In six decades, the union negotiation strategy for freight rails has been split.

• For the first time in 61 years, Union Pacific and CSX have decided to forgo formal national labor talks with railroad unions and instead concentrate on local negotiations.
• CSX and UNP have decided not to participate in a national collective bargaining deal with the traditional joint effort, while CSX, Norfolk Southern, and BNSF have reached tentative agreements at the local level.
• The rail workers union characterized the current round of negotiations as "uncharted waters" just two years after a nationwide strike was narrowly averted.

For the first time in 61 years, the class 1 freight railroads are pursuing the next round of national talks with labor unions differently. While most major rails have traditionally conducted formal national labor agreement negotiations with the rail worker unions as a joint effort, and have now decided to negotiate on their own with rank-and-file chapters at the local level first.

Union Pacific is not taking part in the multi-employer bargaining coalition for the 2025 bargaining round, according to a company spokesperson. Instead, the company is concentrating on hyper-local negotiations that prioritize local service, operating efficiency, and customer satisfaction.

The decision has left two major freight rails, Union Pacific and BNSF, as part of a group seeking a national deal together.

was not a part of the national bargaining for rules and wages.

Major freight rails, excluding Union Pacific, have already reached 50 tentative local agreements. Any carriers and unions that have reached and ratified agreements will not need to participate in the national bargaining round.

The negotiation process with the largest railroad union, SMART-TD, has been described as "uncharted waters" by Jeremy Ferguson, its president, as it has never resulted in a tentative agreement before the scheduled negotiations begin, as required by the Railway Labor Act.

This scenario is 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, according to Ferguson.

The National Carriers' Conference Committee, representing the nation's freight railroads in national collective bargaining, has announced that early agreements will result in a 18.8% increase in pay over five years. With current inflation forecasts, this increase will translate into real wage growth and pay certainty for the life of the contract. Added to the 24% wage increase from the 2022 bargaining round, wages will increase by 50% (compounded) from 2020-2029.

In 2025, employee monthly health-care premiums will decrease by more than 10% to $277/month, which is significantly lower than the national average of more than $500/month for other employer-provided family coverage. Additionally, unionized employees will receive more paid vacation earlier in their careers as part of an effort to address union demands for better work-life balance.

The NCCC reports that most Class I rail employees earn between $90,000 and $140,000 in annual wages, with an average of $111,000. When considering retirement, sickness and health insurance benefits, the average total compensation for these employees ranges from $135,000 to $190,000, with an average of approximately $160,000.

In 2022, a nationwide freight rail strike was narrowly averted after contentious negotiations with carriers determined to implement changes to freight train crews.

In September 2022, a tentative agreement between rail companies and unions was reached, but it was later rejected by a majority of the unions' rank-and-file members. As a result, railroads initiated an embargo process, which slowed down supply chains. The railroad industry warned that the economy would suffer $2 billion in damage per day, while other industry groups predicted a direct hit to GDP and an inflation spike. However, a strike was averted in December 2022 when Congress and President Joe Biden intervened to pass the tentative agreement into law, fearing the potential consequences of a shutdown of the national economy.

"Richard Edelman, a labor attorney with Mooney, Green, Saindon, Murphy & Welch, stated that the unions are open to having a more constructive round of negotiations compared to the previous one, but only if the terms are acceptable to the workforce. He also mentioned that some carriers are willing to engage earlier and have more meaningful negotiations."

Union workers in the United States tend to express their anger towards their employers through their votes against tentative agreements. These agreements provide the only opportunity for them to voice their frustration and dissatisfaction with their treatment.

It is surprising to see the Class 1 rails negotiating with the unions independently, according to Daniel Imbro, an analyst at Stephen.

"Imbro stated that while BNSF, CSX, and NSC have agreed with their union workforce on similar terms, the process is unusual compared to recent cycles. He believes that CSX's early timing, which started the trend, shows their prioritization of service at the moment."

With inflation decreasing, CSX could have possibly delayed reaching agreements, but management is willing to invest in the workforce at a higher rate to maintain service.

BNSF has announced nine tentative union agreements, five of which have already been ratified, representing 53 percent of its union workforce. Despite this, a BNSF spokesperson stated that the company plans to attend the formal national labor negotiations.

BNSF has reached agreements with unions such as NCFO, SMART-MD, ATDA, TCU, and BRC, and has also reached tentative agreements with IBEW, SMART-TD, SMART-TD-YDM, IBB, and other unions.

Approximately 67% of Norfolk Southern's craft workforce has been covered by tentative agreements with 10 of its 13 unions to date.

Mark George, Norfolk Southern CEO, stated on its website that the ongoing early advancements in negotiating new collective bargaining agreements with labor unions provide our craft colleagues with assurance regarding wages and benefits.

The agreement, which has been recently approved, includes a 3.5-percent annual wage increase for the next five years, as well as enhanced vacation benefits and improved health care plans for Norfolk Southern railroad employees.

Additional unions have reached tentative agreements with Norfolk Southern, which are still subject to ratification.

As in past rounds, Norfolk Southern will give its bargaining proxy to the National Carriers' Conference Committee and participate in the bargaining round that opens Nov. 1 with those unions with whom it has not reached early agreements.

Imbro said investors are paying close attention to the negotiations.

"As we approach the end of the year, we will closely monitor the UNP's decision not to participate, as the team has been focused on reducing costs and improving service. It is possible that they are waiting to see if they can secure lower wage inflation in the coming months before making a decision. However, service will be closely scrutinized as we move closer to the agreement."

Now that it's assumed that most have locked in wage inflation of roughly 4% in year one, the investor focus has shifted to price.

""Is it possible for price to surpass inflation and sustain margin expansion?" Imbro remarked, stating a common investor concern following agreements."