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February 2015 - Collective Bargaining
Protective Service Collective Bargaining In a Post-Act 10 and Act 32 World
Attorneys James R. Korom and Kyle J. Gulya
James Korom is an attorney and shareholder in the law firm of von Briesen & Roper, s.c. jkorom@vonbriesen.com or www.vonbriesen.com.
Kyle J. Gulya is an attorney and shareholder in the law firm of von Briesen & Roper, s.c. He may be reached at kgulya@vonbriesen.com or www.vonbriesen.com.
The passage of 2011 Act 10 and, to a lesser degree, 2011 Act 32, were watershed events that dramatically changed collective bargaining for all Wisconsin municipal employers. Act 10 gave local municipal employers sweeping control over personnel costs, job security, and perhaps most significantly, over day-to-day operational decision-making. Local municipal employers have used these “tools” — some to greater and varying degrees than others — to achieve substantial cost savings and operational efficiencies, and to develop sustainable compensation and benefit packages for their employees that reflect the labor market in a time of reduced government revenue streams.
Act 10 made this possible by drastically limiting the scope of collective bargaining for general municipal employee collective bargaining units to wages, and even then only to “total base wages.” Act 10 also allowed the municipal employer to impose its last best offer once the parties reached impasse, thereby eliminating interest arbitration for general municipal employees. Effective use of this virtually unrestricted freedom has allowed most municipal employers to change wages and benefits, but also to completely change how services are provided, and how employees are evaluated. These three components: (1) levels of compensation, (2) job security, and (3) freedom to direct the workforce — are reserved to management.
While not as extensive, through Act 32, the Legislature made meaningful changes to collective bargaining for public safety bargaining units. Those changes are the subject of this article. While the legislature has preserved most of the traditional scope of bargaining for public safety unions, and preserved the traditional access to interest arbitration to resolve disputes, it has been the change to the negotiability of one critical issue, health insurance, that has generated the most significant impact on how negotiations in those units are carried out.
2011 Act 32’s Major Changes
Act 32 first tried to make clear which classes of employees would continue to enjoy broad access to collective bargaining and those covered under the narrower scope of bargaining under Act 10. Act 32 only covers an employee who is a “public safety employee”1 or a “transit”2 employee. The new law defined “public safety employee” as those persons classified by the employer as a protective occupation participant under Wisconsin Statute section 40.02(48)(am), in the occupations of “police officer,” “fire fighter,” “deputy sheriff,” “county traffic police officer,” or a “person employed under s. 60.553(1), 61.66(1), or 62.13(2e)(a),”3 and to an emergency medical service provider for the participating employer’s emergency medical service department.4
Second, the legislature wanted to be sure that unique local conditions were properly considered in collective bargaining. Thus, Act 32 also established a new “greater weight” statutory factor that interest arbitrators must consider and account for in any decision. Section 111.77 (6)(am), Wis. Stats. now requires:
In reaching a decision, the arbitrator shall give greater weight to the economic conditions in the jurisdiction of the municipal employerthan the arbitrator gives to the factors under par. (bm). The arbitrator shall give an accounting of the consideration of this factor in the arbitrator’s decision.5
Third, the legislature applied some of the economic components of Act 10 to new hires in public safety employment. Thus, employees initially employed by the participating employer on or after July 1, 2011, are required to pay towards WRS the same percentage share as that paid by general municipal employees. Employees hired before July 1, 2011, could still lawfully bargain over that obligation. Sensitive to the problems of compression between the wage and benefit packages of non-union command staff compared to the employees they supervise, Act 32 requires command staff initially employed prior to July 1, 2011, to pay the same WRS contributions as their subordinates hired before that date — so if the union agrees to pay more, then the command staff do as well.
Fourth, the legislature prohibited unions from bargaining over any disciplinary matters otherwise subject to the jurisdiction of a local Police and Fire Commission under Section 62.13 Wis. Stats. Thus, like general municipal employees, most job security issues are no longer a proper subject of negotiations.
Finally, and most significantly, Act 32 dramatically restricted the scope of collective bargaining regarding health insurance. The parties are prohibited from negotiating:
the design and selection of health care coverage plans by the municipal employer for public safety employees, and the impact of the design and selection of the health care coverage plans on the wages, hours, and conditions of employment of the public safety employee.6
By creating Section 111.70(4)(cm)6, the intent of the legislature seemed clear — that matters related to the design and the selection of the health care coverage plan and impact bargaining regarding the design and selection of the health care coverage plan constituted illegal subjects of bargaining. Likely because of the significant bargaining power this language gives to the employer, litigation was initiated by unions in many jurisdictions challenging the scope of the employer’s unilateral authority over health insurance plan design, including the selection of different types of plans, deductibles, co-insurance, co-pays, and contributions to health reimbursment accounts (HRAs), Health Savings Account (HSAs), and similar funding vehicles. The Wisconsin Employment Relations Commission, as well as several circuit courts issued decisions which encompassed the following issues:
In October 2012, a circuit court judge decided that contributions to a Health Savings Account are prohibited subjects of bargaining, and the County had no duty to bargain over changes to the amount the employer contributes to the employee’s HSA.7
In April 2013, the Court of Appeals rejected the Milwaukee Police Association’s argument that once an employer decides on a plan design and selects it, then bargaining must occur as to the direct results of the plan design and selection—that is bargaining regarding changes the employer makes to the deductibles and other out-of-pocket costs.8 Milwaukee Police Association appealed this decision to the Wisconsin Supreme Court, where it is currently pending.
In April 2013, the WERC decided the employer’s changes to the Health Reimbursement Accounts, which define the type and amount of health care costs covered by the plan, are functionally no different than a “health care coverage plan,” and therefore constituted a prohibited subject of bargaining.9
In May 2013, a WERC hearing examiner decided no duty to bargain existed regarding the employer’s unilateral changes to health care plan selection and design changes for a pre-2011 Act 32 contract (entered into before July 1, 2011) when those changes occurred after expiration of the collective bargaining agreement.10
In fall 2013, the Court of Appeals overturned a Circuit Court’s writ of mandamus compelling a municipality and County to comply with the health insurance provisions of their expired collective bargaining agreements until new agreements were reached.11
In November 2013, the Court of Appeals, in a decision involving Eau Claire County, affirmed a Dane County Circuit Court decision reversing the WERC and found — under the old version of 111.70(4)(mc)6 (which no longer exists) — that bargaining over the allocation of responsibility between employers and employees to pay deductibles is not a prohibited subject of bargaining.12 The Court of Appeals decision made no reference regarding whether the Union’s proposal constituted an “impact” bargaining proposal that may have been illegal. That decision was not appealed by the WERC, likely due to what the Legislature did next.
