TORONTO (AP) — The Canadian government on Thursday forced the country’s two biggest railroads to enter arbitration with labor unions, a move aimed at averting a union shutdown that could see freight trains in Canada resume service within days. Potentially dire economic impacts Similar incidents could occur across the country and the U.S. if trains are suspended for an extended period of time.
The government’s move came more than 16 hours after Canadian National Railway and Canadian Railway locked out workers due to an impasse over a collective bargaining agreement. Both rail companies said they would work to get trains running again as soon as possible.
Unions representing 10,000 engineers, conductors and dispatchers were outraged by the order, accusing the railroad of deliberately creating a crisis to force the government to intervene, and said they would hold picket lines while they reviewed the decision.
The government ordered the railroad to enter into arbitration with the Canadian Railway Workers Union and end the lockout. Starts Thursday at 12:01 a.m. Because the two parties could not resolve a contract dispute.
Minister of Labor Stephen McKinnon announced the arbitration order at a press conference on Thursday. Minister McKinnon said he expects train services to resume within the next few days. Lifting the lockout is the first step.
The arbitration process is moving quickly, and the railroad is scheduled to meet with the Canada Labour Relations Board on Thursday evening, said a person familiar with the schedule, who asked not to be identified because they are not authorized to discuss the matter. The Teamsters also confirmed that the union is scheduled to meet with the board on Thursday evening.
Negotiations between the two sides failed throughout the day on Thursday, with workers picketing outside and business groups calling on the government to force arbitration.
Paul Boucher, president of the Teamsters Canadian Railway Congress, criticized the government for deciding to step in so early.
“Canada’s two largest railroads have engineered this crisis, held the country hostage, and manipulated our government into once again ignoring the rights of working-class Canadians,” Boucher said. “The Teamsters Canadian Railway Congress (TCRC) is deeply disappointed in this shameful decision.”
Railways welcomed the decision, saying the government had no choice.
“The Canadian government recognizes the enormous impact that rail work stoppages have on the Canadian economy, the North American supply chain and all Canadians,” said CPKC president and CEO Keith Creel. “The government acted to protect Canada’s national interests. We fundamentally believe in and respect collective bargaining, so it is unfortunate that the government had to intervene. However, given the interests of all involved, this situation required action.”
McKinnon said the government wanted to give negotiations every chance to succeed but ultimately the economic risks were too great to allow the lockout to continue. He had rejected an arbitration order a week earlier.
“Canada’s economy cannot wait for an agreement that has been so long overdue amid fundamental disagreements between the parties,” he said.
All rail freight in Canada was halted on Thursday, as was rail traffic across the U.S. border that runs on Canadian Railroad Corporation (CPKC) lines. CPKC and Canadian Railroad Corporation trains continued to run in the U.S. and Mexico during the lockout.
Associated Press reporter Donna Warder reports on a contract dispute between Canada’s two largest freight rail companies that could have huge economic consequences for Canada and the United States.
Many companies in both countries and across industries feared they would be at risk without regular rail service because they rely on rail to move raw materials and finished goods. According to the U.S. Department of Transportation, billions of dollars’ worth of goods move by rail between Canada and the United States every month.
Trudeau decided not to force the parties into binding arbitration before the deadline expired for fear of angering unions and the left-leaning New Democratic Party (NDP), whose support his government relies on to stay in power, but ultimately decided he had no choice.
“Collective bargaining is always the best approach. When that is no longer a foreseeable option – when supply chains and the workers who depend on them are severely affected – governments must act,” Trudeau said.
Most companies probably have enough storage space for supplies and finished goods to withstand a temporary disruption, but ports and other rail lines would soon be clogged with backlogged cargo that Canadian National and CPKC can’t pick up.
Edward Jones analyst Jeff Windau said many companies have made changes to their supply chains since the coronavirus pandemic that have allowed them to withstand short-term disruptions, but he said the real problems will begin if the disruptions drag on.
Most previous Canadian rail outages have lasted a day or two and usually involved just one of the major rail companies, but some have lasted eight or nine days. This time, both rail companies were out, so the impact was magnified.
“Railroads are so tied to the economy,” Windau said, “not to mention the breadth of products they carry. … At the end of the day, I think we need the railroads to keep running.”
Chemical companies and food retailers will be the first to be affected. Railways began a phased shutdown last week, halting new shipments of hazardous materials and perishable goods, but most chemical plants said they would be OK for about a week.
The auto industry may also have been quick to notice the problem, as it has a high volume of cross-border deliveries of engines, parts and finished vehicles and relies on just-in-time shipping. Flavio Volpe, president of the Automotive Parts Manufacturers Association, wrote in a post on X that four out of five cars made in Canada are exported to the U.S. almost exclusively by rail. He said a prolonged lockout could lead to temporary work stoppages similar to those seen in 2022, when the Ambassador Bridge was closed for five days.
More than 30,000 commuters in Vancouver, Toronto and Montreal will be the first to feel the pain of the lockout and may be forced to take the bus on Friday as well. Commuter rail cannot operate while CPKC dispatchers are locked out.
CN has been negotiating with the Teamsters for nine months, while CPKC has been trying to reach an agreement for a year, the union said.
Negotiations in Canada have been bogged down over issues with rail workers’ work schedules and concerns about rules to prevent fatigue and give crews enough rest. The railroads have proposed moving from the current system, which pays workers based on the number of miles they travel, to an hourly system that would give them more predictable time off. Unions have said they don’t want to lose hard-won fatigue protections.
The railroads said the contract includes pay increases that are consistent with recent industry contracts: Canadian National’s engineers already earn about $150,000 a year and its conductors $120,000, and CPKC said its pay is comparable.
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Funk reported from Omaha, Nebraska. Associated Press writer Ammar Madani in Buellton, California, contributed to this report.
