Unions and management reached a tentative agreement early Thursday to avert a railroad strike that threatened to cripple US supply chains and push up prices on many goods.
The deal, with the unions representing more than 50,000 engineers and conductors, was announced just after 5 a.m. ET in a statement from the White House, which called it “an important win for our economy and the American people.”
A verbal agreement between the two sides was reached around 2:30 a.m. ET, according to sources, and the last few hours were spent working out the details.
That ended about 20 hours of talks between union leaders and railroad negotiators, moderated by Labor Secretary Marty Walsh. They began their Wednesday morning meeting with a strike scheduled to begin Friday at 12:01 am ET.
According to a person familiar with negotiations, President Joe Biden made a personal call around 9 p.m. ET Wednesday to speak with negotiators. Biden stressed that families, businesses and communities could suffer catastrophic damage if the rail system were shut down. Sources within the unions credited Biden’s appeal for helping to get the deal through without a strike.
“We are very proud of what we have achieved,” said Jeremy Ferguson, president of the conductors’ union and one of the leaders involved in the marathon session. He thanked Biden and Labor Department officials involved in the talks for the deal.
“Everyone pulled together to make sure we were giving our members what they deserve,” he said.
“This is the quality of life issue that we have been trying to achieve for our members since negotiations began,” said Dennis Pierce, chairman of the engineering union and the other union official involved in the talks.
The agreement must be ratified by union members before it can come into force and completely end the threat of strikes. But it’s good news for a variety of businesses that depend on rail freight to continue operating, and for the US economy as a whole. About 30% of the country’s freight traffic is transported by rail.
The deal offers union members an immediate pay rise of 14% with wage arrears from 2020 and increases totaling 24% over the contract’s five-year term, which runs from 2020 to 2024. They also receive $1,000 in cash bonuses per year. All in all, the back payments and earlier bonuses will bring union members an average payment of $11,000 per person once the deal is ratified.
Few other details of the deal have been released so far. But Biden’s statement indicated that the biggest sticking point — labor rules and planning issues — that had brought the country within a day of its first national rail strike in 30 years had been addressed in favor of unions.
“It’s a win for tens of thousands of railroad workers who have worked tirelessly throughout the pandemic to ensure America’s families and communities receive supplies of what has kept us going through these difficult years,” Biden said in a statement. “These railroad workers will get better pay, better working conditions and peace of mind about their healthcare costs: all hard-earned.”
The dispute centered on staff shortages and scheduling rules, which union leaders said had brought their membership to a breaking point. Unions say railroads require members to be “on call” and willing to report for work at short notice up to seven days a week. The leaders of the two unions had stated that their members would not accept a contract without changes to these labor rules.
The union said the deal offers one extra paid day off per year, protection from disciplinary action if they need time off to attend to routine and preventive medical care, and exemptions from the attendance requirement for hospitalizations and surgical procedures. Actions by the railroad against workers unable to be on call or report for work due to ill health had fueled anger among union members.
Biden described the deal as “also a victory for railroad companies, which will be able to retain and hire more workers for an industry that will continue to be part of the backbone of the American economy for decades to come.”
It’s an important win for Biden, who would only have had to make bad decisions if an agreement hadn’t been reached. Support for Congressional action sought by the business community to force a contract on workers would have angered his supporters among the unions. Permitting the walkout risked massive economic repercussions just ahead of the midterm elections.
Railway workers are subject to different labor laws than most workers, restricting their freedom to strike and allowing more government intervention. In July, Biden issued an executive order preventing a strike at the time and set up a body known as the Presidential Emergency Board to try to resolve the dispute.
It also imposed a 60-day cooling-off period during which unions could not strike and management could not lock out workers. This reflection period should end early Friday.
Biden could not have ordered the railroads to resume operations after Friday’s cooling off period. Only Congress could have acted to get the unions back to work if a strike had started.
With a wide array of business groups urging Congress to act, Republicans had prepared legislation that would have got railroad management the deal they wanted. But Democrats were opposed to taking such action.
A union source said the Democrats’ refusal to side with management was a key to the talks.
“The Senate’s inactive leadership gave space to these negotiations,” the union source said. He said Walsh stuck by the union during the negotiations.
“Yesterday was a grind,” he said with much back and forth.
“Our people didn’t want to give up,” the source said. “Our people would have gone on strike” if no agreement had been reached by Friday’s deadline.
The agreement does not mean that the threat of strikes has completely disappeared. The deal must be ratified by ordinary union members. Recently, members of some unions have refused to approve agreements even when recommended by their union leadership.
About 10,000 members of the United Auto Workers union at farm equipment maker John Deere went on strike last fall after rejecting a lucrative interim agreement and then remained on strike after rejecting a subsequent agreement. They finally returned to work after five weeks.
Striking workers at grain maker Kellogg (K) also rejected a tentative deal and decided to continue striking in December before finally agreeing to a deal weeks later. And just 50.3% of film production workers voted in favor of a deal that met virtually all of their union’s bargaining goals and averted a strike by 63,000 technicians, tradesmen and craftsmen that would have halted production of films, TV shows and streaming shows can bring.
The Association of American Railroads also praised the deal, thanking the Biden administration and the unions themselves for their role in reaching an agreement.
The pay rises and bonuses had been recommended by a presidential committee tasked with finding a solution to the negotiating difficulties at the time.
Those terms have been lucrative enough for most rail unions to agree to tentative agreements in recent weeks. The engineers and conductors, faced with working and scheduling rules that did not apply to others, refused to sign without relief on the scheduling issue.
Shares in major rail freight companies — Union Pacific (UNP), CSX (CSX) and Norfolk Southern (NSC) — rose between 1% and 3% in premarket trading following the news. Shares of Berkshire Hathaway (BRKA), which owns the fourth national rail freight company, Burlington Northern Santa Fe, were also marginally higher.
The threat of a strike had already begun to disrupt operations. Amtrak, whose 22,000-mile system runs almost entirely on freight rails outside the Northeast Corridor, had already canceled all long-distance trains. Amtrak said it “is working to quickly restore canceled trains and reach out to affected customers to accommodate them on the first available departures.” It said it will provide an update once information becomes available.
A week ago, Deutsche Bahn stopped accepting shipments containing dangerous and safety-relevant substances. And as of Wednesday, some of the railroads had stopped accepting shipments of grain from the agribusiness.
Railway customers who were struggling with major problems were relieved that a strike could be avoided.
“This is fantastic business news,” said Eric Hoplin, CEO of the National Association of Wholesale Distributors, in an appearance on CNN’s New Day Thursday. “My phone has been ringing non-stop for the past 48 hours speaking to sales executives from across the country, who are detailing what could have been disastrous for the American supply chain and economy.”
The US economy avoided several economic setbacks, including a potential hike in gasoline prices that could have reversed the 26 percent drop in prices at the pump over the past three months. Although refineries get most of their oil through pipelines and ship most of the gasoline they produce the same way, they still needed rail tank cars to deliver other materials for gasoline refining and waste product removal.
Higher food and car prices and shortages of consumer goods well into the holiday season were likely if the strike had been prolonged, business leaders and economists said.