For the first time in 61 years, there is a split between the class 1 freight railroads in how they are pursuing the next round of national talks with labor unions that begins on Friday. Formal national labor agreement negotiations with the rail worker unions, called, “national handling,” have been conducted as a joint effort among most major rails, but freight companies including Union Pacific and CSX have made the decide to negotiate on their own with rank-and-file chapters at the local level first.
“Union Pacific is not participating in the multi-employer bargaining coalition for the 2025 bargaining round,” said a company spokesperson. It is instead focused on what the spokesperson called hyper-local negotiations, focused on local service, operating efficiency, and how to serve customers.
Canadian Pacific Kansas City has never been a party to the national negotiations.
The decision leaves a three major freight rails — Norfolk Southern, BNSF, a subsidiary of Berkshire Hathaway, and Canadian National — in the group of rails that will seek a national deal together. But even while they pursue a national deal, major freight rails, excluding Union Pacific, have already reached numerous tentative local agreements covering wages and/or benefits packages, and any carriers and unions that have reached and ratified full agreements will not need to participate in the national bargaining round.
In a recent post to members, Jeremy Ferguson, president of the largest railroad union, SMART-TD, characterized the negotiation process as “unchartered waters” because it has never seen a tentative agreement come to fruition before the scheduled negotiations start, negotiations which are required under the Railway Labor Act.
“Undoubtedly, this scenario is a bit unusual to those of us who have been around for a decade or more, and it is even more unconventional to us as international officers who are usually engaged in national negotiations every three to five years,” Ferguson wrote.
According to the National Carriers’ Conference Committee, which represents the nation’s freight railroads in national collective bargaining, early agreements increase pay by 18.8% over five years. Based on current inflation forecasts, the increase will translate into real wage growth and pay certainty for the life of the contract, according to the NCCC. Combined with the 24% wage increase from the 2022 bargaining round, wages will increase by 50% (compounded) from 2020–2029.
Employee monthly health-care premiums will decrease by more than 10% in 2025, to $277/month (compared to a national average of more than $500/month for other employer-provided family coverage), according to the NCCC. Unionized employees will also have access to more paid vacation earlier in their careers, part of an effort to respond to union demands for better work-life balance.
According to the NCCC, most Class I rail employees earn between $90,000 and $140,000 in annual wages, depending on their craft, with average annual wages of $111,000. Adding retirement, sickness and health insurance benefits, the average total compensation ranges from $135,000 to $190,000 annually, with an average of approximately $160,000.
The changes come a few years after a nationwide freight rail strike was barely averted after a period of 2022 negotiations that Ferguson referred to as the “most contentious circumstances imaginable” with all of the carriers being “hell-bent” on achieving changes to freight train crews.
In September 2022, the rail companies and unions had tentatively agreed to a deal but it was later rejected by a majority of the unions’ rank-and-file members. Railroads started the embargo process, which slows down supply chains. At the time, the railroad industry warned the economy would suffer damage of $2 billion per day; other industry groups warned of a direct hit to GDP and inflation spike. A strike was averted in December 2022 after Congress and President Joe Biden intervened to pass the tentative agreement into law fearing what would amount to a shutdown of the national economy.
“All the unions are willing to engage in trying and have a more constructive round of negotiations compared to the last round,” said Richard Edelman, labor attorney with Mooney, Green, Saindon, Murphy & Welch, which represents multiple rail worker unions. “Some of the carriers seem to be willing to engage earlier and have more meaningful negotiations. However, the unions are prepared to agree only on terms that are acceptable to the workforce.”
He added, “Votes of union workers in the United States against tentative agreements tend to reflect the white-hot anger of union employees against their employers. Tentative agreements are their only chance for them to express their frustration with their employer and their anger at the way they have been treated.”
Daniel Imbro, analyst at Stephen, said is surprising to see the Class 1 rails negotiating with the unions independently.
“While BNSF, CSX, and NSC have all reached agreements with a lot of their union workforce that has similar terms, the way this is being done is abnormal relative to recent cycles,” said Imbro. “I think the early timing, started by CSX, indicates their prioritization of service right now.”
He said with inflation coming down, CSX could have potentially held out longer in reaching agreements, but management is willing to invest in the labor force, even at a higher rate, to do its best to ensure service. “This earlier negotiation could also allow CSX and others to make some changes to work rules, which could improve the rails’ speed and efficiency over time,” he said.
A BNSF spokesperson said it is planning to attend the formal national labor negotiations even as it has announced nine tentative union agreements, five of which have already been ratified. These agreements represent 53 percent of BNSF’s union workforce.
BNSF has ratified agreements with unions including National Conference of Firemen & Oilers (NCFO), SMART-MD, American Tran Dispatchers Association (ATDA), Transportation Communications Union (TCU), and the Brotherhood of Railway Carmen (BRC) unions. It also has tentative agreements with the International Brotherhood of Electrical Workers (IBEW), SMART-TD, SMART-TD-YDM (Yardmasters Department), the International Brotherhood of Boilermakers, and Iron Ship Builders (IBB).
To date, Norfolk Southern has reached tentative agreements with 10 of its 13 unions, covering approximately 67% of its craft workforce.
“The continued early progress we’ve made with our labor unions on ratifying new collective bargaining agreements give our craft colleagues peace of mind around wages and benefits,” said Mark George, Norfolk Southern CEO, in a statement.
The newly ratified agreement provides a 3.5-percent average wage increase per year over the next five years. It also offers Norfolk Southern railroaders more vacation earlier in their career and makes significant improvements to health care benefits.
Norfolk Southern has reached similar tentative agreements, which are still subject to ratification, with additional unions.
Norfolk Southern will participate in the bargaining round that opens Nov. 1 with those unions with whom it has not reached early agreements. As in past rounds, Norfolk Southern will give its bargaining proxy to the National Carriers’ Conference Committee.
Imbro said investors are paying close attention to the negotiations.
“In terms of UNP not participating so far, we will watch it closely as we head into year-end,” he said. “The team has been very focused on improving costs and service, and so perhaps they are opting to wait and see if they can secure lower wage inflation in a few months, but service will be scrutinized as we move closer to that agreement.”
Imbro said now that it’s assumed most have locked in wage inflation of roughly 4% in year one, the investor focus has shifted to price.
“Can price exceed inflation and support margin expansion?” Imbro said. “That’s one of, if not, the primary investor concern that we hear after these agreements have been reached.”