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IA-04-99
 
IN THE MATTER OF THE INTEREST ARBITRATION BETWEEN CITY OF OREGON CITY, OREGON, AND OREGON CITY FIREFIGHTER'S ASSOC., LOCAL NO. 11 59. IA-04-99
 
INTRODUCTION
This interest arbitration arose between the City of Oregon City, Oregon (Department) and the Oregon City Firefighters Association, Local II 59 (Union) pursuant to ORS 243.742 et seq. and OAR 115-40-015, The parties mutually selected John H. Abernathy to serve as Interest Arbitrator.
 
At a hearing held on December 11, 1998 in Oregon City, Oregon, the parties had the
opportunity to examine and cross-examine witnesses, introduce relevant exhibits, and argue the issues in dispute. A transcript of the hearing was made by Joyce B. Mine-Finch of LNS Court Reporting and a copy of that transcript was mailed to the parties and the arbitrator on or about December 21, 1998. Both parties submitted written closing arguments that were received by the Arbitrator on or about January 26, 1999.
 
RELEVANT CRITERIA
In arriving at his 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 11540-015(8), specifically:
 
"(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
This Department takes special pride in the fact that it is the oldest fire department west of the Mississippi River. The positions of Chief Deputy Chief, Inspectors, and Secretarial are excluded from the bargaining unit. The Union represents a bargaining unit of 18, including employees in four job classifications: Firefighter/Engineer, Fire Prevention Specialist, Lieutenant, and Captain. The Department serves both industrial and residential communities in the City.
 
The parties agree that the Department is currently in a state of flux, After dealing with a static population throughout the 1980's, population in the District has increased over 33 percent in the 1990's. This rapid growth in population has placed enormous stress on the community's ability to deliver quality public services, including fire services. In the three years (from 1995 to 1998), for example, call volume in the fire department increased by 28%. The Department met this increase in call volume largely through increased productivity of the existing staff. Further community growth, as well as the hiring of more firefighters, is anticipated.
 
The prior labor agreement between the parties expired on June 30, 1998. The parties bargained over a successor agreement until August 1988 when an impasse was reached. The parties had Previously agreed on a number of issues, including a three year agreement, and those agreements remain in place. The parties also agreed to by-pass mediation and submit the remaining issues in dispute directly to interest arbitration.
 
ISSUES IN DISPUTE
This dispute concerns four issues that remain unresolved, namely: wages, vacation scheduling, health insurance (both the cap and contract language), and retiree health insurance contributions. Both parties have agreed to a three year agreement (1998-2001) and to retain all of the other terms of the 1997-1998 collective bargaining agreement unless expressly modified. Both parties also agreed that health insurance is the most critical issue.
 
Issue Union Proposal Management Proposal
 
Wages:
 
Year 1 3% July 1, 1998, 3% January 1, 1999 5% effective July 1, 1998
 
Year 2 3% July 1, 1999, 3% January 1, 2000 5% effective July 1, 1999
 
Year 3 3% July 1, 2000, 3% January 1, 2000 15% effective July 1, 2000
 
3 year total increase - 18% 3 year total increase - 15%
 
Issue: Retiree Health Care Contribution:
 
Union Proposal: No proposal, Retain Current Language of Article 14.8.(1)
Management Proposal: City Cap at $100 per Month or Half the Premium whichever is less for Former Members only.(2)
 
Vacation Scheduling:
 
Union Proposal: No Proposal - Retain Current Language of Article I 0. 5 which states Vacation Leave shall be considered scheduled upon recommendations of the Fire chief and
Approval of the Personnel Director
 
Management Proposal: Limit the Number of Employees Off per Shift to Two: Delete the current section 10.5 and replace it with the following: "Scheduling of vacations shall be based on total Fire Department seniority. The number of employees to be allowed off per shift will be according to the following table:
 
Employees per Shift Allowed off per Shift
 
1-5 1
 
6-11 2
 
12-15 3
 
16-19 4
 
20-24 5
 
Round 1: Selections must be made by November 1, for the following year for successive shifts, and a maximum of six (6) shifts for 24 hr. employees. Round 2: Selections must be made by December 1, for the following year, for successive shifts, and a maximum of six (6) shifts for 24 hr. employees. After December 15th of the current year, the remaining vacation time or
twenty-four (24) hour unscheduled holiday time shall be scheduled on a
first come, first served., space-available basis.
 
