February 21, 2015 12:01 AM, EST

West Coast Port Dockworkers Union, Employers Agree to Deal

Tim Rue/Bloomberg News
West Coast dockworkers and their employers reached a five-year contract deal Feb. 20, averting a shutdown of 29 ports that could have cost the U.S. economy $2 billion a day, Labor Secretary Tom Perez said.

“This is now in the rear-view mirror. A significant potential headwind for this economic recovery has been removed,” Perez told reporters outside the San Francisco headquarters of the Pacific Maritime Association, which had been locked in a nine-month contract battle with the International Longshore and Warehouse Union.

Perez brokered a compromise on the issue of whether the union could fire arbitrators in workplace disputes, which had held up settlement on a contract after the sides agreed on other terms. Instead of a single arbitrator, a panel now will hear grievances, union President Robert McEllrath told reporters.

The labor standoff had reduced productivity at West Coast ports by as much as half since November. California citrus fruit bound for Asia spoiled on the docks, while Mardi Gras beads destined for New Orleans instead languished on cargo ships off the Southern California coast. Carmakers flew in vital components at more than 10 times the cost of shipping them, while Japanese McDonald’s restaurants rationed french fries because of a shortage of Idaho potatoes.

The Port of Los Angeles, the nation’s busiest, handled 29% less cargo in January 2015 compared with January 2014, and volumes were down 19% in neighboring Long Beach, the second-busiest port, according to statements from both ports.

The contract agreement won’t end cargo bottlenecks right away, even after port operations return to normal by the night of Feb. 21, Perez said.

“The parties have agreed to ensure that there are fully operational ports up and down the West Coast beginning tomorrow evening,” Perez said on a conference call with reporters late Feb. 20. “I am confident that they understand the urgency of the task of eliminating the backlog.”

Talks had broken down this month over a union demand that it be able to fire arbitrators in workplace grievances. The two sides had reached terms over salaries, benefits, the right of union members to maintain and repair truck chassis used to haul shipping containers and health care.

On Feb. 4, the management association publicized details of its contract offer, including raises of 3% per year for full-time dockworkers, along with maintaining fully paid health care that costs employers $35,000 per worker per year. The maximum pension would rise to $88,800 per year as part of the proposed five-year contract, the association said at the time. The union and Perez wouldn’t confirm details of the final deal.

The tentative settlement still needs approval from unionized dockworkers from San Diego to Bellingham, Washington.

“After more than nine months of negotiations, we are pleased to have reached an agreement that is good for workers and for the industry,” said maritime association President James McKenna and McEllrath, the union president, in a joint statement released late Feb. 20. “We are also pleased that our ports can now resume full operations.”

In their statement, the union and management declined to release details of the contract agreement until they are presented to members.

Negotiators for the two sides were seen shaking hands and hugging in the Pacific Maritime Association headquarters shortly after 6 p.m. local time, just as word of a deal leaked out.

The West Coast ports, responsible for 43.5% of U.S. trade, have been operating at reduced capacity since late October as dockworkers slowed cargo movement and port employers cut shifts.

The deal came after Perez gave the dockworkers’ union and shipping lines and terminal operators at the ports until the end of Feb. 20 to respond to a contract settlement he proposed. If they didn’t reach an agreement, he said he would move the talks to Washington next week.