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IA-02-05
In the Matter of the Interest Arbitration between Tualatin Police Officers Association ("Association") and The City of Tualatin ("City"). IA-02-05.
This is a single issue interest arbitration addressing, primarily, the City's first year insurance contribution under the parties' next, 2004-2007 collective bargaining agreement. The parties stipulate that the bargainers properly complied with the steps leading up to interest arbitration under ORS 243.736 et. sec. and OAR 115-040-0015. The hearing was orderly. Each party had the opportunity to present evidence, to call and to cross examine witnesses, and to argue the case. The parties filed timely post-hearing briefs.
 
The bargaining unit. The bargaining unit consists of the approximately 27 sworn Police Officers of the City of Tualatin. There is no dispute that the City has concentrated its recent personnel growth on the Police Department. Not only has the City recently constructed a new police facility, but of the 19 FTE increase in the City's overall personnel between '96-'97 and '05-'06, nine positions have been sworn officers and 2.75 have been non-sworn police support personnel. Two of those sworn positions are part of the '05-'06 budget. That means that well over 60% of the City's overall personnel growth in that period has been in the Police Department.
 
Positions of the parties. There are three parts to this dispute over insurance. The parties have had a series of multi-year contracts. Since at least 1990 the insurance provisions in those contracts has set out a first-year city payment amount that fully covered the cost of insurance for that year. And each contract has included a 10% formula for increasing that payment in each subsequent year of the contract.(1) (Since the 1992-1995 contract, any down-year excess cost over the 10% increase has been split evenly by the officer and the City.(2)) The Association proposes to continue that tradition in the 2004-2007 contract, setting out a first-year payment amount that is actually the total cost of the coverages. The City, on the other hand, proposes to continue the 10% annual cost escalation from the final year of the prior contract, setting the City's first year payment amount at 10% above its payments for 2003-2004.(3) That approach would leave the officers with out of pocket medical/dental insurance costs in the initial year of the new contract.
 
Here are the numbers for the dollar differences between the parties' first-year insurance proposals:

 
Employee Only
Employee +1
Employee + 2 or more
Association
$372.06
$762.41
$1,062.93
City
$350.42
$724.62
$1,000.12
The first-year cost difference comes to a little over $11,000 based on the parties' agreed change to a $300 deductible (which is discussed below). The second-year difference--in light of the known 2005 premium rates--comes to a bit over $12,000 according to the Association, and the City does not seriously disagree.
 
The second part of the dispute arises from the parties' tentative agreement to increase the deductible amount of the insurance coverage from $200 to $300 in the new, 2004-2007 contract. Despite that tentative agreement, the officers and the City have continued to pay for the more expensive, $200-deductible coverage for the entire first year of the 2004-2007 contract. A somewhat similar situation arose under the prior agreement when the deductible was changed from $100 to $200 and bargaining was not concluded before the beginning of the new contract. That 2001-2004 contract provided for the reimbursement of the officers' out of pocket costs during the first months of the contract's retroactive coverage. The Association proposes to keep that language in the new contract, requiring similar reimbursement for this contract's much longer period between tentative agreement to the increased deductible and the completion of the bargaining process. The City proposes to delete that language. In fact, the City calculates its premium obligations for the first year at less than the City has actually been paying, so the employees would have to repay the City for the difference.
 
The Association estimates the cost of the officers' out of pocket losses during the first, 2004-2005 year of the contract to be about $7,300.
 
The final part of the dispute borders on "magic language" under established Oregon case law. Prior contracts have listed the down-year escalation points seriatim (e.g., "July 1, 1999 and July 1, 2000 . . ."). The City proposes to continue that structure into the new agreement; but the Association proposes to replace it with "August 1 of each year thereafter. . ." The likely result of that change would be this: under the general language proposed by the Association, the "status quo" doctrine would require the City to apply the 10% increase in the year after the expiration of the contract if negotiations for a successor agreement had not yet been completed; and under the seriatim structure proposed by the City, the City's only obligation after the expiration of the contract would be to continue insurance payments at the level established for the final year of the expired contract. See ORS 243.756. (Although the City actually agreed to increase its insurance contributions by 10% after the expiration of the predecessor agreement in 2004, it objects to contract language requiring it to do so.)
 
