Impending Rail Strike Threatens Major Disruptions Across Canada and US Supply Chains

The ongoing labor dispute between Canadian National Railway Co. (CN), Canadian Pacific Kansas City (CPKC), and the Teamsters Canada Rail Conference (TCRC) has escalated, with significant implications for the Canadian economy. Following the Canada Industrial Relations Board’s (CIRB) decision on August 9, which did not bring the parties closer to a resolution, CN has formally requested the intervention of Canada’s Minister of Labor under the Canada Labor Code. The company is seeking government action to protect the economy from the impacts of prolonged uncertainty in the rail sector.

The CIRB ruling cleared the way for a potential work stoppage at both CN and CPKC, prompting CN to announce that it might have to begin a phased and progressive shutdown of its network, starting with embargoes on hazardous goods. This shutdown would culminate in a lockout, set to begin on August 22 if no meaningful progress is made at the negotiating table or through binding arbitration. CPKC also announced that it would issue a lockout notice effective the same day if no settlement is reached.

The CIRB determined that no services need to be maintained during a rail strike or lockout to protect public health and safety, thereby extending the cooling-off period by 13 days. After this period, a legal strike or lockout could occur, potentially disrupting rail services across Canada. In preparation, CPKC plans to issue an embargo on toxic by inhalation dangerous goods to ensure they are safely removed from the rail network before any work stoppage.

The CIRB’s decision comes as CN and CPKC seek to overhaul the pay structure for conductors and engineers, replacing it with a modernized hourly wage system. The TCRC has opposed these changes, arguing that they would lead to salary cuts and negatively impact work-life balance and rest periods. The West Coast ports of Vancouver and Prince Rupert, which rely heavily on rail for cargo transportation, would be among the most affected by a strike.

Shippers are exploring alternative options to move freight in the event of a strike, including transloading cargo into long-haul trucks or transporting containers south to Seattle for onward movement by U.S.-based railroads. However, these alternatives may not fully mitigate the disruption, particularly for non-containerized commodities like diesel, propane, potash, and grain, which are crucial to various sectors of the economy.

The Canadian government, with parliament out of session until September 16, may need to return to Ottawa early to pass back-to-work legislation if a strike occurs. The CIRB ruling focused on whether a strike impacting non-containerized commodities would pose a danger to public health and safety. The board concluded that reasonable alternatives exist, such as trucking and pipelines, to handle these goods in the short term.

The CIRB’s ruling follows meetings between the railroads, the union, and Canada’s Minister of Labor. Despite the ongoing negotiations, both CN and CPKC have expressed frustration with the lack of progress. CN, in particular, has indicated that it has lost faith in the negotiation process, citing the union’s unwillingness to engage meaningfully at the bargaining table. The company has warned that it will begin shutting down its network unless a resolution is reached.

The TCRC, representing approximately 6,000 workers at CN and 3,200 at CPKC, remains committed to negotiating in good faith, though it has reserved the right to initiate a strike if necessary. The union views the CIRB’s decision as a validation of its members’ right to withdraw services and is determined to secure a favorable settlement.

The potential strike is unprecedented in Canada’s rail industry, as it would simultaneously affect both major railroads. Historically, labor actions have typically impacted only one railroad at a time, allowing freight to be shifted to the other. This time, the synchronized timeline of the negotiations could lead to widespread disruption, affecting companies in both Canada and the United States.

The U.S. is Canada’s largest trading partner, and a significant portion of cross-border freight relies on rail transportation. A strike could have far-reaching consequences for both countries, particularly for industries that depend on the timely movement of goods.

In anticipation of a possible strike, some companies have already begun diverting U.S. customers’ ocean cargo away from Canadian ports. Others are lining up additional trucking capacity on both sides of the border to mitigate potential disruptions. However, capacity is limited, and any significant rail disruption could quickly strain available resources.

As the August 22 deadline approaches, all eyes are on the ongoing negotiations. Industry analysts continue to monitor developments closely, with some predicting that if a stoppage occurs, there could be a temporary shift of freight to the U.S. network. The outcome of the negotiations will have significant implications for the North American economy and the stability of supply chains across the continent.