05/22/2012 03:22 EDT | Updated 07/22/2012 05:12 EDT

CP, union reach deal on commuter trains, continue talks ahead of strike deadline

CALGARY - Officials with Canadian Pacific Railway and the union representing nearly 5,000 of its workers say commuter trains in Montreal, Vancouver and Toronto will keep running in the event of a strike.

Members of the Teamsters Canada Rail Conference can legally walk off the job one minute after midnight Wednesday local time if a deal isn't reached. But now rail passengers on AMT, West Coast Express and GO Transit networks won't be affected if the deadline passes without a deal.

The two sides met with federal Labour Minister Lisa Raitt on Tuesday morning and continued their negotiations throughout the day.

"At the request of the minister of labour, and as a demonstration of goodwill, CP has agreed to allow operation of the three metro commuter services in Canada," said CP spokesman Ed Greenberg.

"The union continues to threaten to withdraw its members' services for the remainder of the CP Canadian freight network."

Teamsters vice-president Douglas Finnson described the meeting with Raitt as "very positive" without elaborating on the topics discussed.

The major points of contention are pensions, some work rules and fatigue management, he added.

"The Minister played a big part in making sure commuter train service is not interrupted," he said later in a statement.

Two inter-city Via Rail routes in Ontario that use CP infrastructure will still be affected if there's a strike: between Sudbury and White River and the Brockville-to-Ottawa segment of the Toronto-Ottawa route.

That list would have been longer had the two sides not reached a deal, said Via spokesman Malcolm Andrews.

"We would have had some runs to Kitchener, London, Sarnia that would have been affected, but because of what they were able to do, those lines now are not affected."

A strike would still halt shipments of grain, fertilizer, coal and other goods Canadian Pacific (TSX:CP) moves along nearly 24,000 kilometres of track in Canada and the U.S.

In a release, Raitt urged CP management and the union to come to an agreement as quickly as possible.

"Our government is concerned that a work stoppage would have a negative effect on Canadian businesses and families, and the economy," she said.

George Smith, a former CP vice-president of industrial relations who now teaches at Queen's University, said he hopes Raitt doesn't intervene with back-to-work legislation.

Raitt stepped in to halt a strike at Air Canada earlier this year that would have inconvenienced March Break travellers.

Smith said that experience should have taught Raitt that "you can't legislate peace" and that she should stand back to allow the collective bargaining process to work.

"I'm a firm believer in the process working. I think I've heard enough from both sides that they realize what's at stake," said Smith, a labour relations expert at the Queen's School of Policy Studies.

"There's a lot at stake. And generally when there's a lot at stake, rational people at a deadline find a way to resolve their differences."

The strike threat comes at a time of major changes at Canada's second-biggest railway.

A bruising months-long proxy fight with the railway's biggest shareholder culminated last week in Fred Green's exit as CEO.

New York hedge fund Pershing Square Capital Management argued the railway was lagging its peers under Green's leadership and that a change in CEO was necessary.

Green and five other board members stepped down hours before the company's annual general meeting last Thursday after it became evident shareholders had voted overwhelmingly for director nominees on Pershing's slate.

The Teamsters' Finnson said the union has not yet met with Green's interim replacement, Stephen Tobias. He said the management shakeup has not affected the bargaining process one way or the other.

Pershing Square CEO Bill Ackman told shareholders at the annual meeting that change would not happen overnight, but that Canadian Pacific could become one of the best railways in the world.

CP's new leadership will have a tough time balancing shareholders' high expectations against the labour challenges the railway is up against, said Smith.

"In a certain sense, the new management is boxed in by their declaration of an economic revival for CP," he said.

"The shareholders don't see that. They see new people who promised great things and here's the first test of it. Only it came a little sooner than anyone expected."