The relevant statutory factors for the current dispute. The Oregon statute (ORS 243.746(4)) requires an interest arbitrator to base his or her decision primarily on the interest and welfare of the public, giving "secondary priority" to four or five specifically listed factors. The first six are familiarly known as "ability to pay," "recruitment and retention," "total compensation," "comparability," "CPI," and stipulations.(4) The statute also lists a seventh factor: "other factors . . . traditionally taken into consideration in the determination of wages, hours, and other terms and conditions of employment." But an arbitrator may consider that seventh factor only if the first six do not "provide sufficient evidence for an award."(5)
 
This case is somewhat unusual in that one of the parties' stipulations is that neither ability to pay nor the CPI are of substantial help in resolving the disputes at hand. Moreover, as usual, the parties agree in using "total compensation" simply as a means of analyzing comparability. That leaves the case to be decided on the basis of comparability, recruitment and retention, and--only if necessary--"other factors."
 
Comparability. The parties agree that comparability is a relevant listed statutory factor. They also both approach comparability on a "total compensation" basis (rather than proposing a comparison of first-year insurance benefits in isolation from other employee compensation). The Association proposes to pick out comparable jurisdictions by considering those nearby police employers within the population range half to twice the population of Tualatin. (The Association argues that the City's proposed consideration of police employers within the population range ± 25% of the City's population has the effect of emphasizing smaller--and therefore less well paid--comparators.) Here are the Association's proposed comparables, selected on that basis:

City
Population
% of Tualatin
County
Distance
Tigard
44,650
180%
Washington
4.1
Lake Oswego
35,930
144%
Wash./Clack.
6.2
Oregon City
28,370
114%
Clackamas
11.5
Tualatin
24,940
 
Wash. (& Clack.)
 
West Linn
23,970
96%
Clackamas
10.5
Milwaukie
20,590
83%
Clackamas
12.6
Forest Grove
19,200
77%
Washington
27.4
The median seniority of the existing police workforce is about six to seven years; and looking at five year police officers (the comparison point nearest to that median in this record) the Association's proposed comparators show the following after correcting for differences in longevity pay, annual leave, out of pocket insurance costs, PERS pickup costs, and deferred compensation:

City
No Education & Basic Certification
AA / Intermediate
BA / Advanced
Average
Forest Grove
4,971
5,110
5,249
5,110
Lake Oswego
5,297
5,534
5,772
5,535
Milwaukie
5,064
5,253
5,442
5,253
Oregon City
4,831
5,055
5,279
5,055
Tigard
5,089
5,325
5,444
5,267
West Linn
4,732
5,036
5,473
5,103
Average
4,997
5,219
5,443
5,220
Tualatin
4,982
5,268
5,440
5,211
Difference
-.31%
0.93%
-.06%
0.17%
As the Association points out, these numbers put the City "squarely mid-market." The City would apply a ± 25% population criterion and a 30 mile proximity limit, all of which results in the same comparables except that McMinnville and Newberg are substituted for Lake Oswego and Tigard. The City makes corrections somewhat similar to the Association's in order to derive this net hourly total rate analysis of sixth year police officers:(6)

City
AA & Intermediate
BA & Advanced
Forest Grove
$34.48
$35.23
McMinnville
$35.12
$36.55
Milwaukie
$35.50
$36.68
Newberg
$34.05
$35.29
Oregon City
$35.39
$36.61
West Linn
$37.13
$39.63
Average
$35.28
$36.67
City - Current
$35.92
$36.84
% difference
2%
0%
City's Proposal
$36.59
$37.53
% difference
4%
2%
Assn. Proposal
$37.32
$38.26
% difference
6%
4%
The City's analysis is based on more current, 2005 rates; and the Association's analysis is based on the 2004 rates in effect at the beginning of the contract at issue. It is really not necessary to resolve the parties' differences with respect to selection of comparables (although I have some misgivings about Newberg, McMinnville and Lake Oswego as comparables for Tualatin) or analysis (although the City's inclusion of insurance costs as a "monetary benefit" is probably indefensible). With or without the more questionable of the proposed comparables, and regardless of which method of analysis one chooses, it is clear on this record that comparability is not really a compelling consideration in this case, one way or the other.
 
Recruitment and retention. Perhaps the sharpest difference between the parties is their disagreement about whether the City has a recruitment and retention problem. The City insists that it has no such problems.
 
The City has hired a total of 51 officers from 1987 to the present (not counting five hires over that period who are now known to be retired or deceased). Twenty-seven of those 51--just over half--are currently employed as Tualatin police officers. Of the remaining 24, the record does not show what happened to four, and the other 20 are exactly split between ten who transferred to other police employment and ten who were terminated or were let go during their probationary period. Of the fourteen new hires since '01-'02, seven have already either transferred to other police employers or have been let go.
 
