Railroads & Unions Reach Tentative Agreement Preventing Strike

 In Freight, shipping, Supply Chain

Just a day ahead of a potential rail strike that would have crippled U.S. supply chains, the railroads and the last two rail worker unions reached a tentative agreement. Shippers, and anyone paying attention to this situation, can breathe a sigh of relief. Strike averted.

The Journal of Commerce reported today:

US freight railroads and unions reached a tentative contract agreement early Thursday brokered by the Biden administration, averting a strike that would have crippled the country’s already fragile supply chain.

The leadership of the country’s two largest rail unions — the Brotherhood of Locomotive Engineers and Trainmen (BLET) and Sheet Metal Air, Rail, and Transportation Workers (SMART-TD) — said in a statement Thursday they will submit the tentative agreement to their rank and file for a vote. No specific timeline was provided, though a spokesperson for SMART-TD told JOC.com it will be “a matter of weeks.”

The tentative deal came after a 20-hour marathon negotiating session was held all day Wednesday and into Thursday at the Department of Labor, with Labor Secretary Marty Walsh hosting leadership from railroads and the unions.

A Presidential Emergency Board (PEB) that was created in July recommended a compounded 24 percent wage increase covering 2020 through 2024 and a total of $5,000 in bonus payments for workers. But sources had told JOC.com that work conditions and lifestyle concerns, rather than compensation, were the main obstacle to a deal.

BLET and SMART-TD were the holdouts to accepting a deal. And things looked even bleaker early Wednesday when a third union, the International Association of Machinists and Aerospace Workers (IAM) District 19, announced that its 4,900 members had voted to reject a tentative agreement.

Indeed, a strike was looking likely after negotiations last week failed to make progress, railroads announced contingency plans on Friday in preparation for a strike, and weekend negotiations continued to bear no fruit.

Averting the strike is a big deal. The Association of American Railroads predicted a strike would have cost 2 billion dollars per day. Shippers and retailers have been urging the two sides to make an agreement, fearful of already congested supply chains shutting down altogether. And, just weeks before the midterm elections, Democrats needed a deal to be reached for political reasons.

As discussed in Tuesday’s blog, Democrat-Party-controlled Congress could put an end to the strike by forcing the sides to accept a recommended contract, ordering more cooling-off time, or mandating arbitration. They couldn’t sit and do nothing as the country’s supply chains shut down, but breaking up a union strike when the Democrats count on union contributions in election campaigns would be problematic for them to say the least. This outcome saves the party from a major political dilemma.

Additionally, the last thing President Biden needed was another disaster to add to the list of disasters his presidency has racked up in just two years in office. Instead, he gets a much needed and timely political win.

Now it’s just a matter of SMART-TD and BLET members voting to ratify the agreement. IAM District 19’s vote to reject the tentative agreement that union made with the railroads shows ratification isn’t guaranteed. Still, the expectation is the unions will vote to ratify it. Even if they don’t, that doesn’t mean a strike immediately gets executed. But that would bring back the possibility of a strike hitting the rails.

In the meantime, this is good news for the nation’s supply chains. Attention now turns to the West Coast ports where contract negotiations between the International Longshore & Warehouse Union and the Pacific Maritime Association are becoming more and more concerning. But more on that next week…

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