Differences between the ILWU and ILA abound, but can port labor negotiations be structured more effectively?
The protracted and contentious collective bargaining for a new dockworkers’ contract on the West Coast has caused economic damage for businesses that depend on ocean transport and raised questions about whether there is a better way to conduct negotiations.
As of press time, the International Longshore and Warehouse Union and Pacific Maritime Association (PMA) were hardening their positions even as importers and exporters pleaded for a resolution to end severe cargo delays that have cost them billions of dollars in lost sales, spoiled food, extra storage and container fees, and transportation to reroute cargo by air or to other ports.
This is the second time in two years that shippers have had to plan for a potential port disruption associated with a labor deal.
In April 2013, the ILWU’s counterpart on the East and Gulf coasts, the International Longshoremen’s Association, and waterfront employers reached agreement on a five-year contract with the help of federal mediators, but not before shippers’ faced the prospect of a potential strike as the talks deteriorated in late 2012. Those negotiations lasted the better part of a year and put pressure on shippers to make contingency plans when the existing contract at the time expired, increasing the chances of a port disruption.
Several observers of, and participants in, the process are recommending constant dialogue between unions, employers and other stakeholders because working out fair ways to address health care, pensions, chassis-repair jurisdiction, safety 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,” John Nardi, president of the New York Shipping Association, said in November at a freight transportation conference in Fort Lauderdale, Fla.
The NYSA, on behalf of member companies, negotiates the local contract in the New York-New Jersey port complex, and helps implement it.
“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.
David Adam knows first-hand the challenges of bargaining an agreement for union labor at the ports. He’s the chief negotiator for the U.S. Maritime Alliance (USMX), which represents terminal operators and international ocean carriers in the eastern half of the United States. He also was an executive for a terminal operator on the West Coast now known as Ports America, where he served as chairman of PMA’s steering committee between 2002 and 2009 and helped negotiate three contracts.
“The process to me is not working. It’s old, it’s decrepit,” he lamented at a mid-December Journal of Commerce conference on port performance held in Newark, N.J.
“I would challenge the industry, both the management side and the union side, to come up with a more efficient process that doesn’t damage our shippers—the guys who pay our bills—the way we’ve been doing it on both coasts over the last several negotiations,” he said.
The traditional negotiating model is breaking down over the enormity of issues that must to be ironed out, Daniel Smith, a freight transportation consultant and principal with the Tioga Group, agreed in an interview.
“There’s got to be a better way to deal with issues as they emerge with the time to do analysis, rather than trying to do it in a matter of weeks or months at the negotiating table,” he said.
“When all that was at stake was wages, and the next cost-of-living increase, and the contribution for the next health plan, then maybe you could get it all done in a few weeks of negotiations. But I think issues have become too complex to still handle in that way,” the Moraga, Calif.-based expert said.
Issues today are more technical in nature or require a great deal of fact-finding or scenario planning. The better approach, he suggested, would be for the parties to identify the issues ahead of time and come back to the table with a range of proposed solutions rather than dropping the problems on the table at the start of negotiations.
“I have a philosophy: you don’t have to be in bargaining to bargain,” Adam said. “When these issues come up they should be resolved. We have a history of not resolving the issues throughout the contract and then we put them into a big huge pile. And we start three or four months before the end of the contract and we have to weed our way through that.
“And it doesn’t make sense. To me, that’s the best process—to have constant dialogue and resolve the issues, and not let them fester.
“When they fester people are more emotional about the outcomes. I think the key is to realize it’s our industry—it’s not their industry and it’s not our industry—it’s a joint-parties industry. We need to make it as efficient and effective as we can and we need to work together to do that. To allow things to just fester and build up throughout a contract is irresponsible, and yet we’ve historically done that,” he said.
The ILWU-PMA talks weren’t supposed to reach the precipice. Last spring, officials from both sides presented a united front that relations were excellent and a deal would be worked out by the time the multi-year contract expired at the end of June, or shortly thereafter. The ILWU refused to extend the existing contract, but both sides promised to do their part to keep cargo moving while talks continued. That turned out to be a critical element to the current gridlock.
