Canada's 2 big freight railroads come to full stop without new contracts

Both of Canada's major freight railroads have come to a full stop because of a contract dispute with their workers, and businesses fear widespread harm if the trains don't resume running quickly.

Canadian National and CPKC railroads both locked out their employees after the deadline of 12:01 a.m. Eastern Thursday passed without new agreements with the Teamsters Canada Rail Conference that represents some 10,000 engineers, conductors and dispatchers.

More than 30,000 commuters in Vancouver, Toronto and Montreal will be scrambling to find a new way into work because their trains won't be able to operate over CPKC's tracks while the railroad is shut down.

Business groups had urged the government to intervene, but Prime Minister Justin Trudeau has declined to force both sides into arbitration yet.

CN said it made one final offer that it was waiting on a response for. CPKC spokesperson Patrick Waldron said the union rejected its last offer that CEO Keith Creel made at the table in person. Both railroads have offered binding arbitration as a way to resolve the contract dispute.

Many companies across all industries rely on railroads to deliver their raw materials and finished products, so without regular rail service they may have to cut back or even close.

That's why the US government kept rail workers from going on strike two years ago and forced them to accept a contract despite their concerns about demanding schedules and the lack of paid sick time.

All rail traffic in Canada and all shipments crossing the US border have stopped, although CPKC and Canadian National's trains will continue to operate in the US and Mexico.

Canada's railroads have sometimes shut down briefly in the past during contract negotiations most recently CPKC was offline for a couple days in March 2022 but it is rare for both railroads to stop at the same time. The impact on businesses will be magnified now because both CN and CPKC have stopped.

Both Canadian National and CPKC had been gradually shutting down since last week ahead of the contract deadline. Shipments of hazardous chemicals and perishable goods were the first to stop, so they wouldn't be stranded somewhere on the tracks.

As the Canadian contract talks were coming down to the wire, one of the biggest US railroads CSX, broke with the US freight rail industry's longstanding practice of negotiating jointly for years with the unions. CSX reached a deal with several of its 13 unions that cover 25 per cent of its workers ahead of the start of national bargaining later this year.

The new five-year contracts will provide 17.5 per cent raises, better benefits and vacation time if they are ratified. The unions that have signed deals with CSX include part of the SMART-TD union representing conductors in one region, the Transportation Communications Union, the Brotherhood of Railway Carmen and the Transport Workers Union. TCU President Artie Maratea said he's proud that his union reached a deal without years of unnecessary delay and stall tactics.

Trudeau has been reluctant to force arbitration because he doesn't want to offend the Teamsters Canada Rail Conference and other unions, but he urged both sides to reach a deal Wednesday because of the tremendous economic damage that would follow a full shutdown.

It is in the best interest of both sides to continue doing the hard work at the table," Trudeau said to reporters in Gatineau, Quebec. Millions of Canadians, workers, farmers, businesses, right across the country, are counting on both sides to do the work and get to a resolution.

Numerous business groups have been urging Trudeau to act.

Trudeau said Labor Minister Steven MacKinnon met with both sides in the Canadian National talks in Montreal on Tuesday and would be on hand for the CPKC talks in Calgary, Alberta. The talks at both railroads were ongoing Wednesday.

MacKinnon later said he wrapped up his meetings with the rail companies and the Teamsters.

'Workers, farmers, commuters and businesses can't wait. Canadians need urgency at the table. The parties need to get deals done now," he posted on the social platform X.

The negotiations are stuck on issues related to the way rail workers are scheduled and concerns about rules designed to prevent fatigue and provide adequate rest to train crews. Both railroads had proposed shifting away from the existing system, which pays workers based on the miles in a trip, to an hourly system they said would make it easier to provide predictable time off.

The railroads said their contract offers have included raises consistent with recent deals in the industry. Engineers make about $150,000 a year on Canadian National while conductors earn $120,000, and CPKC says its wages are comparable.

Nearly 10,000 workers are covered by these contracts.

Similar quality-of-life concerns about demanding schedules and the lack of paid sick time nearly led to a US rail strike two years ago until Congress and President Joe Biden intervened and forced the unions to accept a deal.

Manufacturing companies may have to scale back or even shut down production if they can't get rail service, while ports and grain elevators will quickly become clogged with shipments waiting to move. And if the dispute drags on for a couple weeks, water treatment plants all across Canada might have to scramble without new shipments of chlorine.

If railways are not picking up the goods that are coming in by ships, then pretty soon your terminals get filled up. And at that point you cannot take any vessels at the terminal anymore, said Victor Pang, chief financial officer at the Vancouver Fraser Port Authority.

He pointed to the 13-day strike by 7,400 British Columbia dockworkers last summer, which manufacturers said blocked the flow of $500 million Canadian (US$368 million) worth of goods each day.

Some companies would undoubtedly turn to trucking to keep some of their products moving, but there's no way to make up for the volume railroads deliver. It would take some 300 trucks to haul everything just one train can carry.

In addition to the potential business impact, more than 32,000 commuters could be stranded in Toronto, Montreal and Vancouver because those trains operate over CPKC railroad's tracks.

In the United States, the major railroads have all made efforts to address worker concerns, and CSX led the way with the first paid sick time deal. The Jacksonville, Florida-based railroad also eased its strict attendance policy and announced new efforts to work with its unions.

The current national contracts for US rail workers expire at the end of this year. This will be the first time TCU members have a new agreement in place before the old one expires, and the deal includes the first improvements to the vacation provisions in more than 50 years.

CSX has offered similar terms to all its unions, so more deals could be coming in the days ahead if they agree.

CSX and our labour partners understand our employees don't want to wait several years for their next pay raise, CEO Joe Hinrichs said.