OPRRMS Wrote:
-------------------------------------------------------
> I was wondering if you could provide any
> additional information on what you posted here:
> [www.altamontpress.com]
> ,70228,70240#msg-70240 about a nation-wide hiring
> freeze until all former Rock Island employees had
> been hired by other railroads. I have been unable
> to uncover anything about a government order
> requiring that. I do know that SP gave the right
> of first refusal to former RI employees when it
> hired employees for the so-called "Cotton Rock,"
> but SP also hired many, many new people who were
> not ex-Rock at locations around the system during
> that same time frame.

As part of my quest to find out more information on this subject, I contacted Dr. Fred Gamst, who's well respected in matters involving rail labor. He sent me the following, taken from one of his papers. (It may not format properly when posted here, but all the text is there.)

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5-9. THE MILWAUKEE AND ROCK ISLAND CONDITIONS

5-9.1. General Backgrounds

An important pair of interrelated conditions of 1980 were not first imposed by the ICC, but were approved by the Commission. Instead, they were first structured by Congress and the Federal Railroad Administration (FRA). (The FRA was created by Section 3(e)(1) of the Department of Transportation Act of 1966 [80 Stat. 932] and, among other responsibilities, coordinates federal support of rail transportation.) With Milwaukee and Rock Island conditions, the steadily increasing amount of economic protection to railroad employees in ICC-approved transactions, since the 1930s, took an abrupt about-face.

By 1978, both the Chicago Rock Island and Pacific Railroad Company (the "Rock Island") and the Chicago, Milwaukee, St. Paul, and Pacific Railroad Company (the "Milwaukee") were under strong economic pressure owing to deteriorating traffic levels. But, no 3-R Act for the Midwest and Plains states was to bail out these two carriers. Already, it was apparent that Conrail could not meet its multiple projected goals as set by Congress and would consume all of its public funds under Title V of the 3-R Act, for its reimbursement for the costs of employee protection.

On March 17, 1975, the Rock Island, then the nation's eleventh largest railroad with 7,000 route miles of track in 13 states, filed for bankruptcy. The railroad had previously been in receivership in 1915 and in 1935. The federal USRA twice refused a Rock Island request for a loan of $100 million to remain in operation, because the agency felt the line would be unable to repay its loan. Rock Island president John Ingram outlined a number of causes for his railroad's crisis of insufficient cash flow: a 15 % decline in freight traffic during the previous three months, refusal of the ICC to grant a 7% increase in freight rates to American railroads, USRA refusal to loan the road $100 million, and refusal of the ICC to approve the plan it studied for ten years to merge the Rock Island into the UP and the SP (Nelson 1975). The ICC had authority to order other railroads to assume an insolvent carrier's operations for up to eight months, with the federal government paying for any financial losses, about $8 million per month in this instance. The folk song "Rock island Line" ends with: "But you're going to miss me when I'm gone." These words were not at all prophetic about the line.

A reason the USRA denied the loan was that about 80% of the areas serviced by the railroad could be done by other carriers: the Rock island was not essential to the regional economies. As a way of solving the problem of insolvency, DOT and ICC spokesmen testified to congress that competing railroads should be allowed to assume the Rock Island's operations. In contrast to the ICC's molasses-like processing of the Rock island's request to merge into the UP and SP, the DOT desired that parts of the line should be allowed to be merged into competing railroads without the ICC's final protracted approval (anon. 1975d).

In September 1979, the Rock Island's cash flow position became so critical that the carrier was thereby prevented from continuing normal rail operations. Accordingly, the Commission issued its Directed Service Order no. 1398, authorizing the Kansas City Terminal Ry. Co. (KCT), under 49 USC ¤ 11125, to provide service over the Rock Island system, as a "directed rail carrier" on October 5, 1979 (K.C.T. Ry. Co.--C.R.I.&P., 360 I.C.C. 289, 478, 718 (1979-1980). This KCT directed service was to end on March 23, 1980. For this date, the ICC noted that: "The RI Trustee indicates that he is unable to resume service after KCT's directed service ends" (S.S.W.-- Directed Service--C.R.I.&P., Finance Docket no. 28799). On April 24, 1980, the Rock Island filed an application to abandon or discontinue service across its entire system (C.R.I.&P.RR. Co ., Debtor,--Abandonment--Entire System , I.C.C. Fin. Doc. no. AB-46, 1980). The Commission approved this application on May 27, 1980. On December 19, 1977, the Milwaukee filed for bankruptcy. And on February 25, 1980, an embargo to traffic was placed on a large part of its system. Consequently, the Rock Island was liquidated , that is, closed as a business corporation with apportioning of its assets and debts. And the Milwaukee was greatly reduced in size through abandonments and then sold to another railroad.

