California Apparel News

Even though the six-year contract between West Coast dockworkers and their port employers expired at 5 p.m. on July 1, the two sides will continue negotiations through the middle of July.

The International Longshore and Warehouse Union, which represents some 13,600 registered workers at 29 West Coast ports, and the Pacific Maritime Association, whose 72 members include shipping lines and terminal operators, have been negotiating in San Francisco since May 12.

PMA spokesman Wade Gates said that both sides continue to talk and would be negotiating through the middle of July. That message was reiterated by ILWU spokesperson Craig Merrilees. “They are meeting and negotiating and working on it,” he said. Merrilees added that cargo will keep moving and normal operations will continue at the ports until an agreement can be reached.

Both sides have been relatively quiet about the talks, which is good news because in the past there have been threats of work slowdowns if the talks bogged down.

In the past, it has taken weeks after the deadline to come up with an agreement, and this year it will probably be no different. But it always puts apparel importers and exporters on edge who use ports such as Los Angeles; San Diego; Long Beach, Calif.; Oakland, Calif.; and Tacoma/Seattle, Wash.

Major retailers and apparel manufacturers already have their contingency plans in place in case a work stoppage happens. The National Retail Federation recently issued a study showing if there was a West Coast port shutdown, it would cost the economy as much as $2.5 billion a day.

The study showed that a five-day stoppage would reduce the U.S. gross domestic product by $1.9 billion a day, disrupt 73,000 jobs and cost the average household $81 in purchasing power.

In the past, contract negotiations have been stuck on issues such as automation and technology.

This time, the issues are centered around a generous healthcare plan provided by the employers. Currently, longshore workers pay nothing for their healthcare coverage and only $1 for prescriptions even though they are among some of the highest-paid blue-collar workers in the United States with yearly wages hovering around $100,000.

Under President Obama’s Affordable Care Act, these generous healthcare plans will be subject to a “Cadillac tax” that will cost employers millions. The rationale for the tax is to rein in bloated healthcare plans that raise medical costs and to help fund Obamacare.

This “Cadillac tax” calls for a 40 percent excise tax on employer-sponsored plans spending more than $10,200 per employee or $27,500 per family.

Starting in 2018, PMA members will have to pay a hefty $150 million tax on the healthcare plans provided to longshore workers.

Because the tax doesn’t begin until 2018, it is possible the two sides could end up hammering out a three-year contract rather than a six-year contract to push the issue down the road.

Every contract-negotiation season has its difficulties. In 2008, negotiations got contentious over automation and job security, but an agreement was reached a month after the contract expired.

Many still are haunted by the disastrous contract negotiations in 2002. The PMA’s shipping companies and terminal operators locked out dockworkers on Sept. 27, shutting down all West Coast port operations for 11 days right during the important season to bring in holiday goods. Major apparel companies in Los Angeles lost millions when they were unable to deliver their goods on time and had to pay charge-back money or saw orders canceled.

President George W. Bush invoked the Taft-Hartley Act and got a court order to open up the ports again. It was the first work stoppage at the West Coast ports since 1971, when a strike closed the ports for several months.