CP Rail and the union representing 4,800 workers who have been on strike since Wednesday, confirmed that talks broke off Sunday afternoon with little hope of resumption.
"With the mediator withdrawing and the federal minister releasing the parties this afternoon, the legislative process can now commence," said Ed Greenberg, a spokesman for CP Rail.
Earlier in the day, Labour Minister Lisa Raitt said she still hoped the parties could agree on a process that would end the strike, but made clear she would not wait long.
Pensions, as well as work rules and fatigue management remained major points of contention in the bargaining process.
Teamsters Canada Rail Conference, which represents workers at CP (TSX:CPR) as well as its chief competitor Canadian National Railway (TSX:CN) among others, blamed the rail company for the stalled talks.
"Unfortunately, the company negotiated in bad faith despite Minister Raitt's wishes," said Doug Finnson, the union's vice-president.
"Canadian Pacific was hiding behind the federal government since the very beginning of the process."
But CP Rail said it was only fair that the union agreed to a deal similar to the one the they have in place with CP's primary competitor _ Canadian National.
"The real issue is the reluctance of the Teamsters to agree to pension provisions comparable to those provided to employees represented by the Teamsters at other Canadian railways," Greenberg said in an interview.
"We were simply seeking the same agreement to insure CP can remain competitive."
Raitt said earlier on Sunday that government officials have been talking with impacted industries, farmers and the mining sector, and the reports are that the strike is "starting to actually affect their operations."
"That's the kind of national economic significance we are looking for in order to intervene," she told CTV's Question Period.
"What we're talking about is the prolonged effect of a strike, about what happens for seven days, eight days, nine days, and that's when you start seeing some really significant effects on the economy."
The minister gave notice of intention to intervene shortly after Wednesday morning's walkout halted the company's freight train service across the country, meaning she can table the bill as early as Monday and strikers can be ordered back to work later in the week.
As she did with two previous labour disputes — affecting Air Canada and Canada Post — Raitt cited the damage to Canada's fragile economic recovery for quickly bringing the strikes to an end. She has estimated that a prolonged strike by CP Rail works could cost the Canadian economy an estimated $540 million a week.
Labour issues such as the back-to-work legislation, along with growing resistance to new employment insurance rules unveiled last week, are likely to dominate the agenda in the House, which resumes Monday after a week's recess.
The EI changes would establish a sliding scale on what constitutes "suitable employment" where individuals who most use the program must be the most flexible in what jobs they are willing to accept.
New Democrats and the Liberals have called morning news conferences to lay out their strategies going forward.
"EI is definitely something where we've been asking for greater clarity. There's still a lot of questions about who is going to make the decision about suitable employment and what kind of criteria they use," said Liberal House Leader Marc Garneau.
It's still unclear whether the rules, which were hastily unveiled last week, are open to changes, especially since the premiers in the most affection region of Atlantic Canada say they were not consulted by Ottawa.
A spokesperson for Human Resources Minister Diane Finley said Sunday the minister had talked to her provincial counterparts and with industry representatives since the announcement, but stopped short of saying she was ready to compromise.
"She will continue to listen to their comments as the government moves forward with implementing various aspects of the new approach," said Alyson Queen, the minister's director of communications, in an email response.
But she added: "The changes we have introduced do take into account that there will be differences throughout the country."
While the back-to-work bill is the most urgent issue facing the House, the EI changes have the potential for the most profound political impact on the government long term.
Newfoundland Premier Kathy Dunderdale warns the Conservatives could face a political backlash if they proceed with the changes as they were unveiled Thursday.
Prince Edward Island Premier Robert Ghiz has said that Ottawa failed to take into account the nature of the economy in the region.
"Our three largest industries are still agriculture, fisheries and tourism," he pointed out. "We're going to need seasonal workers ... and if they start to force out seasonal workers, well then, that's going to hurt our primary industries in the province in terms of getting their products processed to go to market."
The region has shown a willingness to vote its displeasure in the past, and even though the next federal election is more the three years off, it has also demonstrated it has a long memory.
In 1997, the Liberals lost seats throughout the Atlantic Canada, including cabinet ministers David Dingwall and Doug Young, after tightening the unemployment system as part of austerity measures.
More recently, the Conservatives struggled in the region for years after Harper in 2002 referred to the "defeatist attitude" in Atlantic Canada.
The Conservatives currently hold 14 out of the 32 seats in the four east-coast provinces, which have by far the biggest proportion of frequent EI users.
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