September 23, 2022

What All Employers Can Learn From Most Recent Railway Dispute

On September 15, 2022, railroad companies and unions representing railway workers reached a tentative agreement to potentially prevent a strike that would have caused significant harm to the American supply chain and economy. While the unions’ membership must still ratify the agreement, the unions agreed not to strike during that process. Ratification votes will occur over the next 45 to 60 days. If any union does not ratify the agreement, then it may have the right to strike. 

The tentative agreement is the product of President Biden invoking a provision of the Railway Labor Act (RLA). Where a labor dispute between railway companies and unions presents a substantial threat to interstate commerce “to a degree such as to deprive any section of the country of the essential transportation service,” the president, in his discretion, may convene an emergency board (the Presidential Emergency Board or PEB) which delays any possible strike or lockout for at least 30 days. Once convened, the PEB investigates the dispute by reviewing each parties’ proposed terms of the future collective bargaining agreement. The PEB then issues a report to the president recommending which proposed terms it believes should be included in the agreement. Although neither side is obligated to adhere to the PEB’s recommendations, the RLA authorizes Congress to adopt and enforce the PEB’s recommended terms via legislation. 

A railway industry strike could have devastating effects on the American supply chain and economy. Without this tentative agreement, nearly 125,000 railway workers could have gone on strike last week. The railroad companies involved in this dispute carry nearly one-third of all cargo shipments across the country including food, water, and raw materials critical to manufacturing and agriculture. The Association of American Railroads estimates a strike would cost the economy a whopping $2 billion per day although some economists predict the damage would be smaller. 

While we all breathe a sigh of relief that our nation’s freight trains will continue to run, there are important lessons to learn from this dispute for all employers about the value that today’s workforce places on “quality of life issues” and the interdependent nature of our current supply chain. 

First, in a post-COVID world, flexible leave time matters to employees almost as much as wages. While the rail carriers were willing to agree to substantial wage increases (24% over the life of proposed contract), that mattered little to union members who were adamant about achieving a more flexible attendance policy. Specifically, the unions wanted an adjustment to the attendance policy so that workers could handle emergency personal matters or see a doctor without the risk of discipline. Under the tentative agreement, workers secured an additional day of paid time off and an adjustment to the attendance policy allowing workers to take personal and medical time without the risk of discipline.

Second, unpredictable scheduling is a major source of employee discontent. Throughout bargaining, the unions consistently complained that rail carriers often scheduled workers for long shifts with little notice — and argued that rail carriers did this because their operations were understaffed as rail carriers sought greater labor savings. Thinking critically about staffing and whether employee scheduling is negatively impacting employee morale is an important way to stay ahead of the labor relations curve. Moreover, while RLA preemptions protects rail carriers from most state and local laws, including more recent “predictive scheduling” laws, most other employers need to worry about these issues and be aware of predictive scheduling laws and/or ordinances that are in effect, or being considered, in jurisdictions where they operate. 

Third, if you are an employer that relies on rail or other means of transportation with significant swaths of unionized workers as part of your supply chain, this is a good time to review your carrier agreements to determine if you have any recourse in the event of a strike. Given the impact a rail strike could have on our national transportation system, finding substitute service could be extremely difficult. Some carrier agreements contain provisions that address substitute service in the event of a strike and/or other provisions that help protect the carrier’s customers from damages related to a labor dispute. Comparatively, other agreements expressly excuse a carrier from performance during a labor dispute. Understanding what your contractual rights are is critical to developing a viable plan in the event of the next labor dispute.  

If you have any questions about how a labor dispute in the supply chain might affect your business, please contact an attorney on the Faegre Drinker labor and employment team.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

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