Longshoremen Set to Strike; Seek to Retain Archaic Practices

harold-daggettWhen it comes to protecting job turf, few unions are as ferocious as the International Longshoremen’s Association (ILA). And the union isn’t about to compromise that reputation, with its collective bargaining agreement set to expire September 30. “It looks like we’re going to have a strike,” said ILA President Harold Daggett (see photo). On August 22, talks in Delray Beach, Fla. between the ILA and a shipping industry trade group, the U.S. Maritime Alliance (USMX), broke down. At this writing, they remain at an impasse, though each side has agreed to meet soon. The ILA, which represents 65,000 employees at East Coast, Great Lakes, Gulf of Mexico and other cargo ports in the U.S. and Canada, is insisting employers drop plans to institute cost-saving technologies and labor practices. The contract would cover 14,500 workers. USMX counters that these reforms are overdue and that a strike could seriously damage the entire economy.

For decades, the ILA leadership has looked after its own. Sometimes that has involved deals with the criminal underworld. For decades, shipping terminals in New York City and New Jersey operated as virtual subsidiaries of the Gambino and the Genovese crime families. On occasion, key principals have been convicted. In March 2003, Gambino family boss Peter Gotti and several other persons were sent to federal prison for their involvement in a scheme to intimidate ILA health plan trustees into awarding a contract to a Gambino associate. Harold Daggett, who was elected unanimously to the top post at the North Bergen, N.J.-based ILA last July, replacing the retiring President Richard Hughes Jr., also has experienced life on the hot seat. In late 2005, a Brooklyn, N.Y. federal jury acquitted Daggett along with ILA Vice President-Miami boss Arthur Coffey and reputed Genovese capo Lawrence Ricci in a criminal case in which the defendants allegedly steered union health plan funds toward a mob-controlled pharmaceutical company. During the trial, Ricci “disappeared.” His corpse weeks later turned up inside a car trunk on the parking lot of a New Jersey diner. A fourth defendant, longtime Newark, N.J. Longshoremen Local 1235 boss Albert Cernadas, pleaded guilty prior to the trial. Federal prosecutors in July 2005 had filed a separate civil RICO suit against the union; in November 2007 U.S. District Judge Leo Glasser threw out the suit despite extensive evidence of union-mob collusion. Former ILA Local 1235 President Vincent Aulisi, moreover, was among the dozens of persons arrested in an FBI mass roundup of mobsters and associates in January 2011.

The union also on occasion has illegally suppressed labor competition. Several years ago Union Corruption Update reported on revelations that three Boston ILA locals for years had engaged in the practice of giving minors, some of toddler age, a union card so as to qualify them as employees. By “working” only a few hours a year, the youthful recipients, upon reaching adulthood, could acquire seniority – and with it, inflated incomes. Then-Massachusetts Attorney General Thomas Reilly launched an investigation into this payroll fraud scheme, and in August 2006 announced a combined nearly 120 indictments against 20 individuals. All defendants eventually pleaded guilty or were convicted at trial. In a separate case, five ILA members in 2003 pleaded guilty to misdemeanor charges following their participation in a riot three years earlier at Port of Charleston, S.C. in an effort to block the unloading of a Danish freighter by nonunion workers.

But the biggest obstacles to labor efficiency, and a new agreement, are practices written into contracts over the years. Shipping industry executives, at least, are taking this view. James Capo, chief executive officer of USMX, which was founded in 1997 and represents management at 14 Atlantic and Gulf Coast ports, plus 24 ocean carriers, puts it this way: “Over the years, we’ve got a number of inefficient work rules and practices that have crept into the operation and need to be addressed. It drives our costs up and makes us noncompetitive.” The average annual wage and benefit package for all ILA workers now stands at $124,138. Put another way, ILA members make an average wage/salary of roughly $50 an hour, or about $100,000 a year. That’s about double the pay for unionized full-time U.S. workers as a whole. At the Port of New York and New Jersey, many ILA members are raking it in. Fully 34 ILA members at its various terminals make at least $368,000 a year in wages and benefits; one in three members make more than $208,000.