Scheduled detail outside regular work assignments, including schools, conferences, seminars, related education, representation of the Fire Department, or other details, shall be established by the Employer after January I of each year. Such details shall also be determined on a space-available basis and shall not conflict with previously scheduled vacation or twenty-four (24) hour unscheduled holidays."
 
Issue: Language 14.1.
 
Union Proposal: No Proposal. Retain Current Language of 1st paragraph of 14.1 which states: "The CITY agrees, throughout the life of this Agreement, to
provide medical, dental, and optical insurance programs through ODS and PACC Service Plan w/vision (no RX Max) for employees covered by the Agreement and their dependents. The CITY may change medical, dental and optical insurance carriers, provide that any such change shall not result in a reduction of either the coverage or benefits currently provided to
employees covered by this payment Agreement. Prior to any change by the CITY in medical, dental or optical insurance carriers, City and the Association shall engage in substantial
discussions regarding such change of insurance carrier.
 
Premiums for this coverage shall be paid by the CITY. In the event that a married couple are
both employed by the CITY, the CITY shall be responsible for only one premium payment for the family unit.
 
Management Proposal: Language Modification as follows:"The City agrees, throughout the life of this Agreement, to provide medical, hospitalization, dental and optical insurance programs for employees covered by this Agreement and their eligible dependents. In the event there is a need to change insurance plans or insurance carriers for any of the provided insurance programs, the City and the Union shall jointly meet and review the coverage proposed by the new carrier(s). In the event that a married couple are both employed by the City, the City shall be responsible for only one premium payment for the family unit."
 
Issue: Insurance Cap
 
Union Proposal: Adjust the 2nd paragraph of Article 14.1 to reflect dates and new caps to reflect: $413,02 per Month Cap, with 50/50 co-pay above the cap or 5% of the premium, whichever is less.
 
Management Proposal: The City proposed to delete the 2nd paragraph of Article 14.1 in its entirety and replace with the following language: "In the event the medical insurance premium cost exceeds $330 per month for any employee covered by this Agreement, that employee shall pay one-half (½) of the amount in excess of $330 or five percent (5%) of the monthly premium costs,
whichever is less,"
 
POSITIONS OF THE PARTIES
The Union's basic position is that the Union's Last Best Offer Package should be accepted and awarded by the interest arbitrator. Arguments in support of this position are as follows:
 
1. The Public Interest - The City's proposed change in the language of Article 14.1 is not in the public interest because it would strip away the Union's right to bargain over a very important mandatory subject of bargaining - the contents of the health insurance plan. Under the City's proposal, the only obligation of the City would be to "meet and review the proposed coverage with the Union. This is not bargaining. The City's proposal clearly violates the public interest and the spirit of ORS 243.662.
 
This issue was not raised during negotiations. It was raised for the first time when the City sent its list of issues to the Arbitrator in November, 1998. Consequently, the proposal has never been bargained with the Union.
 
The Union stands ready to re-open the monetary cap or health insurance once a new health
insurance plan is adopted and effective July, 1999.
 
2. The Employer's Ability to Pay - The City has not raised the inability to pay argument.
 
3. The Ability to Attract and Maintain Qualified Personnel - Two individuals left City employment for reasons other than retirement. Out of the bargaining unit of 18, this is a turnover rate of about 11%.
 
4. Overall Compensation Presently Received/Comparability - The Union used overall compensation in making comparability comparisons. The Union has compared Cities to Cities but excluded fire districts from that comparison. The Union also selected cities of the same or nearest population size as comparable.
 