5-9.2. The Federal Protection Remedy for the Milwaukee and Rock Island Bankruptcies

In order to handle the Midwest-Plains bankruptcies, Congress passed the Milwaukee Railroad Restructuring Act (MRRA) of 1979, in November, (P.L. no. 96-101) and the Rock Island Transition and Employee Assistance Act of 1980 (P.L. no. 96-254). The statutory employee protection of both Acts was less financially bountiful than that provided to Conrail employees under the 3-R Act. And the two Acts' provisions allowed less protection overall than under the ICC's New York Dock and Oregon Short Line conditions.

The Milwaukee Act gave employees just 80 percent of straight time salary only (no overtime or arbitrary allowances could be included) for up to three years. Or else, a termination payment of up to $25,000 could be provided. Total protection payments would be limited to $75 million. The Rock Island Act had similar protective provisions. Unlike the grants of the 3-R Act, under these two Acts, federally guaranteed loans were provided to the administrators of each bankrupt railroad, in accordance with Section 511 of the 4-R Act of 1976. Section 511 empowers the U.S. Secretary of Transportation to guarantee such loans for carrier enhancement. The Milwaukee and Rock Island Acts make the payments for employee protection an expense of administering each carrier's estate. The loan was accepted and used for employee protection by the Milwaukee.

Because the Rock Island was in the process of liquidation, and not recovering from the receivership imposed by bankruptcy, the trustee for the Rock Island and the judge for its bankruptcy court said they could not accept the federal loan. They maintained that payments for employee protection are not required in a liquidation of a railroad. Such payment would only further diminish the estate of the Rock Island. Also, such protective payments were unconstitutional, they held, because these would confiscate the property of senior creditors and bondholders without due process. In an appeal to the Supreme Court, the position of the trustee and bankruptcy court was upheld.

Under the historic precedent of ICC standard conditions for employee security, Milwaukee and Rock Island employees whose seniority districts were purchased by, hence, consolidated into, other carriers would have received protection. That is, any purchase of this kind would have led to New York Dock or, perhaps, Oregon Short Line conditions. But, to the contrary, Congress believed that such financially generous conditions would militate against another railroad's acquisition of an abandoned Milwaukee or Rock Island stretch of track. Specifically, the FRA effected, and the ICC approved, a special protective agreement among the involved railroads and unions, in which the Commission's New York Dock conditions were not required. The unions gained the protection provisions such as they were granted. Further, the railroads that purchased segments of the Milwaukee or the Rock Island would give preference to Milwaukee and former Rock Island employees when recruiting for new positions. But, the massive reductions in forces on U.S. railroads after 1980 made new positions an unattainable Chimera.

5-9.3. The Labor Protective Agreement for Midwest Restructuring (Miami Accords)

The special protective agreement was signed by 13 railroads and 15 unions on March 4, 1980, but was developed in Miami, Florida, during February. (The full title is: Labor Protective Agreement between Railroads Parties Hereto Involved in Midwest Rail Restructuring and Employees of Such Railroads Represented by the Rail Labor Organizations operating through the Railway Labor Executives' Association [March 4, 1980]. But, its short title is often either "Miami Accords" or "Hiring Agreement.") As the ICC said, the Miami Accords were necessary if other railroads were to acquire segments of the Milwaukee and Rock Island (I.C.C. Fin. Doc. no. 28799, June 10, 1980):

It is obvious that labor negotiated the Hiring Agreement with various carriers in an attempt

to provide as many of its members with jobs as possible. Few carriers seemed willing to

purchase portions of RI or Milwaukee in large part due to the expenses of labor protection.

