WASHINGTON -- The Supreme Court gave the federal government yesterday a major new mechanism for helping merged railroads cut their costs: the power to set aside workers' job-protection clauses in existing labor contracts.
Ruling in cases involving two rail mergers -- one of them the linking of the Chessie System and the Seaboard Coast Line into CSX Transportation Inc. -- the court declared that the Interstate Commerce Commission may override railway union contracts if that is necessary to assure that an ICC-approved merger will succeed.
The 7-2 decision provided a sweeping interpretation of a phrase in federal law which says that railroads which get ICC's go-ahead to unite are exempt from "the antitrust laws and all other law" if the merger requires that kind of immunity.
"The term 'all other law' includes any obstacle imposed by law," said Justice Anthony M. Kennedy, and that includes rail labor contracts, which are made legally binding by the federal Railway Labor Act.
"The immunity provision," Mr. Kennedy said, "does not exempt carriers from all law but rather from all law necessary to carry out an approved [merger] transaction." The opinion said that the court was not going to spell out, at this time, what suspension or override of labor contracts would qualify as "necessary." That, presumably, will have to be decided one case at a time, as the ICC acts on railroad pleas to be free of contract obligations.
The legal issue arose after CSX Transportation, which resulted from a merger approved by the ICC in 1980, decided six years later that it wanted to cut jobs at its freight car repair shop in Waycross, Ga., and transfer the shop's work to Raceland, Ky. Rail unions objected, saying that would violate labor contracts.
Ultimately, CSX won an arbitrator's award to go ahead, and it implemented the move in part.
Another incident, also beginning in 1986, involved the Norfolk Southern Corp., a merged rail line combining the Norfolk & Western and the Southern railways.
The new line, which received ICC approval to merge in 1982, decided to shift some of its employees' work from Roanoke, Va., to Atlanta, Ga. It, too, won the right to do that in an arbitration award and went ahead with the shift.
The unions complained about both incidents to the ICC, which then ruled that it had the power to set aside the labor contract provisions that were at stake. The ICC ruling, however, was overturned by a federal appeals court in 1989. The two railroads took the issue to the Supreme Court, which ruled in favor of the railroads and the ICC.
Lawyers involved in the cases said they were not certain what happens next, although it remains possible that the unions will try to undo the job shifts on the theory that they were not really "necessary" to the merged railroads' operations.