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West Coast Dock Strike Update

Port of Long Beach

Port of Long Beach, CA

West Coast Dock Strike Update:

No News Is Good News?

Issues: Wages, Potentially Soaring Healthcare Costs, Automation – and “Jurisdiction?”

Source: Supply Chain Digest

Negotiations between the Pacific Maritime Association, which represents US West Coast ports and terminal operators, and the International Longshore and Warehouse Union are now underway, with little sense yet of how the talks are going.

While pre-negotiations banter was amicable, there are some very tough issues on the table. Given that, few expect the two sides to get a deal done by the expiration of the current contract on June 30. While it is likely that the Longshoremen would continue working under the terms of the current contract for a time or the two sides could agree to a series of contract extensions after that date, a worker strike or a union lockout by the PMA is certainly not out of the question.

The 2002 management lock-out of port workers lasted 10 days, caused many supply chain disruptions, and led to weeks of effort to untangle the backlog. That stand-off ended when then-President Bush invoked the emergency provisions of the Taft-Hartley Act. Estimates at the time put the cost of the action to the US economy at more than $10 billion.While pre-negotiations banter was amicable, there are some very tough issues on the table. Given that, few expect the two sides to get a deal done by the expiration of the current contract on June 30. While it is likely that the Longshoremen would continue working under the terms of the current contract for a time or the two sides could agree to a series of contract extensions after that date, a worker strike or a union lockout by the PMA is certainly not out of the question.

But given the scope of the issues on the table, a similar scenario sometime late summer into fall is certainly a possibility, as US importers start bringing goods in earlier this year or plan for a time to use alternative ports in Canada or the US Gulf Coast that do not have ILWU workers.

Here is a quick summary of the major issues:

Wages: The ILWU will want a raise in hourly wages, of course, saying it expects a “fair” increase – we suspect the two sides have a different view of that term. (Editor’s Note:  ILWU dockworkers already receive an average compensation package of approximately $225,000 per year in wages and benefits.)

Healthcare costs: The current ILWU contract calls for workers to pay very little towards their own healthcare costs, under a generous policy. This insurance will in fact be considered a “Cadillac” plan under the Affordable Care Act, and if not addressed will expose PMA members to something like $100 million in annual penalties. The PMA will want to make changes to the coverage so that Cadillac plan designation isn’t reached. The union will want to be compensated for any new costs on members for their healthcare plans.

Automation: The ILWU has not pushed back much on labor-saving automation at West Coast ports of late, but big plans for such technology – badly needed to make US ports competitive with many foreign rivals – at Long Beach, Los Angeles and elsewhere, could change that this time around. How hard the ILWU will push back on this issue is very unclear, but it also seems certain the automation will reduce union jobs, especially with port volumes no longer showing strong growth year after year.

Jurisdiction: A somewhat obscure issue that is really a battle between unions, the ILWU has seen rival groups move in some cases into what it considers its territory in some ports, specifically the International Association of Machinists and Aerospace Workers and International Brotherhood of Electrical Workers. That has led to brief shutdowns of a few West Coast ports, including a battle with the IAMAW that involved violence at a grain port in Washington. The ILWU will look to gain assurances in this contract that the PMA will not deal with other unions in their operations.

Retirement benefits: The ILWU has also called this area out as a benefit it will seek to improve.

Against the union wish list is the reality that the more the PMA gives, the higher the costs to users of port services. That in term makes West Coast ports relatively less attractive the other options – with the expanded Panama Canal finally coming in late 2015 or early 2016, and opening up additional options for Asian imports.
Any work stoppage could also be costly for shippers and importers.

In addition to delays in shipping or receiving their containers, several ocean carriers have already announced a planned congestion surcharge of $800 per 20-foot container and $1,000 per 40-footer, in the event of a “strike, lockout, work stoppage, work slowdown or other labor-related disruption.”

 

This story originally appeared in Supply Chain Digest.

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