THE MATTER OF THE INTEREST ARBITRATION BETWEEN: TROUTDALE POLICE OFFICERS ASSOCIATION and CITY OF TROUTDALE. IA-03-02.
This matter came to arbitration pursuant to ORS 243.746 and administrative rules promulgated thereunder. The parties' three-year collective bargaining agreement expired June 30, 2001. The bargaining unit involved consists of all sworn police officers below the rank of sergeant employed by the City. The City has a population of 13, 980. There are 75 City employees, 40 of whom are represented by AFSCME. The case was considered submitted based on the evidence presented at the hearing and post-hearing briefs that were received on July 26, 2002.
The parties reached agreement on all provisions to be included in their successor agreement except the following:
1. Article 12.5 - Work Schedules
2. Article 13.2 - Form of Compensation
3. Article 16.4 - Vacation Sell-Back
4. Articles 29.1 and 29.2 - Insurance
5. Article 30.1 - Wages
The City's last best offer on Article 12.5 - Work Schedules was:
An employee will be given seven (7) days advance notice of any change in his/her regular hours of work, except where a change of schedule is due to an emergency outside the City's control, or for the purpose of the employee's voluntary training and/or by mutual agreement of the City and the employee. The parties agree that such notice shall constitute "reasonable notice" under FLSA regulations.
The Association's last best offer on Article 12.5 - Work Schedules was:
An employee will be given seven (7) days advance notice of any change in his/her regular hours of work, except where a change of schedule is due to an emergency outside the City's control, or for the purpose of the employee's voluntary training and/or by mutual agreement of the City and the employee.
The last best offer of the City on Article 13.2 - Form of Compensation was:
The employee may elect to be compensated for all overtime in cash, or he/she may elect to accrue compensatory time, to the extent such is allowed by law, to a maximum accrued balance of sixty (60) hours, with the remainder to be paid in cash.
The Association offered to retain the language of the previous agreement on Article 13.2, which reads:
The employee may elect to be compensated for all overtime in cash, or he/she may elect to accrue compensatory time, to the extent such is allowed by law, to a maximum accrued balance of forty (40) hours, with the remainder to be paid in cash. Compensatory time shall be scheduled and taken off in conformance with the Fair Labor Standards Act (FLSA).
On Article 16.4 - Vacation Sell-Back - the City's last offer was:
Once in each calendar year, an employee who has used at least forty (40) consecutive hours of vacation time within that calendar year may request in writing a "cashout" of up to sixty
(60) hours vacation pay. The City must approve such cashouts in writing and may disallow or reduce cashouts based on the ability of City finances to absorb the cost.
The Association wanted to retain the language of the previous agreement on Article 16.4, which states:
Employees, who have used at least (40) consecutive hours of vacation time within the fiscal year, may at their option, elect to be paid for up to forty (40) hours of accrued vacation in addition to vacation time taken.
With respect to insurance and wages, which the parties agreed are the primary issues upon which this dispute is centered, the City proposed the following language:
29.1 - Health Insurance
The City agrees to make available to full-time employees and their eligible dependents the current dental (sic) insurance plan or a substitute plan, Blue Cross Plan V-A with UCR vision option or CCIS Employee Benefit Services Trust Kaiser Permanente Medical Plan A with Vision Plan and Drug Plan A or a substitute plan of equal to or better than the benefit levels with ninety-five percent (95%) of the premium costs to be paid by the City and five percent (5%) of the premium costs to be paid by the employee. The employee's share of the premium will be paid by payroll deduction.
29.2 - Dental Insurance
The City agrees to make available to full time employees and their eligible dependents the current dental insurance plan or a substitute plan of equal to or better than the benefit level with ninety-five percent (95%) of the premium costs to be paid by the City and five percent (5%) of the premium costs to be paid by the employee. The employee's share of the premium will be paid by payroll deduction.
30.1 - Wages
Effective 7/1/01, the wages of Association members will be increased by 3% as set forth in Schedule "A", attached to the Agreement.
Effective 7/1/02, the salary schedule set forth in Schedule "A" will be increased by an amount equal to the CPI-U for the City of Portland, January, 2001 to January 2002 with a minimum of 2.5% and a maximum of 5%.