In the next state budget bill, 2013 Act 20, the legislature sought to “clarify” what it originally intended — that negotiations regarding health insurance must be limited exclusively to the employee’s share of the health insurance premium contribution. The legislature modified Section 111.70(4)(cm)6 by clarifying the prohibition of bargaining health insurance plan design and selection, and the legislature included language affirmatively identifying premium contributions as the only subject of bargaining:
The Except for the employee premium contribution, all costs and payments associated with health care coverage plans and the design and selection of health care coverage plans by the municipal employer for public safety employees, and the impact of such costs and payments and the design and selection of the health care coverage plans on the wages, hours, and conditions of employment of the public safety employee.13
Following the inclusion of this language in 2013 Act 20, employers and unions throughout Wisconsin seemingly agreed on what the legislature intended and litigation involving health insurance plan design and selection has largely ended. In the only published post-Act 20 case, WERC ruled that the employer has no duty to negotiate with a collective bargaining representative to require the employer to offer more than one health insurance plan option.14 The pending appellate-level cases under the old version of Wisconsin Statute Section 111.70(4)(cm)6 are held up on appeal awaiting the Wisconsin Supreme Court’s decision in Milwaukee Police Association v. City of Milwaukee.
Post Act 32 Interest Arbitration
Following the passage of Act 32, the interest arbitration process has largely remained unchanged. Arbitrators continue to closely track the statutory factors required under Wisconsin Statute section 111.77(6)(am)–(bm).15 As before, external comparability remains the dominant factor. The addition of the new “local economic conditions” factor, the impact of Act 10 on non-public safety employee bargaining, and elimination of bargaining over health insurance, raised three potential new questions for Arbitrators that practitioners continue to watch closely. First, how would Arbitrators apply the new statutory factor in communities where state revenue sharing has been reduced and local taxpayers are already paying high taxes? Second, will internal comparability continue to be used by Arbitrators to inform their decision-making when those “settlements” are the result of an imbalance of bargaining power between the employer and the general municipal employee bargaining unit? And third, what role will the employer’s exercise of unilateral authority over health insurance play in the application of the “overall compensation” factor?
So far, the new “greater weight” factor involving local economic health has not played a significant role in the reported decisions.16 Certainly, arbitrators recognize that municipal budgets are tight. However, they also recognize that budgets are tight everywhere. What they seem to expect is a showing that the parties before them demonstrate the local economic conditions are uniquely tight, warranting a departure from the otherwise preexisting settlement pattern. In other words, if the surrounding communities with tight budgets can figure out how to pay their public safety workers at a certain level, the parties to the case should be able to do so as well. In looking at the exhibits produced in these hearings, most Arbitrators seem to carefully scrutinize the budget of the local community. If the Arbitrator finds individual expenditures on items they deem “less important” than public safety compensation, or if the employer is not taxing to the full extent of its legal authority, or if there is a significant fund balance (and your finance director will never think it is significant enough), then the Arbitrator is likely to give little consideration to this factor.
On the role of internal, non-public safety comparability, Arbitrators have given them little weight, especially as to economic issues. In the seminal post-Act 10 interest arbitration case issued in November 2011, Arbitrator Mahwinney stated:
While internal bargaining unit settlements can be very important in arbitration, especially in the area of benefits, there are no internal settlements. Due to the changes in state law, the internal units have been stripped of almost all of their bargaining rights except for limited bargaining on wages. They are prohibited from bargaining over contributions to the WRS. The 5.8 percent employee contribution was imposed on these units during 2011 by state law. However, the Legislature did not impose the same contribution on public safety employees, except for new employees hired after July 1, 2011.
The County says it is inequitable to have the internal bargaining unit employees pay more to the WRS than the deputies. Of course it is inequitable. It is also inequitable that the non-protective bargaining units lost almost all of their bargaining rights and protective bargaining units retained all their bargaining rights. Neither the County nor the Union created this inequity. The newly enacted state law created it. The Legislature even had a chance to review the WRS contribution by protective employees in May of 2011 and refused to force protective employees pay the employees’ share of the WRS except for new hires. It is appropriate to consider this case involving protective employees with traditional arbitration considerations in analyzing the final offers and how they best fit the statutory criteria (as the criteria existed before July 1, 2011). The external comparables clearly favor the Association on both wage increases and the WRS contribution. The internal comparables have little, if any, weight in this case because the 5.8 percent WRS contribution was imposed upon them by law and because there are no voluntary settlements in the internal units.
. . .
If the County wants to achieve internal consistency among its employees, it may do so over time, as new hires come on board or bargaining starts to equalize benefits. However, at this point in time, none of the statutory criteria favors the County’s final offer, and the Association’s final offer is preferred and to be incorporated into the parties’ successor collective bargaining agreement.17
In short, while some reference to internal comparability on issues such as certain types of leave, or those relating to difficult to administer benefits might occur, for the most part a “voluntary settlement” with a general municipal employee bargaining unit means little. In essence, the Arbitrators seem to recognize that by creating different bargaining systems for the two types of employees, the legislature recognized that public safety employees are simply a more important core governmental service than Act 10 groups.
