Tentative agreements and extended negotiating period keep railroad strike off the tracks

While the prospects of a national railroad strike were fairly high earlier in the week, the situation appears to be far less dire, with tentative agreements in place between major freight railroads and two of the three railroad labor unions that the railroads had yet to reach an agreement.

The National Railway Labor Conference (NRLC), a concern representing more than 30 railroads, including the five United States-based Class Is, in national bargaining with the 13 major rail unions comprised of 132,000 employees, said yesterday that the Brotherhood of Locomotive Engineers and Trainmen and the American Train Dispatchers Association have come to tentative agreements with the railroads. These two unions represent 26,500 employees, according to the NRLC, whom said that sole union without a deal of any kind in place is the Brotherhood of Maintenance Way Employees (BMWE). The BMWE, though, has extended its “cooling off period” with the railroads to February 8, 2012.

These developments quell the possibility of a national rail strike, which would have taken effect on December 6, when the 30-day “cooling off” period between companies and employees was set to expire.

“We’re pleased that we have now settled with 12 of the 13 unions in this bargaining round. Everyone wins when we reach voluntary agreements,” said A. Kenneth Gradia, Chairman of the National Carriers’ Conference Committee (NCCC), the railroads’ bargaining representative, in a statement. “In a tough economy, these agreements offer a terrific deal for rail employees. They lock in well-above market wage increases of more than 20 percent over six years, far exceeding recent union settlements in other industries.”

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.

Matching legislation from both the House and Senate under the guidance of House Transportation and Infrastructure Committee Chairman John Mica (R-Fla.) and Senate Majority Leader Harry Reid (D-Nev.), respectively, proposed to implement the recommendations of the PEB as a final agreement for the three rail unions that had not reached agreements with the railroads prior to yesterday’s developments.

Prior to these agreements, shipper groups were for these issues to be resolved in order to avoid a strike, which could have a severe impact on freight transportation.

In a letter to House all members of Congress on November 23, National Industrial Transportation League (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 National Retail Federation President and CEO Michael Shay explained 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.

Association of American Railroads (AAR) President and CEO Ed Hamberger said last month that if a strike were to occur, Congress under the power of the Railway Labor Act Congress would have the authority to put striking workers back to work almost immediately if it reached that point. A major reason for that is that freight railroading is considered a national defense industry, according to Hamberger.

“The goal of the nation’s freight railroads, from the start of bargaining almost two years ago, has been to reach voluntary settlements with all of its rail unions,” Hamberger said in a statement issued yesterday. “These agreements bring the industry closer to achieving that goal. Freight rail touches nearly every sector of our economy, and we are committed to finalizing the remaining agreement so that we can continue to deliver for the tens of thousands of American businesses that rely on rail, and the hundreds of thousands of Americans who use passenger rail to commute to work every day.”

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