Effective 7-1-03, the salary set forth in updated Schedule "A" will again be increased by an amount equal to the CPI-U for the City of Portland, January 2002 to January 2003, with a minimum of 2.5% and a maximum of 5%.
The Association's last best offer was to retain the contract language on Articles 29.1 and 29.2 and to provide at Article 30.1 - Wages as follows:
Effective July 1, 2001, increase wages by two percent (2.0%) across-the-board.
Effective July 1, 2002, the salary schedule set forth in Schedule "A" will be increased by an amount equal to the CPI-U, Portland, January, 2001, to January, 2002, minimum of 2.5%, maximum of 5%.
Effective July 1, 2003, the salary schedule set forth in Schedule "A" will be increased by an amount equal to the CPI-U, Portland, January 2002 to January 2003, minimum 2.5% maximum 5%.
The City and the Association agreed on all aspects of the insurance issue, except premium sharing. They also agreed to a 2.5% minimum to a 5.0% maximum cost-of-living increase in wages, based on the Portland CPI-U, for the second and third year of the agreement.
APPLICABLE STATUTORY PROVISIONS, ORS 243.746
(4) Where there is no agreement between the parties, or where there is an agreement but the parties have begun negotiations or discussions looking to a new agreement or amendment of the existing agreement, unresolved mandatory subjects submitted to the arbitrator in the parties' last best offer packages shall be decided by the arbitrator. Arbitrators shall base their findings and opinions on these criteria giving first priority to paragraph (a) of this subsection and secondary priority to subsections (b) to (h) of this subsection as follows:
(a) The interest and welfare of the public.
(b) The reasonable financial ability of the unit of government to meet the costs of the proposed contract giving due consideration and weight to the other services, provided by, and other priorities of, the unit of government as determined by the governing body. A reasonable operating reserve against future contingencies, which does not include funds in contemplation of settlement of the labor dispute, shall not be considered as available toward settlement.
(c) The ability of the unit of government to attract and retain qualified personnel at the wage and benefit levels provided.
(d) The overall compensation presently received by employees, including direct wage compensation, vacations, holidays and other paid excused time, pensions, insurance, benefits, and all other direct or indirect monetary benefits received.
(e) Comparison of the overall compensation of other employees performing similar services with the same or other employees in comparable communities. As used in this paragraph, "comparable" is limited to communities of the same or nearest population range within Oregon….
(f) The CPI-All Cities Index, commonly known as the cost of living.
(g) The stipulations of the parties
(h) Such other factors, consistent with paragraphs (a) to (g) of this subsection as are traditionally taken into consideration in the determination of wages, hours and other terms and conditions of employment. However, the arbitrator shall not use such other factors, if in the judgment of the arbitrator, the factors in paragraphs (a) to (g) of this subsection provided sufficient evidence for an award.
SUMMARY OF CITY'S ARGUMENT
The City contends that because of the similarities of the first and second year costs of the parties' last best offers, the parties acknowledged that "ability to pay" is not an issue in this proceeding. The determination of which offer should be selected must be based primarily on the "interest and welfare of the public" with secondary considerations being given to the other statutory criteria listed in ORS 243.746.
The parties' proposals on Article's 12.5 and 13.2 are inter-related, the City maintains. While they agree an employee will be given seven days notice of a change in hours of work, they do not agree that the seven-day notice will also be considered "a reasonable period" for notice of time off for compensatory time use under the Fair Labor Standards Act. The City wants seven days notice by an employee who wants to use compensatory time off; the Association wants to stay with a three-day notice. The City wants to increase the amount of compensatory time an employee may accrue to 60 hours. The Association proposes 40 hours.
The City's reasons for its proposals under Articles 12.5 and 13.2 are the difficulties it encounters accommodating employee requests for time off work, including compensatory time requests. The size of the staff is small and a minimum staffing level must be maintained. The seven-day notice period would provide the City with more time to react to unanticipated staff shortages and would promote operational efficiency. According to the City, its offer would reduce overtime costs, which would promote better utilization of funds and be in the best interest and welfare of the public.
The maximum vacation an employee would be permitted to sell-back, under Article 16.4 of the City's proposal, would be increased from 40 hours to 60 hours. That proposal was conditioned on the City's ability to absorb the cost and would be done once a year. The City argues its proposal is in the best interest and welfare of the public because it promotes vested benefit debt reduction and ease of administration. The buy-back would be at a lower wage scale. The annual arrangement promotes operational efficiency.
