Rail union bosses warn of election consequences as Senate approves labor deal to prevent strike

Leaders of the rail labor unions that have voted not to ratify the tentative labor deal told CNBC ahead of the Senate vote to pass legislation to prevent a rail strike on Thursday afternoon that senators need to realize this is a humanitarian issue and their members will not forget who supported them. The three unions, the Brotherhood of Railroad Signalmen (BRS), SMART-TD, and Brotherhood of Maintenance Way Employees Division represent more than half of all railroad labor.

"Our membership is going to support whoever stands with them," said Tony Cardwell, president of the Brotherhood of Maintenance Way Employees Division. "It's looking like the Democrats are standing with our members and making sure that our members get sick leave. If that's the case, we will. If Republicans are bold enough to step out, stand with labor, stand with the blue-collar workers, and vote with our members, then it's likely that they can gain votes as well."

On Thursday afternoon, the Senate passed legislation that would force a tentative rail labor agreement and thwart a national strike, but a separate vote on adding seven days of paid sick leave to the agreement failed.

On Wednesday, the House had passed the tentative rail labor agreement and additional legislation to add seven paid sick days, which has been one of the most important issues to rail workers in the breakdown of negotiations with freight rail companies.

All three union presidents say they understand why President Biden had to push Congress to pass the tentative agreement. But Cardwell said before the Senate vote, "We hope that he stands by us on sick pay and that he's pushing the Senate to vote for the sick leave proposal that's on the floor." 

"This is a humanitarian issue," said Michael Baldwin, president of the Brotherhood of Railroad Signalmen, said. "People throughout the country have employers who pay them sick time. We have our employer, the railroads paying management paid sick days, and you can't come to the table and bargain with your rank and file for the same? It just doesn't make any sense."

Some members of the House have called the addition of sick pay a gimmick or poison pill. Cardwell noted that 80% of American workers have sick leave, including Congress. "They (Congress) have it, their staffers have it. Many government employees have it. Most corporations provide some form of sick leave for their employees. So I find it completely irritating that they would call it a gimmick," he said.

Jeremy Ferguson, president of SMART-TD added, "It's time for the Senate to say, let's put these union workers in a good place where there is sick pay, so in the event that we have another pandemic or whatever the case may be, so we can keep the supply chain moving and do it adequately."

The railroads and the Biden administration have focused on the significant wage increases included in the deal. But Ferguson said it should not be an either/or. "We were not interested in trading away any of the general wage increases ... Cost of living and where everything else is at, including record profits for big rail, they can afford seven or five extra sick days a year without us having to give that up out of our daily earnings," he said.

Ferguson said the Presidential Emergency Board rail labor deal "missed a few marks and sidestepped a few, mainly our attendance policy issues."

He said those issues are a result of precision scheduled railroading, a model that more Class I freight rails adopted in recent years to improve their efficiency and cut costs, and which has been scrutinized by both unions and government agencies.

"The railroads tighten the attendance policies down to such drastic measures that we have members that are only getting one day off a month where they used to get five or six. And then you know, they (the PEB) also passed on the sick days," Baldwin said.

The three union presidents all said they raised paid sick time as an issue during negotiations, pushing back against comments made by Association of American Railroads (AAR) president and CEO Ian Jefferies, who told reporters after Biden urged Congress to avert a strike, "If the unions are interested in a holistic discussion for structural changes as it relates to their sick time, I think absolutely the railroad carriers would be up for a holistic discussion but [they] have not done it."

Brendan Branon, National Railway Labor Conference chairman, recently told CNBC the future of collective bargaining is in the hands of Congress and urged that the legislation follows the recommendations of the PEB, a board created by Biden in July to resolve the ongoing dispute between major freight rail carriers and their unions. The board crafts its recommendations under a principle known as pattern bargaining, which is a collective bargaining principle used to promote settlement of disputes.

Now that 8 of the 12 unions have ratified the agreement, what is known as a "pattern" has been established. In this case, railroads argue that the pattern of unions approving tentative agreements based upon the PEB, that is the only acceptable path to resolution.

"Pattern bargaining promotes stability in collective bargaining, and it encourages settlement," Branon said. "There's any number of arbitrators and PEBs who have recognized that this is not only acceptable, this is the most appropriate form to settle complex negotiations, especially multi-employer, multi-craft agreements," he added.

Cardwell strongly disagreed with this assessment.

"Of course, we try to stick to the recommendations. But when they aren't satisfactory on either side, both parties have made arguments ... That's the point of negotiations. The PEB recommendations are just that, recommendations that are not binding. The PEB is not the negotiator. We are. And it's the parties' job to come together on these issues. Not the PEB."

After the House passed the tentative agreement and additional legislation to add the seven paid sick days, SMART-TD released a statement saying Congress also needs to take a look at precision railroading.

But Ferguson said this would not be asked of Congress in this agreement.

"There's a lot of work to be done to correct precision scheduled railroading," Ferguson said. "Instead of trying to run 10,000-foot trains every six hours, they would rather run a 20,000-foot train every 12 hours. So they can save on crews and they can save on locomotives, but they don't recognize the fact that the infrastructure will not accommodate a train that is four miles long. And that bogs down the rest of the supply chain all the way from LA to Chicago or wherever it's going."

"They will tell the government otherwise, but we're the ones running the trains every day we can say so. That is part of precision scheduled railroading, run longer, with less crews and less locomotives," he said.

The unions argue that precision railroading and the lack of labor are the reasons behind congestion in the supply chain. The Surface and Transportation Board is calling Union Pacific management including CEO Lance Fritz to appear at hearings December 13-14 about the freight railroad's use of embargoes.

The STB, an independent federal agency with oversight of surface transportation, wants to question Fritz and other Union Pacific top executives about UP's increased use of embargoes that the regulatory body characterizes as "substantial."

According to STB data, UP's use of embargoes to control congestion has increased from a total of five in 2017 to more than 1,000 to date in 2022. The agency said it has received numerous reports that the embargoes are hampering shippers' operations and adding to supply chain problems.

UP carries nearly 27 percent of freight served by rail and nearly 11 percent of all long-distance freight volume. 

Union Pacific said in a recent statement to CNBC that due to its geographic span, number of yards, customer facilities, and commodity mix, "embargoes are one of the few tools, and last steps, to manage and meter customer-controlled railcar inventory levels, helping alleviate network congestion."

"I have all the confidence in the chairman of the STB, [Marty Overman] that he will question them adequately, he will drill down and get the facts and find out the reasons for all these embargoes," Ferguson said. "But I know that the end result is going to be once again precision scheduled railroading and the operating ratios for the quarter trying to achieve better results every chance that you get."

"When Marty gets into this, I'm sure he's gonna say that they do not have adequate staffing levels, contrary to what they have reported that they've been trying to do. They haven't kept up with the rate of attrition. And it's going to go to show when these facts come out here," Ferguson said.

Correction: This story has been updated to properly attribute a quote on the Presidential Emergency Board to Jeremy Ferguson, president of SMART-TD. The story also has been updated to include results of the Senate vote.