Railroads vs. unions: What's next and why the strike threat isn't over

The threat of a U.S. freight railroad strike still looms. Union members still need to ratify a tentative agreement reached by their leaders. Some local members have already rejected the terms. 

The largest U.S. freight railroads and union leaders struck a tentative deal Wednesday after 20 hours of negotiations, temporarily averting a strike that would have shut down rail lines across the country and disrupted the economy. 

But the issue is far from over. Members of the International Association of Machinists and Aerospace Workers District 19 already rejected the agreement, although they agreed to postpone a strike until Sept. 29 to allow more time for negotiations and to allow other unions to vote.

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The tentative deal

The deal was negotiated by the unions representing engineers and conductors, but all 12 rail unions will likely benefit from the concessions railroads made. 

The new contracts provide rail workers a 24% wage increase during the five-year period from 2020 through 2024, including an immediate payout on average of $11,000 upon ratification, the Association of American Railroads said.

Railroad workers will also receive $5,000 in bonuses in the deal that is retroactive to 2020.

The railroad industry has said average rail worker salaries will reach $110,000 by the end of this five-year deal in 2025. 

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In addressing union concerns, the deal also includes an additional paid leave day a year. Railroads also agreed to let workers take unpaid time off for doctor’s appointments or medical procedures without being penalized under their attendance rules.

Workers will have to pay a larger share of their health insurance costs, but their premiums will be capped at 15% of the total cost of the insurance plan. Currently, railroad workers pay $228.88 per month for their health insurance, which is about 12.6% of the total cost of the plan.

What happened after the tentative deal was announced 

IAM members voted to reject their deal. However, the Transportation Communications Union and Brotherhood Railway Carmen Division jointly announced that members voted to ratify the deal. Votes by the other unions that approved tentative deals are still pending.   

Those results can happen at any time "because the tentative agreements have been made pending union member votes," Mark Mix, president of the National Right to Work Committee, told FOX Business.

There is a caveat. 

Mix said there is nothing in the Railway Labor Act that requires that rank-and-file workers vote to ratify union contracts, meaning union bosses can bypass such votes.

"They’ve also been known to impose a contract even after workers vote overwhelmingly to reject it," he said. 

Still, "given the political headache it would create for the Biden administration for this deal to fall apart now, if the union officials do allow a vote, rank-and-file workers will be under tremendous pressure to ratify the deal," Mix added. 

This means "agreeing to a contract they otherwise wouldn’t because it will advance the political goals of Big Labor at this critical moment just before the Midterms," he said. 

The National Mediation Board did not respond to FOX Business' request for comment.

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What could happen next?  

If the units reject the tentative agreements then the strike/lockout threat returns. However, a few things can happen in order to prevent a disruption to the economy. 

If the tentative agreement is rejected, even by some unions, Congress can intervene before a potential strike to keep the supply chain moving.

There could also be a final-offer arbitration, otherwise known as "baseball arbitration," where an arbitrator will view the unresolved issues on both sides and select one party's offer over the other.

"It is known as ‘baseball arbitration’ because each side submits a figure or proposed remedy and the arbitrator is required to select one offer or the other," according to law firm Welborn Sullivan Meck & Tooley.

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If the union does go on strike, then it will be "virtually impossible for the other unions to ignore" and they will honor the picket line, further hindering already troubled supply chains. 

"They will also say, 'we're having a sympathy strike,'" Mix said.  

Representatives for the Brotherhood of Locomotive Engineers and Trainmen, Union Pacific, Norfolk Southern and International Association of Machinists and Aerospace Workers District 19 did not respond to FOX Business' request for comment. 

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However, Jeremy Ferguson, president of SMART's Transportation Division, and Dennis Pierce, president of Brotherhood of Locomotive Engineers and Trainmen, issued a joint statement after the Transportation Division of the International Association of Sheet Metal, Air, Rail, and Transportation Workers and the Brotherhood of Locomotive Engineers and Trainmen Division of the International Brotherhood of Teamsters reached a tentative agreement. 

"For the first time our Unions were able to obtain negotiated contract language exempting time off for certain medical events from carrier attendance policies," the statement read. "Our Unions will now begin the process of submitting the tentative agreement to the rank and file for a ratification vote by the memberships of both unions."

The Associated Press contributed to this report.