The ILWU and ILA will likely have concurrent contract negotiations, making cargo diversion difficult, an NRF official said.
Businesses that depend on West Coast ports to support their international trade are upset that deteriorating negotiations on a new dock-labor contract are hanging over their supply chains like a sword of Damocles, but they should brace themselves for a worse scenario in 2018, warns a retail industry official.
Talks between the International Longshore and Warehouse Union and the Pacific Maritime Association, representing marine terminals and ocean carriers, are becoming more acrimonious after six months without a deal. Since October, ILWU work slowdowns at Pacific Northwest terminals have cut productivity by 30 percent, according to the PMA, and have spread to the ports of Los Angeles and Long Beach, exacerbating pre-existing congestion problems associated with large volumes of peak-season cargo.
Anticipating a potential port shutdown because of the uncertain labor situation, many shippers developed contingency plans to shift some of their imports to the East Coast or even Canada. But three years from now, they may not have that option.
“In 2018, we’re going to have both ILA (International Longshoremen’s Union) and ILWU negotiations going on at the same time,” Jon Gold, vice president of supply chain and customs policy at the National Retail Federation, predicted Monday at the National Industrial Transportation League’s annual conference in Fort Lauderdale, Fla.
“Folks better start preparing now for when that’s going to happen because I don’t think we’re going to get a long-term deal on the West Coast. I think we’ll get maybe a three-year deal,” he said.
In April 2013, the ILA and waterfront employers concluded bargaining on a multi-year deal that includes plans for more hiring, allows terminals to undertake productivity improvements, better calibrates pay to time worked, and institutes a shift system. The contract expires Sept. 30, 2018.
Longshoremen’s contracts on the West Coast typically are for six years. In late August, the two sides announced that a tentative agreement had been reached on terms for health benefits, but Gold added credence to speculation that there will a shorter-term pact this time because of uncertainty about who will be responsible for paying the so-called “Cadillac tax” under the new Affordable Care Act.
A provision in the health-care law imposes a 40-percent excise tax, starting in 2018, on health plans that provide the most generous level of benefits. Employers typically pay premiums for these high-end health plans, which have low, if any, deductibles, and little cost sharing for employees. One of Obamacare’s goals is to slow the rate of growth of health costs, and one way to do that is to create incentives for people to become smarter consumers by having to share the costs. Benefit-rich plans tend to insulate workers from the high cost of care and encourage overuse of care — such as unnecessary tests and hospital visits — that raise health costs overall, according to the journal Health Affairs.
Health plan providers or insurers must pay the tax on the amount of coverage that exceeds a certain annual limit.
Gold reiterated the NRF’s call for the parties to accept a federal mediator to get a deal done. The NRF and dozens of other business groups have appealed to the White House to get involved in the contract negotiations because of the economic impact it is already having even without a strike or lockout. The situation is affecting retailers, who are trying to get inventories in position for the critical holiday shopping season, as well as agriculture exporters and other shippers.
The East Coast dock-worker contract was different in two key regards, Gold said. First, the two sides continuously extended the contract, which prevented slowdowns or other tactics because grievances could be addressed through an arbitration mechanism. The ILWU and PMA have not concluded a contract extension, so the ports continue to operate on good-faith promises to maintain the status quo during the talks.
“I think it would be beneficial for the parties to extend the contract so that either side, whatever the issue, has a grievance mechanism to go to,” Gold said.
The other difference is that the ILA and U.S. Maritime Alliance eventually agreed to a federal mediator, which led to a tentative deal within a few weeks, he noted.
The complexity of issues involved is why the NRF urged the ILWU and PMA to sit down in April rather than waiting to start negotiating one month before the contract expired in July.
John Nardi, president of the New York Shipping Association, recommended constant dialogue with unions and other stakeholders these days because working out fair ways to address health care, pensions, chassis-repair jurisdiction and productivity initiatives takes a lot of work.
“This bargaining is not a one-time event every six years. It’s an ongoing effort that needs to take place. And you need to deal with this stuff going forward because the issues have become so big and complex that you can’t just sit down and expect to get things done in a couple of months,” he said.
After terminals and carriers finalized the labor pact last year, New York and New Jersey-area employers reduced vacations, changed job assignments so a skilled longshoreman couldn’t take a less-skilled job without taking the skilled job first, and changed the absentee policy with the consent of the ILA, he said.
“Bargaining in the future is going to need to be an ongoing process so that when you come up against a deadline, you pretty much have dealt with these very complex, very costly issues beforehand so that you can at least have some predictability about what’s going to happen,” Nardi said.
Gold concurred. “The system is broke. It’s got to be fixed,” he said. “We’ve got to find a better way.”