CN Moves Forward with Lock Out

Rhea-AI Summary

CN (TSX: CNR) (NYSE: CNI) has initiated a lockout of employees represented by the Teamsters Canada Rail Conference (TCRC) as of Aug. 22, 2024, at 00:01 ET. This action follows the union's non-response to CN's latest offer, which aimed to improve wages and align work hours with federal rest mandates. The offer included a pilot project for hourly rates and scheduled shifts on part of the network.

Over nine months of negotiations, CN proposed offers with better pay, improved rest, and more predictable schedules. Currently, conductors and locomotive engineers work approximately 160 days a year, with average earnings in 2023 of about $121,000 for conductors and $150,000 for locomotive engineers, excluding benefits. CN urges the Teamsters to engage in negotiations with urgency, emphasizing the importance of reaching a deal beneficial for employees, the company, and the economy.

Positive

• CN offered improved wages and work conditions in its latest proposal
• The company proposed a pilot project for hourly rates and scheduled shifts
• CN demonstrated willingness to negotiate by offering binding arbitration

Negative

• Failure to reach an agreement led to a lockout of TCRC-represented employees
• The labor disruption could potentially impact supply chains and the Canadian economy
• Multiple rounds of negotiations over nine months failed to produce an agreement

Insights

Labor Relations Expert

The lockout at CN represents a significant escalation in the ongoing labor dispute. This move could have substantial implications for Canada's supply chains and economy. The company's decision to proceed with a lockout after months of negotiations suggests a deep impasse between CN and the TCRC.

Key points to consider:

• CN's final offer included improved wages and alignment with federal rest provisions, indicating an attempt to address core union concerns.
• The proposed pilot project for hourly rates and scheduled shifts could be a major shift in railway work structure, potentially improving predictability for workers but altering traditional practices.
• The lockout's timing, coinciding with peak shipping season, could exacerbate supply chain pressures and impact various industries reliant on rail transport.

This situation underscores the challenges in modernizing railway labor practices while balancing worker demands and operational efficiency. The outcome of this dispute could set precedents for future negotiations in the transport sector.

Economic Analyst

The CN lockout poses significant risks to the Canadian economy. Rail is a important component of Canada's transportation infrastructure and a prolonged disruption could have far-reaching consequences:

• Supply chain disruptions: Many industries rely on rail for transporting goods, potentially leading to shortages and increased costs for consumers.
• Economic slowdown: The lockout could impact GDP growth, especially if it extends for a prolonged period.
• Inflationary pressures: Supply chain issues may lead to increased prices for various goods, potentially exacerbating inflationary concerns.

Moreover, the dispute highlights the ongoing challenges in the labor market, where workers are seeking better conditions and pay amid rising living costs. The outcome of this negotiation could influence labor relations across other sectors, potentially leading to a ripple effect in wage negotiations and work conditions discussions nationwide.

Transportation Industry Analyst

This lockout at CN, one of North America's largest railroads, is a critical event for the transportation sector. It highlights the ongoing tension between traditional railway operations and the push for modernization:

• The proposed hourly rates and scheduled shifts represent a significant departure from the industry's historical pay and scheduling structures.
• CN's focus on aligning work hours with federal rest provisions indicates a growing emphasis on safety and work-life balance in the sector.
• The average earnings reported ($121,000 for conductors, $150,000 for engineers) are substantial, suggesting that the dispute centers more on work conditions than base pay.

This situation could accelerate the industry's transition towards more structured schedules and potentially automation. Other rail companies will be watching closely, as the resolution could set new standards for labor relations and operational practices across the North American rail network.

MONTREAL, Aug. 22, 2024 (GLOBE NEWSWIRE) -- CN (TSX: CNR) (NYSE: CNI) has formally locked out employees represented by the Teamsters Canada Rail Conference (TCRC) as of Aug. 22 at 00:01 ET, after the union did not respond to another offer by CN in a final attempt to avoid a labour disruption.

