ILA Contract a Done Deal

Shippers and carriers have one less problem to worry about next year. Ratification of a two-year contract extension for East and Gulf Coast dockworkers means the transportation industry doesn’t have to plan for a possible strike in 2010.

International Longshoremen’s Association members approved the contract extension by an unofficial margin of 6,417 to 3,319. The contract revises and extends the previous agreement through September 2012. ILA President Richard Hughes said the deal provides the union with more money, doesn’t unfairly penalize carriers, and provides the industry with stability.

“Shippers now have the assurances they want to keep cargo coming to ILA ports on the Atlantic and Gulf coasts,” he said.

The ILA hasn’t had a coastwide strike since 1977, but logistics managers have fresh memories of the 11-day closure of West Coast ports during the International Longshore and Warehouse Union’s 2002 contract negotiations.

Many shippers responded to the West Coast work stoppage by restructuring their supply chains and shifting cargo to East and Gulf Coast ports. Although ILWU labor relations since then have been peaceful and the union last year signed a new contract extending to 2014, West Coast ports haven’t regained much of the business they lost.

Negotiations between the ILA and United States Maritime Alliance were complicated by economic conditions and union politics. The ILA and USMX opened talks last winter in hope of working out a deal several months in advance of the Sept. 30, 2010, expiration of their existing contract.

ILA and USMX leaders said they hoped an early agreement on a new contract would deter shippers from making contingency plans to shift cargo to Canada, Mexico or the West Coast. The concern is heightened by prospects of increased cargo following the Panama Canal’s expansion in 2014.

Another motivation for an early agreement was the sour economy, which has cut volume by 20 percent or more in many ports. USMX Chairman James Capo said a two-year extension would address the ILA’s key concerns while “giving the economy time to square away.”

The Longshore Workers Coalition, an activist faction of the ILA, favored delaying negotiations until closer to the contract’s expiration. So did Harold Daggett, the ILA’s executive vice president, who had said he plans to seek the union’s presidency in 2011.

Daggett and Hughes publicly clashed over negotiating strategy before agreeing to cooperate. Daggett was especially vocal about union demands for language to restrict employers’ right to introduce computer-based technology such as that used at APM Terminals’ highly automated terminal at Portsmouth, Va.

Negotiators addressed that issue by agreeing to establish an ILA-USMX committee to analyze the impact of technology on jobs and to strengthen an existing labor-management committee on jurisdiction.

Wages were another flashpoint. The union sought to eliminate a tiered wage structure — with lower pay for newer workers — that the ILA accepted in 1996 in exchange for a coastwide medical plan.

With union dues based on wage levels and post-1996 hires now comprising a majority of the work force, the international union has been bleeding cash. Its assets have shrunk from $51.1 million in 2004 to $18.4 million earlier this year.

Negotiators agreed to narrow the gap between wage tiers in 2012, when workers with nine years’ experience would advance to top scale and less-experienced workers would receive raises of up to several dollars an hour. The agreement immediately boosted starting pay from $16 an hour to $20 and increased the top hourly wage from $31 to $32 in 2011.

The key to the contract was its reallocation of container royalties that carriers have paid for more than three decades to support ILA bonuses and benefits.

Those payments, $2 a ton, now are capped at 73 million tons a year, with excess funds divided among carriers, local port benefits and the coastwide medical plan.

The revised contract allows carriers to keep the first $42 million in royalties this year to offset the cost of a wage increase set by the previous agreement.

In the contract’s subsequent years, all royalties will go to the ILA, no matter how much cargo is handled. USMX estimated the change could provide the ILA with an additional $50 million a year, or more if the economy recovers and cargo volume rebounds.

The Longshore Workers Coalition objected to shifting royalty funds to pay for wage increases. “The extension agreement gives management the right to pay for an already agreed-to wage increase out of members’ own container royalty checks,” said Darryl Payne, an LWC member who heads Local 1526 in Port Everglades, Fla.

LWC members also complained the technology committee would be ineffective and that the back-loading of pay raises and container royalties would allow employers to use them as bargaining chips in the next negotiations in 2012.

Hughes said the contract would allow the ILA to benefit from a rebounding economy. “With the removal of the container royalty cap, our members could reap tremendous benefits during the life of this contract extension, and put us in an even stronger position to negotiate when this contract term ends,” he said.

Contact Joseph Bonney at jbonney@joc.com.