KALAELOA — Hawaiian Cement and the union that represents 20 of its workers reached a tentative agreement on a five-year contract early this morning, averting a strike that could have brought the state's construction industry to a halt.

The settlement was reached at 2:20 a.m. after negotiators for both sides worked past the 12:01 a.m. strike deadline.

Union leader Mel Kahele said he expects that the workers will ratify the contract within the next five days.

The union accepted the company's demand that employees pay 20 percent of their medical premiums in exchange for raises that are more front-loaded.

Michael Coad, Hawaiian Cement vice president and lead negotiator, said workers will receive raises of $1.20 per hour in the first year, 80 cents per hour in the second year and 75 cents per hour in each of the final three years of the contract.

The company's previous offer was $1 in the first year and 80 cents each year after that.

The contract will cover 20 Hawaiian Cement employees — electricians, terminal operators, pack-house utility workers, heavy equipment operators, terminal laborers and pack-house laborers on O'ahu, Kaua'i, Maui and the Big Island.

Coad said he was very pleased with the agreement. "The settlement is good for both the company and employees," he said. "We both understood the responsibility that we have and I think we took that responsibility seriously."

Kahele said, "We ended up with a real deal, a package that I don't think we were able to refuse." Kahele said the union agreed to the 20 percent medical co-pay but that the increase in take-home pay will more than make up for it.

Coad said he expects work will not be affected today. Most of his customers had made arrangements to have adequate supplies on hand and some trucks had been pre-loaded, he said. "I don't think we will miss a single beat," he said.

The deal was reached 5 1/2 hours after the two sides resumed talks at the company's Campbell Industrial Park offices about 9 p.m. yesterday.

It was the 13th meeting between the two sides to reach agreement on a new contract. The previous contract expired Dec. 31 and was extended until today.

Federal mediator Ken Kawamoto shuttled between rooms at the company facility as the two sides traded offers and counter-offers.

Although the negotiations covered a relatively small number of workers, those are the employees who unload and load the only source of cement imported to the islands, which is distributed throughout O'ahu, Maui, the Big Island and Kaua'i

Before the settlement, contractors and construction companies said they were buoyed by reassurances from Hawaiian Cement officials that they had a contingency plan in place to deal with a possible strike.

"The company has made provision to operate our terminals ... with salaried personnel in the event of a Teamster work stoppage," Hawaiian Cement president John DeLong wrote on the company's Web site. "Further, additional vendor and equipment support is in place to ensure continuous service to our valued customers."

Construction industry officials were hoping they would not have to relive the struggles of the 2004 strike.

In 2004, Kevin Pena, who owns sub-contractor Foundations Hawaii, Inc., was forced to lay off workers for months when Teamsters truck drivers, welders, mechanics, heavy-equipment operators and others went on strike against Hawaiian Cement and its main competitor, Ameron Hawaii, effectively shutting down Hawai'i's thriving construction industry.

Had drivers stopped delivering concrete, Pena said his crews would be shut down "immediately."

Pena had planned to temporarily keep his crews busy building forms and doing other work without concrete — "just getting things ready to pour."

Ryan Wada, president of concrete and masonry contractor Quality General Inc., was at the World of Concrete trade show in Las Vegas yesterday and said by cell phone that he could not continue operating for long had there been a strike.

"If I don't get concrete, I can't survive," he said.

Wada estimated that he would have had to shut down operations almost immediately, followed by layoffs affecting his 90 employees.

Wada was able to struggle through the last concrete strike by buying concrete from the much smaller competitors of Hawaiian Cement and Ameron.

But some of the smaller, independent concrete companies said earlier in the week that they, too, rely on the cement that's loaded and unloaded by the 20 Teamsters at the center of the current negotiations.

The main issue in the contract talks was Hawaiian Cement's "last, best and final offer" that would require employees to pay 20 percent of their medical premiums for the first time — as do Hawaiian Cement's other employee groups and non-union employees, Coad said.

Salaries for the 20 workers under the old contract range from pack-house laborers and terminal laborers who make $23.34 an hour — regardless of years of experience — to a single electrician on O'ahu who makes $28.99 an hour, according to the company.

Nearly half of the workers — terminal operators on all islands — earn $28.86 hourly regardless of experience.

With overtime, according to Hawaiian Cement, 2005 salaries ranged from $70,559 to $101,470. The average was $86,092, including overtime.

Employees also have lifetime medical benefits upon retirement.

The company's "last, best and final offer" called for a $1 per hour raise in the first year of the contract and additional increases of 80 cents per hour in each subsequent year.

But Kahele said that the combination of raises and new co-pay requirement would end up costing employees about $224 per month.

Coad said that combining the proposed raises and a pre-tax option on the medical co-payments would mean that employees would have no net loss of income.

Reach Curtis Lum at culum@honoluluadvertiser.com and Dan Nakaso at dnakaso@honoluluadvertiser.com.