This study is both a chronicle of labor relations in the hotel industry and, to a lesser extent, a critique of both the industry and unionism.
A realistic story of what actually happened in the industry needs telling. Many in.the industry are already familiar with its general outline but may not know all the details. Those not in the industry-especially those concerned with public policy affecting the industry (state and local officials) as well as the general public whose lives are frequently touched by what goes on in union-hotel labor negotiations-should, I believe, benefit from a better understanding of the various elements in the industry, how they developed, and the role they play at any particular time. The chronicle should also be most helpful to those entering the industry as either union or management representatives.
Readers who prefer stories with heroes and villains may be disappointed in this one. This study does have its share of "good guys" and "bad guys" but it's a confusing picture. For one, no single character is labeled as such; each reader will make choices depending on where he or she is coming from. That won't settle the matter, however, because even then the "good guy" in one section of the book becomes the "bad guy" in another section and sometimes the sheer incompetent in still another.
I've tried to tell it as it actually happened in nearly 50 years of labor relations in Hawaiʻi's leading industry. I've also tried to tell the story, as much as possible, in a non-judgmental way, but recognize that some of my biases have probably crept through in an occasional comment or sometimes just in the way an issue is presented.
Since every good story needs its "lessons," and this writer is not devoid of feelings and opinions, this study also engages in some analysis and evaluation, mostly in the last two sections--The Foreign Invasion and Summary and Conclusions.
Two major concerns dominate these final sections: 1) the future of the industry, which cannot be viewed as separate from the future of the Hawaiian economy, and 2) an evaluation of how well dual unionism has served and is likely to serve the interests of the 30,000 plus employees in the industry. Hawaiʻi is probably the only major tourist area in the United States in which two unions share in the representation of a substantial portion of hotel employees.
Questions raised by the dual unionism issue were probably a major motivating force in my undertaking this study. My conclusions will not be accepted by many but will, I hope, provoke some much needed discussion.
The Only Game in Town
Tourism, since the mid-1970s, has been Hawaiʻi's leading industry, ". . . the pillar upon which the Hawaiʻi economy rests." How organized union workers in that industry have fared, their impact on the industry and on the wages and conditions of all hotel workers, is what this study is about.
Tourism's dominance of the Hawaiian economy is a post-World War II development. There were many earlier efforts to bring visitors to the Islands1, but those efforts were aimed at a relatively narrow market-the "upper crust" that traveled by boat and spent several weeks at a beach-side resort. Pre-World War II tourism reached a peak of nearly 32,000 visitors in 1941, after which the visitor industry was suspended for the period of the war.2
The reopening of the relatively few hotels to tourists after 1945 plus the opening of many new trans-Pacific routes to new airline carriers3 marked the start of the Hawaiʻi tourist boom.
The airlines were the major single force in the development of Hawaiʻi's tourism. They were the magic ingredient that converted the Hawaiian market from a limited market for the wealthy to a mass market of middle-income and low-budget families.4 The airlines also facilitated the development of the economy package tours which, by the 1970s, brought in as much as 50 percent of all visitors. Many Waikīkī off-beach hotels and smaller neighbor island hotels were almost totally dependent on these tour groups for their economic survival; when this market started to decline in the late 1970s and early 1980s these hotels experienced serious distress at the same time that other sectors of the tourist market were flourishing.
Strong support by all state administrations in the post-war period also provided a favorable climate for the growth of tourism. The role of government has been mainly to provide the infrastructure-airport facilities, highway construction, improved visitor use areas (beaches, parks, scenic sites) and a generally supportive climate of laws and regulations.
Under Governor William Quinn's administration (as appointed Territorial Governor and later as first elected State Governor) the state expended some $260 million in Capital Improvement Program funds to construct a substantial infrastructure. Quinn personally invited Laurance Rockefeller to develop a hotel complex in Hawaiian invitation that culminated in a 99-year lease for the exclusive development of 1,800 acres on which the luxury Mauna Kea Hotel resort on the Big Island of Hawaiʻi (with further additions still to be made) now stands.
Governor John A. Burns, who held office from 1963 until his death in 1974, was also an ardent supporter of tourism. "From both a short and long term point of view," he told the legislature after one year in office, ". . . tourism shows the greatest promise of sustained growth." His grand scheme was to develop a vast hotel-resort complex on the island of Hawaiʻi's Kona Coast. In 1966 the Māhukona-Kawaihae highway along the coast was completed; although designed to serve the sugar industry, it also made the area more accessible to newly-built hotels.5
Tourism was also supported by many as a means of taking up the employment slack caused by the decline of the sugar and pineapple industries. The 1963 Officers Report of the International Longshoremen's and Warehousemen's Union, Local 142 (ILWU), had a chart showing that from 1950 to 1960, employment in sugar had dropped by 37.4 percent, in pineapple by 3.6 percent. "Like it or not," the report stated, "it is in tourism and related service industries that most private industrial growth can be expected."
The Union's support for tourism, backed by its strong political influence with the Burns administration, the state legislature, and county governments (especially on the neighbor islands), played an important part in the expending of public funds for the tourism infrastructure.
The Boom Years
New hotel construction flourished in this supportive climate. There was rapid expansion of the industry in Waikīkī in the immediate post-war years through the 1950s: seven new large hotels6 appeared in quick succession, -all but one of which soon recognized the AFL Hotel, Restaurant Employees, and Bartenders Union, Local 5 as the bargaining representative of its employees. These six hotels, together with the previously organized Matson (later Sheraton) properties and the Alexander Young Hotel, made Local 5 undisputed7 representative of 85 to 90 percent of all employees of the larger hotels in Hawaiʻi.8 In the late 1950s and into the 1970s additional hotels were built in the off-beach areas of Waikīkī and other Oʻahu areas (Mākaha, Kuilima).
The 1960s saw the start of the neighbor islands hotel boom with the opening of the Royal Lahaina and the Sheraton Maui in the Kaʻanapali area of Maui. That boom continued at a much faster rate, although in smaller absolute numbers than on Oʻahu, until the early 1980s; after an apparent pause a new "boomlet" in luxury hotels on the neighbor islands was under way.9
The ILWU, with NLRB election wins at the Royal Lahaina in Kaʻanapali (1964) and later at Mauna Kea on the Big Island (1966), established beachheads that were later expanded to make them the major union in the hotel areas on the neighbor islands.
The tourist boom has been exceedingly profitable although not uniformly or consistently so. It was especially so in its early stages. The official historian for Amfac, writing in 1973, exulted thaʻanapali, quoted one Amfac president as saying: "From now on, it is nothing but a money machine."10 There were problems later--slowdowns in the economy (1974, 1980), airline strikes (1985), and changes in the tourist mix from mainly prepaid groups to FIT (Free Independent Traveler). The Kaʻanapali resort complex, however, with sales and leases to other operators, has done very well despite such problems.
The development of hotels within a total resort complex that also provides other visitor accommodations and facilities (condominiums, single homes, retail shopping plazas, golf and tennis courts) has generally proven to be a money maker.11 This has been a major trend since the late 1960s. As one industry observer notes:
A hotel may be highly profitable when viewed as part of a total complex. The developer recaptures the hotel cost in the sale of land and other facilities. When seen in the perspective of the total development which may run as high as $500 million to a billion dollars the cost of the hotel is minimal.Profit data for specific hotels is generally not available12 but there are many indications of high profitability. U.S. Census data for 1982, the latest year available, show that Hawaii hotels had the second highest income per resort, second only to California. Hawaiʻi's hotels, despite variations, have consistently shown unusually high occupancy rates, from a high of 87 percent in 1967 (when there was a large influx of Vietnam armed service persons on "rest and relaxation" leave) to lows in the '70s.13 What is not generally appreciated is that even the low rates are generally above annual rates for the other resort areas. As one industry consultant, in one of his candid moments put it: "There's no danger of an inability to attract outside capital with the kinds of occupancy we have. Waikiki (speaking in early 1986) is still running full 11 months of the year."
Similar sentiments were expressed by Walter A. Dods, Jr., President of First Hawaiian Bank and Chairman of the Board of the Hawaii Visitors Bureau (in 1986): "Financiers are 'voting with their money' to show confidence in Hawaii's tourism industry and the money talks a lot stronger than the 'anti-business' criticism of Hawaiʻi. . . ."14 Not all hotels have always shared in this general prosperity. With any slackening of demand for hotel rooms those hotels which operate at the margin are the first to be pushed out of the market. Similarly the entry of new higher quality hotels into a given market tends to downgrade other hotels in that market with the heaviest impact on those at the bottom. There have also been failures due to unfortunate choices of location or errors in judgment as to what would appeal to different classes of tourists. The industry has had its share of failures-bankruptcies, forced sales, and conversions to condominiums. Yet the press of outside large investors, mainland and foreign, to enter the market testifies to a long range faith in the profitability of the industry.
The "Higher Quality Market"
The decline of the package tour groups, starting around the mid-70s, sparked interest in the need for developing a "higher quality market"-one that would produce ". . . higher per capita visitor expenditures and longer length of stay" rather than "sheer volume of visitors." The theoretical basis for such thinking was provided by an article, "Tourism in Hawaii-Can It Grow Forever," by David Ramsour, Bank of Hawaii economist, in the Bank's 1984 Annual Economic Report. Applying a previously developed "tourist life cycle pattern" to Hawaiʻi, Ramsour noted that the decline of tourist arrivals in 1980 (with zero increase in 1981) and the "historic decline of first-time visitor share to less than 50 percent in 1983 could mean the beginning of a declining stage for tourism for Hawaii."
... keeping this resort destination from declining into the typical life cycle will probably involve the difficult move back away from mass marketing [our emphasis] that has so characterized it in recent years. Not only does that mass market strategy link all growth inextricably to rising numbers of tourists and the problems of crowdedness, but it also relies on higher percentages of repeat visitors who bring thinner profit margins and who thereby reduce the resort's ability to maintain its facilities and environment.Ramsour hedged his analysis with cautionary statements. He stated that in such an event:
Neither private nor public revenues can rise sufficiently to keep the resort center from moving into the decline phase of the life cycle. The chances of Hawaii then attracting 8 million visitors a year at the end of the century ... may be considerably lower than predicted by state planners.
He also questioned whether "...a [promotional] comparison of any type" can "divert a resort from a life cycle of maturity and ultimate stagnation or decline..."
By the time of the Governor's Tourism Conference in December 1984, the cautions were forgotten and Ramsour's article became the programatic expression for a new emphasis on quality. Kent Keith, director of the state's then Department of Planning and Economic Development, told the conference:
We want tourists who will stay a long time and spend lots of money. This is a return to what we had years ago-an affluent market which resisted economic cycles,15 rather than a mass market which compounds the effects of economic cycles. Dr. Ramsour of the Bank of Hawaii has demonstrated that tourist destinations have their life cycles and Hawaii may be reaching maturity. We need to reinvigorate our visitor plant with quality ...Keith spoke of the success of the Kaʻanapali area which at the time enjoyed a 99 percent plus occupancy rate, and saw this as pointing ". . . toward the potential for similar success on the Kona Coast." These sentiments were echoed by Christopher Hemmeter, one of the more successful developers of quality hotels,16 in his talk to the conference on "Why Quality Tourism is Needed in Hawaii." Some ten months later, Hemmeter explained to the Biennial Convention of ILWU Local 142 that
... his approach to resort management is to attract the top 25 percent of the tourist business worldwide and thus ensure quality and stability. The remaining 75 percent of the tourist business is vulnerable to changes in the economy."17and,
Over the next three years, we will be expending in this state in excess of $1.75 billion to advance our visitor industry. We had to bring that kind of capital in from outside. It doesn't exist here.The Honolulu Advertiser, in October 1985, estimated that proposed hotel and resort developments would add perhaps 20,000 hotel rooms and thousands of resort condominium units to the total of 66,000 hotel rooms and condo units then in the islands. Total spending: perhaps $5 billion.
Not all industry analysts share the optimism of Keith and Hemmeter. Anthony Downs, a senior fellow of the Brookings Institution in Washington, told a local Honolulu group:
Tourism, alone, even if it grows rapidly, cannot sustain past rates of economic growth in Hawaii.18In a general article on the nationwide building boom, "This Building Boom Shows Something's Busted" that appeared in The Wall Street Journal of October 29, 1985, Downs also raised the spectre of overbuilding:
What will it take to halt office and hotel overbuilding? As long as the developers can obtain more loan or equity funds to start a project than it costs to build it, not risk their personal assets, and gain large fees for developing, some will keep on doing so. Only restraint by capital suppliers can stop them.In early 1986 the American Automobile Association, on the occasion of making four 5-star awards to four Hawaiian hotels on three islands, reported that Hawaii then had "the greatest concentration of luxury hotels of any state in the U.S. or province in Canada." The nearly-as-prestigious 4-star awards were given to 19 hotels on four islands. The question persists-how many luxury hotels can the industry absorb?19
The Pros and Cons of Tourism
There are also those who don't agree on the importance of further developing tourism. Its critics and detractors include politicians, economists, sociologists, environmentalists, psychiatrists, farmers, and numerous community leaders who waver between opposing an intrusion into established life styles and welcoming a source of much needed jobs.20
Tourism, among other things, has been held responsible for the disruption of family life and an increase in the divorce rate in a rural community on the Big Island of Hawaiʻi. A radical political scientist charged that the ILWU leadership and membership, in supporting the public funding of the tourism infrastructure ". . . abandoned their faith in socialism and endorsed capitalism's program . . ." although just when this "faith in socialism" was part of the union program is never made clear.21 An Hawaiian activist charged that "profit making, multinational mass tourism" has forced the native Hawaiian people into "cultural prostitution" (example: The hula-"once a sacred act is now a voyeuristic event to draw visitors and make money").22 The more widely held criticisms are those based on environmental and economic grounds.
Environmentalists have appeared at almost every public hearing involving approval of proposed resort projects either to oppose or restrain new developments. Their concerns include possible destruction of rare archaeological sites, destruction of surfing beaches and fishing reefs, loss of agricultural land, traffic congestion, shortages of water, lack of adequate housing for the needed workforce.
Economists and others have warned a tourist-dominated economy is vulnerable to external economic conditions and seasonal employment fluctuations. Governor Burns was probably over-optimistic when, in his address to the 1964 legislature, he stated that tourism "need no longer be regarded as subject to sharp fluctuations as the economy goes up and down." He claimed that statistics show that the number of visitors did not decline in 1953-54 nor 1957-58, nor in 1960. Later data show a different picture-a three percent decline in 1957-58, zero increase in 1960-61 (compared with a 31 percent increase just immediately before), and a slower than before increase (15 percent as against 21 percent in the previous year) in 1953-54. Also, in later years-in 1974 and 1975 -there was virtually no increase because of a mainland recession, and an actual decline in 1980 and 1981. The conclusion reached in one study is that ". . . tourism probably causes mainland recessions to be felt in Hawaii to a minor extent at some times but not at others."
Gregory Pai, First Hawaiian Bank's economist, has pointed out that Hawaiʻi's labor force has experienced seasonal fluctuations in employment that are 65 percent greater than the national average. The result has been an overall deterioration in wages and the quality of jobs which has polarized job categories.
Another bank official predicted that in Hawaiʻi's job market, in the not too far-off future, ". . . the middle classes as we know it will be gone; they will not be able to afford Hawaiʻi; the islands will be occupied by the wealthiest people of the world and by those who provide services to the wealthy and the tourists."
Tourism is commonly recognized as a "fragile" industry-one subject to abrupt, damaging changes. As one hotel executive stated:
Tourism is probably the most fragile major industry the world has ever seen. It can employ great numbers of people, in favored areas. It can bring great economic bounty to those favored areas and yet, virtually overnight, relatively minor factors can undermine this industry in any particular area.The obvious answer to too much reliance on a "fragile" dominant industry is to develop other industries, preferably those that provide better jobs at higher pay. Everyone is agreed on this; as with support of motherhood and patriotism there's no room for argument. Not much progress can be reported in this area in spite of much political rhetoric, especially around election time, on the need for developing new industries to stop the "brain drain"-the loss of educated young people to the mainland because of the lack of suitable jobs in Hawaiʻi.
Hawaiʻi's Department of Planning and Economic Development concluded, in October 1981, that,
Exclusive of a 2 percent growth in Federal defense expenditures and a 4 percent growth in Federal civilian expenditures, there will be insufficient growth in any other primary industry-agriculture, garment, energy production and other businesses-to provide the jobs Hawaii needs for its citizens by 1990.The inescapable fact-despite the many pros and cons of the continuing controversies over tourism-is that tourism is now the main support of the Hawaiian economy and that when industries such as sugar and pineapple are reducing operations, "some form of economic development must take their place and tourism has been the mainstay of the process."
The two labor unions in Hawaiʻi which represent workers in tourism-the Hotel Employees and Restaurant Employees Union, Local 5 (also referred to as Local 5 or Hotel Workers Union) and the International Longshoremen's and Warehousemen's Union, Local 142 (also referred to as the ILWU or Local 142)-perform an important role in protecting and defending the interests of workers in the industry. What they do and how they do it has and can influence the direction in which segments of the industry move at any particular time. For the most part the unions accept the industry situation as they find it; they have certainly not imposed any roadblocks to the further development of tourism. The history of their past relations with hotel management, and the probable course of future relations, form an important part of Hawaiʻi's economic history.
Organizing the Unorganized
For those who lived through, or even read about, the 1930s and 1940s, the slogan "Organize the Unorganized" was the battle cry under which millions of workers in America's basic industries- auto, steel, rubber, lumber, metal mining and others-were brought into newly organized unions under the banner of the Committee for Industrial Organization (CIO)1. The slogan conjures up recollections of mass rallies, sit-down strikes, picket lines, the Chicago Memorial Day massacre, and other bitter and violent clashes. It wasn't quite like that in the organizing of Hawaiʻi's hotel workers.
There were some easy and some rough periods in Local 5's organization of Waikīk 9; hotels. An initial recognition of Local 5 at the Royal Hawaiian Hotel without an NLRB election in 1941 was soon nullified by World War II when the U.S. Navy took over the hotel and martial law was imposed upon the islands.
After World War II Local 5 had to reorganize the hard way- through an NLRB election and tough negotiations. The agreement reached was then extended to other Matson hotels on the "accretion" principle.
In the 1950s two new hotels, Kaiser (later Hilton Hawaiian Village) and Waikiki Biltmore, recognized Local 5 without any NLRB election.
The decisive event in establishing Local 5 as a power in the industry was the 1952 strike against the Moana Hotel wherein the union established its ability to inflict serious damage to a hotel.
Local 5's power was further shown in its successful effort in 1960 to reject the International union's effort, supported by Sheraton, to displace Arthur A. Rutledge and James Chock, the union's president and secretary-treasurer, as leaders of the local.
Thereafter organizing was extended by simple recognition and an occasional election (several were lost) until the 1970s when resistance developed by both management and the ILWU.
When Local 5 organized its first hotels in 1941, Matson Navigation Company, the owner, recognized the Local as the exclusive bargaining representative for its employees at the Royal Hawaiian Hotel, the Moana Hotel, and the Waialae Golf Club, without a Labor Board election, a procedure that nearly every other union at the time was required to follow. "Matson," Art Rutledge wrote in a letter to International President Edward Flore, ". . . after being furnished proof that nearly all its employees had designated Local 5 as their bargaining agency, recognized the Union as such today."
Three months later Rutledge wrote to Harry Fox, managing editor of the International's publication the Catering Industry Employee, that agreement had been reached on a contract. Gains won included shorter hours, approximately $59,000 more per year in wages (about a 20 percent increase to all employees) and other improvements. Provision also was made for the union to maintain an office on company premises for a full-time representative there to police the agreement. Credit for achieving an agreement without a strike or Labor Board vote, wrote Rutledge, should be given to a Honolulu-born 12-year hotel employee, Edward Anzai, who later became president of the Local's new Hotel Division. Rutledge also credited Clifford O'Brien, a Portland, Oregon attorney and International Representative for the ILWU who assisted in the negotiations, with helping the Local ". . .to receive a much better deal than we may have received otherwise."
The organizing of Matson hotels wasn't entirely divorced from the waves of organizational activity that were sweeping the mainland and had already spread to Hawaiʻi. The ILWU in Hawaiʻi by 1941 had successfully organized the waterfront and gained a small but solid base on the plantations. Within the recent period before the Matson contract there had been a brutal confrontation (in 1938)-the "Hilo Massacre"-on the waterfront at Hilo on the Big Island, in which 50 longshore strikers were wounded and 25 taken to the hospital, during a strike against the Inter-Island Steamship Company.2 Longshoremen at Ahukini Landing on Kauaʻi were then on strike, a strike that had already lasted for six months and was to go on for four more. Just a month before the Matson contract was signed, Honolulu bus drivers, after 17 years of company unionism and four years under a docile leadership, had waged a one-month strike in a vain effort to win a union shop. Organization had also spread to many AFL craft groups and to workers in breweries, dairies, quarries, warehouses and others.
Organizing and strikes were very much in the air and Matson, undoubtedly aware that any type of disruption might affect their hotel operations and possibly spread to their steamships, apparently chose the safe and prudent course.
Organization of Matson was undertaken about a year and a half after Rutledge became business agent for Local 5. Until then the local, chartered in 1938, had mostly operated in waterfront bars, where owners sought the union card in order to attract union-minded seamen but rarely observed union conditions. A few sporadic efforts to organize Oriental restaurants met with indifferent results. It was clear that organization of the large hotels offered the one opportunity for a large, stable membership.
An Organizational Freeze
The impressive gains won in Local 5's first contract with Matson (also later agreed to by the Alexander Young Hotel) were soon nullified by the bombs that fell on Pearl Harbor. Tourist traffic was ended. The Navy took over the Royal Hawaiian and cancelled the contract. Within two years, local union membership was down to 64, about one-tenth of what it had been before the war.
Hawaiʻi was placed under martial law within hours after the attack on Pearl Harbor; the Army then took over and ruled Hawaiʻi under the Office of the Military Governor (OMG) until
October 1944. OMG was, in effect, a military dictatorship that controlled, among other things, all aspects of labor relations- wages, conditions of employment, and utilization of labor.
Rutledge, with little to occupy him in Local 5 during the war years, expanded into other areas. He became business agent for several organized groups-Dairy Workers, Teamsters, Honolulu Gas Company employees, Transit Workers-all of which later became part of Hawaii Teamsters Union Local 996, the second union that he headed during his long labor career in Hawaii. He also functioned as an officer of the Honolulu Central Labor Council, as a member of the U.S. War Manpower Commission and later of the War Labor Board.
He operated as a gadfly on several fronts. As head of a Teamsters' local, he challenged the military governor's jurisdiction over labor and called for a return to "competent and constitutional civilian controls"-"the first articulate protest," according to J. Garner Anthony, who was then serving as Hawaiʻi's Attorney General. He also challenged Hotel Workers International President Edward Flore's refusal to place American-Japanese (AJA) culinary workers in union jobs. In an open letter to the Catering Industry Employee, he defended the loyalty of these workers to America.
Man for man, we will match these "Japs" against the same number of members of any other local in the United States. . . . The Hawaiian Japanese-American makes a good union man because he knows that the unions are the one force against the damnable dual standard of wages for Orientals and whites, which local big business instituted and would like to perpetuate. . . . He knows that in a union, he is an American.3The letter was reproduced in local papers and in some areas of the mainland. It undoubtedly raised his standing among Japanese-Americans in Hawaiʻi, many of whom later became staunch union members.
After V-E Day
The lifting of wartime restrictions in late 1944 did not bring an automatic return to conditions that existed before the war. Matson was in a less compliant mood and Local 5 had to undertake a new organizational campaign for union recognition at the Moana Hotel against strong company resistance. Undoubtedly because of the participation of the Hawaii Employers Council, newly formed in 1943, the company now insisted on an NLRB election and campaigned against the Union.