The Union maintains its comparability methodology is more reasonable, and fully supports the Union's LBOP.
 
5. Cost of Living - Data was provided, but the CPI is not a relevant factor in this dispute as the CPI is less than the proposals of the Union and the City.
 
6. Stipulations of the Parties and Other Factors. The parties made no
stipulations and argued no other factors.
 
The City's basic position is that the City's Last Best Offer Package should be accepted and awarded by the interest arbitrator. Arguments in support of this position are as follows:
1. The Public Interest - The self-interest proposals of the Union must be measured in light of the general needs of the City and the other services that the City must provide.
 
The City has historically provided all City employees (including the City's
three bargaining units and management personnel) with the same medical and
health insurance plans. Doing so permitted the City to shop for insurance for a pool of about 200 members. Broader coverage has historically meant less cost. Thus the City's insurance proposal is more consistent with the public than the Union's proposal.
 
The Union's insurance proposal is not consistent with the public interest because it would require the City to provide the same level of benefits as the PACC plan. However that plan terminates July 1, 1999 and the City has learned that no other insurance company will provide a plan similar to the current PACC plan in the future. The Union's proposal would create a physical impossibility, the City argued.(3)
 
Further, the Union's proposal would require the splitting off of 18 firefighters from the City-wide health insurance pool and the selection of an insurance carrier for only 18 people. That approach would diminish the City's ability to spread its limited resources over a larger health insurance pool and would result in higher insurance costs for the pool and almost prohibitive costs for the very small firefighter group.
 
The City, thus, finds it impossible to comply with the phrase in Article 14.1 that requires the City, if it changes an insurance carrier, not to reduce either the coverage or benefits currently provided. The City cannot comply; first, because the PACC plan is a "dinosaur" that will no longer be written by PAC (now Qual-Med) after July 1, 1999. Second, no other insurance carrier will provide or duplicate the old PACC policy currently in effect. Third, even if the City could find a carrier who would underwrite a plan that maintained all of the PACC benefit levels, the price would be prohibitive. Therefore, effective July 1, 1999, the City has no choice but to find a replacement plan. The City will not be able to maintain all of the exact benefit levels contained in the current PACC plan. The Union refuses to accept this reality, The Union proposal would, if adopted, commit the City to a physically impossible insurance plan. The City must be allowed to shop for the best plan available at an affordable price. The City is willing to meet with the Union and review the coverage proposed by the Carrier. The City has committed itself to paying 95% of all premium increases for this new coverage.
 
2. Ability to Pay - The City did not argue an absolute inability to pay, but argued that several events have combined to reduce revenues and increase costs: Ballot Measures 47 and 50 have reduced the City's tax revenues. The PERS contributions that the City is required to make will be increasing
significantly.
 
3. The Ability of the City to Attract and Retain Qualified Personnel - Between November 1995 and February 1998, the City hired seven (7) new firefighters. There were 320 qualified applicants for these seven positions, or an average of 45 qualified applicants for each vacancy. Of the six (6) firefighters who left City employment during this time, four (4) retired, and two (2) left for outside employment. The City argues that this data supports the conclusion that the present wage and benefit structure in Oregon City makes it possible to attract and retain qualified personnel.
 
4. Overall Compensation/Comparability - The 1998-99 wages of Oregon City entry level and top level firefighters are compared with the average of their counterparts in Lake Oswego (population 34,000 in 1996); Bend (32,000)-l McMinnville (22,300)- Grants Pass (20,200); Roseburg (19,700) and Ashland (I 8,360). The Oregon City entry level firefighter exceeds this six (6) city average by $84.00 per month, and the top step firefighter exceeds the average by $63.00 per month. In addition, the City's's's fringe benefit and leave programs are equal to, or better than, the average of these six (6) cities.
 
5. Cost of Living - The City's's wage offer for 1998-1999 increases wages by 5. 0%, which is more than three (3) times the CPI increase (1.5%) for the same period.
The statutory criteria when considered in relation to the facts of this case, mandates the selection of the City's's last best offer, the City concludes.
 
