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Shippers want rail service reform even if unions ratify contracts

‘I don’t want everybody to think now that we’ve solved this labor issue, we’re done’

A train of tank cars. (Photo: Jim Allen/FreightWaves)

While rail shippers are greatly relieved that last week’s potential strike was averted after two of the biggest rail unions reached a tentative agreement with U.S. freight railroads for a new contract, shippers are still wary about whether ratification of the agreements will improve service.

“I don’t want everybody to think now that we’ve solved this labor issue, we’re done,” Rob Benedict, vice president of petrochemicals and midstream for the American Fuel & Petrochemical Manufacturers, told FreightWaves. “The issues that we’re feeling based on PSR [precision scheduled railroading, an operating method used by the Class I railroads to streamline operations] are going to remain even with a new deal there.

“There have been a lot of rail shippers coming out and saying, ‘Great that we solved this and we’re glad, but the work’s not done and we’re still in the middle of a supply chain crisis.’”

One of the big concerns is whether the tentative agreements will be enough to retain the existing unionized workforce, some of whom feel that PSR has stretched them too thin.

Another is whether the railroads will be able to find all the additional workers necessary to ensure network capacity and meet service needs. That could be a challenge, not only because of the difficulty in finding qualified workers but also because of work-life balance issues that the labor negotiations spotlighted. The tentative agreements have started to address those lifestyle issues through adjustments in attendance and sick leave policy, but some railroaders question whether more needs to be done.

“Rail service would be exponentially better if rail carriers had more staff,” said Justin Louchheim, senior director of government affairs for The Fertilizer Institute. “They need more staff to be able to do their jobs. And if they have more staff to do their jobs, the staff they have will have a better work-life balance. There’ll be more flexibility if folks get sick and have to step away for a week or so.”

If the Class I railroads do sustain their recent hiring initiatives, which they kickstarted this year to improve rail service, another question is whether the railroads can reach desired staffing levels while minimizing costs to the customers. The railroads could reduce dividends and stock buybacks or reassess executive and senior management compensation, although that might be an unattractive option for Wall Street investors, said one shipper, who spoke on condition of anonymity. 

Class I railroads have also been earning billions in profits, which makes these options possible, some observers have said. But the railroads have argued that those billions are needed to maintain network infrastructure since the railroads are the ones that fund the infrastructure improvements.

For now, shippers told FreightWaves that expanding the railroads’ workforce even more would enhance service because it would provide the rail network with elasticity, especially if workers are out for medical reasons, as happened when many were out sick or had to quarantine during peaks of the COVID-19 pandemic.

“The system is stretched about as thin as it can be,” said Scott Jensen, spokesperson for the American Chemistry Council (ACC). “As far as if there had been a shutdown and exploring other contingency plans, there really wasn’t much left in the bag of tricks to keep things moving.”

Chemicals shippers were having service issues even leading up to the narrowly averted shutdown and were already employing contingency plans, Jensen said. If a strike had occurred last week, there could have been some shifting of freight to truck. But because of existing service issues, some ACC members were already putting additional cars on the network to maintain deliveries.

Said Benedict: “The truth of the matter is, there’s only so much storage at our facilities, and there’s only so many options” besides rail not just to move feedstocks such as crude oil in, but to move products and byproducts, such as butane, asphalt and sulfur, out. 

Shippers also said they would continue to press Congress and the Surface Transportation Board (STB) to make reforms that could improve rail service, such as the bill in the U.S. House of Representatives reauthorizing STB and bestowing greater regulatory power on it.

Whether the remaining unions will ratify their tentative agreements is yet to be seen. On one hand, union leadership worked hard to reach a deal that could pass muster among union members, according to sources. Union leaders are expected to work to educate members the next several weeks on what the agreements would mean for their paychecks and benefits. 

But on the other hand, there are members, many of whom are on social media, who contend that the agreements don’t go far enough in addressing the sick leave and attendance policies of the Class I railroads, which they view as punitive because union members felt they were getting punished for taking sick days. They could reject the agreements, as the International Association of Machinists and Aerospace Workers (IAM) did last week.

If the contracts are rejected, the unions may seek further negotiations with the railroads, as IAM is doing. But another unknown is whether the railroads would be willing to negotiate further, given their actions during the negotiations process and their dedication to PSR.

A new labor deal for union members has been in the works since January 2020, but negotiations between the unions and the railroads failed to progress. A federal mediation board took up the negotiations but released the parties from those efforts earlier this summer. 

The Presidential Emergency Board — a three-person panel appointed by President Joe Biden that convened in July and August to come up with ways that the unions and railroads could resolve the impasse — issued recommendations last month. The recommendations were meant to serve as a jumping-off point for a new contract.

Almost all of the dozen unions reached tentative agreements with railroad representatives in recent weeks, but two of the biggest unions — the Brotherhood of Locomotive Engineers and Trainmen (BLET) and the Transportation Division of the International Association of Sheet Metal, Air, Rail and Transportation Workers (SMART-TD) — were deep into negotiations over issues regarding the railroads’ attendance policies, which they viewed as punitive and too restrictive.

Both BLET and SMART-TD said last Thursday that they finally reached a tentative agreement with the railroads, and that agreement will be sent to union members in the coming weeks for approval.

The Association of American Railroads estimated that a strike would have cost the U.S. economy as much as $2 billion a day. Shippers lobbied Congress to ensure that the tentative labor deals were reached to prevent a strike.

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    1. Brent D Goracke

      The contract dispute is FAR from over. The agreement was/ is tentative which means the members have to vote on it. Our main goal as railroad workers is to atleast have the basic employee benefits which generally include sick days. We have worked through and continue to work through a Global Pandemic with any sick days at all. Can you tell me any place of employment that does not provide sick days? I personally have had Covid twice since 2019 and unfortunately had to use my vacation time, which I had planned on taking with my family, to cover my time away from work. The first time I was off for 2 months and the second time thankfully was only 3 weeks. When you have four weeks of vacation, those days go away pretty quickly with Covid, the flu and common cold etc. We just want to be treated like most employees in the year of 2020, not 1920!!! Plus there is a attendance policy in place that you can be dismissed if you take more than 7 days off unpaid within a year!!! Do you have sick days? Did you work during the Covid quarantine at work or from home? We Railroaders worked, without a raise, without sick days, all while company executives worked from home AND made record profits while the rest of the United States struggled financially!! We are human beings, we are US citizens and we deserve to be treated as such!!!

      1. Duke Mcgee

        I’ve had a hand full of newer conductors say they would leave if this agreement is not worth their time. This is following the many that walked already. I am lucky, I have assigned days off in my pool. Time off and sick days won’t affect me that much. The money the carriers are offering as well as the untouched H/W benefits sounds appealing. The problem I see is with the newer employees. There is little to offer them to try to muscle through 20 years of employment. early in my career, we worked a lot but, we had a good size work force with numerous yard/locals working. With the dumpster fire of PSR, many of the jobs are gone and the thin workforce has to make up for abolished jobs. Let’s throw on top of the pile the constant threat from the carriers to go to one man freight trains. Would any other industry be able to hire for a position that may not exist in the future? I wish the best for all of us. In 6 years I get to throw my keys on their desk and walk out the door.

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.