Special Message to the Congress on the Railroad Rules Dispute.

To the Congress of the United States:

This Nation stands on the brink of a nationwide rail strike that would, in very short order, create widespread economic chaos and distress. After more than three and one-half years of constant but fruitless attempts to achieve a peaceful settlement between the parties through every private and public means available, this dispute has reached the point where only prompt and effective Congressional action can assure that serious injury to the public will be prevented.

BACKGROUND OF THE CASE

This dispute is between virtually all of the Nation's major railroads and the five railroad operating brotherhoods--the Brotherhood of Locomotive Engineers, the Brotherhood of Locomotive Firemen and Enginemen, the Order of Railway Conductors and Brakemen, the Brotherhood of Railroad Trainmen and the Switchmen's Union of North America. It involves--in addition to the more traditional issues of wage structure and fringe benefits--new and complex issues relating to changes proposed by the carriers and the brotherhoods in work rules affecting the manning of certain railroad operations and the assignments of particular crafts. The background and history of this case, the issues in dispute and the respective positions of the parties have been clearly and concisely set forth in a July 19, 1963 Report unanimously signed by 6 tripartite members of a Special Subcommittee of the President's Advisory Committee on Labor-Management Policy. That Report, including the Appendices, is included as an appendix to this Message, and should be carefully read by all who seek the facts on this case.

Without attempting to summarize either the findings of that Report or the excellent work of the other panels mentioned below, the following points are worth noting:

--After the carriers on November 2, 1959 had served notice of proposed rules changes on the brotherhoods, and the brotherhoods had served notice of other proposed rule changes on September 7, 1960, and no agreement was forthcoming, both parties agreed on October 17, 1960 to submit the entire subject to a special Presidential study commission of 15 members, composed of an equal number of public, railroad and brotherhood representatives. Following thirteen months of extensive hearings and deliberations, 15,500 pages of oral testimony and more than 300 exhibits, this Presidential Railroad Commission, under the chairmanship of Judge Simon H. Rifkind, recommended specific rules changes and employee protection provisions in a comprehensive 342 page report.

--Following a Supreme Court determination that there was no legal barrier to the carriers' initiating such changes, with appropriate bargaining and recourse to the Railway Labor Act procedures, and following the continued inability of the parties to negotiate an agreement, the National Mediation Board recommended to the parties that the case be submitted to binding arbitration.

--As disagreement continued and a nation-wide strike threatened an Emergency Board established pursuant to Section 10 of the Railway Labor Act, under the chairmanship of Judge Samuel I. Rosenman, following its own unsuccessful efforts to mediate the dispute, made a series of recommendations designed to serve as the basis for constructive collective bargaining.

--After further discussions and an extension at my request of the status quo period, the Secretary of Labor on July 5, 1963 recommended solutions for the two most controversial issues along with procedures to dispose of the rest.

--On July 9, 1963, I recommended to the parties that all issues be submitted for final settlement to Associate Justice of the Supreme Court Arthur Goldberg, whose judicious temperament, expert competence and many successes as a mediator uniquely deserved the confidence of both parties. This recommendation, and each of the preceding four sets of recommendations, were accepted by the carriers; but the brotherhoods rejected them in whole or in part.

--On July 10, at my request, the parties agreed to maintain the status quo until July 29 to permit time, first, for the Labor-Management Subcommittee to examine and report the issues, and, second, for the Congress to consider this entire matter. It was my hope--and remains such--that the parties would recognize the importance of settling this dispute without resort either to legislation or to a crippling national strike. However, too little progress has been made in the past 11 days to release me from my July 10 commitment to transmit to the Congress on this date a review of the case and my recommendations for its disposition.

We face this 'prospect: In the absence either of an agreement, postponement or reversal of position on the part of the parties, or of enactment of some contrary measure on the part of the Congress, July 29 will almost certainly witness the start of a general rail strike. The carriers on that date can be expected to initiate work rules changes along the lines of those approved by the various panels. And the brotherhoods thereupon can be expected to strike 94% of the Nation's rail mileage.

THE EFFECTS OF A PROLONGED NATIONWIDE RAIL STRIKE

In the event a strike occurs it will bring widespread and growing distress.