DISCUSSION
 
Status quo. The Association first presses its claim that the City proposes to change the status quo between the parties by departing from the prior contract's pattern of setting the first year City insurance contribution at the full cost of the coverage.(7) The notion of "status quo" can be a slippery devil in labor law, as demonstrated by many of the quotes from prior interest arbitration awards provided by the parties.(8) Without entering the wonderland of analyzing prior discussions, we might best begin by considering some notorious features of bargaining about insurance benefits. In particular, it is generally recognized that there is a substantial difference between "capped" and "uncapped" benefit language. A union that has previously had language providing that "the employer shall pay the full cost of medical insurance . . ." will usually fight hard against the proposal to change to "The employer shall pay $888 . . .," even if "$888" is actually "the full cost of medical insurance" at the moment. (And employers will vigorously resist a proposal to change in the other direction.) That is partly because both sides generally recognize the specification of the actual full cost amount--"$888" in my example--to be like "the camel's nose under the tent," a first step toward an employer's possible bargaining for payment of less than the full cost of coverage. (Of course, there are also magic language concerns under the status quo doctrine: an employer is far less likely to be required to cover postcontract premium increases if the insurance provision is couched in terms of "$888" rather than "the entire cost," even though the two expressions referred to exactly the same thing.)
 
The problem with the Association's status quo argument, it seems to me, is that it treats the specific amount formulation of the prior contracts as if it were understood to be exactly the same as a general "entire cost" formulation. And bargainers of collective bargaining agreements do not understand those two formulations to be the same. In fact, these two formulations are understood to be different in just exactly the sense at issue here: A formulation in general terms of "the entire cost"--that is, the contract language formulation itself, quite apart from the actual amount of the cost--is understood to be a sort of benefit that has to be traded for, or traded away, in the process of negotiations. The Association never got that benefit in any of the prior contracts; and the "status
quo" argument that it presses now would require me to ignore that fact.
 
To make matters worse, from the Association's point of view, when we look at the proposal abandon a list and to change to general language for the specification of benefit increase dates, there is no serious dispute that that part of the Association's LBO departs from the well-established status quo (in just the sense the Association uses the term) of listing future increase dates seriatim.
 
In short, the "status quo" argument is not compelling in this case. It is true that the City has departed from the prior pattern of paying full insurance costs in the initial year of a new contract, but that possibility, at least, should always have been implicit in the specification of particular cost caps rather than a general "full cost of coverage" formulation.
 
Recruitment and retention. The Association's second appeal is to recruitment and retention. A substantial part of the hearing was devoted to recruitment and retention; and the heart of the relevant data is set out above.(9) No one would call the resulting picture exactly rosy. But the City argues that its experience has not been significantly off the regional and national norm during a period marked by widespread shortages of entry level police applicants. The City argues (Post-hearing Brief at 22) that "the last four hires into the Department . . . have involved the hiring of lateral officers from predominately larger police agencies." But the actual recent recruitment record is decidedly mixed. Only one of the four was a genuine, nonproblematic lateral transfer from a nearby larger agency (i.e., Tigard). The second of the four was a former Tualatin officer who moved laterally to the Hillsboro Department and was successfully courted back to Tualatin. That experience does not support much of a conclusion one way or the other about the Department's recruitment and retention picture. The third was a lateral hire from a nearby department who washed out less than a month into his probation at Tualatin.(10) And the fourth, although a genuine lateral hire from a larger agency in another state, was the City's second choice after the lateral candidate first in line failed to pass the Department's psych test. All in all, this is not a record of shining success in lateral recruitment; but neither is it a record of abject failure as the Association argues.
 
With respect to retention, there is no dispute--as the Association points out--that well over a third of the City's police force was hired within the last five years. But some of that hiring is the result of expansion, and some of the hires are laterals, so the resulting picture does not really depict a police force too heavily dependent on less than veteran officers.
 
One serious problem with the Association's appeal to recruitment and retention is that there is no particular reason to conclude that the adoption of the Association's package would alleviate the city's recruitment and retention problem, either in the near term or in the intermediate future. Indeed, the Association agrees that its proposal "will not solve the recruitment and retention problem currently faced by the City of Tualatin, [but] at least [it] will not make it worse."
The City's proposal on the other hand, especially the punitive aspect of taking monies already paid back from employees, will not enhance employee morale and will not enhance employees' desires to remain in employment of the City. If anything, the City's proposal will increase the desire of Tualatin Police Officers to move into other jurisdictions. (Post-hearing brief at 19.)
 
