Independent recommendations on pay and benefits are out, and the two sides have until September 16 to reach an agreement before work stoppages are permitted.
Independent recommendations on pay and benefits are out, and the two sides have until September 16 to reach an agreement before work stoppages are permitted.
S ince January 2020, unions and employers in the freight-rail industry have been hashing out a new labor agreement for the sector under the Railway Labor Act. Negotiations were delayed by Covid, then failed to reach a resolution, and in February of this year, unions requested that the National Mediation Board, an independent federal agency, get involved to help resolve the dispute.
In June, the NMB terminated its services after only two months of actual work, the shortest time on record. Unlike in other industries, rail-labor agreements do not expire on set dates, but with the NMB’s decision to terminate mediation, a series of deadlines came into being.
The first was on July 18, which was President Biden’s last day to appoint a presidential emergency board (PEB) to help resolve the dispute. He appointed three experienced arbitrators that both sides believed to be fair and professional. They met with both sides, collected the evidence they presented, and weighed their arguments against each other.
The second deadline was yesterday, which was the release of the PEB’s report. At 124 pages, it presents a thorough record of each side’s arguments on wages, benefits, and working conditions, and offers non-binding recommendations for how to resolve the dispute and reach a new labor agreement.
The third deadline is September 16. That’s after the 30-day cooling-off period following the release of the PEB report. And at that point, the parties are free to pursue “self-help action,” which is RLA-speak for lockouts and strikes.
The Association of American Railroads and the National Carriers Conference Committee, two relevant employer groups, both issued statements tepidly supporting the PEB report’s recommendations yesterday morning.
Today, the president of one of the largest unions issued a very different statement. SMART-TD union president Jeremy Ferguson said that, “while the recommendations of PEB 250 were a vast improvement over the carriers’ previous proposals, the recommendations do not go far enough to provide our members with the quality of life that they have earned, and that both they and their families deserve.”
What the PEB Report Recommended
The period covered by the agreement currently being negotiated extends retroactively to 2020 and continues through the end of 2024. The two parties are the carriers, which consist of 20 employers, and the unions, which consist of twelve labor organizations.
The carriers proposed a 17 percent wage increase over the five-year term of the agreement. The unions proposed a 31.3 percent wage increase. In total, these proposals were about $9 billion apart. The sides argued about the proper definition of inflation, whether the carriers’ profitability was relevant, and how much other industries’ pay raises matter for the rail sector.
The PEB met them almost perfectly in the middle, recommending a 24 percent wage increase over the life of the agreement. It also added a $1,000 service-recognition bonus each year. Broken down by year, the PEB recommended a wage increase higher than the inflation rate in 2020, lower than the inflation rate in 2021 and 2022, and higher than the projected inflation rates for 2023 and 2024. Given the retroactive nature of the pay increases, workers would receive an average of roughly $11,000 immediately if the PEB’s recommendations were to be included in the new agreement.
For health benefits, carriers had proposed significant changes to the existing plans. They wanted to increase deductibles and co-pays and create multiple tiers for employees (currently, employees pay the same rate whether their families join the plan or not). Unions mainly wanted the status quo to continue.
Rail-employee health plans are very generous compared with the average worker’s. They’re classified as Platinum under the Affordable Care Act, which means at least 90 percent of the cost of the benefits covered by the plan are paid by the plan, leaving about 10 percent being paid by the members in aggregate. The employee-contribution rate is 15 percent, but with contributions capped at $228.29 per month, which has been binding, meaning that all additional costs have been assumed by the employers for the past few years.
The PEB rejected the carriers’ desires to change the structure of the plans, but it did recommend removing the $228.29 cap and setting the employee contribution at 15 percent, no matter how high that is in dollar terms, so that employees and employers share proportionally in cost increases over time. The PEB justified this move by noting that the recommended wage increase would more than compensate for the higher employee contribution.
The PEB rejected unions’ request for three additional holidays. Rail employees currently have eleven paid holidays, and the unions wanted to add Martin Luther King Jr. Day, Juneteenth, and Veteran’s Day. Unions also wanted 15 days of paid sick leave for all workers (currently, sick benefits are negotiated locally). The PEB said no, but it did recommend one additional personal day of paid leave be added.
Individual unions made a number of special requests. The PEB did not recommend any be approved, except for a request from maintenance-of-way workers concerning travel expenses.
The PEB also mentioned crew size, or the number of workers in the cab of a train. The current industry standard is two, but railroads have wanted to be able to reduce it to one as technology advances and the second crewman becomes less necessary. The PEB recommended that issue be negotiated at the local level. That puts it in contrast with the Biden administration, which is seeking to implement a two-crewman requirement under the guise of safety regulation by the Federal Railroad Administration.
Where Things Will Go Next
It’s important to remember that labor wanted to be released from NMB mediation so that the process would go to a PEB. The NMB voted 2–1 in favor of releasing the parties from mediation, with the two members voting in favor being Democrats with union backgrounds.
One possible rationale for why the unions wanted the early release is that if an agreement is not struck by September 16, Congress will mostly likely resolve it with legislation. If you’re a union, you like the Democratic majorities in the House and the Senate (with the vice president’s vote) right now, and you know at least one of those is likely to go away in November. You also like the self-described “most pro-union president leading the most pro-union administration in American history” in the White House.
If things get to that point, Congress will use the PEB report as its starting point for the agreement. But now unions will have a chance to lobby pro-union Democrats and get them to maybe approve a few of the special requests that the PEB didn’t recommend, or get a slightly higher pay increase or slightly better health benefits.
That’s a risky move, though. There will be many more interest groups lobbying for a quick and easy resolution of the dispute, which would mean just adopting what the PEB recommended. Retailers, farmers, miners, energy companies, and countless other industry groups (along with the railroads themselves) will be lobbying members of Congress reminding them that a rail strike would cripple their business.
By sending the dispute to Congress, unions would risk what is already a sizable pay increase (Ferguson notes it would be the largest in 47 years) and the preservation of very generous health benefits for their members. But as Frank Wilner wrote for Railway Age in late July, union leadership has been whipping its members into a frenzy and it knows it has an ally in the White House.
U.S. freight-rail workers would also be joining a wave of transportation-sector strikes around the world this year. Unions have demonstrated time and again that even though supply chains are already stressed, they have no qualms making them worse.
The American Train Dispatchers Association, one of the twelve unions party to the dispute, has already voted to authorize a strike. The BMWED, another of the unions, is currently circulating strike ballots to its members. The Brotherhood of Locomotive Engineers and Trainmen has said it is “continuing to analyze the report.”
Ferguson’s statement leans into class-warfare rhetoric, pitting the “hedge fund managers, shareholders, and railroad officers” against the “working people, their employees, our members, fellow brothers, and sisters.” He says that, “The decision on whether to accept a tentative agreement that could be based on these recommendations may ultimately lie in the hands of those same workers whose passion and determination carried the country through a pandemic and a supply-chain crisis.” Unlike in the past, Ferguson’s statement today does not include any boilerplate language about wanting to avoid a strike.
The ball is now in labor’s court. The unions can avoid a strike by accepting a deal along the lines of the PEB’s recommendations, which the railroads have already said they would support, and bring this years-long process to an end with the largest pay raise in decades. Or they can try for better terms with their political allies in Congress and the White House by possibly bringing the American freight-rail network to a complete stop on September 16.