Many industries which rely primarily on rail shipment--including coal and other mining which is dependent on rails leading directly to the mine, steel mills that ship by rail, certain chemical plants which load liquids directly into tank cars, and synthetic fiber mills dependent on chemicals which for safety reasons can be carried only in rail tank cars--all of these and others would be forced to close down almost immediately. There would not be enough refrigerated truck capacity to transport all of the West Coast fruit and vegetable crop. A substantial portion of these and other perishable products would rot. Food shortages would begin to appear in New York City and other major population centers. Mail services would be disrupted. The delay, cost and confusion resulting from diverting traffic to other carriers would be extremely costly; and considerable rail traffic would be wholly incapable of diversion.

The national defense and security would be seriously harmed. More than 400,000 commuters would be hard hit.

As more and more industries exhausted their stockpiles of materials and components-including those engaged in the production of automobiles, metal products, lumber, paper, glass and others--the idling of men and machines would spread like an epidemic. Construction projects dependent on heavy materials--exports and waterway shipping dependent on rail connections-community water supplies dependent on chlorine which also moves only by rail-slaughter houses and stockyards, iron ore, rubber and machinery, magazine publishers and transformer manufacturers--all would be hard-hit by a strike. The August grain harvest would present a particularly acute problem.

The Council of Economic Advisers estimates that by the 30th day of a general rail strike, some 6 million non-railroad workers would have been laid off in addition to the 200,000 members of the striking brotherhoods and 500,000 other railroad employees-that unemployment would reach the 15% mark for the first time since 1940-and that the decline in our rate of GNP would be nearly four times as great as the decline which occurred in this Nation's worst post-war recession.

At the same time, shortages and bottlenecks would increase prices--not only for fruits and vegetables but for many industrial materials and finished products as well--thus impairing our efforts to improve our competitive posture in foreign and domestic markets and to safeguard our balance of payments and gold reserves. And even if the strike were ended by private or Congressional action on the 30th day, at least another month would be required before the economy would be back on its present expansion track. Indeed, a prolonged strike could well break the back of the present expansion and topple the economy into recession before the tax reductions and other measures now before the Congress for reinforcing the expansion have had a chance to take hold.

THE LEGISLATIVE SETTING

In short, the cost to the national interest of an extended nation-wide rail strike is clearly intolerable. No responsible government could accept the present situation with complacency. Because in the past both sides have recognized the serious consequences involved, there have been only two brief national rail strikes in this century. The likelihood of a strike next week thus means that we are confronted with an extraordinary situation, both in terms of the impact of the strike on our economy and in terms of the issues involved. These issues, unlike those of typical wage disputes, are ones with very little collective-bargaining play left in them. The work-rules aspects of the present dispute are regarded as do-or-die matters by both parties--and the history of industrial relations shows that when employers and employees consider the issue to be this vital, they can both stand a strike much longer than the country can stand it. Therefore the parties being unable or unwilling to reach agreement or accept arbitration, and the Executive Branch having exhausted all statutory and other tools available, the responsibility now lies with the legislative branch.

The Congress has expressly refused to give the Executive authority to seize the railroads in time of peace and has expressly excluded railway labor from the national emergency provisions of the Labor Management Relations Act of 1947. The Supreme Court has stated that the Congress is the appropriate forum for considering remedies against strikes designed to prevent the railroads from reducing employment for economic reasons. (Telegraphers vs. Chicago & N.W.R. Co., 362 U.S. 330, 342). When adopting the Railway Labor Act in 1926, moreover, it was contemplated that special Congressional action might be required "to protect the public interest in adequate and uninterrupted transportation. If (the bill) does not so work . . . so as to avoid any impairment of the public interest . . . Congress will be unembarrassed in adopting any means it sees fit to protect the public interest." (Report of the Senate Committee on Interstate Commerce, S. Rept. 222, 69th Congress, 1st Session 1926).

In 1916, the Congress set a precedent that is of interest today. As the result of a dispute over hours and wages, the railroad brotherhoods had issued a call for a nation-wide rail strike; and President Wilson held a conference with the parties. When he proposed arbitration, the carriers agreed and the brotherhoods refused. When he proposed the eight-hour standard of work and wages, the brotherhoods agreed and the carriers refused. Confronted with the prospects of an early strike, the President then asked Congress to enact the eight-hour standard as an interim law pending a further report to the Congress by a special Presidential Commission. He pointed out that he had "no resources at law . . . for compulsory arbitration, to save the commercial disaster, the property injury and the personal suffering of all . . . if the strike was not prevented." The Interstate Commerce Commission, he stated, would protect the carriers through its rate powers against any undue cost increases resulting from this change. Congress acted promptly and effectively; and the Supreme Court (Wilson vs. New, 243 U.S. 332, 333, 342, 1917), emphasizing the fact that the nature of the railroad industry required both employers and employees to defer to regulation in the public interest, held that Congress had the power to impose a settlement binding on both parties "for a reasonable time, in order that the calamity may be averted and that opportunity may be afforded the contending parties to agree upon and substitute a standard of their own."