While Arbitrators so far have given little weight to internal morale issues created by disparate benefit treatment of general municipal employees and public safety personnel, Arbitrators have begun to define the “hot issues,”18 the most dominant of which seems to be external comparability. One Arbitrator was more inclined to rely on the external comparability factor in Wisconsin Statute Section 111.77(6)(bm)4a than internal comparability, even with another internal public safety unit.19 Arbitrator Morrison stated:
The Association says it is well aware of the fact that arbitrators are loath to award settlements that are greater than those voluntarily agreed to by other bargaining units within the same municipality. (Internal comparables) . . . . The Association says it was not able to bargain with the City because it (the City) refused to bargain in good faith since they knew they were never going to offer more than the Firefighters had received. It went through the motions but did no more than that. To award the City’s offer based on the Firefighter’s offer flies in the face of the arbitration process and the arrogance of the City cannot be condoned. Each bargaining unit must be allowed to determine what is, and what is not, worth fighting for. The Undersigned agrees with the Association’s position in this regard and has mentioned it above under No. 4.20
The issue of “total compensation” has also been addressed by Arbitrators. If the employer offers a better-than-average health plan, do they get any “credit” for it from the Arbitrator? Conversely, if the employer unilaterally gives a less competitive plan, will the Arbitrator “punish” the employer because of the lack of any “quid pro quo” for the reduced benefit? Certainly, pre-Act 32, the answer was “yes”. But by making health insurance and the impact of health insurance on wages, hours and working conditions a prohibited subject, what will Arbitrators do? How Arbitrators have approached the “quid pro quo” issue generally after Act 32 gives us some guidance.
Looking only at WRS and health insurance premium contributions (not at plan design) after Act 32, Arbitrator Strycker stated:
It is important to recognize that wage adjustments cannot be viewed independently, as employee health insurance premium and employee WRS contributions impact actual earnings. In order to have a more complete understanding of the economic situation within the comparables and the Union proposal, an analysis of employee contributions is necessary . . . 21
Some employers have either made significant health insurance plan design reductions to encourage favorable settlements, or have “promised” positive changes as an incentive for unions to accept other concessions. That approach was unsuccessful in the City of New Berlin, Dec. No. 34024-A. There, the Arbitrator stated:
The City Final Offer does not provide for the (better) health insurance plan now used by the Fire and general employees. The undersigned does not doubt the City’s word that it would put the Association members on that plan as a result of selecting its Final Offer that proposes a two year term expiring December 31, 2013. But that is not contained in its certified Final Offer. Selection of the City Final Offer would of necessity bring some uncertainty into the relationship between the parties, with the City having a free hand to design the plan under the law as it negotiates a new agreement. The certainty of knowing what the wages, benefits and working conditions are provides a more stable environment for the parties to negotiate. These matters make the City offer less preferable.22
In summary, Arbitrators feel constrained by the language in Act 32 such that insurance plan design decisions, either good or bad from the employee’s point of view, will not play any overt role in their decisions. Whether it plays any “unofficial” role is the subject of mere speculation.
What is not subject to speculation is the continued importance of a quid pro quo when external comparability does not support the party’s position. After Act 10, employers tried to get pension contributions from public safety unions so as to preserve equality with non-represented and general municipal employees. Arbitrators have required a quid pro quo for concessions involving benefit contributions in the absence of support from external comparables:
Furthermore, the County’s offer has no wage increase and no quid pro quo for the 5.8 percent WRS contribution. Such a significant concession without any support in the externals demands a quid pro quo. At a minimum, it demands a quid pro quo of some value. Nothing is offered by the County.23
The importance of a quid pro quo in the absence of support from the external comparables has encouraged continued incremental changes to benefits (albeit now on a larger scale than incremental change pre-Act 32) rather than immediate wholesale change.
Bargaining Trends
Based on the authors’ personal experiences, as well as the information-gathering required for effective negotiations, there seem to be several collective bargaining trends in the public safety sector which have developed since the passage of Act 32. (The reader may have his or her own perceptions about whether these trends may exist, as reflected in their own local experiences). The first trend is the high rate of voluntary settlements. Whether voluntary settlements are the result of local economics, local politics, or a desire for labor peace, the low number of interest arbitration cases shows a strong preference for voluntary settlement. Both employers and unions seem to recognize the current political climate and respect the new financial realities facing them.
Second, employers are opting for shorter collective bargaining agreements. Municipal finance structures have changed, resulting in greater uncertainty year-to-year for municipal employers who have previously been reliant on higher levels of shared revenue, grants, and other aid. As such, those employers are attempting to achieve greater certainty regarding their expense budgets by negotiating collective bargaining agreements of a shorter duration of one or two years rather than three years.
Finally, settlements seem to have fallen into three main categories. First (and by far the lowest), are those where the employer has told the union that if the voluntary settlement is not fiscally sound enough, the employer will implement significant reductions in health insurance plan design, to include dramatic (and, at times, draconian) changes in deductibles, drug co-pays, co-insurance levels, and more, which would cost the employees significant out-of-pocket costs beyond the premium share. There are serious morale, political, and legal implications to this approach, both short and long term. But for those that have done it, and have the political will to follow through, the short term economic results are favorable to employers. (Note that those employers participating in the “State Plan” do not have this option because of the structure of the State Plan.)
The second category of settlements involves the employer “buying” the WRS contributions by offering corresponding wage increases. So, over the term of a two-year or three-year contract, the employees may move from no WRS contributions up to “full” contributions in steps, with wage increases phased in over time to make up for part or all of those contributions. That may mean net wage reductions in some years, and net increases in others, but over the term of the contract, the employees see little or no net wage increases. If you see a 3 or 4 percent wage increase in one of your comparables, that is likely due to the employees absorbing more WRS contributions at or near the same time. By now, most public safety employees have agreed to pay “full” WRS contributions, so future collective bargaining trends will focus on “normal” factors involving other benefit changes.
The third category involves employers who have taken the view that employee turnover will solve the WRS contribution issue over time (because every new hire automatically pays the “full” WRS contribution), so those employers have allowed pre-2011 hires to pay nothing towards WRS. There, the wage settlements have been zero or low, commonly tracking the CPI or the trend among the general municipal employees. This category is not widespread, but can help explain what would appear to be an “out of line” settlement.
Conclusion
Act 10 had dramatic and far-reaching effects on non-public safety collective bargaining. The impact of Act 32 on public safety collective bargaining will be much less. We predict that police and fire collective bargaining will continue to function in a manner similar to pre-Act 32 practices, with a few important exceptions. Foremost among these will be the ability of the local community to use the “nuclear option” of drastic cuts in health insurance benefits as leverage when there is a significant issue facing the community that the local union refuses to help address. Such issues could include local economic problems, but could also include day-to-day operational issues that prevent the employer from effectively serving the community. As indicated above, this option carries with it significant consequences to the relationship between the parties, but if the union refuses to help the local community solve its unique problems because of “past practice,” or because “the comparables don’t do that,” then the employer may have no other choice but to use the “nuclear option” to effectively serve the public.
