Pacific Maritime Association President Jim McKenna said this week that the U.S. West Coast employers’ organization will begin face-to-face contract negotiations with the International Longshore and Warehouse Union (ILWU) on May 12 and work continuously, unlike the East Coast and Gulf Coast negotiations, until an agreement is reached. The current six-year labor agreement expires on June 30. The total contract will be worth $4 billion.
As the U.S. West Coast waterfront employers prepare to begin negotiations with the ILWU, their message to the ILWU is clear–the new contract must keep West Coast ports competitive in the battle among North American ports for discretionary cargo. West Coast ports over the past decade have seen their share of the U.S. container trade drop steadily to 45 percent from 51 percent. Shippers are now using ports in Canada, Mexico, using all water to the East Coast through the Suez Canal, as well as the upcoming expansion of the Panama Canal.
However, it is also clear that the mantra among West Coast dockworkers during contract negotiations will be to preserve ILWU jurisdiction, which can conflict with the employers requirement for efficiency. Other issues the union has directed its negotiating committee to address include stronger safety provisions, wages, and more secure benefits.
Another big sticking point in the upcoming talks will be who pays for a so-called “Cadillac tax” in the federal Affordable Health Care Act. Obamacare’s tax on generous health care plans, which is meant to subsidize the millions of workers in the United States that have little or no health coverage so they, too, have access to affordable health care, is set to begin in 2018. The ILWU currently has such a health care plan where the “Cadillac tax” will apply.
On the West Coast, employers pay 100 percent of the premiums in the ILWU health care plan, and union members pay just a $1 co-pay per prescription. The “Cadillac tax” non-deductable pricetag is estimated to be $150 million per year.
The health care issue also impacts the potential length of the contract to be negotiated. Recent contracts have been for six years, which is preferred by retailers and other interested parties, because it provides for a longer period of stability on the docks. But, a three-year contract could possible be negotiated this year in order to avoid the “Cadillac tax” issue in the hopes that Congress would take action before 2018 to remove the tax.
The two sides are being urged by retailers and other interested cargo parties to do whatever is necessary to avoid work slowdowns or work stoppages, including extending the existing contract if negotiations continue beyond July 1, as they are expected to do. When the contract expires, the “no-strike” clause in the agreement also ends.
Matthew Shay, president and CEO of the National Retail Federation, has said that many shippers already have begun contingency planning to ensure that their supply chains are not disrupted. Contingency plans include accelerating shipments and using ports on the East Coast or in Canada or Mexico. “Any kind of disruption at the ports would add costly delays to our members’ supply chains and other industry relying on U.S. West Coast ports, and it likely further threatens the fragile economic recovery,” Shay said in a letter to the ILWU and the Pacific Maritime Association.
Pacific Maritime Association President McKenna has said he is expecting contentious negotiations, but he does believe an agreement will be reached a week or two after the July 1 deadline without an employer lockout or work stoppage.
The last coastwide labor shutdown on the West Coast was a 10-day management lockout of the ILWU in 2002 that ended after President George W. Bush invoked the Taft-Hartley Act.