With all of these legal, economic and other facts in mind, this Administration has given careful consideration to the kind of legislation Congress might usefully enact to meet the needs of the present situation.

--Ineffective measures which would not halt an injurious nation-wide rail strike have been rejected as inconsistent with the public interest.

--Punitive anti-labor measures which would destroy railway labor's rights to collective bargaining and reasonable job security have been rejected as harmful to the nation and insensitive to the very real issues posed by the proposed work rule changes.

--Seizure of the railroads has been rejected as unjustified in the circumstances of this case, as creating complex legal and financial problems for the government, and as merely postponing the day of reckoning on more efficient work rules and their acceptance by the brotherhoods.

--Compulsory arbitration of this dispute by a special or Congressional panel has been rejected as inconsistent with the principle that solutions reached through free collective bargaining should always be permitted and preferred.

--Indefinite extension of the status quo for one or both parties has been rejected as an evasion of a serious public, as well as labor-management, issue that must be squarely faced.

Our objective instead was to find a solution which

(1) is sufficiently familiar to the Congress, in terms of the procedures and principles involved, to facilitate its prompt enactment;

(2) encourages the parties to achieve their own solutions through collective bargaining;

(3) confronts the parties, on issues where voluntary agreement is not possible, with methods and standards of solution which are comparable to those both sides have previously experienced and found acceptable;

(4) recognizes both the public interest in promoting railroad efficiency and preventing a disastrous strike and the public's concern for those adversely affected by a settlement; and

(5) provides for an interim remedy while awaiting the results of further bargaining by the parties.

RECOMMENDED LEGISLATION

As noted above, the Railroad Eight Hour Law of 1916 provides a precedent for Congressional intervention of this type; and the Interstate Commerce Act provides a pattern to which both Congress and the parties are accustomed. Recognizing that both railroad mergers and their effect on railroad employment are deeply affected with the public interest, Section 5 of that Act wisely supplements the results of private decision-making and collective bargaining in this area with the quasi-judicial regulatory powers of the independent Interstate Commerce Commission. Proposed mergers must be passed upon by the Commission after due regard to their effect on public service and safety, the rights of employees and other considerations. In its order of approval the Commission includes specific terms and conditions to protect the job security of the employees involved. The carriers and brotherhoods remain free to supersede these employee security provisions with their own collective bargaining agreement. The value which railroad and other unions attribute to this section was reflected in their urging that comparable provisions be included in this year's Mass Transportation Bill; and there are such provisions in this bill as it passed the Senate and as it was reported in the House.

There is no reason why these principles and procedures, if they are applicable to the employment security problems raised by railroad mergers and mass transit modernization, are not equally applicable to the employment security problems raised by railroad modernization and mechanization. An expert body should pass on these proposed rule changes in the light of public service and safety; and it should also make provision to prevent the employees from bearing the full cost of technical or economic progress, so long as priority is given to agreements privately reached by the parties themselves.

I recommend, therefore, that--for a two-year period during which both the parties and the public can better inform themselves on this problem and alternative approaches-interim work rules changes proposed by either party to which both parties cannot agree should be submitted for approval, disapproval or modification to the Interstate Commerce Commission in accordance with the procedures and provisions of Section 5 of the Interstate Commerce Act, the Commission being directed to use to advantage the work of the two previous panels which received evidence on these matters. At its discretion, the Commission may also appoint a Special Advisory Panel to assist it in the discharge of its functions. The Commission shall judge the effect of each proposed rule on the adequacy and safety of transportation service to the public and on the interests of both parties; and it shall, with the advice of the Secretary of Labor, require fair and equitable arrangements to protect the interests of the affected employees, giving proper weight to the protection provisions of Section 5(2)(f) of the Interstate Commerce Act and those recommended by the Presidential Commission and Emergency Board reports. Emerging from the recommendations of these boards was the principle that, while many jobs would not be filled following the death, retirement or voluntary transfer of the present occupants, every present employee with a significant attachment to the railroad industry would retain the right to his present employment or to comparable railroad employment at comparable pay. Provisions would also be made for rehiring priority, relocation expenses, displacement allowances, education and retraining grants, supplemental severance and retirement benefits and other features. In short, no one would be thrown out in the street; and, while the railroads gradually modernized their operations, there would be little, if any, loss to individual employees.