ANALYSIS
The parties submitted five (5) issues to interest arbitration. The parties agreed, however, that two (2) of those five (5) issues were the most critical - the language of Article 14. 1 and the insurance cap. The other issues are not critical ones. The parties are very close on wages. In fact, the City's's first year wage proposal is .05% higher than the Union's's first year wage demand. The major difference in wages shows up in the second and third year of the contract and in the three year total. The cost of contributions for retiree health benefits are very small at this time. Vacation scheduling is an important issue for both sides, but by itself is not a deal breaker. Consequently the analysis that follows will concentrate on the critical issues of the language of Article 14.1 and the insurance cap.
 
The Oregon Public Sector Collective Bargaining Statute, as amended by SB740, changed interest arbitration in two significant ways. First, issue-by-issue interest arbitration was changed to final-offer, total package interest arbitration. Second, interest arbitrators must now apply a revised set of selection criteria in a specific order of preference. Priority must now be given to the criteria of interest and welfare of the public. Secondary priority can then be given to the next six criteria (ability to pay, ability to attract and retain qualified personnel, overall compensation, comparability, cost of living, and stipulation). If the primary and secondary criteria provide insignificant guidance, the II interest arbitrator can consider the remaining criteria - such other factors that are normally and ordinarily taken into consideration - in determining wages and benefits.
 
These criteria do not make the interest arbitrator's task a mechanistic one. The ambiguity of the criteria becomes evident when one attempts to apply them. For example, implicit in most of the criteria is the assumption that impasses only occur over money items. That is not always the case. Often parties, as here, reach impasse over language issues. The primary criteria is not precisely defined. What is the interest and welfare of the public? How can it be determined? The statute does not define the phrase "interest and welfare of the public." Nor has any Oregon Court provided a definition.(4) Also the statute does not weigh or prioritize the secondary criteria. That weighing and/or prioritizing is left up to the judgment of the interest arbitrator. The parties still dispute the selection of comparable jurisdictions. Therefore, interest arbitrators have to apply these criteria on a case by case basis.
Interest and Welfare of the Public - The statute requires interest arbitrators to give primary consideration to this criteria. Presumably, if one final offer package is found not to be in the interest and welfare of the public, it would not be necessary to address the remaining criteria.
In this case, current health insurance language in the collective bargaining agreement requires the City to maintain the same level in benefits as in the current PACC insurance plan. The major difficulty in continuing that language in the new agreement is that plan will no longer be available through PACC (now Qual-Med) after July 1, 1999. No other health insurance carrier has expressed interest in underwriting a comparable plan. Therefore, the PACC plan is being scrapped and it is not possible to secure a new health insurance policy from another carrier that provides the same benefits as the old PACC plan. Therefore the City has to go shopping for a new health insurance provider and a new plan. It has no choice but to do so, in my opinion. The Union proposal, in my opinion, does not face this overwhelming reality.
The Union asserts that the benefits of a health insurance plan is normally a mandatory subject of bargaining. That assertion is correct, but interest arbitration is a semi-judicial, not a negotiation forum. The Union also asserts that it is not in the public interest to compel the Union to give up their right to bargain in favor of the lesser rights of jointly meeting and reviewing the proposed new coverage. That assertion is not totally persuasive, in my opinion. The City has been holding health insurance discussions with employees over the termination of the PACC plan since the Fall of 1998. There is evidence that the Firefighters participated in only one of these meetings. There is evidence
that the Firefighters demanded to bargain on new plan benefit levels.
 
The Firefighter's Union is not the only Union or employee group affected by the demise of the PACC plan. The City's's AFSCME bargaining unit, the police unit and non-represented employees are also affected. Those groups have already agreed to language similar to that proposed here by the City. If the Firefighters were the only group with the contractual right to bargain new health insurance coverage, the Firefighter Union of 18 members would be able to dictate the terms for the remaining 182. Majority decision making is in the public interest, in my opinion.
 