The vote for the Union in July 1945 was overwhelming-159 to 7. Again there was more company resistance and it took seven months of negotiations, capped by a one-day strike, to reach agreement. This same agreement, with some further wage increases, was extended to the Royal Hawaiian in 1947 when they reopened for the tourist trade. This became the pattern for union organization in all new Matson (later Sheraton) properties into the 1960s, until challenged by the ILWU and finally blocked by the NLRB-as new hotels were developed, the existing contract with Local 5 was extended to cover the new operation. This was known as the policy of "accretion," which was applied at the Surfrider (1952), the Princess Kaiulani (1955), the Royal Manor (1960), the Sheraton Maui (1962), the Sheraton Kauai (1968), and the Sheraton Waikiki (1971).4
The Moana contract also served as a model for other new Waikīkī tourist hotels as they opened; there were variations- some improvements, some lesser provisions-depending on many circumstances.
Shortly after the signing of the Royal Hawaiian contract, problems developed with some of Local 5's members. The influx of several hundred new hotel members markedly changed the character of the Local. Although many new bars and restaurants were organized in 1945-46, it proved almost impossible to retain such membership-in part because of employee turnover but mainly because of employer open opposition that was difficult to control with many small operators. Several bartenders, by now a small minority in the local, felt that they were being neglected by Rutledge and complained to John Owens, AFL Organizer in Honolulu. In turn, he relayed the complaint to AFL headquarters in Washington from where it was sent to Jack Weinberger, then organizational director for the International Union, who asked Rutledge for an explanation.
Rutledge seized the opportunity to unburden himself of some of his own complaints:
. . . the largest percentage of our membership is composed of Oriental, Hawaiian and other nationalities known as 'local people.' We have a small vociferous minority of white bartenders who seek to use the organization for their own particular benefit . . . without being willing to go out and fight for working conditions shoulder to shoulder with the local workers. It is this group that we have had difficulty with. I have been in the unfortunate position of being forced to fight not only the employers, the raiding CIO and the 'rule or ruin' policy of the local Communist Party but also a group within the AFL whose main object seems to be getting rid of the 'Hebe'- Arthur A. Rutledge, as I am often referred to by this group.After a sympathetic response from Weinberger, Rutledge further detailed his complaints against the bartenders: they showed sharp membership fluctuation, they were lax in their dues payments, exercised the loudest voice at membership meetings, demanded the most, were willing to do the least work. Among the hotel workers, Rutledge wrote, there was talk of pulling away and getting their own charter. Rutledge ended his letter by applying for a charter for a separate Bartenders' local, which was finally chartered on June 1, 1948 as Bartenders Local 9 with 62 members.5
Organizing in the 1950s
No new major hotels were built to compete with Matson in the 1940s but all that changed in the next decade. As already noted, seven new large hotels rose in Waikīk 9;. One, the Waikikian, was never organized. Of the remaining six, the two new Matson hotels, the Princess Kaiulani and the Surfrider, were covered by the existing union contract by "accretion"; two others-the Hawaiian Village, built by Henry J. Kaiser, and the Waikiki Biltmore, built by a mainland company-recognized Local 5 without an NLRB election; and the remaining two operations, the Edgewater and the Reef, both owned by Roy C. Kelley, had to be organized the hard way, by signing up individual employees and going through an NLRB election. There were only 66 eligible voters at the time but Kelley kept expanding by buying and building and by 1968 had over 600 employees. Kelley, in the beginning, fought the union with everything at his command but, after the results were in, signed an agreement within six weeks after the election in which he agreed to what no other hotel in Hawaii had yet accepted -a union shop6 for new employees and a maintenance of membership7 provision for old ones. In the next contract the union shop applied to all employees.
Rutledge came under sharp criticism from the ILWU for his Waikiki Biltmore contract in which recognition was granted without an NLRB election. This criticism was leveled at a time when the see-saw relationship between Rutledge and the ILWU (over a period of more than 40 years) was at an unusually low level.8
The ILWU, in a resolution adopted at their September 1955 convention entitled Labor Unity (no humor intended), charged:
At the Biltmore Hotel, Rutledge negotiated a union shop contract which provided for substantially lower pay rates than the Matson hotels. The deal is wide open. Rutledge gets the initiation fees, the Biltmore the low pay scales. The workers get robbed both ways---and no election was held. The employees were literally entrapped by the deal…. We of the ILWU believe that working people are entitled to elections. We do not believe organizations built on gangster principles and collusion with management against the wishes of the working people can rightly describe themselves as unions.After some further strong language the resolution concluded with an invitation to Local 5 members to come over to the ILWU:
. . . whenever working people are trapped by a Rutledge contract and want out we will help you in every way if you are first willing to help yourself.The charge and the invitation were repeated within a month by Robert McElrath, ILWU public relations director, in one of his nightly 15-minute radio broadcasts. McElrath also included the recently announced contract with Kaiser's Hawaiian Village as another "back door" agreement. There was no indication of any concerted movement from Local 5 into the ILWU. Also, as will be shown in later sections, the ILWU itself, in later years, was not above making deals with management in which "no election was held."
Rutledge's retort to McElrath was that the two hotels, Waikiki Biltmore and Hawaiian Village, were "... 100 percent organized and agreements were signed because management knew the employees wanted our union."
In the case of the Hawaiian Village, a former Local 5 organizer said that Henry J. Kaiser, who enjoyed a reputation as an enlightened industrialist, literally "came looking for the Union."
The situation was somewhat different with the Waikiki Biltmore. There was, in the words of this same organizer, quite a lot of "pushing and shoving" before recognition was achieved.
Within three months after the Biltmore contract was signed, the Union called a one-day walkout to hold the company to its union shop clause.
Brief mention should also be made of the fact that it was in the early 1950s that Local 5 won and then lost two Inter-Island hotels on Kauaʻi, and Kona on the Big Island; both of these hotels were later organized by the ILWU and helped to establish their position as the major union on the neighbor islands.
Thus, by the end of the 1950s, just before the rapid growth of new hotels in the off-beach areas of Waikīkī and on the neighbor islands got under way, Local 5 had organized all but one or two of the major hotels then operating in Waikīkī. Only two NLRB elections were involved in the organizing effort-at the Moana Hotel and the two Kelley hotels. At the other six hotels recognition was achieved without an initial election.9
More Organizing on Oʻahu
While holding on to its main base of organized hotels in Waikīkī, Local 5 was able in the 1960s and 1970s to organize several new large hotels on Oʻahu, but the going was a lot tougher. There was strong resistance from previously unorganized hotels; in two cases, this resistance resulted in hard-fought strikes (one of which, the Halekulani, was lost). Also, by the 1970s, Local 5 was facing intense competition on Oʻahu from ILWU Local 142, which had previously concentrated its organizing efforts on the neighbor islands. Overall, Local 5's relative control diminished during this period because new hotels, particularly in the off-beach areas of Waikīkī, were built and opened faster than the Local could organize them.10
The big hotels organized in the 1960s included the Kahala Hilton, after an NLRB election with only Local 5 on the ballot and with tacit company support,11 and the two Chinn Ho12 properties-the Ilikai in Waikīkī (1964), and the Makaha Inn on the Waianae Coast (1969). The Ilikai proved to be tough to organize, after a second NLRB election was won in October 1965.13 Local 5, after nearly four months of negotiations, was unable to secure a contract and called a strike in February 1966. It took nearly two months before a settlement was reached. Some three years later the other Chinn Ho property at Mākaha14 was organized and won recognition without an election.
Several of the largest Waikīkī hotels became Local 5 organized properties during the 1970s almost painlessly-the Sheraton Waikiki by accretion; the Ala Moana Americana through a sign-up of their employees (without opposition) under the Railway Labor Act;15 the Hawaiian Regent and the Hyatt Regency by recognition without an election. The relatively small Kuilima Hotel on the North Shore of Oʻahu, however, became the battleground of one of the most fiercely fought campaigns between Local 5 and ILWU Local 142. This was the first major effort by the ILWU to gain recognition at an Oʻahu hotel.
The land on which the Kuilima was built was originally owned by Campbell Estate and zoned for agricultural use. The Estate Trustees' petition before the State Land Use Commission in 1964 for a change in designated use from agricultural to urban to permit building the hotel resort was actively supported by the ILWU, which was then concerned about securing jobs for some members who were being laid off in a shutdown of the nearby Kahuku plantation. With Eddie Tangen, ILWU International Representative, sitting as an influential member of the Land Use Commission, the rezoning request was granted. A 50 percent portion of the 808 acres was then sold to the Kuilima Development Company which built the hotel. Ownership of the company was equally shared by Del Webb, a prominent mainland hotel operator, and Prudential Insurance Company; the remaining 50 percent of the original land was retained by the Campbell Estate but leased to Prudential.
Shortly after the hotel opened for business in 1972, some 107 former Kahuku plantation ILWU members were hired. When the union election campaign got underway, Campbell Estate Trustee Fred E. Trotter openly campaigned for the ILWU which, he said, had fought for approval of the zoning change and made it possible to build the hotel. The ILWU, in addition to its usual organizing staff, also retained a popular local person who had been actively involved in community athletic activities.
With the combination of Campbell Estate support, a solid base of some 107 ILWU members, and strong local community support, the situation looked good for the ILWU. And in the first election, held in July 1972, the ILWU did win a plurality, 167 to 160 for Local 5, with 49 "neither" votes, but 22 votes short of the needed majority.
Events moved quickly between the first and second election, held a month later; there was enough intrigue and mystery involved for a first rate thriller.
There were charges and countercharges of anonymous threats, and well publicized defections by ILWU supporters. Also, according to the ILWU version of what happened, Del Webb leaned toward Local 5. His people were reported to have overstaffed the hotel with people from other Local 5 hotels who had been given leaves of absences to work there; all of them were then laid off after the election.16
Finally a "pot luck" party on the evening before the election is believed to have swayed a large number of the previous 49 "neither" votes, most of whom were transient North Shore residents, probably more concerned at any one time with surfing conditions than with union representation. When the votes were counted on August 24, Local 5 had a clear majority-194 to 61 (ILWU) with only 13 challenged ballots.
Two of the earliest organized hotels on Oʻahu went out of business in the early 1970s. The Alexander Young Hotel, one of the few downtown hotels, first organized in 1941, closed down in 1971; the structure was converted into an office building. In May of 1974 the Waikiki Biltmore, after 19 years in business, was leveled with dynamite in order to make room for the larger, more luxurious Hyatt Regency. Finally, in August 1980, ILWU Local 142, for the first time, after several previous unsuccessful efforts, won bargaining rights at an Oʻahu hotel, the Holiday Inn, at the airport.
Certain organizing patterns can be discerned from the account thus far of Local 5's organizing activities. There was the need, for example, to overcome early employer resistance as exemplified in the first NLRB election at the Moana Hotel in July 1945. That this kind of resistance was more than a matter of rhetoric and paper flyers was shown about a year later when Jimmy Chock, then a Royal Hawaiian cook and volunteer organizer, suffered loss of most of his teeth in a fracas with a Matson security guard while trying to sign up employees in the union at the Royal Hawaiian. Thereafter, over a period of many years, as new Matson (later Sheraton) hotels were opened, the existing Local 5 contract was extended to these new properties without going through an NLRB election (the "accretion" policy). In several situations on the neighbor islands, which will be discussed later, the NLRB did order recognition to be withdrawn and an election held. This proved to be little more than a gesture because by the time of the election, after employees had enjoyed the fruits of an established bargaining relationship, it proved impossible to displace the entrenched union. This was also true of a Hilton hotel and, in a somewhat different context, of an ILWU-organized Inter-Island Resorts hotel.
There were also several situations in which newly built hotels agreed to recognize the Union without any formal demonstration of the Union's majority status. And then there were the many more situations in which employers actively campaigned against a union or unions and insisted on an NLRB election, some of which were won by a union, most of which were not. As has already been shown for some Waikīkī hotels, and will be more fully demonstrated in many neighbor island situations, several large and important hotel companies, over a period of many years, have successfully resisted union organizing attempts.
From Confrontation to Accommodation
How do we account for the many situations in which hotels appeared to favor a particular union by extending recognition without any show of resistance?
The answer, we believe, lies both in the power relationships and the economic circumstances that existed among industry groups at the particular times. For example, by the early 1960s, Local 5 had won recognition as a force to be reckoned with as the result of two struggles which it waged-the first strike in the industry against the Moana Hotel in 1952, and its successful rejection of the International union's effort to displace local leadership and place the Local under trusteeship. Also the 1950s and 1960s were boom times for the unionized Waikīkī hotels; any disruption of activities would have been costly.
The Moana strike, the first and probably the most effective strike in the industry,17 clearly established, after about two weeks, the Union's ability to inflict serious damage to a hotel. The gains won were not spectacular but the disruption caused to the hotel's operation and the discomfort caused to "carriage trade" guests were such that no management, if it could possibly avoid them, would want a repetition of these events, especially during a boom period.
The 1960 confrontation with the International demonstrated the complete control exercised by Rutledge and James (Jimmy) Chock, the Local's Secretary-Treasurer, over the membership. They completely prevailed in their fight with the International and Sheraton, which had been closely allied with the parent body's efforts to get rid of Rutledge and Chock. When the smoke cleared over the battleground, Sheraton and in particular their newly appointed Hawaiʻi manager, Richard Holtzman, made every effort to mend fences and develop an amicable relationship with Local 5.
In the early 1950s Matson had extended recognition to Local 5 for two new hotels, the Surfrider and the Princess Kaiulani. This was done at a time when Local 5 was the only union operating on Oʻahu. (The ILWU was not then a factor in the hotel business. Its first organized hotel, the Kauai Inn, recognized the ILWU in November 1955.) By the time that Sheraton, and later Hilton, started expanding on the neighbor islands in the 1960s, a kind of equilibrium had been reached with Local 5-each side knew and respected the other's strengths. Management had no desire to introduce a new and discordant note in the form of another union into their established relationship, and so they did favor Local 5 in granting recognition on the "accretion" principle.
Similarly, managements of many of the new larger hotels in Waikīkī faced a choice of whether to fight off attempts at union recognition, with attendant public skirmishes and possible disruption of their operation, or to go along with the dominant union in the area and the standards recognized by their competitors. Several new hotels took the path of least resistance, others decided to fight.
ILWU Local 142 also followed a similar transition route from confrontation to accommodation in its dealings with several neighbor island hotels. This was particularly true in their relations with Inter Island Resorts; in 1971, after 16 years of dealings, the company sought to recognize the Union at its newly opened Kona Surf without going through an NLRB election. The ILWU also introduced a new organizing technique-one at which it developed a high degree of expertise, namely, political organizing.
The ILWU in Hawaiʻi has always placed a great deal of emphasis on political action. That meant more than just supporting friendly candidates at election time and seeking legislative enactment of measures that it favored. It also meant running its own members and staff people for legislative and county offices and actively seeking appointments to the many non-paying State and County commissions and boards that, in Hawaii, play an influential role in the application of governmental policies affecting the union's interests. ILWU's political clout was probably at its peak during the Governor Burns administration (1962-1974); in his three elections, especially in 1966 and 1970, ILWU support on the neighbor islands had provided the needed margin of victory. Again, in the two elections of Governor George Ariyoshi, successor to Governor Burns, the ILWU provided the crucial neighbor island votes. Its reward from both governors included appointment of ILWU people to state boards and commissions. As recently as 1983, 25 ILWU officers or members sat on such bodies. In addition, at any one time, many ILWU persons held either elective or appointive office on numerous county bodies, many of which have to do with the granting of building permits, variances, or other needed approvals for erecting or modifying hotel structures.
Of these many appointments, the most important was that of International Representative Eddie Tangen in 1969 to the State Land Use Commission. At the time, Tangen headed the local's hotel organizing drive. He was originally brought to Hawaii by ILWU Regional Director Jack Hall in 1962 after a 19-year stint with the Marine Cooks and Stewards Union (eight years as International Secretary-Treasurer) to help in organizing new industries (first white collar, then hotels). Tangen, an intelligent, articulate, energetic and experienced administrator, almost immediately became an extremely influential member of the Commission. In 1973 he was elected Chairman, a position he held until 1977 when he left the Commission.
ILWU appointees on these various commissions were open and frank in using their positions to advance ILWU interests.18 In addition to seeking understandings on organizational efforts, which will be detailed later, they also attempted, in several cases, to trade their support for resort development for an agreement to provide housing for ILWU members.
In one such case, where an arrangement for providing housing was agreed upon, the State Ethics Commission, acting on a complaint filed with it, found that Tangen by his involvement in the arrangement, had violated the "conflict of interest" provisions of the state's ethics law. That decision was reversed by Circuit Court Judge John C. Lanham. In his decision Judge Lanham distinguished between conflicts of interest involving "interests of large landowners who wish to rezone their land ... for the purpose of making immediate profits of a greater sum than farming gives to them . . ." and "that of a labor union representative . . . whose motivation is to protect the jobs and provide reasonable housing accommodation for their members and families and others. The former is a private, personal interest; the latter is for the benefit of a general class."
Judge Lanham's decision was later unanimously upheld by the Hawaiʻi Supreme Court.19
One clear example of how one company favored the ILWU was in Inter Island Resorts' recognition of Local 142 as the bargaining representative at its newly opened Kona Surf in the fall of 1971. Inter Island, after resisting ILWU chain-wide representation in 1960 and 1962,20 had developed a good working relationship with the Union and found it helpful in several situations involving Land Use Commission and County Board actions. Shortly after the Kona Surf opened for business, Tangen and Kimo Peltier, Inter Island's industrial relations director, arranged for a local priest to conduct a card check21 of ILWU membership applications, despite a Local 5 petition for representation before the NLRB. As a result of the check a union shop contract was signed. On objections filed by Local 5, the NLRB called for a representation election. Four days before the election, Kona Surf notified its employees of a wage increase retroactive for two and a half months, based on a recent negotiation with the ILWU for all other Inter Island hotels. ILWU Local 142 won the election with an overwhelming vote, 62-27.
Some 13 months later, an NLRB decision found that Kona Surf had "rendered unlawful aid and assistance and support (to the ILWU) . . .", voided the December 1971 representation election and stated that it would later set the date for a new election. But the 9th Circuit Court of Appeals later denied the NLRB s petition for enforcement on the grounds that absent any showing of coercion, and there was none here, courts have consistently refused to find a violation where an employer has recognized one of two competing unions "... on basis of clear demonstration of majority support."
In early 1983 the Mauna Lani Bay Hotel, developed by Japanese conglomerates on the Big Island, recognized ILWU Local 142 as the result of a cross-check. A contract with the ILWU was signed on January 15, 1983. When Local 5 tried to file a representation petition six days later it was advised by the NLRB that the recently signed contract was a bar to any election.
Again, on June 16, 1986, the ILWU gained recognition at the Makena Prince on Maui, a luxury hotel owned by Japan's Seibu group, through a cross-check.
Not all company-union arrangements have worked out that well for Local 142. In at least one case involving the Sheraton Molokai Hotel, Local 142 was outmaneuvered by Local 5. The ILWU had actively supported efforts of the developer Kaluakoi to tap into an existing water system and transmission line, thereby saving the company the large cost of having to build a desaliniza-tion plant and separate system and line. The State Land Board, on which ILWU was represented,22 voted to approve Kaluakoi's application.
In return for its support the ILWU expected Kaluakoi's support for a card check recognition procedure. Several years elapsed, because of legal challenges, before ground was finally broken in 1975 for the new hotel. When the golf course was opened in 1976, the ILWU was recognized as the bargaining agent via a crosscheck for some 36 employees. When, several months later, the hotel was getting ready to open, Kaluakoi was no longer in charge. Sheraton had taken over as operator of the hotel and on a weekend, when the NLRB office was closed, it (Sheraton), by a cross-check, recognized and signed a collective bargaining agreement with Local 5. Despite furious objections by the ILWU, the NLRB later ruled that the agreement was valid.
While the possibility of future cross-check deals is not to be ruled out they appear to be less likely, at least as far as the established hotel chain operators are concerned. The changed attitude of Sheraton, for example, was shown in the Coconut Beach election on Kauaʻi in 1982 when the company opposed both unions and neither was selected. In the next hotly contested election at the Sheraton Royal Waikoloa, Local 5 won after three elections in two years in August 1983. According to the ILWU, Sheraton showed support for Local 5, although Local 5 leaders deny this. It is possible that when it became apparent, after the first two elections, that one of the two unions would win, Sheraton may have preferred the union with which it was most familiar.
That what happened at the Sheraton Royal Waikoloa did not represent a new trend was dramatically shown at the newly opened Sheraton Princeville Hotel on Kauaʻi in November 1985, where both unions together against company opposition garnered a mere 32 percent of the vote.
Tommy Trask, ILWU Regional Director, publicly complained at a meeting of the Hawaii Chapter of the Industrial Relations Research Association that the ILWU did " 'stick our necks out' to support the development of Princeville on Kauaʻi, but when Local 5 and ILWU tried to organize the workers there, 'suddenly we were the bad guys.' "
Reasons for the changed attitude by Sheraton (and others) are not hard to find. Sheraton today, as is also true to a lesser extent of Hilton, are managing agents rather than owner operators. Of the 12 hotels that Sheraton now operates, it owns only one; the remaining 11 are owned by mainland and Japanese companies. Within recent years several large mainland companies have opened and maintained non-union hotels in Hawaiʻi so that the industry today is much more competitive than it has been.
What these changes may portend for the future will be covered in later chapters.
Organizing the Neighbor Islands
The neighbor islands were to become the major battleground in the continuing struggle between Hotel Workers Local 5 and ILVVU Local 142 for representation of Hawaiʻi's hotel workers. The 1LWU, until the 1960s - -when the vast expansion ot hotels on the neighbor islands first got under way-represented only two small units of the Inter Island Resorts chain and had never challenged Local 5's dominance of the industry in Waikīkī in fact, lack Hall had been most helpful with his advice and counsel to the inexperienced Art Rutledge in the early organizing in 1941. The (ILWU's representative, Clifford O'Brien, had helped negotiate the first contract with the Matson hotels, and the ILWU had provided strong support to Local 5 in their first strike against the Matson hotels in 1952. But when hotels started sprouting on the other islands, the ILWU claimed exclusive jurisdiction over all hotel workers in what they regarded as their territory, and fought hard to assert that claim.
The Inter-Island Resorts Chain
Local 5, in fact, had secured a strong running start in organizing neighbor island hotel workers but failed to exploit its initial advantage. In August 1952, Local 5 won an NLRB election at the Kona Inn, one of two hotels owned by Inter Island Resorts, the neighbor island hotel chain formed after the break-up of the Inter Island Steamship Company.
The Local was either unwilling or unable to maintain a resident business agent on the island for some 70 employees and there was virtually no servicing done of the membership. Rutledge was unable to budge any gains out of Walter Dudley Child, Sr., the company president, in several negotiating sessions. In desperation he called a strike on New Year's Eve; although immediately effective, the strike soon petered out and, after three months, there was neither a strike nor an organized unit left.
While the Kona strike was still on, Local 5, on February 20, 1953, won an NLRB election at the other Inter Island hotel, Kauai Inn; here, too, in the absence of any gains for its members the unit faded away. Nearly two years later, Kauai Inn employees, many with past connections with the ILWU, asked the ILWU to help in organizing; in an agreed upon cross-check,23 29 of 34 eligibles chose the ILWU. Soon thereafter, a contract was negotiated.
As Inter Island built new hotels, that Kauaʻi unit became the base upon which the ILWU built to ultimately become the bargaining representative for workers at seven hotels on three islands. In 1960 the ILWU won a chain-wide election for five hotels in a second election after Local 5 withdrew and urged its supporters to vote for the ILWU.24 Two years later, Local 5 sought to replace the ILWU but was defeated by a vote of 178-117 out of 346 eligibles. At two new Inter Island units, the Kona Surf in 1971,25 and later the Maui Surf, the ILWU was recognized as the result of cross-checks.
