Could the Railroad Industry Go Completely Off the Track?

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Do you believe fuel and food are too expensive now? Do you have trouble finding the things you want or need for your family? According to at least one railroad employee, you should expect difficulty finding Tylenol, baby formula, sriracha, and tampons, as well as Jif.

Nearly all products you purchase or use were once transported by rail in containers on their way to you. Many manufacturers get raw materials and supplies from trains. The manufacturing process will stop if they don’t receive the necessary inputs. Frontline workers say that bad management and labor issues can put the whole system at risk.

The Association of American Railroads reports that the AAR, the trade group representing Class I railroads and 12 labor unions, as well as 30 freight railroads, is currently engaged in a multi-year effort to reach a long-lasting collective bargaining agreement. The multiemployer agreement will cover wages, benefits, and workplace safety. Negotiations are governed by the Railway Labor Act (RLA), which Congress adopted in 1929.

The RLA creates a process of deliberate negotiation for railroads and workers. There are many opportunities for mediation or resolution. This process is meant to prevent interstate commerce interruptions and requires that the parties “exert every reasonable attempt” to reach an agreement. Both parties usually reach an agreement on their own, but if necessary, the National Mediation Board (NMB), an independent federal agency, may be called to mediate the negotiations.

According to employees, the current negotiations are in danger of reaching an impasse. Employees say that the National Mediation Board (NMB), which convened in January, required all parties to travel to Washington, D.C. for their meeting. This is not common. The parties were released from the statutorily required mediation by the NMB on June 17, 2022. The National Carriers Conference Committee and 12 unions have not yet been given a contract that the members can vote on. On June 18, 2022, the required cooling-off period of 30 days began. The cooling-off period will end on June 18, 2022. Union members will vote to authorize the bargaining committee to call for a strike.

Rail workers, like many unions, have stopped receiving healthcare wages over the past four decades. The wage increase proposed will not be enough to meet members’ increased cost of living. Healthcare will become more expensive. Management offered a 2.5% increase and a high-deductible health plan to compensate for the 8.6% inflation and 3.4% drop in the dollar’s value. The hourly wages of rail workers are very high. But, employees’ take-home pay is significantly reduced by mandatory retirement contributions, union dues, and personal liability coverage, which pays for an employee in the event of an injury or destruction of property.

The employees feel that a strike authorization is possible. Canadian National Railroad received a 72-hour strike notice from the International Brotherhood of Electrical Workers in Canada. The workers walked out on June 18th. The bargaining unit consists of only 750 workers. Management seems to have put in place a contingency plan. The current negotiations under RLA involve approximately 115,000 workers.

Also, working conditions can be a problem. Rail carriers have used the Precision Scheduled Railroading operating model (PSR) for many years. Employees claim that PSR reduced total staff by 25%. This has caused inflexibility in the system and created more operational problems than Wall Street realizes. The cracks began to appear in the first quarter of 2022. Union Pacific Railroad blamed service disruptions for staffing shortages. According to employees, the PSR-mandated staffing cuts, long working hours, delays that were not disclosed by redefining destination locations, and recrews that were hidden by relabeling trains lead to burnout and safety issues.

High turnover is a result of the PSR-created perfect storm. One employee said that the railroads’ ability to recruit had suffered from the effects of PSR in the past few years. Like the families of firefighters and cops, his grandfather and father were railroad workers. His son is not interested in the railroad, despite having watched his father for many years. This is also the first time that the carriers have ever had to post jobs. You had to be able to refer someone to get in until very recently.

According to the parties, President Biden is expected to establish a Presidential Emergency Board within the next 30 days. The PEB is an attempt to stop a strike. To settle the contract disputes, the unions refused binding arbitration. The PEB will give the 115,000 employees a contract to review. The offering will be developed by the board in 30 days. Employees would then vote on it within the next 30 days.

This is not the same situation as for the 1981 air traffic controllers or the 1992 railroad strike. The government cannot threaten to fire striking workers to force an agreement. There is no longer a waiting list for railroad jobs. According to employees, management is unable to pick up the same amount of work as in Canada’s smaller strike.

Management may attempt to unilaterally impose their offer if employees reject the PEB contract. If the members authorize their representatives, the union may strike. This would place Democrats in a difficult position. Only Congress or President Biden can compel rail workers to return to work.

To overrule union members’ will, either a Democratic majority in Congress would be required or a Democrat president. The only truly Democratic institution outside of the legislative branch of federal or state government is the union. The dues of rank-and-file members make up the majority of the union contributions.

It would seem that a Secretary for Transportation who spent months on paternity leave in a supply chain crisis and loves trains, would want to make sure America’s railroads are safe. There are good odds that the trains will go off the tracks in September, according to current estimates.