The City argues that the adoption of its insurance and wage proposal is critical for a number of reasons. The City is in dire financial straits. While the cost differences between the parties' package proposals are relatively insignificant, it is in the best interest of the public that the City maintain policies that are credible and defensible to ordinary taxpayers. It is no longer defensible, in the present economic climate, for public employers to pay 100% of the costs of health insurance plans. Public managers need to be sensitive to the concerns of taxpayers who often contribute to their own health insurance plans. According to a noted survey, a significant percentage of employees in Oregon and southwest Washington are required to contribute to their insurance plans. It is not prudent to require taxpayers to bear 100% of the escalating cost of health insurance for City employees. Such policies provide ammunition for the anti-government contingency that cites such examples to sponsor a number of representatives who have undercut the ability of local governments to provide basic services. It is also in the public's interest to sensitize employees to rising health insurance costs.
The cost to employees to contribute 5% to the insurance premium costs is more than offset
by the 3% wage increase the City proposes for the first year of the agreement. The parties' proposals are close and the Association may argue its proposal is less costly than the City's; however, the cost savings from the Association's proposal are insignificant and it fails to address the public's interest in requiring employees to bear a part of the cost of insurance.
In the City's view, evidence introduced at the hearing demonstrates a compelling need for change in the status quo. Moreover, there is no true status quo in health insurance premiums, unless the cost of those premiums has not increased. In the current case, premiums have skyrocketed, nearly doubling during the last six years.
The City has been able to attract and retain well qualified police officers. There was no evidence to suggest that its own proposal would affect its ability to do so, in the City's view. The overall compensation for City officers compares favorable with that paid to officers working in Portland area communities of similar populations. Moreover, since a majority of those jurisdictions require officers to contribute to insurance costs, it cannot be argued that the City's proposal for premium sharing will affect its ability to attract and retain officers.
The City maintains it complied with the legislative mandate by selecting as comparators six Oregon cities with populations closest to the population of Troutdale. The Association did not select cities of the same or nearest population range. Instead, the Association's comparative range in population is from 26,680 to 11,450. Moreover, 17 cities within those ranges were omitted. While the Association argues it selected cities in the Portland metropolitan area, the statute does not define "comparable communities" as those of the same or nearest population range "within a geographic area." Also the Association did not include all cities in the Portland metropolitan area with populations between 26,680 and 11,450. Because the Association's selection of "comparable communities" is selective, its comparison of overall compensation data is flawed. Evidence introduced at the hearing showed other admitted inaccuracies in the Association's data.
The overall compensation paid to Troutdale officers compared to the overall compensation paid to officers in communities of comparable populations in Oregon is higher than that of officers in any of the statutory comparisons. This is true for officers within all three profiles for both the first and second years of the agreements, the City holds.
A comparison of the insurance premium-sharing policies of the six cities with populations closest to the population of Troutdale reveals that all those cities, except those participating in the Teamster Trust and one in negotiations, require employees to contribute to the cost of health insurance. Even if communities with the closest population to Troutdale in the Portland area are selected, the City compares favorably in terms of overall compensation and premium cost-sharing, the City contends. The 3% wage increase and the 95/5% insurance premium-sharing proposals by the City result in a wage-health insurance package that more closely resembles that paid by statutory "comparable communities" as well as Portland area communities traditionally used by the parties as "market comparators." The City's proposed wage increase more closely matches the applicable CPI than the Association's proposal.
SUMMARY OF ASSOCIATION'S ARGUMENT
The Association contends that the last best offers of the parties are very similar. Aside from wages, the differences all involve City proposals to change the status quo. The City has not proved the need for its proposed changes. The Association has always had fully paid health insurance. The City's proposal is a major change in the status quo. To justify such a change in the status quo, the City should have the burden of proving a compelling need and a "quid pro quo" for its proposed change.
Arbitrators have held that in order to change an existing contractual relationship a party must show evidence that the existing situation is unworkable or inequitable, evidence of a quid pro quo, and proof of a compelling need. An inequity was created by the City when it imposed the 5% insurance contribution on its other employees who had little choice. Other City employees do not have collective bargaining and interest arbitration. Police officers are not in the same category as other public employees. The legislature recognized that when it granted them the right to interest arbitration.
