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IA-10-00
In the Matter of the Interest Arbitration Between Gladstone Police Association and City of Gladstone. (Re: Section 21, Medical Benefits). IA-10-00.
 
I. INTRODUCTION
 
This interest arbitration arises pursuant to the expiration of a Collective Bargaining Agreement between the GLADSTONE POLICE ASSOCIATION (hereinafter the ASSOCIATION) and the CITY OF GLADSTONE (hereinafter the CITY), under which DAVID GABA was selected to serve as Arbitrator and under which his Decision shall be final and binding among the parties.
 
A hearing was held before Arbitrator Gaba on December 8, 2000 at Gladstone, Oregon. The parties had the opportunity to examine and cross-examine witnesses, introduce exhibits, and fully argue all of the issues in dispute. No transcript of the proceedings was provided. Both parties filed post-hearing briefs on or about January 30, 2001.
 
II. ISSUES
 
The Gladstone Police Association and the City of Gladstone are parties to a Collective Bargaining Agreement dated July 1, 1998 through June 30, 2000.(1)
 
The parties stipulate to the following statement of the issues:
 
1. With reference to Article 21 - Insurance, Section 2, shall the Last Best Offer of the Gladstone Police Association or that of the City of Gladstone be adopted for the 2000-2002 Collective Bargaining Agreement?
 
2. With reference to Article 21 - Insurance, Section 2, of the 1998-2000 Collective Bargaining Agreement, what should have been the method of computing the employer/employee cost share of the insurance premiums?
 
III. BACKGROUND
 
The Gladstone Police Association is a bargaining unit composed of nineteen members, including thirteen sworn officers and six dispatchers, who are strike-barred employees required under the collective bargaining law of Oregon to submit disputes to an arbitrator if the parties fail to reach agreement through collective bargaining. The Association represents nineteen of the forty-three employees of the City of Gladstone.
 
Article 21 (Insurance) of the Collective Bargaining Agreement was entered into by the Association and the City in June, 1998, and was effective July 1, 1998 through June 30, 2000. That Agreement contains the following language:
 
Section 1. Effective upon ratification, the City will make available to employees in the bargaining unit and their dependents medical, dental and vision benefits and prescription drug insurance coverage in effect as of July 1, 1998. Effective upon ratification to June 30, 1999, the City will contribute up to a maximum of five hundred and twenty-four dollars ($524.00) per month.
 
Section 2. Effective July 1, 1999, the City will contribute to any increase in the insurance premium by contributing an amount equal to eighty-nine percent (89%) of the cost of the increase. The employee shall pay the remaining eleven percent (11%) of any increase. Notwithstanding the provisions in this section, the City will provide to members of the Gladstone Police Association any increased insurance contribution that the City Council determines to provide other City employees that exceeds the City's contribution under this section.
 
On May 4, 2000, Attorney Mark Makler, acting on behalf of the Association, filed a Health Insurance Grievance with the City Administrator, Ron Partch.(2) In that Grievance, Mr. Makler outlined the Association's contention that the City was not in compliance with the language of Article 21, inasmuch as the Association maintained that Sections 1 and 2 must be read together and thus established that the shared responsibility for increased insurance premiums between the City and the Employee (89 percent and 11 percent respectively) was relevant only for premiums that exceeded the $524.00 cap for City contributions that was established in Section 1. The Association contended that the language of the Article was not ambiguous and not subject to interpretation, and maintained that the City had failed to appropriately implement the bargained-for language.
 
