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IA-12-02
IN THE MATTER OF THE ARBITRATION BETWEEN CITY OF ONTARIO POLICE DEPARTMENT "THE CITY" OR "THE EMPLOYER" AND SERVICE EMPLOYEES INTERNATIONAL UNION LOCAL 503, OREGON PUBLIC EMPLOYEES UNION "SEIU LOCAL 503" OR "THE UNION". IA-12-02.
 
EXHIBITS
 
City
 
1. Do not spend list, 2002-2003
 
2. Health cost and PERS increases
 
3. Comparators for City
 
4. Medical Insurance Comparators
 
5. City cost savings sheet
 
Union
 
1. Union's Last Best Offer, January 28, 2003
 
2. City's Final Offer, October 4, 2002
 
3. Comparisons, Monthly Total Compensation, One Person Insurance Package, OPEU & City's Proposals
 
4. Comparisons, Monthly Total Compensation, Two Person Insurance Package, OPEU & City's Proposals
 
5. Comparisons, Monthly Total Compensation, Family Rate Insurance Package, Current Contract
 
6. Comparator Cities
 
7. City of Ontario Financial Analysis
 
8. Mediation Notes, July 12, 2002
 
9. Collective Bargaining Agreement between OPEU, SEIU Local 503 and the City of Ontario Police Department, 2000-2003
 
10. Salary Survey
 
BACKGROUND
 
By letter dated October 23, 2002, the Arbitrator was notified of his selection to provide an interest arbitration award for a dispute between the City of Ontario and its police officers who are represented by SEIU Local 503, OPEU. The Arbitrator accepted his selection and set a hearing date of February 11, 2003. Prior to the hearing, each party provided the Arbitrator and each other with its Last Best Offer (LBO) as per the requirements of ORS 243.746 (3). The Union's submission was provided in compliance with the fourteen calendar day requirement of ORS 243.746 (3).
 
The City's submission was not timely provided, and as a result the Union filed a motion requesting that as a result of the untimely filing the Arbitrator should direct the adoption of the Union's Last Best Offer Package. The Employer provided a written response to this motion and contended that the Arbitrator should not direct the adoption of the Union's Last Best Offer Package. The Arbitrator, by letter dated February 7, 2003, ruled as follows:
  • •The City of Ontario's Last Best Offer package was not timely submitted per the requirements of ORS 243.746, but was submitted more than a week out.
  • •ORS 243.746 is silent as to the consequences of an untimely submission.
  • •The rules of the Employment Relations Board (ERB) are also silent as to the consequences of an untimely submission.
  • •My oral discussion with a Board member leads me to believe that there are no ERB decisions of record on this question.
  • •Based on the information available to me, at this time, I am convinced that the City's Last Best Offer package is the same as that which has been in front of the Union for substantially longer than the fourteen day time limit.
 
Without specific authority either from the Statute or ERB rules, I am unwilling to grant the Union's motion to adopt its Last Best Offer package. Moreover, it does not appear to me that the Union's case or rights under the Statute will be prejudiced if the matter proceeds to hearing. Therefore I am denying the Union's motion and directing that we proceed to hearing based on the Last Best Offer package of the Union and that submitted by the City, albeit untimely. (Excerpted from Arbitrator's Correspondence)
 
The hearing was held on February 11, 2003, at City Hall in Ontario, Oregon. Both parties were given full opportunity for an opening statement, the submission of evidence, and final argument. The parties chose to provide their final arguments in written form; which were timely received by the Arbitrator. Upon receipt of the written arguments on February 26, 2003, the Arbitrator closed the hearing.
 
This award is based on the record created during the hearing and on the parties' written final arguments. Moreover, the Arbitrator has carefully considered the criteria, provided in ORS 243.746 (4); the criteria that are to be the basis for the final award. Specifically, the Arbitrator has given first priority to sub-paragraph (a) and secondary priority to sub-paragraphs (b) through (h). These provisions read 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, proved 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 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 provide sufficient evidence for an award.
 
