Labor-Management Relations and Sinecures for Life: Is There a Better Way to Automate the Logistics of Business?

Posted October 1, 2009 by   · Print This Post Print This Post

Transportation services have long been a haven for American labor unions. As other business processes are automated, unions face increasing threats to demand for jobs for their members. This case study considers a modern manifestation of such tension between employment and automation in the business of global logistics.

Union contracts under the National Labor Relations Act are sacrosanct. Union labor has been fighting to retain rights and controls. The negotiations, under the guidance of the Federal Mediation and Conciliation Service and with a little coaxing by President George W. Bush’s announcement of a Board of Inquiry, appear to have broken new ground in labor-management relations. Does this settlement suggest that Big Labor is now willing to negotiate deals that would convert a port operator clerk’s job into an outsourced job for a major outsourcing services vendor’s “unionized” subsidiary? Should non-union service providers play with “union fire” by accepting unions?

Does the Impending West Coast Port Settlement Opens New Doors for Business Process Automation and Eventual Outsourcing?

In early November 2002, the Federal Mediation and Conciliation Service announced that West Coast port operators and union dock workers had concluded a tentative agreement on key issues in technology, with potential 50% increase in productivity for port operators from San Diego to Seattle. The International Longshore and Warehouse Union (“ILWU”), representing 10,500 West Coast dock workers, agreed in principle to key concessions on the introduction of technology following a 10-day strike that closed the ports and led to President George W. Bush’s order for mediation and return to work.

Chronology.
As reported by a Presidential Board of Inquiry:

The contract between the parties expired on July 1, 2002. Before the expiration of the contract, in May 2002, the parties began to negotiate over a new contract. Negotiations proved unsuccessful and, after the contract expired, the parties began to operate under short-term extensions of the contract. On September 1, 2002, the parties’ practice of operating under short-term extensions of the contract ceased.

The impasse resulted in a lockout.

Affected Parties.
The labor dispute affected, on the one hand, employees represented by the ILWU and, on the other hand, employers and the bargaining association of employers who are (1) U.S. and foreign steamship companies operating ships or employed as agents for ships engaged in service to or from the Pacific Coast ports in California, Oregon, and Washington, and (2) stevedore and terminal companies operating at ports in California, Oregon, and Washington.

Union Practices under Scrutiny.
The operating business model that existed prior to the settlement resulted in a huge bottleneck. While the terminal operators had software that allowed expeditious transit of cargo through ports, their systems came to a stop because the union contract gave the union exclusive jurisdiction over the process of transmitting essential information. In short, only union workers could re-key and re-format the data inputs, resulting in duplication of costs and delays, with a loss of productivity of the West Coast ports as compared to Asian and other Pacific port and terminal operations.

Key Union Demands in Exchange for Introduction of Information Technology.
The introduction of new technologies was expected to eliminate between 200 and 600 jobs, particularly marine clerks. Initially, the ILWU demanded:

  • minimum staffing levels for marine clerks, even if they did not have any job to do due to the efficiencies of automation;
  • protection of those jobs of currently registered dock workers (whose salaries are reported to be approximately $106,000 a year on average) who are displaced, for the remainder of their career, until retirement;
  • the union’s retention of jurisdiction over marine clerical work, which may include some yard and rail planning work but not including vessel planning work;
  • the union’s participation in the productivity benefits and cost savings for the employers, in the form of increased management contributions to pensions as payment for a share of the “increased wealth” that the new technology would bring.

Agreement on Terms of Service.
In early November 2002, the Pacific Maritime Association, which represents West Coast terminal operators and shipping companies, agreed to the protection of jobs and the union dropped its demand for minimum staffing, a practice formerly known in the railroad industry as “featherbedding.” Reportedly, the jobs will secure for the lifetime of the clerical workers. The union reportedly retained the jurisdiction over the marine clerical work and some other work in the terminal yards. At this writing (mid-November 2002), the sharing of productivity benefits had not been resolved, but the union took the position that such sharing was a “deal-breaker.” Negotiations appear to be on track for a contract only because, under federal law, the President has the power to force the parties to “go back to work” and use a “cooling off” period to negotiate a workable new contract.

Legislative and Judicial Context.
The “back-to-work” order, signed by President George W. Bush under the Taft-Hartley Act, ended the lockout instigated by the Pacific Maritime Association in anticipation of an impending strike. The President appointed a Board of Inquiry. See Section 206, 209 of the Labor Management Relations Act, 1947 (61 Stat. 155; 29 U.S.C. 176, 179). A federal judge began monitoring compliance by each side with the legally mandated procedures during such a back-to-work order.

Union Negotiations as a New Business Opportunity for Outsourcers?
The approach of the ILWU in the contract negotiations suggests that it will be a long time before unions voluntarily agree to improve productivity using information technology. The ILWU demanded that the jobs of the incumbent employees be protected for life at current salary levels and the union share in the productivity gains from changes in union work rules.

Competitive service providers will see this episode as further proof that unions do not accept business process re-engineering or any other change in the union’s “jurisdiction” over the “work” as classified in the union contract. Companies and governments that seek to improve their business processes through changes in work rules can be expected to confront similar resistance.

Is there a “Better Way”?
Nothing in the press announcements of the apparent reconciliation suggests that the unions were willing to accept any conditions on their “life tenure in employment” contract for the affected clerical workers. There was no mention of any duty to seek retraining, to increase personal productivity, to learn and apply new skills, or to make any other change in “business [process] as usual.” If their jobs had been eliminated due to imports of goods, they would be eligible for federally funded worker adjustments and retraining, as a principle of promoting international free trade under the WTO and U.s. enabling legislation.

In defense of the union, elimination of jobs due to technology is a constant threat to the number of union members. With declining numbers of members, a union becomes weaker and more subject to further defections.

In conclusion, there may be a “better way” if there are ongoing improvements in quality of service as a condition of job tenure. This law of business applies to business enterprises, which must constantly compete on the basis of service quality. Similarly, the classic “siren song” of the outsourcing service provider, willing to take over the “overhead” and “back office” employees of a customer as part of a long-term service contract, has been that the individual employee will become part of a team, dedicated to service quality, process improvement and where skill and initiative will be rewarded with upward mobility.

This promise of a new career path probably falls on deaf ears, though. Union leaders distrust the benefits of such a new employment environment, which might be available only to the best and most ambitious workers and not available to the larger mass of “ordinary” workers.

Management of unionized operations struggle for productivity improvements. Extrapolating on the ILWU-Pacific Maritime Association dispute, there will remain sharp differences between unionized operations and non-union operations. Where union labor has a right to share, as an equal “equity” partner with management and shareholders, in all productivity gains from business process improvements, they are only pushing management to find ways to circumvent their “jurisdiction,” such as by exporting jobs or eliminating entire classes of work. This struggle, under rules defined in the 1930’s, continues.

International Perspective.

Perhaps, in the long run, government and the parties will see the issue as one of international labor competitiveness. By applying worker adjustment assistance and retraining of workers who need ever increasing skills to remain competitive, government, labor and business might find a “better way” through such transitions to a redesigned workplace. Otherwise, valuably human capital investment opportunities could be lost forever to foreign labor and business.

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