The good news is that most public safety unions recognize the fact that both Act 10 and Act 32 changed the status quo, and they have voluntarily absorbed the WRS contributions, accepted greater premium share payments, and worked fairly and effectively with the employer to come to a new balance of power under these new laws. Similarly, most local employers recognize the difficult, often dangerous jobs our public safety personnel perform, and they have tried to maintain their current levels of compensation in a challenging fiscal environment. We can only hope that trend continues, and it will be the rare case that works its way through the interest arbitration process that gives us all more guidance on how the Arbitrators will apply the statutory factors in this new legal environment.
Employees 345
1. Wis. Stat. sec. 111.70(1)(mm)1–2.
2. Wis. Stat. sec. 111.70(1)(p).
3. Wis. Stat. sec. 40.02(48)(am) 9–10, 13, 15, 22.
4. Wis. Stat. sec. 111.70(1)(mm)2.
5. 2011 Act 32 sec. 2409iv; Wis. Stat. sec. 111.77(6)(am) (emphasis added).
6. 2011 Act 32 sec. 2409c; Wis. Stat. sec. 111.70(4)(cm)6.
7. Manitowoc County Sheriff’s Department Employees v. Manitowoc County, Case No. 12-CV222 (Man. Cty Cir. Ct. Oct. 2012) (appeal No. 2013AP1, appealed to the Court of Appeals, awaiting decision pending the Wisconsin Supreme Court’s decision in Milwaukee Police Association v. City of Milwaukee, appeal No. 2012AP1928).
8. Milwaukee Police Association v. City of Milwaukee, 2013 WI App 70, 348 Wis. 2d 168, 833 N.W.2d 179 (appealed and decision pending by the Wisconsin Supreme Court).
9. City of Marinette, Dec. No. 34096 (WERC, 4/13); see also Wisconsin Professional Police Association v. City of Hudson, No. 12-CV-371(St. Croix County Cir. Ct. July 2013).
10. Village of Menomonee Falls, Dec. No. 34017-A (Jones 5/13), affirmed 34017-B (WERC 6/13).
11. Green Bay Professional Police Association, et al. v. City of Green Bay, et al., 2013 WI App 269 (The other half of this case, 2013AP270, is still on appeal to the Court of Appeals and also awaiting decision pending the Wisconsin Supreme Court’s decision in Milwaukee Police Association v. City of Milwaukee, appeal No. 2012AP1928).
12. Wisconsin Professional Police Association v. WERC, 2013 WI App 145.
13. 2013 Act 20 sec. 1722p (strikeout in original, emphasis added); Wis. Stat. sec. 111.70(4)(cm)6.
14. Milwaukee County, Dec. No. 35042 (WERC, May 2014) (“Implicit in the MPSO’s proposal is the fact that the two plans for health insurance coverage must be different. Whether the requirement is for two plans or ten plans the presentation of different plans creates choices for employees. We read the new language as limiting all health insurance decisions (other than premium payment) solely to the employer. Put another way, the employer has the discretion to make all decisions regarding the type of plan or plans to be offered. If the employer chose to offer more than one choice that is their prerogative, but a union cannot bargain for language requiring that a certain number of optional plans be offered. If an employer, for example, were to propose a health insurance plan, the union would be barred from offering an alternative plan with different coverage provisions. Requiring an employer to offer two or more plans is, in effect, similar to the union offering a counterproposal.”)
15. Wis. Stat. sec. 111.77(6)(am)–(bm):
(am) In reaching a decision, the arbitrator shall give greater weight to the economic conditions in the jurisdiction of the municipal employer than the arbitrator gives to the factors under par. (bm). The arbitrator shall give an accounting of the consideration of this factor in the arbitrator’s decision.
(bm) In reaching a decision, in addition to the factors under par. (am), the arbitrator shall give weight to the following factors:
1. The lawful authority of the employer.
2. Stipulations of the parties.
3. The interests and welfare of the public and the financial ability of the unit of government to meet these costs.
4. Comparison of the wages, hours and conditions of employment of the employees involved in the arbitration proceeding with the wages, hours and conditions of employment of other employees performing similar services and with other employees generally:
a. In public employment in comparable communities.
b. In private employment in comparable communities.
5. The average consumer prices for goods and services, commonly known as the cost of living.
6. The overall compensation presently received by the employees, including direct wage compensation, vacation, holidays and excused time, insurance and pensions, medical and hospitalization benefits, the continuity and stability of employment, and all other benefits received.
7. Changes in any of the foregoing circumstances during the pendency of the arbitration proceedings.
8. Such other factors, not confined to the foregoing, which are normally or traditionally taken into consideration in the determination of wages, hours and conditions of employment through voluntary collective bargaining, mediation, fact-finding, arbitration or otherwise between the parties, in the public service or in private employment.
16. See, e.g., City of Greendale, Dec. No. 33924 at 30 (Strycker, March 2013).
17. Oconto County, Dec. No. 33283-A at 12–13 (Mawhinney, Nov. 2011) (emphasis added).
18. City of Oshkosh, Dec. No. 33976-A at 28 (Gallagher, June 2013).
19. See, e.g., id. at 30–32; City of Greenfield, Dec. No. 33924 at 37–42; Douglas County, Dec. No. 33350-A at 39 (Kossoff, Jan. 2012) (rejecting the Association’s offer and identifying the unsupported shift in the external comparability wage rankings created by the Association’s offer); City of New Berlin, Dec. No. 34024-A at 19 (Gordon, Dec. 2013) (“There is a matter of how much weight should be given to [internal comparability]. The police and fire are separate bargaining units. They are autonomous from each other. Some interests may be similar, but each is independent of the other. Effective, productive collective bargaining between one group and the City would be undermined if one bargaining unit’s settlement were to be determinative of what the other bargaining unit must or will get. That could have negative morale repercussions and fail to take into account other priorities in the other unit. While the internal comparable with the Fire settlement in this case does favor the City, it does so slightly.”)
20. City of Beaver Dam, Dec. No. 35654-A at 38 (Morrison, Sept. 2014).
21. City of Greenfield, Dec. No. 33924-A at 41.
22. City of New Berlin, Dec. No. 34024-A at 20.
23. Oconto County, Dec. No. 33283-A at 12; see also City of Oshkosh, Dec. No. 33976-A at 30.
Attorneys James R. Korom and Kyle J. Gulya
James Korom is an attorney and shareholder in the law firm of von Briesen & Roper, s.c. jkorom@vonbriesen.com or www.vonbriesen.com.
