Railways say lockouts ending after federal government orders binding arbitration

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The federal government has moved to end the railway stoppage, sending the labour dispute to the Canada Industrial Relations Board for final arbitration, but it’s still not clear how soon service will resume amid a dispute that is putting much of the Canadian economy at risk.

Labour Minister Steve MacKinnon made the announcement on Thursday, less than 24 hours after Canadian Pacific Kansas City (CPKC) CP-T railway and Canadian National Railway CNR-T locked out workers and shut down their rail networks.

The two companies made the move after they each failed to secure new contracts by Wednesday at midnight with the Teamsters union, which declared a strike at CPKC.

Both railways responded by announcing plans to restart operations. CN said its lockout was over as of 6 p.m. ET on Thursday and said rail service would resume “as soon as possible.” CPKC said it would begin hauling freight once it received the order from the CIRB.

The Teamsters Canada Rail Conference, which has opposed arbitration, called the order “shameful” and accused the government of doing so because it does not have the votes in Parliament to legislate a solution that would ”appease“ the railways. “Meanwhile, picket lines remain in place,” the union said.

When asked, Mr. MacKinnon indicated he could not guarantee that the Teamsters would not challenge the process.

A Teamsters spokesman, Christopher Monette, said it is too soon to say if the union planned to fight the order. “We are still reviewing the minister’s referral and seeking advice from counsel. The situation remains fluid,” Mr. Monette said.

Mr. MacKinnon said he is using his power under the law to skirt the collective-bargaining process and resolve the impasses because of the risks to Canadians and the economy created by the shutdowns. He said he is directing the CIRB to ensure that rail operations are resumed “forthwith.”

“Millions of Canadians rely on our railways every day – workers, farmers, ranchers, commuters, small businesses, miners, chemists, scientists,” he said. “The impacts cannot be understated and they extend to every corner of this country.”

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Mr. MacKinnon declined to predict when trains would resume running, noting that the CIRB is an independent agency. “I assume the trains will be running in days but I want to be deferential to the process here,” he told reporters in Ottawa. He is also directing the CIRB to extend the previous collective agreements during the process.

The shutdown has a far-reaching impact for multiple industries on both sides of the Canada-U.S. border and commuters in major cities such as Toronto and Vancouver that run on CPKC tracks. Business groups estimated that shuttering both of Canada’s freight railways would cost the economy billions, and lobby associations and some premiers urged the federal government to intervene.

Shipments of grain, chlorine for cities’ water-treatment plants, consumer goods and other freight have all ground to a halt and more than 9,000 rail employees were off the job Thursday.

In a statement, CPKC said it “will follow the order of the CIRB once it executes the minister’s direction. Our teams are already preparing for the safe and orderly resumption of our rail network and further details about timing will be provided once we receive the CIRB’s order.”

Both CPKC and CN said they were disappointed that the government had to intervene after months of collective bargaining produced no agreements.

“The government has acted to protect Canada’s national interest,” said Keith Creel, chief executive officer of CPKC, in a statement. “We regret that the government had to intervene because we fundamentally believe in and respect collective bargaining; however, given the stakes for all involved, this situation required action.”

The two sides are far apart in their demands and both companies have for weeks asked the federal government to send their cases to binding arbitration. Mr. MacKinnon declined last week, insisting that they work out a deal at the negotiating table.

Mr. MacKinnon said he wanted to give the negotiators and mediators the chance to reach deals. But when the deadlines passed and the lockouts occurred, he realized it was time to act.

Business groups, which have called for intervention, welcomed the government’s move.

“A prolonged stoppage would have imposed enormous costs on Canadian business and workers,” said Dennis Darby, head of Canadian Manufacturers and Exporters.

The Conference Board of Canada says a two-week stoppage at both railways would cause a $3-billion loss in Canada’s nominal gross domestic product for this year. Households would see a $1.3-billion decline in wages while business profits would fall by $1.25-billion.

CPKC, CN and the union have been in separate negotiations for several months. The Teamsters had issued a strike notice at CPKC but not at CN. Contract talks assisted by federal mediators resumed on Thursday in Montreal and Calgary.

In Calgary, Mr. Creel presented the union negotiators with a final offer shortly before the midnight Wednesday deadline, with improved wages and scheduling provisions.

“That offer was presented and it was rejected before the deadline,” said Patrick Waldron, a CPKC spokesman.

Both railways say they offered better pay and schedules for the workers, who include engineers, conductors, dispatchers and yard workers in three separate bargaining units. However, the union says its members need better safety and scheduling provisions, and the employers are demanding that they work longer days and spend more time away from home.

Court rulings that have strengthened and upheld collective bargaining and union rights have also made Ottawa’s options more difficult.

Section 107 of the Canada Labour Code gives the minister broad powers, including the ability to direct the Canada Industrial Relations Board to impose binding arbitration in the disputes. This can avert or end strikes or lockouts, but not always.

In June, then-labour minister Seamus O’Regan told the CIRB to use binding arbitration to resolve the contract talks between WestJet Airlines and the Aircraft Mechanics Fraternal Association. It was believed that move would eliminate the chance of a strike, but it did not.

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If a labour board referral does not work to end the lockout, the government could also table back-to-work legislation. The minority Liberals have used it in the past with the support of the Conservatives but a government official said Ottawa has no imminent plans to table such legislation and the government believes the two sides need to work out their differences.

The official noted that they are private-sector companies that need to manage their affairs.

The Globe and Mail is not identifying the official because they were not permitted to publicly discuss confidential government plans.

Complicating matters is that the House of Commons is on summer break, so if the Liberals choose to table back-to-work legislation, they would need to recall Parliament and also find an opposition party to support such a bill. The NDP has said it will not. The Conservatives and Bloc Québécois have not yet said where they stand on it but the Bloc this week noted that it has not previously supported such legislation.

Business groups warn that the shutdown of the railways, which carry $380-billion in goods every year, will cause lost jobs, closed factories and shortages of consumer goods and raw materials.

The railway shutdown is raising supply chain concerns in the United States. In a sign of how closely the U.S. is watching the issue, Mr. MacKinnon on Thursday spoke with his American counterpart, Acting Labour Secretary Julie Su.

With reports from Jeff Gray in Toronto and Jeff Jones in Calgary