The Rail Quagmire: Port Congestion, An Ongoing Labor Dispute, and Efforts to Avoid a Strike
In early July, rail congestion at some of the West Coast ports was so bad it was described as “reaching an inflection point.”
Writing for CNBC, Lori Ann LaRocco noted then that “rail congestion from Berkshire Hathaway subsidiary BNSF and Union Pacific, the railroads servicing the West Coast ports, is getting worse and slowing down container processing at the nation’s largest port complex.”
Quoted in the article, Gene Seroka, executive director of the Port of Los Angeles described the backups.
“60% of our long dwelling containers are scheduled to go on the rail,” Seroka said. “Our land capacity is at 90%.”
Also cited was Mario Cordero, the executive director for the Port of Long Beach.
“We are at a point of inflection as to the rail bottlenecks, including the lack of rail cars at the nation’s largest and most significant container gateway,” Cordero said.
In the following CNBC video, LaRocco describes some of the dynamics involved at West Coast ports—as well as how East Coast ports are picking up the slack.
Like many of the scenarios contributing to a persistently sluggish supply chain, rail congestion is being influenced by a variety of factors. Here, we’ll take a look at one of them—railway labor dynamics—and what stakeholders across the supply chain are dreading most: the potential for a rail strike that would bring everything to a grinding halt.
Ongoing Labor Dispute
In her article, LaRocco also noted the labor dispute between Class I freight railroads and the twelve rail unions that has been brewing since 2020.
A July 18th Congressional Research Service report authored by transportation policy analyst Ben Goldman entitled, “President Forms Emergency Board to Resolve Rail Labor Dispute,” provides a summary of the ongoing dynamics involved:
“After more than two years of bargaining, the unions requested the assistance of the National Mediation Board (NMB)—a federal agency responsible for facilitating labor negotiations in the railroad and airline industries—in January 2022. On June 17, the NMB announced that both sides would exit mediation without a new contract in place. Since then, the parties have been in a federally mandated ‘cooling-off’ period during which no action may be taken that would result in a work stoppage. If an Emergency Board had not been formed, this cooling-off period would have expired after 30 days, after which the railroad companies could have begun a lockout or unions could have gone on strike.”
“Negotiations have occurred against a backdrop of declining railroad employment, a trend that began well in advance of the Coronavirus Disease 2019 (COVID-19) pandemic. Since November 2018, railroad employment has shrunk by some 40,000 jobs, or by over 20%, according to the Bureau of Labor Statistics. Some of these job losses can be attributed to the decline in the transportation of coal, while others may have been due to new approaches to staffing and asset use within the rail industry.”
“Labor disputes in the railway and airline industries are governed by the Railway Labor Act (RLA). If a dispute is not settled through RLA-prescribed negotiation, mediation, or arbitration, and if the NMB determines that the dispute ‘threatens substantially to interrupt interstate commerce to a degree such as to deprive any section of the country of essential transportation service,’ the law authorizes the President to establish an Emergency Board to investigate and issue a report. The Presidential Emergency Board’s recommendations are not binding on the parties, and either party may reject them.”
“Effective July 18, 2022, President Biden created a three-person Emergency Board to resolve a labor dispute affecting six major railroads and many smaller ones. All three members are attorneys who have served on prior Emergency Boards. Depending on what actions the board and Congress take, and the ongoing bargaining between railroads and 12 unions, the dispute could still lead to a work stoppage later this summer.”
In the report, Goldman also describes two key issues that are on the negotiating table: Workplace rules and precision scheduled railroading; and train crew size.
Workplace Rules and Precision Scheduled Railroading
“Several of the largest railroads in North America employ a loosely defined set of industry practices designed to maximize efficient use of railroad assets, collectively known as ‘precision scheduled railroading’ (PSR),” Goldman writes. “Rather than adhering to regular schedules as the name suggests, these practices often involve planning train movements so as to reduce the amount of physical assets (such as yards and locomotives) needed to generate revenue, thereby improving an indicator of railroad performance called the operating ratio. PSR sometimes can be accompanied by workforce reductions, but labor unions have contended that it also has placed unrealistic workloads and duty schedules on remaining employees.”
“Federal law limits how many hours railroad employees can work during a shift and how closely shifts can be spaced apart, but unions are demanding the retraction of specific workplace operating and attendance rules, in addition to wage increases and changes to vacation and medical benefits,” Goldman says. “The surge of freight volume and other supply chain disruptions experienced since the start of the COVID19 pandemic may already be prompting a retrenchment from some of the more aggressive implementations of PSR among large railroads.”
Train Crew Size
“Railroads have explored the use of one-person train crews to further maximize asset utilization, while unions and some lawmakers have sought to establish a two-person crew minimum on safety grounds,” Goldman notes. “The Federal Railroad Administration proposed a crew size rule in 2016 after several crashes but withdrew it in 2019, stating that available data ‘does not establish that one-person operations are less safe than multiperson train crews.’ In the run-up to the current bargaining session, some rail unions asserted that preexisting moratorium provisions prevented negotiations over train crew sizes. However, in response to a lawsuit filed by the rail carriers, a federal judge ordered that the unions must engage in good-faith negotiations over train crew size proposals put forth by rail carriers as part of a new labor agreement.”
What Comes Next
As far as what comes next, Goldman outlines options for Executive and Legislative action:
“The newly formed Emergency Board has 30 days to investigate the facts and report to the President with nonbinding recommendations for settlement of the dispute. These will not address minimum crew size, which is being negotiated separately on a railroad-by-railroad basis. During this initial 30-day period and for 30 days after the report has been issued, the NMB continues to mediate the dispute. If the parties do not agree on either new contract terms or an extension of the cooling-off period by September 16, either side may engage in work stoppages. The last time a Presidential Emergency Board was created to resolve a freight railroad labor dispute was in 2011. In that case, the final cooling-off period was extended several times before a new agreement was reached in April 2012 without a strike or lockout.”
“On several past occasions, Congress has intervened in labor disputes by enacting legislation to delay or prohibit railway and airline strikes. For example, in 1986, Congress passed P.L. 99-385, which extended the final cooling-off period by an additional 60 days to allow the unions and the Maine Central Railroad to continue negotiations. In 1992, P.L. 102-306 required Amtrak and Conrail to enter into arbitration with unions representing their employees in an effort to resolve various labor disputes. Additionally, Congress has from time to time enacted legislation requiring the parties to a railroad labor dispute to submit to another emergency board or to accept a board’s recommendations.”
FRA’s Crew-Size Proposal
On July 28th, the Federal Railroad Administration (FRA) published a Notice of Proposed Rulemaking (NPR) that would require a two-person train crew minimum in most cases, “with limited exception for low-risk operations,” says Supply Chain Dive’s Sarah Zimmerman, describing the proposed rule. She says it’s a “victory for workers” and a thorn in the side for railroads that warn such a requirement “could exacerbate labor problems that have contributed to declining service and worsening congestion.”
According to the summary published in the Federal Register:
“FRA proposes regulations establishing safe minimum requirements for the size of train crews depending on the type of operation. A minimum requirement of two crewmembers is proposed for all railroad operations, with exceptions proposed for those operations that do not pose significant safety risks to railroad employees, the public, or the environment. This proposed rule would also establish minimum requirements for the location of crewmembers on a moving train and promote safe and effective teamwork. FRA also proposes a special approval procedure to allow railroads to petition FRA to continue legacy operations with one-person train crews and allow any railroad to petition FRA for approval to initiate a new train operation with fewer than two crewmembers.”
Comments on the proposed rule must be received within 60 days of the NPR’s publication.