On May 8, 2000, City Administrator Ron Partch replied to the Grievance, indicating the City's sense that its interpretation of the Article was in direct accord with the language of that Article, which he maintained provided that the shared payment for any insurance premium increases would be borne by both parties regardless of the relationship of the previous premium to the $524.00 cap.(3)
 
On September 8, 2000, Mr. Makler wrote to the Arbitrator to inform him that he had been selected by the parties as the Interest Arbitrator to address the parties inability to reach an agreement on the language of Article 21 for the 2000-2002 Collective Bargaining Agreement, as well as to resolve the issue of the parties' differing interpretations of that Article in the previous Agreement. Mr. Makler also wrote to City Attorney Kathy Peck withdrawing the Association Grievance. This letter specified (pursuant to City Representative Candace Ludtke's letter of June 14, 2000, for which no exhibit was provided) that withdrawal of the grievance did not mean the Association was agreeing with the City's interpretation of the issue, but rather agreed that the pending interest arbitration between parties would provide a resolution to this matter.(4)
 
City Representative Candace Ludtke wrote to Attorneys Mark Makler and Diane Moffitt on November 17, 2000, November 22, 2000, and on November 28, 2000. Her first letter agreed to the simultaneous exchange of last best offers to occur on November 22, and proposed that parties stipulate the issue be decided by the arbitrator without consideration of the total compensation package already agreed to by the parties or of the comparable jurisdictions. She indicated the City would be using comparators traditionally used for its salary survey as an information item. On November 22, Ms. Ludtke submitted the City's Last Best Offer to Association Attorneys Makler and Moffitt, and to Arbitrator David Gaba: in her cover letter she noted that she was doing so in accordance with ORS 243.746 (3) and OAR 15-40-015 (7) (g).(5) On that same day Association Attorney Makler also proffered the Association's Last/Best Final Offer, pursuant to ORS 243.746.(6) On November 28, City Representative Candace Ludtke responded to Mr. Makler's offer by stipulating that ORS 243.746 (d) and (e) would not be part of the parties' presentations. She was unwilling to stipulate to the exclusion of the CPI (f).(7)
 
The Last Best Offers provided by the Association and the City on November 22, 2000, were not radically dissimilar. The language proposed by each for inclusion in Article 21 of the July 1, 2000, through June 30, 2002 Collective Bargaining Agreement is reproduced here in its entirety for ease of reference:
 
Gladstone Police Association


 
Section 1. The City will make available to employees in the bargaining unit and their dependents medical, dental and vision benefits and prescription drug insurance coverage in effect as of June 1, 2000. For the term of this Agreement, the City will contribute up to a maximum of five hundred and twenty-four dollars ($524.00) per month.
 
Section 2. Effective July 1, 2000, the City will contribute to any increase in the insurance premium costs above $524. The employee shall pay the remaining eleven percent (11%) of the insurance premium cost increase. Notwithstanding the provisions in this Section, the City will provide to members of the Gladstone Police Association any increased insurance contribution that the City Council determines to provide other City employees that exceeds the City's contribution under this Section.
 
City of Gladstone


 
Section 1. Effective July 1, 2000, the City will make available to employees in the bargaining unit and their dependents medical, dental, vision benefits and prescription drug insurance coverage in effect as of June 30, 2000. The City shall contribute the following for the indemnity plans:
 
Employee only $272.61
 
Employee plus Children $581.73
 
Employee plus Spouse $568.65
 
Employee plus Spouse and Children $723.60
 
The City shall contribute the following for employees selecting the HMO plan:
 
Employee only $194.15
 
Employee plus Children $575.04
 
Employee plus Spouse $388.55
 
Employee plus Spouse and Children $575.04
 
The employee shall pay any amount above the city's contribution through payroll deduction.
Section 2. Effective July 1, 2001, the city and the employee shall continue the amount of the premium contribution. In addition, the city shall contribute an amount equal to eighty-nine percent (89%) on any increase in the insurance premium and the employee shall pick up the remaining eleven percent (11%) on any increase on the insurance premium regardless of the amount of the premium unless the premium after increases is five hundred and twenty-four dollars ($524.00) or less per month. In the event the total premium is five hundred and twenty-four dollars ($524.00) a month or less, the city shall contribute the entire amount and the employee shall have no payroll deduction.
 
Notwithstanding the provisions in this Section, the City will provide to members of the Gladstone Police Association any increased insurance contribution that the City Council determines to provide other City employees that exceeds the City's contribution under this Section.
 
