There Is Little Appeal to the Current Use of Binding Arbitration at the T

Eliminating final and binding arbitration at the MBTA is key part of Governor Baker’s reform proposal.  His bill does not call for ending collective bargaining and arbitration at the T, but instead for applying the same collective bargaining/arbitration law that applies to other public employee unions at state agencies and municipalities, including at police and fire departments.

The Governor’s task force explained it this way:

The MBTA has the only public union in the Commonwealth with binding arbitration settlements which are not subject to approval (i.e. by legislative, board, or municipality). The current collective bargaining process creates inefficiencies and has delayed recent legislative reforms.  Many existing labor contracts are automatically extended until a new agreement is reached (‘evergreen provisions’), exposing the MBTA to large retroactive wage increases.  Bargaining typically ends with binding arbitration. This process disincents collaboration between the MBTA and its employees to address short term issues and long-term structural concerns.

Attorney Phillip Boyle, representing the MBTA and MassDOT in Massachusetts Superior Court in 2013, presented the following statements to the judge concerning the adverse effect of binding arbitration at the T:

“The fair conclusion that can be drawn is that [MBTA unions] use interest arbitration to avoid, delay or frustrate the application of legislative changes that it perceives are adverse to its members. . . . The Union’s tactical use of interest arbitration has inured to the benefit of [union] members, active and retired, the past 25 years and cost the MBA millions of dollars in lost savings.”

In Massachusetts cities and towns, city councils and boards of selectmen have final approval authority over collective bargaining agreements, which is the same process Governor Baker has proposed be applied at the MBTA.  Under his proposal, the MBTA Fiscal and Management and Control Board would be granted the fiduciary responsibility to evaluate the cost and provisions of a contract to determine whether the contract is affordable and if the value of the operational changes in the new agreement is appropriate given the added cost to the taxpayers.  The Boston Municipal Research Bureau explained it this way with respect to municipal arbitration, using Boston as example:

The Boston City Council does not have a passive role with regards to any collective bargaining contract.  While not responsible for the negotiation of a contract, the City Council, as Boston’s appropriating authority, does have the fiduciary responsibility to evaluate the cost and provisions of a contract to determine whether the contract is affordable and if the value of the operational changes in the new agreement is appropriate given the added cost to the taxpayers.  The same responsibility holds true for arbitration decisions.  In fact, state law on binding arbitration (Ch. 589, Acts of 1987) specifically states, “If the municipal legislative body votes not to approve the request for appropriation, the decision or determination shall cease to be binding on the parties and the matter shall be returned to the parties for further bargaining.”

According to The Boston Globe, since 2004, elected officials in Worcester, Holbrook, Somerville, and Northampton have stood up to arbitrators.

The Governor’s proposal to make T employees subject to the same arbitration law that governs other public employee unions in Massachusetts can hardly be deemed an anti-union “union proposal.”  According to Barney Frank biographer Stuart Weisberg[1], “In 1976, [then-state representative Barney Frank] proposed repealing the law requiring that MBTA collective bargaining disputes be submitted to binding arbitration because he felt that MBTA employees should be treated the same way other state employees were. . . . Barney detested wasteful government spending and inefficiency. “It’s the liberal’s responsibility to try to save money because if we don’t save money in the right places, it’s going to be cut in the wrong places,” he said. As a liberal he is an enthusiastic supporter of trade unionism. But he took the lead in efforts to reduce the power of public employee unions in Massachusetts. He sponsored legislation to limit the power of MBTA unions because he thought they were out of control and their demands for salary and benefits were excessive and contrary to the public interest, and he wanted to curb what he viewed as the excesses of civil service and the intolerable inefficiency at the MBTA.

Arbitrators’ decisions at the MBTA have “long tails,” impacting the finances and operations of the T retroactively.  Arbitrators have ruled that MBTA contracts “roll-over” and continue in effect until a new contract is finalized, often not until an arbitrator makes an award on a new contract three or more years later, upon which retroactive payments become legally due. The Governor’s legislation would also end this practice.

The Arbitration Process

The Carmen’s Union at the MBTA represents about 3,500 employees, or more than half (56 percent) of the T’s unionized ranks. When disputes arise on a new contract, after 90 days of the termination of the former contract, either party can request a mediator.  If the parties can’t agree on one, either side can petition the Commonwealth Employment Relations Board (CERB) to choose a mediator for them.

Provided both parties negotiated in good faith but remain at an impasse after 45 days, the mediator documents the last best offer of both parties.

Either side can request an arbitration by giving 10-day notice.  The parties then have 15 days to select a mutually agreed-upon arbitrator. If they cannot agree, the CERB provides them a list of five names from the American Arbitration Association to choose from.  Each party takes turns eliminating names on the list until a final name remains.  If one of the parties fails to act on the list in a timely manner, the other party can strike a second name and the CERB then selects an arbitrator from the names remaining.

The Mission of the Commonwealth Employment Relations Board and Impartiality

The stated mission of the CERB is to “effectively and expeditiously encourage the parties to a labor dispute to agree on the terms of a settlement or to agree on the method and procedure which shall be used to resolve a dispute” involving public employees. Given its deep influence on the potential pipeline of arbitrators, the CERB can wield great influence on how disputes are resolved through the arbitration process. To be effective and uphold the public trust, the board be impartial, in both fact and appearance.

