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Nationwide Railroad Strike Avoided

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As reported in the Wall Street Journal, there’s some good news from Washington, DC.  The nation’s largest freight railroads and union leaders reached a tentative labor agreement to avert a nationwide strike that would have crippled swatches of the U.S. economy.

White House officials interceded to broker a deal to avoid transport disruptions that could have snarled supply chains, putting new pressure on prices when inflation has been hovering near four-decade highs. Business groups and key rail customers, such as energy companies and national retailers, had been calling on the government to avoid a strike.

The overall U.S. job market is tight, with wages rising and unemployment low, and the railroads struggling with service issues they say have been caused by worker shortages. Union members had been working without a contract since 2019 and labor leaders had used the negotiations to protest new attendance policies some of the companies had adopted.

Both sides said Thursday they wrung concessions from the negotiations, which produced a deal that runs through 2024. The terms largely reflected a proposal put forth by a federal panel a month ago, including about 24% in wage increases over five years. The tentative agreement must now be ratified by members of the various unions covered by the contracts.

The deal, which is retroactive to 2019, includes a 14.1% wage increase upon ratification. Workers would then get a 4% raise in July 2023 and 4.5% increase in July 2024, as well as five annual $1,000 lump sum payments. There are no changes to health insurance copays or deductibles in the new deal.

Amtrak said Thursday it was restoring long-distance train services that it had suspended ahead of the Friday deadline for a possible strike. The passenger-rail provider was notifying customers to accommodate them on the next available departures, a spokesman said.

The freight railroads, including CSX Corp. and Union Pacific Corp., this week had started suspending transport of some shipments, including industrial chemicals categorized as hazardous, so the cargoes wouldn’t get stuck in their networks under a strike. Officials from the railroads said they were pleased to avert a work stoppage and were working to fully restore services.

Two unions that had held out for better terms—the Brotherhood of Locomotive Engineers and Trainmen, and SMART-Transportation Division—said Thursday they were able to secure changes to company attendance policies. “For the first time, our unions were able to obtain negotiated contract language exempting time off for certain medical events from carrier attendance policies,” the unions said.

The wages and other contract terms largely followed the recommendations of a federal panel appointed by the White House in July to mediate the dispute. Unions had sought raises of 31% over the five-year term of the contract, while railroads offered 17% before the presidential panel drafted a proposed compromise last month. In the previous five-year contract, wage increases amounted to around 13%.

The annual rate of inflation in August was 8.3% in the U.S. Nationally, average hourly earnings for non-managerial employees were up 6.1% in August from a year before, about the same pace as the past year, according to the Labor Department.

On Wednesday, one of the unions said its members rejected a tentative agreement its leaders had reached, while two others labor unions said their members had ratified the agreements. Members of the International Association of Machinists and Aerospace Workers, or IAM, which rejected the deal, were concerned over attendance policies and unscheduled days off if workers or family members get sick, an IAM union official said.

This labor agreement will certainly be watched closely by the Teamsters Union as well as by UPS as they negotiate a new labor agreement in 2023.  We do not expect those negotiations to be quick or painless for either party.

We’ll keep you posted on all the happenings, right here, in real time so be sure to check back.

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