State of Freight

Railroads, unions draw their lines in sand as Biden, Congress move to prevent strike

Key Points
  • Railroads says the future of collective bargaining for many industries including airlines is at stake after President Biden urged Congress to prevent a rail strike by passing legislation.
  • The rail unions say Congress mandating the labor deal without changes to paid sick leave will worsen the supply chain and further alienate rail workers. 
  • After a meeting with Biden on Tuesday, leaders from both Democratic and Republican parties including Nancy Pelosi, Chuck Schumer and Mitch McConnell indicated support for passing legislation quickly.
  • Four rail unions aligned on a potential national strike date of Dec. 9.

In this article

Freight rail cars sit in a rail yard on November 22, 2022 in Wilmington, California. A national rail strike could occur as soon as December 5 after the nation’s largest freight rail union, SMART Transportation Division, voted to reject the Biden administration’s contract deal.
Mario Tama | Getty Images

The National Railway Labor Conference and The Brotherhood of Maintenance of Way Employees Division of the International Brotherhood of Teamsters (BMWED) are drawing their lines in the sand after President Joe Biden called on Congress to pass legislation that would enforce the tentative rail labor agreement.

In a statement, the BMWED said pressuring Congress to pass legislation does not fix the problems or concerns of their workers.

"It both denies railroad workers their right to strike while also denying them of the benefit they would likely otherwise obtain if they were not denied their right to strike," the statement says. "Additionally, passing legislation to adopt tentative agreements that exclude paid sick leave for railroad workers will not address rail service issues. Rather, it will worsen supply chain issues and further sicken, infuriate, and disenfranchise railroad workers as they continue shouldering the burdens of the railroads' mismanagement."

How a rail strike could interrupt parcel delivery services
How a rail strike could interrupt parcel delivery services

The BMWED says it is calling upon President Biden and any member of Congress "that truly supports the working class to act swiftly by passing any sort of reforms and regulations that will provide paid sick leave for all Railroad Workers."

The posturing from the NRLC and the unions came after President Biden called on Congress to pass the tentative agreement on Monday night. "Congress, I think, has to act appropriately. It's not an easy call, but I think we have to do it," Biden said. "The economy is at risk."

After Biden met with Congressional leaders on Tuesday, several leading figures on Capitol Hill including Speaker Nancy Pelosi, Senate Majority Leader Chuck Schumer, and Senate Minority Leader Mitch McConnell expressed support for legislation passing quickly.

"Tomorrow morning we will have a bill on the floor," Pelosi told reporters after the meeting.

In a press conference on rail preparations, Association of American Railroads (AAR) President and CEO Ian Jefferies told reporters that, "If the unions are interested in a holistic discussion for structural changes as it relates to their sick time, I think absolutely the railroad carriers would be up for a holistic discussion but [they] have not done it in the zero hour."

House announces bill aimed at resolving rail worker dispute
House announces bill aimed at resolving rail worker dispute

According to the AAR, the Presidential Emergency Board reviewed the union's request for additional paid sick days and instead offered additional salary. Each union has its own sick day policy, according to the National Railway Labor Conference. If an employee is sick, they need to be out of work between 4 to 7 days before they collect their version of sick pay. In the tentative deal, the PEB offered one additional personal day for their use. This would bring a total of three personal days for railroad workers. A worker must provide 48 hours notice to request a personal day.

Brendan Branon, National Railway Labor Conference chairman, told CNBC the future of collective bargaining is in the hands of Congress and urged that the legislation they pass follow the recommendations of the PEB, a board created by Biden in July to resolve the ongoing dispute between major freight rail carriers and their unions. The board crafts its recommendations under a principle known as pattern bargaining, which is a collective bargaining principle used to promote settlement of disputes. Now that 8 of the 12 unions have ratified the agreement, what is known as a "pattern" has been established - in this case railroads argue with the pattern of unions approving tentative agreements based upon the PEB set, that is the only acceptable path to resolve the round.

"Pattern bargaining promotes stability in collective bargaining, and it encourages settlement," Branon said. "There's any number of arbitrators and PEBs who have recognized that this is not only acceptable, this is the most appropriate form to settle complex negotiations, especially multi-employer, multi-craft agreements." Branon said a number of industries including the railroads have developed a set of clear practices in bargaining and the additional negotiating by the unions after the tentative agreement departs from the framework recommended by the PEB.

"Departing from a pattern would establish a precedent that there's still a better outcome achievable and I think it would pose significant stress and risk for collective bargaining in the future for the railroad industry," Branon said. "I think it would also apply to the airline industry as well, where there are a number of significant outstanding negotiations, especially with the large pilot groups. Not to mention the ongoing Amtrak negotiations and all of those other industries under the National Labor Relations Act (NLRA)."

The railroad industry forecasts that a strike could inflict economic damage of $2 billion per day. Other industry groups have also warned of a direct hit to GDP as well as an increase in inflation. According to the AAR, 40% of cargo based by weight and long distance freight is moved by rail.

The alignment of the four unions that have voted not to ratify a labor deal has provided a clear timeline for strike prep plans among the freight railroads and with sensitive cargo including chemicals.

The Brotherhood of Railroad Signalmen (BRS) announced last week it was extending its status quo period through December 8 to align with the BMWED (Brotherhood of Maintenance of Way Employees), SMART-TD, and the International Brotherhood of Boilermakers. If no agreement is reached by then and Congress does not intervene, a coordinated strike could start on December 9. Railroad unions that voted for ratification have said they will not cross the picket lines and will support their fellow union workers, posing the risk of a nationwide freight rail shutdown. Their deals are moving forward.

According to federal safety measures, railroad carriers begin prepping for a strike seven days before the strike date. The carriers start to prioritize the securing and movement of security-sensitive materials like chlorine for drinking water and hazardous materials in the rail winddown.

Ninety-six hours before a strike date, chemicals are no longer transported. According to the American Chemistry Council, railroad industry data shows a drop of 1,975 carloads of chemical shipments during the week of September 10 when the railroads stopped accepting shipments due to the previous threat.

Corey Rosenbusch, president and CEO of The Fertilizer Institute, told reporters that railroad carriers have told their members that ammonia shipments, a critical component for fertilizer companies, will not be allowed on the rail on December 4.

"It traditionally takes 5-7 days for the supply chain to catch up when you have a shutdown," said Rosenbusch. "Fertilizer manufacturing would have to be curtailed."

The four railroads typically move more than 80% of the agricultural freight traffic, according to the National Grain and Feed Association (NGFA). "We are looking for alternatives now to position our product," said Mike Seyfert, president and CEO of NGFA. "We have zero elasticity right now. There are zero drivers, and the barge situation with the low water levels has only added to this challenge."

AAR said that 467,000 trucks and trailers would be needed to move the amount of rail-bound freight per day in the event of a strike.

President Biden urges Congress to take action to prevent rail shutdown
President Biden urges Congress to take action to prevent rail shutdown