The splitting off of 18 firefighters from the total City health insurance pool of 200 to form an 18 person firefighter pool does not, in my opinion, contribute to the interest and welfare of the citizens of Oregon City. Such a move, in my opinion, would make the insurance costs to the smaller City-wide pool and the even smaller firefighter pool cost more.
 
Clearly the Union's final offer package is in the best interests of the 18 members of this bargaining unit. That does not, however, make it in the best interests of the public. The interest and welfare of the Oregon City community is different and larger than the special interest of the Firefighter's bargaining unit. Quality service at the lowest cost is the Community's basic interest. The decline in City revenues due to Ballot Measures 47 and 50, and increases in costs due to escalating PERS payments by the City have affected the City"s ability to continue provide quality services at the lowest possible price.
 
None of the remaining issues, I find, have a significant impact on the interest and welfare of the public. Vacation scheduling is a planning and control administrative measure from the City's standpoint and a matter of freedom and principal from the Union's standpoint. If this issue impacts the interest and welfare of the public in Oregon City, the impact is slight and is limited to assuming that departmental staffing will be adequate during vacation periods. The City's proposal would do so, in my opinion. The
insurance cap for current employees is in reality part of the City's insurance proposal. The City's insurance cap proposal for retired employees reflects the reality of having to adopt a new insurance plan and is therefore consistent with the City's final offer.
 
In summary, I find that it would not be in the public interest to award the Union's last best final; offer because -it would place the City in an impossible situation with the respect to selecting a new insurance carrier and program.
 
Second Criteria - I find the secondary criteria need not be individually addressed because of my findings and conclusions on the primary criteria, However it is important to note that given the size of the Union's wage demands and the City's wage offer, the cost-of-living criteria and the comparability criteria arc irrelevant. The City's wage proposal is 1/2% higher than the Union's wage demand in the first year. Both the Union's and the City's wage proposals exceed the cost of living by about 4.5%, so the CPI criteria
has no bearing on this case. The City did not argue inability to pay, only that City revenues were tight because of new tax freeze measures and the increase in PERS retirement costs. The remaining issues in dispute either involve contract language changes (for which the criteria do not apply) or are relatively small in impact.
 
AWARD
 
The City's final offer shall be accepted.
 
Dated: March 4, 191
 
John H. Abernathy, Interest Arbitrator
 
Appearing for the Union: Michael J. Tedesco
 
Appearing for the City: Bruce Bischof


 
Footnotes:
 
1. "The CITY agrees to pay the first $100 per month towards medical insurance for all employees covered by this Agreement who retire after July 1, 1983."
 
2. The City proposes to delete Article 14.8 in its entirety and replace with the following language: "The City shall provide the option to each retired employee and their family the same medical coverage provided to the employees of the City until the age of 65, or death, whichever comes first. The City will pay one-half (½) of the insurance premium, or $100, whichever is less for the retiree only. Those retires choosing additional coverage for family members will be required to pay all additional costs." (Note: Appendix B, Letter of Understanding The City proposes to delete the Letter of Understanding consistent with its proposal on employee insurance benefits.
 
3. The PACC plan has continued in effect since the CBA expired on July 1, 1998 and will continue until it terminates on July 1, 1999. The parties have previously agreed to a three year contract, effective July 1, 1998, Thus, any new health coverage insurance program would only be effective for the last two years of the three year agreement.
 
4. The Superior Court Appellate Division of New Jersey has addressed this issue, however. In 1993 the Court upheld the vacating of three interest arbitration awards in part because the interest arbitrators had not given separate and proper consideration to the "interest and welfare of the public" criteria. See N.J. Super.Ct. App.Div., Hillsdale PBA Local 207 v. Borough of Hillsdale, A. 2750-91T5, and Township of Washington v. New Jersey State Policemen's Benevolent Association, Inc., Local 206, A 4855-91T2, decided March 17, 1993. John M. Fox, Morris County Sheriff v. Morris County Policemen's Association, PBA 151, A-4181-91T3, decided July 28, 1993.
 