IV. APPLICABLE STATUTORY PROVISIONS
 
ORS 243.746 (4) sets forth the legal guidelines for interest arbitration, which guidelines are also outlined in OAR, 115-40, Dispute Resolution in Public Employment, and, OAR 115-40-015, Binding Interest Arbitration.(8) Section 8, Criteria, details the criteria upon which the arbitration must base his/her findings, opinions and order. First priority must be given to subsection (a) the interest and welfare of the public, and secondary priority must be accorded to subsections (b) to (h). The relevant subsections are reproduced here in their entirety:
 
(b) The reasonable financial ability of the unit or 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) (Omitted from consideration by stipulation of the parties.)
 
(e) (Omitted from consideration by stipulation of the parties.)
 
(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.
 
The Arbitrator must note at this point that, while this is clearly an interest arbitration and the guidelines of ORS 243.746 (4) must be given precedence, it will be found upon a thorough examination of the facts that the normal standards for contractual arbitration will play a crucial role in part of this decision, based upon the first section of this dispute, which pertains to contractual interpretation with regard to language construed as ambiguous. The standard reference for contract disputes of this nature is Elkouri and Elkouri's How Arbitration Works, of which Chapter 9, Standards for Interpreting Contract Language, will be shown to have relevance in this particular proceeding.(9)
 
V. POSITION OF THE ASSOCIATION
 
It is the Association's contention that the language for Article 21 in the previous Collective Bargaining Agreement(10) was intended to reflect the formula that the Association is now presenting for adoption as part of the 2000-2002 Agreement. The Association insists that the City did not present any testimony to the contrary, and acknowledges that the Arbitrator is responsible for determining what the previously intended "status quo" was and implementing the offer which best captures that intended "status quo."
 
In the Association's Closing Brief, it contends that the Arbitrator should adopt the Association's Last Best Offer.(11) The Association states that the language of its Last Best Offer reflects what was bargained for in the 1998-2000 Collective Bargaining Agreement and that it therefore best serves the interest and welfare of the public. The Association maintains that the City has the financial ability to meet the Association's offer and that the benefit as interpreted by the Association will enhance the Police Department's ability to attract and retain qualified personnel. Further, it is the position of the Association that the other criteria are not relevant to this decision, although they are addressed in the Association's Closing Brief for the sake of argument.
 
VI. POSITION OF THE CITY
 
The City of Gladstone, in its Post-Hearing Brief, maintains that adoption of its Last Best Offer is supported by a consideration of the statutory criteria that are to be used by arbitrators in interest arbitration.(12) The City argues that there is no generalized requirement for burden of proof in interest arbitration, inasmuch as burden of proof attaches when an arbitrator is required to make a determination of right and wrong. However, the City addresses the issue of a "compelling need" test, as formulated by Arbitrator Torosian, being used as the basis for a decision when the moving party is asking for a change to the status quo.(13) The City cites three parts to this test; namely, a compelling need for the change, that the change reasonably addresses that need, and a sufficient quid pro quo if a change is required. This test maintains that both parties have the burden of proof when changes in the status quo are at issue, in that both must meet the "compelling need" test to justify taking away a benefit previously obtained through negotiated settlement. It is the City's contention that its Last Best Offer incorporates existing contractual practice for computation of increased insurance premiums.
 
According to the City, its proposal is fair and equitable and the share of costs borne by employees under its formula cannot be proven to be sufficiently onerous so as to compromise the competitiveness of the City with respect to hiring. The City maintains that the Association did not establish a compelling reason to alter the status quo represented by the City's offer. Testimony of officers at the hearing established that in at least two cases officers were not availing themselves of the savings that could be obtained by using the mail order prescription service, thereby abdicating their responsibility to control costs. The City also maintains that this bolsters its contention, as does the fact that all the employees who testified have chosen to stay on the more expensive Lifewise plan and pay the greater premium, that no undue hardship is being placed on employees.
 
