Possibility of freight railroad strike looms as deadline approaches

With the clock winding down, the ongoing dispute between railroad management and labor over contractual issues largely focused on health care and economic issues remains in flux.

As of press time, United States freight railroads have come to contractual agreements with ten of 13 unions representing 60 percent of the 132,000 employees in the current round of bargaining, while an 11th union representing maintenance workers intends to continue talks into February along with no agreement yet in place with unions representing dispatchers and locomotive engineers. Both these groups could go on strike when a 30-day “cooling off” period between companies and employees is set to expire on December 6.

In early November, a Presidential Emergency Board (PEB) offered recommendations on contract terms for the two sides to resolve their disagreements. These recommendations included:
-a five-year package of wage increases for a total of 15.6 percent, plus a 1 percent lump-sum signing bonus along with proposing that each union have the right to sign off on an additional 3 percent pay raise, effective January 1, 2015;
-moving towards a restructured health and welfare plan reducing the cost of insurance for employees; and
-freezing employee health insurance contributions at the current level of $200 per month until July 1, 2016.

Various shipper groups are calling for these issues to be resolved in order to avoid a strike, which could have a severe impact on freight transportation.

The National Industrial Transportation League (NITL) has asked Congress to “quickly consider and apply the terms” of the PEB’s recommendations if an agreement is not made by December 6.

In a letter to House Transportation and Infrastructure Committee Chairman John Mica, NITL President and CEO Bruce Carlton said that if the remaining unions do not reach an accord with management and a strike or similar job action is called, America’s freight rail system will shut down, including passenger rail systems that use freight rail track, adding that such a result would have a devastating impact on the economy and businesses of all sizes and hinder the economic recovery. Carlton also noted in the letter that economists have estimated the impact of a national rail strike at $2 billion per day.

And in the event that an agreement is not reached in time to avoid a strike, Carlton and NITL are requesting that Congress pass legislation to end the strike and impose the recommended terms by the PEB.

National Retail Federation President and CEO Michael Shay wrote in a letter to members of Congress that retailers rely heavily on freight rail to move merchandise throughout the U.S., especially during the holiday season and even a strike lasting just one day at such a crucial time would create a sustained backlog that could clog the transportation system for weeks, with other modes of transportation being unable to take over the extra volume.

“For retailers, a strike during the busy holiday shopping season could be devastating,” wrote Shay. “It is imperative that Congress recognize the severe economic harm threatened by the failure to reach agreement with the remaining rail unions and move quickly to prevent a rail strike that would prove devastating to both businesses and consumers.”

Wolfe Trahan analyst Ed Wolfe wrote in a research note that his firm believes the chances of a strike occurring are very low, as there have only been two strike days in the railroad sector going back to 1991.

What’s more, at the RailTrends conference presented by Progressive Railroading and independent analyst Tony Hatch in early November, Association of American Railroads President and CEO Ed Hamberger said that if a strike does occur in December 6, as part of the Railway Labor Act Congress does have the authority to put striking workers back to work almost immediately if it gets to that point. A major reason for that is that freight railroading is considered a national defense industry, according to Hamberger.