Unlike compulsory arbitration, this method would preserve and prefer collective bargaining and give precedence to its solutions. But any strike or lockout designed to impose a rules change which has not been approved by the Commission or the parties, or to oppose one which has been approved, would be subject to the remedies of Section 5(8) of the Interstate Commerce Act.

This procedure is most appropriate to the disposition of those rule changes involving the manning of train or engine crews--the "automation" issues, in a sense. It would build on the progress made to date in defining and refining those issues through the various panel studies and subsequent bargaining efforts.

While the disposal of those issues should be sufficient to remove the barriers to a peaceful solution of all other issues by collective bargaining between the parties, many of them are closely interrelated to the work rules changes--and I recommend that the same Joint Resolution of the Congress provide that either party may submit such issues to the Commission to be settled by procedures deemed appropriate by the Commission.

I stress the fact fiat, unlike compulsory arbitration, these procedures would provide only interim changes and only for those situations and for such length of time as the parties are unable to agree by collective bay gaining. This was also true of the 1916 Act. Experience with both the interim rules and these temporary procedures should enable the parties to consider in two years, under considerably less pressure, whatever more comprehensive and final solution is needed, if any.

This recommendation contemplates that the nation as a whole, which shares in the benefits, would also bear part of the burden imposed by advancing railroad technology. To the extent that provision for retraining and other payments may be available to an employee under the Manpower Development and Training Act of 1962 or other Federal statutes, the carrier will be relieved of this obligation. As Congress recognized in the readjustment provisions of the Trade Expansion Act and Selective Service Laws, the government has some obligation to assist those adversely affected by governmental decisions which are required in the national interest; and there is little logic in protecting the economy by methods which also lead to increased unemployment and more distressed areas. The unfairness of placing the entire burden of readjustment costs upon either the carriers or the workers is an additional reason why legislation is particularly appropriate in this case.

The combination of elements stressed in this bill--permitting progress for the carriers and assuring job security and readjustment assistance for the workers--was also stressed by both the Presidential Railroad Commission and the Emergency Board established in this case. Referring to the provisions of Sec. 5 of the Interstate Commerce Act and their successful application to other areas, the Presidential Commission states:

"--An adequate program to realize the benefits of advancing technology in the public interest, therefore, must include both reasonable opportunity for management to achieve change, and for workers to enjoy reasonable protection against the harsh effects of too sudden change. Progress plus protection must be our choice . . . in the case of technological improvement . . . as in the case of mergers."

The Emergency Board stated:

"--We are mindful also of the necessity for progress in the railroad industry, for efficiency in order to meet the challenge of competing industries. We have sought by our recommendations to increase these prospects of the Carriers, and at the same time to preserve not only strong unions for the employees, but for the individual worker a continued life of usefulness to himself and his family, and to society itself. The railroads, and society as a whole, have benefited by these changes; and they should both share generously in the burdens which have been cast upon the workers by the dislocations. These burdens, in addition to dollar payments, involve education or retraining for new jobs at the expense of the Carriers, supplemented by public funds now or hereafter committed to general retraining of displaced manpower."

AUTOMATION

This brings me to the broader issue to which this Message is addressed. The dispute which confronts us today has many special features--including the unusual public-interest nature of the industry, the disastrous impact of a prolonged strike and the particular circumstances of this case. It would be wholly inappropriate to make general and permanent changes in our labor relations statutes on this basis.

It would be particularly unwise to enact a general and permanent compulsory arbitration law, which I have always opposed. The Congress contemplated, in enacting the Railway Labor Act as well as the Labor-Management Relations Act of 1947, that special actions by the Congress may be required as a final recourse in any individual dispute; but the automatic assurance of compulsory arbitration would encourage one or both parties to neglect their bargaining responsibilities. The measure I am recommending today, in contrast with compulsory arbitration, gives encouragement and preference to solutions reached by collective bargaining, and provides only for interim decisions. It recognizes, moreover, that disputed rules changes and their effects on employment are appropriately matters for regulation by an independent agency which has specialized knowledge of the railroad industry and possesses procedures for handling these matters.

I would be remiss in my duty, however, if I failed to note that this dispute over railroad work rules is part of a much broader national problem. Unemployment, whether created by so-called "automation," by a shift of industry to new areas, or by an overall shortage of market demand, is a major social burden.