Local 5's second opportunity to gain a stronghold on at least one of the neighbor islands, Maui, came in late 1962 when Sheraton recognized Local 5, without an election, as the representative of its employees at its newly opened Sheraton Maui; the company agreed to extend its existing Waikīkī contract to this operation.26 The new hotel was the first in Kaʻanapali, Hawaiʻi's first planned destination resort area. The wage rates and benefits set by Local 5's contract exceeded what the ILWU had up to then secured at its organized hotels. One would have expected that these superior conditions would have been used to good advantage by Local 5 in future organizing in Kaʻanapali but that was not to be.
Again, the lack of a resident business agent on Maui (or on any other neighbor island), a situation that the ILWU effectively exploited in its organizing activities for the next 20 years, seriously hindered Local 5's efforts. Typically Local 5 shipped in a crew from Honolulu just before an election. The ILWU, on the other hand, with members, business agents and organizers who lived on the island, plus a few imports, thoroughly canvassed the hotels and the homes of hotel employees, many of whom had previous ILWU connections. John Arisumi, who later became ILWU's Regional Director for Maui, recalls that he spent 66 days on the campaign at Royal Lahaina, next door to the Sheraton Maui, almost entirely on house-to-house canvassing. The effectiveness of this approach can be seen in the election results. In the first election, held about the time of Sheraton Maui's recognition of Local 5, neither union won but Local 5 received 21 votes, one more than the ILWU. When the second election was held, 26 months later, Local 5 received only five votes to the ILWU's 85, out of 147 eligibles.
After establishing themselves at the Royal Lahaina, the ILWU went on to win later Kaʻanapali elections at Kaanapali Beach (1965), Maui Hilton27 (1967), and the Hyatt Regency (1980).
The Kaʻanapali area proved to be one of the most popular, and clearly the most successful, resort areas in Hawaiʻi. As this is written (in 1987) it is the ILWU stronghold, with that union representing workers in over 65 percent of the hotel rooms in the area. Of seven presently organized hotels (including one at nearby Kapalua Bay) the ILWU is the bargaining representative at five; one hotel, Mariott Kaanapali Beach, is unorganized, and one, Sheraton
Maui, is held by Local 5. Of the five ILWU hotels, four were initially won in NLRB elections and at one, Maui Surf,28 the union was recognized as the result of a cross-check.
A decisive turning point in the union organizing battle between the ILWU and Local 5 occurred with the ILWU victory in the NLRB election in February 1966 for employees at the Mauna Kea Beach Hotel on the island of Hawaiʻi. The hotel complex was built by Laurance S. Rockefeller on land fronting Kawaihae Bay. The new hotel for many years set a high standard for a luxury hotel and to this day has enjoyed consistently high occupancy rates.
Several factors contributed to the ILWU victory. Most of the new hotel workers either came from or were related to workers on two nearby ILWU organized plantations, Kohala Sugar and Laupāhoehoe. As against this built-in advantage, Local 5 organizers arrived on the scene from Honolulu after the ILWU petitioned for representation rights, and only a few months before the actual election. In the first election, in August 1965, Local 5 received only 10 votes against 144 for the ILWU and 159 for no union, with 342 eligibles. On the basis of a complaint filed by the ILWU, the NLRB ordered a rerun election for February 1966.
Between the first and second elections, a three-way public debate was held with Eddie Tangen, ILWU international representative, and Arthur Rutledge, president of Local 5, sharing the platform with the hotel manager. How the different speakers fared in that debate depends on whose opinion is offered. In any event, in the rerun election, ILWU gained 70 votes (for a total of 214), to win the election; Local 5 gained 21 (for a total of 31), out of 360 eligibles. There was never again a public debate in any election contest.29
Other Neighbor Island Elections
Kaanapali and Mauna Kea formed the bases from which the ILWU expanded its organizing on Maui and the island of Hawaii. It was less successful on the other islands.
In over 30 years of trying, the ILWU, after it organized the Kauai Inn in 1955, was able to win only one other hotel, Hanalei, on the island of Kauaʻi; a few years later, that hotel went out of business. On Molokaʻi it was thwarted in its efforts to organize the Sheraton Molokai, as previously reported, by a cross-check deal between the company and Local 5.
In the 25-year span between 1960 and 1986 there were 58 NLRB elections30 for representation rights at neighbor island hotels; of these contests, the ILWU participated in 57, Local 5 was involved in 38.31
Our tally of the results shows:
These overall figures obscure more recent significant trends. Local 5, for example, has won only one election on the neighbor islands in the past 16 years (Sheraton-Waikoloa in 1984). ILWU, in the past eight years, has won one important election (Hyatt Regency-Maui, October 1980), and since then has lost 15.
Several hotels have become particularly adept at resisting union organization. On the neighbor islands, two in particular stand out-Intercontinental and the Amfac Group of hotels (Island Holiday).
Intercontinental, part of a multi-national chain of luxury-type hotels located throughout the world, defeated five separate attempts at union organization by overwhelming margins. Originally owned by Pan-American Airlines (now owned by Grand Metropolitan, a British conglomerate), the hotel retained the Hawaii Employers Council as its consultant in resisting organization of its employees at its Wailea, Maui property. Its appeal to employees "to give us a chance" when it was experiencing low occupancy rates (for many years) struck a responsive chord, according to union sources. Also effective in tying employees closer to the company, according to these same sources, were its "strawberry nights" (a program under which employees with one year or more of service may stay at the hotel one day and one night as a guest of the hotel), moonlight cruises for employees and similar events.
Island Holiday, over an 18-year span (1963-1980), lost only two elections to unions in 14 contests. The results can be attributed to two "local boys"32 who ran the company's campaigns--Lyle L. "Gus" Guslander and Laurence "Pat" Perry.
Guslander, over a six-year period as manager of the Moana Hotel in Waikīkī, dealt with Local 5 as the representative of its employees. In 1953 he bought the Coco Palms Resort on Kauaʻi with a $25,000 loan and over the next 16 years acquired nine more hotels to create the Island Holiday chain, the largest on the neighbor islands. In 1969 he sold his chain to Amfac for about $20 million and then stayed on as an Amfac vice president until his retirement in 1978. (He died in 1984.) Guslander set the labor relations policy that became the Island Holiday hallmark. Wages and benefits varied only slightly from prevailing union contracts.33 Close attention was paid to personal relations with hotel workers. One ILWU organizer tells of an incident that could probably be repeated many times. In one of the early King Kamehameha elections he was practically driven out of a hotel worker's home that he visited at night. The worker's wife, on the way out, showed him a small cake, "possible cost about 90 cents," with "Happy Birthday" on top that her husband had received that day. "You see," she said, "we're well taken care of. We don't need any unions here."
During the period (before April 1969) that Guslander handled his own labor relations, both unions were defeated in three NLRB elections. After April 1969, when Pat Perry came to work for Island Holiday, there were 11 elections in which the ILWU won two, King Kamehameha and Hanalei (no longer in operation), both in 1970; both unions were defeated in nine.
Perry was hired as Island Holiday's industrial relations director in April 1969, a few weeks after he left a position as senior business agent with the Hawaii Teamsters Union under Rutledge. Perry had been with the Teamsters for five years after his return to Hawaiʻi, where he was born. Before that he had held several union jobs on the mainland after receiving his degree from the University of San Francisco in 1957, where he majored in industrial relations. Perry combined his understanding of the importance of the "local" touch with an expertise in labor relations that has thus far thwarted efforts at new organization in the chain.
Island Holiday now represents three hotels in negotiations with the ILWU-King Kamehameha (won in an NLRB election in 1970) and two others at Kaʻanapali, acquisitions after they had already been organized by the ILWU.
By 1986, the ILWU held bargaining rights in 15 neighbor island hotels;34 in 11 of these, representation had been won the "hard way"-by organizing workers and winning elections. In four situations (Kona Surf, Maui Surf, Mauna Lani, and Makena Prince)35 the union had gained recognition via the cross-check route.
Within the immediate future, the ILWU should show a big increase in membership because of expanded operations at several hotels where they now hold bargaining rights-at the Westin Maui and Westin Kauai (formerly Maui Surf and Kauai Surf), the Mauna Kea and Mauna Lani. The big organizing contest will be at the Hyatt Regency Waikoloa now under construction on the Big Island, one of the largest hotels in the state, due to open in 1988. The ILWU now holds an organizational advantage in this situation because of an already established organizational base on the island.
Hyatt management has recognized the ILWU on the basis of a card check. Local 5 has filed charges of unfair labor practices and the issue remains unresolved. Should the ILWU finally win representation-that, plus the expanded membership in already recognized properties, would make it the largest single hotel union in the state.36
Negotiating for More
How good a job have the unions done in advancing and protecting the economic well-being of their members? Are hotel workers in Hawaiʻ'i today better off than they would have been if substantial segments of the industry had not been organized? The answers, while seemingly self-evident, are still disputed by some, particularly by employers who offer strong resistance to new organizing efforts.
From about 1964, when the first industry-wide settlement (although with separate contracts) was reached with Waikīkī hotels (Sheraton, Hilton, Kelley), until 1977, when a five-year contract was negotiated with 14 major hotels represented by the Council of Hawaii Hotels, Local 5 consistently claimed that their contracts were ahead of all other agreements in the country; from time to time they "partially" excepted San Francisco contracts.1
Local 5, as the larger union dealing with the more established segments of the industry, set the pace on wages and benefits during this period but the ILWU sooner or later caught up, so that there have been few differences between the two sets of contracts.
If, then, these economic conditions for hotel workers were among the best in the country how does one reconcile that with the fact that hotel workers have consistently been among the lowest paid workers in a low-wage state? Gregory Pai, assistant vice-president in charge of the First Hawaiian Bank Research Department, told the Governor's Conference on Tourism in December 1984 that annual hotel workers' earnings in 1982 were 40 percent below the average in the state which, in turn, ranked 32nd ($15,361) among all states, nine percent below the national average ($16,732).2 Average weekly earnings for hotel workers, as reported by the State Department of Labor and Industrial Relations, have been among the lowest in the state; only two industry sectors, laundries and retail trade, report lower weekly earnings. John C. Brogan, managing director for the Sheraton Waikiki, in emphasizing the need for development of other industries, told a conference of Hawaii business executives in November 1985: ". . . for 30 percent of the workers in the visitor industry, wages are barely above the minimum pay required by law."
The above cited figures are generally accepted as far as they go. Industry representatives have been quick to point out, however, that they don't tell the whole story insofar as they neglect the peculiar figures of the hotel industry wage structure.
Hotel Industry Wage Structure
Industry sources claim that reported earnings, as released by the State Labor Department, understate actual earnings in at least two respects:
1. Tips, which make up a substantial part of the earnings of many employees, are not included in the officially reported figures.
2. The widespread use of part-time workers distorts the earnings picture. To what extent do these features affect reported earnings?
Unpublished studies prepared for hotel operators vary widely in their estimates as to the number of workers who receive tips andthe extent to which their base pay is increased by such tips. One recently quoted, but unidentified study reports that,
. . . waiters and waitresses in hotels and restaurants make three times as much from tips as from their base pay. The base pay may be only the minimum wage but tips quadruple the actual earnings of the employee.
This same study estimates that 25 percent of all worker employed directly in the visitor industry receive tips.
A much lower estimate is presented in an earlier unpublished study which classifies hotel employees who receive tips into two main classifications:
Primary (bartenders, bellmen, cocktail waitresses, doormen, wait-help) who receive as much as 45 to 57 percent of their total compensation in tips.
Secondary (bar porters, busboys, hosts/hostesses, housemen, housekeepers) who regularly receive tips but generally less than 20 percent of total compensation.
Whatever the amount received in tips may be, they are not reported in the Labor Department's earnings figures. Those in "primary" tipping occupations who regularly work a full work week probably earn more than most other semi-skilled workers in the state; they make up a minority of the industry workforce.3
From one-third to as many as one-half of all hotel employees, it has been estimated, are part-time workers; many of these hold other jobs, including jobs in other hotels and restaurants.4 While it is difficult to assign precise values to the impact of these facts, it is clear that they distort the earnings figures.
Part-timers who worked more than one job in hotels would be counted twice in the denominator, thereby lowering the true average per person. The total impact of this factor is difficult to measure.
When these two factors, namely tips as part of earnings, and the impact of part-time employment on earnings figures, are taken into account, then, on balance, average annual earnings for hotel workers are neither the best nor the worst in the state, probably close to the state average which is still relatively low. When the value of fringe benefits-medical and dental benefits, pensions, and free meals for all employees (one meal on short shifts, two meals on straight shifts, and three meals on split shifts)--are included for organized workers (and also by many unorganized hotels), then it appears that the unions have done better than the official figures show.
How the unions got there will be the subject of the next sections of this chapter.
Local 5, under Art Rutledge, dominated the Waikīkī (plus a few neighbor island hotels) bargaining picture from about 1946 to 1980, when Richard Tam displaced Rutledge as the head5 of the local. The ILWU for most of this period played a "catch-up" role. Until the mid-1960s, when ILWU-organized hotels were limited to a few Inter Island Resort hotels, no real effort was made to match Waikīkī wages and conditions.6 That changed with the organizing of newly built neighbor island hotels, beginning with the Royal Lahaina (and later, other Kaanapali hotels) in 1962, and the Mauna Kea Beach Hotel in 1965, where wage parity with Honolulu was achieved with the first contracts. In 1970, as will be detailed later, an unsuccessful effort was made to surpass the Local 5 settlement through a 75-day neighbor island strike; the Local did achieve a basically uniform wage benefits structure for all of its organized properties,7 although within limits established by the Local 5 settlements.
The 34-year span of Rutledge hotel negotiations falls into several sub-periods, each marked by significant changes in one or more of the factors affecting bargaining-the number of hotels involved, the particular employers' condition, the tourism economic climate, the state and national political situation. What remained fairly constant throughout the period was Rutledge's negotiating style --the creation of tension as needed (only one two-week strike8 but many one- or two-day stoppages that disrupted operations); whipsawing and wedge driving, when possible, so as to exploit differences among employers; use of outside influence, governmental and private; an innovative and creative approach to many problems; and infinite patience. Perhaps it wasAll summed up best by another labor expert, Harry Bridges of the ILWU, who described Rutledge as "an operator, a maneuverer, and a tough, rough guy."
The Matson Era
The period from 1946, after Local 5 regained bargaining rights at the Moana Hotel, until 1955, when the Waikiki Biltmore and Hawaiian Village became organized, can best be described as the "Matson Era." The Matson chain, in those years, grew from two to four hotels. Whatever Matson agreed to was usually followed by the downtown Alexander Young Hotel and Kelley hotels (organized in 1951), the only other organized hotels. This was a period in which, except for the disruption in tourist arrivals during the 177-day longshore strike in 1949, there was a constant growth in the number of arriving visitors - a total increase of 632 percent over the nine years.
"More" was the guiding philosophy of the Rutledge approach in this as well as in all later periods. But "more" at this time generally meant securing for Matson's Hawaiian workers more of what Matson already provided for its cooks and stewards on its steamship Lurline that regularly brought many tourists from the mainland. A frequently uttered threat, never executed, but one that kept management on edge, was the tie up the waterfront, possibly with ILWU support, when the Lurline was due to arrive or leave.
The first post-war contract with the Moana Hotel (later extended to the Royal Hawaiian), achieved after seven months of negotiations and a one-day strike, recorded relatively modest economic gains - wage increases, paid sick leave, a one-week increase in vacations (from one to two weeks) - but important advances in the union's status: a check-off of union dues and the making of all discharges subject to the grievance procedure.
There were further wage gains in the next four years with a crucial showdown, on the established Local 5 as a power in the industry and determined the course of hotel labor relations for many years, in a 15-day 1952 strike. The strike occurred after nearly six months of negotiations and at a time when Rutledge was also threatening to shut down two other Teamster organized companies, in addition to his usual talk about shutting down the waterfront. The Hawaii Employers Council, which conductednegotiations for Matson, took all of these threats seriously and called meetings of leading employers from industry and finance to mobilize support for Matson. Among other things, committees were set up to review bargaining developments and to recruit volunteer help to replace striking workers. The wife of a bank president was in charge of volunteers at the Royal Hawaiian, an industrialist's wife led the troupe at the Moana.
Matson closed the dining rooms as soon as the strike started; guests were refunded eight dollars a day and asked to seek their meals in outside restaurants. On the fourth day of the strike, the Employers Council, in a written report to its members, stated that Matson hotels were operating "fairly well"; three days later Matson proposed a resumption of negotiations and agreement was finally reached on the fourteenth day of the strike.
The economic settlement was substantial for that time. The International's research publication may have exaggerated, but only slightly, when it termed the settlement "one of the largest won by any local union in the U.S." The package, estimated at 21-1/2 cents, included wage increases, free meals for food handlers, a reduced work week (45 hours for 48 hours pay), paid lunch period, a third week of vacation for 15-year employees, the first medical plan for employees and dependents (Matson paid half). Final terms exceeded the company's last pre-strike offer in several areas; on the key union security issue the company agreed to notify the union of all vacancies with the union given 48 hours in which to provide people. Overriding all of these gains was the new status achieved by the union through the strike-recognition as a strong and independent force to be reckoned with in the industry.
The year 1955 was a year of growth for Local 5. Matson opened its Princess Kaiulani Hotel and covered its employees under the existing agreement. The Waikiki Biltmore and the Hawaiian Village, then managed by Henry J. Kaiser,9 were added to the union fold without an election.
Each of the four main groups with whom Local 5 dealt-Matson, Hawaiian Village, Kelley and Waikiki Biltmore-had separate contracts with varying expiration dates, and for the next nine years Rutledge developed an expertise in whipsawing-each new settlement included some new feature not contained in any previous contract, all of which were to be copied in later settlements with the other operators.
Thus, Henry J. Kaiser, in the first contract for the Hilton Village, in addition to wage increases and a union shop, agreed to the first five-day, 40-hour week (at 48 hours pay) labor contract in the Hawaii hotel industry. Two months later Kelley signed a similar contract; the Waikiki Biltmore contract already had the union shop; it reduced hours to 37-1/2 (including a paid lunch period) in July 1957.
The Honolulu Advertiser reported the plaint of unidentified operators: ". . . industry-wide bargaining, the operators feel, would stop whipsawing. . . ." But that was not to be for many years.
In 1956, Matson, in an effort to set an independent course, agreed to a five-year contract (wage reopener after three years) after publicized hints of a possible work stoppage on Lurline Day. The contract followed its competitors in granting the 40-hour week (previously 44) and the union shop; a new feature was the company agreement to pay the full cost of the health and welfare plan.
In 1957 and 1958, Hawaiian Village, under wage openers, negotiated wage increases that were followed by Waikiki Biltmore and Kelley. In June 1959, the hotel operators made another effort to break the whipsawing cycle-Ed Hastings, then with Sheraton, on behalf of all four major operators, wrote a letter to Rutledge asking that they negotiate an industry-wide contract. Apparently nothing came of that effort-Kelley, later that year, after a nine-month stalemate, signed a two-year agreement, followed by Hawaiian Village in April 1960.
Matson, under its contract, was not open for negotiations until June 1959. By that time Matson had sold its Hawaii hotels to Sheraton. After stormy negotiations, extending over 10 months, agreement with Sheraton was finally reached in April 1960 but then, because of the International's intervention in the situation, deferred for about three months. While Sheraton negotiations were in progress in early 1960, Kelley, Hawaiian Village, Waikiki Biltmore and Alexander Young agreed to wage increases that Sheraton, with the support of the International, argued were excessive. The new feature in the final Sheraton settlement was a five cents an hour contribution into a pension fund, a benefit that Hawaiian Village and the Biltmore matched the next year.
There were still separate negotiations in 1961, but for the first time an effort was made to standardize the settlements and contract language. Kelley, because of disputes over which of his operations were to be covered (finally resolved by an NLRB election in June 1962), didn't actually settle until August 1962 when he signed a contract with the same provisions as in the other Waikiki agreements.
Finally, in the 1964 round of negotiations, the three leading hotel groups-Sheraton, Hilton and Kelley-jointly negotiated a new three-year settlement, although with separate contracts. But even that didn't come about easily. At the first negotiating session with Hilton in November 1963, Holtzman (Sheraton) and Kelley also showed up, indicating a preference for an industry-wide contract. After a few meetings Rutledge made it clear that the union wanted to bargain separately with Hilton, and non-Hilton representatives were asked to leave. Three months later, Kelley and Sheraton, this time at Rutledge's suggestion, were back in negotiations and on June 3, 1964 a new three-year agreement was executed.
The Joint Bargaining Era
The 1964 agreement was the first of what were hereafter to be jointly bargained settlements. It was, in many respects, a generous contract, reached after a year of negotiations, including many smaller meetings of technicians and hotel personnel people working on language and specific benefits. There were minimum wage increases each year (actually a four-year package since wage gains were made retroactive to June 1, 1963), more added to the pension plan, higher premiums for short and split shifts, recognition of "luxury hotel" wage levels at the Royal Hawaiian and Kahala Hilton (just organized in 1964), and a one-cent per hour contribution for a jointly administered central employment office.
In 1964 the number of overnight visitors in Hawaii increased by 31.4 percent. The newly signed contract, Rutledge told his members was". . . unquestionably the best hotel contract in America."
Three years later, joint bargaining with Sheraton, Hilton and Kelley resulted in a four-year contract, wages to be reopened after three years, with "the biggest wage increase so far in our history . . ." but not without many difficulties along the way. It was again a banner year for tourism (a 34.6 percent increase in visitor arrivals), and with two major conventions due to arrive, Rutledge warned of a major hotel strike; Governor Burns, at the request of both parties, then appointed Attorney General Bert Kobayashi to join the Federal mediator Ron Hagist in trying to settle the negotiations. There was also a one-day stop-work meeting at all Kelley hotels in July, apparently in an effort to compel recognition at the recently opened Waikiki Outrigger.10
The settlement, in addition to wage increases ranging from $600 to $2500 over a three-year period, included more on pensions and health and welfare, with five cents per hour to be applied to a dental plan by 1970.
The Waikīkī hotel operators paid a price for the first nearly uniform contract in their sector of the industry.
"Wedge driving" may be described as the splitting of an apparently solid group into antagonistic elements; it differs from "whipsawing" which pits one group or entity against another. Rutledge, in the 1970 negotiations, showed his mastery of both techniques.
Several changes in the bargaining situation had occurred before the 1970 negotiations. The neighbor island hotels, in an effort to control another kind of whipsawing, wherein the ILWU after each Waikīkī settlement pushed for a "me too" approach in bargaining, influenced the Hawaii Employers Council to organize the Hotel Employers Association of Hawaii (HEAH) to represent them in negotiations. The group was later expanded to include Waikīkī hotels.11 Four of the main hotels-Sheraton, Hilton, Cinerama12 and the Ilikai-made up the bargaining team led by Phil Maxwell when negotiations opened on May 5.
Maxwell, backed by what he thought was a united bargaining team, took a tough bargaining stance and negotiations moved slowly. Then, without any forewarning, the local head of Cinerama, on June 2, informed the employer bargaining committee that his vice-president had told him that Rutledge had called to say that he had reached an agreement with Cinerama through Sidney Korshak, a Los Angeles labor attorney. A few days later it was reported that the deal with Rutledge had originally been made on behalf of Hilton and that Cinerama had gone along. Most of June and early July were spent in unraveling the details of what had occurred. Rutledge claimed that he contacted Korshak, whom he had previously met on the mainland, as the result of a standing invitation to call him any time that trouble appeared to be developing in negotiations. Korshak, formerly of Chicago, reportedly had close connections with both the International union and prominent hotel operators.
The settlement reached with Hilton and Cinerama amounted to an average increase of 20 cents per hour (12 percent for skilled maintenance, 9 percent for non-tipping categories, and 5 percent for tipping employees). This was much more than the Maxwell group had offered. Faced with the defection of two of their key players, the remaining hotels had no choice but to go along. On July 11 they accepted the same settlement.
The Employers Council spokesmen, although outmaneuvered in negotiations, did get in some final verbal blasts.
