Sep 15, 2022 - Politics & Policy

White House says tentative deal reached to avoid rail strike

A Union Pacific locomotive pulling railcars is visible on tracks in Truckee, California.

A Union Pacific train pulling railcars is visible on tracks in Truckee, Calif. Photo: Gado/Getty Images

Early Thursday morning, after 20 hours of talks, the White House announced that a looming rail strike was averted and a tentative deal struck between the freight rail operators and their unions. The run-up to the agreement had businesses — and the economy — on the brink.

Why it matters: The negotiations, which started in 2019 but reached a fever pitch this week, were the latest issue to pop up in the game of supply chain whack-a-mole we've played for two-plus years.

  • Virtually every part of the economy needs functioning railways. Plus, a strike would have driven up prices at a time when inflation is showing signs of remaining stubbornly high.

What's happening: The tentative agreement now goes back to the unions for a vote. The parties also agreed to a post-ratification cooling-off period of several weeks, to ensure that if a vote doesn't succeed the rails keep running, according to a source familiar with the talks.

Details: The key sticking point in negotiations had been leave policies and work conditions. Rail workers said they get penalized for taking time off when they're sick or need to go to a doctor.

  • The tentative deal appears to resolve the concern, according to a statement from one of the largest unions, which had been a holdout.
  • In what they said was a "first," the agreement "provides our members with the ability to take time away from work to attend to routine and preventive medical care, as well as exemptions from attendance policies for hospitalizations and surgical procedures."
  • Rail workers will also get a series of wage increases, amounting to a 24% pay bump by 2024.

Catch-up quick: Businesses were seeing some delays leading up to the agreement, John Drake, VP of transportation, infrastructure and supply chain policy at the Chamber of Commerce, said in a statement to Axios.

  • The beer, food, retail, wholesale, manufacturing and energy sectors all either put out statements warning of devastating consequences or urged Congress to step in.
  • Amtrak had shut down long-distance service everywhere outside of the popular Northeast corridor.

Between the lines: The negotiations, led yesterday by Labor Secretary Marty Walsh, were widely seen as a test and balancing act for the Biden administration, "caught between" its pro-labor stance and its need to keep the supply chain in check, and inflation from getting too hot.

What they're saying: "The tentative agreement reached tonight is an important win for our economy and the American people," President Biden said in a pre-dawn morning statement.

  • Terms of the deal were not yet announced, but the industry's trade group said in a statement that the tentative agreement followed the proposals outlined by the Biden-nominated board in August.
  • The board recommended a pay increase of 7% this year, as well as retroactive increases for the previous two years, and two more raises in 2023 and 2024 of 4% and 4.5%. Plus, an annual $1,000 "service recognition bonus."
  • One sticking point had been working conditions. In his statement, the president said, "These rail workers will get better pay, improved working conditions, and peace of mind around their health care costs: all hard-earned."

The bottom line: The labor dispute on the rails highlighted yet again how the pandemic surfaced unrest and dissatisfaction in the workforce, as well as the still-recovering fragility of the nation's supply chain.

Editor's note: This story was updated with new details on some terms of the tentative agreement.

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