Canada’s two biggest railways closed operations early Thursday after contract negotiations with union leaders failed, shutting down 80% of the country’s rail network and immediately blocking arteries of North American supply chains that carry about C$1 billion ($740 million) per day in trade.
More than 9,000 employees at Canadian National Railway Co. (CN) and Canadian Pacific Kansas City Ltd. (CPKC) were locked out after a deadline passed at midnight without an agreement on a new contract. Members of the Teamsters Canada Rail Conference (TCRC) had voted to strike over a number of issues, including scheduling and worker fatigue.
Late on Aug. 22, however, Canadian Labor Minister Steven MacKinnon directed the Canada Industrial Relations Board (CIRB) to impose final binding arbitration on the parties. MacKinnon also ordered the CIRB to direct the parties to extend their current labor contract, and said the railways should resume operations “forthwith.”
Both CN and CPKS released statements on Aug. 22 saying they had ended the lockout and were preparing to restart operations following MacKinnon’s announcement. CN said it ended its lockout at 6 p.m. Eastern time and has started a recovery plan.
“While CN is satisfied that this labor conflict has ended and that it can get back to its role of powering the economy, the company is disappointed that a negotiated deal could not be achieved at the bargaining table despite its best efforts,” the company said in a statement.
CPKC also said it is preparing to restart operations. “The government has acted to protect Canada’s national interest,” CEO Keith Creel said in a statement. “We regret that the government had to intervene because we fundamentally believe in and respect collective bargaining.”
The TCRC on Aug. 23 confirmed that union members had taken down picket lines at CN and would begin returning to work on Friday. The union cautioned, however, that the work stoppage at CPKC “remains ongoing” pending an order from the CIRB.
“Despite the Labor Minister’s referral, there is no clear indication that the CIRB will actually order an end to the labor dispute at CPKC,” the TCRC said, adding that it would meet again with the CIRB Friday morning. TCRC President Paul Boucher said the union would review the minister’s referral and the CIRB’s response, and would consult with legal counsel to determine the next steps.
“By resorting to binding arbitration, the government has allowed CN and CPKC to sidestep a union determined to protect rail safety. Despite claiming to value and honor the collective bargaining process, the federal government quickly used its authority to suspend it, mere hours after an employer-imposed work stoppage,” Boucher said. “The Teamsters Canada Rail Conference is deeply disappointed by this shameful decision.”
The work stoppage on Aug. 22 had an immediate impact on shipments of fertilizer, wheat, chemicals, and other goods. An Aug. 21 estimate from Moody’s Corp. warned that the work stoppage could cost Canada as much as C$341 million ($251 million) per day.
The strike was a big topic of conversation at Fertilizer Canada’s annual conference in Montreal on Aug. 19-21. The trade group on Aug. 20 issued a statement urging the Canadian government to “take immediate action,” warning that a work stoppage “will have devastating impacts on Canada’s economy, our reputation as a reliable trading partner, and global food security.”
The railways move an average of 69,000 mt of fertilizer product per day, and 90% of Canadian-produced fertilizer destined for the US market is delivered by rail. Disruptions impacting all rail services across the country will cost the fertilizer industry an estimated C$55-$63 million per day in lost sales revenue, not including logistical and operational costs, Fertilizer Canada said.
“In the last seven years, Canadian supply chain labor disruptions have cost the fertilizer industry nearly a billion dollars,” said Karen Proud, Fertilizer Canada President and CEO. “These stoppages are doing immense damage to our reputation as a reliable trading partner. Our customers, who rely on Canadian fertilizer products, are being forced to turn to our competitors in Russia, Belarus, and China. We can’t afford for our railways to shut down, and we can’t afford a passive approach to our supply chains any longer. We need long-term solutions.”
Fertilizer shipments were among the first the feel in the impact of the looming strike. Both CN and CPKC issued embargoes halting certain ammonia shipments a full 10 days ahead of the Aug. 22 work stoppage (GM Aug. 16, p. 1). Additional embargoes followed, including US railways halting shipments to Canada as services began to slow down.
In an Aug. 22 statement, CN said it has negotiated “in good faith” with the TCRC and made a final offer to the union ahead of the lockout, but the union did not respond. “Without an agreement or binding arbitration, CN had no choice but to finalize a safe and orderly shutdown and proceed with a lockout,” CN said. “The Teamsters have not shown any urgency or desire to reach a deal that is good for employees, the company, and the economy.”
CPKC also issued a statement on Aug. 22, saying it had “executed a safe and structured shutdown of its train operations” across Canada when it became clear that an agreement with the TCRC was not within reach. CPKC also renewed its push for binding arbitration to end the dispute, which the railroads had urged in June but the offer was rejected by the TCRC (GM June 7, p. 1)
TCRC President Paul Boucher responded by saying the fault lies with the railroads and not the union. “Despite reaping billions in profits over the years, CN is demanding concessions that would drag working conditions back to another era,” Boucher said.
“They don’t care about supply chains, farmers, or small businesses – their sole focus is on padding the pockets of their managers and shareholders, with little regard for the safety or well-being of employees,” he continued. “Make no mistake – corporate greed is what brought us here. The biggest sticking points are company demands, not union proposals. The Teamsters remain committed to negotiating in good faith and doing everything possible to achieve a fair and equitable agreement.”