Phil Maxwell said of the settlement:
We have created a Frankenstein monster which . . . [is] now uncontrollable. It demands and receives ever spiralling inflationary wage increases.Bob Grunsky, president of the Hawaii Employers Council, in a public statement, accused Cinerama and Hilton,
... of one of the most flagrant cases of bad faith bargaining and double dealing I have experienced in 35 years in the labor relations business.Thus Rutledge, in 1970, smashed the first state-wide bargaining effort by employers. The Hawaii Employers Council was never again to be involved in any negotiations involving the Waikīkī hotels. The neighbor island hotels stayed with HEAH for several more years. The Waikīkī hotels did their own bargaining for several years until, in 1977, both groups again came together to set up a Council of Hawaii Hotels, without any Hawaii Employers Council affiliation.
Local 5's contract settlement in 1970 indirectly influenced the next momentous event in the bargaining situation that year-the first and only strike called by the ILWU. It was also the longest strike (75 days) in the history of the industry.
The Long Neighbor Island Strike
Although Phil Maxwell, spokesman for the hotel operators, publicly termed the Local 5 settlement "ridiculously high and inflationary . . . one that might lead to potential bankruptcy of smaller hotel operators . . .," Eddie Tangen, who headed up the ILWU bargaining team, told his union caucus before 1970 negotiations got under way that "the union does not intend to settle for what AFL Local 5 settled for."
What Tangen presumably meant was that the ILWU would seek a superior benefits package since wages never were the real issue in that year's bargaining. From the outset the Hotel Employers Association of Hawaii (HEAH), speaking on behalf of the neighbor island operators, offered wage parity with Waikiki. This meant equalizing wage rates among all hotels. Some hotels such as the Royal Kaanapali (1962), the Mauna Kea (1965), and other Kaʻanapali and Kona Coast hotels had pretty well achieved wage parity. Other hotels had lagged behind for many years and the employers were now offering a uniform wage scale.
Crucial to the operators' approach was their insistence on bargaining as one unit, something that had never been done before. To guard against any possible defections, each of the operators was bound by a written agreement whereby they would be subject to heavy fines and penalties should they make a separate deal with the union.13
Tangen, admittedly skeptical of where multi-employer bargaining would lead to, and possibly not wishing to abandon opportunities for some whipsawing, preferred dealing with each employer separately. While trying as much as possible to standardize contracts, he told his caucus, he recognized that all hotels could not be treated exactly alike. At a pre-negotiating luncheon with principal employer representatives, he told the employers that he wanted to use the Inter Island contract as a basis for negotiations, to proceed as far as they could on Inter Island and then proceed with the rest of the companies individually. At the start of negotiations the union presented 39 typewritten pages of demands, with separate demands for each hotel. When the strike started, about one month later, there were still some 42 to 44 demands, depending on who did the counting, on the bargaining table.
With little movement in negotiations, the union called a series of stop-work meetings at all hotels, carried a strike vote by an overwhelming margin (1439 to 19) and, after a week's postponement at the request of the Governor, some 2000 workers struck eight hotels on October 9. Two Island Holiday hotels (King Kamehameha and Hanalei Plantation), at which NLRB elections had been won in February, were not struck but the company then proceeded to shut them down and lock out the employees.
The companies, from the start of the strike, kept some of their hotels in operation behind the picket lines (Kauai Surf, Royal Lahaina, Naniloa); these were later joined by Mauna Kea on a limited basis. Where other hotels of the same company were operating in a given area, the struck hotels were shut down (e.g., Kona Inn, Kaanapali Beach).
Before the strike started the employers had offered 23 cents per hour in wage increases plus eight cents for pensions. The ILWU termed the offer "within the ball park" on wages but stated that they wanted better fringe benefits.
Shortly after the strike started, Governor Burns asked Ron Hagist of the Federal Mediation and Conciliation Service to be his personal representative in efforts to end the strike. About a month later Bert Kobayashi, now an Associate Justice of the Supreme Court, joined Hagist in the mediation effort. In early December ILWU International Secretary Lou Goldblatt arrived to join the union bargaining team.
By December 18, after continued negotiations, Governor Burns announced that a tentative settlement subject to ratification by the workers and members of HEAH had been reached. Six days later all striking workers were back on the job.
The settlement included two agreements-a five-year contract on vacations, sick benefits and pensions, and a three-year basic collective bargaining agreement. There were to be two wage re-openings, one on wages only after one year, a second on wages and one other issue after two years; if agreement was not reached during any opening, the matter would be submitted to arbitration by Associate Justice Bert Kobayashi.
Over the five-year period, pension contributions of five, eight, eight, eight and ten cents an hour were to be made; all hotels with lesser vacation benefits were to increase benefits up to the Mauna Kea level; similarly, sick benefits were to be brought up to the Inter Island Resorts level.
There was also some improvement in premium pay for work on three holidays at no cost because the union gave up a provision for extending a vacation when a holiday fell within the vacation period.
What were the net results of the strike?
Robert Grunsky, president of the Hawaii Employers Council, on the eve of the strikers' return to work, issued a press release in which he said:
The hotels have been caught in the middle of the organizing battle between Art Rutledge's Local 5 and the ILWU for supremacy in the industry. That was the basic cause of the 75 day strike.Other employer representatives claimed that the final economic package was virtually identical with what was on the table before the strike started. The additional pension contributions and the equalization of vacations and sick benefits over a five-year period, they claimed, could have been negotiated without a strike.
The employers' insistence on unified bargaining with a uniform contract prevailed-the negotiated contract was a master agreement between the Association and the Union, not with individual companies.
The ILWU, on the day the strike ended, termed the agreement "outstanding" and "the best in the industry anywhere." Their official publication later estimated the total cash value of the settlement at 90-1/2 cents, or 31-1/2 cents more than the value of the last pre-strike offer. Some 16 years later, union officials involved in the strike conceded that the strike was "no great victory" but that they came out "O.K." and that the strike had definite positive values-(1) after 1970, neighbor island hotels were recognized as on an equal basis with Waikīkī , and (2) it solidified union members, particularly women members who had previously had little such experience, around the union.
Rutledge Negotiations in the 1970s
After Rutledge's "end run" play with Sidney Korshak in 1970, there were two distinct phases in Local 5's bargaining:
1. From 1971 to 1975 Local 5 negotiated with a separate Waikiki negotiating team.
2. In 1977 Local 5 negotiated for the first time with the newly organized Council of Hawaii Hotels.
During this entire period the Waikiki and neighbor island hotels went their separate ways in bargaining although there were informal contacts between the two employer groups and by 1976 agreement was reached on the establishment of a new statewide association. In February 1977 the Council of Hawaii Hotels was organized to represent all unionized hotels in the state in the negotiation and administration of contracts; separate negotiating committees were set up for Local 5 and ILWU organized hotels. In April 1977, the Council hired Irving Baldwin, a former Hawaii Employers Council negotiator (January 1960 to September 1969), and with more recent experience in the hotel industry as executive director of the San Francisco Hotel Employers Association. The new Council was an independent body with no ties to the Hawaii Employers Council.
During that same interim period (1971 to 1975) the major Waikīkī hotels negotiated as the Council of Hawaii Hotels; the neighbor island hotels bargained through the Hotel Employers Association of Hawaii, affiliated with the Hawaii Employers Council.
Negotiations -- 1971-75
For Waikīkī hotels there were four negotiations-wage reopen-ers in 1971 and 1972, a three-year contract in 1973, and another wage reopener in 1975. The ILWU organized hotels, by their 1970 contracts, were tied down for five years on the issues of sick leave, pensions and vacations but were free to negotiate on wages and other issues during anniversary reopeners. Local 5 negotiated first; wage increases were then almost automatically matched but not exceeded by ILWU organized hotels, and the hassling then generally occurred on whatever other issues were under discussion.
The Waikīkī management negotiating team included mainland representatives of Hilton and Sheraton. Leadership of the team was shared by Richard Hashimoto, director of industrial relations for Sheraton Hawaii, Joseph Zaffy, vice-president labor relations for the Sheraton Corporation, and David Mendelson, a partner in Sidney Korshak's Chicago law firm, representing Hilton. Gains won in 1971 and 1973 were pretty much limited to what was then permitted under the presidential wage-price freeze under President Nixon. By 1973 the Hawaii Council of Hotels represented 11 major hotels, and in 1975 the settlement agreement (including increases in wages, employer contributions for pensions, drug and vision benefits) was, for the first time, signed by seven major hotels. The same settlement, it was reported, was to be a pattern for smaller hotels.
New ground, for Hawaiʻi, was broken in two of these contracts: in 1973, the Waikīkī hotels agreed to a "maintenance of benefits" clause in their contract; in 1975 the parties recognized a classification scheme for hotels with varying wage rates to be applied to the different classes.
"Maintenance of Benefits"
The significance of the "maintenance of benefits" clause requires some explanation. Since 1955, Local 5 hotels had participated in a jointly administered Taft-Hartley health and welfare trust fund to which they were to contribute a fixed amount per compensable hour to cover medical, dental and death benefit coverages for eligible employees. The employer contribution in 1955 was set at six cents per hour.1 The collective bargaining contract also provided for employee contributions to the fund "as determined by the Trustees of the Fund to be the amount necessary for eligibility as a beneficiary under the Fund." In fact, there never was an employee contribution. The original six cents per hour employer contribution was increased over the years, both by negotiations and trustee action, so that by early 1973 the contribution rate was 20 cents per hour.
In 1973 the union proposed and the employers agreed to add a provision whereby employers would "pay whatever additional contribution, as determined by the Trustees, is required to maintain the present level of benefits." ("Maintenance of benefits") That provision remained in all later contracts until 1984 when Local 5, in negotiations led by Richard Tarn, agreed to set a maximum contribution, by March 1984, of 98 cents an hour. That concession by Tam, as will be discussed later, probably contributed to the loss of his position as financial secretary-treasurer of Local 5 in the 1985 election.
Available evidence indicates that employer agreement to a "maintenance of benefits" provision in 1973 was urged by mainland representatives on the bargaining team; experience in some mainland cities, they claimed, showed that such clauses worked well and were not unduly expensive. Several local representatives on the bargaining team, we are told, opposed the provision but it was finally agreed to by a majority of the committee.
"Maintenance of benefits" did provide a relatively generous level of benefits for Local 5 employees. It has also been a hotly disputed issue in every negotiation after 1975.
Classes of Hotels
The parties in the 1975 Waikīkī negotiations, for the first time, formally recognized different classes of hotels:
A - hotels off Kalākaua Avenue and on the beach
B - hotels mauka (toward the mountains) of Kalākaua
C - originally outside of Waikīkī, later applied to several smaller hotels.
Neither the "maintenance of benefits" provision nor the classification of hotels applied to ILWU organized hotels. Local 142 had never attempted to negotiate a trust fund for health and welfare benefits in hotels, nor in other industries (longshore, pineapple, and sugar) in which they represented workers. The ILWU negotiated specific benefits (medical, dental, group life) with the employer directly paying the cost to the carrier.
Although ILWU contracts do not formally provide for Class B or Class C hotels, the union has in practice negotiated lower rates or deferred gains for some smaller hotels or for hotels which were experiencing financial problems.
The 1977 negotiations between Local 5 and the newly formed Statewide Council were unique and precedent setting in several respects. It was the first encounter between Tony Rutledge (son of Arthur Rutledge) for the Local 5 team, and Irv Baldwin as the spokesman for the Council of Hawaii Hotels. Although Art Rutledge had ultimate responsibility for the final result, it was Tony who actually led the Local 5 negotiating committee in the 115 marathon sessions that dragged on from late April to December 10, when the new contract was signed. There were at least three publicized strike threats by the union, and an employer counter-threat of a lockout. The contract was for five years, with a reopener on wages and two other issues in 1980. For the first and only time in the industry the contract required that, if the parties were unable to reach agreement during the reopener, the unresolved issues were to be submitted to final offer2 arbitration. The arbitration provision was Art Rutledge's suggestion which came as much of a surprise to his own committee as it did to the employers. Rutledge, after settlement was reached, said "... the contract's binding arbitration far outshines any terms in the contract. It's more important than wages ... A strike doesn't help anyone, especially now."
The union estimated the total cost of the package-including three wage increases, improved pensions, health and welfare benefits, vacations, holidays, sick leave-as worth 11 percent a year over the first three-and-a-half years of the contract. The new contract, it claimed, topped both Los Angeles and San Francisco in wages and in such benefits as holidays, vacations and sick leave.
The contract was between the Council of Hawaii Hotels, on behalf of 14 Class A hotels (including three neighbor island hotels), and Local 5. It was to be applied with some modifications to 10 other Class B and Class C hotels on Oʻahu.
Less than a year after this precedent-setting contract was negotiated, both Rutledges, father and son, were defeated in a referendum vote for union office in Local 5. In the 1980-1981 negotiations, under the reopener provisions of the contract, both parties, now headed by new team leaders, agreed to remove the binding arbitration provision.
The ILWU, in neighbor island negotiations that soon followed the Local 5 settlement, negotiated substantially the same gains except that there was no binding arbitration requirement in their contract.
Negotiations after 1977, the last contract negotiated under Arthur Rutledge's leadership, will be covered in later chapters.
Which is Better?
At some point in every contest for bargaining rights between the ILWU and Local 5, workers are flooded with printed material pointing up the superiority of one union's contracts over those of the other. There have been 21 such elections since 1970, when wages and benefits for neighbor island hotels were basically matched with Waikīkī hotels. The purpose of these comparisons of conditions and benefits is to demonstrate one union's greater negotiating ability or better understanding of hotel workers' problems.
The fact that elections are not won by contract comparisons alone3 has not slowed the continuing tide of such comparisons.
At any given time over the past 24-25 years one could select some feature of one union's contract that appeared to be better than that of the rival union's contract. Over the years, though, there has been an equalizing process whereby the differences have been pretty much ironed out. For example, the ILWU was the first to negotiate free meals for all of its food and beverage employees; in time Local 5 contracts provided for the same. Today all employees, not just food and beverage employees, receive free meals. Similarly, ILWU contracts have had the better vacation, sick leave and severance pay provisions; in these as in other areas of the contract, there has been a "catching up," except where Local 5 preferred to place its money elsewhere. Also, as has been shown, Local 5 for many years led the way on wage increases; today, ILWU-negotiated wages for areas such as Kaʻanapali and the Kona Coast equal those of Waikīkī hotels. There are variations in the form of delayed increases for Hilo, Kona and Kauaʻi but there are also variations from the Waikīkī rates negotiated by Local 5 for outlying areas on Oʻahu and other islands.
What it boils down to, in the words of one ILWU negotiator, is that the differences in contract terms are mainly differences on how the money gained in negotiations is to be applied. Each union, he claims, has different emphases depending on the makeup and interests of their membership. Benefits in ILWU contracts, he claims, are spread among a larger group, including many part-timers who would not qualify for benefits under Local 5 contracts.
In ILWU contracts, all benefits4 are provided for "regular full time"5 and "regular part-time" employees regardless of how many hours they actually work in any time period. There are no classes of employees in Local 5 contracts; many benefits are tied to hours worked either for eligibility or compensation purposes.6 At different times these differing benefit requirements have different effects. In a slow period, for example, when work opportunity is more limited, a regular full timer or part-timer under an ILWU contract would still be eligible for benefits that might be denied under a Local 5 contract. Contrariwise, in a very busy period an employee who would be considered a "casual," with no benefits under an ILWU contract, might still qualify for many benefits under a Local 5 contract. The issue has been endlessly argued and will continue to be argued for many years.
There are contract areas in which differences are not likely to be eliminated in the near future. These are: (1) super seniority for stewards, (2) short shift premiums, and (3) establishment of a health and welfare trust fund.
Stewards' Super Seniority
In January 1956, a supplementary agreement to the 1955 bargaining agreement between Hawaiian Village and Local 5 recognized the union's right to install one shop steward in each department in which its members were employed; shop stewards were to have seniority over all other employees (super seniority) for the purpose of layoff. This was later extended to other hotels. Over the years a differentiation was set up between "head" shop stewards and regular shop stewards. Both kinds of stewards enjoyed super seniority for purposes of layoff and recall (and by 1977, work opportunity); head shop stewards were also paid an hourly wage premium (first 10 cents per hour, then 25 cents per hour by 1977). In the 1984 agreement the premium pay for head stewards was eliminated but they (not including the regular stewards) still retained super seniority for purposes of layoff, recall, and work opportunity.
Throughout this period the ILWU never sought nor are they likely in the future to seek any kind of wage premium or super seniority for any of their stewards. As a matter of principle, they don't believe that special inducements should be offered to stewards.
Again, as early as 1955, Local 5 contracts provided wage premiums for dining room help for shifts of less than eight hours, varying from 10 to 15 percent over the regular hourly rate. These premiums have changed over the years; by 1977, short shifts of four but less than eight hours were paid at 20 percent above the regular rate, six but less than eight hours at 10 percent, three hours (banquet functions) at 25 percent. The 1984 contract provided for only a 10-percent premium for a four-hour or greater short shift.
The reasoning behind the short shift premium, from the union point of view, was to discourage use of part-timers. The employers claim that the original thinking was to compensate part-timers for the fact that they were ineligible for most fringe benefits. Neighbor island employers who deal with the ILWU insist that with their relaxed eligibility requirements (regular part-timers eligible for all benefits) there is no need for any additional premiums.
The ILWU has at times proposed short shift premiums for food and beverage employees; they have never pressed it to the point of a strike issue.
Health and Welfare Fund
The AFL Hotel and Restaurant Workers Health and Welfare Fund, established under Local 5's contracts since 1955, has provided slightly better medical and hospital benefits than have the ILWU contracts which call for HMSA Plan IV. The main differences are in such benefits as charges for diagnostic, laboratory and X-rays (100% as against 80% and 50%) and hospital benefits (semi-private room rate versus ward rate). The Health Fund, by action of its trustees, also provides continuing medical, dental, drug and vision care benefits for retirees and their dependents, plus a reduced death benefit ($500) for the pensioner.
As already noted, employer contribution rates for the AFL Health and Welfare Fund have been a continuing controversial issue for many years. Employers have been especially disturbed by the "automatic" increases that occurred under the "maintenance of benefits" provision, in effect since 1973. They claim these benefits made it difficult for them to project costs for any given future period. In 1984 negotiations, as already noted, Local 5 agreed to "cap" the employer contribution at 98 cents per hour by March 1, 1986-a barrier that is intended to limit future benefit increases and possibly reduce existing benefits.7
The ILWU has never proposed establishment of a health and welfare fund for neighbor island hotels. The slightly better medical and hospital benefits in Local 5 contracts, they claim, are offset by both the easier eligibility requirements in ILWU contracts and superior clauses in other parts of the contract (for example, severance pay). Also, health and welfare benefits for retirees have not been an issue with their members. In general the work force in their organized hotels is a much younger group; as of 1984 there were roughly three retirees under the Local 5 pension plan for every one under the ILWU plan-and it is certainly not an issue among employees in newly opened hotels.
We can expect the debate about relative contract clauses to continue in future representation contests. How effective that may be in any given situation is in itself debatable.
Strikes in Newly Organized Hotels
Local 5, our account thus far indicates, organized the major Waikīkī hotels and negotiated substantial wage and benefit gains with only one significant strike (against Matson hotels in 19528). In the early 1960s, however, the Local was engaged in two fairly long strikes, both outside the main negotiations going on at that time. Both strikes, although with different outcomes, strongly affected the future collective bargaining situation in Waikīkī . The two strikes, within a three-year period, involved one of the oldest hotels in Hawaiʻi, the Halekulani, and one of the newest at that time, the Ilikai; they also provide, in retrospect, a fertile area for speculation and theorizing about strike strategy and tactics.
The Halekulani Strike
The Halekulani Hotel, located on the beach at Waikīkī , has since the 1920s been one of the outstanding luxury-type hotels in Hawaiʻi. Originally built as the home of Robert Lewers, a Honolulu financier and industrialist, the property was leased about 1917 by Clifford Kimball, previously manager of a hotel on the North Shore of Oʻahu, for $150 a month. Three years later Kimball bought the property, then consisting of 25 rooms, for $250,000. Over the next few years he leased and bought adjoining property, built upon the original structure, added numerous cottages to the grounds, and by the early 1930s had invested about $500,000 in the property. When the depression hit the tourist industry in the 1930s the hotel was put up for sale with no takers; several years later business again picked up and has apparently been profitable ever since. By the mid-1950s the hotel consisted of 182 rooms.
The hotel, under Clifford Kimball, and later under his son, Richard "Kinjie" Kimball, was run in the paternalistic tradition then common among many Hawaiian businesses. The help, mainly Japanese-American, had long tenure-many had been there for 30 or more years, identified closely with the owners and, despite the better wages and conditions in nearby unionized hotels, werecold to union efforts at organizing. Employees were told that although their pay may have been lower than other beach hotel rates, they were guaranteed 40 hours. The "guarantee," as several employees later told it, meant a call for "volunteers" to take time off during slack periods. Other "volunteer" efforts, as reported by employees, included waiters and housekeepers putting in extra hours without compensation.
In late 1956, stories appeared in the local Honolulu papers that the Kimballs wanted to sell and get out of the hotel business. In a letter "To our Employees" dated November 1, 1956, Richard K. Kimball wrote:
Whether or not you will continue as an employee of the new owners (whoever they may be) will be a matter between you and them.Kimball personally assured several employees that the severance pay would be enough to make a down payment on a house. The letter to employees also stated that it would be a minimum of six months and possibly longer before "you have a 'new boss' here at Halekulani." Actually, it took five and a half years before the purchaser, Norton Clapp and Associates of Seattle, took over. (Norton Clapp was president of the Weyerhaeuser Paper Company.) The sale price was reported at $4.5 million.
Just before an "Aloha" farewell party for the Kimballs, held on May 28, 1962, employees had contributed for appropriate gifts for the former owners. At the party, Richard Kimball told the employees that everything would remain pretty much as was and that the new owners would continue the Kimball system. But not a word was said about the promised severance pay.
Halekulani employees, in shock and anger, flocked to Local 5 for a solution to their problems. Many of the old timers feared that without severance pay and with no assurance of continued employment by the new owners, they would be left destitute.
Throughout the month of July almost daily meetings were held with Halekulani employees by Local 5 organizers. By late July the union petitioned the NLRB for representation rights. Four days before the election, on August 3, 1962, the new owners fired Richard Kimball who had been retained as hotel manager. Kimball's activities, it was apparent, had precipitated the surge toward the union. In spite of his dismissal, Halekulani employees voted 126 to 74 for Local 5 representation.
When the company protested the results, based on a union violation of NLRB rules (the union had circulated a likeness of the NLRB ballot with an explanation in Japanese), the union immediately consented to a new election. This time, on August 28, 1962, they won again but by a closer margin, 104 to 93.
When contract negotiations got under way in September, the hotel management was assisted by an Hawaiian Employers Council representative, Irving Baldwin; the Council at that time had not been involved in any hotel negotiations since the 1952 Matson hotel strike.
Halekulani workers then lagged far behind what organized workers in other beach front hotels were receiving in wages and benefits-the union estimated that wages averaged 28 to 45 cents an hour less and that fringes accounted for an additional 25 cents (no pension plan; inferior medical plan, vacations and paid holidays). Against an original union proposal for parity with other organized hotels, management suggested that Halekulani workers wait two years to catch up with Waikīkī contracts.
Negotiations moved very slowly and broke off in November 1962. The next month Halekulani unilaterally put into effect increases averaging 17 cents, but no pension plan.
For the next eight months there were virtually no meetings. In July 1963, a new manager, William Charlock, a "local boy," replaced the previous manager (Norton Clapp's son-in-law) and efforts were made by the union to resume negotiations. The negotiations were complicated by personal considerations. Norton Clapp's teenage son had been beaten up just a few months before after going to work for a dairy company during a strike by the Teamsters, Arthur Rutledge's other union, and this had not disposed Clapp toward a settlement. After two days of negotiations with no progress the union, in frustration, called a three-day workstoppage, then made it an official strike on the fourth day, August 5, 1963. At the time of the walkout, management still had a proposal on the table to match Waikīkī wages and conditions within a two-year period-a proposal that the union rejected.
