Terminals where longshoremen work
Terminals at the Port of New York and New Jersey where longshoremen work. Reuters

Union negotiators for dockworkers on the U.S. East and Gulf Coasts and negotiators for port operators and maritime shippers have reached a tentative labor pact that will avert a potentially devastating economic blow to the U.S. economic recovery.

Federal mediator George Cohen said late Friday that both groups -- the International Longshoremen's Association, the AFL-CIO (the ILA) on one side and the U.S. Maritime Alliance (the USMX) on the other -- agreed on terms of a “master contract,” an umbrella agreement that governs labor relations in all 15 major ports from Maine to Texas. These ports handle about 35 percent of U.S. imports.

It was further agreed that there will be no work stoppage as negotiators hammer out local agreements and pacts specific to each port.

The news provides a huge relief to U.S. retailers worried that a strike by the International Longshoremen's Association, AFL-CIO, which represents about 14,500 workers, would cost more than $1 billion per day.

“The retail industry, which supports one in every four U.S. jobs, is pleased to hear that the ILA and USMX have reached a tentative, long-term master contract," National Retail Federation President and CEO Matthew Shay said in a statement released Saturday.

Negotiators were operating under a Wednesday deadline to avoid what would have been the first longshoremen's strike in 35 years.

"I am extremely pleased to announce that the parties have reached a tentative agreement for a comprehensive successor Master Agreement,” Cohen said. “The tentative agreement is subject to the ratification procedures of both parties and, as well, to agreements being achieved in a number of local union negotiations. Those local negotiations are ongoing and will continue without interruption to any port operation.”

A strike would have hit the New York-New Jersey area particularly hard. About 3,250 longshoremen load and unload boats on ports in the area. Port activity directly supports nearly 200,000 jobs in the New York area alone. A one-week dockworkers strike would cost the region an estimated $110 million in economic output and $136 million in personal income. Even without sympathy strikes by dockworkers in other ports, a New York-area job action would have cost the U.S. $1 billion to $2 billion per day in economic activity.

Moreover, a strike would have hammered the nation's fragile economic recovery because consumers, who constitute about 70 percent of the U.S. economy, would have to absorb the extra cost of goods as a result of higher transportation charges.

Talks between labor and industry have centered primarily on two contentious issues. One is container royalties, or payments to dockworkers, many of whom make more than $100,000 per year, to compensate them for work lost because of shippers using containers. Maritime shippers have been using containers on freighters for decades to handle cargo efficiently as containers can be easily moved among ships, trucks and trains.

Those shippers -- and also the terminal operators -- argue that there are few if any dockworkers today who have been impacted by the 1960s introduction of containerization, and that royalties no longer compensate workers for time actually lost.

Still, container royalties have remained in place and, since 2009, when a cap on royalty payments was scrapped, those payments skyrocketed. In 1996 they averaged $6,028 per worker; in 2011 they averaged $36,000 per worker, according to the Wall Street Journal.

The ILA argues that these payments are now an essential part of worker compensation.

“Container Royalty (payments) supplements the members’ income and keeps his benefits package financially strong,” says a statement on the ILA website. “Container Royalty eligibility must be earned by an ILA member reaching a certain amount of hours worked each year. ILA work isn’t like other professions: no ships mean no work, but employers depend on a strong and skilled workforce when ships need to be worked. Container Royalty helps keep an ILA workforce available.”

Work rules are another central issue in the labor dispute, indeed a more contentious one. The terminal operators and ocean carriers point to a number of egregious activities that were unearthed during public hearings in 2010 held by the Waterfront Commission of New York Harbor. These hearings featured testimony about such waterfront abuses linked to the longshoremen as crane operators who work eight hours but are paid for 24 hours of work; dockworkers who earn overtime pay despite not even being at the port; “no-show” jobs, which, in one case, paid $73,531 in 2009; shop stewards who earn more than $400,000 per year; timekeepers who earn more than $400,000 per year and are paid for 27 hours of work per day; and the outsized influence of the Genovese crime family on the New York-area docks.

Port management has been demanding that these activities are finally eliminated, and it’s insisting that in the next few years, the longshoremen and the companies that ship on the waterfront focus on improving productivity substantially.

Besides the Port of New York and New Jersey, the ports involved in the contract negotiations are Hampton Roads, Va.; Houston; Savannah, Ga.; Boston; Delaware River; Baltimore; Wilmington, N.C.; Charleston, S.C.; Jacksonville, Fla.; Port Everglades, Fla.; Miami; Tampa Fla.; Mobile, Ala.; and New Orleans.