The CERB is appointed by the governor with its three members having staggered five-year terms. Governors often have to wait well into their first terms to gain control of the CEB.  In his specific case, unless a board member resigns, Governor Baker won’t have control of the board until the final days of his first term. This is in great part the result of Governor Patrick’s 11th hour (November 30, 2014) re-appointment of Harris Freeman.

When first appointed in 2009, Mr. Harris noted, “I’m very excited to be appointed and have the opportunity to help advance collective bargaining rights in Massachusetts.”

In our opinion, upholding the public trust means that CERB Board members should remain impartial at all times and not seek to advance anything but the board’s mission.

Case in Point: The Carmen thwarted the Legislature’s reform efforts Group Insurance Contract Transfer: How Binding Arbitration Unspun a Legislative Act (excerpts from Legislative Testimony prepared by Pioneer’s Research Director Greg Sullivan)

Attorney Phillip Boyle [representing the Commonwealth] explained to the court that after the legislature enacted Section 140 of Chapter 25 [which transferred MBTA employees from existing health plans to the state’s GIC in an effort to save roughly $30M annually] Local 589 filed a Superior Court action challenging of the legislature’s authority to have done so.

The Superior Court upheld the constitutionality and validity of Section 140 four months later.

Local 589 then filed a complaint with the U.S. Department of Labor (DOL) under DOL rule 13(C) to block the Commonwealth from receiving what the arbitrator later described as “millions or perhaps billions of dollars of federal funding of MBTA projects.”  The DOL directed Local 589 and the MBTA to engage in negotiations.  After negotiations, the parties agreed to jointly petition the legislature to amend Section 140 to permit the Authority to engage in collective bargaining over the establishment of a Health and Welfare Trust Plan “or to pay the cost, in whole or in part as determined by collective bargaining, of any supplemental benefits or coverage provide under the Trust Plan.” The legislature adopted the language as approved by the parties and Chapter 189 of 2011.  This had the effect of subjecting the matter once again to binding arbitration.

Neither the DOL nor the FTA requires that disputes like this one be made subject to final and binding arbitration.  Their rules require only that matters in dispute be brought before an arbitration system established by local or state law that meets DOL standards, which standards allow not only for final and binding arbitration but also for fact-finding arbitration with final approval left up to state boards, which is what Governor Baker has proposed in the legislation before you today.  In other words, had the legislature not made collective bargaining at the MBTA subject to final and binding arbitration through Chapter 161A, an act adopted when the MBTA was the Massachusetts Transit Authority, the final decision on the matter of the GIC migration could have been brought before any other form of interest arbitration devised by the legislature acceptable to DOL and FTA.

In the GIC migration arbitration matter, the arbitrator ordered that the transfer to the GIC should be delayed until the conclusion of binding arbitration, upon request by Local 589. According to the MBTA, this delay cost the MBTA $61 million.

The Union demanded that the effect of Section 140 be reversed and that its members “be made whole” for all additional costs borne by its members because of its adoption.

During arbitration, Local 589 told the arbitrator, “Without adopting the Union’s proposals regarding the Health and Welfare Fund, the economic impact on employees and retirees will be devastating.”  In the list of so-called “devastating” outcomes that Local 589 presented to the arbitrator were the following:

• Premium contribution: Local 589 active members pay 15%; GIC requires premium contributions of 20% for most employees and 25% for those hired after July 1, 2003;
• Non-Medicare retirees: Local 589 non-Medicare eligible retirees pay 0%; 10% for recent retirees. GIC non-Medicare retirees pay 10%, 20%, and 30% depending on retirement date;
• Deductibles: Local 589 active members and retirees currently paid no deductibles (except for out-of-network); GIC: $250 individual; $500 family of 2; $750 family 3+;
• Co-pays for inpatient hospitalization; outpatient surgery; diagnostic imaging. MBTA employees and retirees: no co-pays for these services; GIC: $200-$750;
• Tiered co-payments: MBTA members pay $20 for a physician visit; GIC has a three-tier system with co-pays up to $45 for Tier 3 physicians;
• Limited network: MBTA can go to any provider; GIC offers less expensive Limited Network plans with certain providers off limits.

 

Ultimately, the matter of Local 589 and other MBTA union members’ right to receive compensatory funding from the Health and Welfare Trust was submitted as a matter of collective bargaining to an arbitrator in binding arbitration.  The arbitrator ultimately included in her decision three elements that the MBTA later unsuccessfully challenged in Superior Court: 1) the benefits of the Trust were extended to MBTA retirees; 2) the benefits of the Trust were extended to include life insurance; and 3) the benefits of the trust were extended to include full coverage of Medicare Part B coverage for retirees.  The arbitrator also ordered the MBTA to provide $3,175,289 to the Trust for the remaining period of the collective bargaining agreement, through June 30, 2014.  Most significantly, the arbitrator ruled that the matter of whether the MBTA employees have to be “made whole” for any additional costs incurred by them because of the health insurance reform were made subject to future collective bargaining.

[1] Weisberg, Stuart Barney Frank: The Story of America’s Only Left-handed, Gay, Jewish Congressman, University of Massachusetts Press (2009)