Anyone who lived through the prior ILWU contract negotiations understands the major impact this event can have on business, especially small business. A more limited supplier base and less frequent shipments put smaller businesses as risk when their entire inventory to operate for the next few months is stranded on a ship waiting to get into port or inaccessible at the terminal.
No one, not even the Union or the Pacific Maritime Association (PMA) leadership, knows the outcome of these negotiations. While we always hope for the best going into contract negotiations, as someone who has lived through ILWU contract talks and negotiated contracts with unions such as the Teamsters, here are some reasons why we believe contingency planning is essential for your business:
- The odds are against you: There has not been a disruption free contract negotiation in the past twenty years, and 2002 and 2014/15 were especially harmful.
- It’s been a long time coming: It has been over seven years since the two sides really sat down at the table. While the employer always wants a longer contract, longer time between negotiations can allow issues to fester. When the list of grievances is long, each side will be more committed to standing firm on issues they brought to the table.
- The ILWU believes they have earned it: The ILWU has now worked on an extended contract with inflation hitting recent highs and the longshore men & women continuing to work through the pandemic. There will be a sense within the Union that they deserve a big increase to make up for these factors.
- It’s a matter of leverage: The ILWU knows they are going into the negotiations with a lot in their favor. These negotiations are governed and protected by Federal law (known as the National Labor Relations Act) and the process is overseen by the Executive appointed National Labor Relations Board. President Biden will be more supportive of the Union’s position. Additionally, in most negotiations the employer has the right to permanently replace striking workers. This option will never be utilized with the ILWU, so their risk for going on strike is highly diminished. Additionally, the supply chain is already backed up making cargo diversions to the Gulf and East Coast more difficult.
- The “X” factor: Unlike 2014/15, the container shipping lines have reported record earnings. Typically, this means the Union will expect a higher increase. This is the “x” factor because it is unknown how much the shipping lines (who sit on the board of the Pacific Maritime Association) will be willing to give. If both sides strike the right balance, the impact may be minimal, however there is oftentimes a mismatch between what one side wants and the other is willing to give.
ILWU contract negotiations, like earthquakes along the San Andreas fault, are a fact of life for those connected to the West Coast port complexes. While we know that negotiations are coming, no one knows exactly when disruptions may start, how severe they will be, and who will be impacted the most. Like earthquakes, the only option is to be prepared and have a variety of contingency plans to provide the best outcome possible. This takes actively leading your organization, supply chain team, or small business to think through scenarios, look for risk, and mitigate them.
Let’s rise above and lead.
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