Shippers are paying the price now to avoid costly delays that could come with an ILA strike or lockout
International Longshoremen’s Association and management negotiators are running out of time to avert a threatened Maine-to-Texas dock strike that is forcing shippers to scramble for alternatives.
With their coastwide master contract set to expire at midnight on Sept. 30, the ILA and United States Maritime Alliance remain at odds over negotiation of changes to work rules and staffing practices.
Contract bargaining collapsed Aug. 22 when ILA President Harold Daggett refused to discuss USMX’s proposals. “It looks like we’re going to have a strike,” he said. The standoff continued past Labor Day, raising the prospect of the ILA’s first coastwide work stoppage in 35 years.
Shipper organizations, including the National Retail Federation, Retail Industry Leaders Association and Waterfront Coalition, have urged the ILA and USMX to avoid a work stoppage. “A disruption of this magnitude would be devastating to the retail industry and would have severe consequences for the U.S. economy,” RILA President Sandy Kennedy said. “The negative impact a strike would have on retailers and our national economy cannot be overstated.”
Bruce Carlton, president of the National Industrial Transportation League, requested Transportation Secretary Ray LaHood’s help in “strongly encouraging the two sides to get back to the bargaining table. Only as a last resort should other measures be considered to head off a port work stoppage.”
Shippers already are incurring extra costs for transportation and inventory.
Container ship lines report a surge in bookings for West Coast services stretched thin by the annual peak season for holiday imports. To meet customers’ deadlines for production or in-store delivery, importers and exporters are paying higher spot rates, absorbing longer transit times, and paying extra for inland transportation.
Data from PIERS, a JOC sister company, indicate some shippers have built stockpiles as a hedge against a port shutdown. Major East Coast ports posted solid year-over-year increases in containerized imports in July while most West Coast ports declined. East Coast imports rose especially sharply for auto parts and European beer.
Ports are preparing for possible chaos. The Virginia Port Authority said it would move as much incoming cargo as possible through its terminals before the contract expiration. Joseph E. Dorto, CEO of Virginia International Terminals, said he expects port shippers to make contingency plans to shift 10 to 15 percent of their imports to the West Coast.
Some shippers are sitting tight. They’re hoping the ILA and USMX work things out or temporarily extend their current contract, or that the Obama administration will move quickly to halt any work stoppage by seeking an injunction and back-to-work order under the Taft-Hartley Act.
That Taft-Hartley is being mentioned is a sign of how serious the ILA-USMX standoff has become. The law allows the president to seek an injunction that could lead to an 80-day cooling-off period for labor disputes that threaten the economy or public health or safety.
It’s a drastic step that’s been taken only once in the last 24 years. The Bush administration used the law in 2002 to force an end to an 11-day lockout of West Coast dockworkers. The Federal Reserve said that by the 10th day of the lockout, the economic impact was $2 billion a day.
The 2002 lockout of the International Longshore and Warehouse Union followed days of work slowdowns during contract negotiations.As the ILA contract expiration nears, shippers and carriers are worried about similar slowdowns on the East Coast. Before the Memorial Day holiday, New York-New Jersey dockworkers slowed port traffic with time-consuming chassis inspections that caused mile-long truck lines.
Between 1948 and 1971, when the ILA struck upon every contract’s expiration, the ILA was hit with a record seven back-to-work injunctions under Taft-Hartley. The ILA hasn’t had a coastwide work stoppage since 1977, and most recent contracts have been settled or extended months before expiration. It’s been apparent for months, however, that this year would be different.
Since his election as ILA president last year, Daggett has struck an aggressive tone. He warned the JOC’s TPM shipping conference in March that the ILA was prepared to strike if it didn’t win satisfactory terms on a list of issues led by automation and jurisdiction over chassis maintenance and repair.
The ILA and USMX agreed on automation and chassis in late July, raising hopes the negotiations were progressing. The optimism lasted less than a month.
When ILA and USMX officials gathered for a planned three-day bargaining session on Aug. 22, Capo asked Daggett to agree to discuss “archaic work rules and manning practices” that require extra staffing and inflate overtime pay. Daggett refused, and the talks broke down.
The ILA president accused USMX of a “take-it-or-leave-it proposition” and said the employers’ proposals were an “insulting and unexpected” effort to wipe out decades of union gains.
Employers’ proposed changes came as no surprise. Management officials had said for more than two years that they planned to use this year’s negotiations to address work rules, pay guarantees and other practices, particularly in New York-New Jersey, which Capo said has become “the most expensive (port) in the world.”
One-third of New York-New Jersey dockworkers earned more than $208,000 in wages and benefits last year, not counting tonnage-based bonuses. Thirty-four ILA members in the port topped $368,000, plus bonuses, and in some cases were paid round-the-clock for a few hours of work.
Many of these practices date back more than 50 years, and have been carried forward from contract to contract. The ILA’s local contract with the New York Shipping Association sets relief-staffing levels that require 15 to 16 workers per gang when only nine to 10 are working at a time.
The Waterfront Commission of New York Harbor publicized these practices in a series of hearings in late 2010. Annual pay exceeds $400,000 for a “privileged few” dockworkers, mostly with family or other connections to ILA officials or mob figures, a commission report noted.
Management officials told the commission that many of these practices are indefensible but could be changed only through collective bargaining. Daggett defended ILA pay levels, saying, “I wish all the members earned more than $400,000.”
He said many of the work-rule issues raised by USMX should be negotiated in local contracts, such as the New York-New Jersey agreement between the port’s locals and the NYSA.
Capo said master contract negotiations have concentrated on ILA demands on automation and chassis. The ILA, he said, had been unwilling to consider USMX proposals to discuss issues including hourly guarantees, staffing requirements and work rules that drive up overtime and other costs.
After the breakdown in negotiations, Daggett asked USMX for a final offer to present to the union’s 200-member wage scale committee. Capo replied that USMX couldn’t present a final offer because negotiations remained incomplete.
“I don’t think we expect to do everything at once, but we’ve got to sit down and put together a plan to address these things,” Capo said. “We really have to address the inefficiencies in the operation – the manning, the archaic work rules, all of this pay for time not worked. They’ve got to be willing to talk about these things, and so far they haven’t been.”
USMX is seeking changes such as amending the master contract’s 8-to-5, Monday-to-Friday workday so that any work outside those hours doesn’t automatically trigger overtime pay. Employers also are seeking master contract language to remove restrictions on what can be negotiated in local port contracts.
A secondary issue for USMX in the master contract talks is a proposal to cap carriers’ per-ton royalty payments on containers and use the excess to support other ILA benefits. A 2009 contract extension removed caps on the carriers’ payments, which totaled $211 million last year.
The vast majority of ILA members in East and Gulf Coast ports weren’t in the work force, and many hadn’t even been born, when the royalties were established in the 1960s to shield union members from the impact of containerization, USMX notes.
Container royalty bonuses are based on a formula that calculates each port’s increase in container tonnage from a base level established years ago, and divides it by the number of eligible ILA workers in the port.
Bonuses average $15,500 a worker, but vary widely among ports. In Savannah, where container tonnage has soared, bonuses totaled nearly $36,000 a worker last year. In other ports such as New Orleans, where container volume growth has been slower, bonuses are below the coastwide average.
