Landmark judgment puts ILWU on its heels

Landmark judgment puts ILWU on its heels

The ILWU for two decades has used work slowdowns along the West Coast as leverage against employers without ever having to pay a financial price for that strategy. Photo credit: Shutterstock.com.

Last week’s landmark $93 million judgment against US West Coast longshore workers to compensate for years of work slowdowns in Portland could cripple the powerful union in the short term, but more importantly, employers hope it will lead to improved productivity and fewer labor disruptions.

Employers say the severity of the jury award should send a strong message to International Longshore and Warehouse Union (ILWU) rank and file that they will pay a price for work slowdowns in terms of financial liability, but also in the continued loss of discretionary cargo to other ports unless the labor environment improves.

Despite steadily losing cargo to East and Gulf Coast ports since the labor disruptions surrounding the 2002 coastwide contract negotiations, the ILWU for two decades has continued to use work slowdowns and other productivity-crimping tactics as leverage against employers, without ever having to pay a financial price for that strategy. 

“This will hopefully be a wake-up call for the industry,” one employer told JOC.com this week, although he quickly added: “For the ILWU, I’m not sure.”

Another employer said no company has ever taken on the union to this degree, nor has such a large penalty ever been assessed against the ILWU. “This may not stop the union completely, but they might think twice about trying this again,” that employer told JOC.com.

The ILWU didn’t make itself available for comment. 

The unprecedented jury award of $93 million against the international union and ILWU Local 8 in Portland was rendered on behalf of International Container Terminal Services, Inc. (ICTSI), which operated Portland’s only container terminal. Local 8 reduced container crane productivity on and off for five years from 30 moves per hour to the low 20s, ostensibly over a refusal by ICTSI to move two work tasks from the jurisdiction of the electrical workers union, which controlled those jobs for decades, to the ILWU.

If the full judgment is upheld, the ILWU will have several options. It can file for bankruptcy protection and continue to operate as is, or it can levy assessments up to an estimated $10,000 on each of its 42,000 members up and down the West Coast to pay the settlement. Another option is to convince the US District Court in Portland to reduce the level of the award. 

In a much broader sense, though, West Coast waterfront employers say, there is a chance this experience in Portland could be the wake-up call that was needed to convince the ILWU and its rank and file that shipping lines have options and will move their discretionary cargo elsewhere if it becomes too costly to call at West Coast ports, or if labor conditions at other ports in the United States and Canada are less volatile.

Improved labor relations key to regaining market share

The five-year saga involving ICTSI ended up eliminating Portland as a port of call for regular liner services when Hanjin Shipping and Hapag-Lloyd pulled out in 2017. Before the problems began in 2015, Portland handled 10,000 to 12,000 TEU per month. That has fallen to 3,843 TEU through the first nine months of this year, according to Pacific Maritime Association (PMA) statistics.

The loss of discretionary cargo in Portland sends a powerful message to the ILWU and employers at all West Coast ports, James McKenna, president of the PMA, told JOC.com Thursday.

“This industry has become a game of how much does it cost to come here, and how much does it cost to go elsewhere. The loss of discretionary cargo sent a message that carriers have options for discretionary cargo,” he said. The PMA, which represents shipping lines and terminal operators, negotiates and administers coastwide contracts with the ILWU.

Since the ILWU work slowdowns and the PMA lockout of longshore workers during the 2002 coastwide negotiations that ushered in the age of computerization and eventual automation at West Coast ports, the ports’ market share of US imports from Asia has declined from more than 70  percent to 64.2 percent, according to PIERS, a JOC.com sister company within IHS Markit. Asian imports are considered truly discretionary cargo because they can move through US West, East and Gulf Coast ports, or through Canadian ports, to major population centers in the Midwest, Texas and the mid-South.

McKenna noted that competing ports have invested billions of dollars since 2002 to deepen their channels to handle larger vessels that once only called on the West Coast, and to expand the port and marine terminal infrastructure needed to move containers to the dozens of import distribution warehouses that have been established throughout North America.

Further boosting the attractiveness of competing ports was the reputation of the West Coast as having an unreliable, if not militant, workforce that is willing to engage in costly work slowdowns over real or perceived labor issues. Under the West Coast waterfront contract, the ILWU cannot strike during the life of a contract. The union for decades has therefore deployed work slowdowns involving crane operations, gate moves, chassis inspections, or shorting employers of workers. Because slowdowns tend to be transitory, and they roll from terminal to terminal, their effects are difficult to quantify during the arbitration process.

