Union Pacific (NYSE: UNP) is suing the city of Palestine, Texas, to nullify a 150-year-old contract to keep a certain number of jobs in the town indefinitely.
The agreement between Union Pacific and Palestine — which was signed in 1872 — dates back to the days when the city was at the crossroads of several railroad companies that promised to keep jobs there indefinitely, according to the Palestine Herald-Press.
Union Pacific’s lawsuit, filed Nov. 27 with the U.S. District Courts in the Eastern District of Texas, alleges the railroad’s contract with Palestine should have been invalidated when the federal Surface Transportation Board became the nation’s regulating authority for freight rail in 1996; and again in 1997, when Union Pacific merged with the Missouri-Pacific Railroad.
The agreement requires the Omaha, Nebraska-based railroad to keep 0.52% of its total jobs in Palestine, local officials said.
Union Pacific operates around 32,000 miles of track in 23 Western states. The company had around 37,000 employees as of its last earnings report.
If the courts rule in Union Pacific’s favor, it could threaten more than 60 jobs in Palestine that pay an average of $65,000 a year, local officials said.
Palestine Mayor Steve Presley told the Herald-Press the city would fight the lawsuit.
“The city council will decide on the best course of action, once we have a chance to discuss the lawsuit,” Presley said. “Personally, I will do everything within my power to keep all jobs possible here in Palestine.”
Union Pacific spokeswoman Raquel Espinoza said the 150-year-old agreement is limiting the company’s flexibility with its freight car repair shop in Palestine.
“The agreement keeps us from implementing modern railroad practices in Palestine,” Espinoza said in a statement.
Palestine, in East Texas, has a population of 18,136. It is located around 125 miles equidistant between Dallas and Houston, as well as Shreveport, Louisiana.
In 2014, Union Pacific employed as many as 150 people in Palestine, according to the Tyler Morning Telegraph. They worked in “the car shop and the transportation, signal, track and freight claims departments.”
In April, Union Pacific laid off 30 employees from its car shop in Palestine.
“These steps are part of Unified Plan 2020, which streamlines operations as we ensure Union Pacific remains a strong, competitive company that provides safe, efficient and reliable service,” said Union Pacific spokeswoman Kristen South.
Unified Plan 2020 is Union Pacific’s version of precision scheduled railroading, according to a FreightWaves article Oct. 17.