Never mind the fiscal cliff. For container shipping, the U.S. budget impasse has been upstaged by another year-end crisis: the threat of a Maine-to-Texas dockworkers’ strike.
More than eight months after opening contract negotiations, an International Longshoremen’s Association work stoppage is a growing possibility. The union and United States Maritime Alliance remain far apart on an agreement to replace a 90-day extension that expires Dec. 29.
The ILA and USMX extended the contract in September, at the height of the peak shipping season, after a federal mediator joined the talks, which had broken off the previous month. The mediator persuaded the two sides to resume bargaining and halt their public bickering.
ILA President Harold Daggett broke silence in mid-November with a statement declaring the union would not accept caps on payments to workers from carrier-paid container royalties, and would resist changes to work rules and practices.
USMX Chairman-CEO James Capo replied that Daggett appeared unwilling to compromise to reach an agreement. “The ILA leadership’s latest missive on the negotiations is yet another indication that ILA leaders view bargaining as a one-way street that leads only in their direction,” Capo said.
Daggett issued a rejoinder that USMX’s carrier members “invest in building new ships at nearly $200 million each, but don’t put a dime on the table in negotiations to compensate ILA members who helped them accumulate their riches.”
The negotiators’ war of words raised the blood pressure of already-nervous supply chain managers. Fearing a peak-season strike, many shippers paid extra to accelerate or divert shipments in advance of the original Sept. 30 contract expiration. Now they must decide whether to do it again.
This time, instead of racing the clock against the peak season, shippers and carriers are racing another crucial shipping period: the run-up to the Chinese New Year, when factories from Shanghai to Guangzhou shut down for two weeks.
The 2013 Lunar New Year falls on Feb. 10, more than two weeks later than this past year. That provides some breathing room, but if a deal isn’t struck by the year-end deadline, shippers again will face tough decisions on how to route cargo during what carriers treat as a secondary peak season.
And with labor strife also breaking out on the West Coast, there’s no guarantee of labor peace on either coast. The International Longshore and Warehouse Union honored pickets established by the union’s Office Clerical Unit in Los Angeles-Long Beach twice in the last month, including last week.
For most supply chain managers, the threat of an East and Gulf coast shutdown is a new experience. The ILA hasn’t had a coastwide strike since 1977. During the past three decades, the ILA and employers have generally settled new contracts long before the previous ones expired.
Daggett signaled that this year’s negotiations would be different when he delivered a combative acceptance speech after his election as ILA president in July 2011. He followed up last March by warning the JOC’s TPM container shipping conference that a strike was possible if employers didn’t meet ILA demands.
His unyielding stance set up a showdown with employers, especially the container lines that dominate USMX. Carriers entered this year’s negotiations determined to change decades-old work rules and practices, especially in the high-cost Port of New York and New Jersey, the ILA’s headquarters and power base.
Unlike other ports with day and night shifts, New York-New Jersey uses “continuous staffing” that allows workers to stay with a ship until the job is finished. Employers must hire work gangs of 15 to 16 members when only nine or 10 are working at a time. More than half of the ILA workers in the port earn wages and royalty payments totaling more than $100,000 a year, plus benefits. A few receive $400,000-plus a year for 24/7 pay, mostly overtime.
Similar work rules and staffing requirements, with no-show and “low-show” jobs, don’t exist elsewhere along the East and Gulf coasts. Nevertheless, ILA leaders outside New York-New Jersey have backed the union’s negotiating position, and Daggett’s recent statements appeared designed to bolster that support.
The ILA president emphasized coastwide issues such as workers’ container royalty payments, which apply to all ports and are highest in Savannah and Charleston; eight-hour work guarantees that apply to all ports; and requirements in South Atlantic local contracts for seven-man lashing gangs that employers say are unnecessarily large.
“USMX has made it clear in negotiations and to the public through their Web site postings that they are looking to cut, as an example, an ILA member in Savannah’s container royalty payment and eliminate an eight-hour guarantee for an ILA member in Houston,” Daggett said. “They attack work rules in New York and look to strip the seven-man lashing gang in the South Atlantic. We understand that USMX has continually played one port against the other, but that strategy will not succeed.”
