PEB makes wage hike recommendations for railways, unions

The President’s Council on Emergency Situations forwarded to the White House and stakeholders a The report is 124 pages long a list of recommendations for how freight railroads and unions can work toward a new labor agreement.

The report’s guidelines can be used as a basis for a labor agreement between freight railroads and their unions.

A new labor agreement has been in place since January 2020, but negotiations are ongoing have failed to progress. The Federal Mediation Board took up negotiations, but released the parties from that effort earlier this summer. The three-member Presidential Emergency Management Board (PEB), created and appointed by Joe Biden, became involved in the process and the hearings held in the last month.

Following the board’s report released late Tuesday, all parties will now participate in a 30-day cooling-off period during which both sides will consider the recommendations.

Among the recommendations in the report, which can be viewed at National Mediation Council websiteis an annual wage increase that will take place over five years starting in 2020. According to the National Conference of Carriers Committee (NCCC), the group that negotiates on behalf of the freight railroads, wages will increase by 24% over a five-year period from 2020 -24, with a 14.1% wage increase effective immediately.

“The recommendations also include five annual lump sum payments of $1,000, adjustments to health care premiums and limited changes to work rules,” the NCCC said. “Part of the wage increases and lump sum payments will be retroactive, resulting in immediate payments to employees averaging more than $11,000.

“These recommendations, if implemented, would include the largest pay increase in decades, bringing the average salary for railroad workers to about $110,000 a year by the end of the agreement. When health care, retirement and other benefits are factored in, the total value of the railroad workers’ compensation package, which is already one of the highest in the nation, will average more than $150,000 a year.”

Both parties’ proposals for salary increases differ

Pay raises and changes to health benefits have been issues for both sides since contract negotiations began in January 2020.

In developing the recommendations, the PEB noted “a wide variation in the proposals, both in percentage terms and in absolute dollar terms. When all proposals that had a significant monetary impact and can be evaluated are considered, the parties’ proposals in this process are separated by more than $9 billion.”

According to the board, parties submitting wage proposals asked it to consider a variety of factors, including a history of negotiated wage changes; cost of living adjustments; recruitment and retention issues in today’s labor market; change in working conditions as a result of precise railway schedule and reduction of labor force; profitability of railway carriers; and economic forecasts of freight rail transportation.

The recommended wage increase splits the difference between the railroads’ offer and the union’s request, according to Susquehanna Financial Group transportation analyst Bascom Majors in a Wednesday report.

While the wage proposal favors railroads in the early years of 2020 and 2021, it calls for larger than historical increases in the remaining years, according to Majors. The salary increase for the first years will be retroactive.

“We see manageable low single digit earnings per share [earnings per share] Risk to US Rail in 2023 [estimates], but investors should adjust for 2-3% labor inflation, and rail customers should expect higher fares, hopefully coupled with better service,” Majors said. “Finally, workers can legally strike on September 16, and pressure from Congress could be the catalyst for an agreement.”

Majors also noted that the emergency board declined to address the size of the train crew, recommending instead that the parties discuss the issue at the local level.

“There are significant questions about whether the council has the authority to decide [the] crew composition [makeup of a train crew] process in general,” said PEB. “The question is clearly one that, despite its great importance, has been recognized time and again as a local question under [Railway Labor Act].”

In response to the report, Ian Jeffries, president and CEO of the Association of American Railroads, said that if railroads and unions agree to the board’s recommendations, the terms would lead to the largest overall wage increase in nearly 40 years.

“While Biden’s PEB recommendations go well beyond the rail carriers’ proposals, they provide a useful framework for reaching a resolution,” Jeffries said. “In the interests of all railroad stakeholders, now is the time for the railroads and their unions to enter into a contract. The industry is ready to offer agreements based on the PEB’s recommendations to secure long-overdue wage increases for our employees and prevent disruption to rail service.”

The AFL-CIO Transportation Trades Department could not be reached for comment.

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