It is the City's position that its proposal is justified by comparison with the traditional comparators. The City acknowledges that both parties stipulated to the omission of subsection (e) from consideration, but maintains that the use of comparators for insurance rates only should not be prohibited by that stipulation. The City maintains that under its formula employees pay less than the average of the comparators for insurance premium co-pays, and that an examination of the comparators provides justification for maintaining the status quo represented by the City's proposal.
 
From the City's perspective, the Association's proposal is too extreme, in that it is not supported by the history of payroll deductions since August 1, 1997; it is not supported historically since all employees in the bargaining unit have always had the same insurance programs and costs for premium sharing as the rest of the city employees; it is unnecessary for the remaining eighteen months of the successor agreement; and its proposal for a joint insurance committee that will provide another avenue for the examination of insurance plan benefits and costs has already been tentatively agreed to by both parties.
 
The City concurs that it is not arguing an inability to pay the costs of the Association proposal.
 
The City maintains that departmental turnover has not been particularly high, but rather that comparator turnover rates are much higher than those of Gladstone for police officers. The City further maintains that there is no evidence showing any relationship between turnover and dissatisfaction with insurance payroll deduction.
 
Finally, the City emphatically maintains that its proposal satisfies subsection (a), the interest and welfare of the public, noting its examination of recruitment and retention history, its evaluation of comparators with reference to insurance premiums, and public policy issues regarding the interests and welfare of the Gladstone community. The City cites Arbitrator William Dorsey's approach to interest arbitration, wherein it is initially assumed that the interest and welfare of the public is supported by the employer's last best offer, and only an association's proofs of to the contrary with reference to subsections (b) through (h) should be used to overturn that initial assumption. In a close case, therefore, the City posits that the arbitrator should defer to public officials or to the expression of the electoral process as the clearest expression of the interest and welfare of the public.(14)
 
The City concludes that the status quo is fair and equitable for the employees and the public, and makes reference once again to hearing testimony showing that employees have not done all they could reasonably be expected to do to minimize insurance costs.
 
VII. DECISION: 2000-2002 COLLECTIVE BARGAINING AGREEMENT
 
As has been noted under Section IV., Applicable Statutory Provisions, for the purposes of an interest arbitration, a specific set of criteria are considered by an arbitrator in arriving at a decision. Those criteria must be explicitly and individually addressed by the Arbitrator in order to arrive at a decision as to which Last Best Offer should be implemented. Subsection (a) the interest and welfare of the public, must be given first priority, but as a practical matter the evaluation of this criterion can best be arrived at by a thorough examination of subsections (b) through (g), so this examination will begin with those subsections.
 
(b) The City does not contest the Association's proposal on financial grounds and concurs with the Association that it has the ability to pay. The Arbitrator took this into account, but also concluded that an ability to pay cannot be construed as a justification, in and of itself, for choosing a more costly alternative: a greater expenditure for benefits cannot be justified solely because monies are available for such expenditure.
 
(c) With respect to attraction and retention of qualified personnel at the wage and benefit levels provided, the Association presented no evidence that the City of Gladstone has been unable to attract and retain qualified personnel for its Police Department. The Association contends that its interpretation will enhance hiring capability, but the public interest is best served when only enough expense is incurred to remain competitive. The evidence at the hearing showed the City to be competitive with respect to this issue. Among the evidence the City provided was a chart showing turnover of commissioned officers in surveyed cities that clearly documented the City's below average turnover.(15) It is the opinion of the Arbitrator that the City has documented that the ability to hire and retain qualified personnel cannot be said to be in any way impacted by the increased insurance premiums that are the subject of this arbitration. Therefore, an examination of this factor favors the City's Last Best Offer.
 
(d) (Omitted from consideration by stipulation of the parties.).
 
(e) (Omitted from consideration by stipulation of the parties.)
 
(f) With regard to the CPA-All Cities Index, or cost of living, the City compared compensation levels for comparable cities to show the competitiveness of their wage and benefit levels and proved to the Arbitrator's satisfaction that they fall within reasonable bounds. Due to the de-minims nature of the cost of insurance relative to the City's budget, this test favors neither the Association or City's Last Best Offer.
 