FACTS
 
The parties are in the midst of a three year collective bargaining agreement (CBA) with effective dates of July 1, 2000 through June 30, 2003. Article 19 - Insurance Benefits, Section 6 provides for a premium cap on the cost of health insurance. The language of section 6 provides that the parties will reopen negotiations in regard to health, vision, life and dental insurance benefits in the event that costs for these benefits increase by more than eight percent in a year. Specifically the language of Article 19 reads as follows:
 
Article 19
 
Insurance Benefits
 
Section 6. The City will pay one hundred percent (100%) of the health, vision, life and dental insurance for employees and dependents up to but not exceeding a combined cost of $550.00 per month. The costs per month over and above the cap shall be paid fifty percent (50%) by the employee and fifty percent (50%) by the City. Beginning in 2001 the cap will be adjusted annually on July 1 of that year and each subsequent year of this contract in an amount equivalent to the lesser of the actual increase in the premium costs or the annualized change in the All US CPI-W as reflected from January of the previous year to January of the current year; however, in no event shall the cap be increased more than five percent (5%) in any one year. The parties recognize that health insurance costs are projected to increase fifteen (15%) during calendar year 2000. Health insurance premium adjustments are made in August each ear. In the event health insurance costs increase during the calendar year 2001 more than eight percent (8%) over the cost of insurance as of December 2000 or increase during the calendar year 2002 more than eight percent (8%) over the cost of insurance as of December 2001, the parties agree, no later than forty-five (45) calendar days following said health insurance premium increase, to reopen negotiations only in regards to the health, vision, life and dental insurance benefits provided hereunder and the cost allocation of the premiums for said benefits.
 
The medical benefit cost increase was in excess of eight percent for two consecutive years and thus the parties reopened negotiations on this benefit for the final year of the three year agreement. The parties were unable to resolve their differences during the negotiations over how to pay the increased costs of the insurance benefit and thus the matter was sent to interest arbitration.
 
Prior to the negotiations that lead to this interest arbitration, the cap was set at $666.75. The City proposes in its LBO to change this benefit for the 2002-2003 year as follows:
The City will pay one hundred percent (100%) of the health, vision, life and dental insurance for employees and dependents up to but not exceeding a combined cost (cap) of $737.00 per month. The costs per month over and above the cap shall be paid fifty percent (50%) by the employee and fifty percent (50%) by the City. For cost sharing purposes, employees with Employee Only coverage shall pay one-third of the family employee contribution amount; and employees with the Employee Plus One shall pay two-thirds of the Family employee contribution amount. This offer would be effective as of July 1, 2002.
 
The Union's LBO raises the base from $666.75 to $737.00 but otherwise leaves the existing language intact.
 
ARGUMENTS OF THE CITY
 
The City contends that its final offer is reasonable and should be accepted by the Arbitrator given the facts about its current financial situation, its overall effort to provide high wages and a premium medical insurance package, and its need to maintain consistency amongst its employees with regard to the medical insurance program. Specifically, the City summarized its arguments as follows:
 
1. The City is already deficit spending in its general fund and has had to reduce budgeted expenditures in the police department, as well as all other general fund departments due to revenue short falls.
 
2. The current wage and benefit package is ample to attract and retain qualified people in bargaining unit positions.
 
3. On average, the City's proposal is better than comparable cities in the benefit package and required employee contribution.
 
4. Comparables submitted by the union establish a common practice of employee participation even by employees with Employee Only coverage and by employees with Employee Plus One Dependant coverage.
 
For all the above reasons, the City urges the Arbitrator to select its LBO.
 
ARGUMENTS OF THE UNION
 
The Union's Last Best Offer is to retain the current language, changing only the level of the cap. The Union considers its position to be maintenance of the status quo and that it is the Employer who comes to the Arbitrator with a proposal to significantly change the way in which employees participate in the payment of medical insurance premiums. The Union advances four primary arguments in support of the status quo and in opposition to the changes proposed by the City. Those arguments are summarized as follows:
 
1. The Arbitrator should not be persuaded by the City's budget arguments as the actual difference between the City's LBO and the Union's LBO is minuscule and clearly affordable by the City.
 