As noted in a Congressional report on the (Stagger's) Rail Act of 1980, in its discussion of the Rock Island conditions, the Miami Accords of March 4, 1980 provide the following (House Report no. 96-1035, the Rail Act of 1980, 96th Congress, 2nd Session, May 16, 1980, p. 145):

7. Employees not hired have no protection provided by the

acquiring carrier.

8. The protection of the agreement is the total protection available

to the hired employees. It satisfies the requirements of the Interstate

Commerce Act.

The Miami accords were the best conditions for employee protection that rail labor unions could obtain, given the deteriorating financial health of the bankrupt Rock Island and Milwaukee. Thus, for example, rail labor changed its position against the acquisition by the St. Louis SouthWestern Ry. Co. (SSW) of the Rock Island's Tucumcari Line. In S.S.W.--Purchase (Portion)--C.R.I.&P., I.C.C. Fin. Doc. no. 28779 (1980), pp. 56-57, the Commission notes:

The changes occurring to the RI in the past year [1979-1980]

have caused labor organizations to modify their stance. Throughout

the hearings labor opposed the application [of SSW to purchase the

RI's TL], arguing that applicants did not provide affected employees

with adequate protection. Due to RI's changed position and probable

inability to resume service over the Tucumcari Line, RLEA now

supports SSW's application from Santa Rosa to Kansas City. RLEA expresses

no opinion as to which applicant should acquire the Kansas City/St. Louis

segment.

Also the ICC said on the same pages:

As a result of the great uncertainty over the future of both RI

and Milwaukee, labor and management entered into an agreement

for the protection of employees. The Hiring Agreement, entered into

on March 4, 1980, provides protection for those employees of the

bankrupt carrier hired by the purchasing carrier.

Note that the ICC does not say the agreement provides protection for all employees of the bankrupt carrier having seniority on a line of that carrier acquired by the purchasing carrier.

The ICC continued that among other groups not covered by the Hiring Agreement, the RLEA sought protection for "RI employees not hired by the purchasing carrier" (p. 56). Regarding this not-hired group the Commission said (p. 57):

As to RI employees not hired by applicants, applicants should not

be forced to pick up the labor protection costs for a carrier whose

operations ceased some time ago. Those RI employees not covered

by the hiring agreement must seek relief in the RI liquidation

proceeding. RLEA acknowledges this fact in its brief when it

asserts that the Trustee will be ultimately liable for the costs of

protections.

The Miami Accords had the following significant provisions. (The sequential numbers below are those provided by this writer, and the Article Sections from which the selections below are taken are given, in brackets.)

(1) The Accords covered a "bankrupt carrier employee" that is, "any person with an employment relationship (i.e., in active service or on furlough) with the Rock Island, or with the Milwaukee as of the date of this agreement." [Art. I (1) (d)]

(2) "The provisions of this agreement shall constitute the complete labor protection obligation of a purchasing carrier to the bankrupt carrier employees who are taken into its employ because of a transaction." [Art. I (2) (a)]

(3) "The labor protection obligation, if any, for employees of the Rock Island who are not taken into the employ of a purchasing carrier because of a transaction . . . will not be the responsibility of the purchasing carrier." [Art. I (2) (b)]

(4) "A purchasing carrier will notify interested employee representatives, including those on the Rock Island or Milwaukee, of each transaction" as soon as authorized by the ICC. "Thereafter, except as specifically provided in Article II the purchasing carrier shall be relieved of any requirement to notify its employees or to reach implementing agreements concerning that transaction." [Art. I (3)]

(5) "A purchasing carrier shall determine its necessary additional manpower requirements by craft due to its taking over those Rock Island or Milwaukee Lines. Each of the determinations shall be discussed with representatives of the crafts on purchasing carrier and on the Rock Island or Milwaukee with detailed explanation to them of the basis for each determination prior to serving notice under paragraph 4 hereof, but there shall be no delay in hiring employees or in commencement of operations." [Art. II (2)]

(6) "As a carrier determines its need for additional employees under this Article, it shall allow eligible employees in seniority order on the Rock Island or Milwaukee the first right of hire respectively, dependent on whose trackage is involved . . . ." [Art. II (3)]

