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There’s a time limit for interest arbitration, but it’s rarely used; that costs taxpayers

In March of 2019, the City of Hartford won a number of cost-saving provisions in an interest arbitration decision between the city and the Hartford Municipal Employees Association. 

The stakes were high for Hartford, which in 2017 had been hit with a costly arbitration decision involving the same union that cost the city $1.1 million in pay increases retroactive to 2014. 

At the time, with his city on the verge of bankruptcy, Mayor Luke Bronin told the Hartford Courant “Arbitration panels are supposed to give priority consideration to a city’s ability to pay, and given the city’s fiscal challenges, this was a stunning decision.” 

Negotiations between the city and HMEA had taken three years. The contract first went to arbitration in October of 2015 and a decision was not reached until July 2017.

No sooner had the 2017 arbitration decision been made than Hartford had to start negotiating with the union again and, once again, go to arbitration over wage increases, step increases, health care costs, sick leave and pension contributions.

This time, the results would be different.

Using a little-known – or, at least, little-used — provision in interest arbitration law, attorneys for the City of Hartford insisted on sticking to statutory time limits outlined in Connecticut law.

According to a press release from Siegel, O’Connor, O’Donnell & Beck – the law firm that represented Hartford: “Negotiations with the Hartford Municipal Employees Association began in 2017; however, by insisting on adherence to the statutory timeline for interest arbitration, the parties held eight arbitration sessions in less than 90 days.” 

The arbitration panel sided with the city and agreed to four years of no wage increases, a freeze on step increases, implementation of the health savings account, sick leave payout reform, and higher employee contributions toward pension and health care costs.

The award received little coverage in the press and Bronin’s administration stayed rather quiet on the subject. But it was, in the end, a victory that helped Hartford’s recovery plan under the watchful eye of the Municipal Accountability Review Board.

Contract negotiations between municipalities and unions can sometimes take years, especially when the two parties reach an impasse and the matter is turned over to an arbitration panel. That process can add months or even years to contract negotiations and put cities or towns in a bind – forcing them to pay more in retroactive pay increases and benefits.

“Interest arbitration is meant to take two months, not two years,” said Ryan O’Donnell, who represented the City of Hartford in the latest arbitration negotiation.

“Frankly, nobody wants to do it because it makes the process very difficult, but interest arbitration isn’t meant to be a walk in the park,” O’Donnell said. “It’s a last resort and it should be taken seriously. It’s not fun, it’s meant to push people toward agreement.”

And who wins when arbitration is extended for years? Well, the lawyers of course. The longer an interest arbitration hearing is dragged out, the more taxpayers have to pay attorneys to represent their municipality.

According to state statute, both parties must agree to extend the time limit for interest arbitration, so either a municipality or the union can insist on adhering to strict timelines.

According to a 2006 report by the Legislative Program Review and Investigations Committee, 42 percent of arbitrated contracts examined by the committee extended more than two years past the termination date of the contract. 

According to a 2006 report by the Legislative Program Review and Investigations Committee, 42 percent of arbitrated contracts examined by the committee extended more than two years past the termination date of the contract. 

The Committee recommended establishing a one-year deadline for binding arbitration, limiting the number of times parties could mutually agree to extend the arbitration timeline.

Connecticut Department of Labor Commissioner at the time, Shaun B. Cashman, disagreed with the committee’s recommendation.

“I strongly believe that the MERA mutual waiver process should be maintained and not subject to a one-year deadline,” Cashman wrote in response to the committee’s report. “The present process requires the mutual agreement of both parties. Absent such mutual agreement, the statutory timeframes control… the present process is working.”

But working for whom?

Connecticut’s municipal organizations like the Connecticut Conference of Municipalities and the Connecticut Council of Small Towns have been pushing the legislature to reform the binding arbitration process for years.

In 2017, the legislature approved a small change, limiting how much of a town or city’s reserve funds can be considered by an arbitration panel for a contract award. Arbitrators are required to consider a municipality’s ability to pay for a contract and a reserve fund is considered fair game. Under the change, arbitrators can only consider 85 percent of a municipality’s reserve funds.

O’Donnell is the first to admit that following the time limit is “brutal,” forcing attorneys to submit briefs within 17 days after receiving final offers and crunching a timeline of negotiations into mere days. During negotiations with HMEA, O’Donnell’s firm agreed to one timeline extension.

But the process is meant to be hard, O’Donnell says, to help limit the number of issues brought before an arbitration panel and deter municipalities and unions from using an unelected panel as a substitute for difficult negotiations.

But pushing a contract to interest arbitration can pay off for a union because the way interest arbitration is structured virtually ensures the union will get part of what it’s seeking.

Each point of contention become its own issue and arbitrators decide between the last best offer from both the municipality and the union. For instance, three years of a general wage increase is not treated as one issue, rather it becomes three issues – one for each year. 

In an effort to remain neutral, the arbiters will likely side with the union on at least one year of their last best offer, so the union is virtually guaranteed that arbitration will lead to a few percentage points of higher wages, even if it isn’t the full amount they wanted. 

Factor in the protracted nature of the arbitration process and those mediocre pay raises can add up to big retroactive payments for years’ worth of wage increases – plus lawyers’ fees, of course.

And the economic conditions facing a town or city can change over the course of two years, particularly in cities that may be struggling, like Hartford.

“Neither side should want to go to arbitration,” O’Donnell said, with the recognition that he may be shooting his own profession in the foot by sticking to the statutory guidelines for interest arbitration. 

“We recognize the impact this issue has on the taxpayers of this state,” O’Donnell said.

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