Final, Binding Arbitration Major Obstacle to MBTA Accountability & Performance

Uniquely unaccountable arbitration at MBTA, if unchanged, will make reform at the MBTA impossible

BOSTON – A study of thousands of pages of interest arbitration documents stored in Superior Court argues that full, final and binding interest arbitration involving the MBTA circumvents the power of all three branches of government and leaves a single, unelected individual in the role of decision-maker on contract disagreements with tens of millions of dollars at stake.  The new report from Pioneer Institute entitled “MBTA Reform—The Case of Full, Final and Binding Interest Arbitration” underscores how this system of arbitration, which is unique to the MBTA, is not only a relic of the past but an obstacle to reform of the state’s largest transit system.

“The current system of arbitration at the MBTA gives a single, unelected arbitrator massive authority, even as it negates legislative intent, the executive branch’s ability to manage the agency, and any meaningful role for the judiciary,” says John Sivolella, Senior Fellow in Law and Policy at Pioneer Institute and the head of PioneerLegal, the Institute’s new public-interest law arm.  “After this winter’s catastrophic failures, it would be hard to believe that the legislature would allow this exclusive instance of full, final and binding interest arbitration to trump its attempts to reform the T that its constituents are rightfully demanding.”

Generally, binding interest arbitration laws delegate to a supposedly neutral arbitrator the power to resolve public sector labor disputes that emerge during collective bargaining.  An arbitrator’s decision is final and binding on both parties.

Six Key Findings from a Review of the 2010-2014 Interest Arbitration

Our review of interest arbitration regarding the 2010-2014 collective bargaining agreement demonstrates how final and binding arbitration has broken any attempt to reform the MBTA.

1. The MBTA’s full, final and binding interest arbitration system is one of a kind. No other public agency in the Commonwealth is subject to this process.
2. In the current system, the arbitrator is essentially a private individual with no accountability to the taxpayers – who pay for the implementation of the decisions. The scope of judicial review over an arbitration decision is, by the superior court’s own admission, “quite limited.”  The executive branch and legislature have no authority over an arbitrator.
3. The arbitrator has enormous discretion over the factors to be considered when rendering an opinion.
4. The current arbitration system also reduces the accountability of the parties themselves to the public. The “chilling effect” of the process discourages the parties from making concessions during collective bargaining negotiations, where they should be made, out of fear that they would undermine their positions in arbitration.
5. The rhetoric that the present arbitration system is a “substitute for the strike” reflects an outdated rationale for early federal labor policy. In modern times, all public employee strikes are illegal in the Commonwealth as they are in roughly three-dozen other states.
6. The arbitrator’s rationale for many decisions in the most recent opinion is “it was always thus”:

• The arbitrator ignored sizable wage differentials enjoyed by the Carmen’s Union. The arbitrator was unmoved by evidence that the Carmen’s Union earned 15-43 percent more than municipal and state employees in comparable positions over at least the last 35 years, noting that it was a “historical ratio.”
• The arbitrator ignored legislative intent. In 2009, the Legislature passed a law dedicating a portion of the sales tax increase to transportation purposes and seeking savings through such actions as moving the members of the Carmen’s Union to health plans offered by the state’s Group Insurance Commission. The union balked at the move, obtaining an official action from the federal government that resulted in a halt to the MBTA’s federal funding. The delay ran afoul of legislative intent and cost the MBTA over $60 million, but the arbitrator reasoned that MBTA retirees were not “mainstream” Massachusetts public retirees and had to be held harmless from cost increases associated with the GIC.

“People may not know much about final and binding arbitration – and frankly they shouldn’t have to,” says Pioneer’s executive director Jim Stergios.  “The fact is no one likes unaccountable government – and that is why this system exists nowhere else in the Commonwealth.  It’s time to give the people, through their duly elected officials, the ability to enact real reform at the MBTA.”

The provision in the Baker bill making the appropriation needed to pay for an arbitrator’s determination subject to Finance and Management Control Board (FMCB) approval is not new or unusual.  It is closely modeled after 1987 laws that successfully revised the arbitration system between police and firefighter unions and their public employers. The reform adds accountability to the process because the FMCB answers to the Governor, and its decision making is subject to public debate as well as open meeting and public records laws.

Access Documents from Latest Interest Arbitration

Pioneer Institute has posted original documents from the latest round of interest arbitration (2010-14), along with accompanying descriptions, on its website blog.    

About the Author

In addition to his service as Senior Fellow in Law and Policy at Pioneer Institute, John Sivolella teaches American Politics at Columbia University – where he earned a Ph.D. in Political Science.  His research concentrates on federal agencies, executive power, public policy, and public law and the courts.  John received his J.D. from New York University School of Law where he was a member of the Annual Survey of American Law.  He earned an M.P.A from the Woodrow Wilson School at Princeton University.  John received a B.A. from Rutgers University, where he was Phi Beta Kappa and a Henry Rutgers Scholar.

About Pioneer

Pioneer Institute is an independent, non-partisan, privately funded research organization that seeks to improve the quality of life in Massachusetts through civic discourse and intellectually rigorous, data-driven public policy solutions based on free market principles, individual liberty and responsibility, and the ideal of effective, limited and accountable government.