Those figures don’t even include bonuses known as “container royalties,” which are paid to union members on the basis of cargo weight. In 2011 these royalties amounted to $232 million or about $15,500 per worker at Atlantic and Gulf Coast ports. This arrangement was established in 1960 when New York Longshoremen sought to protect themselves against job losses resulting from the introduction of automated cargo container weighing. It’s been a ticket for inefficiency. The USMX notes: “The initial reason for implementing container royalties…has long been forgotten. Today, thousands of workers who were not even born in 1960 – or in 1968 when container royalties were first distributed – continue to receive payments.” The employer group wants to cap royalty payments, not roll them back or eliminate them. ILA President Daggett is adamant about maintaining the system. His union is demanding that carriers pay all royalty fees. “I want a scale on every pier,” he said. Daggett also stated that if an ILA local discovers a shipping container exceeds highway weight limits, the union will insist that the trucks be prevented from leaving the port and that the containers should be emptied and reloaded into other containers. “If they want to play games,” he said last year, “we’ll play games.”

Even if the container royalty system were scrapped, there are still numerous work rules that hamper productivity and invite participation by organized criminals. A special report (see pdf) issued this past March by the Waterfront Commission of New York Harbor to the governors and legislatures of New York and New Jersey shows how these rules are products of a deeply ingrained and corrupt patronage system. Based on extensive public hearings conducted during October 14-December 2, 2010, the commission concluded:

Certain hiring practices, achieved primarily through calculated provisions of collective bargaining agreements, illogical interpretations of other provisions, and claims of “customs and practice,” have created with the Port (of New York & New Jersey) no/low-work, no/low-show positions generally characterized by outsized salaries. The privileged few that are given these jobs are overwhelmingly connected to organized crime figures or union leadership.

Among abuses, the report cited policies forcing shipping companies to pay salaries exceeding $400,000 for jobs that “require little or no work.” In addition, dockworkers work in much bigger groups (or “gangs”) than needed. This explains why three dockworkers are paid to operate a crane that only one person can operate at a time. Even more absurd, work rules are structured so that workers can be paid for 24 and even 27 hours of work in a given day, even if the actual work they do amounts to eight hours and sometimes far less.

Think the Mafia no longer casts a shadow upon this union? Think again. The commission revealed the ILA has put a good number of relatives of organized crime figures on the payroll – and has rewarded them generously. The spirit of the late godfather of the Genovese crime family, Vincent “the Chin” Gigante, for one, lives here. One of Gigante’s nephews, Ralph Gigante, is a shop steward for an ILA local, which provides him with an annual income of at least $400,000. And two of Gigante’s sons-in-law, Joseph Colonna and Robert Fyfe Jr., serve as stewards in the same union. Colonna’s predecessor, John Bullaro, was the Chin’s brother-in-law. In all, the late Genovese boss has nine relatives working for the union.

The sum of these archaic rules, to say nothing of mob influence, says USMX’s Capo, has cost port operators billions of dollars. “The ILA has absolutely refused to discuss it,” he added. This reluctance may mean an end to a 35-year good luck streak; there hasn’t been a full-fledged Longshoremen’s strike since 1977. President Daggett’s home union, the New Jersey-based ILA Local 1804-1, which represents about 1,200 of the 3,500 Longshoremen at the Port of New York and New Jersey, in fact, already has voted in favor of a strike. Daggett says he doesn’t want a strike, but apparently isn’t leaving anyone too much choice. “I’m not threatening to strike, but you’ve got four hurdles to jump over,” he told an audience at the Journal of Commerce’s 12th Annual Trans-Pacific Maritime Conference in Long Beach, Calif. Those hurdles are: 1) technology and automation; 2) union jurisdiction; 3) chassis; and 4) overweight containers. Each in itself constitutes a complex area of negotiations.

A strike, should it occur, could result in extreme damage to the nation’s economy. With nobody around to load or unload ships at union-controlled ports, retailers and suppliers alike wouldn’t be able to plan ahead. “Logistics supply chains don’t turn on a dime, so even if the issues are resolved fairly quickly, it could take months before all the business comes back,” says Curtis Foltz, executive director of the Georgia Ports Authority. Retailers will be hurt as the Christmas shopping season approaches. “Failure to reach agreement will lead to supply chain disruptions, which could seriously harm the U.S. economy,” writes Matthew Shay, CEO of the National Retail Federation. Similarly, Sandy Kennedy, president of the Retail Industry Leaders Association, states that a strike would be “devastating to the retail industry and would have severe consequences for the U.S. economy” because it would force retailers to “redirect their supply chains during the crucial period before the holiday shopping season.”

