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IA-03-98
 
In the Matter of the Interest Arbitration between International Association of Firefighters, Local 1817, and Jackson County Fire District No. 3. IA-03-98
 
This Interest Arbitration arises between International Association of Firefighters, Local 1817 ("Union"), and Jackson County Fire District No. 3 ("District"). LUELLA E. NELSON was selected to serve as Arbitrator, and her Award shall be final and binding upon the parties.
At a hearing held on August 27, 1998, in Medford, Oregon, the parties had the opportunity to examine and cross-examine witnesses, introduce relevant exhibits, and argue the issues in dispute. Both parties submitted the matter on closing oral argument.
 
RELEVANT CRITERIA
In arriving at her Decision and Award, the Arbitrator weighed and considered the following criteria set forth in the Oregon Public Employees Collective Bargaining Act, ORS 243.746(4), and the Rules of the Oregon Employment Relations Board ("ERB"), OAR 115-40-015
 
(8):
 
(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 a 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 the 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 subsection, "comparable" is limited to communities of the same or nearest population range within Oregon. Notwithstanding the provisions of this subsection, the following additional definitions of "comparable" apply in the situations described as follows:
 
(A) For any city with a population of more than 325,000, "comparable" includes comparison to out-of-state cities of the same or similar size;
 
(B) For counties with a population of more than 400,000, "comparable" includes comparison to out-of-state counties of the same or similar size; and
 
(C) For the State of Oregon, "comparable" includes comparison to other states.
 
(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 subsections (a) to (g) of this section 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 subsections (a) to (g) of this section provide sufficient evidence for an award.
 
BACKGROUND
The District provides emergency response service in 220 square miles of the Rogue Valley, including the City of Central Point. It serves a population of roughly 45,000 people in an area that includes rural, municipal, and industrial areas. Through mutual aid agreements, it at times provides service in seven neighboring fire districts. In addition, it provides support to the police for actions involving clandestine drug labs; stand-by service for various community sporting activities; fire inspections; smoke alarm testing and replacement; and patient transport for the local ambulance service.
 
ISSUES, ANALYSIS AND AWARD
The parties are in disagreement regarding four sections of the Contract--wages, duration, layoff language, and insurance. The differences in their "Last Best Offer Packages" may be summarized as follows:
 
UNION
WAGES: Year 1 3%; Year 2 3%; Year 3 No proposal
 
DURATION: 2 years, through June 30, 2000
 
LAYOFF: No proposal-current language Current language requiring layoff of least senior employee
 
INSURANCE: Policy: Blue Cross H-4 starting January 1, 1999 (replacing Blue Cross H-1). Insurance Cap: No proposal - current language providing for District to pay full
 
DISTRICT
WAGES: Year 1 3.5%; Year 2 CPI: minimum 2.5%-maximum 4%; Year 3 CPI: minimum 2.5%-maximum 4%
 
DURATION: 3 years, through June 30, 2001
 
LAYOFF: Current language requiring layoff of least senior employee, except that the District, in its discretion, may lay off the next non-EMT if layoff would reduce the number of EMT's below 9
 
INSURANCE: Policy: Blue Cross H-4 starting January 1, 1999 (replacing Blue Cross H-1). Insurance Cap: Cap of $750 per employee per month, no co-pay
 
PUBLIC INTEREST
The District argues employees should share the cost of the insurance benefit, which currently exceeds the average paid by comparators by more than 30%. The Union asserts there is no public interest in an insurance cap. It argues a cap will not slow cost increases, because the events that increased health care costs in this unit are beyond employees' control. It argues that, rather than place the risk of cost increases on employees, the parties must work together to attack cost increases. It notes it proposed, and the parties agreed, to replace the existing health insurance plan with one providing lower cost and lower benefits.
 
The District argues a three-year contract would contribute to stability and predictability and give it relief from the financial and administrative burden of bargaining. The Union ties its concern over contract duration to the insurance cap proposal. It argues that adding a third year to the contract duration is not in the public interest, particularly if coupled with an insurance cap. It suggests these factors could combine to lower comparative compensation in the third year to the point where the District would no longer be a desirable place to work.
As to layoff language, the District argues it is essential to be able to retain a minimum number of Paramedics even if a drastic layoff becomes necessary. It adds, however, that it does not foresee such a layoff becoming a necessity. In this regard, to fall below nine Paramedics, a layoff would have to eliminate more than 13 of the current 32-member bargaining unit. The Union disputes the importance to the District of giving super seniority to Paramedics. In this regard, it notes very few recent hires have been Paramedics, and suggests the District has not hired more Paramedics because of the incentive pay that goes with that position. It argues the District could ensure the necessary number of Paramedics by making Paramedic certification a job requirement. It also argues seniority historically has been an accepted basis for determining the order of layoff, and notes the Union has protected its seniority language since at least 1983.
 