Kyle J. Gulya is an attorney and shareholder in the law firm of von Briesen & Roper, s.c. He may be reached at kgulya@vonbriesen.com or www.vonbriesen.com.
The passage of 2011 Act 10 and, to a lesser degree, 2011 Act 32, were watershed events that dramatically changed collective bargaining for all Wisconsin municipal employers. Act 10 gave local municipal employers sweeping control over personnel costs, job security, and perhaps most significantly, over day-to-day operational decision-making. Local municipal employers have used these “tools” — some to greater and varying degrees than others — to achieve substantial cost savings and operational efficiencies, and to develop sustainable compensation and benefit packages for their employees that reflect the labor market in a time of reduced government revenue streams.
Act 10 made this possible by drastically limiting the scope of collective bargaining for general municipal employee collective bargaining units to wages, and even then only to “total base wages.” Act 10 also allowed the municipal employer to impose its last best offer once the parties reached impasse, thereby eliminating interest arbitration for general municipal employees. Effective use of this virtually unrestricted freedom has allowed most municipal employers to change wages and benefits, but also to completely change how services are provided, and how employees are evaluated. These three components: (1) levels of compensation, (2) job security, and (3) freedom to direct the workforce — are reserved to management.
While not as extensive, through Act 32, the Legislature made meaningful changes to collective bargaining for public safety bargaining units. Those changes are the subject of this article. While the legislature has preserved most of the traditional scope of bargaining for public safety unions, and preserved the traditional access to interest arbitration to resolve disputes, it has been the change to the negotiability of one critical issue, health insurance, that has generated the most significant impact on how negotiations in those units are carried out.
2011 Act 32’s Major Changes
Act 32 first tried to make clear which classes of employees would continue to enjoy broad access to collective bargaining and those covered under the narrower scope of bargaining under Act 10. Act 32 only covers an employee who is a “public safety employee”1 or a “transit”2 employee. The new law defined “public safety employee” as those persons classified by the employer as a protective occupation participant under Wisconsin Statute section 40.02(48)(am), in the occupations of “police officer,” “fire fighter,” “deputy sheriff,” “county traffic police officer,” or a “person employed under s. 60.553(1), 61.66(1), or 62.13(2e)(a),”3 and to an emergency medical service provider for the participating employer’s emergency medical service department.4
Second, the legislature wanted to be sure that unique local conditions were properly considered in collective bargaining. Thus, Act 32 also established a new “greater weight” statutory factor that interest arbitrators must consider and account for in any decision. Section 111.77 (6)(am), Wis. Stats. now requires:
In reaching a decision, the arbitrator shall give greater weight to the economic conditions in the jurisdiction of the municipal employerthan the arbitrator gives to the factors under par. (bm). The arbitrator shall give an accounting of the consideration of this factor in the arbitrator’s decision.5
Third, the legislature applied some of the economic components of Act 10 to new hires in public safety employment. Thus, employees initially employed by the participating employer on or after July 1, 2011, are required to pay towards WRS the same percentage share as that paid by general municipal employees. Employees hired before July 1, 2011, could still lawfully bargain over that obligation. Sensitive to the problems of compression between the wage and benefit packages of non-union command staff compared to the employees they supervise, Act 32 requires command staff initially employed prior to July 1, 2011, to pay the same WRS contributions as their subordinates hired before that date — so if the union agrees to pay more, then the command staff do as well.
Fourth, the legislature prohibited unions from bargaining over any disciplinary matters otherwise subject to the jurisdiction of a local Police and Fire Commission under Section 62.13 Wis. Stats. Thus, like general municipal employees, most job security issues are no longer a proper subject of negotiations.
Finally, and most significantly, Act 32 dramatically restricted the scope of collective bargaining regarding health insurance. The parties are prohibited from negotiating:
the design and selection of health care coverage plans by the municipal employer for public safety employees, and the impact of the design and selection of the health care coverage plans on the wages, hours, and conditions of employment of the public safety employee.6
By creating Section 111.70(4)(cm)6, the intent of the legislature seemed clear — that matters related to the design and the selection of the health care coverage plan and impact bargaining regarding the design and selection of the health care coverage plan constituted illegal subjects of bargaining. Likely because of the significant bargaining power this language gives to the employer, litigation was initiated by unions in many jurisdictions challenging the scope of the employer’s unilateral authority over health insurance plan design, including the selection of different types of plans, deductibles, co-insurance, co-pays, and contributions to health reimbursment accounts (HRAs), Health Savings Account (HSAs), and similar funding vehicles. The Wisconsin Employment Relations Commission, as well as several circuit courts issued decisions which encompassed the following issues:
In October 2012, a circuit court judge decided that contributions to a Health Savings Account are prohibited subjects of bargaining, and the County had no duty to bargain over changes to the amount the employer contributes to the employee’s HSA.7
In April 2013, the Court of Appeals rejected the Milwaukee Police Association’s argument that once an employer decides on a plan design and selects it, then bargaining must occur as to the direct results of the plan design and selection—that is bargaining regarding changes the employer makes to the deductibles and other out-of-pocket costs.8 Milwaukee Police Association appealed this decision to the Wisconsin Supreme Court, where it is currently pending.
In April 2013, the WERC decided the employer’s changes to the Health Reimbursement Accounts, which define the type and amount of health care costs covered by the plan, are functionally no different than a “health care coverage plan,” and therefore constituted a prohibited subject of bargaining.9
In May 2013, a WERC hearing examiner decided no duty to bargain existed regarding the employer’s unilateral changes to health care plan selection and design changes for a pre-2011 Act 32 contract (entered into before July 1, 2011) when those changes occurred after expiration of the collective bargaining agreement.10
In fall 2013, the Court of Appeals overturned a Circuit Court’s writ of mandamus compelling a municipality and County to comply with the health insurance provisions of their expired collective bargaining agreements until new agreements were reached.11
In November 2013, the Court of Appeals, in a decision involving Eau Claire County, affirmed a Dane County Circuit Court decision reversing the WERC and found — under the old version of 111.70(4)(mc)6 (which no longer exists) — that bargaining over the allocation of responsibility between employers and employees to pay deductibles is not a prohibited subject of bargaining.12 The Court of Appeals decision made no reference regarding whether the Union’s proposal constituted an “impact” bargaining proposal that may have been illegal. That decision was not appealed by the WERC, likely due to what the Legislature did next.