A "quid pro quo" could justify taking away a benefit previously obtained through negotiated settlement; however it would mean a raise more than the cost of living increase. The City's wage increase proposal of 3% is only .1% above the CPI and can hardly be viewed as an adequate quid pro quo for the risk the City is attempting to impose on the Association in the future. The City offer constitutes a take-away, in the Association's view.
The Association does not dispute the increasing costs of health insurance; however, with no quid pro quo in the City's last best offer, the imposition of the 5% contribution is regressive and the more the insurance costs increase, the more future wage increases will be reduced. The City is attempting to treat Association members the same as its other employees who have no recourse to interest arbitration.
The City has not shown a compelling need for instituting a 5% employee contribution to insurance. The willingness of the Association to take a low raise the first year of the contract to help pay for the increased health insurance costs obviates any compelling need. The Association's last best offer costs less in several respects than the City's last best offer. The first year wage proposal, and roll-up costs in the remaining years of the contract, is substantially less in the Association's last offer.
According to the Association, the City seeks other "takeaways" in its last best offer. It wants control over the compensatory time off and vacation cash-out of employees. The City was not satisfied with previous concessions made by the Association and wants to expand the Fair Labor Standards Act notice period from three days to seven days. The status quo, as proposed by the Association, is not costly to the City and the City has not shown a compelling need to change the status quo.
The City proposes to change Article 16.4 of the contract to provide an increase in the amount of vacation cash-out available, but to also require City approval for all such cash-outs. In the Association's view, the current contract language is preferable. The City has not shown a compelling need to change the language.
The Association argues that the City should not be permitted to dictate what is in the interest and welfare of the public. Some arbitrators have deferred to the opinions of employers when evaluating this primary factor. They have relied on the testimony of employer witnesses who gave their views of taxpayer concerns and perceptions. Similar testimony was given in this case, even though the difference in the cost of the two offers is negligible. The decision in this case should not be based on deference, but rather on the evidence. If the Association's last best offer is chosen, any reordering of the City's priorities would be minimal. The City should not be allowed to rely on speculation about the future to prevail when its last best offer lacks sufficient quid prop quo to justify its proposed changes to the status quo.
With respect to the secondary statutory criteria, the Association urges that no ranking can be given them, except subsection (h), the "other factors", which may be considered only if the other criteria provide insufficient evidence for an award. While the City claimed it has a tight budget and is in dire financial straits, the City has the ability to pay for the Association's proposal because officers will receive less under the Association's offer than under the City's offer. The City's ability to attract and retain qualified officers would be adversely affected if the City's proposal is adopted.
Studies by the Association show City police officers are behind the comparator jurisdictions the Association used. City studies using its comparators shed a more favorable light on the City's position. Comparisons with other jurisdictions, however, is but one of several secondary factors, the Association argues. The primary criteria is the interest and welfare of the public. If the City did not meet its burden in the "quid pro quo" test, the fact that its comparators favor its proposal would not justify the change to the status quo.
From the beginning of cases following the 1995 statutory revisions, arbitrators have recognized that in addition to the consideration of population, geography may be used as a limiting criterion in choosing comparator jurisdictions, the Association contends. For a Portland area jurisdiction it is advantageous for an employer to advocate a strict population rationale because many of the statewide jurisdictions are not compensated as highly as those in the Portland area. The City acknowledged the use of Portland area jurisdictions in its decisions involving employee compensation. It makes more sense to use Portland area jurisdictions because the parties have traditionally used the Portland CPI as a gauge for wage increases. The Association's comparators are within Troutdale's population and geographic range, and they provide a comparison that is more consistent with the parties' use of the Portland CPI.
The Association maintains that the statute calls for a comparison of total compensation, not individual categories of compensation. The fact that Troutdale does not pick up the PERS cost is balanced in a total compensation analysis by its police officers having fully paid health insurance. Even with fully paid insurance, however, Troutdale officers are behind the Association's comparator jurisdictions in total compensation.
With respect to the consumer price index the Association does not dispute the fact that the Portland CPI-U has been traditionally used by the parties.