As both parties acknowledge, there is no significant difference in the wage proposals. While the District's proposal would give a slightly higher first-year increase, using the CPI standard in the out years has the potential to even out by the end of a three-year contract (or, alternatively, to give a greater wage increase than under the Union's proposal, if inflation worsens). There is thus no significant difference in the public interest in either wage proposal.
Both parties' insurance proposals contribute to the public interest. The Union's insurance proposal shares with the District's proposal the substitution of less expensive insurance for the current plan. While the District's proposed insurance cap would limit potential cost increases for the District, its value must be balanced against other aspects of the public interest. In particular, the possible erosion of net pay in the event of large health premium increases is of concern because the proposed cap is coupled with a lengthier contract term proposal, which provides more time for inflation to bring premiums above the cap. The impact of such a result is uncertain; however, it is logical to conclude, as the Union suggests, that it could decrease the desirability of employment with the District. This result would be contrary to the public interest.
 
The contract duration has little bearing on the public interest in itself; a contract of either two or three years' duration is within the standard range for contracts. However, the District's proposal for a longer contract increases the likelihood that volatility in insurance costs could offset the wage increases called for by its wage proposal. This potential effect would be contrary to the public interest.
 
The District's layoff proposal has a bearing on the public interest only in the event of a catastrophic layoff. It can hardly be questioned that EMT skills are a valuable commodity. However, other means exist to achieve the end of retaining EMT's in the District. The proposed exception from layoff is a departure from both the past standard in this unit and the usual standard in this industry. It is therefore not necessary nor in the best interest of the public to provide such "super seniority" for EMT's.
 
For all the above reasons, it is concluded the Union's package is more consistent with the public interest.
 
ABILITY TO PAY
The cost of the parties' wage proposals is very similar; the District's first-year wage proposal is slightly more generous than the Union's proposal. On the only other economic item, the health insurance proposals differ in allocating the risk of escalating health insurance costs. As to this issue, the difference in costs depends on the extent of future inflation in health care costs. No evidence exists of any concern over financial reserves or fiscal integrity. No dispute exists that the District has the means to pay the costs of either package. Accordingly, this factor does not significantly impact the analysis.
 
ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL
No evidence exists that the District has encountered any difficulty in recruiting and retaining qualified personnel. The District's layoff proposal could affect the ability to retain EMTs, but only in the event of a catastrophic layoff. However, a layoff of that magnitude is unlikely. If insurance costs rose quickly, the District's proposed insurance cap could discourage qualified personnel from seeking or maintaining employment with the District, particularly over the course of a three-year contract. However, the extent of such an effect is unknown. This factor lends slight weight to the Union's final offer package.
 
OVERALL COMPENSATION PRESENTLY RECEIVED
Under either party's proposal, insurance coverage will be reduced from current levels. Although employees do not "receive" insurance premiums paid by the District, the payment of those premiums relieves employees of costs they otherwise would bear. The net impact is thus functionally equivalent to receipt of those premiums. The total compensation received would not be significantly different under either proposal unless insurance costs rose enough to exceed the District's proposed cap. In that event, the net effect would be to decrease compensation, as the CPI-based wage increases would be offset by increased insurance premiums. This factor argues against the District's proposal.
 
COMPARATIVE OVERALL COMPENSATION
The District asserts its salary schedule makes it a leader among comparable jurisdictions and notes its premiums are 30% higher than its comparators. The Union argues the District is below average in compensation, but asserts its primary concern is to address increases in insurance costs. It thus argues that this factor argues for rejecting the proposed insurance cap. It argues this factor also supports its layoff proposal, in that the "industry standard" is to provide for layoff by seniority, either by classification or by department.
 
The parties disagree regarding the appropriate comparators. The Union points to eight comparators; of those, it alleges that five service populations from 47,000 to 68,000, while the other three service populations from 30,000 to 40,000. All lie within municipalities; two lie within the Portland metropolitan area, and all but the smallest (Bend) are west of the Cascades. The District points to eleven comparators; of those, it alleges that three service populations from 58,000 to 76,000 (all within municipal boundaries), six service populations from 15,000 to 37,500 (all within municipal boundaries), and the population served by the two remaining comparators is not stated by the District but is alleged by the Union to be at or below 20,000. The parties disagree regarding the populations serviced by the four comparators they share; with the possible exception of Medford, the difference would not change the analysis significantly. If one accepted the District's figure for Medford, the population served (76,210) would exceed the Union's self-imposed population limit of 70,000, and thus exclude it from the Union's calculations. The Union asserts the population served in Medford is 47,021.
 