(7) "A purchasing carrier shall not take over or assume any of the contracts, schedules or agreements in effect between the Rock Island or Milwaukee and its employees concerning rates of pay, rules, working conditions or fringe benefits, and shall not be bound by the terms and provisions thereof." [Art. II (8) (a)]

(8) "An employee of the Rock Island or Milwaukee hired by a purchasing carrier shall come under the coverage of all contracts, schedules, and agreements in effect between such carrier and its employees . . . ." [Art. II (8) (b)]

(9) "The purchasing carrier shall have the option: (1) to commingle, under the purchasing carrier's work rules, work in connection with lines acquired from the Rock Island and/or the Milwaukee with work in its existing seniority districts including expansion of those seniority districts to encompass the acquired lines; or (2) to operate the acquired property as a separate seniority district or districts under the purchasing carrier's work rules." [Art. II (8) (c)]

(10) "In accordance with the option selected under paragraph 8 of this Article, agreements will be reached on each purchasing carrier concerning the manner in which seniority will be allocated in filling additional job assignments, between the purchasing carrier's employees and the bankrupt carrier employees hired by the purchasing carrier. . . . Where no additional jobs are established, the purchasing carrier's present employees' jobs may be expanded to include work on or in connection with the acquired property. If, as a result of the agreement on allocation of seniority, bankrupt carrier employees used on such a temporary basis do not secure jobs with the purchasing carrier, their employment with the purchasing carrier will be terminated without any preservation of rights or benefits with the purchasing carrier." [Art. II (9) (a)]

(11) "A purchasing carrier will provide a monthly compensation guarantee, as hereafter provided, only to bankrupt carrier employees hired by the purchasing carrier pursuant to this agreement and to its own employees who are (1) working in the same seniority district in the zone or working district of the acquired property and (2) are in active service on the date that interim operation is begun or purchase completed, whichever first occurs." [Art. III (1)]

5-9.4. The Miami Accords and the Rock Island

In Senate Report no. 96-614, The Rail Act of 1980, (1980) p. 1156, the legislative history of Public Law 96-254, the Rock Island Railroad Transition and Employee Assistance Act of 1980, is discussed. Section 6 of the bill for this Act set "a deadline for a labor protection agreement between the Rock Island Railroad and its employees" (p. 1160). But in this legislative history no mention is made of an obligation for labor protection of Rock Island Employees by a company acquiring a part of the Rock Island's lines. Nowhere in this history does Congress change the customary practice and terms of ICC orders sometimes imposing an obligation for employee protection in abandonments upon the immediate carrier employing or controlling carrier affecting those adversely impacted by such a transaction. What remains, then, for Rock Island employee protection beyond that provided by the Rock Island's trustee and bankruptcy court is the ICC-approved Miami Accords.

The economic protection provided to employees on the Milwaukee and Rock Island were, according to the terms of the Miami Accords, much more restricted than that provided by the steadily evolving protective provisions of ICC conditions since the 1930s. For the parts of the Milwaukee that were abandoned and for the entire Rock Island, which was totally abandoned, protection was particularly restricted by the fact of line abandonment and cessation of all original carrier operations. To focus upon the protective circumstances of such abandonment and cessation, the Rock Island is now examined in light of the Miami Accords, which govern applicable protection. But, first the ICC's approval of these Accords is reviewed.

On June 6, 1980 the Commission affirmatively decided on the St. Louis Southwestern Railway's (SSW's) application to acquire the former Rock Island line ("Tucumcari Line") running from St. Louis to Tucumcari, NM. The ICC noted and approved of the Miami Accords/Hiring Agreement of March 4, 1980, in its order of approval and the Commission specifically precluded protection by the purchasing carrier of other than the former Rock Island employees that it hires. The ICC specifically precludes New York Dock protective conditions for former Rock Island employees covered by the Accords (S.S.W. Ry. Co.--Purchase (Portion)--C.R.I.&P.RR. Co., Debtor , I.C.C. Fin. Doc. no. 28799, 1980, pp. 56-57; see also S.S.W. Ry. Co.--Temporary Authority--Chicago , 360 I.C.C., 1980, p. 748).

