As of August 22, labor negotiations between two Canadian rail transportation companies and the Teamsters Canada Rail Conference, representing their workers, have slid to a screeching halt. The railroad companies involved, Canadian National Railway Co. and Canadian Pacific Kansas City, have declared they will shut down their rail activity until further notice.
The work stoppage is likely to cause increased demand for trucking companies and headaches for North American supply chain professionals. The details of who initiated the work stoppage may hold clues for how severe the impact on North American supply chains will be.
Work stoppages are, as the name suggests, any time work, well, stops. When it comes to labor issues, there are two kinds: Strikes and lockouts. Strikes are initiated by unions on behalf of represented employees to pressure their employers; Lockouts are initiated by companies to pressure their workers. Both usually occur during contract negotiations, and both are meant to call the other side’s bluff.
In a strike, employees at a worksite show up but refuse to work. The reasoning behind a strike is that a company loses money from loss of production if its workers don’t provide the necessary labor. This forces a tough calculus on the company: Spend money meeting striking workers’ demands, or take increasing losses from the ongoing work stoppage.
In a lockout, employers at a worksite simply stop offering work to employees. The reasoning behind a lockout is the mirror image of a strike: Employees work to earn money, and if they can’t earn money by working, they’ll accede to the demands of their employer.
The United Auto Workers union’s strike, last year, of General Motors, Ford, and Stellantis, did not include any employer-initiated lockouts, but the UAW’s strategy revealed some of the logic behind them.
The UAW strike was, like other strikes, predicated on doing financial damage to the targeted companies. UAW President Shawn Fain could have done massive damage by simultaneously striking at over a thousand UAW-represented auto factories in the U.S. Yet doing so would have significantly strained the UAW’s strike fund, which is used to pay workers while they’re on strike in lieu of wages.
Before the strike, analysts predicted the strike fund would limit the UAW’s capacity to strike. Fain’s “stand-up” strike, which involved waves of strikes at individual locations, allowed most UAW members to continue going to work and earning wages, effectively extending the time the UAW could continue to hinder normal business.
The effect of CN and CPKC’s lockout is similar to if the UAW had called a strike of all of its represented locations at the same time. The Teamsters Canada Rail Conference are now effectively on strike, whether they wanted to or not, and spending money paying striking workers accordingly. If CN and CPKC can weather the financial damage to their companies better than the employees represented by TCRC-CFTC, they can force the union to the table under their terms.
Unfortunately for North American shipping, the stoppage is close to a mutual one. On August 18, the Teamsters issued a 72-hour strike notice against CPKC, indicating they had already begun to prepare for a strike. What happens next will be determined based on which side feels they have the strongest hand, and which folds first.