This offer improved wages and would have seen employees work less days in a month by aligning hours of service in the collective agreement with federally mandated rest provisions. The offer also proposed a pilot project for hourly rates and scheduled shifts on a portion of the network as CN continues to believe this is a better and more predictable framework for our employees.

Without an agreement or binding arbitration, CN had no choice but to finalize a safe and orderly shutdown and proceed with a lockout.

Over the last nine months, CN has negotiated in good faith. The Company consistently proposed serious offers, with better pay, improved rest, and more predictable schedules. The Teamsters have not shown any urgency or desire to reach a deal that is good for employees, the company and the economy.

We urge the Teamsters to engage in these negotiations with the urgency and importance that this situation requires.

Current Rest and Wages
Rest:

• By combining Duty and Rest Period Rules (DRPR), paid sick days, personal leave days, and existing rest and vacation provisions in their collective agreements, conductors and locomotive engineers currently work approximately 160 days a year.
  

Wages:

• In 2023, the average conductor earned approximately $121,000, not including pension and medical benefits.
• In 2023, the average locomotive engineer earned approximately $150,000, not including pension and medical benefits.

Background on 2024 Negotiations and Offers
In January, CN offered the TCRC a modernized agreement that improved safety, wages, and work/life balance while protecting acquired rights. This offer was refused.

The offer was then improved in April with a focus on better wages (75$/hour for Locomotive Engineers and 65$/hour for Conductors), job security, and guaranteed earnings for employees. The TCRC refused the improved offer.

In May, CN then presented a simplified offer within the framework of the existing collective agreement with improved wages and predictable days off, which the TCRC also refused.

In the absence of a path forward, CN offered to voluntarily submit to binding arbitration in June. Binding arbitration is a process where both parties empower a mutually agreed upon independent arbitrator to determine the terms of a settlement. It is an impartial approach that would achieve a resolution while avoiding a costly disruption to supply chains, Canadian consumers, and the Canadian economy. The TCRC refused this offer.

All of the information regarding the offers, including details on the proposed wages, rest, and labour availability, is available publicly here.

CN Forward-Looking Statements
Certain statements by CN included in this news release constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws. By their nature, forward-looking statements involve risks, uncertainties and assumptions. CN cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty. Forward-looking statements may be identified by the use of terminology such as “believes,” “expects,” “anticipates,” “assumes,” “outlook,” “plans,” “targets,” or other similar words. Forward-looking statements reflect information as of the date on which they are made. CN assumes no obligation to update or revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable securities laws. In the event CN does update any forward-looking statement, no inference should be made that CN will make additional updates with respect to that statement, related matters, or any other forward-looking statement.

About CN
CN powers the economy by safely transporting more than 300 million tons of natural resources, manufactured products, and finished goods throughout North America every year for its customers. With its nearly 20,000-mile rail network and related transportation services, CN connects Canada’s Eastern and Western coasts with the U.S. Midwest and the Gulf of Mexico, contributing to sustainable trade and the prosperity of the communities in which it operates since 1919.

Contacts:
Media	Investment Community
Jonathan Abecassis	Stacy Alderson
Director, Public Affairs and	Assistant Vice-President
Media Relations	Investor Relations
(438) 455-3692 media@cn.ca	(514) 399-0052 investor.relations@cn.ca

FAQ

When did CN initiate the lockout of TCRC-represented employees?

CN initiated the lockout of TCRC-represented employees on August 22, 2024, at 00:01 ET.

What were the average earnings of CN conductors and locomotive engineers in 2023?

In 2023, CN conductors earned an average of approximately $121,000, while locomotive engineers earned about $150,000, not including pension and medical benefits.

How many days per year do CN conductors and locomotive engineers currently work?

CN conductors and locomotive engineers currently work approximately 160 days per year, considering various rest and leave provisions.

What key improvements did CN offer in its latest proposal to TCRC?

CN's latest proposal included improved wages, alignment of work hours with federal rest mandates, and a pilot project for hourly rates and scheduled shifts on part of the network.