By Brian Platt and Monique Mulima (Bloomberg) —

Canada’s two largest railways are preparing to restart operations after Prime Minister Justin Trudeau’s government stepped in to try to end a labor dispute that has stopped freight movement across the country.

Labor Minister Steven MacKinnon asked the Canada Industrial Relations Board to impose binding arbitration on Canadian National Railway Co., Canadian Pacific Kansas City Ltd. and the Teamsters union. He also ordered the board to direct the parties to extend their current labor contract, and said the railways should resume operations “forthwith.” 

MacKinnon told reporters in Ottawa he’s “confident” the measures will get the trains rolling again within days, ending a lockout that began just after midnight Ottawa time on Thursday. 

Workers at Canadian National said they’d take down picket lines and go back to work on Friday. But thousands of employees at Canadian Pacific are still off the job, and the Calgary-based railroad said the union wants to challenge the constitutionality of the government’s decision. 

The industrial relations board — an independent tribunal — will now have its own process to follow. MacKinnon said the board will consult with all sides and he hopes a decision will come “very quickly” that will send railway employees back to work.

“I assume that the trains will be running within days,” he told reporters Thursday. “But I want to be deferential to the process that will unfold here.”

The CIRB is scheduled to hold a case-management conference at 10 a.m. Ottawa time Friday to discuss next steps, according to a statement from Canadian Pacific.

The Teamsters Canada Rail Conference said it’s reviewing the minister’s referral and CIRB’s eventual response with its lawyers. In an emailed statement, union division president Paul Boucher also accused the railways of manufacturing the crisis and manipulating the government to disregard worker rights, and attacked the government for stepping into the dispute just hours after rail traffic came to a halt. 

The two railways control about 80% of Canada’s rail network, and shutting them down swiftly causes economic harm.

A two-week lockout would shave as much as C$3 billion ($2.2 billion) from the country’s nominal gross domestic product, including a C$1.3 billion hit to labor income and a C$1.25 billion loss to corporate profits, the Conference Board of Canada said. Moody’s put a higher price tag on the stoppage, saying it could reduce nominal GDP by as much as C$4.8 billion if it lasted two weeks. 

The companies and the railways remain “very, very far apart” in talks on a new contract, the labor minister said. 

“We have an impasse here,” he said. “We wanted to give these negotiations the absolute possibility of concluding successfully. We see little prospect of that currently.”

Commodities Supply Chain

Business groups in Canada and the US have been calling on the Canadian government to intervene, as the lockout disrupted the countries’ interconnected supply chain. Commodities like coal, wheat, fertilizer and lumber depend on the railways, and there are few shipping alternatives. 

Teamsters, which represents more than 9,000 workers at the two railways, said its members were negotiating provisions to address scheduling and crew fatigue. The previous collective agreements had expired on Dec. 31, 2023.

Canadian National said it ended its lockout at 6 p.m. Eastern time and has started a recovery plan.

“While CN is satisfied that this labor conflict has ended and that it can get back to its role of powering the economy, the company is disappointed that a negotiated deal could not be achieved at the bargaining table despite its best efforts,” the company said in an emailed statement.

Canadian Pacific Kansas City also said it’s getting ready to operate again. 

“The government has acted to protect Canada’s national interest,” Chief Executive Officer Keith Creel said in a statement. “We regret that the government had to intervene because we fundamentally believe in and respect collective bargaining.”

MacKinnon said the government will also examine why labor disputes happen so frequently in the railway sector and the conditions that led to this week’s parallel work stoppages. 

“Millions of Canadians rely on our railways every day — workers, farmers, ranchers, commuters, small businesses, miners, chemists, scientists — the list goes on, and the impacts cannot be understated,” MacKinnon said. “They extend to every corner of this country.” 

© 2024 Bloomberg L.P.