Capo noted that USMX had shown willingness to compromise on ILA demands for payment of workers displaced by automation, and for protection of union jurisdiction over chassis repair. “It is disappointing that ILA negotiators have refused to give the same consideration to issues that concern USMX and the employers it represents,” he said. “It’s incredible that they continue to defend antiquated work rules, manning and other practices that have made many of the East and Gulf Coast ports prohibitively expensive, harming our ability to compete and threatening the viability of port operations.
“The current economic reality demands that we improve efficiency and productivity at the ports,” Capo said. “It also requires that we begin to control container royalty payments that have risen dramatically since they were first established in 1960, totaling $211 million in 2011 or an average of $10 per man-hour. Employers are not seeking to eliminate these bonuses, only to cap them and use the extra money to help pay for benefits for ILA workers.”
Capo acknowledged that changes in work rules and practices won’t happen overnight, but he urged the ILA to engage in “meaningful discussions about these challenges to reach agreement on a new master contract, one that will preserve thousands of well-paying jobs averaging $124,138 a year in wages and benefits and ensure the viability of the ports for years to come.”
The latest back-and-forth between Daggett and Capo echoed their similar exchanges last spring and summer.
In August, three days of scheduled negotiations with the ILA’s 200-member wage scale committee broke up within minutes after Daggett refused to discuss employer proposals on work rules and pay practices. Bargaining resumed after the mediator joined the talks.
Daggett has summoned wage scale delegates for another round of meetings Dec. 10-12 in Delray Beach, Fla. USMX officials will be on hand to resume negotiations, which the Federal Mediation and Conciliation Service continues to oversee.
Shippers will watch the Florida meetings closely for signs of movement toward an agreement — or a possible work stoppage. Although wage-scale delegates must approve any deal, the real work of negotiations comes in smaller meetings of union and management representatives.
Even if negotiators make headway at this month’s meetings, they’ll still have much to do before the contract extension expires on Dec. 29. An ILA-USMX agreement is only part of the negotiating process, which is conducted at two levels.
The coastwide master agreement between the ILA and USMX sets container and roll-on, roll-off wages. It also covers jurisdiction, technology, container royalties and the coastwide medical plan, and defines the basic 8-to-5 workday, after which overtime is paid. Supplementary local or regional contracts cover breakbulk wages, local pensions and benefits, work rules, skill differentials, starting times and grievance procedures.
Sporadic local negotiations have continued alongside the ILA-USMX negotiations, but many local issues remain in limbo until the master contract is settled. The largest — and most contentious — local contract is in New York-New Jersey, where the New York Shipping Association agreement covers 3,300 of the 14,500 ILA workers affected by the coastwide contract.
Further complicating the situation in New York-New Jersey is the Dec. 31 expiration of the ILA’s contract with the Metropolitan Marine Maintenance Contractors Association, which represents chassis and container repair companies in the port.
The ILA-Metro contract normally expires three months after the master and NYSA contracts, and generally tracks the master contract’s pay provisions. The ILA’s Metro negotiations are led by Local 1804-1, which Daggett headed before his elevation to ILA president. Local 1804-1 now is led by his son Dennis.
With the coastwide ILA-USMX contract unsettled, time is growing short to reach a New York-New Jersey agreement by year-end. Union and employer officials say issues in other ports along the coast present fewer obstacles.
Hovering over this year’s ILA negotiations has been speculation about how a newly re-elected President Obama would handle a port shutdown if one occurs. The Taft-Hartley Act empowers the president to order strikers back to work for up to 80 days, while negotiations continue, if a work stoppage imperils national health or safety.
Such back-to-work orders are rare. When President George W. Bush invoked Taft-Hartley to halt a lockout of West Coast dockworkers in 2002, it was the first time the provision had been used since President Carter used it to halt a coal miners’ strike in 1978.
East and Gulf Coast port employers are frustrated at the pace of negotiations, but remain hopeful the two sides can reach a compromise and avoid a strike. “Bargaining is a process of give-and-take,” NYSA President Joseph Curto said. “When one side or the other fails to grasp this concept, the results generally are not going to be good.”