The strike, over several weeks, received much publicity but was not very effective in damaging the hotel's business. When pickets marched on the beach in front of the seawall fronting the hotel, management rigged up a long wall of coconut fronds and canvas, which was soon termed a "Bamboo Curtain," to separate guests and pickets from each other's view. Pickets for brief periods took to boats in the ocean before the hotel. When six state and county employees continued to moonlight at the hotel during the strike, the union set up picket lines before public schools where two of the "moonlighters" taught, and handed out leaflets describing their conduct. Although there were no immediate results, the next session of the legislature enacted a law forbidding government employees to remain at work during a strike or lockout.9
Union supporters raised substantial sums for strike relief. On one day, for example, over 19,000 chickens were sold in a huli-huli chicken sale. But by the end of 1963 the strike was over-most of the strikers were placed elsewhere and the picket line was withdrawn.
The strike was doomed to failure from the beginning. For one, it was totally unplanned, so much so that Rutledge himself was unaware of it until it actually happened. Rutledge's tendency had been to play a waiting game, a technique at which he had developed high proficiency. For months he had not been personally involved in the negotiations, leaving it to staff people. The walkout, when it occurred on August 2, 1963, was an emotional reaction to a totally bogged down situation-members with no previous union experience were led off the job to a nearby public park and then voted to strike. Rutledge was informed of their action when he arrived at work that morning and thereafter tried to make the best of a bad situation.
The strike also occurred at a bad time. The union, for several months, had been involved in a mass picketing effort against a drive-in restaurant, Kapiolani Drive Inn-an effort that depleted the energies and enthusiasm of its most active members and was eventually abandoned.
Ironically, Local 5's success in other areas also undermined the Halekulani strike. While the strike was on, the Kahala Hilton started hiring employees for its opening in late 1963; a very large number of Halekulani employees, three-quarters of all the strikers according to one estimate, were hired at the new hotel.
Local 5's failure to establish a bargaining relationship with the Halekulani has left a major non-union outpost in the otherwise organized beach front hotels, one that has persisted to the present day.
Two-and-a-half years after its defeat at the Halekulani, Local 5 was again engaged in a major strike-at the Ilikai Hotel. There were some similarities in the two situations, many differences, and a totally different outcome.
The Ilikai Strike
The Ilikai Hotel and condominium, built by Chinn Ho, local self-made real-estate tycoon,10 opened for business in May 1964. Nearly six months later, Local 5 was defeated in an NLRB representation election-101 votes against 218 "No" votes and 25 for ILWU Local 142. The Ilikai complex consisted of the hotel operation and an International Innkeepers Inc. which operated the restaurants. Local 5 had originally filed for only hotel employees. The ILWU filed for the entire complex, including restaurant employees. Management also claimed that the hotel and restaurant operations could not be separated-a position adopted by the NLRB.
A year after its first defeat, Local 5 won the second NLRB election by a 53 percent majority of those who voted. Of 468 eligibles,
Local 5 received 228 votes against 199 for management. This time the ILWU was not on the ballot.
Three months of negotiations showed virtually no movement on either side. The employer, with negotiations led by Irving Baldwin of the Hawaii Employers Council (the same negotiator as in the Halekulani strike), made clear that they would not accept the standard Waikīkī contract. On February 18 the Ilikai strike was on.
It was an unusual strike in several ways. About 53 percent of the work force --roughly the same percentage as voted for the union-walked out. They were almost immediately replaced and together with those who remained on the job kept the hotel in operation throughout the eight-week strike. At no time was there any serious disruption of the hotel's activities.
Those who struck included a solid core, about 150, that maintained daily picket lines throughout the strike. These picketers were supplemented by volunteers from other hotels, from the Teamsters union, and from other unions. The strike was endorsed by the Hawaii State Federation of Labor. On one day, March 17, 1966, some 600 members of the Teamsters Trucking Division, after adjourning a conference they had attended, circled the hotel for several hours. None of these activities shut down the hotel but they did keep the glare of publicity on the dispute.
What did hurt the hotel and was probably a crucial factor in bringing about a settlement was the support given to the strike by the Honolulu building trades unions. The hotel, before the strike, had started work on a new wing facing the main building. Construction workers, in a display of solidarity with the hotel workers --a display never before or since equalled by Hawaiian labor unions--refused to cross picket lines set up by the hotel workers. Each day's delay in construction was costing the hotel thousands of dollars in interest on construction loans and further deferring the opportunity to earn on its investment.
Unlike what occurred during the Halekulani strike, negotiations were continuous throughout the strike. There were long interminable discussions, frequently until early in the morning. Western International Hotels, which had contracted to take over management of the entire Ilikai complex, became concerned over the delay in construction. New faces were brought into the negotiations, including Chinn Ho's attorney, City Councilman Matsuo Takabuki, a power in Hawaiʻ'i's Democratic Party. Finally, on April 14, the combination of continued economic pressure plus some fresh approaches to old problems produced a compromise settlement.
Hotel workers, not including restaurant workers, were to receive the same wages as paid by other Waikīkī hotels but with a three month lag, over the next three years. They were to automatically pick up all wage increases and benefits negotiated in these other hotels. Food and beverage workers received a small immediate increase (15 cents) with the amount of their wages to be arbitrated by a representative of Western International Hotels and a vice president of the Hotel Workers International Union. The short shift premium was still to be negotiated. The Ilikai was to keep its own pension plan and profit-sharing plan.
The two arbitrators were later unable to reach an acceptable settlement on wage rates for food and beverage workers. At the end of 1967, on the basis of an impasse, the Ilikai put into effect the rates it had proposed in June 1966, still below those in other unionized hotels. The short shift premium was still unsettled. Despite these problems, the union wisely refrained from attempting another strike so soon after the last long one.
In 1972, the Ilikai agreed to catch up on retroactive pay increases. Since 1973 they have participated in joint negotiations with other Waikīkī hotels. Except for a difference in pension plans which Ilikai employees prefer to retain, they now have identical wages and conditions with other Waikīkī Class A hotels.
Rutledge vs. Tam
Rutledge's continuous control of Local 5 for some 38 years was challenged on December 13, 1977 when Richard Tam, SecretaryTreasurer of the Local (an elected position) since 1967, and a business agent since 19551 (a paid position), called a press conference at a public library and announced that he would be running for Rutledge's job as president and business manager.
"I want to end the dictatorship of our union and return Local 5 to the members,"and
For over 15 years, Art Rutledge has been making retirement pronouncements. I plan to help him keep that promise. For once, I will make his word good.Tam, the third youngest in a family of nine boys and one girl, was a product of Maui public schools and the University of Hawaiʻi Industrial Relations Center. He was hired by Local 5 in 1955 after an apprenticeship in which he worked in various departments of organized hotels.
Tam's announcement of his candidacy ushered in an eight-year period of intense conflict between the Rutledges and Tam in nearly all areas of union activity. The eight-year period of factional strife was a period of no growth for the local--there were a few gains but also several setbacks.
On the organizational front, the local won one important victory--the gain of representation rights, after three elections, at the newly opened Sheraton Royal Waikoloa on the Big Island in 1984. This was the first neighbor island election victory for Local 5 in 13 years but it was overshadowed by the loss of bargaining rights for some 600 members at the Kelley hotels in Waikīkī that same year.
In negotiations there were modest wage gains on a wage reopener in 1981, and again in 1984, but also concessions and givebacks in 1984 that split the negotiating committee and contributed to the toppling of Tam's leadership in the 1985 elections.
Much of the energies and finances of both antagonists were expended in litigation, some to define the rights (material and otherwise) of the parties, some in the nature of harassment. In all, four cases were filed in the U.S. District Court (all disposed of by 1980), and eight cases in the First Circuit Court of Hawaiʻi (four settled, three adjudicated, one withdrawn).
Circumstances other than internal disputes also impeded the union's activities. Hawaiʻi's tourism industry suffered a serious slump in the early 1980s; for the first time since 1949 the number of visitors arriving in Hawaiʻi showed actual declines. Also a new pro-business regime at the NLRB enunciated doctrines, as will be developed more fully later, that both hindered new organizing efforts and made it easier to get rid of existing bargaining representatives.
The International officers played an ambivalent role in these conflicts, trying to play the role of a mediator but generally supporting those in power at any time. The International officers themselves seemed to be divided on how to handle the Rutledge vs. Tam conflict. While some officers appeared to be supporting Tam's bid for reelection in 1985 the International itself never took action on removing Tony as an International Vice-President on charges filed by Tam and his assistant, Bill Fuhrmann, in January 1985. As an International Vice-President, a position he had held since January 1981 and could not have retained without the support of the International President, Tony Rutledge occupied a strategic vantage point from which to criticize and harass Tam's activities.
Tam's Ascent to Power, December 1977 to January 1980
Rutledge's reaction to Tam's first press conference (December 13, 1977) was quick and decisive. He appeared determined to squelch in its infancy what he regarded as brazen heresy. Two days later Rutledge stated at his own press conference that "Dick Tam has abandoned his job"2 and that the Local 5 Executive Board had designated Tony Rutledge as Union Business Manager with the duties of Secretary-Treasurer. In answer to another Tam charge that he had failed to schedule Union elections for November 1977, as required by the Union by-laws, Rutledge stated that a nominating meeting would be scheduled for January 29, 1978.
At Tam's second press conference, held two weeks after the first one at another public library, Tam was handed a letter by Sally Gomes, a local Executive Board member, informing him that he was fired as a staff employee for "misuse of union funds" and because of "poor organizing efforts."
Thereafter Tam's ascent to power became a steep climb with obstacles thrown in his path at virtually every step. After his dismissal as a staff employee, Tam went to work as a dishwasher in the Princess Kaiulani Hotel.
The 1978 Election
International President Hanley, on grounds that the members had not been given timely notice, ordered the nominating meeting pushed back from Art Rutledge's initially announced date of January 29. When nominations were finally made five weeks later at a March 12, 1978 meeting, Tony Rutledge was nominated to oppose Tam for the job of Business Manager and President3 (Art Rutledge's job) and Art Rutledge was nominated for Secretary-Treasurer. Both sides also fielded complete slates of nominees for all other Executive Board positions.
The election was finally held some three months later after further unsuccessful efforts to keep Tam off the ballot.4
The Labor Department, on a complaint filed by Tam, sought a federal court order on May 30, 1978, allowing the department to run the election but by then the ballots had been mailed out by the local. Before the ballots were counted, Tam stated that the election was invalid because it had not been supervised by the Labor Department. When the ballots were counted the results, in the words of the Honolulu Advertiser front page banner headlines,
Tam defeated Tony Rutledge for the job of President by 2914 to 1732.
MacCallum defeated Art Rutledge for the job of Secretary-Treasurer by 3142 to 1423.
The Tam slate swept the entire Executive Board.
The hotel industry work force has been predominantly female (60-65 percent). Women members had been on the Local's executive board but there had never been a female officer. Tam's chief running mate-the candidate for local union Secretary-Treasurer (later president) was Frances MacCallum, a paymaster from the Hawaiian Regent Hotel.
Probably the fastest growing group in the industry were the Filipinos-a fact of which the Rutledges did not seem to be fully aware. Tam made special efforts to win their support. His job as a dishwasher placed him in close personal contact with a large concentration of Filipinos who now regarded him as one of their own. He also selected as his candidate for Vice-President Romeo Mindo, a bellman at the Sheraton Waikiki, a former mayor of a small town in the Philippines and an ex-Philippines army officer.
Tam also sharply criticized the most recently negotiated master contract for having weakened the right of Filipino workers (about 30 percent of the membership) to extended leaves of absence (previously entitled "homeland visit"5).
The combined support of old timers, many women and Filipinos assured the Tam election victory. The Star-Bulletin was unrestrained in its approval of Art Rutledge's defeat. Under a heading "Hotel Union Vote is a Healthy Sign," it editorialized:
... while retaining a healthy respect for Rutledge's past accomplishments-we think the election results are good for the hotel workers union-and good for the labor movement.The Honolulu Advertiser was more restrained in its comment on the results. Its editorial "Art Rutledge's defeat" noted that Rutledge had been "buried prematurely before."
. . . If there's one outstanding characteristic about Rutledge it's his tenacity. Like the Indian rubber-ball man, no matter how hard you throw him down he always sprang upright.
The 1980 Election
Events proved the Advertiser to be more accurate in its appraisal. One election victory, no matter how decisive, was not sufficient to overcome the Rutledges' resistance to releasing control of the Union. Tam had to undergo another 18 months of legal proceedings, an International-imposed trusteeship, and another Federal court-ordered election before he and his slate were able to assume control of the Local.
After the election, Local 5 officers still faced a suit filed by the Labor Department for an order that would allow it to supervise the election. Tam, in a letter to Rutledge, asked that his installation be "expedited" despite the Labor Department's challenge.
On August 18 the Local 5 Executive Board wrote International President Hanley asking the International to set up a trusteeship over Local 5 on grounds that the local had failed to hold an election of officers in November 1977, as required by the Local's bylaws, and also because of the confusion created by the lawsuits. Three days later, the International imposed the trusteeship citing additional grounds.6
Two trustees, first Herman Leavitt, an International Vice-President, followed by Joseph Belardi, another Vice-President, were nominally in charge of the Local for 17 months. Tony Rutledge, the defeated candidate for President was designated the assistant trustee after Dick Tam declined the job. All officers were immediately removed (in August 1978) except Art Rutledge, who voluntarily stepped down, but within a year was back on the payroll directing the work of all business agents. All of the agents were retained.
As soon as the trusteeship was imposed, Tam filed a lawsuit against the local, the International and the Rutledges, asking that the courts certify the June election, order him and his slate installed and have the trusteeship thrown out.
A series of rulings by Judge Samuel King over a seven-month period eventually untangled the snarled legal situation and cleared the way for a new Labor Department-supervised election in January 1980.7
In the January 1980 election, the Tam slate again won, although by a narrower margin than in the June 1978 election. The results were:
For President: Tam-2548; Tony Rutledge-1933
The Rutledge slate won one seat on the Executive Board-an atlarge member.
The newly elected officers were finally installed on January 24, 1980.
Tam's General Style
Tam, upon assuming office, promised more openness in union affairs, greater rank and file participation in decision-making, a break-up of the Unity House connection, and a tripling of the union membership. He also promised an end to long-term contracts with no-strike clauses and vigorously stated his opposition to binding interest arbitration (arbitration of issues that are unresolved in negotations). There were also, he said, no plans for purges of pro-Rutledge forces. During the six years that Tam held office there was an actual loss of union members instead of the promised tripling. Most of the other promises were substantially met (there were no explicit promises, it will be noted, on wage and benefits contract provisions).
There were no purges of pro-Rutledge forces. The majority of Rutledge's staff was retained by Tam but during the first year five business agents were removed from the staff-two (Tony Rutledge and Sally Gomes) almost immediately after Tam took over, two others for alleged insubordination or incompetence and one, assigned to Hilo, who refused an option to move to Oʻahu.8
Tam also faced other personnel problems in his first year in office. The staff, having survived buffeting and uncertainty during the years of factional strife, sought greater job security and improved conditions. They organized themselves into a staff union, won NLRB certification, and finally negotiated a written contract after one rejection by the members. The contract provided wage increases, coverage under the industry pension plan, a codification of many existing practices, and many other benefits.
The break with Rutledge control of the union was symbolized by the physical removal of the local (desks, files, office equipment) from Unity House, first to space made available by the Carpenters Union and then, later, to the entire floor of a relatively new office building.
It was also during his first year in office that Tam undertook an experiment in group education for which he was strongly criticized by the Rutledge forces. The local sponsored two five-day seminars for 280 shop stewards and business agents, at an approximate cost of $100,000, in "motivational leadership." Three days of each seminar were led by Cybernetics of Hawaii, Inc. The University of Hawaiʻi's Center for Labor Education and Research then led sessions in steward training.
When asked by a reporter if the union got "its money's worth," Tam responded:
Beyond our boldest expectations ... At the conclusion of the last session we had a spiritual rebirth of our union ... it was mind-boggling, there was so much energy there ... the enthusiasm, the positiveness, the willingness to participate-all were evident.
For a brief period in early 1981 it appeared that Tam and Tony Rutledge had settled their differences, but appearances, as later events proved, were deceptive.
The January 23, 1981 Advertiser had a picture showing Tam and Tony Rutledge in a hand clasp with a caption "Tam, Rutledges end feud, pledge future cooperation." The accompanying story quoted both men as stating that they'd buried the hatchet, "ending a long and expensive war for control of the Hawaiʻi hotel workers," and that they would cooperate in trying to organize new hotels. They also discussed, it was reported, possible merger of Local 5, the main hotel local, and Local 555, the local covering the smaller hotels and restaurants.
At the time Tony Rutledge headed Local 555, and also held a position on the International Union payroll as International Organizer. His father, Arthur Rutledge, until just before this meeting had held the position of International Vice-President. The occasion for this January 23 meeting was to announce Arthur Rutledge's resignation as International Vice-President and Tony Rutledge's elevation to that position.
About a month after this reported meeting, International President Hanley wrote to Dick Tam that he was awarding jurisdiction over Class B hotels-at the time eight hotels with about 600 members-to Local 555.
A further display of apparent unity was shown when Tony Rutledge supported Tam in his 1981 negotiations under the reopener clause of the 1977 contract. This was Tam's first major negotiation since assuming office (there had been one previous negotiation with Hotel Hana on Maui). It was also a bad year for tourism-for the first time since World War II the number of arriving visitors was down from the previous year (in 1980), and again failed to increase in 1981.
After five months of negotiations, Tam, in a bulletin to his members, reported that a settlement of eight percent per year over a 39-month period plus pension contribution increases and some other benefits was "the best we could get" because of the difficult times for the industry. The negotiations were held under a wage reopener in the existing contract that was due to expire on May 31, 1982. The union, in its settlement, agreed to extend the existing contract for an additional 21 months. There was organized opposition to the settlement from dissident groups within the Local. Tony Rutledge then issued a statement endorsing the agreement "as the best that can be achieved for the members under these unfavorable circumstances." With his support, approval of the settlement barely squeaked through by 63 votes in a ratification referendum-2039 for to 1976 against.
Tony Rutledge's statement about the 1981 negotiations was the last favorable statement that he made about Tam, but even then, beneath this apparent surface of harmony, there simmered a series of long, expensive and bitterly contested legal struggles in the state and federal courts. Two of these cases-the Trustee Case and the Unity House case-were especially hard fought.9
The Trustee Case arose out of the Rutledges filing in U.S. District Court in June 1980 for a temporary restraining order to prevent the trustees from replacing the Rutledges as the union trustees on the hotel pension and health and welfare funds. The case finally went to trial in early February 1981.
Under the trust agreements setting up these funds the union trustees were to be appointed and serve "at the pleasure of the Union." There was also provision that ". . . If there is more than one Union they shall participate in appointments and removals in such manner as may from time to time be provided by majority vote of the Union trustees."
When the Tam slate. took over control in January 1980 Tam, McCallum, and Mindo were designated to replace both Rutledges and Anthony Merritt (a former financial adviser to the union) as the union trustees.
The two Rutledges, originally appointed as Local 5 trustees, were also later designated as Local 555 trustees. They charged that, by their removal, Local 555 was denied representation on the trustee boards of these funds. At the time, Local 5 had approximately 10,000 members, Local 555 about 1300.
In April 1981, after nearly three months of hearings, Federal Judge Martin Pence ruled that the Rutledges had filed a "frivolous" suit against the trustees. The judge said of the Rutledges and Local 555, "It was a deliberate attempt on their part to frustrate the normal result of a change in administration which occurs in unions."
The judge further ordered the two Rutledges to pay two-thirds of the legal costs spent by Local 5 in fighting the suit. He later assessed both Rutledges and Local 555 $20,836 in attorney fees plus $6,021 in costs.
The Rutledges and Local 555 later appealed Pence's decision to the Ninth Circuit Court of Appeals; the Appeals Court confirmed the lower court decision.
The Unity House Case
The Unity House case, filed by Tam and five other individuals (three from Hotel Workers Local 5, two from Local 996) has been in litigation since December 1978 and as of this writing (August 1987) still remains undecided.
Even before the appeal to the Intermediate Court of Appeals was taken, Arthur Rutledge estimated that the suit cost Local 5 $1 million (Tam said $200,000); defense of the suit, said Rutledge, cost $400,000 to $500,000.
Unity House Inc. (present name assumed in 1956) was originally chartered in 1951 as the Hawaii Federation of Labor Memorial Association, a non-profit corporation. It was originally financed by non-interest bearing debenture bonds, in $10 denominations, sold to members of both Hotel Workers Local 5 and Teamsters Local 996. In 1957 Unity House constructed the Unity Building with money loaned by both unions. Unity House rented space in the Unity building to both unions. In 1974 Unity House built and became owners of the Waikiki Marina Hotel, situated next to Unity House.
After the Unity House building was completed each of the two unions contributed a monthly charge per member to Unity House Inc., variously referred to as "dues," "charges for office space," "administration services," and for "other services." As of January 1980 before Local 5 physically moved to another building, these monthly charges were $1 per member. As of June 1980, according to an outside appraisal, the assets of Unity House Inc.-the Unity House building and the Waikiki Marina Hotel-were valued at $14 million.10
In their original complaint, filed in December 1978, Tam and his fellow plaintiffs claimed that by virtue of their membership in Locals 5 or 996 they automatically became and remained paying members of Unity House. They charged that because of mismanagement and breach of fiduciary duties, Arthur Rutledge and other officers should be replaced by an appointed impartial receiver to manage and control the corporation, and asked that after the corporation's affairs were in order, an impartial and fair election be arranged to duly elect new directors and officers.
In February 1982 the complaint was amended both to ask for a permanent injunction enjoining Rutledge from managing or using the corporation's assets in defense of the suit, and also ". . . to completely effect the dissolution of the corporation (with a sale of all of the corporation's non-cash assets) . . . and to disburse the resulting cash assets among the corporation's creditors and members."
In the 1983 union election (discussed later) the Dick Tam slate, "Team for Democracy, 1983," in a leaflet distributed to members, claimed that:
YOUR money. It's been locked up at Unity House for years, benefitting only a selected few. DICK will get back the money and return it to you. You, the individual member. NOW when you need it the most. (boldface in original)
The charges finally came to a non-jury trial before Circuit Judge Richard Y. C. Au. After many months of hearings and frequent delays to permit the parties to work out a solution, the judge found that all of the ". . . misconduct, breaches of fiduciary duties, wrongdoing and illegal acts . . . have been corrected since this action was instituted or were de minimis." He further found that it was impossible to determine, from the evidence advanced, the plaintiffs' status as members of Unity House. He concluded that plaintiffs failed to show that they "fairly and adequately represent the interests of the membership of Unity House," and entered judgment for Rutledge and Unity House.11
About a year later the Hawaiʻi Intermediate Court of Appeals, reviewing the case on appeal, agreed with the trial court that plaintiffs did not, because of their membership in Locals 5 or 996, automatically become members of Unity House and had no standing to bring this action.
Thus, in 1987, after over eight years in the courts, Art Rutledge appeared to be firmly entrenched as the President of Unity House Inc. and in virtually undisputed control of its assets. But in August 1987 his status again became uncertain when the Hawaiʻi Supreme Court reversed both the Intermediate Court of Appeals and the original Circuit Court decisions and remanded the case to the Circuit Court for further hearings and findings.
The Supreme Court noted that it granted the petition seeking further review of the trial court's decision because,
... we were troubled by the appellate court's ruling, which in essence was that equitable relief for plaintiffs was barred because of the defendants' failure to abide by a charter provision governing membership in the corporation, as well as the trial court's ruling that 'the equitable remedies requested by Plaintiffs are not practicable.'The Supreme Court noted that the Circuit Court "failed to recognize that the plaintiffs were seeking redress to injury for them individually as well as to the corporation . . ." "This, in our opinion, was error . . ."
The Circuit Court, it was held, had it within its power, where it could not grant the specific relief prayed for, to fashion appropriate relief on its own, under the prayer for general relief in the complaint.