In the next state budget bill, 2013 Act 20, the legislature sought to “clarify” what it originally intended — that negotiations regarding health insurance must be limited exclusively to the employee’s share of the health insurance premium contribution. The legislature modified Section 111.70(4)(cm)6 by clarifying the prohibition of bargaining health insurance plan design and selection, and the legislature included language affirmatively identifying premium contributions as the only subject of bargaining:
The Except for the employee premium contribution, all costs and payments associated with health care coverage plans and the design and selection of health care coverage plans by the municipal employer for public safety employees, and the impact of such costs and payments and the design and selection of the health care coverage plans on the wages, hours, and conditions of employment of the public safety employee.13
Following the inclusion of this language in 2013 Act 20, employers and unions throughout Wisconsin seemingly agreed on what the legislature intended and litigation involving health insurance plan design and selection has largely ended. In the only published post-Act 20 case, WERC ruled that the employer has no duty to negotiate with a collective bargaining representative to require the employer to offer more than one health insurance plan option.14 The pending appellate-level cases under the old version of Wisconsin Statute Section 111.70(4)(cm)6 are held up on appeal awaiting the Wisconsin Supreme Court’s decision in Milwaukee Police Association v. City of Milwaukee.
Post Act 32 Interest Arbitration
Following the passage of Act 32, the interest arbitration process has largely remained unchanged. Arbitrators continue to closely track the statutory factors required under Wisconsin Statute section 111.77(6)(am)–(bm).15 As before, external comparability remains the dominant factor. The addition of the new “local economic conditions” factor, the impact of Act 10 on non-public safety employee bargaining, and elimination of bargaining over health insurance, raised three potential new questions for Arbitrators that practitioners continue to watch closely. First, how would Arbitrators apply the new statutory factor in communities where state revenue sharing has been reduced and local taxpayers are already paying high taxes? Second, will internal comparability continue to be used by Arbitrators to inform their decision-making when those “settlements” are the result of an imbalance of bargaining power between the employer and the general municipal employee bargaining unit? And third, what role will the employer’s exercise of unilateral authority over health insurance play in the application of the “overall compensation” factor?
So far, the new “greater weight” factor involving local economic health has not played a significant role in the reported decisions.16 Certainly, arbitrators recognize that municipal budgets are tight. However, they also recognize that budgets are tight everywhere. What they seem to expect is a showing that the parties before them demonstrate the local economic conditions are uniquely tight, warranting a departure from the otherwise preexisting settlement pattern. In other words, if the surrounding communities with tight budgets can figure out how to pay their public safety workers at a certain level, the parties to the case should be able to do so as well. In looking at the exhibits produced in these hearings, most Arbitrators seem to carefully scrutinize the budget of the local community. If the Arbitrator finds individual expenditures on items they deem “less important” than public safety compensation, or if the employer is not taxing to the full extent of its legal authority, or if there is a significant fund balance (and your finance director will never think it is significant enough), then the Arbitrator is likely to give little consideration to this factor.
On the role of internal, non-public safety comparability, Arbitrators have given them little weight, especially as to economic issues. In the seminal post-Act 10 interest arbitration case issued in November 2011, Arbitrator Mahwinney stated:
While internal bargaining unit settlements can be very important in arbitration, especially in the area of benefits, there are no internal settlements. Due to the changes in state law, the internal units have been stripped of almost all of their bargaining rights except for limited bargaining on wages. They are prohibited from bargaining over contributions to the WRS. The 5.8 percent employee contribution was imposed on these units during 2011 by state law. However, the Legislature did not impose the same contribution on public safety employees, except for new employees hired after July 1, 2011.
The County says it is inequitable to have the internal bargaining unit employees pay more to the WRS than the deputies. Of course it is inequitable. It is also inequitable that the non-protective bargaining units lost almost all of their bargaining rights and protective bargaining units retained all their bargaining rights. Neither the County nor the Union created this inequity. The newly enacted state law created it. The Legislature even had a chance to review the WRS contribution by protective employees in May of 2011 and refused to force protective employees pay the employees’ share of the WRS except for new hires. It is appropriate to consider this case involving protective employees with traditional arbitration considerations in analyzing the final offers and how they best fit the statutory criteria (as the criteria existed before July 1, 2011). The external comparables clearly favor the Association on both wage increases and the WRS contribution. The internal comparables have little, if any, weight in this case because the 5.8 percent WRS contribution was imposed upon them by law and because there are no voluntary settlements in the internal units.
. . .
If the County wants to achieve internal consistency among its employees, it may do so over time, as new hires come on board or bargaining starts to equalize benefits. However, at this point in time, none of the statutory criteria favors the County’s final offer, and the Association’s final offer is preferred and to be incorporated into the parties’ successor collective bargaining agreement.17
In short, while some reference to internal comparability on issues such as certain types of leave, or those relating to difficult to administer benefits might occur, for the most part a “voluntary settlement” with a general municipal employee bargaining unit means little. In essence, the Arbitrators seem to recognize that by creating different bargaining systems for the two types of employees, the legislature recognized that public safety employees are simply a more important core governmental service than Act 10 groups.
While Arbitrators so far have given little weight to internal morale issues created by disparate benefit treatment of general municipal employees and public safety personnel, Arbitrators have begun to define the “hot issues,”18 the most dominant of which seems to be external comparability. One Arbitrator was more inclined to rely on the external comparability factor in Wisconsin Statute Section 111.77(6)(bm)4a than internal comparability, even with another internal public safety unit.19 Arbitrator Morrison stated:
The Association says it is well aware of the fact that arbitrators are loath to award settlements that are greater than those voluntarily agreed to by other bargaining units within the same municipality. (Internal comparables) . . . . The Association says it was not able to bargain with the City because it (the City) refused to bargain in good faith since they knew they were never going to offer more than the Firefighters had received. It went through the motions but did no more than that. To award the City’s offer based on the Firefighter’s offer flies in the face of the arbitration process and the arrogance of the City cannot be condoned. Each bargaining unit must be allowed to determine what is, and what is not, worth fighting for. The Undersigned agrees with the Association’s position in this regard and has mentioned it above under No. 4.20
The issue of “total compensation” has also been addressed by Arbitrators. If the employer offers a better-than-average health plan, do they get any “credit” for it from the Arbitrator? Conversely, if the employer unilaterally gives a less competitive plan, will the Arbitrator “punish” the employer because of the lack of any “quid pro quo” for the reduced benefit? Certainly, pre-Act 32, the answer was “yes”. But by making health insurance and the impact of health insurance on wages, hours and working conditions a prohibited subject, what will Arbitrators do? How Arbitrators have approached the “quid pro quo” issue generally after Act 32 gives us some guidance.