FINDINGS OF FACT AND OPINION
The statutory criteria that arbitrators are required to use in analyzing last best offer packages submitted by parties in interest arbitration disputes are found in ORS 243-746 (4) and in the administrative rules of the Oregon Employment Relations Board, OAR 115-40-015 (8). The law mandates that "the interest and welfare of the public" be given first priority and that the remaining criteria be given secondary priority. While no definition is given in the statute for "interest and welfare of the public," it has been decided by a number of arbitrators that the interest and welfare of the public must be considered in conjunction with the secondary statutory criteria. Professor Snow, in Bend Firefighters Union and City of Bend, p 4, (1996), said " 'the interest and welfare of the public' is not a criterion that stands alone. It is to be given first priority, but other criteria may not be ignored in view of the requirement that they be given secondary priority. Giving the other criteria secondary priority clearly means that they must help inform the abstractions set forth in the first criterion."
The parties agreed at hearing that this matter went to arbitration because of the importance of the health insurance issue that is in dispute. That the cost of health insurance has increased astronomically in recent years in not in dispute here. The City historically has paid 100% of the health insurance costs for all its employees, including the employees in this bargaining unit, its non-union employees and its AFSCME- represented employees. The AFSCME unit agreed to contribute 5% of the total cost of health insurance premium effective August 1, 2001. The unorganized employees did likewise.
The 14 employees in the police officer bargaining unit are the only City employees who currently receive fully paid insurance. The City has two health insurance plans. One is a "Cadillac" Blue Cross plan, the other a less expensive plan. Three out of four Association bargaining unit members have the Blue Cross plan with full family coverage, meaning the City's cost is higher than it would be if officers chose a less expensive plan and/or had fewer dependents to cover. The impact of the City's proposed 5% employee contribution to health insurance would be lessened somewhat because employees could pay their share out of pre-tax dollars under the City's Section 125 plan.
The City's Finance Director testified that the City's revenue sources are increasing at a rate of 3% to 5% while expenses are increasing at a rate of 15% to 20% across the board. Due to the similarities in the overall first and second year costs of the last best offers of the parties, they acknowledged; however, that "ability to pay" is not of critical importance in this matter. In the first year of the contact, the Association's proposal of a 2% wage increase with fully paid insurance is less expensive than the City's 3% wage increase proposal with a 5% employee contribution to the cost of health insurance. For practical purposes, however, the monetary difference between the two first year proposals is insignificant. While the actual monetary difference may be slight, that difference is not the important consideration that must be addressed.
Two concepts that are of great importance to parties who are in a collective bargaining relationship are stability and continuity, or synonymously, permanence and continuation. Both serve to maintain the status quo and should not be changed drastically unless certain conditions are met. Both Professor Snow in Bend Firefighters Association and City of Bend, supra, p. 6,and Arbitrator Wollett in City of McMinnville and McMinnville Police Officers' Association (2000), p. 4, articulated the requirements involved in changing the status quo. First, there must be evidence that the status quo has proved to be unworkable or inequitable. Second, there must be a quid pro quo to justify taking away a benefit that was gained through negotiations. Third, there must be proof of a compelling need.
In the instant case, there is no evidence that the status quo is unworkable or inequitable. Although it is clear that, from the City's perspective, any organization would like to have the same insurance arrangement for all its employees, if for no other reason than ease of administration. The City's argument, however, does not focus on that reason. Instead, it argues that it is in the best interest of the public because most private sector employees who are also taxpayers, have to share in the cost of health insurance premiums; therefore, public sector managers must show an awareness of that fact and attempt to sensitize its employees to rising health costs by giving them a shared stake in resource utilization. However, employees in the Association bargaining unit do not want to participate in the City's new approach. Their desire to maintain the status quo is fully as important and rational as is the City's desire to change it. The status quo has worked equitably in the past and there was no persuasive reason given to show it will not continue to do so. If the public believes police officers, as Oregon public employees who are not permitted to strike, are getting extraordinary treatment, it is the public that should be sensitized to the unique work of law enforcement personnel and the fact they are entitled to exercise their right to interest arbitration. If there are employees who are not already fully aware of the fact that health insurance costs have been rising at an alarming rate for the last several years, it is difficult to imagine they would be suddenly awakened by a 5% sharing proposal that is offset by a 3% wage increase and whose impact is reduced by the City's 125 plan. The better reasoning would be that they would view it exactly as it is: An effort to take away any cost of living adjustment and make inroads into a continued employee contribution arrangement from which it would be difficult at best to retreat. I, like Arbitrator Wollett in City of McMinnville and McMinnville Police Officers' Assn., supra, p. 5, have difficulty with the inequity argument where the City created it in the first place.
