Both of Canada's major freight railways have come to a complete standstill due to contract dispute with their employees, a dead end that could lead significant economic damage businesses and consumers in Canada and the United States if train service does not resume soon.
Canadian National and CPKC railways announced they were locking out their employees after the 12:01 a.m. ET deadline expired Thursday, and new agreements with Teamsters Canada Rail, the rail workers' conference representing about 10,000 engineers, conductors and dispatchers, were not reached.
All rail service within Canada and all service across the U.S. border has been suspended, although CPKC and CN trains will continue to operate in the U.S. and Mexico.
According to the U.S. Department of Transportation, billions of dollars worth of goods are transported by rail between Canada and the United States every month.
“If rail service were to stop completely, it would hurt businesses and families across the country,” said Jay Timmons, president and CEO of the National Association of Manufacturers. “Manufacturing workers, their communities, and consumers of all types of products would be hurt by supply chain disruptions.”
There will be other impacts, including more than 30,000 commuters in Vancouver, Toronto and Montreal who will have to find a new way to get to work because their trains won't be able to run on the CPKC tracks while the railway is closed.
Business groups have called on the government to intervene, but Prime Minister Justin Trudeau has refused to force both sides into arbitration.
CN said it was waiting for a response to one final offer it made late Wednesday when it locked out workers. CPKC spokesman Patrick Waldron said the union rejected its final offer, which CEO Keith Creel made in person at the bargaining table. Both railroads said they would end the lockout if the union agreed to binding arbitration.
“Despite the lockout, the Teamsters union continues to negotiate with both companies,” the union said in a statement.
CN has been negotiating with the Teamsters union for nine months, while CPKC has been trying to reach an agreement for a year, unions said.
Many companies in all industries rely on rail to deliver their raw materials and finished products, so without regular rail service they may have to reduce production or even close.
That's why two years ago the US government prevented railroad workers from going on strike and forced them to sign a contract despite their concerns about the grueling work schedule and lack of paid sick leave.
Canada's railways have occasionally shut down briefly in the past during contract negotiations — CPKC was most recently shut down for a couple of days in March 2022 — but it's rare for both railways to shut down at the same time. The impact on business will be magnified because both CN and CPKC are shut down.
Both CN and CPKC have been shutting down gradually since last week ahead of the contract deadline, with shipments of hazardous chemicals and perishable goods the first to be stopped to prevent them from getting stuck somewhere along the tracks.
As negotiations on the Canadian contract neared their end, one of the largest U.S. railroads, CSX, broke with a long-standing U.S. freight railroad practice that has lasted for years, to negotiate jointly with unions. CSX reached agreements with several of its 13 unions, representing 25 percent of its workforce, ahead of national negotiations later this year.
The new five-year contracts would provide a 17.5 percent raise, better benefits and vacation time if ratified. Among the unions that signed the agreements with CSX are part of the SMART-TD union, which represents conductors in one region, the Transportation Communications Union, the Brotherhood of Railway Carmen and the Transportation Workers Union. TCU President Artie Maratea said he was proud his union reached an agreement “without years of unnecessary delays and stalling tactics.”
Trudeau was reluctant to initiate arbitration because he did not want to offend the Teamsters Canada Rail Conference and other unions, but he urged both sides to reach an agreement Wednesday because of the enormous economic damage a complete shutdown could cause.
“It is in the interests of both sides to continue to work hard at the negotiating table,” Trudeau told reporters in Gatineau, Quebec. “Millions of Canadians, workers, farmers, businesses across the country are counting on both sides to do the work and come to a solution.”
Numerous business groups are calling on Trudeau to act.
Trudeau said Labour Minister Stephen MacKinnon met with both sides at the CN talks in Montreal on Tuesday and will attend the CPKC talks in Calgary, Alberta. MacKinnon later said he had completed his meetings with the rail companies and the Teamsters union.
“Workers, farmers, commuters and businesses cannot wait. Canadians need urgency at the negotiating table. Parties need to make deals now,” he wrote on social media platform X.
The talks have stalled over issues related to railroad scheduling and rules designed to prevent fatigue and ensure train crews get enough rest. Both railroads have proposed switching from the current system, which pays workers based on miles traveled per trip, to an hourly system they say will make it easier to provide predictable rest time.
The railroads said their contract offers included raises in line with recent industry deals. Engineers earn about $150,000 a year at Canadian National, while conductors earn $120,000, and CPKC says their salaries are comparable.
Similar quality of life issues about the busy schedule and lack of paid sick leave almost led to US Railroad Strike two years ago, while Congress and President Joe Biden intervened and forced the unions to accept the deal.
Manufacturing companies may have to scale back or even stop production if they can't get rail service, while ports and grain elevators will quickly become clogged with cargo waiting to be shipped. And if the dispute drags on for a couple of weeks, water treatment plants across Canada may have to stand still without new supplies of chlorine.
Some companies would undoubtedly turn to trucking to move some of their products, but there is no way to offset the volumes that the railroads carry. It would take about 300 trucks to move everything that one train can.