Looking only at WRS and health insurance premium contributions (not at plan design) after Act 32, Arbitrator Strycker stated:
It is important to recognize that wage adjustments cannot be viewed independently, as employee health insurance premium and employee WRS contributions impact actual earnings. In order to have a more complete understanding of the economic situation within the comparables and the Union proposal, an analysis of employee contributions is necessary . . . 21
Some employers have either made significant health insurance plan design reductions to encourage favorable settlements, or have “promised” positive changes as an incentive for unions to accept other concessions. That approach was unsuccessful in the City of New Berlin, Dec. No. 34024-A. There, the Arbitrator stated:
The City Final Offer does not provide for the (better) health insurance plan now used by the Fire and general employees. The undersigned does not doubt the City’s word that it would put the Association members on that plan as a result of selecting its Final Offer that proposes a two year term expiring December 31, 2013. But that is not contained in its certified Final Offer. Selection of the City Final Offer would of necessity bring some uncertainty into the relationship between the parties, with the City having a free hand to design the plan under the law as it negotiates a new agreement. The certainty of knowing what the wages, benefits and working conditions are provides a more stable environment for the parties to negotiate. These matters make the City offer less preferable.22
In summary, Arbitrators feel constrained by the language in Act 32 such that insurance plan design decisions, either good or bad from the employee’s point of view, will not play any overt role in their decisions. Whether it plays any “unofficial” role is the subject of mere speculation.
What is not subject to speculation is the continued importance of a quid pro quo when external comparability does not support the party’s position. After Act 10, employers tried to get pension contributions from public safety unions so as to preserve equality with non-represented and general municipal employees. Arbitrators have required a quid pro quo for concessions involving benefit contributions in the absence of support from external comparables:
Furthermore, the County’s offer has no wage increase and no quid pro quo for the 5.8 percent WRS contribution. Such a significant concession without any support in the externals demands a quid pro quo. At a minimum, it demands a quid pro quo of some value. Nothing is offered by the County.23
The importance of a quid pro quo in the absence of support from the external comparables has encouraged continued incremental changes to benefits (albeit now on a larger scale than incremental change pre-Act 32) rather than immediate wholesale change.
Bargaining Trends
Based on the authors’ personal experiences, as well as the information-gathering required for effective negotiations, there seem to be several collective bargaining trends in the public safety sector which have developed since the passage of Act 32. (The reader may have his or her own perceptions about whether these trends may exist, as reflected in their own local experiences). The first trend is the high rate of voluntary settlements. Whether voluntary settlements are the result of local economics, local politics, or a desire for labor peace, the low number of interest arbitration cases shows a strong preference for voluntary settlement. Both employers and unions seem to recognize the current political climate and respect the new financial realities facing them.
Second, employers are opting for shorter collective bargaining agreements. Municipal finance structures have changed, resulting in greater uncertainty year-to-year for municipal employers who have previously been reliant on higher levels of shared revenue, grants, and other aid. As such, those employers are attempting to achieve greater certainty regarding their expense budgets by negotiating collective bargaining agreements of a shorter duration of one or two years rather than three years.
Finally, settlements seem to have fallen into three main categories. First (and by far the lowest), are those where the employer has told the union that if the voluntary settlement is not fiscally sound enough, the employer will implement significant reductions in health insurance plan design, to include dramatic (and, at times, draconian) changes in deductibles, drug co-pays, co-insurance levels, and more, which would cost the employees significant out-of-pocket costs beyond the premium share. There are serious morale, political, and legal implications to this approach, both short and long term. But for those that have done it, and have the political will to follow through, the short term economic results are favorable to employers. (Note that those employers participating in the “State Plan” do not have this option because of the structure of the State Plan.)
The second category of settlements involves the employer “buying” the WRS contributions by offering corresponding wage increases. So, over the term of a two-year or three-year contract, the employees may move from no WRS contributions up to “full” contributions in steps, with wage increases phased in over time to make up for part or all of those contributions. That may mean net wage reductions in some years, and net increases in others, but over the term of the contract, the employees see little or no net wage increases. If you see a 3 or 4 percent wage increase in one of your comparables, that is likely due to the employees absorbing more WRS contributions at or near the same time. By now, most public safety employees have agreed to pay “full” WRS contributions, so future collective bargaining trends will focus on “normal” factors involving other benefit changes.
The third category involves employers who have taken the view that employee turnover will solve the WRS contribution issue over time (because every new hire automatically pays the “full” WRS contribution), so those employers have allowed pre-2011 hires to pay nothing towards WRS. There, the wage settlements have been zero or low, commonly tracking the CPI or the trend among the general municipal employees. This category is not widespread, but can help explain what would appear to be an “out of line” settlement.
Conclusion
Act 10 had dramatic and far-reaching effects on non-public safety collective bargaining. The impact of Act 32 on public safety collective bargaining will be much less. We predict that police and fire collective bargaining will continue to function in a manner similar to pre-Act 32 practices, with a few important exceptions. Foremost among these will be the ability of the local community to use the “nuclear option” of drastic cuts in health insurance benefits as leverage when there is a significant issue facing the community that the local union refuses to help address. Such issues could include local economic problems, but could also include day-to-day operational issues that prevent the employer from effectively serving the community. As indicated above, this option carries with it significant consequences to the relationship between the parties, but if the union refuses to help the local community solve its unique problems because of “past practice,” or because “the comparables don’t do that,” then the employer may have no other choice but to use the “nuclear option” to effectively serve the public.
