Canada forces arbitration in freight train labor dispute, averting economic crisis

TORONTO — Freight trains are expected to start rolling again soon in Canada after the government forced the country’s two major railroads into arbitration with their labor union Thursday, averting potentially dire economic consequences across the country and in the U.S.

Canadian National said it ended its lockout immediately Thursday evening in an effort to get its trains running quickly. CPKC railroad did not say exactly when its lockout would end. The company said in a statement that it will follow the direction of the Canada Industrial Relations Board, which is overseeing the arbitration. The union hasn’t yet responded to the government’s decision.

The government ordered the railroads into arbitration with the Teamsters Canada Rail Conference to end the lockout that began at 12:01 a.m. Thursday after the two sides were unable to resolve a contract dispute. The union represents nearly 10,000 engineers, conductors and dispatchers.

Labour Minister Steven MacKinnon announced the decision to order the arbitration at a news conference Thursday moments after The Associated Press broke the news, citing an official familiar with the situation who was not allowed to speak publicly before the statement.

MacKinnon said he expects the trains will resume moving within days. Ending the lockouts is the first step.

Throughout the day Thursday, both sides negotiated unsuccessfully while workers picketed outside and business groups urged the government to force the arbitration.

“The Canadian government has recognized the immense consequences of a railway work stoppage for the Canadian economy, north American supply chains and all Canadians,” said Keith Creel, CPKC President and CEO. “The government has acted to protect Canada’s national interest. We regret that the government had to intervene because we fundamentally believe in and respect collective bargaining; however, given the stakes for all involved, this situation required action.”

MacKinnon said the government wanted to give negotiations every chance to succeed, but ultimately the economic risk was too great to allow the lockouts to continue. He had declined to order arbitration a week ago.

“Canada’s economy cannot wait for an agreement that has been delayed for a very long time and when there is a fundamental disagreement between the parties,” he said.

All of Canada’s freight handled by rail — worth more than $1 billion Canadian (US$730 million) a day and adding up to more than 375 million tons of freight last year — stopped Thursday along with rail shipments crossing the U.S. border. About 30,000 commuters in Canada were also affected because their trains use CPKC’s lines. CPKC and CN’s trains continued operating in the U.S. and Mexico during the lockout.

Many companies in both countries and across all industries rely on railroads to deliver their raw materials and finished products, so they were concerned about a crisis without regular rail service. Billions of dollars of goods move between Canada and the U.S. via rail each month, according to the U.S. Department of Transportation.

Paul Boucher, president of the Teamsters Canada Rail Conference, said Thursday morning that he believed the railroads were “holding the Canadian economy hostage to try and pressure the Liberal government to impose final binding arbitration and take your rights away to free collective bargaining.”

Trudeau decided not to force the parties into binding arbitration before the deadline passed for fear of offending unions and the leftist NDP party that his government relies on for support to remain in power, but he ultimately decided he didn’t have a choice.

“Collective bargaining is always the best way forward. When that is no longer a foreseeable option — when we are facing serious consequences to our supply chains and the workers who depend on it — governments must act,” Trudeau said.

Most businesses probably have enough supplies on hand and room to store finished products to withstand a brief disruption. But ports and other railroads would have quickly become clogged with stranded shipments that Canadian National and CPKC won’t pick up.

Edward Jones analyst Jeff Windau said many companies made supply chain changes after the COVID-19 pandemic that can help them withstand a short disruption. The real trouble starts if it drags on.

Most previous Canadian rail stoppages have only lasted a day or two and usually involved only one of the big railroads, but some have stretched as long as eight or nine days. The impact was magnified this time because both railroads had stopped.

“They are so integrated and tied into the economy,” Windau said. “Just the breadth of products that they haul. ... Ultimately, I think we need the rails to continue to be running.”

Chemical businesses and food distributors would have been the first to be affected. The railroads stopped accepting new shipments of hazardous materials and perishable goods as they began gradually shutting down last week, but most chemical plants had said they would be OK for about a week.

The auto industry also may have seen problems quickly because it relies on just-in-time shipments, with significant cross-border deliveries of engines, parts and finished vehicles. Flavio Volpe, President of the Automotive Parts Manufacturers’ Association, posted on X that about four of every five cars made in Canada are exported to the U.S. almost exclusively by rail. He said a prolonged lockout could cause temporary work stoppages similar to the impact of the five-day 2022 Ambassador Bridge blockade.

More than 30,000 commuters in Vancouver, Toronto and Montreal were the first to feel the pain of the lockouts. They had to scramble Thursday morning to find a new way to work because their commuter trains aren’t able to operate while CPKC is shut down.

CN had been negotiating with the Teamsters for nine months while CPKC had been trying to reach an agreement for a year, the union said.

The Canadian 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 that they said would make it easier to provide predictable time off. The union said it doesn’t want to lose hard-fought fatigue protections.

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

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Funk reported from Omaha, Nebraska. Associated Press writer Aamer Madhani in Buellton, California, contributed to this report.