A contract extension could have averted union slowdowns, because it would have re-instituted arbitration procedures to deal with grievances by either side. Arbitrators tend to rule quickly, which minimizes any potential disruption. PMA says that in the 2008-to-2014 contract period arbitrators presided over more than 250 labor disputes involving allegations of union slowdowns or work stoppages, and employers won more than 85 of those cases.
The ILA and USMX twice extended their contract in 2012.
Relations between the two sides were very poor when bargaining began that year, to the point that “people wouldn’t answer each other’s phone calls,” Adam recalled.
“It’s something personally I’d never seen before going into bargaining,” the USMX chairman and chief executive officer said of his experience on the West Coast.
Since then the relationship has become excellent. “There was a pretty clear understanding on their side that we were not the enemy, that we were there to work with them,” Adam said.
To understand how the industry got to this point it’s instructive to compare the differences between the ILWU and ILA.
On the West Coast, according to PMA, 20 percent of the workforce can be classified as full-time, or steady, employees who show up to the same terminal every day. The remaining 80 percent are split between daily laborers (registered longshoremen eligible for benefits who are hired for single work shifts at the local hall and may be asked to return each day until a certain job is completed) and casuals (recognized workers who are only dispatched after all registered, available longshoremen have received assignments). Under the system, large numbers of relatively new workers are dispatched to different terminals each day and have to relearn how things are done at each location.
“That’s extremely problematic when you have automation and new technology,” Anthony Scioscia, a former president of APM Terminals in North America, who now does management consulting for the maritime industry, said at the JoC event. “You need people who have the skills to do that and it would also be very helpful if they came to the same facility every day and became familiar with the equipment and the systems.”
On the East Coast, the number of regular longshoremen is much higher, although statistics to quantify the number are not available, Scioscia said.
“Plus, you have lists and you have house gangs, so more and more people on the East Coast are coming to the same work site every day, which improves efficiency,” he said.
Scioscia, who also served as senior vice president of labor relations for Maersk Agency U.S.A., said the ILWU relies on the hiring hall to control who goes to work and where, whereas on the East Coast the ILA doesn’t demand the use of hiring halls. At some ports, longshoremen get their daily assignments over the phone.
The centralized West Coast approach extends to pay. Longshoremen receive their checks from PMA, not the actual terminals where they work.
West Coast longshoremen have a defined benefit plan while the ILA and USMX have a defined contribution plan, which has a relatively large surplus. Both plans are excellent, with minimal co-pays, according to Adam.
“One of the things we used to laugh about in West Coast bargaining, the benefits are so good that when we talked about what benefit demands might be it was for maybe pet health care, or something, because there wasn’t a lot more you could ask for,” the USMX chief executive said.
Negotiations are different, too.
On the East Coast, there are two levels of negotiations: the master contract, which deals with systemic issues up and down the coast for container and vehicular cargo, such as wages, medical benefits, and container royalties; and local contracts where issues such as staffing, work rules, and pay differentials are addressed, as well as bulk and breakbulk wages.
Scioscia, who is serving as an advisor to the PMA during the current talks, said the maritime industry didn’t pay enough attention to the local contracts over the years, resulting in operating practices that are expensive and inefficient.
“On the West Coast I think the system is much better. They have one point of negotiation and they deal with the majority of the issues. There are some local discussions, but most are dealt with by the PMA and ILWU leadership,” he said.
PMA and the ILWU also jointly manage the pension plan whereas on the East Coast every port has its own.
The negotiating dynamic is very complicated on the East Coast, Adam concurred. “It’s the ultimate cat-herding exercise.”
Many employers at local ports can’t figure out the value to place on certain contract terms or don’t want to start bargaining local deals until the master contract is finished, he explained.
“The West Coast piece was certainly more manageable. It hasn’t always proven any more productive in terms of getting a contract, but certainly the workload of the East Coast contracts is significantly greater,” Adam said. “The potential for stupidity is significantly greater too, because you have so many more chefs in the kitchen and so many different political agendas.”
The USMX CEO said he is working with the ILA now to come up with a more rational process for dealing with local contract agendas.
“And it’s not a way to disenfranchise anybody, it’s just a way to coordinate the process so that you end up with the grand finale vs. what we’ve got, which is a bunch of cats and dogs out there running around, that we all having to chase.”
ILA Leftovers. The ILA and USMX have been able to maintain dialogue on several issues since the master contract for container cargo was ratified in 2013.