Earlier, the Commission ordered that the SSW was "authorized to enter upon and operate RI's Tucumcari line . . ."(p.12) (S.S.W. RY. Co.--Directed Service--C.R.I.&P.RR Co., Debtor, 1980, I.C.C. Directed Service Order 1453). This order was because the Rock Island "cannot transport the traffic offered to it because its cash position makes its continuing operation impossible . . ." (p.11). In operating on the Tucumcari Line, the SSW "shall afford affected RI employees the protection provided by the [Miami Accords] of March 4, 1980." Concluded the ICC: "We interpret this negotiated labor protection agreement as satisfying the employee protection requirements of the Interstate Commerce Commission--including the provisions of 49 U.S.C. ¤ 11125(b)(p.4)--for purposes of interim operations over the Rock Island . . ." (p.8). Thus, the Commission has consistently approved the Miami Accords as both the sufficient and the totality of the employee protection for former Rock Island employees on the Tucumcari Line acquired by the SSW.



5-9.5 Effects of Abandonment and the Miami Accords on Rock Island Employee Protection

In Chicago, Rock Island and Pacific RR. Co., Debtor--Abandonment Entire System , 363 ICC 150 (1980), the Commission recommended "to the Reorganization Court that the trustee of the Chicago, Rock Island and Pacific Railroad Company be permitted to abandon all lines and discontinue all operations." But abandonment and discontinuance authority was to be withheld on the Tucumcari line between Santa Rosa, NM and St. Louis until the ICC issued a final decision on Fin. Doc. no. 28799 (Sub. no.1) regarding the purchase of this line by the St. Louis SouthWestern Railway.

The ICC concluded that "abandonment" of the Rock Island and its "dissolution" is required by the public convenience and necessity. Given the carrier's then current finances and future prospects there was no realistic hope for reorganization or continued service in its then present form. "The extremely deteriorated condition of its plant and severe erosion of its traffic base (through interrupted and uncertain operations) make it clear that the Rock Island will not be able to recover." Fairness to creditors and stockholders "dictates that the carrier be liquidated" (366 ICC at 152). The Bankruptcy Court on January 25, 1979 rejected the Rock Island's reorganization plan filed December 28, 1979. Judge McGarr held that the carrier was unable to continue operations on an income-producing basis. He thereupon in his Order no. 229 directed the carrier to file a plan liquidating its assets by July 17, 1980 (366 ICC at 154).

Regarding the abandonment of the entire rail system of the Rock Island, including trackage rights, and the discontinuance of operations, in C.R.I.&P. RR. Co.,Debtor--Abandonment Entire System, 363 ICC, 150 (1980), the Commission discussed protection as follows. Under Section 17 (a) of the MRRA, "the duty to impose employee protection rests squarely with the Bankruptcy Court." The Commission made no recommendation as to this protection but noted the Court's options. New York Dock conditions were one option, and (363 ICC 150 at 161):

... another viable option is not to impose any form of

labor protection. In past instances where entire rail systems

have been abandoned and no company would reap the benefits

of abandonment, we have found the imposition of employee

protective conditions not to be warranted.

Thus, no acquiring carrier had an obligation of protection for Rock Island employees, except as strictly limited by the Miami Accords. And such obligation might not even be provided by the Rock Island's estate.

The liquidation of the Rock Island effectively refuted the once-common view that a large rail carrier could not go out of business and cease operations. Because the Rock Island was indeed liquidated, no railroad company consequently existed with which former Rock Island employees had or could continue an employment or a labor relationship. Accordingly, all Rock Island employees were separated from the Rock Island Railroad Company, that is, discharged, or dismissed, from further employment. The rail carrier of employment had ceased to exist. And it had no corporate or contractual carrier successor, with one exception. Former Rock Island employees offered permanent employment by a carrier acquiring the trackage upon which the employees formerly had seniority rights to craft work now had particular rights, as circumscribed by the Miami Accords. A number of the Rock Island employees so separated were in fact offered a new employment by various of the railroads purchasing particular parts of the former Rock Island system.

