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November 21, 2022

Rail Strike Worries Ramp Up After Union Rejects Contract

Still, there are options for averting a supply chain-crippling work stoppage before deadlines in early December.

By  Christopher Ruvo

The gist: Fears of a supply chain-devastating railroad strike that would affect the promo products market and many other industries intensified Monday, Nov. 21, after a union representing 28,000 rail workers – SMART Transportation Division – rejected a proposed new contract.

railroad at sunset

The good news: There’s time for a  work stoppage to be averted before agreed-upon dates in early December when SMART, and other rail unions that have also rejected the deal, could go on strike (Dec. 5 being the earliest).

If a resolution between rail lines and unions isn’t reached, Congress could step in to prevent a rail shutdown. Options include ordering rail workers to accept a contract that the Biden administration helped broker over the summer.

Still, Congress is aflame in partisan politics, and it’s unclear if the legislative body would act efficiently and in unison to prevent a strike. Some analysts think Congress would act, since to allow a stoppage would be “crippling economically and politically.” Republicans favor imposing the deal to avert a crisis.

Promo impact: Almost 30% of cargo shipments by weight in the U.S. move over rail, meaning a shutdown stands to exacerbate inflation, lead to shortages of goods and make it exponentially more expensive and logistically difficult for promo suppliers to move products from port to warehouse, potentially leading to inventory shortages in the industry depending on how long a work stoppage might last. Suppliers farther from the coastal ports would likely be affected more severely.

Additionally, a strike could kneecap coal shipments, close passenger rail and even threaten drinking water supplies. A month-long strike could lead to the loss of 700,000 jobs and $160 billion domestically, according to an analysis by the American Chemistry Council.

Why the strife? Contentious negotiations between railroad employers and unions have ground along for several years. The current big sticking point is that union members want paid sick-leave time added, plus easing of schedules that they say keep them working or on call around the clock. Employers have rebuffed those demands, saying workers have already received a generous compensation package.

But some unions have approved the contract, right? Yes. In all, 12 rail unions need to approve the contract. The same day that SMART-TD rejected the proposed contract, another large union – the Brotherhood of Locomotive Engineers and Trainmen, representing 24,000 workers – voted in favor of the deal. More than half of the other unions have also voted to accept the contract, but several others, like SMART, have rejected it.

If any one union goes on strike, others are extremely unlikely to cross the picket line and there will be a work stoppage.

The proposed deal: In September, union leadership and railroad employers reached a tentative agreement on a new contract, averting what was then an imminent strike. The deal didn’t immediately go into effect, however, because rank and file union members needed to approve it.

According to the Association of American Railroads, a trade group representing railroads, a worker’s average pay under the contract would be $110,000 by 2024. Under the deal, workers would get an immediate 14.1% wage increase following ratification. They’d also get wage increases totaling 24% during the five-year period of the contract: 2020 to 2024. The deal is retroactive.

Unionized workers would see their next annual increase in July 2023 – 4% – followed by a 4.5% rise in July 2024. They’d also receive five $1,000 annual lump-sum payments, and at a time when healthcare costs are skyrocketing, the workers would see no change to their insurance copays or deductibles. The workers have been without a contract since 2019.