2. The City's proposed change is tantamount to asking single employees and employees with one dependant to subsidize the insurance for employees with families (two or more dependants). This request is fundamentally unfair in the Union's view, and could potentially have the ability to undermine the morale of the officers.
 
3. The Union strongly disagrees with the City's desire to have a single medical insurance program that cuts across all bargaining units and all employees. The fact that the police Union bargains separate from the other Unions and the other employees clearly gives it the right to bargain terms and conditions acceptable to the members of the police bargaining unit.
 
4. The Union argues for the status quo and the City argues to change it. The status quo has worked well and the Union believes the Arbitrator ought hold the City to a rigorous test with regard to justifying its LBO. ...
 
For all the above reasons, the Union urges the Arbitrator to support the status quo and select its LBO.
 
ANALYSIS
 
Under ORS 243.746 (5) the Interest Arbitrator's job is to "select only one of the Last Best Offer Packages submitted by the parties." In the instant dispute, the parties are negotiating subject to a re-opener clause in a multi-year agreement. The only provision subject to negotiation is Article 19 - Insurance Benefits, Section 6 Premium Cap. Thus, the package of the City and the package of the Union consist of their positions on this single issue.
 
Both parties are in agreement that the new cap should be $737.00. The parties also are in agreement that insurance premium payment beyond the $737.00 is to be split fifty-fifty between the City and the Employee. The $737.00 cap is a raise over the current cap of $667.50.
 
The Union's position is the status quo with the exception of the increase to the cap. Under the status quo, Employee Only insurance costs $319.80 and thus the four employees in this category provide no contribution to their insurance benefits. Also under the status quo, an Employee Plus One Dependant costs $657.35 and thus the five employees in this category make no contribution to their insurance benefits. The premium, under the status quo, for an Employee With Family is $896.90, which means that the twelve employees in this category each contribute $79.95 (50% of $159.90) monthly towards the payment of their insurance premium. The Arbitrator notes that this description of the status quo is also a description of the Union's LBO as the Union argues for the retention of the status quo.
 
The City, on the other hand, seeks a cost savings over the status quo through a program which would require every employee to make at least some personal contribution toward the insurance premium. Under the City's LBO the four employees in the Employee Only category would pay one third ($26.65) of the $79.95 contribution made by the Employee With Family; the Employee Plus One Dependant would pay two thirds ($53.30). In other words, even though the premium cost for the Employee Only is less than half of the cap, the four employees in this category would be required to make a small contribution toward their premium. The Employee Plus One Dependant would be required to pay twice as much as the Employee Only towards their insurance premium, even though the total cost of the premium is almost $80.00 underneath the cap. The City sees the change as necessary both as a cost savings method and because it places a reasonable and proportionate burden on each employee.
 
Having set forth the essential differences between the parties, the Arbitrator will continue his analysis of the acceptability of the parties' LBOs by first taking a comprehensive look at the City's proposal to substantially deviate from its prior practice and, second, by applying the statutory criteria to each party's LBO.
 
Status Quo
 
Costing for the two LBOs are as follows:
CITY FINAL OFFER

CAP
E Only (4)
$737.00
E + 1 (5)
$737.00
Family (12)
$737.00
Total per employee$319.80$657.35896.90816.95
Amount Exceeding Cap----159.90
Amount Paid By Employee$26.65$53.30$79.95
Total monthly cost to City$1,172.60$3,020.25$9,803.40$13,996.25
Total annual cost to City$14,071.20$36,243.00$117,640.80$167.955.00
 
(Copied from the City's Last Best Offer)
 
UNION's DATA
Number of WorkersEmployer ContributionEmployer Cost
4 (employee only)$319.80$1,279.20
5 (employee + 1)$657.35$3,286.75
12 (employee and family)$816.50$9,798.00
Monthly Cost to Employer$14,363.95
Annual Cost to Employer$172,367.40


(Copied from the Union's Last Best Offer)
 
The Arbitrator notes that the total cost difference for the year between the Union's LBO and the City's LBO is $4,477.20. The Union calls this minuscule given the overall size of the City's budget and, from the Arbitrator's view, it certainly is not a sizeable amount of money.
 