Such fears are borne out by economic multiplier studies. A strike, for example, would sideline about 1,500 longshoremen and 1,000 auxiliary employees in Savannah, the second-busiest container port along the East Coast. Yet the real impact likely would be far greater. A recent study by University of Georgia economist Jeff Humphreys concluded that during July 1, 2010-June 30, 2011, deepwater ports in Savannah and Brunswick, Ga. supported a combined more than 350,000 full- and part-time jobs, generating a statewide economic impact of $67 billion. A 2001 report by Tim Ryan, an economist at the University of New Orleans, estimated the total impact of Gulf and Mississippi River ports in Louisiana in 1999 at $29.75 billion, of which $10.32 billion consisted of direct spending and $19.43 billion consisted of secondary spending. This activity supported 243,621 jobs in Louisiana. And several years ago the Lancaster, Pa.-based consulting firm of Martin Associates, in a study for the American Association of Port Authorities, concluded that the total economic output – direct, induced and indirect – generated by U.S. deepwater seaports in 2007 was $3.16 trillion, accounting for 13.3 million jobs.

Union officials know that a strike could cause tremendous economic disruptions. But they insist that it’s management, not the ILA, who is failing to negotiate in good faith. “I thought we were doing OK until they (the U.S. Maritime Association) dropped the bomb on us,” said Daggett. He was referring to the shipping companies’ insistence on improvements in productivity and efficiency that he claims would eliminate decades of ILA gains. Daggett apparently cares little for the technologies largely responsible the boost in productivity. During his presidential acceptance speech last July at the union’s quadrennial convention in Hollywood, Fla., he announced, “We are against automation in the United States on the East Coast and the West Coast.” In a June 2, 2012 letter to the U.S. Maritime Association’s Capo, Daggett wrote:

I have been in this industry over 40 years and know firsthand how technology has affected our membership. Yet every time I raise this issue, you state that the ILA has sufficient rights in the current Master Contract. The current provision needs to be strengthened, especially if USMX wants the ILA to agree to a multiyear agreement. You may be looking forward to retire and leave the industry at the end of this year, but my members want to preserve their jobs for the length of the new contract. Your true goal seems to be productivity for the shippers and unemployment for the ILA.

In an August 31 letter to Daggett, Capo clarified the industry position:

At the previous negotiating sessions, most of the discussion centered around the ILA’s demands regarding automation and chassis. After a great deal of effort and a willingness to compromise on the part of management, we were able to agree to reach agreement on both of those issues. The ILA had made it very clear how these agreements were absolutely critical to being able to successfully conclude an agreement on a new master contract.

When we met during the week of August 20th, USMX presented the issues that we believed were critical to successfully reaching an agreement. Those issues all center around inefficiencies that have crept into our operations over the years. I’m referring to archaic work rules and manning practices, and the system of guarantees and overtime pay practices that result in millions of dollars being paid for time not worked. These inefficiencies are causing many of our ports to become prohibitively expensive, harming our competitive ability and threatening the long-term viability of our operations. USMX was hopeful that we would receive the same consideration from the ILA as we had given it on its critical issues. Instead, our presentations were simply rejected without any consideration, and when management objected to this lack of consideration, the ILA responded with a threat to strike.

In logjams like these, federal intervention usually isn’t far behind. Such is the case here. At the request of the Federal Mediation and Conciliation Service (FMCS), the ILA and USMX have agreed to resume negotiations under FMCS auspices during the week of September 17. Everything will be under tight wraps. In a statement issued last Thursday, the FMCS indicated: “Due to the sensitivity of this high-profile dispute and consistent with the agency’s longstanding practice, we will not disclose either the location of the meeting or the content of the substantive negotiations that will take place.” The National Retail Federation is counting on things working out. “We continue to strongly encourage both sides to remain at the table until a new deal is agreed upon, even if it goes beyond the end of the current contract on September 30,” said Jonathan Gold, NRF vice president for supply chain and customs policy. “It is critical that negotiations continue without disruptions to the supply chain that could impact the critical holiday shopping season and the overall U.S. economy.”

Yet a settlement by the end of the month is far from certain, so long as the ILA continues to make member job preservation, rather then maintenance of industry competitiveness, priority number one. This is not new for union leadership. In 1965, when containerization was gaining favor, ILA President Teddy Gleason negotiated a landmark contract to ensure preservation of union jobs and high levels of compensation. In a way, the Longshoremen’s union can’t be blamed for its current intransigence. Like all unions, it can be counted on to promote the interests of its members over those of the nation as a whole. That is the nature of cartels. But its almost monomaniacal focus on union job preservation may wind up costing a lot more jobs elsewhere. Retail shoppers in a few months may be in for some rude surprises in attempting to find a desired item in stock. And job seekers, and job holders, at many stores may learn that their services suddenly won’t be needed.


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