During the past six years the level of unemployment has remained far too high. Men have been without jobs and factories have been without orders, primarily because the over-all level of market demand has fallen short of the nation's productive capacity. But when job opportunities are already scarce, those whom technological progress or industrial change displace are more likely than ever to join the ranks of the unemployed than to find a new job. General unemployment is thus a double burden; as it penalizes those without jobs, it also creates fear and resentment against the very kind of modernization and change upon which our economic progress must in the long run depend. This is why I have placed such heavy emphasis upon the prompt enactment of my tax proposals, designed to stimulate market demand and return the economy to full employment.

To be sure, even with full employment, economic change will still bring problems in the wake of progress. Problems will remain for workers who are displaced by advances in technology, obsolescence of their skills or their industries, inadequacy of their education or training, or geographical shifts in economic activity. These problems are not new; they are the price of progress in any dynamic society. More particularly, the phenomenon that we call "automation" is not new; technological innovation and change have been the mainspring of economic growth in this country for more than a century. Nor is there yet convincing evidence that the over-all pace of such change has accelerated recently.

But seen through the magnifying lens of our general unemployment problem of the past six years, the difficulties faced by those who are technologically and structurally displaced from work have captured unprecedented attention; and this is as it should be. Our awareness has been mounting that it is unfair to ask particular workers--or in some instances, even particular employers-to bear the full social costs that attend such progress.

This problem is particularly but not exclusively acute in the railroad industry. Forty percent fewer employees than were employed at the beginning of this decade now handle substantially the same volume of rail traffic. The rapid replacement of steam locomotives by diesel engines for 97% of all freight tonnage has confronted many firemen, who have spent much of their career in this work, with the unpleasant prospect of "human obsolescence." The introduction of self-propelled vehicles for railroad maintenance, repair and construction work--the use of longer, heavier, faster and more efficiently filled trains--and the initiation of centralized traffic control, electronic inspection equipment, telephonic and radio communications, and automatic switching and braking equipment have all decreased the need for railroad employment. The Presidential Commission was established in part, it said, because of the need "to close the gap between technology and work."

That Commission recognized, however, that "revolutionary changes even for the better carry a high price in disruption... (that) might exceed the value of the improvements."

Yet we cannot stop progress in technology or arrest economic change in transportation or any other industry--nor would we want to. For technological change has increased man's knowledge, income, convenience, leisure and comfort. It has reinforced this nation's leadership in scientific, economic, educational and military endeavors. It has saved lives as well as money, and enriched society as well as business. Our task as a nation, to use the phrase of the Commission report, is simply to make sure that this public blessing is not a private curse. We cannot pretend that these changes will not occur, that some displacement will not result or that we are incapable of adapting our legislative tools to meet this problem.

While last year's Manpower Development and Training Act recognized the Federal Government's responsibility to help retrain and readjust workers who have been displaced by industrial change, as do this year's Vocational Education proposals, their scope is too limited to 'provide the full answer to a problem of this magnitude. The problems of manpower displacement, of which automation is only one cause, should not be settled primarily by the use of private economic power and pressure, or discussed only on the picket lines. They cut across many Departments of Government, all types of occupations, all standards of income, all sections of the country. Their solution is of importance to the entire nation which now enjoys all the benefits of economic progress but, except when it is part of the employee group affected, now bears very little of its burdens.

For these reasons, it is my intention to appoint a Presidential Commission on Automation, composed of the ablest men in public and private life, and charged with the responsibility of

(1) identifying and describing the major types of worker displacement, both technological and economic, which are likely to occur during the next ten years, and the social and economic effects of these developments on our economy, our manpower, our communities, our families, and our social structure and human values; and

(2) recommending, in addition to those actions which are the responsibility of state and local government and private management and labor, specific administrative and legislative steps to be taken by the Federal Government in meeting its responsibility to share the costs and alleviate the losses of automation job-displacement, in such a way as to assure both the continued advance of our technology and the continued well-being of our people.

This Commission should undertake the most comprehensive review of this complex and many-sided subject ever ventured, and report no later than the close of next year. Its report must pioneer in the social, political and economic aspects of automation to the same extent that our science and industry have pioneered in its physical aspects. For the pending railroad dispute is likely the first of many, and a comprehensive long-range policy will be needed. I have no doubt, let me add, that such a policy will embody the basic elements of the measure recommended today--encouraging the advance of technology while protecting the security of the workers, encouraging private bargaining while protecting the public interest.

Thus the prompt enactment of this measure by the Congress will help launch a new national effort to meet the growing challenge of worker displacement by technological and economic change. Both the proposed bill and the new Commission are actions that will benefit both labor and management-but above all, they will benefit the public interest, and that is our primary test.

JOHN F. KENNEDY