Attainable Rail Strike Looms After Union Rejection

The U.S. now faces what could potentially become a crippling railroad strike in two weeks after one of the country’s largest rail unions rejected a contract offer brokered by the White House.

The union, SMART Transportation Division, which represents about 28,000 freight conductors, rejected the tentative labor deal. The vote was close, with 51% of union members voting to reject the deal.

All 12 rail unions have now completed their ratification process, with members of eight unions voting in favor of the deal and four voting against it. Workers for the four unions that voted against it will remain on the job as negotiations continue to try to avoid a strike that could cause widespread disruptions as the country heads into the holiday season.

The proposed contract includes a 24% pay increase over five years, voluntary assigned days off, one additional paid day off, guaranteed time away and medical visits, and no disruptions to current health care plans. 

Freight railroads move about 40% of U.S. long-distance cargo and deliver freight such as feedstock, coal, lumber, construction materials, and autos. If no deal is reached, Congress could order the railroad workers to remain on the job or return to work. The White House, which has pushed for the deal, reiterated the president’s position that a rail shutdown would be “unacceptable” because of the harm it could cause to jobs, families, farms, businesses, and communities across the country.

Shares of railroad operators, including CSX Corp. (CSX), Norfolk Southern (NSC), and Union Pacific Railroad (UNP) are rising in early trading Tuesday. Year-to-date, shares of all three companies are down roughly 15%, in line with a 16% decline for the S&P 500.