(g) The stipulations of the parties, as noted.
 
(h) The Arbitrator judges that the factors in subsections (a) through (c), and in (f) and (g), provide sufficient evidence for an award, and therefore has not thought it necessary to take into account subsection (h), a decision he has discretion to make as provided for directly in that subsection.
 
Finally, the Arbitrator turns to subsection (a), the interest and welfare of the public, and concludes that the interest and welfare of the public are not in any way compromised by either the City's or the Associations "Last Best Offer" of language for Article 21, but that a close look at the issues supports both City's and Association's contention that they have carefully considered the interest and welfare of the public in preparing there Offers.
 
As noted earlier, the City brought up the use of the "compelling need" test formulated by Arbitrator Torosian being used as the basis for a decision when the moving party is asking for a change to the status quo.(16) The City cites three parts to this test; namely, a compelling need for the change, that the change reasonably addresses that need, and a sufficient quid pro quo if a change is required. This test maintains that both parties have the burden of proof when changes in the status quo are at issue, in that both must meet the "compelling need" test to justify taking away a benefit previously obtained through negotiated settlement. It is the City's contention that its Last Best Offer incorporates existing contractual practice for computation of increased insurance premiums. The Arbitrator adopts this test up to a point, with the caveat that the party proposing the change has the burden of proof, rather than both parties having the burden of proof, as was stipulated by Arbitrator Torosian in his initial formulation of the test. The proposing party alone must meet the "compelling need" test to justify taking away a benefit previously obtained through negotiated settlement.
 
Also cited by the City is Arbitrator William Dorsey's approach to interest arbitration, wherein it is initially assumed that the interest and welfare of the public is supported by the employer's last best offer, and only an association's proofs to the contrary with reference to subsections (b) through (h) should be used to overturn that initial assumption. In a close case, therefore, the City posits that the arbitrator should defer to public officials or to the expression of the electoral process as the clearest expression of the interest and welfare of the public.(17) The Arbitrator rejects this argument by the City, in that had the Legislature intended for arbitrator to defer to elected officials they would have clearly reflected that intention in the language employed in the ORS 243.746(4), or simply eliminated the requirement for Interest Arbitration and allowed City officials to unilaterally set wages and working conditions.
 
The Association has not made its case for there being any detrimental consequences to the acceptance of the City's Last Best Offer, with reference to the statutory provisions, nor has it provided any proofs that its own Last Best Offer is in any way superior with respect to supporting the interest and welfare of the public. Likewise, the City has not made its case for there being any detrimental consequences to the acceptance of the Association's Last Best Offer, with reference to the statutory provisions, nor has it provided any proofs that its own Last Best Offer is in any way superior with respect to supporting the interest and welfare of the public. The Arbitrator's interest, after reviewing the merits of the case, is in leaving the parties in a status quo position with reference to the language of Article 21, and the Arbitrator must therefore determine which proposed language modifications, those of the Association or those of the City, satisfy this intention.
 
VIII. DECISION: 1998-2000 COLLECTIVE BARGAINING AGREEMENT
 
With respect to the separate, although related, question of interpretation of the language of Article 21 in the 1998-2000 Agreement, the Arbitrator has determined that, while this is perforce an interest arbitration, it is impossible at this point to resolve this matter according to the statutory provisions for interest arbitration without first interpreting the current contract language. The possibility of contractual arbitration was previously set aside when the Association withdrew its Grievance in September, 2000, so it could go to interest arbitration in conjunction with the negotiation of the 2000-2002 Collective Bargaining Agreement. It appears that the parties entered into interest arbitration because they were having difficulties in arriving at an agreed upon version of Article 21 in their existing Collective Bargaining Agreement.
 