I agree that if Oregon did not force interest arbitrators to award the ill-advised parts of a LBO package, I would certainly separate out the repayment part of the City's proposal. (On the other hand, I would also separate out the Association's proposal to change the identification of increase dates from a specific list to "each year thereafter," a change with no bargained justification at all in this record.) But on the record before me I cannot conclude that the adoption of the City's LBO would be likely to have a substantial adverse effect on the City's recruitment and retention experience.
 
Conclusion. Public employers in general and cities in particular always have many competing priorities for every dollar. (See ORS 243.746(4)(b).) The additional cost of the Association's proposal here is not massive, but neither is it entirely insignificant. Because none of the statutory "secondary" factors provides substantial support for the adoption of the Association's proposal, and because it appears that the City's proposal will continue to keep its overall police compensation comparable and probably will not adversely affect its recruitment and retention experience, I must award the City's proposal in this case.
 
AWARD
 
The new contract shall include the City's last best offer package.
 
Respectfully submitted,
Howell L. Lankford, Arbitrator
 
Dates: July 20, 2005
 
Representing the Association: Daryl S. Garrettson, Garrettson, Goldberg, Fenrich & Makler
 
Representing the City: Kenneth E. Bemis, Bullard Smith Jernstedt Wilson
 
1. That pattern appeared in the parties' contracts for 1990-1993, 1992-1995, 1995-1998, 1996-2001, and 2001-2004.
 
2. In the 1990-1993 contract any excess over the 10% increase was to be paid entirely by the officer.
 
3. The contract language is ". . . the City's tiered maximum monthly contribution will be increased equal to the increase in premiums established by the [carrier], up to a maximum of ten (10%) percent of the previous year's contribution by the City." There is no dispute in the record, however, that the City has unfailingly taken that language to require a ten percent increase in its insurance contributions regardless of whether the costs increased by more or less than 10%. (The record does not show that the City has ever taken its contribution cap to increase above the total cost in a down year of any contract.)
 
4. Some of the shorthand labels are poor encapsulations of the statutory language.
 
5. The first six listed factors apply most comfortably to financial disputes. It seems
to me that the threshold determination required for consideration of "other factors" would
almost always be restricted to disputes that include very substantial non-economic
"language" issues which cannot be analyzed productively on the basis of the other listed
factors. The threshold determination, after all, is not that the arbitrator's decision would
easier to come to, or would be better reasoned, by looking outside the first six listed factors;
the statute allows consideration of "other factors" only if the first six factors do not provide
"sufficient evidence for an award" (not necessarily the best award) at all.
 
6. The City apparently includes total PERS costs but also reflects differences in
insurance benefits only in terms of employee out of pocket costs.
 
7. It is not quite clear how this issue can be shoehorned into the secondary factors set out in the statute. In light of the discussion below, however, that problem is not significant.
 
8. It seems useful to distinguish at least three senses of "status quo." The first sense applies to actual benefits received by bargaining unit employees. Historically, the law of the status quo in this sense probably begins with case law addressing what "benefits" may be changed and what may not be changed after a representation petition is filed but before the election is held. The term is used in a somewhat different sense when it is applied to noneconomic "contract language" benefits. In that sense it is part of the ancient medical admonition "First, do no harm" and the labor relations corollary "If it ain't broke, don't fix it." The burden of proof, when dealing with the status quo in this sense, properly falls on the party proposing to "fix it." Finally, the term "status quo" is sometimes used in a third sense to recognize some sort of positioning of a particular employer with respect to, e.g., the CPI or a particular body of similar employers. I submit that those three senses of the term are vastly different--they are "variables ranging over different sorts of particulars," a logician might say--and mixing them all together often produces an unhelpful conceptual witches' brew.
 
9. At hearing, two officers testified that they had applied elsewhere. After the hearing, but before the briefs were due, the City moved to augment the record to show that those officers had withdrawn their applications. I allowed the motion over the Association's objection. The additional evidence certainly did not affect the results in this case. I suspect that few interest arbitrators are much convinced by evidence that "employees are now applying to transfer to other departments," even when that evidence comes in the form of sincere first person testimony. For one thing, I have never seen any study of the percentage of a department that normally has applications in process with other departments, so it is very difficult to evaluate the significance of any particular number of such applications. Looking at the same problem from the other side, we have no dependable way of knowing whether any given employee who has made application elsewhere would actually leave his or her present employer if offered an alternative position. Considering the vistas of uncertainty that open up when considering this sort of "applications out" evidence, it makes much more sense to confine our consideration to the hard data of the employer's actual track record.
 
10. That points out that one of the obvious hazards of lateral hires, which may be of some concern to the City on this record: a series of lateral hires who fail probation suggests that the employer may be taking in too many officers whose departure did not entirely sadden their prior employers.