Massive rail strike next week could deal another blow to America’s economy

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By Chris Isidore, CNN Business

Freight railroads have been around since the 19th century, but you can’t run a 21st century economy without them.

The looming possibility of a strike by unions representing more than 90,000 workers at the nation’s freight railroads has businesses nationwide worried. The unions are poised to go on strike on September 16, a move that could bring nearly 30% of the nation’s freight to a grinding halt, according to data from the Bureau of Transportation Statistics.

It’s about the last thing the US economy needs as it struggles to get over several years of supply chain issues. A prolonged strike could mean empty shelves in stores, temporary closures at factories that don’t have the parts they need to operate, and higher prices due to the limited availability of various consumer goods.

“We’re hearing more and more that shippers and the railroads are getting anxious,” said John Drake, vice president for transportation, infrastructure and supply chain policy for the US Chamber of Commerce. The chamber is calling on the two sides to reach a deal that avoids the first national rail strike in 30 years.

The unions and the National Railway Labor Conference, which represents management at the negotiating table, met with federal mediators and US Labor Secretary Martin Walsh Wednesday to see if they could move closer to an agreement. The unions said there was no progress.

The freight railroads have generally thrived during the pandemic, so a key dispute is not over pay, but rather the rules controlling worker scheduling. Many of the engineers and conductors who make up the two-person crews on each train have to be “on call” to report to work seven days a week, preventing them from making their own plans, depriving them of time with their families and creating a high turnover rate.

Time running out

Since railroad workers are under a different labor law than the one that control labor relations at most businesses, it’s possible that Congress could act to prevent or quickly stop a strike. But that would require a level of bipartisanship that is rare in Washington just weeks ahead of midterm elections.

President Joe Biden prevented a strike two months ago by imposing a cooling off period during which a panel he appointed, known as a Presidential Emergency Board (PEB), looked at the disputed issues in the negotiations and issued a recommended settlement.

That 60-day cooling off period is due to expire at 12:01 am ET Sept. 16, and Biden does not have the power to prevent a strike at that time. Only Congress can act to prevent a work stoppage, either by imposing a deal on the two sides or to extending the current cooling off period.

The PEB recommended multiple annual raises back to July 2020, when the previous contract had been set to expire.

They would give workers an immediate 14% raise, as well as additional back pay for the hours they worked since 2020. There would be more raises going forward, resulting in a 24% pay increase over the five-year course of the contract that would run from 2020 to 2024, as well as annual cash bonuses of $1,000.

The PEB’s wages recommendations are somewhat less than the unions requested, and somewhat more than management had previously offered.

But it was a lucrative enough that five of the smaller unions that represent more than 21,000 railroad workers agreed to a tentative labor deals based on the panel’s recommendations, although they still need to be be ratified by their rank-and-file members to go into effect. And the PEB’s wage recommendations would probably have been enough to win the approval of the other unions, even though they were asking for more.

“We’re not going to sit here and argue about [wages] or health care. We’re beyond that,” said Jeremy Ferguson, president of the union that represents the conductors, one of the two workers on freight trains along with the engineers.

Anger over work rules

The conductors’ union and other six unions poised to strike, which includes the one representing engineers, are not satisfied with the work rule recommendations, and how the “on call” requirement will affect the quality of their members’ lives, denying them any free time with their families even when off of work.

The unions are urging allies in Congress not to act, arguing that a strike is the only way to reach a deal that can improve what they say are intolerable work rules driving employees to quit the business, causing staff shortages and well documented service problems in freight rail service.

“The fact is they [the railroads] are counting on Congress to act,” said Dennis Pierce, president of the Brotherhood of Locomotive Engineers and Trainmen. “We’ve let them [the union’s allies in Congress] know we need them to stay out of it.”

“This is a chance for the Democrats to stand up for something they say they support, the working class and labor,” Ferguson said.

Will Congress act?

If Congress does act, it would pose a difficult political choice for the Biden administration. Biden is as pro-union as any president in history, but he doesn’t want to see any problems for supply chains, prices and the economy ahead of crucial midterm elections.

Asked about risk of a strike, a White House official did not address the possibility of Congressional action, instead stressing the need for a negotiated settlement to avoid a shutdown it hopes to avoid.

“After the pandemic and supply chain disruptions of the past two years, now is not the time for more uncertainty and disruption,” the official told CNN’s Betsy Klein.

The official said the White House “stands ready to support the parties as they work toward an agreement or a voluntary extension of the cooling off period.”

“We take no position on what the elements of an agreement should be,” the official added. “We are confident the parties will make every effort to negotiate in good faith toward a mutually acceptable solution, and we urge both sides to do so promptly.”

Democrats in Congress could impose a contract more to the unions’ liking than what was recommended by the presidential panel. But that might have trouble getting the necessary Republican support to pass. Republicans could potentially benefit if there was a prolonged rail strike causing problems in the economy right before the election, especially if it could be blamed on the Democrats.

Even some businesses that would like to see the dispute settled without a strike are nervous about turning to Congress.

“Quite frankly, it’s not a good sign if it ultimately goes to Congress,” said one business official closely monitoring the potential for a strike, who spoke on the condition his name not be used.

“You don’t know what you’re going to get. You could have members that could hold up legislation to demand one thing or the other…Once Congress gets involved, it’s a mess.”

This executive believes that Congress will kick the can down the tracks, extending the cooling off period, perhaps past election day, rather than imposing a contract. But that’s still no solution.

“Here’s the rub, it’s been 30 days since the [presidential panel’s] recommendations. Only five of the 12 rail unions have signed onto the recommendations,” he said.

At this point the railroads are still urging the unions to agree to the terms recommended by the presidential panel, rather than calling on Congress to act.

“It is in the best interest of all stakeholders and the public for the railroads and rail labor organizations to promptly reach agreements that provide pay increases to employees and prevent rail service disruptions,” said the National Railway Labor Conference “Now is the time to use the PEB’s recommendation as the basis for a prompt and voluntary agreement.”

The railroad’s trade group put out an estimate Thursday that a halt to freight rail service would cost the US economy $2 billion a day. It did not specifically call for Congressional action, encouraging the parties to settle the dispute through negotiations, although it’s statement said, “ultimately, Congress has the power to intercede and avert a shutdown.”

Record profits for railroads

The strike threat comes as several railroads, including Union Pacific, Norfolk Southern and Berkshire Hathaway’s Burlington Northern Santa Fe have reported record earnings.

The unions argue the companies are making the profits on the back of their employees, creating conditions that are driving workers to quit. Employment at the nation’s major railroads is down by more than 30,000, or about 20% of the workforce, since the last contract was reached in 2017.

Leaders of the unions say their members are now at a breaking point and that they are eager to strike to win changes.

“This isn’t a personal choice by the presidents of the unions,” said the engineers union president Pierce. “Our membership has made it loud and clear that this is not a deal membership would ratify.”

— CNN’s Betsy Klein contributed to this report

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