The Court consolidated the Hillsdale and Washington Township cases for purposes of opinion. After the interest arbitrator in Hillsdale accepted the last final offer of PBA Local 207, Hillsdale resisted the implementation of the arbitrator's award. Local 207 sought confirmation in the Chancery Division. Hillsdale counter-claimed seeking to vacate the award. The Chancery Division confirmed the arbitrator's award. The Appellate Division affirmed in part and reversed in part. Washington Township followed a similar path.
 
On appeal Hillsdale argued that under the applicable standard of review the arbitration award must be vacated because Local 207 failed to offer adequate proofs to justify an award in its favor; the award was speculative, conjectural, contrary to the intent of the bargaining statute and was procured by "undue means", lelisdale sought a remand for a new arbitration hearing before a new arbitrator. Washington Township sought vacation because the arbitrator failed to properly apply the statutory criteria. The Court found the primary dispute in both appeals concerned the arbitrator's application of the criteria.
 
The Court made several statements in their opinion regarding the interest and welfare of the public criteria, such as:
 
"If can be argued that the paramount 'interest' involved (in interest arbitration) should be the public interest."
 
". . . public sector interest arbitrators, who are not accountable to the taxpayers, must adhere strictly to the statutory standards"
 
"(the statute) requires consideration of the interests and welfare of the public at large, both in the area affected and in general. This factor focuses in part on the priority to be given to the wages and monetary benefits of public employees within a municipality's budget plans. The arbitrator's opinion reveals that this factor was not given real consideration, let alone 'due weight.' Hillsdale's arguments was not addressed."
 
"It might be argued that the arbitrator's brief discussion of the borough's ability to pay constituted Implicit consideration of the public's interests and welfare. However, the Legislature surely intended that there be more to consideration of the public's interest and welfare than mere financial impact vis-a-vis ability to pay (notwithstanding instances where evidence will inevitably impact multiple factors)."
 
"It is not enough to simply assert that the public entity involved should merely raise taxes to cover the costs of a public interest arbitration award. That would also conflict with other enumerated factors and render them hollow."
 
"It is unlikely that the interests and welfare of the public" can ever be irrelevant when an interest arbitrator is essentially limited under the statute to a choice between the municipality's or local unit's last offer."
 
"The importance of this factor to the overall legitimacy of the award has given rise to the suggestion that arbitrators have an obligation, when weighing the public's interests and welfare, to justify the choice ultimately made."
 
"Analysis taking this factor into account is lacking in the award, and evidence relating to it was not adequately presented. Nor was consideration given to the tension between maintaining adequate police service without exorbitant price, or to the prospects for police or other municipal layoffs."
 
"A review of Washington Township's arbitrator's opinion reveals that (the statute) which requires application of 'the interests and welfare of the public" was apparently not applied, let alone given 'due weight".
 
"The 'interests and welfare of the public" should not be irrelevant, particularly when an arbitrator, unaccountable to the electorate, decides governmental affairs in selecting one side's last offer."
 
"Adequate evidence of this factor was not presented nor taken into account in the award."
In the John Fox case, the Court vacated the interest arbitrator's award for failure to adequately consider the statutory factors of 16g of the statute and for refusing to accept pertinent and material evidence offered by the Sheriff:
 
"With respect to the statutory factors, the arbitrator's first error was in grouping together '[t]he interests and welfare of the public,' 16g(l), '[t]he lawful authority of the employer, 16g(5), and '[t]he financial impact on the governing unit, its residents and taxpayers' 16g(6) under the rubric of a nonstatutorily based category dubbed 'ability to pay'."
 
"The grouping of three of the statute's eight factors under the vague 'ability to pay' label effectively renders two of the criteria of 16g mere surplusage. It also seriously under-values the public's interests and welfare, factors which can fairly be said to always be relevant since the arbitrator's award may have a great impact on a governing body's policy decisions."