Given the abundance of proof that Unity House had obtained large sums of money and services from members of Local 5 and Local 996 laboring under a belief induced by Rutledge's frequent representations that they were members of the Corporation, equitable relief enabling the plaintiffs to exercise membership rights was in order.
A Wide Open Campaign
Richard Tam's campaign for more openness in the union probably reached its peak in the 1983 election for union officers when 56 members on five different slates filed as candidates for office. Lined up against Tam and his slate were four other slates headed by aspirants for Tam's. position, including two of his staffFrances "Mac" McCallum, the local's president who was Tam's running mate in the 1980 elections, and Malcolm Sur, a Local 5 business agent. The main contender for Tam's position, as in the 1980 election, was again Tony Rutledge, who still held the position of Organizer and Vice-President of the International union. Also filing for the head position in the union was Sally Gomes, a waitress at the Sheraton Waikiki and a former business agent under Rutledge for 10 years who was fired by Tam. Although elected to the executive board as a Tony Rutledge supporter in 1980, she now charged that neither Tam nor Rutledge represented the rank and file.
To Tam, the large number of candidates was an expression of democracy. "I ran on the avowed purpose of developing democracy, and this is a by-product of it," he told a reporter. "I know this could never have happened 5 years ago because of dominance, atmosphere, fear."
To Tony Rutledge, 56 candidates represented a "circus." Charging that Tam had ". . . spent over $3 million [of assets now at about $7 million] in three years with nothing to show, except a circus of 56 candidates," he said, ". . . That's a hell of a learning experience."
The three "minor" candidates (as shown by the final results) charged Tam's rule as "dictatorial," "expensive (waging vain lawsuits and taking petty grievances to arbitration that should have been solved informally)." They blamed him for loss of recognition at the Prince Kuhio hotel (discussed later), and with loss of five organizing campaigns.
Both McCallum and Rutledge raised the issue of Tam's relationship with the law firm of Gill, Park, Park and Kim. Tony Rutledge claimed that attorney's fees had cost the union $500,000. McCallum, in a newspaper interview, charged that the law firm "... runs Local 5."
Rutledge, in a steady stream of leaflets and bulletins to the membership, charged Tam with "inexperience in decision making," a lack of accountability, and squandering of union assets.
Tam's slate included Romeo Mindo as the candidate for president, to replace McCallum, plus several new faces. They identified themselves as Team for Democracy, 1983. In newspaper interviews and bulletins Tam stressed his "accomplishments" (cutting Local 5's ties to Unity House, electing shop stewards, holding regular membership meetings, distributing by-laws to every member, increased pensions, improved health and welfare benefits, and the winning of arbitration decisions). He defended his record on organizing by claiming that he was inhibited during the first two years of his term because of the "conflict of interest" charges that hung over the union because of the connection between Unity House, as the owner of the Waikiki-Marina Hotel, and the Rutledges. Tam stated on more than one occasion that Local 5 members had a claim to the assets accrued by Unity House. And, as has already been promised, a leaflet issued by the Tam's Team for Democracy, 1983 promised that "DICK will get back the money and return it to You, YOU, the individual member."
When the election results were announced on January 28, 1983 by the League of Women Voters, which did the ballot count, Tam's slate had made a clean sweep of all offices. His total for the head job was 2428, about 45 percent of the total votes cast, and 708 votes more than Tony Rutledge received. The three other candidates received an aggregate of 1271 votes, about 23 percent of the total; McCallum, the incumbent president received the lowest vote-161, less than three percent of all votes cast.
The results of the 1983 election made clear that despite organizational setbacks in 1982, Dick Tam still had the support of his membership.
The Beginning of the End
If one were to pick a single event that marked the beginning of Dick Tam's slide from power as Secretary-Treasurer of Local 5, the 1984 Master Agreement negotiations would be a likely candidate. This is said despite overwhelming membership acceptance of the settlement in a referendum vote (2-1), against an organized opposition, and also in full recognition of the fact that Tam might have yet prevailed over Tony Rutledge in the 1985 election but for an administrative blunder that probably deprived him of several hundred votes.
The 1984 negotiations, despite some gains, also contained many concessions, or give-backs, something not uncommon in many settlements at that time, but a first for Hawaiʻi hotel negotiations. The full impact of these concessions was not immediately felt by the membership but, by the time of the 1985 election (with frequent reminders from Rutledge publicity), were better understood. -
The 1984 negotiations were also unique in that a majority of the negotiating committee (seven out of 12, including some staff persons) opposed the final settlement and urged the membership to reject it. Tam won acceptance of the contract but the rift created in the Local's leadership carried over into the next year's election.
Background of Negotiations
In the 1981 negotiations, under a wage reopener provision of the 1977 contract, the original expiration date of May 31, 1982 had been extended to February 24, 1984. Negotiations started in December 1983 and continued until nearly the middle of March 1984. These negotiations occurred against a depressing background of serious problems, defeats, setbacks, frustrations and harassments-a chain of events largely stemming both from economic circumstances and a persistent opposition mounted by the Rutledge forces. The particular incidents involved included the Kuilima hotel situation, Tam's becoming trustee of Local 555, the organizational attacks by a "new" independent union, loss of membership at the Miramar hotel and at one group of Kelley hotels, and a complete rout during negotiations at another group of Kelley hotels.12
When the Hyatt Kuilima, after a seven-month shutdown, reopened as the Kuilima Turtle Bay under new management, Hilton, (but with the same owners, Prudential Insurance) about 55 former employees were not rehired and others were rehired at lower pay. Local 555, under Tony Rutledge's leadership, challenged Local 5's handling of the situation, filed unfair labor practice charges against the company, picketed the hotel and the other Hilton operation on Oʻahu (the Hawaiian Village)-all of this while Tam was trying to organize Kuilima employees and negotiate a new contract with the new management. When the contract was finally settled on February 13, 1984, Tony Rutledge immediately termed it a "sellout."
After Tam complained to the International Union about Tony Rutledge's conduct, the International Union, in early December 1983, named Tam as trustee of Local 555 and filed charges against the local based on fiscal mismanagement "and interfering with Local 5's organizing efforts at Kuilima." Tam then suspended all of Local 555's officers and seized control of all of its records.
Rutledge forces13 immediately responded to these acts by announcing the formation of a new union, the Independent Service and Culinary Workers Union, and proceeded to file petitions with the NLRB for representation of 326 employees at seven hotels organized by Local 555; for representation rights at other hotels, and for elections to revoke union-security agreements (requiring deduction of union dues from employee paychecks) at still other hotels.
Within weeks, Tam, as head of Local 555, became immersed in several serious defeats and setbacks, notably the Miramar Hotel situation (originally handled by Tony Rutledge, although backed by Tam) and the Kelley hotels negotiations and deauthorizations.
At Miramar, about 130 members of Local 555 were permanently laid off as the result of a change in ownership. Continued picket lines and a federal court complaint failed to alter the situation.
More shattering defeats were suffered at the hands of the Kelley hotels. Local 555 held contracts with six Kelley owned hotels (all in what was then called the Hotel Operating Company of Hawaii). The new independent union filed petitions for elections at these hotels, but later withdrew them on the same day that a petition for decertification was filed. On March 14, 1983, just before Local 5 members were to vote on the settlement in the Master Agreement negotiations, employees of these six Kelley hotels voted 122 to 9 for decertification of Local 555.
At this same time, Tam was hopelessly mired down in extremely difficult negotiations involving two other Kelley hotels which held contracts with Local 5. While faced with totally unacceptable proposals by the employer he was unable to rally the members in any kind of resistance,14 and the union sat by as the employer declared an impasse and later unilaterally imposed its own terms and conditions, without union representation.
The 1984 Master Hotel Contract Negotiations
The economic setting was mixed and uncertain as negotiations between Local 5 and the Council of Hawaii Hotels, representing 15 hotels (11 on Oʻahu, four on four different neighbor islands) got under way in the first two months of 1984.
The 1981 wage reopener negotiations occurred during a two year decline in the number of arriving visitors (-.7 percent change in 1980, zero percent change in 1981). There had been a slight increase (7.8 percent) in 1982 and a much smaller increase (2.9 percent) in 1983. There were much healthier gains in the first two months of 1984 but the employers, in letters sent to all employees in early March (identical letters signed by the manager of each hotel), wrote that ". . . a long term contract cannot be based on two months of business" and flatly predicted ". . . the current level of business will not be maintained throughout the year."15
Tam, from the outset of negotiations, found himself caught between two opposite pressures-a firm, coordinated approach by the Council seeking changes in the health and welfare program (a major objective) and other cost concessions on the one hand, and an organized opposition within his union ranks that pressed for stronger resistance to employer demands.
Shortly after the contract expired on February 29, 1984 Local 5 took a strike vote of its membership-3801 voted for, 176 against. A committee of seven members then sent a resolution to the negotiating committee urging immediate appointment of a strike preparation committee to formulate detailed plans necessary to run a successful strike.
No such action was taken. Negotiations continued until early in the morning of March 15 when, despite the negotiating committee's rejection of a last three-year contract offer by the employers (by a vote of 7-5), Tam reassured the employers that he would support ratification of the offer in a referendum vote.
At a mass meeting called later that morning and at another afternoon meeting at the Waikiki Shell, an outdoor amphitheater, Tam and other members of the negotiating committee debated the proposed settlement. Tam's opening remark at the morning meeting was "Friends, I'm happy we're not on strike."
Tony Rutledge issued a statement urging members to reject the proposed settlement.
In a statement distributed by the negotiating committee majority, "Negotiating Committee Majority Report Why You Should Vote No On New Contract," particular objection was made to the give-backs and concessions.
The removal of the Maintenance of Benefits (MOB) provision in the health and welfare program,16 the statement said, ". . . makes it almost certain that you will have to pay out of pocket for your medical coverage or see your medical benefits reduced".17 The Majority Report also objected to other concessions:
A 20 percent reduction in wages for new employees for the first 60 days (previously 10 percent)
Ten percent less on short shift premiums
Banquet tips reduced to 10 percent from 15 percent Elimination of 25 cents/hour premium for shop stewards.
Tam's letter to employees emphasized the wage increases over the three-year period-4%, 4%, 5%, with some variations for hotels experiencing financial problems,18 increased contributions for health and welfare benefits-from 64 cents/hour to 78 cents the first year and, if needed, 86 cents and 98 cents in subsequent years (but with no mention of the elimination of the MOB provision), paid meals for non-food and beverage employees, improved vacations, more for pension contributions, higher porterage (guaranteed tips on baggage handling for group tours).
When the referendum vote was tallied in late March the new proposed three-year contract was ratified by a better than two to one margin.19
The impact of this settlement was to be debated well into the next year, when there was a new election for local officers, and beyond.
The 1985 Election
The 1985 election that ended Dick Tam's six-year control of Local 5 was the end result of an election campaign that was waged by both Tam and his opposition for over a year.
At the October 1984 meeting the membership adopted charges accusing Rutledge of "gross disloyalty" and "conduct inconsistent with his duties as an International Vice-President" based on his assisting the "new" independent union at an NLRB hearing.
Three months later, Tam, in his role as a trustee of Local 555, together with his Administrative Assistant, Bill Fuhrmann, filed charges with the International Union to have Tony Rutledge removed as an International Vice-President. Charges included "gross disloyalty" "gross inefficiency," "fostering secession" in encouraging Local 5 and Local 555 members to form the independent union, and that he had unsuccessfully sought to replace Local 5 at Turtle Bay and at other companies.
Tony Rutledge denied having anything to do with the independent union.
Worth noting here is that even if the charges against Tony Rutledge had been upheld and he had been removed as an International Vice-President, he would have still been eligible to run for local union office. But such an outcome would clearly have discredited Rutledge and made his election more difficult.
Three-and-a-half months after Tam filed the charges, International President Hanley notified Rutledge, by letter, that the charges had been filed and that a hearing would be held during the month of June 1985. A month later Hanley wrote that the hearing would be postponed until further notice.
In April 1985 Rutledge forces secured 627 signatures on petitions withdrawing the charges against Tony Rutledge. And, at the July 1985 membership meeting, the members adopted a resolution dropping the charges.
International President Hanley wrote to Tony Rutledge, on September 23, that the resolution adopted at the July 21 meeting was invalid.
The fact remains that in spite of these letters from Hanley, the International union officials never acted on the charges.
Both candidates fielded full slates and ran wide-swinging campaigns.
Tam mostly defended his record on wage gains and increased contributions to both the health and welfare and pension plans. His attacks on Rutledge centered on alleged financial irresponsibility. Tony, he claimed, had run Local 555 broke. "You can't trust Tony" one leaflet said, "he uses union funds as his own bank account."
Tam also asserted that he was seeking to recover over half a million dollars, "monthly assessments to Unity Council from 1954-1977" that Art Rutledge "refused to return." If Tony gets elected, his leaflet stated, ". . . he will drop our suit against his father."
Tony Rutledge's campaign launched broad attacks on many fronts. With the aid of an experienced public relations man he mailed out frequent leaflets, pasted bumper stickers on his supporters' cars-all with an imprint of his face, his name and the slogan "Let's Get Local 5 Moving Again."
Over a period of many months, Tony's leaflets charged Tam with weak leadership, loss of members, a poor negotiated contract, squandering of union money on excessive legal fees. In an eight-page bulletin mailed out near the end of the campaign all the charges against Tam were summed up in the front page head: "Tam's Poor Record Is Only Issue Of Campaign."
Rutledge forces billed Tony Rutledge as "The Best Labor Negotiator in Hawaii" in a leaflet that listed contract gains negotiated for various Teamster contracts.
Rutledge, in a signed letter to union members, also urged them to apply for union staff positions. The letter concluded, "Let me make clear, experience is not a major factor. All applicants will be interviewed . . ." To the letter was attached a list of 26 staff people and their "1984 salary."
Rutledge also took mixed positions on the pension issue. In several leaflets he criticized the recent pension increase as totally inadequate. One leaflet complained, "COULD DICK TAM LIVE ON THE MEAGER PENSION HE PROVIDES? . . . Longawaited increase is only 80 cents."
After the International Union's Director of Organization, Vince Sirabella, at a luncheon for Local 5 retirees, praised the pension plan as the "best local union pension plan in the country," Rutledge put out a leaflet with Sirabella's statement on the top followed by "Guess who negotiated it for you? Tony Rutledge." The text then went on to charge that "Tam and Team Robbing Your Pension to Cover Shortages in Medical Plan."
When the vote was finally tallied in January 1986, Tam had lost to Rutledge by a margin of 485 votes--2900 to 2415-but everyone else on his slate defeated candidates who ran with Rutledge. Under the local union by-laws, the Financial Secretary-Treasurer is the decisive power that runs the union.
At least two factors contributed to Tam's defeat-(1) the way in which loss of spouse benefits under the health and welfare program was handled, and (2) Tam's isolation from the members during the campaign. How much each influenced the final result is open to debate and speculation.
After the 1984 settlement, trustees of the Health and Welfare Fund, in order to minimize costs, agreed to charge a $40 monthly fee to cover those spouses of eligible members who were also eligible for coverage under other health and welfare plans. Many such spouses, for years, had been covered under the hotel plan, even though eligible under their own employer's plan, because the hotel plan's benefits were generally superior to almost any plan provided by other employers. Isolating and identifying those spouses who were eligible under other plans was a detailed administrative chore that took several months. Although the effective date for the new regulations was set for January 1985 many members did not provide the needed information until many months later and their spouses continued to be carried by the Fund. Finally, in December 1985, the administrative office sent letters to all such members20 asking that they reimburse the Fund for the money that the Fund had spent on their spouses' coverage, in many cases exceeding $400. These letters reached members just weeks before the election. If, and we have no way of knowing for sure, 243 members were turned against Tam by these letters, that would have completely changed the election results.
The other factor contributing to Tam's defeat grew out of a brutal beating that he suffered in November 1984. While walking from his car on the office building parking lot he was attacked from behind by an unknown assailant; he suffered a fractured jaw and several facial lacerations. More than a month after the incident Tam, while still in the hospital, told a reporter that he felt the beating was union related, "a professional job," but thereafter never further clarified that statement.
On his return to work several months later, Tam was provided with a bodyguard at union expense but by the time of the election that protection was dropped. Tam later claimed that because of this beating he was reluctant to go out and mingle with members on the job, particularly in the Waikīkī hotels, as had been his custom for many years, and that this may have influenced the election results.
After Tony Rutledge's election, there were drastic changes in the union leaderhip. Within a few months after he took over, all but two or three of the business agents, including some who had been elected to the Executive Board, were no longer on the payroll. More important, there was a new style of leadership.
A frequent complaint of the organized hotel employers, usually voiced during negotiations, is that Local 5 by failing to organize the competition-the Second Layer of hotels, mostly off-beach1 hotels and the small and medium sized hotels that have sprouted all over Waikīkī since 1960-have put them at a serious disadvantage in competing for business.
A similar complaint against the ILWU on the neighbor islands is that they have failed to organize the condominiums which, employers claim, are highly competitive with the hotels. On Maui, for example, there are more condo units than hotel rooms (8,220 condo units vs. 5,231 hotel rooms, as of February 1986).
How valid are these complaints?
On Oʻahu, as of February 1986, Local 5 represented workers in less than 45 percent of all hotel units in Waikīkī, about 48 percent in all of Oʻahu. This was probably a low point in the history of the local; back in the early 1960's, Local 5 represented about 80 to 90 percent of all hotel units in Waikīkī. Thereafter, while Local 5 continued to grow, it never kept pace with the increase in new hotel units. From 1960 to 1986 there were periods of both growth and decline in Local 5's representation of employees in the Second Layer of Waikīkī hotels.
During the 1960s and 1970s Local 5s organizing efforts met with indifferent success. In all, about 15 or 16 new off-beach hotels in Waikīkī were organized, of which four remained in the Local 5 fold by 1986. Local 5 also had some conspicuous organizing failures during this same period.2 The union failed to organize new Outrigger hotels, four -of which were opened between 1967 and 1973.3 These units were built by a separate corporation in which Roy Kelley had a major interest. Rutledge several times attempted to have employees at the original Outrigger hotels included in the Kelley contract on the accretion principle that had brought several thousand Sheraton employees into the union fold but Kelley resisted all such efforts. There were some informational picket lines placed in front of Outrigger hotels but the union never signed up enough members to file for an NLRB election.
During the mid-seventies, new organizing efforts were thwarted for several years as the result of objections raised to Local 5 organizing new hotels while Art Rutledge, in his role as head of Unity House,4 managed the Waikiki Marina Hotel, as will shortly be explained.
Then, in the late '70s and early 1980s, Local 5 and Local 555 suffered serious losses in membership among their Class B hotels as the result of sales of hotels,5 some bankruptcies, and decertification elections, all of this exacerbated by the sharp factional struggle that erupted between Tam and Rutledge forces in the early 1980s.
The "Bausch & Lomb" Period 6
Unity House, of which Arthur Rutledge was head, constructed the Waikiki Marina Hotel as an investment on a parcel of land that it owned adjacent to the Unity Building. Shortly after the hotel opened, it recognized Local 5 as the bargaining representative for certain of its employees. After the ILWU filed unfair labor practice charges against the hotel, a settlement agreement was reached whereby both the hotel and Local 5 agreed not to give effect to their agreement until Local 5 divested itself of all management control (i.e., Art Rutledge no longer controlled the hotel) and Local 5 was certified by the NLRB as the exclusive bargaining representative of Waikiki Marina employees.
Also in 1974 another hotel workers local, Culinary and Service Workers Union Local 555, was chartered by the International, with Tony Rutledge as administrative agent.* The reason for chartering Local 555, according to Tony Rutledge's testimony in several NLRB cases, was to give better representation to workers in Class B hotels and restaurants.
Local 555's charter petition was signed by 25 former Local 5 members. Its office was originally located in Unity House; Local 5 loaned or donated $10,000 to Local 555 to help it get started and provided Local 555 with bookkeeping, secretarial and telephone services. Local 5 also transferred some of its Class B hotels and several restaurants to Local 555.
Shortly after Local 555 was established, the Waikiki Marina recognized it as the collective bargaining representative of certain of its employees. Again the ILWU filed unfair labor practice charges and there was another settlement agreement in which the hotel agreed to cease recognizing Local 5 and Local 555 as the collective bargaining representative of its employees. This time the NLRB had the U.S. Ninth Circuit Court of Appeals enter a judgment enforcing the Board's order on February 11, 1976.
The effect of the 1976 judgment, in the opinion of some observers, was to inhibit new organizing for a period of several years.8
After Dick Tam took over as head of Local 5, International President Hanley ordered Local 5 to surrender about 450 of its members from Class B hotels in Waikīkī to Local 555. In the early 1980s, after both Arthur and Tony Rutledge no longer had any formal connection with either Local 5 or Local 555, employers continued to resist efforts by both locals to organize some of the smaller Waikīkī hotels9 on the grounds of the "Bausch and Lomb" doctrine. In every one of these cases the NLRB found the lack of a conflict of interest and ordered elections to be held. In at least two such cases, the union, as a result of the long litigation, had lost its majority and was unable to win the election. In one case the union won the election but lacked the strength to win a decent settlement.
Once again employers found that, in the long run, it was far less costly to engage in protracted litigation than to be saddled with union wages and conditions.
Union Losses Through Sales of Hotels
Every Local 5 collective bargaining contract for many years contained a "successors and assigns" clause under which a purchaser of a hotel would be bound by the terms of the agreement. In the fifties and sixties there had been several changes of ownership by large hotels in which the new owners, without incident, assumed obligations required by the existing contract.10 By the early 1980s, however, the practical value of a "successors and assigns" clause had been seriously diluted by a series of federal court and NLRB cases."11
Without attempting any detailed analysis of the impact of these various decisions on existing "successors and assigns" clauses we may briefly note some of the more obvious and generally recognized modifications introduced by these decisions:
Local 5, in the early 1980s, lost representation rights at a number of Waikiki hotels as the result of sales to new owners-among others, at the Miramar, Gateway, Coral Reef, Prince Kuhio. In each instance, the existing staff was laid off, sometimes invited to apply for new employment. Sometimes a minority of former employees were hired on as new employees. In one instance (Miramar) about 100 of an entire work force of 130 were dismissed. At another hotel (Coral Reef) the hotel was sold twice in one day.
In 1986, as will be discussed more fully in a later section, some 16 hotels in Hawaiʻi were sold, 12 of them to Japanese investors. These 12 included three Waikīkī hotels under contract with Local 5. The new owners in these hotels did ask all employees to apply for employment by the new employer, made a few efforts to change some existing conditions but finally agreed, after discussions with Local 5, to defer all such matters to the negotiations that were to occur a few months later.
The loss of union representation at the Prince Kuhio Hotel in 1982 fairly typifies the tactics employed by acquiring companies in ridding themselves of unions. The Prince Kuhio situation is also significant because of its portent of the changes that were to occur in Local 5's relations with the Kelley hotels.
Loss of the Prince Kuhio
The Prince Kuhio Hotel, one of the better "off beach" hotels (626 units), was opened for business in 1980 by its original owners, Richard Hadley and William Pruyn, both of whom had previously been involved in various development projects. The newly opened hotel soon recognized Local 5 and signed a fairly standard contract after it opened for business. Within two years the hotel ran into financial difficulties and was sold to the Kelley family. As part of the sales agreement the owners agreed to lay off the hotel's 350 employees.
On October 1, 1982 all of the hotel's employees were notified that they were terminated by the old owners but could apply for employment by the "new Prince Kuhio" under Kelley control. About 110 former employees, according to the union, were not rehired. (As of November 13, this number, again according to the union, was reduced to 40.) The union insisted that the new owners honor the existing contract with Local 5 that would not expire until April 1984. Dr. Richard Kelley, head of the Kelley Outrigger Hotels, the new owners of the Prince Kuhio, contended that the Prince Kuhio had been integrated with the other four Outrigger hotels in Waikīkī and that the Prince Kuhio workers were now part of a larger non-union work force encompassing all of the Outrigger hotels. The new management, he said, had consolidated some functions and reorganized other areas. If Local 5 wanted to represent the current employees at the Prince Kuhio, he said, it should ask the NLRB to conduct an election.