Based on the above, the Arbitrator notes that the amount of savings between the parties' LBOs could easily have been achieved had the City simply agreed to retain the status quo and argued for a cap of $670.00. A $670.00 cap would have created a savings of $4,824.00. The Arbitrator points this fact out for the purpose of supporting his conclusion that the cost savings by themselves are not the important factor. Clearly, the City is interested in cost savings, given its overall financial situation, but there are other factors which appear more significant to it in shaping its specific proposal. Based on the City's arguments, the Arbitrator concludes that those other factors include implementing what the Arbitrator calls a "share the pain" program that brings every employee into the financial reality of the rapidly rising costs of medical insurance. Also, the City emphasizes that the firefighters bargaining unit has adopted this approach to paying for the increased costs of medical insurance and that the program has been applied to other non-represented employees within the City - it wants consistency.
 
Moreover, what appears to be a very compelling reason, from the City's perspective, is the fact that contributions from the Employee Only and the Employee Plus One Dependant categories allow the City to raise the cap level thus making medical insurance premiums for those employees on the Family Plan more affordable. In other words, the nine employees spread out between the Employee Only and Employee Plus One Dependant are being called upon to help subsidize insurance premiums for the 12 employees on the Family Plan.
 
In reviewing the above factual information, the Arbitrator draws two significant conclusions. First, the LBO of each party is reasonable on its face. Moreover, there is clearly some merit to the City's proposal and, as the Union notes; the status quo has worked well. This is not simply a choice between a good plan and a bad plan.
 
Second, the City's LBO calls for a change in the status quo. This fact, as the Union points out, places a burden on the City to step forward with compelling case, based on the statutory criteria, for the change.
 
Statutory Criteria
 
As previously noted, the Arbitrator is required to use a set of statutorily provided criteria when making his choice as to whether to select the Union's LBO or the City's LBO. Statute (ORS 243.746 (4)) specifically requires that the Arbitrator first consider the "interest and welfare of the public," and then give secondary consideration to a list of what might be termed "traditional benchmarks" for setting wages, hours and working conditions.
 
The Arbitrator turns first to the interest and welfare of the public. After thoughtful consideration of this criterion, he arrives at the conclusion that there is nothing in this particular case that raises an issue such that it threatens the interest and welfare of the public. The amount of monetary difference between the two proposals is so small as to not raise any significant concerns or issues with cost to the public. For example, if the Union's position is selected (the more expensive proposal) no new taxes will be called for, etc. Similarly, the City is not threatened with laying-off part of its police force (testimony of Chief Kee).
 
Since the criterion of "interest and welfare of the public" is not depositive of this case, the Arbitrator turns next to the secondary criteria. The Arbitrator finds that three of the secondary criteria are the ones argued by the parties and the ones directly applicable to this dispute. Secondary criterion (b) speaks to the "financial ability of the unit of government to meet the cost of the proposed contract." The parties acknowledge that the City's LBO costs less than the Union's. But, that cost is not very substantial; minuscule according to the Union.
 
Overall, given the City's well documented financial situation, the Arbitrator finds that sub-paragraph (b) favors the City's LBO as opposed to the Union's. But, the amount of difference is small and the Union's LBO clearly does not substantially harm the City's financial condition. Thus, while sub-paragraph (b) works in favor of the City's position; it tips the scales only slightly in that direction.
 
Sub-paragraph (e) requires that the Arbitrator consider "overall compensation of other employees performing similar services with the same or other employees in comparable communities." The Union provides a set of comparables which include the cities of Canby, Gladstone, St. Helens and Newport (Union's Exhibit #6). These are all cities of similar size to Ontario.
 