The good news is that most public safety unions recognize the fact that both Act 10 and Act 32 changed the status quo, and they have voluntarily absorbed the WRS contributions, accepted greater premium share payments, and worked fairly and effectively with the employer to come to a new balance of power under these new laws. Similarly, most local employers recognize the difficult, often dangerous jobs our public safety personnel perform, and they have tried to maintain their current levels of compensation in a challenging fiscal environment. We can only hope that trend continues, and it will be the rare case that works its way through the interest arbitration process that gives us all more guidance on how the Arbitrators will apply the statutory factors in this new legal environment.
Employees 345
1. Wis. Stat. sec. 111.70(1)(mm)1–2.
2. Wis. Stat. sec. 111.70(1)(p).
3. Wis. Stat. sec. 40.02(48)(am) 9–10, 13, 15, 22.
4. Wis. Stat. sec. 111.70(1)(mm)2.
5. 2011 Act 32 sec. 2409iv; Wis. Stat. sec. 111.77(6)(am) (emphasis added).
6. 2011 Act 32 sec. 2409c; Wis. Stat. sec. 111.70(4)(cm)6.
7. Manitowoc County Sheriff’s Department Employees v. Manitowoc County, Case No. 12-CV222 (Man. Cty Cir. Ct. Oct. 2012) (appeal No. 2013AP1, appealed to the Court of Appeals, awaiting decision pending the Wisconsin Supreme Court’s decision in Milwaukee Police Association v. City of Milwaukee, appeal No. 2012AP1928).
8. Milwaukee Police Association v. City of Milwaukee, 2013 WI App 70, 348 Wis. 2d 168, 833 N.W.2d 179 (appealed and decision pending by the Wisconsin Supreme Court).
9. City of Marinette, Dec. No. 34096 (WERC, 4/13); see also Wisconsin Professional Police Association v. City of Hudson, No. 12-CV-371(St. Croix County Cir. Ct. July 2013).
10. Village of Menomonee Falls, Dec. No. 34017-A (Jones 5/13), affirmed 34017-B (WERC 6/13).
11. Green Bay Professional Police Association, et al. v. City of Green Bay, et al., 2013 WI App 269 (The other half of this case, 2013AP270, is still on appeal to the Court of Appeals and also awaiting decision pending the Wisconsin Supreme Court’s decision in Milwaukee Police Association v. City of Milwaukee, appeal No. 2012AP1928).
12. Wisconsin Professional Police Association v. WERC, 2013 WI App 145.
13. 2013 Act 20 sec. 1722p (strikeout in original, emphasis added); Wis. Stat. sec. 111.70(4)(cm)6.
14. Milwaukee County, Dec. No. 35042 (WERC, May 2014) (“Implicit in the MPSO’s proposal is the fact that the two plans for health insurance coverage must be different. Whether the requirement is for two plans or ten plans the presentation of different plans creates choices for employees. We read the new language as limiting all health insurance decisions (other than premium payment) solely to the employer. Put another way, the employer has the discretion to make all decisions regarding the type of plan or plans to be offered. If the employer chose to offer more than one choice that is their prerogative, but a union cannot bargain for language requiring that a certain number of optional plans be offered. If an employer, for example, were to propose a health insurance plan, the union would be barred from offering an alternative plan with different coverage provisions. Requiring an employer to offer two or more plans is, in effect, similar to the union offering a counterproposal.”)
15. Wis. Stat. sec. 111.77(6)(am)–(bm):
(am) In reaching a decision, the arbitrator shall give greater weight to the economic conditions in the jurisdiction of the municipal employer than the arbitrator gives to the factors under par. (bm). The arbitrator shall give an accounting of the consideration of this factor in the arbitrator’s decision.
(bm) In reaching a decision, in addition to the factors under par. (am), the arbitrator shall give weight to the following factors:
1. The lawful authority of the employer.
2. Stipulations of the parties.
3. The interests and welfare of the public and the financial ability of the unit of government to meet these costs.
4. Comparison of the wages, hours and conditions of employment of the employees involved in the arbitration proceeding with the wages, hours and conditions of employment of other employees performing similar services and with other employees generally:
a. In public employment in comparable communities.
b. In private employment in comparable communities.
5. The average consumer prices for goods and services, commonly known as the cost of living.
6. The overall compensation presently received by the employees, including direct wage compensation, vacation, holidays and excused time, insurance and pensions, medical and hospitalization benefits, the continuity and stability of employment, and all other benefits received.
7. Changes in any of the foregoing circumstances during the pendency of the arbitration proceedings.
8. Such other factors, not confined to the foregoing, which are normally or traditionally taken into consideration in the determination of wages, hours and conditions of employment through voluntary collective bargaining, mediation, fact-finding, arbitration or otherwise between the parties, in the public service or in private employment.
16. See, e.g., City of Greendale, Dec. No. 33924 at 30 (Strycker, March 2013).
17. Oconto County, Dec. No. 33283-A at 12–13 (Mawhinney, Nov. 2011) (emphasis added).
18. City of Oshkosh, Dec. No. 33976-A at 28 (Gallagher, June 2013).
19. See, e.g., id. at 30–32; City of Greenfield, Dec. No. 33924 at 37–42; Douglas County, Dec. No. 33350-A at 39 (Kossoff, Jan. 2012) (rejecting the Association’s offer and identifying the unsupported shift in the external comparability wage rankings created by the Association’s offer); City of New Berlin, Dec. No. 34024-A at 19 (Gordon, Dec. 2013) (“There is a matter of how much weight should be given to [internal comparability]. The police and fire are separate bargaining units. They are autonomous from each other. Some interests may be similar, but each is independent of the other. Effective, productive collective bargaining between one group and the City would be undermined if one bargaining unit’s settlement were to be determinative of what the other bargaining unit must or will get. That could have negative morale repercussions and fail to take into account other priorities in the other unit. While the internal comparable with the Fire settlement in this case does favor the City, it does so slightly.”)
20. City of Beaver Dam, Dec. No. 35654-A at 38 (Morrison, Sept. 2014).
21. City of Greenfield, Dec. No. 33924-A at 41.
22. City of New Berlin, Dec. No. 34024-A at 20.
23. Oconto County, Dec. No. 33283-A at 12; see also City of Oshkosh, Dec. No. 33976-A at 30.