By Esther Fung

It took three years for freight railroads and unions to agree on their last labor deal, which was reached in late 2022 only after Congress and the White House stepped in to block a national strike. That contract lapses in a few days.

CSX Chief Executive Joe Hinrichs broke from his peers in 2024 to avert another dragged out negotiation -- during which workers went years without raises and bosses were reprimanded by regulators about poor service.

"I believe it's in the industry's interest not to repeat this again," Hinrichs said in a recent interview. The former Ford Motor executive took over CSX in September 2022 and was thrust into the prior labor dispute.

Rather than wait for national collective bargaining sessions, CSX started in early 2024 to negotiate directly with the various unions that represent its workers. Union Pacific did too. The companies reached some tentative agreements months before the old contract expired.

Most of the new agreements are five-year contracts that provide roughly 19% in compounded wage increases and greater flexibility for workers to take time off earlier in their careers. The prior contract offered 24% in wage increases over five years.

Historically, the major freight railroads have been represented by a group called the National Carriers' Conference Committee, or NCCC, that hammers out national deals with each of the 12 major unions that cover close to 100,000 workers in a variety of rail occupations. The process can stretch out, but under federal law, railroad labor contracts remain in effect while a new contract is being negotiated.

CSX and Union Pacific aren't participating in the bargaining with the NCCC this time, while Norfolk Southern and BNSF are still working through the group. A fifth major freight railroad, Canadian Pacific Kansas City, has authorized the NCCC to represent it only for health and welfare issues.

In August, CSX was the first railroad to announce a tentative wage agreement with the Transportation Communications Union, which represents clerks, carmen and other workers. It came as a surprise because new contracts aren't typically negotiated so far ahead of the end of the existing one.

"We know how it's always been, but does it always have to be this way?" said Matt Hollis, national vice president of the TCU. The union initially tried to get an agreement with the NCCC. Those talks didn't pan out so the union decided to bargain locally.

Workers wanted a wage agreement without waiting years, union leaders said. Bargaining locally helped the parties address specific issues, which often aren't addressed in national bargaining.

The NCCC started its national round of negotiations in November and has reached tentative deals with several of the unions so far. It said that the local deals between some railroads and unions set a framework for the national negotiations.

"The NCCC is pleased to close out 2024 with three ratified agreements, and we look forward to building on this momentum in the new year," Jeff Rodgers, chair of the NCCC, said in a Dec. 20 statement.

Two unions have been holdouts in the current talks: the Brotherhood of Railroad Signalmen and the Brotherhood of Locomotive Engineers and Trainmen. The BRS and BLET didn't respond to requests for comment.

Excluding benefits like retirement and health insurance, Class I rail employees make between $90,000 and $140,000 in annual wages, depending on their craft. The average annual wage is $111,000, according to the NCCC.

Before the latest negotiations, major freight railroads had agreed to provide paid sick leave to most unionized employees, an issue that had stymied the prior negotiations. A longstanding dispute over the crew size in the locomotive cab has also been set aside.

"We don't have a big cause célèbre issue to fight over," said Hinrichs, the CSX boss.

Union Pacific said it is negotiating directly because it wants to address local issues that allow it to enhance service. "We offer great jobs with amazing benefits. Our goal is a fair agreement that improves operating efficiency," said Union Pacific spokeswoman Kristen South.

Norfolk Southern has around one-third of its employees covered by new labor pacts, including an agreement with the Brotherhood of Maintenance of Way, which represents workers who build and maintain the tracks. The union earlier this year had supported an activist investor in a proxy fight with the Atlanta-based railroad.

Write to Esther Fung at esther.fung@wsj.com

(END) Dow Jones Newswires

December 27, 2024 05:30 ET (10:30 GMT)

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