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Rail industry must overcome strained labor relations in order to survive

By Admin

Reported by Joanna Marsh for Freightwaves.

The drama about whether union members would go on strike has passed, with Congress passing legislation and President Joe Biden signing that legislation requiring all unions to ratify the labor agreement that union and railroad negotiators reached in September.

But the battle scars still remain and those scars must be healed in order for the rail industry not only to fully restore service levels but also to thrive and assume the role as a vital and necessary freight transportation mode.

“If railroads want to be serious about addressing these issues that the members so vocally stated were a problem during these past three years, that would be a welcome change. … If they want to start to build employee morale, they should proactively reach out,” said Greg Regan, president of the Transportation Trades Department, which is affiliated with the AFL-CIO.

How can the railroads and the unions move on? They can do so through local negotiations and through changing railroad culture. But both endeavors will have challenges.

Why contract negotiations went differently this time around
The unions undergo collective bargaining for a new agreement every several years, and there has been a cultural expectation within the industry that both sides would give and take without significant noise.

But this negotiation round, which started in January 2020, was different for several reasons.

One was because of the headcount reductions that had occurred in recent years, with some arguing that the railroads slashed their workforce levels as they sought to implement precision scheduled railroading (PSR). PSR is a way to streamline operations, but others contend it’s merely a means to cut costs and increase shareholder value.

The COVID-19 pandemic and quarantine orders also exacerbated staffing shortages, which in turn influenced how this latest bargaining round proceeded. It became harder to take sick leave because of attendance policies that discouraged taking time off. These policies were put into place to ensure there were enough workers on hand — especially since the railroads’ headcount numbers dropped significantly in recent years because of workforce cuts.

A third reason was the impact that social media had in fueling worker discontent; shippers also used the media to warn of the dire economic impacts that would result from a strike. As a result, a historically private negotiation process was made more public so that Congress and the general public could understand the issues at hand.

“The rail unions played their cards well. They played to the court of public opinion because they knew that the public and Congress was ultimately going to be an arbitrator,” said independent rail analyst Tony Hatch. “So with the explosion of social media, you heard all these things about how awful it was working on the railroad. And I’m not saying they were being disingenuous, I’m saying they went public [in a way] that has never happened before because they wanted Congress to know this.”

But Hatch said the unions weren’t the only ones seeking to influence public opinion: “They’re not the only ones to do it. The railroads organized [and made] very strange bedfellows [with] the shippers, who put out press releases saying this will be a catastrophe. And they wanted Congress to hear that.”

Addressing quality-of-life issues at the local level
Although the railroads and the unions have just ended this collective bargaining round, another one is following up not far in the future. The next national collective bargaining round will start in January 2024.

But before then, work is underway at the local level to try to get the railroads and the unions to address quality-of-life issues.

Local negotiations involve a railroad working with the unions on a localized or regional basis. This grew out of the period when numerous smaller railroads existed. The Class I railroads are comprised of smaller railroads that had been consolidated to become who the Class I railroads are today.

Local negotiations are traditionally where work rules and craft-specific policies were typically addressed, while top-line economic issues were discussed at the national bargaining level.

The Presidential Emergency Board, a three-person independent panel appointed by Biden this past summer to offer recommendations on how the railroads and the unions could resolve their negotiations impasse, had also recommended that quality-of-life issues be addressed at the local level.

Now that the national contract has been reached and the compensation package has been established, the hope is the railroads and unions will “begin to talk about a new way of doing business, where there is a more reliable schedule for workers because we want attrition to go back up to normal levels,” Hatch said. “The investment community is behind that 100%. Service needs to be more reliable. That is the first thing they have to do. We want to see attrition rates and quality of life improved.”

Those discussions could include how the railroads should schedule their crews. That could mean adjusting operations so that there is more shift predictability for workers.

“I really think that if you’re going to run a predictable railway, your trains are going to be on time. You’re going to be able to schedule your crews much more accurately,” said Nick Little, managing director of the railway management program at the Eli Broad College of Business at Michigan State University.

“You’re also going to have to be flexible so you need extra resources, whether it’s people or equipment, to be able to handle any minor disruptions and be a lot more responsive to things, because ultimately, what we’re trying to do is we’re trying to serve customers. We’re trying to value our workforce, and we’re trying to grow the business,” Little said.

But discussions must also include how the railroads can integrate technology into operations, Hatch said.

“In the give-and-take world that there is, we would love to see the existing and developing technology be better used. That includes some forms of autonomy that don’t have to be necessarily job reducing but could be greatly capacity enhancing. I’m thinking of things like automatic car inspection,” he said.

If the local negotiations go well, there is a possibility that those successes could inform other local negotiations, according to Jim Blaze, a railroad economist and independent contributing editor for Railway Age. Blaze also worked in the rail industry for 21 years at Conrail.

The freight rail industry needs to be on top of hiring initiatives because they’re fighting with other industries for qualified candidates, Blaze said. The need to replace retiring workers with new hires has been talked about in the rail industry for years, but the pandemic and PSR squelched that discussion.

“Which one of these Class I railroads, and in which areas of the country, is gonna say, ‘Screw this, we got to make a regional deal with one of the local cells of a union because that’s the only way we’re going to get people’? Because not only are we competing against BN and Union Pacific and Norfolk Southern for people, we’re also competing with the construction industry, the truck driver industry and everybody else,” Blaze said. “And if the other competitive opportunities for these skilled folks [are based on where] they’re gonna get treated better, particularly on the wages or time off, well, then we got to make a deal.

“It isn’t that [the railroads] can’t afford it, because which one of these industries has the highest profit margins? The railroads do. Let’s say it cost them 1, 2 or 3% of their earnings per share. Who cares? Do the shareholders really care? I doubt it. They’re not going to miss it,” Blaze said.

Ideally, local-level negotiations should also delve into other uncomfortable topics, such as how craft employees could benefit from PSR, and include discussions about how to create a more predictable schedule for some crews, Little said.

“The question of PSR has got to come up. The question of operating ratio has got to come up. But the railroads themselves — their people, leaders — have actually got to say, ‘Here’s what’s in it for you’ to the union, because they can make something in it for them, whether it’s regular working conditions or something else,” Little said. “Let’s find the right way to work together. Let’s, by all means, measure performance so that we all know how well we’re doing. But let’s use the right metrics to do that, and at the same time, let’s make sure we satisfy what it is that our stakeholders — including the shareholders — are looking for, not just today but in the long term as well.”

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