The four common comparators, together with Corvallis and Bend (which are included only in the Union's figures) occupy what one might call the middle ground of the proffered comparators. Their populations served are the closest in size to that of the District. The comparators excluded from this group differ most from the District. Those excluded from the District's proposed comparators serve considerably smaller populations. Those excluded from the Union's proposed comparators are at the ends of the population spectrum, and both the largest (Gresham) and the smallest (Lake Oswego) lie within the Portland metropolitan area (as does Hillsboro). It is logical to assume that the proximity to such a major population center affects the compensation levels necessary to attract and retain qualified personnel in those jurisdictions. It is thus reasonable to look primarily at the shared comparators in analyzing this factor.
 
Both parties have excluded the value of the PERS contribution from their figures. The parties' calculation of the health insurance premiums under the new plan in the first year differs. The District calculates the total cost of family coverage at $622.40, while the Union calculates it at $603.35. The Union has excluded health insurance premiums from its calculations for comparators, on the theory that they are not "received by" employees.
 
The District has not attempted a calculation of overall compensation; instead, it has compared the salaries for each of four job titles (one of which exists at only some comparators), as well as the current health insurance premiums. The Union has calculated the value of the various forms of time off, as well as the various forms of premium pay for various purposes. However, it suggests using three overall compensation figures -- base Firefighter plus the value of time off; base Firefighter plus Paramedic plus the value of time off; and base Firefighter plus Paramedic plus the value of time off plus the value of all possible types of premium pay.
 
The impact of the two approaches is evident when one compares the outcome in the District and the four comparators that overlap in the parties' presentations. For ease of comparison, the following compares only the Firefighter classification (without premium pay or paramedic certification) in the District and the four common comparators.(1) Within those five jurisdictions, Albany couples the lowest salary with the second highest health premiums; it is third in overall compensation (as calculated by the Union). If one added in the cost of health insurance, Albany would rank lowest in salary plus health premiums (from the District's figures), but second in total compensation plus health premiums (from the Union's figures). Springfield ranks first in salary and lowest in health premiums, making it first in the total of those two; it is fourth in overall compensation, and would be fifth if one added in the value of health insurance premiums. The District ranks fourth in salary and highest in health premiums, with the result that it is highest in the total of those two; it is lowest in overall compensation and would be fourth if one added in the value of health insurance premiums.
 
The statute calls for a comparison of overall compensation, not just those economic items which are in dispute. This approach reduces the risk that anomalies in some aspects of the pay structure will outweigh more general principles of comparability. The impact of other forms of compensation (particularly including the value of time off included in the Union's figures) makes it difficult to utilize the data presented by the District on comparators that are not common to the District's presentation.
 
Looking at the total compensation, both parties' economic proposals would put the District's firefighters toward the bottom of the closest comparators during the first year of the contract. This is true for both Paramedics and firefighters without EMT certification. Paramedics who receive all the possible forms of premium pay would still fall in the middle. However, the District's proposed insurance cap has the potential to put all employees at a relative disadvantage if insurance costs increase dramatically over the course of the contract. This is so because the comparators either have no insurance cap or have a cap that is considerably further above the current premium levels (and thus, presents a lesser risk that premiums will exceed the cap during the contract term). This factor therefore tends to favor the Union's proposal.
 
CPI - ALL CITIES
The most recent CPI-All Cities Index in evidence is lower than either party's proposal. The Union argues that, because compensation is below that of comparable districts, it is appropriate to give less weight to the CPI. The District notes its proposed wage increase exceeds recent CPI increases. Given the closeness of the parties' economic proposals, this factor is not significant to the analysis.
 
STIPULATIONS and OTHER FACTORS
The parties have not stipulated to other factors relevant to most of the issues in dispute. The Union argues its earlier agreement to a wage freeze, following passage of ballot measures 47 and 50, is relevant to the wage proposals. It further argues that industry standards and traditional collective bargaining provisions militate against superseniority for Paramedics. It notes the seniority principle has historically been upheld in interest arbitrations. This factor has already been accounted for under other criteria.
 
SUMMARY
For all the above reasons, it is concluded that the Union's package of proposals is the more appropriate of the two.
 
AWARD
The Union's final offer shall be adopted.
 
LUELLA E. NELSON - Arbitrator
 
November 7, 1998
 
On behalf of the Union: Michael Tedesco, Esquire
 
On behalf of the District: Patrick J. Mosey, Esquire
 
Footnotes:
 
1. Corvallis, which is not among the shared comparators, falls at or near the top of total compensation for each of the three categories calculated by the Union, and has no insurance premium cap. Bend, which also is not among the shared comparators, falls at or near the bottom of total compensation, but still above the District; it has no cap on insurance premiums.