The Association was clearly responsible for drafting the language of the 1998-2000 Collective Bargaining Agreement. If past practice existed to support one of the parties interpretation of the language in dispute, then that interpretation would prevail. This is not, however, the case, and it appears that the language in this case is ambiguous. Elkouri and Elkouri state:
 
…it is recognized that whether a document is or is not ambiguous is a matter of impression rather than of definition; and this is obviously so, because each provision "may be as clear and definite as language can make it, yet the result of the whole be doubtful from lack of harmony in its various parts."(18)
 
It is the Arbitrator's opinion that the language in Section 21 of the 1998-2000 Agreement did contain sufficient ambiguity to allow for both parties to interpret it differently. Elkouri and Elkouri address this issue as follows:
 
It is incumbent upon the proponent of a contract provision either to explain what is contemplated or to use language which does not leave the matter in doubt. Where doubt exists, any ambiguity not removed by any other rule of interpretation may be removed by construing the ambiguous language against the party who proposed it. It is reasoned that the draftsman, by exactness of expression, can more easily prevent doubts as to meaning.(19)
 
It is the Arbitrator's decision that the City's method of implementation of the insurance premium increase formula was based upon its reasonable interpretation of ambiguous language in the Collective Bargaining Agreement and that interpretation shall be allowed to stand. Whatever the Association maintains it intended to convey, the fact is that the language of Section 2 in the 1998-2000 Agreement states that the 89 percent/11 percent split will apply to any increase in the insurance premium, and no specific reference to an exception for anything under the $524.00 maximum coverage is included. Ambiguous language must be interpreted against the drafter in a case such as this where other tools of contractual interpretation are not available.
 
IX. CONCLUSION
 
The Last Best Offer of the City of Gladstone is adopted for the 2000-2002 Collective Bargaining Agreement between the parties, inasmuch as neither party could justify a departure from the status quo.
 
With reference to Article 21 - Insurance, Section 2, of the 1998-2000 Collective Bargaining Agreement, the City's method of computing the employer/employee cost share of the insurance premiums is ruled to have been appropriate and its calculations stand.
 
X. AWARD
 
All fees and expenses charged by the Arbitrator shall be borne equally by the parties, as provided for in the Oregon Administrative Rules, Chapter 115, Division 40, Dispute Resolution in Public Employment, 115-40-015, Binding Interest Arbitration, Section (7), Subsection (u).
 
David Gaba, Arbitrator
 
February 20, 2001
 
Seattle, Washington

APPEARANCES:
 
On behalf of the Association: Diana Moffat, Esq
 
On behalf of the City: Candace Ludtke
 
1. 0 Exhibit C-7.
 
2. 0 Exhibit A-15.
 
3. 0 Exhibit A-16.
 
4. 0 Exhibit A-17.
 
5. 0 Exhibit C-2.
 
6. 0 Exhibit C-2.
 
7. 0 Exhibit A-6.
 
8. 0 Employment Relations Board Statutes and Rules for the State of Oregon (January 1996); Oregon Administrative Rules, Chapter 115, Division 40.
 
9. 0 Elkouri and Elkouri, How Arbitration Works (4th Ed. 1985).
 
10. 0 Exhibit A-10.
 
11. 0 Association's Closing Brief.
 
12. 0 City's Post-Hearing Brief.
 
13. 0 Arbitrator Torosian, In the Matter of Interest Arbitration Between Klamath County Peace Officers' Association and Klamath County, June 1998, p. 9-11.
 
14. 0 Arbitrator William Dorsey, Interest Arbitration Between Clackamas County Peace Officers Association, Oregon City, Oregon and Clackamas County, State of Oregon, Oregon City, Oregon, 1998, p. 8.
 
15. 0 Exhibit C-10.
 
16. 0 Arbitrator Torosian, In the Matter of Interest Arbitration Between Klamath County Peace Officers' Association and Klamath County, June 1998, p. 9-11.
 
17. 0 Arbitrator William Dorsey, Interest Arbitration Between Clackamas County Peace Officers Association, Oregon City, Oregon and Clackamas County, State of Oregon, Oregon City, Oregon, 1998, p. 8.
 
18. 0 Elkouri and Elkouri, How Arbitration Works (4th Ed. 1985).
 
19. 0 Elkouri and Elkouri, How Arbitration Works (4th Ed. 1985).