Presidential Emergency Board issues recommendations focused on rail carriers-unions labor issues

Earlier this month, the Presidential Emergency Board (PEB) appointed by President Biden—and focused on resolving a labor dispute between Class I rail carriers and 12 U.S.-based rail labor unions on reaching labor accord—issued recommendations to help further quell further rail-related supply chain disruptions.  

As previously reported, the White House said that the objective of the PEB is to provide a structure for railroad workers and management to resolve their disagreements, with the PEB investigating the dispute and delivering a report with recommendations on how the dispute should be resolved within 30 days of the establishment of the PEB.

At the heart of the matter—and the need for the PEB—are existing disputes between certain railroads represented by the National Carriers’ Conference Committee (NCCC) and their employees represented by certain labor organizations, noted President Biden in the Executive Order issued by President Biden on July 15 and went into effect on July 18.

Leading up to the White House EO was a June 17 announcement made by the National Mediation Board, confirming that “pursuant to the Railway Labor Act, the National Carriers’ Conference Committee (NCCC) and the twelve unions…were released by the NMB from statutory Mediation on June 17, 2022, and a 30-day cooling-off period [began] on June 18, 2022.” NMB added that as part of an initiative to help the parties in reaching agreements, it is scheduling public interest meetings, which are set to begin on July 12. 

The 12 U.S.-based rail labor unions include: the American Train Dispatchers Association (ATDA), Brotherhood of Locomotive Engineers and Trainmen (BLET), Brotherhood of Maintenance of Way Employees Division of the International Brotherhood of Teamsters (BMWED), Brotherhood of Railroad Signalmen (BRS), International Association of Machinists and Aerospace Workers (IAMAW), International Brotherhood of Boilermakers, Iron Ship Builders, Forgers and Helpers (IBB), International Brotherhood of Electrical Workers (IBEW), National Conference of Firemen & Oilers, District of Local 32BJ, SEIU (NCFO), International Association of Sheet Metal, Air, Rail and Transportation Workers – Railroad, Mechanical and Engineering Department (SMART-MD), International Association of Sheet Metal, Air, Rail and Transportation Workers – Transportation Division (SMART-TD), Transportation Communications Union/IAM (TCU/IAM), and the Transport Workers Union of America (TWU).

A Reuters report noted that the PEB’s recommendations included:

• annual wage increases between 4%-to-7% through 2024;
• a 3.5% retroactive increase for 2020 and 3.5% for 2021, when rail workers did not have a contract) and five $1,000 annual bonuses and an additional paid day off;
• removing the cap on monthly employee healthcare contributions so that they equal 15% of the plans' overall cost of providing covered benefits; and
• jointly rebidding contracts to ensure that current costs are competitive

The Association of American Railroads (AAR) stated that the proposal would provide immediate pay increases and an average employee payout of more than $11,000 upon ratification.

“President Biden’s PEB issued recommendations that should set the framework for a negotiated agreement between railroads and unions,” said AAR President and CEO Ian Jefferies in a statement. “The recommendations would provide 24% compounded wage increases by 2024, with 14.1% of those increases effective immediately, along with additional service recognition bonuses totaling $5,000 over the course of the contract. An agreement based on these terms would lead to the largest general wage increase in nearly 40 years. While the Biden PEB’s recommendations markedly exceed the rail carriers’ proposal, they provide a useful basis to reach a resolution. In the interests of all rail stakeholders, now is the time for railroads and their unions to reach a contract. 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.”

NCCC officials applauded the PEB report, explaining that the recommendations would increase wages by 24% during the five-year period from 2020 through 2024, with a 14.1% wage increase effective immediately.  

“These recommendations, if implemented, would include the most substantial wage increases in decades—with average rail worker wages reaching about $110,000 per year by the end of the agreement,” it said. “When health care, retirement, and other benefits are considered, the value of rail employees’ total compensation package, which already ranks among the highest in the nation, would average more than $150,000 per year.”

Morgan Stanley analyst Ravi Shanker observed in a research note that under the Railway Labor Act, both sides have until September 16th to reach a tentative agreement.

“After this deadline, if the parties do not reach a tentative agreement, it becomes possible that labor strikes or carriers lockout,” he wrote. “According to Railway Age, this may cause Congress to end any nationwide rail shutdown by imposing a third-party settlement. If an agreement is reached before September 16th, or if both sides mutually agree to extend negotiations beyond this date in anticipation of a future settlement, that tentative contract will be provided to members of the 12 unions for ratification. However, if one or more of the union memberships fail to ratify the contract, the unions may initiate a strike or continue additional negotiations.”