Given the terms of the Miami Accords, nothing beyond the following protection exists for each of the matters discussed as follows. A purchasing railroad has no responsibility to provide any conditions of labor protection to former Rock Island employees that it does not expressly take into its employ. Further, aside from possible claims against the estate of the Rock Island, no provisions of labor protection exist for these employees outside of the Miami Accords.

Unrestricted in its final action by the terms of the Accords, unilaterally and solely "a purchasing carrier shall determine its necessary additional manpower requirements" . . . "due to its taking over those Rock Island . . . Lines." No other party has the right of giving or withholding its consent (i.e., agreement to something proposed) to this determination. "Due to" means "caused by, or resulting from" Therefore, any former Rock Island employees hired by a purchasing carrier must be hired from a need for additional manpower directly resulting from the acquisition of former Rock Island trackage. For example hypothetically, if just prior to its corporate demise the Rock Island had a night local hauling and distributing freight cars along the line between stations A through K, then this local work would result in the need for added personnel drawn from former Rock Island seniority rosters. However, new traffic not running over the line between A and K at the time of demise, but added to that trackage after the acquisition by the purchasing carrier would not be "due to" taking over the Rock Island and would not trigger a need for additional former Rock Island manpower. The former Rock Island employees are entitled to handle, and follow if diverted, their former work, but not new work.

Separately from the Accords' terms of the purchasing carrier's sole power of determination, the carrier is obligated in its determining only to discuss , with representatives of its own employees' crafts and those of the Rock Island, each determination, with a detailed explanation of it. Because discuss means "to take up in conversation or writing" and explanation means "to make clear the meaning" these two terms of requirement of an action do not restrict the power of determination. "But," (in this conjunction term of the Accords) such discussing and explanation will not result in any delay in the purchasing carrier's commencement of its operations on an acquired Rock Island line.

Under the Accords, after a purchasing carrier determines it does need some former Rock Island employees, then it is obliged to offer the first right of hire, in the rank order of seniority, to those former employees, who are eligible. Those eligible in the terms of the Accords means all former Rock Island employees holding seniority as of March 4, 1980, in a particular craft represented by a union signatory to the Accords. Those former employees on a seniority district or point generating the work triggering the hiring determination have prior eligibility over all others not on that location.

Significantly, a purchasing carrier does not assume the contracts, of any kind, in effect between the former Rock Island and its ex-employees. And it is, therefore, not bound by any of the terms and provisions of such contracts. The former Rock Island employee hired by the determination of the purchasing carrier comes under the contracts of all kinds in effect between it and its employees, in the same manner and extent as for its employees in a particular craft.

Without any restriction by the terms of the Accords, unilaterally and solely "[t]he purchasing carrier shall have the option:" either "(1) to commingle under [its] work rules, work in connection with lines acquired from the Rock Island . . . with work on its existing seniority districts . . .; or (2) to operate the acquired property as a separate seniority district or districts under [its] work rules." The act of either commingling or keeping separate the seniority districts not only is in accordance with the sole judgment of the purchasing carrier, but also is without an added requirement of any kind, including any discussion with or any explanation to any party.

Under the guidance of the Accords, an implementing agreement will be reached bilaterally on a purchasing carrier concerning the allocation of seniority between its own and any former Rock Island employees that it has determined to hire. Accordingly, it is this implementing agreement in conjunction with the Accords that creates the all-important craft seniority for hired former Rock Island employees. The Accords provide no terms or conditions for the form of this seniority.

Importantly, "Where no additional jobs are established, the purchasing carrier's present employees' jobs may be expanded to include work on or in conjunction with the acquired property." Thus, if the purchasing carrier's existing jobs can be extended to encompass former Rock Island operations, then it is not required to hire additional former Rock Island employees for this work.

Finally, the "Duration of Preferential Hiring" is limited by the Accords' terms to be continued "for not less than one year" from April 24, 1980, but "in no event beyond April 1, 1984" [Art. II(5)]. Thus, the terms of the right of preference in hiring, triggered only by the purchasing carrier's sole determination of its need for additional employees, ends on this specified date. Without contradiction by the terms of the Accords, after this date, the parties to the Accords are not required to continue a practice of preferential hiring.