On Monday, employers (PMA) and labor (ILWU) open discussions on the master contract that governs all port operations along the West Coast. Anyone with a long memory or access to the Wiki can remember what happened in the early 2000’s when things got so contentious that the employers locked out the longshoremen inflicting billions of dollars in damage on the economy.
This time around, it’s different. Many of the issues related to salary and work rules have been ironed out. Minor things can cause friction between employers and labor, though. Who knew on the East Coast right now that the push of a button could lead to the filing of a grievance?
As happens all the time, shippers (both commercial and freight forwarders) as well as carriers have contingency plans in place. These plans revolve, essentially, around moving goods by air, shipping before the contract expires on June 30th and using other ports in Canada, Mexico and the US Gulf or East Coast. Some carriers have warned of exorbitant surcharges as high as $1000 per forty-foot container if work is interrupted. These negotiations are always, honestly, a crapshoot, but there are two major issues that PMA and ILWU negotiators will focus on this year for the next contract.
Issue one: Cost sharing of health care benefits.
The Affordable Care Act requires that “Cadillac Health Care Plans” (those where the premium is over $27,500 for a family and $10,200 for an individual) pay a 40% excise tax beginning in 2018. The benefits received by ILWU members are very generous, and are 100% covered by the PMA. The PMA is going to look to the ILWU to share some of these costs because that could represent an additional $150 million per year. Those costs eat into employers profits which are already under pressure from reduced import and export volumes and the diversification of supply chains to other ports. During this contract, the Panama Canal’s third set of locks are expected to come on line (construction has resumed after a two-week strike was settled on Wednesday), and that will change the distribution patterns and habits of shippers as well.
Issue two: Jurisdiction by ILWU members.
Technology has changed things tremendously. Paper records have given way to optical character recognition (OCR), radio frequency identification (RFID) and GPS tracking of equipment in and through the yards. Jobs that were previously handled by ILWU members have been automated, and as with technology, there are some jobs that do not need to be performed in close proximity to the cargo. There are other jurisdictional issues where the ILWU has fought to cede control of activities to even other unions, as was the case with the maintenance of refrigerated containers in Portland which was being handled by the IBEW.
The world IS watching.
The West Coast of the United States is the gateway to much of the country’s distribution channels. There is never a doubt that a contract gets signed. How long it takes, and how much it impacts all the stakeholders, is the part that has everybody watching these PMA and ILWU contract negotiations very closely.