“Historically, our relationship was such that we bargained a contract and then they went their way, we went our way and we saw each other again in five-and-a-half years. And to me, that doesn’t make sense. The business doesn’t allow for that anymore,” Adam said.
The union and employers are collaborating on the chassis supply problem and jointly marketing advantages of their partnership, the chief negotiator said.
In the master contract, USMX agreed to support the ILA’s jurisdiction over maintaining chassis. In the past year, the availability of chassis has become a major pain point for shippers and their motor carriers, contributing to congestion particularly at the Port of New York and New Jersey. Chassis equipment operators have separate pools that tend to affiliate with specific terminals, forcing motor carriers to return chassis to one location before going to pick up cargo at a different terminal. The system creates inefficiency as truckers run empty legs to collect wheels for the containers they need to pick up.
Late last year, chassis leasing companies, ocean carriers and others agreed to establish an interchangeable “gray pool” by the end of June so truckers can use the same piece of equipment at any terminal location.
Adam said the ILA and USMX participated in the talks, organized by the port authority’s Council on Port Performance, to come up with a port-wide solution.
USMX now wants to educate other port communities down the coast about the lessons learned on chassis management in the Port of New York and New Jersey, he added.
Meanwhile, USMX is working with the union on a program to convince shippers to come back to its member carriers.
The ILA has lost breakbulk work to non-union breakbulk operators in the past 20 years, but after 1999 it also lost some container business in the South Atlantic and Gulf to non-union and Teamster terminal operators when Danish shipping line Maersk bought Sea-Land Services. CSX Corp., the seller, could only sell Sea-Land’s international operations to Maersk because under U.S. law, designed to protect the domestic shipping industry, coastal transport between U.S. ports and territories must be conducted by U.S.-flagged vessels that are owned and crewed by U.S. citizens. The Sea-Land domestic service eventually was sold to investors.
Sea-Land’s intra-Americas market share at the time was about 20 percent and when it exited much of the Caribbean trade was picked up by small, regional carriers who had no relationship with the ILA.
Adam declined to provide details on the service promotion effort.
In January, Maersk reintroduced the SeaLand brand, launching a regional subsidiary dedicated to intra-American ocean transport. The carrier will operate 24 of Maersk’s existing loops under the SeaLand name. It does not plan to introduce any new services or make any large-scale changes to existing loops during the first six months of operation, but as it wins business and potentially adds U.S. ports of call it is expected to turn to stevedores and terminal operators affiliated with the ILA, experts say.
Some loose ends from the 2013 bargaining still require attention. Although labor peace exists since master contract ratification, some local ILA contracts remain unfinished.
In October 2013, members of the ILA’s Baltimore local went on strike and shut the port for about three days. A federal arbitrator ruled in USMX’s favor and ordered the local union to pay $3.8 million in damages to terminal operators for lost revenue.
The local contract covers automobiles, forest products, and other breakbulk cargo, as well as local labor conditions. Adam declined a request to explain the outstanding issues, but an ILA official previously quoted in the Baltimore Sun said one of them is how jobs are awarded to union members.
The USMX negotiator said a lot of progress has been made to resolve the local Baltimore issues and there haven’t been any more work stoppages.
The only stoppage in 2014 was for four hours at the Port of Mobile in Alabama.
The local union in Charleston, S.C., also is without a contract.
There are three different contracts in the South Atlantic. A master contract covers container operations; a district contract covers breakbulk and roll-on/roll-off cargo, as well as cruise ships; and some locals have contracts to deal with specific local issues.
The main beef in Charleston has to do with the union’s desire for an increase in pensions, according to a local maritime official who asked not to be named because of the sensitivity of the issue.
Labor stability in Mobile remains a concern, Adam said, but solving the situation in Charleston will help matters because the leadership in Mobile follows the leadership in Charleston.
Adam said employers hope to soon close out the remaining local issues so “we can have the last three years of our contract without having any of these local open contracts,” adding “I expect 2015 will be a very smooth year for the ILA and the industry.”
USMX officials have been invited to participate in the ILA’s quadrennial convention in Puerto Rico this summer, which the chief negotiator said is a testament to the relationship between labor and management.
This article was published in the March 2015 issue of American Shipper.