Rail Shippers Applaud Labor Deal, Seek Rapid Ratification

“We hope railway workers will accept the new terms of the proposed contract and the railway system can continue to operate on behalf of the millions of hardworking Americans who rely on it for their jobs and the economic security of our country,” Mr. Shay said in a statement.

The deal came less than 24 hours before a deadline Friday that could have led to a shutdown of rail operations across the U.S., potentially stranding tens of thousands of shipments.

Major freight railroads had already started halting shipments of hazardous materials so that the cargoes wouldn’t get stuck in their networks under a strike. Norfolk Southern Corp. had begun to restrict intermodal shipments—which move between trains, trucks and cargo ships—ahead of the deadline.

Norfolk Southern said Thursday it had reopened the gates at its intermodal facilities on word of the agreement.

The tentative deal must now be ratified by members of the various unions covered by the contracts. The timing for ratification votes hasn’t been set but it could take several weeks.

The International Association of Machinists and Aerospace Workers, one of several unions in talks with the railroads, said Wednesday that its members had rejected the tentative agreement. Two other labor unions, the Brotherhood of Locomotive Engineers and Trainmen, and SMART Transportation Division, said Thursday they were able to secure changes to company attendance policies in the new deal.

“This morning’s announcement of a tentative agreement between the railroads and their workers is a welcome relief,” said National Association of Manufacturers President and Chief Executive Jay Timmons. “Manufacturers had been putting into place contingency plans as they were facing disruptions with moving their supplies and products.”

The country’s biggest apparel trade group, the American Apparel & Footwear Association, said it was watching for final ratification by union members and it would press Congress to intervene if the pact is rejected.

“If a deal is not completed in full, the 25% of apparel and footwear that typically touches the rail lines would immediately get stuck and threaten the busy fall shopping season,” said Steve Lamar, the association’s president and chief executive.

The terms of the agreement, which runs through 2024, largely reflect those proposed by a presidential panel. They include wage increases of about 24% over five years.

The union members had been working without a contract since 2019. The deal, which is retroactive to 2019, includes a 14.1% wage increase upon ratification. Workers would then get a 4% raise in July 2023 and a 4.5% increase in July 2024, as well as five annual $1,000 lump-sum payments.

The terms may help push shipping prices higher as railroads seek to preserve profit margins under the higher labor costs, UBS analyst Thomas Wadewitz wrote in a research report.

Still, the agreement may help improve rail service in operations that have been hit by capacity and staffing shortages, he wrote. The railroads can “benefit from the new agreements which boost pay and could reduce the pace of attrition among the railroad workforce and also increase their effectiveness in hiring new workers,” Mr. Wadewitz wrote.

Mr. Lamar said companies remain concerned about potential disruption because of a labor impasse at West Coast ports, where dockworkers have been working without a contract since midsummer and bargaining appears to be stalled. “We continue to urge speedy conclusion of the parallel labor negotiations at the West Coast ports—now in their fourth month—to make sure that we can avoid similar brinksmanship in the future,” he said.