The union started mass picketing of the hotel on October 13 and continued such picketing until mid-November. Both union and management filed unfair labor practice charges with the NLRB. The union charged management with discriminating against employees by failing to hire them after the hotel's sale and with refusing to bargain. Management charged that the union was illegally trying to force it to recognize Local 5, with creating a secondary boycott situation and with coercing employees and trying to keep them from entering the hotel to work.
Each side also filed damage suits in federal court-the Outrigger hotels, on October 18, brought a $7 million suit against the union claiming a secondary boycott and other alleged violations because of mass picketing; the union on November 12 filed a $6 million countersuit, claiming the former owners failed to give adequate notice before selling the hotel and that the new owners "refused to bargain" with the union on lost wages, benefits and other contract issues.
Ultimately, before either the NLRB charges or the federal court actions reached the hearing stage, a settlement was reached whereby those former employees who were not rehired were paid severance pay. The union lost its representation rights. Prince Kuhio remained a non-union employer.
The repercussions over the Prince Kuhio battle were to be felt in the next encounters between Local 5 and the Kelley chain-in 1984 negotiations with one group of Kelley hotels, and in decertification proceedings at another Kelley group.
The Rise and Fall of Unionism at the Kelley Hotels
The largest loss of members by Local 5 and Local 555, of which Richard Tam became trustee in 1983, occurred in 1984 when both locals through loss of representation rights at all Kelley hotels lost a total of over 750 members. -
The story of the Kelley hotels can be viewed from several different aspects, some of which overlap and some of which convey conflicting signals.
There is the economic aspect-a kind of classic American success story, wherein Roy Kelley, the founder of the chain, and his wife Estelle (and later with their three children and several grandchildren), starting with a four story walk-up hotel with 24 rooms, developed in the next 40 years a self-made hotel empire that controlled over 7000 rooms, all in Waikiki, in 21 hotels, all but one of which they owned. The Kelley chain is now the largest hotel chain in the state. Most of the hotels were built by the Kelleys; a few were bought. Except for a brief period in which they sold partial interests in three of their hotels (original Outrigger hotels) and sold four hotels to another company, Cinerama (all of which were later repurchased), in order to help finance new building, all of the expansion of the chain was self-financed by income generated by existing hotels.
The basic market that Kelley aimed at was the low-cost budget market. In the words of a later competitor who concentrated on the same market ". . . Roy Kelley opened the way to making Hawaiʻi affordable for the average American," or as Dr. Richard Kelley Roy's son who took over management of the chain around 1970, put it, "We concentrated on renting rooms to Mr. and Mrs. America."
Roy Kelley, over the years, gradually eliminated all food services, leasing such services to outside companies.12 The success of their efforts is attested to by Forbes magazine which, in 1985, listed the Kelley family business among the 400 wealthiest in the nation at $250 million. The labor relations history of the Kelley chain can't be fully understood without some understanding of the special personal relationship that existed between Roy Kelley and Arthur Rutledge. Kelley hotels were first organized in 1951; the hotels recognized the union as the result of an NLRB election. Before that, Roy Kelley was regarded as a tough,13 strongly anti-union employer. When confronted with the need to deal with the union, Kelley, in his own words, felt that he might as well "go the whole works" and signed the first union shop contract in the Hawaiian hotel industry.
On August 1, 1951, Rutledge, in a letter to Hugo Ernst, president of the International union, enclosed a copy of a picture showing the signing of the first union shop agreement in Hawaiʻi. Wage rates, he wrote, were "somewhat lower than the Royal Hawaiian but within five or ten cents." This was to be true of virtually all Kelley contracts with Local 5.
There was one more occasion in which Kelley recognition of the union was confirmed. In 1962, when Kelley balked at including some of his new additions under the union contract, Local 5 again went to the NLRB and an election was ordered for all employees of Kelley operations at the time. The vote for Local 5 was overwhelming and some 106 employees were added to the bargaining unit.
Thereafter, although Roy Kelley never lost an opportunity to belabor the union, he maintained an unusual and close personal relationship with Art Rutledge, one that defies all pat formulas on what the proper relationship between a union leader and an employer should be. Kelley claims that he never paid much attention to union negotiations, just going along with what Sheraton and Hilton worked out. Any special problems were worked out directly with Rutledge.14
The Rutledge-Kelley relationship manifested itself in many ways. In 1960, when the Hotel Workers International suspended Rutledge from local union leadership and appointed an International trustee, Kelley signed a contract with Art's other union, Teamster Local 996, "because Art wanted me to." Kelley, a trained architect, helped Rutledge build Unity House; later, in the early 1970s, he provided help on the building of the Waikiki Marina Hotel, reportedly a replica of an existing Kelley hotel. In the late 1970s, when Rutledge was under government pressure to remove himself as manager of the Waikiki Marina Hotel, he engaged Roy Kelley's son-in-law to run the hotel for a brief period. To this day, when there are no union members left in any of the Kelley hotels, there is still a close relationship between the elder Kelley and Art Rutledge; both are ardent supporters of a convention center at Fort DeRussy and frequently see eye to eye on other issues. Directly facing Rutledge's desk in his second floor Unity House office is a painted picture of Roy Kelley, one of several businessmen he admired.15
Structural changes in the Kelley hotels also affected the relationship between Kelley and Local 5. Throughout the period from 1951 to 1984 Kelley hotels, at various times, fell into one of three operating groups:
In November 1985 the Kelley hotels formalized what they had been doing-one master partnership was set up for owners16 and one operating company with a new name, Outrigger Hotels Hawaii.
The complete elimination of the union from all Kelley operations occurred in early 1984, as previously explained, in two procedures: 1) the decertification of Local 5 and Local 555 at six hotels in the Hotel Operating Company of Hawaii group, and 2) the complete rout of Local 5 in negotiations with the Reef Tower hotels.
The context of circumstances in which these events occurred is worth recalling in order to fully appreciate what happened. Neither of the Rutledges was involved in these proceedings-Tam, in mid-December 1983, took over control of Local 555 with which Tony Rutledge had previously been connected. Whether Rutledge leadership in these locals would have deterred or avoided what did happen is open to speculation. Also, in mid-December 1983, Rutledge forces had formed the Independent Service and Culinary Workers Union which then petitioned for recognition at all previous Loca1555 properties. While trying to negotiate with the Reef hotels, Tam was also engaged in negotiations with the Council of Hawaiian Hotels for the main hotel group-negotiations in which he split with his own negotiating committee. Also playing an influential, if not fully determined, role in the 1984 proceedings was Pat Moon, a former Local 555 business agent who was then serving as a consultant to the Kelley operations as well as other employer groups.
Pat Moon is generally recognized by both friends and opponents as probably the most effective organizer that Loca1555 had. He singly organized most of the properties that Local 555 brought under its wing. After he left Loca1555 he became an employer consultant and assisted several hotels in resisting union attempts at organization, both by Local 555 and the ILWU.
His exact role in the Kelley operations is obscure both because of his refusal and that of the Kelley management to discuss it.17 His close contact with many employees and his active campaigning on behalf of the company undoubtedly influenced the final outcome of both the decertification proceedings and the Reef negotiations.
What became clear in both procedures was that the Local S leadership had lost touch with its membership in Kelley hotels and was unable to rally them, if it tried, in any active opposition to management. Also affecting the outcome-a fact conceded by several Local 5 business agents-was Roy Kelley's style of personnel relations. Over the years he had mostly gone along with the negotiated patterns set by Sheraton and Hilton, generally with a reduced wage scale for his Class B hotels; he had also retained a solid core of more permanent employees who were usually paid more than the contract required and felt a strong sense of loyalty to the company.
In late December 1983 the newly organized Independent Service and Culinary Workers Union filed petitions for representation at the six Kelley hotels in the Hotel Operating Company of Hawaii group, still organized by Locals 5 and 555. Shortly thereafter the Independent withdrew its petition when an individual member filed for decertification of the union. When the decertification election was held on March 14 (a day before the main negotiations were settled) the union was able to garner only nine votes out of a total turnout of 131 members.
The same smothering effect was achieved in the negotiations between the two Reef hotels and Local 5. These hotels, as part of the Cinerama group (bought back by Kelley in 1983), held a contract with Local 5 that expired in February 1984. This time Kelley management, instead of the "follow the leaders" approach that had characterized previous negotiations, turned the negotiations over to a high powered lawyer, a partner in one of the top management law firms in Hawaiʻi. The attorney pursued an unusually aggressive negotiating stance, practically swamping Local 5's negotiators with demands for concessions and give-back, many of which no self-respecting union could possibly accept. For example, on the pension issue, management proposed (as one option) that the Plan agree to continue to cover Kelley employees even if they went non-union or voted in another union. When the joint management and union trustees later voted to oust Kelley employees from the plan because of non-payment of contributions, management then issued a bulletin to all employees headed: "Tam Votes to Throw Reef Employees Out of Industry Pension Plan." The bulletin stated:
We were shocked to learn that Dick Tam and the other Trustees, without any notice to you or to us, voted unanimously on April 25 to oust you from the Pension Plan.The bulletin went on to state that the Plan Trustees were not required by law to throw Reef employees out of the Plan. "They could have decided that this was a 'labor dispute' situation and merely suspended contributions." Regardless of the correctness of that opinion (and there is some question on that), realistically that approach would never be accepted by other employers who were making regular contributions; it would probably result in the end of the plan.
Faced with impossible demands and lacking the necessary strength to mobilize any kind of opposition to the company's position, the union was virtually immobile. The company declared that an impasse had been reached and effective April 1, 1984 implemented its new medical and pension plans. That was the end of Local 5 in the Kelley operations.
With the elimination of Local 5 from all Kelley operations the union's organization of Second Layer hotels was and continues at a new low.18 How significantly does this affect the competitive position of the larger, mostly luxury hotels, with which the union does have bargaining relationships?
Roy Kelley has stated on numerous occasions that he got along well with the big hotels because, as he put it, "we operate in a different world." Kelley hotels, for the most part, aim at the budget priced market. There are some few hotels (Prince Kuhio and some of the beach-side hotels) that may offer some competition to the larger hotels, but Kelley is mainly competitive with Aston Hotels and Resorts (previously Hotel Corporation of the Pacific Inc.) which manages some 27 properties, hotels and condominiums on four islands. On Oʻahu, Aston manages four hotels.
That Kelley or Aston offers significant competition to the organized hotels on Oʻahu is highly debatable. Similarly there is question whether neighbor island condominiums, generally located in the less desirable areas of the islands,19 present a real threat to the established luxury hotels in such areas as Kaʻanapali or the Kona coast where the ILWU is most strongly organized.
Both unions recognize the need for more organizing, particularly in such areas as are competitive (larger hotels in Waikīkī , and those hotels on Maui and Kauaʻi that have successfully resisted unionization20), but as successive negotiations have demonstrated, the unions can survive with a big chunk of the pie, if not the entire pie. Ultimately, though, failure to control a larger share of the industry could cost the unions loss of some of their established gains.
The 1987 Hotel Negotiations
Local 5 Negotiations
The 1987 negotiations between Local 5 and the Council of Hawaii Hotels, one of the most significant in the history of the hotel industry, had all the elements of high drama. There was the usual suspense and tension that are part of many important negotiations, including a 31-hour marathon session just before the final settlement. There were also many unusual elements not found in previous negotiations in this or other industries. The union, in a widely publicized campaign, effectively raised the issue of absentee ownership. There was an unusual concentration of political figures drawn into the final stages of the bargaining sessions including a U.S. Senator, the Governor of the State, and the past Governor. The membership was mobilized in active support of their negotiators to a degree not reached since the 1960s including a very crucial and influential role played by retirees.
The economic gains won by the union, although respectable, were not spectacular; greater gains had been achieved in many earlier negotiations. Most significant in the final outcome was the retention of the jointly administered Health and Welfare Fund despite the employers' most intensive effort yet to scrap it in favor of an employer controlled plan. Also important was a much greater degree of protection against subcontracting and against termination of employees as a result of changes in the management of hotels (in situations where the ownership remained the same1). There were also pension gains and language improvements on many non-economic issues.
Although formal negotiations consumed 42 days the preparations and positioning of the parties for the stances that they were to assume took well over a year so that by the time they met across the table each side knew pretty much what to expect.
Tony Rutledge had barely taken office in January 1986 when he signalled a new aggressive and adversarial role for the union. His victory, he told the membership, "was a mandate to get tough and provide stronger representation for the membership."
A few months later on May 9, 1986, at a seminar conducted by the Hawaii Chapter of the Industrial Relations Research Association, he bluntly stated ". . . all signs point to labor trouble ahead when the union negotiates a new contract next year. . . ." Wages, he claimed, had fallen 20 percent behind San Francisco, and management attitudes had changed.
Medical benefits became an early target of Rutledge's attention. The Health and Welfare Fund, he claimed, was in critical condition because of the failure of the previous trustees (including Tam and other union trustees) to maintain an adequate four months reserve level, as called for by previous trustee resolution. When the union, in 1984 negotiations, agreed to eliminate the maintenance of benefits (MOB) provision from the health and welfare section of the contract it also agreed to a maximum amount (cap) that any employer would be required to contribute during the life of the contract.2 In addition, some five or six of the hotels, in lieu of a cap, preferred to continue paying on a MOB basis, but for several months made no contributions. The failure to collect contributions from the MOB employers plus the limitation of the agreed-upon cap soon eroded the required four months free fund reserve; by the end of 1985 the reserve had declined to a 2 month level and employer trustees were pressing for cutbacks in benefits.
The union, in mid-1986, retaliated by filing a suit against the previous trustees of the Fund claiming that they "failed to perform their fiduciary responsibility to the Fund and its members causing it to be in financial crisis." The suit sought damages from the trustees in their personal capacity. The employers, the union maintained, owed more than $1.9 million in contributions since 1984.
Bickering over contributions and reserves continued to occupy the Fund trustees at virtually every meeting in 1986. It was evident to all parties that this was to be a major issue in the 1987 negotiations.
The union carried its position directly to its membership with an open air rally on August 5, 1986 at which some 1500 members gathered. The declared purpose of the rally was to protest employer actions related both to subcontracting and the medical fund.
Both sides, for months prior to actual negotiations, intensively sought support among hotel employees for the positions that they were to assume. The Council of Hawaii Hotels, in the fall of 1986, engaged a nationally known public relations firm to provide data on developing an approach to hotel workers, to put together a "communication program" designed to promote management goals to employees. There were two stages to the program. In the first stage, each hotel was to develop "focus groups" in which independent-minded employees were encouraged to be outspoken in their views among other employees. This was followed by a survey of employee attitudes. According to a summary of that survey presented to the union during negotiations, some 4000 employees, including Local 5 and ILWU members, responded, and 59 percent reported that they trusted information provided by general managers.
As Tony Rutledge later pointed out, that survey may have been misleading-it was taken in November 1986 at a time when Local 5 was bogged down in a seven-week strike against Kaiser Hospital and there was relative discontent among many Local 5 members.
Starting in mid-January 1987, after the Kaiser strike had been settled, Local 5 leadership held informational meetings in each hotel unit, explaining in great detail the whys and wherefores of union proposals and employer demands. On February 23rd, employees on the job wore buttons stating "We March 1st For Fairness and Dignity." When management threatened disciplinary action unless the buttons were removed, the union responded with the threat of a picket line and the companies backed down.
The economic context in which negotiations occurred, the union made clear to its members, was most favorable for big gains. The past year (1986) had been a "banner year" for tourism -the visitor count had shown the greatest annual growth rate in14 years (14.8 percent); the overall Waikīkī occupancy rate had increased 6.0 percent to 85.7, the neighbor island increase had been 8.8 percent. Room rates at Waikīkī on-beach hotels had increased by about eleven percent to an average of $94.80 for the year.
The employers, in turn, emphasized that the hotels which competed with them for tourists were less than one-half organized and this placed severe limits on what the organized hotels could grant. The unorganized hotels, they claimed, paid roughly equivalent wages but enjoyed a substantial advantage in savings on benefit costs. Hence, according to them, the need for controlling benefit costs, particularly health and welfare benefits.
A new development, one not entirely foreseen by either party, dramatically intruded into the bargaining picture in late 1986. There was a flurry of Japanese purchases of Hawaiian hotels, particularly in the latter half of 1986. For the entire year of 1986 18 hotels in Hawaii were sold; this compared with eight in the previous year, four in 1984, and one in 1983. Of the 18 hotels that changed ownership, 13 were bought by Japanese investors.
Local 5 had negotiated with Japanese-owned hotels for many years, dating from the time that Kenji Osano, the pioneer Japanese investor in Hawaii hotels, started buying previously Sheratonowned hotels in Waikīkī and on Maui in 1963 through his subsidiary Kyo-Ya Company Ltd. By 1974 Kyo-Ya owned six hotels in Waikīkī (one fifth of all hotel rooms in Waikīkī ) and the Sheraton Maui on Maui, all managed by Sheraton. In fact, of the 13 hotels represented in negotiations by the Council of Hawaii Hotels, seven had been under Japanese ownership for many years. So Japanese ownership in itself was nothing new.
What was new was that in 1986, two Local S organized hotels3 that were in negotiations (Hawaiian Regent, Hyatt Regency Waikiki) were sold to new Japanese investors. Whereas in the 1960s and 1970s new owners generally took over existing contracts, this time one of the new owners, seeking to take advantage of the more recent trend in NLRB decisions,4 proposed starting new seniority lists beginning with the date of the takeover by the new company and scrapping the existing health and welfare fund. Two days of discussions convinced the company to continue jobs, seniority, wages and benefits of current employees with new proposals to be left to the major negotiations. The employer identified nine employees who would not be retained; it was agreed that these cases would be submitted to an arbitrator to decide if the failure to retain these employees was a violation of the contract.
While the particular dispute was amicably settled it was apparent to the union that many of these sales, as well as the concentration of absentee owners in the Council, had the potential for destabilizing established conditions.
When, in early January, a local columnist in the Honolulu Star-Bulletin made a passing reference to the "growing transfer of Hawaii business ownership to investors out of State" with the comment that "We want and need their investment capital," Tony Rutledge challenged what he called the "accepted wisdom" in a letter that appeared on January 29, 1987.
First, Rutledge pointed out that while buyers were picking up properties at bargain rates (because of the lowered value of the dollar and cheap interest rates in Japan) and sellers were reaping huge profits on the sales, the new money was more in the nature of speculation rather than new investment."5
Rutledge then raised the specific question: "What do the people working in these hotels get out of all of this?" His answer:
Our experience has been that as the new owners take over they first require all employees to reapply for employment and sometimes they move, where union contracts are in effect to lower existing wages and benefits. Worse, they could all be terminated from their jobs.
The letter, if it was noticed by many readers, could have been regarded as a theoretical essay with little practical significance. Actually it was the opening salvo in a well-orchestrated campaign by the union to bring the issue of absentee ownership both to the membership and the public and to shame the employers into a retreat from many of their original positions.
When the parties first met in formal negotiations in mid-January 1987, the employers, while not presenting a complete package, did submit a written proposal to eliminate the Health and Welfare Fund with no mention at that time of continued coverage for retirees. Later, as the union kept raising the retiree issue, the employers claimed that coverage of retirees was a non-mandatory issue but that they might agree to talk about it.
On February 10, 1987 the union grabbed headlines and pictures in both Honolulu papers when from 300-350 retirees picketed the Japanese Consulate to protest efforts by Japanese owners to deprive them of their medical benefits. This was followed by daily picketing of individual hotels by retirees and then by a media campaign including TV commercials, radio announcements and newspaper ads dealing not only with medical benefits but also with the issues of subcontracting and wages. The entire campaign was run under the slogan of "fairness and dignity."
One of the most effective TV commercials showed a dozen women, all Local 5 retirees, who hear that the "big" hotels want to cut medical benefits from -current workers and take them away from retirees.
"Is it fair," one retiree asks, "to take away something we planned our lives around?" There's then a close-up of the elderly woman's face with a single tear running down her cheek. The announcer then says, "All Hawaii's hotel workers are asking for is fairness and dignity."
One half-page newspaper ad, entitled "An Open Letter to Japanese Hotel Owners from Local 5," raised the question in large capital letters "Want to be Good Corporate Citizens? START TREATING YOUR HOTEL WORKERS WITH FAIRNESS AND DIGNITY," and proceeded to detail efforts by the mainland hotel chains that were operating these hotels to abolish the medical plan and replace it with an inferior plan, to offer a meager increase in wages, and to refuse to provide protection against subcontracting -all this after a year of record-breaking profits.
The employers, during this time, applied their own peculiar twist to the significance of the sale of hotels to Japanese buyers. As reported to the membership in his daily early morning radio broadcast near the end of negotiations, the operators, said Rutledge, claimed that they were unable to offer more money to workers because,
... there is more pressure from the Japanese owners for profits. As they put it, the Japanese paid a lot for the hotel, now they want more profitability. Maybe that's why one of our members ... yesterday asked me how do we say 'Yankee go home' to a Japanese investor.Up until the end of February 1987 little progress was made at the bargaining table and the parties were far apart on virtually all major issues. Each side recognized that the ultimate outcome depended on their ability to muster public support and rally hotel employees.
On February 13 the Star-Bulletin ran a story quoting Gregory Pai, economist with the First Hawaiian Bank, as predicting a "worst case" scenario that in the event of a strike at the Council hotels, the Hawaiian economy would lose $4.6 million a week ($18.6 million per month) plus additional weekly tax losses of $372,000 ($1.5 million per month).
Decisive evidence of membership support for the union's position came on February 26, two days before the contract expiration date, when some 2500 to 3000 members rallied in front of Waikīkī hotels to show that they backed their union. That turnout made clear that the members were prepared to strike if necessary.
At the rally, supported by other AFL unions, Tony Rutledge announced that if there was no progress at the bargaining table, the union would strike on Sunday, March 1.
While night shift workers were gathering at the Waikiki Shell to cast a strike vote on March 1, Governor John Waihee and ex-Governor George Ariyoshi entered the negotiations in a last-minute effort to avert a strike. Previously U.S. Senator Inouye had urged the parties to continue negotiations; Waihee pressed them not to abandon negotiations but it was ex-Governor Ariyoshi who, in a 31-hour marathon session, did the mediating that eventually brought a settlement. Most of the important issues were settled within the last few hours. While these marathon negotations got started, the membership voted 87 percent to 13 percent to authorize a strike.
Ariyoshi was uniquely qualified to fill the role of mediator. He enjoyed the respect and confidence of all parties; in addition, his knowledge of the Japanese scene (where many of the hotel owners lived), gathered over many years of contact, enabled him to see possibilities for movement where others might not have.
In the final hours these agreements were made:
Medical benefits. The major thrust of the employers-to abolish the medical health and welfare fund-was completely abandoned and the employers agreed to provide enough money (30 cents per hour starting March 1, 1987 and another five cents on March 1, 1989). This was the sum insisted upon by the union to ensure full medical benefits for employees and retirees in order to maintain a threemonth reserve. If the last five cents was not needed for the reserve, it could be used for more pension.The settlement was overwhelmingly accepted by the membership-3344 (89%) voted to accept the contract with 400 (11%) opposed.
About three months after the Local 5 settlement was reached, the ILWU settled with the Council of Hawaiian Hotels for seven hotels6 on the neighbor islands. William Crawford, director of the Council, said that "The costs to the employers for the ILWU and Local 5 contracts are comparable but the funding pie is cut up differently."7
Separate agreements, based on the Council settlement were then negotiated with seven non-Council hotels.8
The costs to the employer for the ILWU settlement were comparable to the Local 5 contracts. The ILWU decided to retain the existing medical benefit. If, as appeared likely, medical costs would exceed eight percent per year, then these options would apply:
Ultimately neighbor island wages would match Waikīkī rates and other conditions would be roughly comparable.
