Key freight rail union BMWED extends deadline for strike that threatens U.S. economy

The Brotherhood of Maintenance of Way Employees Division, the third largest rail union in the country, is extending its status quo period (no strike, no lockout) during which it wants to continue negotiations with the freight rail carriers.

In a posting on its website, the BMWED union explained that it has moved the end of its cooling off period from Nov. 19 to Dec. 4, the same date on which the Brotherhood of Signalmen Union (BRS) — the other rail union to reject the proposed deal with railroad management recommended by the Biden administration — status quo period ends. The Signalman’s union is having another meeting with the carriers Wednesday afternoon over their fight for paid sick time equivalent to that offered to federal contractors, which has been a primary sticking point in labor talks.  

Meanwhile, two major rail unions are set to vote on ratifying the deal on Nov. 21: The Brotherhood of Locomotive Engineers and Trainmen, and the Smart Transportation Division.

“With this extension, BLET and SMART-TD will have the opportunity to finish their ratification procedures for any tentative national agreements without disruption. If these Unions do not ratify, then we will have the opportunity to bring all of Rail Labor together, under a single deadline, to finish national negotiations,” the BMWED stated.

A labor spokesperson explained to CNBC if the BLET or SMART-TD does not ratify, the ending of the new cooling-off period date would be December 8. That means the earliest a possible strike would happen is December 9.

Freight industry trade group The Association of American Railroads, said in a release that this extension provides greater certainty for the economy, rail customers, and rail passengers planning to travel for the Thanksgiving holiday. The rail industry has previously estimated the cost to the economy of a rail strike at $2 billion per day.

“This agreement to extend the cooling off period affords all unionized employees the opportunity to vote on their agreements free of a looming strike threat,” said AAR President and CEO Ian Jefferies in the statement. “Our goal remains the same – successfully completing this round of bargaining – and we stand ready to reach an agreement with BMWED based upon the Presidential Emergency Board’s recommendations.”

Union Pacific, Berkshire Hathaway’s BNSF, CSX, Norfolk Southern and the U.S. railroads owned by Canadian National are among the Class I freight railroads represented by the AAR.

Industries across the U.S. economy are voicing their concerns. The National Association of Manufacturers posted on its website concerns about the impact of a railroad strike a segment of the economy still facing supply chain challenges.

“Manufacturers are encouraged to see that all the unions have now agreed to extend the deadline for reaching and ratifying an agreement,” Jay Timmons, CEO of National Association of Manufacturers, told CNBC. “It provides some temporary breathing room for operational and logistical planning for manufacturers and delays any rail service interruptions. We hope that this extension will provide the additional time necessary for all parties to conclude a voluntary agreement, as has been our hope throughout. Any disruption to rail service would have devastating economic and inflationary effects, so in line with [U.S. Department of Labor] Secretary [Marty] Walsh’s comments yesterday, we continue urging congressional leaders to be prepared to act should a work stoppage appear imminent.”

Last Thursday, a group of nearly 200 agricultural trade groups known as the Agricultural Transportation Working Group and including the National Grain & Feed Association, sent a letter to Congress stating that a “strike or lockout combined with existing challenges in the rail system, at our ports, with trucking and with record low water levels on the Mississippi River impacting numerous barge shipments would be catastrophic for the agricultural and broader U.S. economies.”

“We are pleased to see the extension of the status quo from the union today,” Jonathan Gold, National Retail Federation Vice President of Supply Chain and Customs Policy, told CNBC . “We encourage the parties to remain at the table and resolve the outstanding issues and avoid a strike that would impact the entire supply chain and harm the economy.”

The BMWED was the first rail union to vote against ratification of a labor agreement negotiated in conjunction with Biden’s PEB. All 12 labor unions must ratify a labor agreement to avoid the potential for a nationwide rail shutdown.

Under the Railway Labor Act, Congress has the ability to impose the resolution from Biden’s Presidential Emergency Board, or order the trains to operate as usual with an extension of negotiations.

Richard Edelman, counsel for BMWED and chief spokesperson in the collective bargaining said a recent four-page joint proposal by the Brotherhood of Signalmen Union (BRS) and BMWED for paid sick leave was presented to the carriers, but the carriers said no.

The BRS became the second union to reject the tentative agreement two weeks ago, with more than 60% of its members voting it down in the highest participation vote in its history. The unions to vote down the deal have consistently said that rail management is underestimating the frustration and anger of rail workers, especially when it comes to quality of life issues such as paid time off.

Union Pacific CEO Lance Fritz laughed during a recent CNBC “Squawk on the Street” interview when asked if the railroad was preparing for a possible strike.

“Let’s not get ahead of ourselves,” Fritz said. “We’ve got some negotiating to do with that union and we’ve agreed to status quo, we’re in status quo while we’re doing that. I am confident we will find a way to craft an agreement that can be taken back out for ratification. That doesn’t mean a strike is not possible, it just means in my opinion I don’t think it’s probable. We’ve got plenty of runway to figure it out.”

The agreement based upon President Biden’s PEB recommendations includes the largest wage increases in nearly five decades and would lead to immediate payouts averaging more than $11,000 per railroader ahead of the holidays.

In a letter prepared November 1 for railroad workers to send to their members of Congress and posted on BMWED’s website, the union stated, “We were told during the pandemic that we were classified as ‘federal contractors’ for purposes of the vaccine mandate. In turn, we are asking for the 56 hours of paid sick time off as prescribed currently to federal contractors.”

Edelman said the recent union proposal rejected by the rails mirrors the executive order for federal contractors.

“The absence of a recommendation for paid sick leave by PEB [Presidential Emergency Board] 250, and the carriers’ refusal to agree to paid sick leave was a major factor for members who voted against ratification,” Edelman said.

In addition to sick pay, Edelman said because it typically takes years of negotiation for changes in agreements, members are voicing concern about wage increases keeping up with the cost of living, and their costs for health and welfare benefits.

The AAR told CNBC it updated the leave policy explainer in mid-October. In a September report, the AAR quantified the impact of a strike on the supply chain and the U.S. economy at up to $2 billion a day.

The BMWED has its paid sick time proposal to the NCCC on its website.