The Portland court ruling punished the union for work slowdowns that basically ran from 2012 to 2017 and made it impossible for ICTSI to profitably operate the port’s only container terminal. The fact that the union’s gripe was ostensibly over the jurisdiction of two tasks involving plugging, unplugging, and monitoring refrigerated containers made it impossible for ILWU Local 8 to garner much support for its actions.

Much more at stake in Portland than two work tasks

There was much more at play in Portland than jurisdiction over the reefer tasks, according to Bill Wyatt, the port’s executive director at the time. Wyatt told JOC.com in a 2015 interview that the end game of ILWU Local 8 was to force Portland to get out of its contract with ICTSI and return to its former status as an operating port. As an operating port, Portland lost money in 36 out of 38 years, Wyatt said. It contracted with ICTSI in 2012 to operate Terminal 6 as a business. That meant the favorable deals the union enjoyed when the port authority operated the terminal had to end because ICTSI began to enforce the terms of the West Coast waterfront contract, Wyatt said.

After a two-week trial in the US District Court in Portland, the jury took three hours to render its verdict on Nov. 4. If the award stands, the international union will be responsible for paying 55 percent of the $93 million award and Local 8 will pay 45 percent. The ILWU attorney immediately asked the judge to delay entry of the judgment while additional post-verdict motions are filed. The judge is expected to render his decision by next week. Additionally, the ILWU is expected to schedule a caucus of its members to help determine a strategy.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.

Comments

I would add that ultimately it is not the steamship lines that determine where their ships will call, it is the shipping public that decides. As a shipper I avoid Portland calls as much as possible because of the delays and problems that my cargo will incur due to union / management labor tensions. Beyond the jobs at the ports, Portland suffers job opportunities for warehousing, 3PL, distribution services, and even manufacturing that could thrive with a smoothly operating port. In general, the shipping public would prefer more options rather than fewer, but the economic realities of the costs of poor labor relations lead to disruptions and inefficiencies in the supply chains of the shipping community. Hopefully both sides of the dispute will realize the heavy costs of their refusal to come to terms, and avoid recurring labor slow downs and retaliatory lock outs.

I would add that ultimately it is not the steamship lines that determine where their ships will call, it is the shipping public that decides. As a shipper I avoid Portland calls as much as possible because of the delays and problems that my cargo will incur due to union / management labor tensions. Beyond the jobs at the ports, Portland suffers job opportunities for warehousing, 3PL, distribution services, and even manufacturing that could thrive with a smoothly operating port. In general, the shipping public would prefer more options rather than fewer, but the economic realities of the costs of poor labor relations lead to disruptions and inefficiencies in the supply chains of the shipping community. Hopefully both sides of the dispute will realize the heavy costs of their refusal to come to terms, and avoid recurring labor slow downs and retaliatory lock outs.

Samuel, to a degree you are right, but ships call where the cargo is flowing. Generally that is usually a combination of larger movements of indigenous cargoes and access to inland connections to the ultimate destination. Shippers can and do change routings for various reasons, we see the changing flows over the US East Coast due to previous labor issues on the US West Coast, and the increased capacities of vessels to the US East coast. The carriers pulled out of Portland due to the labor issues, it became untenable for them to maintain services there due to the disruption to schedules. You and other shippers had little choice over time, there were fewer and fewer services, and then none.

Good luck with all of this. Already a postponement on the verdict and then the appeals. But the math of 42,000 paying $10,000. each??

The local has to pay 45% of the 93 million. The international has to pay 55% of the 93 million. 45% of 93 is about 42 million +/-. I am thinking the local is the only entity which could impose extra fees on it's "West Coast" members? Thus the $10,000 per member of the International is about 10X too high. It should be about $1,000 each member for the obligation, not $10,000, if my math works. (Note: this article uses the "ILWU" interchangeably with the "Local 8", as opposed to referring to the International as a separate entity, thus my conclusion above).

The $93 million figure is ridiculously high - I can only assume that must have been something in the order of profits for the next 100 years or something. Stevedore companies have razor thin margins. As the article says, the Port of Portland lost money in 36 out of its 38 years operating the terminal. So if ICTSI, absent the ILWU shenanigans, would have *ever* made a profit from the terminal is unknown. And since Hanjin went bankrupt in early 2017, that would have stopped the clock on any future profits - they were the only line that called at the terminal. So a more reasonable award would be five year's profits - whatever that might be - and that's it. Period. Ain't no $93 million - That'd be $18,600,000 per year? Get real. Or if stevedore companies do make $18,000,000 from one terminal, then sign me up!