Washington, D.C. — You may have seen news reports on rail labor negotiations—and most recently the announcement of recommendations from the Presidential Emergency Board (PEB) appointed by the Biden administration. We wanted to provide a quick run-down of recent developments and the implications of negotiations for the U.S. rail network.
PEB recommendations: On Tuesday, August 16, the PEB issued its recommendations to resolve the ongoing rail labor negotiations. These recommendations include immediate pay increases and an average employee payout of more than $11,000 upon ratification. Specifically, employees would receive a 24% compounded wage increase by 2024, with a 14.1% wage increase effective immediately. Employees would also receive service recognition bonuses totaling $5,000 over the course of the contract.
What exactly is a PEB? Following precedent, President Biden appointed in mid-July a three-member Presidential Emergency Board (PEB), which took 30 days to conduct hearings and issue settlement recommendations. Both labor groups and railroads welcomed the appointment of the PEB. While its proposals are not binding, they often serve as the basis for voluntary agreements.
The path here: On June 17, the National Mediation Board (NMB), an independent government agency that coordinates labor-management relations in the railroad and airline industries, ended the mediation process between the Class I freight railroads and major rail labor unions representing 115,000 employees. The termination of the mediation process by the NMB initiated, by law, an initial 30-day cooling off period that then ended when the PEB was appointed mid-July.
The recs in context: The PEB’s proposals would represent the most substantial compensation changes in nearly 40 years in the railroad industry. If implemented, they would mean the average pay for a rail employee would reach roughly $110,000 per year by the end of the agreement and total nearly $160,000 annually when including the carriers’ cost of health care, retirement, and other benefits.
Reactions: The Association of American Railroads issued a statement on August 17 saying that the PEB recommendations are a useful base for reaching a resolution: “The industry is prepared to propose agreements based on the PEB’s recommendations to provide our employees with long overdue pay increases and avert rail service interruptions.” SMART-TD released a statement August 18 calling the board’s proposals an improvement, recognizing the historic pay raises included.
What’s next? With the PEB recommendations in-hand, railroads and labor unions will now seek to reach voluntary agreements by September 16. Strikes are prohibited in this final “cooling off” period.
Possible role of Congress: In the past, Congress has intervened in rail labor negotiations that have remained unresolved at the end of the final cooling off period by enacting legislation. In this case, armed with the PEB recommendations, the most prudent path would be to enact those terms by law.
The stakes: The topline goal for policymakers, railroads, rail employees, and the entire supply chain sector, including rail customers and the consumers who rely on goods movement, should be to avoid a network disruption while balancing the needs of rail employees and companies. Failure to reach a reasonable agreement could result in network disruptions. This would negatively impact the broader supply chain, from manufacturers to retailers to consumers.