US railroads and unions reached a tentative deal early Thursday, a breakthrough that looks to avert a labor disruption that risked adding supply-chain strains to the world’s largest economy.
After 20 straight hours of talks, the companies and union negotiators reached a preliminary agreement balancing the needs of workers, businesses and the economy, according to a Labor Department statement.
It was a “hard-fought, mutually beneficial deal,” the emailed statement said. “Our rail system is integral to our supply chain, and a disruption would have had catastrophic impacts on industries, travelers and families across the country.”
Thursday’s deal extends the so-called cooling off period -- during which the unions may not strike -- for several weeks, to give the unions time to ratify the agreement, a person familiar with the agreement said.
Ratification Next
But ratification is not a given. Just this week a machinists union rejected a different tentative offer with rail carriers.
The tentative freight-rail agreements include a 24% wage increase over five years, 2020 through 2024, including 14.1% effective immediately, as well as five annual $1,000 payments, according to a statement by the National Carriers’ Conference Committee, which represents national freight railways in bargaining. The statement is silent on scheduling sick days, which was a core issue for unions.
Amtrak, which in anticipation of a strike had canceled rail service in parts of the country where it operates on freight lines, said Thursday it would work quickly to resume normal operations. The cancellations didn’t affect travel in major eastern cities such as New York and Washington, where Amtrak operates its own lines.
In early trading, shares of major freight railroads CSX Corp., Norfolk Southern Corp. and Union Pacific Corp. rose.
Industry groups welcomed the deal, with the National Retail Federation saying in a statement that a strike during a time of economic uncertainty and hot inflation would be “further challenging consumer budgets and putting business resiliency at risk.”
Soy Transportation Coalition Executive Director Mike Steenhoek said that “without cost-effective, reliable rail service, so much of what farmers produce will never connect with our domestic and international customers.”
Aside from the disruption to key freight from corn to cars, the prospect of a strike was a serious political risk for President Joe Biden, who is vocal in his pro-union stands but would not want the blame for adding pain to an economy already beset with soaring inflation and supply-chain snarls.
The president weighed in late Wednesday night as the negotiations were ongoing, stressing during a call with negotiators the importance of avoiding harm to families, farmers and businesses, a White House official said.
“These rail workers will get better pay, improved working conditions, and peace of mind around their health care costs: all hard-earned,” Biden said in a statement.
The tentative resolution was announced just a day before a Friday deadline that could have seen rail workers walk off the job or be locked out by the companies, freezing critical infrastructure that transports about 40% of all long-haul cargo in the US and threatening a fresh wave of supply chain chaos.
The breakthrough to cap day-and-night negotiations came after a Biden-appointed board last month issued a set of recommendations to resolve the dispute, including wage increases and better health coverage.
That proposal didn’t include details on scheduling, attendance and other issues important to the two major unions that held out for a better deal until today.
The unions are the Brotherhood of Locomotive Engineers & Trainmen and the International Association of Sheet Metal Air, Rail & Transportation Workers. Together with the Brotherhood of Railroad Signalmen -- whose leadership on Monday voted not to send an earlier deal to members for ratification -- they represent about 60,000 workers. All three have agreed to the tentative pact, the National Carriers’ Conference Committee said in its statement.
