The good news: Canadian National and Canadian Pacific Kansas City trains are rolling just days after a work stoppage for the first time shut down most of the country’s rail network.
The restart of operations on the two largest railroads came after the Canada Industrial Relations Board on Saturday backed an order by Labor Minister Steven MacKinnon ending the lockout and sending the contract dispute between the railroads and the Teamsters Canada Rail Conference to binding arbitration.
The not-so-good news: While the order bars labor stoppages during arbitration, the TCRC said it would challenge the constitutionality of the decision in court, so it’s unclear when the sides will reach agreement on new contracts. Moreover, recent Canadian Supreme Court rulings regarding government-imposed contracts could set up another work stoppage in as soon as a year.
It’s expected to take several weeks for the supply chain to catch up as idled shipments begin moving again.
The railroads had earlier called for government intervention in negotiations but Prime Minister Justin Trudeau, unwilling to offend labor and its support for his government, had rejected those pleas throughout bargaining on contracts that expired in December 2023.
Until he didn’t.
That came as a shock to the left-wing, union-aligned New Democratic Party, which in 2022 agreed to back Trudeau’s minority Liberal Party in exchange for new health care benefits and taxes on financial institutions. The confidence and supply deal was seen as a key to shoring up support for the liberal government led by Trudeau, who saw his approval rating dive from 40% in 2022 to 30% today, whipsawed by soaring inflation and lack of economic growth. Inflation has since been tamed, but his popularity has yet to return.
The NDP could call for snap elections, since the next general election isn’t scheduled until 2025. NDP leader Jagmeet Singh visited with picketing rail workers in Montreal and said he would vote against back-to-work legislation, but hasn’t said whether he’ll call for a referendum on Trudeau’s leadership.
Trudeau’s about-face was a calculated decision: the votes of fewer than 10,000 rail union members against a functioning supply chain and nationwide economic damage of around $340 million a day, according to Moody’s. What good are gasoline, pharmaceuticals, food and countless other stuff society depends on to function if you can’t get them? Toilet paper shortage, anyone?
Still, it took a surprisingly long time for Trudeau to come around to viewing logistics as a critical national asset the same as petroleum reserves and electric utilities. No matter the instigation, a shutdown of the rail network is a DEFCON 1 attack on the heart of what makes a nation, a nation. It was doubly embarrassing considering the federal government only days before in refusing to intervene actually termed the railroads “non-essential” — a reversal from the pandemic. C’est la politique.
So the rail companies got what they wanted: binding arbitration. It’s a historic tradition and almost a cherished way of life for railroad management to drive a hard bargain with workers, and one that has come under scrutiny as activist hedge funds push for ever-lower operating ratios. But hold on — that approach now stands in sharp contrast with their Class 1 brethren in the U.S., who, while Canadian trains stood idle, not only announced tentative contracts with many of their unions but did it four months ahead of the deadline for reopening those agreements. Peace in our time (pending ratification. The Brotherhood of Locomotive Engineers and Trainmen is notable by its absence in these deals, but that’s another story)!
It’s easy to see why U.S.-based Norfolk Southern, CSX and BNSF sought early deals. The labor shortages since the COVID pandemic have been well documented, and railroads are on a long list of employers that struggle to recruit new hires. Remember, it was the pre-COVID implementation of precision scheduled railroading that put a premium on running longer trains with fewer crews. As a result, the railroads deployed draconian attendance policies for remaining workers in order to run the business. The new tentative contracts include higher pay and better benefits, as well as provisions for improved scheduling and days off, quality-of-life issues for which the unions had long been clamoring.
Whether the Teamsters wrest similar gains from CN and CPKC remains to be seen. The union has already played the safety card, a time-honored strategy when rail labor talks hit uneven track. To be sure, it’s not all playacting as U.S. regulators recently called out Norfolk Southern and Union Pacific for prioritizing cost-cutting over safety amid a series of derailments and fatalities.
So now the Teamsters have the hammer. The union helped blow up trucker Yellow Corp. as a way to ensure a favorable outcome in contract negotiations with UPS, and later a series of airline contracts that followed. Now there’s uncertainty over negotiations with 5,000 Air Canada pilots, also represented by the Teamsters.
But these things have a way of balancing out. President Joe Biden in 2022 signed legislation blocking what would have been a devastating nationwide rail strike. And in 1980, deregulation by Congress was widely seen as a way to break the iron grip of the Teamsters, who could effectively shut down trucking nationwide.
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