There is no quid pro quo in the City's proposed offer to switch to a cost-sharing plan to fund rising health insurance premiums. The City's 3% wage increase proposal barely covers the cost of living increase as measured by the Portland CPI. A .1% wage increase above the CPI is far too little to be considered a quid pro quo for changing a previously obtained benefit by the Association members. Moreover, the Association's proposed 2% wage adjustment was designed to help offset increased health insurance costs.
Contrary to the City's argument, the evidence does not demonstrate a compelling need to change the status quo. The status quo is the fully paid health insurance premiums the bargaining unit members have realized in the past, not the variable premium increases the City must fund. The fact the Association was willing to accept a first year wage increase lower than the cost of living increase serves to ameliorate any perceived compelling need and taxpayer concerns over equity.
The Association's proposal in its last best offer regarding the health insurance and wages issues represents a continuation of the status quo on insurance premium payment. It will serve to maintain high morale among a bargaining unit of employees who perform one of the most critical and difficult of public services. It is, therefore, in the best interest and welfare of the public to adopt that proposal. There is no compelling need to change the status quo nor was there a quid pro quo offered by the City to justify taking away the benefit of fully paid health insurance. That all other City employees now have a different premium-sharing arrangement with the City does not render the Association's position on the matter unworkable. The Association proposal on wages and insurance does as much to promote accountability and efficiency as does the City's proposal.
In the parties' last best offers there were three other issues in dispute. While both parties emphasized the importance of the insurance/wage issue and directed most of their evidence and argument to it, completeness of analysis requires that the other issues and the applicability of the secondary criteria in the statute be addressed. The parties acknowledged that ability to pay is not of crucial importance in this case because the two offers are nearly identical in cost.
No evidence was offered to suggest that either last best offer would affect the City's ability to attract and retain qualified personnel. The City has been able to attract and retain well
qualified officers without difficulty in the past.
As one would expect, the parties selected different comparator jurisdictions to compare the
overall compensation and benefits presently received by Troutdale officers with officers' compensation in other communities. The City selected six Oregon cities with populations closest to the population of Troutdale. The Association selected seven Oregon cities using both population and geography, relying on interest arbitration case precedent to do so. The City justified its selection based on a strict interpretation of the word "comparable" in the statute. Not surprisingly, each party found fault with the other's selection of comparators and method of analysis. The Associations' comparators showed bargaining unit members behind in overall compensation. According to the data compiled by the City, the overall compensation paid to City of Troutdale officers is higher than the overall compensation paid to officers working for any of its statutory comparators. The persuasiveness of the City's evidence and argument on the issue of overall compensation and benefits compared with what seems to be statutorily mandated comparable communities' compensation and benefits does not alter the fact that the City failed to justify its desire to change the status quo on a major benefit. Compensation comparison is one of the secondary factors in the law and by definition pales in importance compared to the primary factor, the interest and welfare of the public. While not standing alone, on balance, the primary factor outweighs any of the secondary factors given the focus in this case on a proposal to change the status quo.
The parties have traditionally used the Portland CPI-U. The index was 2.9% for January 1, 2000 to January 1, 2001. Neither party argued it as a relevant factor as a secondary priority in this interest arbitration case.
The parties' evidence and arguments on the other issues in dispute have been considered. As the parties stressed at the beginning, however, those issues were insignificant compared to the insurance/wage issue to which almost all the evidence and argument was directed. Suffice it to say, neither of the last best offers related to work schedules, form of compensation nor vacation sell-back was unreasonable and not in the public interest. The determination reached here was based primarily on the insurance/wage issue with less weight given to the other issues.
The interest and welfare of the public factor, as discussed herein, coupled with a consideration of the relevant secondary factors provided the basis for this award.
The last best offer of the Association is hereby selected and ordered adopted.
Dated this 19th day of August, 2002.
Jack H. Calhoun, Arbitrator
FOR THE ASSOCIATION: Jamie B. Goldberg, Garrettson, Goldberg, Fenrich & Makler
FOR THE CITY: Kathy A. Peck, Williams, Zografos & Peck