Labor officials huddled Wednesday to decide how to respond to the Burlington Northern Railroad Co.'s decision to activate a subsidiary to implement low- cost freight service on its main line.

Meanwhile, a Burlington Northern official characterized the dispute with labor over the creation of the Winona Bridge Railway Co. as one over work rules, not labor protection.The BN Monday announced it was activating the Winona Bridge Railway

because its unions refused to agree to longer trains and smaller crew sizes.

Alan Fitzwater, a BN vice president, said the carrier had assured its workers that they would not suffer due to the creation of the Winona Bridge Railway because it is designed to capture new business.

However, a United Transportation Union official Wednesday strongly contested Mr. Fitzwater's contention: If he told you that this isn't a labor- protection case, I wonder if he'll submit to an Emit (drug and alcohol) test.

The official said the union disagreed with the BN over the characterization of what was new business; he said the carrier has refused to negotiate over its desire to reduce crew sizes and related matters.

Mr. Fitzwater was clearly moving to put distance between the Winona Bridge Railway and the ongoing controversy over short-line railroads. The industry is currently awaiting a decision by the 3rd U.S. Circuit Court of Appeals on a landmark short-line case.

Short lines had become a hot item in the industry, as major carriers moved to spin off branch lines and abrogate traditional labor contracts in the process, since the Interstate Commerce Commission was routinely exempting them

from usual labor-protection rules.

The union official pointed out that the BN created the Winona Bridge Railway under the ICC's short-line exemption procedure.

Mr. Fitzwater said labor protection is not an issue, since the railroad agreed to implement the provisions of Mendocino Coast, a case that provides for severance payments in certain conditions.

The UTU official, however, said the union would be prepared to approve the creation of Winona, if the BN would accept the provisions of New York Dock labor protection.

The primary difference between the two cases involves the necessity under New York Dock to reach an agreement between the carrier and the unions before the desired plan is put into effect.

Mr. Fitzwater said the real problem was the refusal of Mel Winter, the UTU's general chairman in the district, to agree to reductions in crew sizes or longer trains.

Mr. Winter was attending a meeting of BN general chairmen Wednesday, and was unavailable for comment.