Why Canada is on the brink of an unprecedented rail work stoppage By Reuters

By David Ljunggren

OTTAWA (Reuters) – For the first time, Canada’s two main rail companies – Canadian National Railway (TSX:) and Canadian Pacific (NYSE: ) Kansas City – are on the brink of a simultaneous work stoppage that could cause billions of dollars in economic damage.

WHY ARE BOTH COMPANIES READY TO STOP?

Contract talks between the Teamsters union and the companies usually take place every year, but in 2022, after the federal government introduced new fatigue rules, CN asked for a one-year extension of its existing agreement rather than negotiate a new one.

This meant that both companies’ employment contracts expired at the end of 2023 and talks have been ongoing since then. As a result, for the first time the failure of negotiations would shut down the vast majority of the Canadian freight rail system.

The Teamsters represent about 10,000 members who work as locomotive engineers, train drivers, train and yard workers and rail traffic controllers at the two companies in Canada.

WHAT IS LIKELY TO HAPPEN NEXT?

Both CN Rail and CPKC say they will begin locking out workers in the early hours of Thursday if they can’t reach an agreement. The union has issued a strike notice to the CPKC, which will take effect early Thursday.

CPKC, created in 2023 by a merger of Canadian Pacific and Kansas City Southern (NYSE: ), has a U.S. and Mexican network that it says will operate as normal. CN also says trains will run on its US network.

That said, a shutdown will still lead to transport disruptions south of the border. Both rail operators and some of their US competitors have begun to refuse certain cross-border freight that would rely on the CN and CPKC networks.

CPKC said it would halt new rail shipments originating in Canada and new U.S. shipments to Canada beginning Aug. 20 if talks do not progress.

Railroads carry grain, cars, coal, and potash, among other shipments.

WHAT ARE THE PARTIES ARGUING ABOUT?

The union says CPKC wants to “eliminate all safety-critical fatigue provisions,” meaning crews will be forced to stay awake longer, increasing the risk of accidents.

CPKC says its offer maintains the status quo for all work rules, “fully complies with the new regulatory requirements for rest and does not compromise safety in any way”.

The Teamsters say CN wants to implement a forced relocation provision that would require employees to move to Canada for months at a time to fill labor shortages.

CN says it has made four offers this year on wages, rest and workforce availability, while remaining fully compliant with government-imposed rules overseeing work and rest periods.

WHAT CAN THE FEDERAL GOVERNMENT DO?

Under section 107 of the federal Labor Code, Labor Minister Steven MacKinnon has broad powers and can order parties to enter binding arbitration. In 2023, his predecessor, Seamus O’Regan, issued such an order to end a pig strike in British Columbia. In that case, unlike the current railroad dispute, the parties largely agreed on the lines of a settlement.

MacKinnon last week rejected a CN request for binding arbitration, urging the parties to put more effort into the bargaining table. In a separate statement issued Monday, he called on the companies and the union to do the hard work needed to reach an agreement.

WHAT HAPPENS IF THE UNION FAILS?

Talk of the government acting to end a strike is moot, given that both companies have made it clear they will lock out workers.

In the event of a strike, the government can introduce back-to-work legislation that forces union workers back to work. The previous federal Conservative government did this in 2012 to end a walkout of Pacific Pacific workers.