Railway workers’ right to strike compromised by corporate regulatory capture

The Board accepted a request from the government to order more than 9,000 Teamsters members back to work at Canadian National Railway and Canadian Pacific Kansas City and to impose binding arbitration to produce a new contract.

Paul Boucher, president of the Teamsters Canada Rail Conference stated in response to the order: “It signals to corporate Canada that large companies need only stop their operations for a few hours, inflict short-term economic pain and the federal government will step in to break a union.”

CIRB has not designated railways as an “essential service,” a status that would give legal standing for the government to force staff back to work. The union has now filed four separate appeals with the Federal Court of Appeal, challenging the minister’s referrals and CIRB’s binding arbitration orders on the grounds that that they violate workers’ rights to collectively bargain and strike.

According to Bruce Curran, a specialist in labour law at the University of Manitoba’s law faculty: “Ordering the workers back to work may in fact present Charter problems with respect to the workers’ constitutionally protected right to strike and right to collectively bargain, such that the [board] may have some legal concerns.” He also stated that unions’ concerns around safety issues will not be addressed through this binding arbitration process, because binding arbitration doesn’t deal particularly well with non-monetary issues.

According to the union, the primary issue in the negotiations, which have been underway for a long time, is the companies’ desire to gut safety fatigue provisions, namely efforts to weaken protections around rest periods, shift length, and scheduling. CN is also targeting fatigue provisions and wants to implement forced relocation provision, requiring workers to move long distances to fill labour shortages.

CIRB appoints arbitration board members. Case management conferences are currently underway. There will likely be separate arbitrations for each railway. It is expected the arbitration board will rule soon, given the seriousness of the dispute. However, insiders have told me “don’t hold your breath.” If no agreement is reached among the parties, the arbitration board will rule. Ginette Brazeau, the CIRB chair, will oversee the case.

Safety regulation deficiencies, corporate resistance

Working conditions have become more dangerous over the last decade due to major staff cuts, in line with the precision scheduled railroading model—in tandem with running longer heavier trains—that has been embraced by almost all major railways. CPKC CEO Keith Creel’s predecessor at CP, Hunter Harrison, pioneered this model. The volume of dangerous goods on the tracks rose by 70 per cent between 2011 and 2019, according to the government’s rail traffic database.

Railway safety oversight systems, called Safety Management Systems (SMS), introduced by Transport Canada in 2001, contain serious defects. Past Auditor General reports have found flaws in Safety Management Systems and have made numerous recommendations for improvements, including science-based fatigue management practices. Railways have long resisted their implementation accompanied by Transport Canada deference. They remain on the latest Transportation Safety board’s TSB’s Watch list. “The TSB has determined that railway companies’ SMS are not yet effectively identifying hazards and mitigating risks in rail transportation.”

Even after rules came into effect in 2023, aimed at reducing maximum shift length and raising minimum rest periods between shifts, companies have not heeded the new rules. On June 6, 2023, a Federal Court judge found CPKC guilty of contempt of court for employees working excessively long hours. CPKC has appealed.

Federal Transport Committee recommendations on rail fatigue management regulations

In May 2023, the Commons Standing Committee on Transport issued a report that made the following recommendations on railway safety in consultation with labour and management:

• That Transport Canada, based on the latest science, strengthen fatigue management rules for railway operators and require railway companies to do better in this area.
• That Transport Canada develop legislative and/or regulatory structures to ensure predictable scheduling for rail workers that reflect best practices for fatigue management.
• That Transport Canada review CNN and CP Rail’s draft fatigue management plans to address the impact of deadheading on maximum duty periods and require advance work schedule notice to employees.
• That Transport Canada establish adequate standards for away-from-home rest facilities used by rail employees to ensure proper rest between shifts.

As a result of my research over the last 10 years, culminating in my book—Lac-Mégantic Rail Disaster: Public Betrayal Justice Denied— I was invited to appear before the Standing Committee on Transport, Infrastructure and Communities’ review of Bill C-33 in late October 2023, regarding legislation proposed by Transport Canada to amend the Railway Safety Act, the Transportation of Dangerous Goods Act, among other legislative amendments. The bill is currently at report stage and has yet to go to third reading. Draft regulations are not expected until 2025. Delay, delay.

The income and power relationship between railway owners, CEOs, and workers

It’s important to understand the context within which arbitrations are taking place. There is a huge gap in the income and power relationship between the incomes of railway owners, their CEOs, and their workers.

Owners of both companies are mostly financial institutions—notably private equity companies. The three largest shareholders of CN are the Bill Gates Foundation, MFS Investment Management, and Wellington Management Company. The three largest CPKC owners are TC Fund Management Limited, Royal Bank of Canada, and Vanguard Group Inc.

Between 2013 and 2023, CN Rail’s net annual income doubled, from $2.6 billion to $5.6 billion. CPKC’s net annual income more than quadrupled during the same period, from $875 million to $3.9 billion. CN’s annual gross profit for 2023 was $9.243 billion.

With profits booming, things are comfortable in the companies’ executive suites. CPKC CEO Keith Creel took home over $20 million in 2023, according to the company’s financial filings. The average locomotive engineer earns about 0.6 per cent of the CEO’s compensation. CN CEO Tracy Robinson take-home total compensation was $14 million in 2022.

Regulatory capture

The power relationship between Transport Canada and the railways clearly fit within the bounds of regulatory capture theory, as defined by Amatai Etzioni.

Regulatory capture describes the corporate co-optation of regulatory agencies. Historian and author John Ralston Saul characterized the last four decades as a “corporate coup d’état in slow motion.”

It should be stressed that most civil servants at Transport Canada are conscientious and work to uphold the public interest. The capture relationship generally applies to government and leadership.

Under regulatory capture, corporations shape policy, legislation and, ultimately, regulations that govern their operations. They regularly block or delay new regulations and they exert pressure to remove or dilute existing regulations, which they frame as “red tape” that allegedly makes them less competitive or is detrimental to job and wealth creation.

Corporate-government interactions are largely shielded from public view. Political agendas are set in private meetings with cabinet ministers, committee chairs and senior bureaucrats, among other lobbying activities. When compared to international legislation, Canada’s access-to-information laws and whistleblower protections rank poorly.

Regulatory capture is reinforced by the extreme industry concentration as well as a massive corporate lobbying and management consulting (“consultocracy”) eco-system. I agree with Taylor Noakes that such a vital national infrastructure under the sway of profit-driven corporations is contrary to the public interest.

In my book Corporate Rules, I review measures that seek to rebalance the corporate government power relationship; measures that minimize vulnerabilities to corporate capture and make regulations more capture resistant.

While the odds of transcending the power status quo are formidable, transformative changes are possible. To paraphrase Italian philosopher Antonio Gramsci, in a 1930s letter from prison entitled Pessimism of the Intellect, Optimism of the Will, giving up the fight is not an option.