The Employer challenges the Union's set of comparables because they all come from the west side of the Cascade Mountains and are primarily located in the only major metropolitan area of the State of Oregon. The City provides an alternative set which includes St. Helens, Pendleton, Canby, Gladstone, Hermiston, Lebanon, Astoria, Baker, The Dalles, Dallas, Redmond and Central Point (City Exhibit #4).
 
The Arbitrator carefully reviewed this evidence and in part agrees with the City that the Union's comparables are flawed from the standpoint that they don't include any city east of the Cascade Mountains. While the Arbitrator concludes that the City's list of comparables are closer to meeting the statutory requirement, the difficulty with the City's evidence is that it includes little if any information about the critical point at dispute in this interest arbitration. The critical point of dispute is the extent to which employees ought to be required to contribute towards their medical insurance premium when the cost of the insurance premium for that employee is less than the negotiated cap. The simple fact is that the City's comparables provide information only about the cost of family coverage, not about Employee Only or Employee Plus One Dependant. Moreover, four of the jurisdictions listed, Lebanon, Astoria, The Dalles and Central Point, provide medical insurance by way of a "composite rate;" which, in this Arbitrator's view, raises the old apples and oranges concern.
 
Moreover, while the City does point to the Union's comparators and emphasizes that two of the four do require some premium payment by Employee Only and Employee Plus One Dependant, the other two do not require such payment.
 
All together, the Arbitrator finds that criterion (e) does not help the City present a compelling case for changing the status quo. The City is asking for a change and thus it has the burden to provide solid evidence in support of its position. Absent this evidence, this Arbitrator favors the continuation of the current program.
 
Sub-paragraph (h) permits the Arbitrator to consider other pertinent factors. In reviewing the parties' arguments, the Arbitrator finds one other issue of some help in making a choice between the two LBOs. First, the Union outlines in its written arguments what it considers a three-prong test used by interest arbitrators when one of the parties seeks an award that would modify or change the status quo. The three tests include:
 
(1) That the status quo has proved to be unworkable or inequitable,
 
(2) That a quid pro quo has been given that would justify taking away a benefit that was gained by the other party in negotiations, and
 
(3) That proof of a compelling need exists for the proposed modification of change in the status quo (Union's Brief, Page 9).
 
The Arbitrator reviewed these three tests and clearly the City's case fails on all three points. There is no evidence whatsoever that the status quo has proved to be unworkable or inequitable. Also, the parties' re-opener provision in Article 19 permits negotiations on only the issue of the medical insurance premium. Thus, no quid pro quo is possible in these negotiations. The Arbitrator notes, however, that since this is the last year of a three year agreement, negotiations over a new successor agreement will provide the opportunity for quid pro quo discussions.
 
Finally, and most importantly, the City is unable to point to a compelling need. Obviously it desires to find a method to save some money and clearly it believes that there is importance in having a consistent medical insurance program across all City employees. While these reasons, in the Arbitrator's view, have some merit, there is no evidence on the record that suggests that they rise to the level of a compelling need.
 
In summary, the Arbitrator finds that the City has negotiated to implement a change in employee contributions towards the medical insurance premium, but it is unable to provide the kind of evidence that would justify imposing this change through interest arbitration. As such, the Arbitrator will enter an award and an order that the Union's LBO be implemented.
 
AWARD
 
After careful consideration of all statutory criteria, the oral and written arguments and evidence, and for the reasons set forth in the Opinion that accompanies this Award, it is ordered that:
 
1. The City implement the Union's Last Best Offer.
 
2. The Grievance is denied.
 
3. The Arbitrator splits his fees equally between the parties per ORS 243.746 (6).
 
Respectfully submitted on this the 11th day of March, 2003, by,
 
Timothy D.W. Williams
 
Arbitrator
 
REPRESENTING THE CITY: Mike Franell, City Attorney and Scott Trainor, City Manager
 
REPRESENTING THE UNION: Elizabeth Baker, Attorney and Andrew Boeger, SEIU Local 503 Senior Researcher