Both sides said they were happy that there was a resolution in the final hours before a strike deadline set by the union, which represents about 2,000 Via employees.
"We are sorry for the inconvenience this may have caused to our clients but today we are operating according to the normal schedule, with all of our employees," Via spokeswoman Mylene Belanger said Friday morning.
Union spokesman Bob Orr, assistant to the CAW's national president, said earlier that the tentative deal followed a "long and emotional" bargaining process.
"We've spent days engaged in very tense bargaining on issues most important to members and we’re happy to have settled this contract without a labour disruption,” Orr said
As recently as Thursday afternoon, the union said talks had stalled because Via attempted to circumvent the negotiation process by communicating directly with its employees.
And Orr had said there was "no chance" to reach an agreement by the deadline.
But the union confirmed Thursday evening that negotiations had resumed and a deal was announced shortly after midnight, averting a strike that was set to begin if there was no deal by 12:01 a.m. Friday.
The union represents about 2,000 of Via's customer service employees, as well as on-board service and maintenance workers at the passenger rail company.
Via Rail presented its latest proposal on Wednesday, offering wage increases of two per cent every year for three years.
However, the offer also included higher employee contributions to the pension plan that the union said would result in members taking home less money, not more.
"What the company wants to do is increase employees' pension contributions substantially over the next three years," Orr said.
The union also objected to plans that would slash pension benefits for new Via employees and the rolling back of income protections for seasonal workers.
Via said its employees need to contribute more to the pension because it currently faces a $419-million deficit.
Via president and chief executive Marc Laliberte said the company's pension deficit is putting pressure on its bottom line.
Via Rail laid out a contingency plan last week in the event of a strike. Management were to have offered basic railway services, including daily trips in the morning and at the end of the day on the Quebec City to Windsor, Ont., corridor.
Long-distance trips and service to remote locations would have been provided once a week.