Potential Longshoremen Strike: What Small Businesses Need to Know and How to Prepare

As negotiations between longshoremen unions and shipping companies continue to stall, the likelihood of a longshoremen strike looms large. This potential strike could have significant effects not just on the ports but on small businesses across the country that rely on imports and exports for their goods. In this article, we’ll explore who the longshoremen are, what this potential strike involves, and provide small business owners with actionable steps to mitigate its effects.

Who Are the Longshoremen?

Longshoremen, also known as dockworkers, play a critical role in international trade. They are responsible for loading and unloading cargo from ships at seaports, ensuring that goods flow efficiently from overseas manufacturers to U.S. markets and vice versa. These workers are typically represented by the International Longshore and Warehouse Union (ILWU) on the West Coast and the International Longshoremen’s Association (ILA) on the East and Gulf Coasts.

The work of longshoremen goes beyond simply moving containers. Their duties often include the maintenance of equipment, overseeing the logistics of port operations, and ensuring the safe storage of cargo. Given that 90% of global trade moves by sea, their labor is essential for businesses that depend on imports for their supply chains or exports to reach international markets.

The Potential Strike: What Is It About?

As the current collective bargaining agreements between longshoremen unions and port authorities near their expiration, negotiations have stalled over several key issues. Some of the central points of contention include:

• Wages and Benefits: Longshoremen are seeking wage increases and better health and retirement benefits, arguing that the physical demands of their jobs and the rising cost of living necessitate improved compensation packages.

• Automation: Another major issue is automation. Shipping companies and port authorities are increasingly investing in automation technology to replace manual labor, which could reduce the need for longshoremen. The unions are pushing back, seeking guarantees that their jobs won’t be replaced by machines.

• Working Conditions: Unions have also raised concerns about safety and working conditions at the ports, including long hours and a lack of adequate rest breaks.

If negotiations do not result in an agreement by October 1, 2024, a strike could occur, halting the movement of goods in and out of major U.S. ports. This would create ripple effects throughout the economy, disrupting supply chains and slowing down shipments.

The Impact on Small Businesses

The potential longshoremen strike could have far-reaching consequences, particularly for small businesses that rely on the timely delivery of goods. Businesses across industries, from retail to manufacturing, could face delays in receiving inventory, resulting in stock shortages and the inability to meet customer demand. Furthermore, businesses that export goods could see delayed deliveries, negatively affecting international contracts and customer relationships.

Here’s how the strike could directly impact small businesses:

• Supply Chain Disruptions: For businesses reliant on international suppliers, the most immediate impact will be a significant slowdown or complete halt in shipments. This could lead to shortages of raw materials, finished goods, or components.

• Increased Costs: Shipping delays could force small businesses to seek alternative, more expensive transportation options, such as air freight, to meet their inventory needs.

• Event Cancellations and Delays: Businesses in event planning or those relying on imported goods for specific projects could see cancellations or delays if goods don’t arrive on time.

Proactive Steps for Small Businesses to Take

To prepare for potential disruptions caused by a longshoremen strike, small businesses should take a proactive approach. Below are a few steps businesses can take to mitigate risks and manage potential challenges:

1. Review Contracts and Force Majeure Clauses
   Small businesses should review their existing contracts, particularly those involving supply chains, leases, or service agreements. Look for force majeure clauses, which may excuse performance obligations if the strike significantly disrupts business operations. Force majeure clauses typically cover unforeseen events like strikes that are outside the parties' control. If your contracts don’t include such provisions, it’s worth consulting with an attorney about how to add or strengthen them in future agreements.

2. Government Contractors: Review Your Contracts and Provide Notice
   If you’re a government contractor, review your contracts with the government to ensure compliance with performance requirements. If you anticipate that the strike could hinder or halt your ability to perform, provide notice to the contracting officer consistent with the notice requirements of your agreement to avoid penalties or claims of default.

3. Communicate with Your Suppliers and Customers
   Start communicating with suppliers now to assess whether they have contingency plans in place in case of delays. Set clear expectations with customers about potential delays, and consider adjusting lead times or delivery estimates. Transparent communication is key to maintaining trust.

4. Reach Out to Your Insurance Company
   If you carry business interruption insurance or other relevant coverage, reach out to your insurance provider to understand what your policy covers in the event of a strike. Some policies may cover losses from supply chain disruptions or delayed shipments, while others may not. It’s important to know your coverage limits in advance.

5. Build Up Inventory
   Where possible, stock up on critical inventory or materials in advance of the strike. While this requires an upfront investment, it can be a safeguard against potential shortages that could negatively affect your business.

6. Seek Legal Advice
   Navigating a strike's potential legal and financial implications can be complex. Consulting with an attorney who understands your industry and contracts can help you identify risks and implement proactive measures. If your business is particularly vulnerable to supply chain disruptions or event cancellations, an attorney can also assist with contract renegotiations or advising on alternative legal strategies.

Tips for Small Businesses to Navigate the Strike’s Effects

Here are additional strategies small businesses can employ to navigate the longshoremen strike:

• Diversify Suppliers: If your business heavily depends on imports, consider diversifying suppliers, including sourcing from domestic producers. While this may not be feasible for all industries, it could provide a critical lifeline in the event of long-term shipping delays.

• Adjust Cash Flow: Delays in receiving goods could affect your ability to generate revenue. Make sure you have adequate cash reserves to withstand short-term disruptions. Consider applying for a small business loan or line of credit to provide additional financial cushioning during this period.

• Monitor the Situation Closely: Stay informed about the strike negotiations and potential developments. The situation could change rapidly, and being prepared to pivot quickly could be the difference between mitigating losses and suffering significant financial strain.

• Consider Temporary Staffing Needs: If your business is involved in shipping or receiving large quantities of goods, plan for potential fluctuations in labor needs. The strike could affect not only goods coming in but also workers who manage those shipments.

Conclusion

The potential longshoremen strike has serious implications for businesses of all sizes, but small businesses are often the most vulnerable to supply chain disruptions and cost increases. Preparing in advance by reviewing your contracts, talking to your insurance provider, and taking steps to mitigate disruptions can help your business stay resilient during this period. For businesses concerned about their legal options, consulting with an attorney can ensure that contracts and strategies are in place to minimize risks and capitalize on opportunities in the face of potential challenges.

By taking proactive measures now, small businesses can better navigate the uncertainty of the upcoming strike and ensure they are prepared for whatever happens next.