The Foreign Invasion
When Japanese companies purchased 13 hotels in 1986 few persons in Hawaii had any idea what this meant. This resulted from a seemingly deliberate policy by establishment media to conceal from the public the reality of what was happening. The purchases created new instabilities in the industry. Media publicity obscured the fact that these purchases drained funds out of the industry to the new owners. The total amount paid by Japanese companies for these 13 hotels (not including Waikiki Plaza for which no price was quoted) came to $1054.15 million, equivalent to over 73.6 percent o f all Japanese hotel purchases in Hawaii (our emphasis) since Kenji Osano first started buying Sheraton hotels in Waikīkī in 19639 (70.3 percent of all non-Hawaiian hotel purchases in Hawaiʻi).
Of the 13 purchases, six were made from mainland firms, four were bought from other Japanese companies and only three were traded from Hawaii or a combination of Hawaii or mainland interests. Thus nearly all financial transactions could have been consummated outside of the state and there's no indication that much of this money actually came to Hawaii.
Since 1986 additional Japanese purchases have been made as of this writing (October 1987). These were:
How and why did this happen? What does it mean for Hawaiiits hotel industry, its economy, and its people, including those working in the industry?
Fueling the Purchases
Large-scale purchases of Hawaii hotels were fueled by large surpluses accumulated in Japan. These surpluses arose out of three main sources: 1) a huge trade surplus ($86 billion in 1986), 2) huge gains by some interests on the sale or appreciation of Tokyo land, and 3) the appreciation of the yen which vastly expanded its dollar-buying power.10 There was also relatively easy credit available from Japanese banks (five to six percent) for loans with which to finance the purchases.
These surplus earnings sought investment outlets that were not available in Japan on an almost irrational basis, propelled more by the need to lend funds than by any rational calculation of basic values and probable returns.
The sales brought huge profits to the sellers of these hotels. Barrons (January 5, 1987) cites one instance: Christopher B. Hemmeter, the developer of Hyatt Regency Waikiki, sold it to VMS Realty of Chicago in 1984 for about $108 million, netting an estimated $40 million profit. In September 1986 Azabu paid VMS $245 million for the property with Hemmeter pocketing an additional $38 million from the sale to Azabu (his original sales contract retained a 30-percent claim to any profit realized within 10 years of the sale). Thus Hemmeter's take on an approximate $68 million hotel came to 115 percent in a little over two years; VMS's take was reported at about 88 percent over a two-year period.
There were also additional savings to the seller in that tax return on sales completed before the end of the year could be filed under the more liberal tax law before the new 1987 tax law with a higher rate became effective.
News of these purchases precipitated a kind of unsophisticated gut reaction on the part of many-a consensus that this was not good for Hawaii, without necessarily articulating all the reasons.11
In an effort to allay some of these concerns both major Honolulu papers presented a series of articles on the new hotel purchases-the Star-Bulletin on April 16 and 17, the Advertiser on April 19, 20, and 21. Despite some sharp critical comments by economists and industry analysts, the articles generally failed to clarify the situation for the typical layperson-in part because of an excess presentation of conflicting views and also because of an undue emphasis on business spokesperson, including developers, bank representatives, and political figures (those who had or stood to gain from the purchases). The general impression, despite some strong negative comments which only an expert researcher could uncurl, was that this was still the best of all possible worlds and everything would be all right. The net effect appeared to be a gigantic effort to gloss over the full significance of what had happened and to fail to face up to the full implications of what might have to be done in terms of public policy.
Is It Investment?
Much of the confusion concerning the significance of these Japanese purchases arises out of the indiscriminate use of the term "investment" to describe what happened.
An investment, economically speaking, usually results in new assets that generate jobs, additional income, tax revenues and economic activity. It was such investments, largely with outside capital, that built the bulk of the Hawaiian hotel industry, and such investment is still taking place in Hawaii today.
That, however, is not the situation with regard to these purchases of existing assets (the 13 hotels). There was no significant infusion of new capital into the Hawaiian economy since, as already indicated, most of the sales were consummated elsewhere. There was no addition of new employees. What happened was that Japanese companies bought additional claims on the proceeds of Hawaii's hotel industry-in fact, a form of speculation.12
Some industry representatives counter this argument with the claim that the purchasers will be investing more money to expand and upgrade many of these properties. A headline in the Star-Bulletin of April 16 suggests that a new kind of private enterprise has come into play, one in which companies seek profits only to plow it back in new investments.13
A careful reading of the text shows that before any profits can be realized (for further investment or whatever) there's an immediate demand on the cash flow of the purchased business in order to service the extra debt that was incurred on the high priced purchase: "Debt service is the major immediate problem for the Japanese."
Granted that there will be some expansion and refurbishing of existing properties. The expansion would clearly constitute new investment but the amounts to be so spent are presently indeterminate.14 If what is known is totalled it still amounts to a small percentage of the total expended on all purchases. As for the refurbishing, this is part of the regular routine of running a hotel business; most of it would have occurred with or without a sale. Most hotels, particularly resort hotels regardless of ownership, generally plan to modernize and update their facilities at regular intervals if they are to remain viable. For example, Sheraton hotels, which were not sold recently (even though Japanese owned), were reportedly planning a $120 million renovation of their properties in Hawaii.
Although media people15 and political figures are generally aware of the distinction between investment and speculation,16 they are the most frequent offenders in misusing these terms. Newspaper reporters, TV and radio commentators, most business people, when referring to these purchases, invariably refer to them as "investments" and almost as frequently add some gratuitous remark on how this outside capital is needed to support the Hawaiian economy.
A clarification of this issue is needed if we are to properly appraise the significance of these purchases and decide what, if anything, should be done about them.
The Economic Impact
Loss of economic sovereignty-the transfer of authority to make decisions affecting Hawaii's future to outsiders not wedded to Hawaii-appears to be the major concern of those harboring misgivings about these hotel purchases. This translates into probable impact in three main areas:
1. Competitive position of Hawaiian hotels.
Competitive Position of Hawaiian Hotels
During 1987 negotiations with Local 5, employer representatives argued that the high prices paid by some of the new Japanese owners required a higher return on their investment in order to pay off their newly incurred debts-hence the need to restrain wages and other economic gains. While the highly organized Local 5 was able to partially counter such arguments, the same will probably not be true of the many unorganized properties, and the pressures for lower wages and benefits will intensify.
In addition to pressure on wages there will be further increases in room rates, which rose an average of 11.5 percent in 1986, as against a national average of 5.4 percent.17
Higher room rates would add to the inevitable glut that's now developing among the ultra-high quality hotels.
Increased Vulnerability to Foreign Developments
Increased Japanese ownership of Hawaiian hotels will also mean that our hotel industry now becomes more closely tied to the Japanese economy and more vulnerable to any fluctuations that might occur there.18
A little noted consequence of the large-scale ownership of assets in Hawaii by out-of-state owners is the high volume of income that regularly flows out of the state to these outsiders. That income consists of dividends, interest, management fees, director's fees, and other service fees.
The First Hawaiian Bank, in its "Economic Indicators" for January-February 1987, estimated that the "annual income to out-ofstate investors from investors in Hawaii comes to $1.5 billion, equivalent to the size of Hawaii's entire construction industry. That income doesn't all come from investments in hotels but as the dominant industry in Hawaii, tourism clearly contributes a major portion of the outflow." That $1.5 billion (no date) would have to be greatly increased on the basis of more recent data.
Unfortunately no state or private agency has a figure on the total value of assets owned by out-of-staters. Considering the vast increase in foreign-owned assets in 1986 ($911,471 million in foreign investments alone) the outflow of capital would have to be very much higher. How much higher? It's almost anybody's guess. Based on preliminary estimates of the Department of Business and Economic Development and our modest projection of added capital outflow based on the increased value of assets held by foreigners, we estimate that the total outflow would amount to between 10 and 15 percent of gross state product. In other words, of all income generated in the state by total economic activity, this percentage would be drained off to out-of-state investors without any appreciable new benefits to the state economy.
There's a two-fold significance in these figures:
What Can Be Done?
Are we in a situation that can no longer be controlled-or are there policies that can be undertaken to arrest or alleviate the dangers?
One bromide appears to have universal acceptance by both newspapers and numerous "experts" in the field. It's important, they all emphasize, for Japanese companies to offer charitable contributions to Hawaii, a proposal that nobody can disagree with but which won't go to the heart of the problem.
Gregory Pai of First Hawaiian Bank suggested that the state get involved in developing an "early warning system" that would help it to prepare for possible adverse effects (Star-Bulletin, April 16, 1987), a proposal endorsed by the Star-Bulletin.
Just how an "early warning system" would operate is unclearit could perhaps mark a significant beginning to understanding the problem or it could serve as another term to be used for evasion of the real issues.
What does seem baffling and frustrating is that the state lacks the most basic information on which its economy is so dependent. There's an immediate need for more complete information on how the tourist economy operates. For example, what are the capital flows into and out of the state each year? One suggestion that has been made is that, as a requirement of doing business in the state, each out-of-town company be required to report what funds it sends into the state and what it takes out each year.19 This could be filed with its tax return and kept confidential but it would at least give the state some overall conception of the sums involved and at what point further policy approaches are called for.
It's a small beginning but we need to start somewhere.
This final chapter is being written shortly after the U.S. stock market received its worst buffeting in history on October 19, 1987 when the market dropped 508.32 points. In language that virtually repeated what President Herbert Hoover said one day after Black Thursday on October 25, 1929, President Reagan tried to reassure the country: "There is nothing wrong with the economy. I don't think anyone should panic because all the economic indicators are solid." But despite his reassurance the market continued to fluctuate wildly over the next few weeks, up and down, and all signs pointed to a recession in 1988.1
The Hawaii Visitors Bureau has come up with its own "Catch22" solution to the impact of a crash on tourism. A committee of tourism executives concluded that the solution lay in more advertising. In other words, those who lacked the means for an Hawaiian vacation might be persuaded to come to Hawaii to spend money which they don't have for a vacation they can't afford.
Two opposing views as to the effect of the crash on tourism are developing. As indicated in our previous section on The Foreign Invasion, a recession, according to Gregory Pai, First Hawaiian Bank Research Director (10/25/87), would require a reevaluation of commitments with a probable cutback in new investment. At the same time, Christopher Hemmeter, the exuberantly optimistic 'Four of the nation's top economists-John Kenneth Galbiaith (Harvard), Allan Sirai (Shearson, Lehman), Herbert Stein (American Enterprise Institute, Washington, D.C.) and Martin Feldstein (Massachusetts Institute of Technology), in testimony before the House Banking Committee, unanimously agreed that a recession would come in 1988. spokesman for developer interests, told the State Land Use Commission that the luxury resort projects are "recession proof" (Advertiser, 10/28/87), although conceding that they will be affected by the world financial crisis. A moment's reflection will indicate that Hemmeter had little choice. A contrary statement would signal the collapse of the developers' interests, something they are still reluctant to concede. Hemmeter's statement, in effect, defies logic and reason.
Anthony Downs of the Brookings Institution noted in 1986 that,
... so long as developers can obtain more loan or equity funds to start a project than it costs to build it, not risk their personal assets, and gain large fees for developing, some will keep on doing so ...This may explain much of the developers' attitude on loans. Our review of the history of labor relations in Hawaii's hotel industry also leads to important conclusions. One salient fact that emerges is that for at least the past 40 years organized labor has set the tone for wages and benefits in the industry; despite a declining share of the total number of hotel units unions have managed to hold on to a substantial -bloc of hotels, usually with the support of management (Local 5's "accretion policy," ILWU's political organizing). This has persisted throughout the Waikiki phase, when Local 5 dominated the scene, and the later neighbor island phase, when the ILWU became a force in the industry.
The greatest gains made by unions occurred in periods when members were on the move in sharp confrontations with management-in the Matson strike of 1952, the ILWU threat of a strike at Royal Lahaina (1967), the Local 5 1987 contract settlement, and others.
Management finally defeated the ILWU's efforts to develop new bargaining patterns in 1970 and established a pattern whereby the ILWU could equal but not surpass gains made by Local 5. This limits concessions required by management.
The bitter Rutledge-Tam dispute over leadership of Local S sapped much of the strength of Local 5 and resulted in loss of previously organized hotels, as did the 1980-82 industry slump and the give-backs agreed to in the 1984 negotiations. Local 5 has also suffered from its inability to organize the "Second Layer"* of hotels.
One of the objectives of this study, as explained in the Preface, was "an evaluation of how well dual unionism has served . . . the interests of the 30,000 plus employees in the industry." What does the study show in this respect?
Given the low wage and poor working conditions tradition of Hawaii and the tourism industry, the unions have managed to protect the wages and working conditions to a greater extent than prevails in most resort destinations. As organizing becomes more difficult, the question becomes one of what the unions will do to meet the new challenges. The suicidal raids of the two labor organizations against each other must cease if the interests of the members are to be served. The ultimate solution is in the merger of the two organizations, which appears inevitable. But until such time as that can be arranged, some agreements respecting each other's jurisdiction should be arranged.
Finally, while recognizing the dominant role played by tourism in stimulating Hawaii's economy many now recognize some negative aspects of this stimulation.
The emphasis on tourism as the main source of growth has resulted in a low-wage, -high-cost economy that distorts Hawaii's economic development. An excellent, objective analysis of this situation is contained in Hawaii Business (October 1987); several economists note that what is needed for growth is a more balanced economy, one that develops other industries besides tourism. The implication is that instead of sending committees out to look for "floating factories" we might do better to develop industries which already exist-possibly agriculture, fishing, food factories, and the like.
This book is based upon files and records maintained by the two unions that have organized hotel employees in Hawaii: Hotel Employees and Restaurant Employees, Local 5 and the International Longshoremen's and Warehousemen's Union, Local 142, and the Hawaii Employers' Council.
Edward Beechert, Professor of Labor History, University of Hawaii; William J. Puette, University of Hawaii Center for Labor Education and Research; and Ah Quon McElrath, retired social services director, I..L.W.U, gave freely of ideas, suggestions, and comments during the writing of this book.
Special thanks are due to Elwood Mott and the research department of Local 5 for permission to use their table, "Owners and Managers of Hawaii's Hotels," as our Appendix, and to Jean S. King who donated her time copy-editing the original manuscript.
Thanks also are due to Robert Hasegawa, Director of the Center for Labor Education and Research for his valued support in bringing this book to press.
Name Owner Ala Wai Terrace Hotel
& Apts. Outrigger Hotels Outrigger Hotels Ambassador Hotel of Waikiki Tropical Enterprises
Inc. Tropical Enterprises
Inc. Coral Reef Hotel Andre Tatibouet
&Resorts Discovery Bay (Condo) Hawaiiana Resorts Hale Koa Hotel U.S. Army U.S. Army Halekulani Hotel Mitsui Fudosan
(U.S.A.), Inc Halekulani
Corp. Hawaii Dynasty Hotel China Air Lines China Air Lines Hawaiian Monarch Roberts Hawaii, Inc. Aston Hotels &
Resorts, Honolulu Hawaiian Regent Hotel Otaka, Inc. Emerald Hotels, Inc. Hilton Hawaiian Village
Hotel Hilton Corporation
& Prudential Insurance Co. Hilton Hotel Corp. Holiday Inn Waikiki Otaka, Inc. Otaka, Inc. Hotel Miramar Hawaii Ponderrosa Hawaii Ltd. Ponderrosa Hawaii Ltd. Hyatt Regency Waikiki Azabu USA, Inc. Hyatt Hotels Ilikai Waikiki Jowa Hawaii, Inc. Ilikai Investors Island Colony Hasegawa Komuten Aston Hotels &
Resorts Kahala Hilton Hotel WKH, Inc. Hilton International
Hotels Maile Court Outrigger Hotels Colony Resorts, Inc. Moana Hotel Kokusai Kogyo Sheraton Hotels Outrigger East Outrigger Hotels Outrigger Hotels Outrigger Malia Outrigger Hotels Outrigger Hotels Outrigger Prince Kuhio Outrigger Hotels Outrigger Hotels Outrigger Surf Outrigger Hotels Outrigger Hotels Outrigger Waikiki Outrigger Hotels Outrigger Hotels Outrigger West Outrigger Hotels Outrigger Hotels Pacific Beach Hotel HTH, Corp. HTH, Corp. Pacific Monarch (Condo) Colony Resorts Park Shore Hotel Universal Express Inc. Universal Express Inc. Pleasant Hawaiian Hotel Pleasant Travel
Services, Inc. Pleasant Travel
Services, Inc. Pleasant Holiday Isle
Hotel Pleasant Travel
Services, Inc. Pleasant Travel
Services, Inc. Princess Kaiulani Hotel Kokusai Kogyo Sheraton Hotels Quality Inn Waikiki Matsuzato Hawaii Inc. Quality Inn
International Queen Kapiolani Hotel Matsuzato Hawaii Inc. Hawaiian Pacific
Resorts Reef Hotel Outrigger Hotels Outrigger Hotels Royal Hawaiian Hotel Kyo-ya Co., Ltd. Sheraton Hotels Sheraton Waikiki Kyo-ya Co., Ltd. Sheraton Hotels Surfrider Hotel Kokusai Kogyo Sheraton Hotels Waikiki Banyan (Condo) WardAir Waikiki Beachcomber Hotel Azabu USA, Inc Azabu USA, Inc. Waikiki Beach Tower Tasayu & Taisei Aston Hotels
&Resorts Waikiki Gateway Hotel K&S Enterprises Aston Hotels
&Resorts Waikiki Hobron Outrigger Hotels Outrigger Hotels Waikiki Marina Hotel Waikiki Marina, Inc. Waikiki Marina, Inc. Viscount Waikiki Trusthouse Forte Trusthouse Forte Waikiki Plaza Yamada Pacific,
Inc. Vail City Corp. Waikiki Resort Hotel Korean Air Lines Korean Air Lines Waikiki Sands Villa
LaForet Hawaii LaForet Hawaii Waikiki Sunset (Condo) Aston Hotels
&Resorts Waikiki Surf Outrigger Hotels Outrigger Hotels Waikiki Tower Outrigger Hotels Outrigger Hotels Waikiki Village Outrigger Hotels Outrigger Hotels Ala Moana Hotel Azabu USA, Inc. Azabu USA, Inc. Pagoda Hotel HTH, Corp. HTH, Corp. Holiday Inn-Airport
Airport Plaza Ironwood Resorts
Bay Hilton Prudential Insurance
Co. Hilton Hotel
Corp. Sheraton Makaha Resort ANA Sheraton Hotels Hilo
Hawaiian Hotel Hilo Hawaiian
Associates Hawaiian Pacific
Resort Naniloa Surf Hotel Nakano Group Aston Hotels &
Resorts Mauna Kea Beach Hotel Westin Hotels Westin Hotels Mauna Lani Bay Hotel Tokyu, Inc. Emerald Hotels Sheraton Waikoloa T.A.A.S. Associates
Sheraton Hotels Hotel King Kamehameha Island Holiday
Ltd. Island Holiday
Ltd. Keauhou Beach Hotel
Azabu USA, Inc. Azabu USA, Inc. Kona Hilton Beach &
Tennis Resort, Kona Pleasant Travel
Services, Inc. Hilton Hotel
Corp. Kona Lagoon Azabu USA, Inc. Azabu USA, Inc. Kona Surf Otaka, Inc. Otaka, Inc. Hyatt Regency Maui Kokusai Jidosha-KM
Hyatt Hotels Kaanapali Beach Hotel Run Run Shaw AMFAC Kaanapali Shores (Condo) Colony
Bay Hotel Maui Land &
Pineapple Co. Kapalua
Bay Co. Marriott Kaanapali
Beach Azabu USA, Inc. Marriott Corp. Maui
Islander James Tweedt (Sole
Proprietor) Maui, Hawaiʻi James Tweedt Maui Royal Lahaina Hotel Pleasant Travel
Services Inc. Pleasant Travel
Services Inc. Sheraton Maui Hotel Kokusai Kogyo Sheraton Hotels Kamaole Sands Resort (Condo) Colony Resorts Maui Intercontinental
Metropolitan Co., Ltd., Intercontinental
Hotels Stouffer's Wailea Beach Nestle Stouffer's Hotels Maui Prince Seibu Railway Co. Seibu Railway Co. Coco Palms Waialua Associates Park Lane Hotels Islander on the Beach (Condo) Village Resorts, Inc. Kauai
Beach Boy Watamull Brothers WardAir Kauai Hilton Hasegawa
Komuten Hilton Hotel
Corp. Kauai Resort Hotel
Charles River Hawaii
Ltd., Aston Hotels &
Sands Hotel Hukilau Hukilau Sheraton Coconut Beach
Services, Inc. Sheraton Hotels Kiahuna (Condo) Hawaiiana Resorts
Sheraton Kauai Ohbayashi Guma Sheraton Hotels Waiohai Nestle Stouffer's Hotels Sheraton Princeville Qintex America, Ltd.
Sheraton Hotels Kaluakoi Resort Kukui Resort, Inc. Colony Resorts Appendix prepared by
the -Hotel Employees & Restaurant Employees, Local 5, AFL-CIO -Research
Department, Elwood K. Mott, Jr., Director.
Ala Wai Terrace Hotel
Ambassador Hotel of Waikiki
Coral Reef Hotel
Hale Koa Hotel
Hawaii Dynasty Hotel
China Air Lines
China Air Lines
Roberts Hawaii, Inc.
Aston Hotels & Resorts, Honolulu
Hawaiian Regent Hotel
Emerald Hotels, Inc.
Hilton Hawaiian Village
& Prudential Insurance Co.
Hilton Hotel Corp.
Holiday Inn Waikiki
Hotel Miramar Hawaii
Ponderrosa Hawaii Ltd.
Ponderrosa Hawaii Ltd.
Hyatt Regency Waikiki
Azabu USA, Inc.
Jowa Hawaii, Inc.
Aston Hotels &
Kahala Hilton Hotel
Colony Resorts, Inc.
Outrigger Prince Kuhio
Pacific Beach Hotel
Park Shore Hotel
Universal Express Inc.
Universal Express Inc.
Pleasant Hawaiian Hotel
Pleasant Holiday Isle
Princess Kaiulani Hotel
Quality Inn Waikiki
Matsuzato Hawaii Inc.
Queen Kapiolani Hotel
Matsuzato Hawaii Inc.
Royal Hawaiian Hotel
Kyo-ya Co., Ltd.
Kyo-ya Co., Ltd.
Waikiki Beachcomber Hotel
Azabu USA, Inc
Azabu USA, Inc.
Waikiki Beach Tower
Tasayu & Taisei
Waikiki Gateway Hotel
Waikiki Marina Hotel
Waikiki Marina, Inc.
Waikiki Marina, Inc.
Vail City Corp.
Waikiki Resort Hotel
Korean Air Lines
Korean Air Lines
Waikiki Sands Villa
Ala Moana Hotel
Azabu USA, Inc.
Azabu USA, Inc.
Sheraton Makaha Resort
Naniloa Surf Hotel
Aston Hotels &
Mauna Kea Beach Hotel
Mauna Lani Bay Hotel
Hotel King Kamehameha
Keauhou Beach Hotel
Azabu USA, Inc.
Azabu USA, Inc.
Kona Hilton Beach & Tennis Resort, Kona
Azabu USA, Inc.
Azabu USA, Inc.
Hyatt Regency Maui
Kaanapali Beach Hotel
Run Run Shaw
Maui Land &
Azabu USA, Inc.
James Tweedt (Sole Proprietor) Maui, Hawaiʻi
James Tweedt Maui
Royal Lahaina Hotel
Sheraton Maui Hotel
Kamaole Sands Resort
Metropolitan Co., Ltd.,
Stouffer's Wailea Beach
Seibu Railway Co.
Seibu Railway Co.
Park Lane Hotels
Islander on the Beach
Village Resorts, Inc.
Kauai Resort Hotel
Charles River Hawaii
Aston Hotels &
Sheraton Coconut Beach
Qintex America, Ltd.
Kukui Resort, Inc.
Appendix prepared by the -Hotel Employees & Restaurant Employees, Local 5, AFL-CIO -Research Department, Elwood K. Mott, Jr., Director.