Cape Issues: Individual, Group Public Sector Bargaining Part 1

(The following is the first of three articles prepared by Tom Henry of Sea Isle City for Cape Issues. They will be published in three weekly segments beginning with the March 3 print edition.)
Part 1: The Challenges Ahead
The country’s economic crisis is forcing local municipalities to deal with a policy dilemma, namely, how to reconcile the new fiscal reality with their existing collective bargaining contracts. Towns negotiating new contracts have demanded, and won, wage concessions, higher insurance co-pays, and in some cases reductions in the workforce. Municipalities with existing contracts are struggling with how to develop budgets that stay within the state-mandated budget caps. Since salaries and benefits account for 70 to 80 percent of the budgets in most municipalities, the possible solutions are limited. The most common choices are: compensation givebacks, workforce reductions, and contracting out services. Since the taxpayer must ultimately pay for any possible settlement, it is important to understand how this situation developed and what are the best practices that are being used to develop alternative approaches.
This three-part series is intended to help individuals understand the public sector bargaining process; its impact on state, county and local budgets; and the recommendations that have been advanced to reform the process. Part One will examine the history of public sector bargaining and the gains employees have made through the process. Part Two will deal with the contractual process for public employees who cannot join a bargaining unit. Part Three will look at the problems of the current bargaining process and the recommendations that have been proposed for reforming the process.
The History of Public Sector Collective Bargaining
The National Labor Relations Act of 1935 (the Wagner Act) was passed in an effort to deal with the economic and industrial problems of the Depression. The act affirmed the right of employees in the private sector to form unions and to bargain collectively through representation of their own choosing. The Act also prohibited various employer practices used to discourage or prevent employees from organizing.
The first significant order granting federal employees the right to engage in collective bargaining was President Kennedy’s Executive Order 10988 issued on Jan. 17, 1962. Most historians consider this order as important in establishing unionism in the federal sector as the Wagner Act had done in the private sector. Following the President’s lead many states granted public employees the right to bargain collectively.
By 1981, 35 states had granted public employees, including teachers, the right to bargain collectively by legislation, executive order, court decision, or attorney general opinion (GERR, 1981 b). Issues such as: who can bargain; unit representation; the mandatory, permissive, and illegal subjects of bargaining; grievance procedures; impasse resolution; and governing authority were all treated differently in the states.
In New Jersey, public employee collective bargaining came to being with the passage of the New Jersey Public Employment Relations Act in 1968. The law established the Public Employment Relations Commission (PERC) and the procedures for determining bargaining units, holding elections, and resolving bargaining impasses. Earlier court decisions prohibiting the right of New Jersey public employees to strike were not superseded by the legislation (Begin, et al; 1977).
The first groups to organize in New Jersey were teachers and college professors. Aided by their national organizations- the American Association of University Professors
(AAUP), the American Federal of Teachers (ATF), and the National Education Association (NEA), local employee groups petitioned for the right to bargain. They were supported by the national and state associations in the running of training institutes for local bargaining teams and by providing of detailed model contracts. The employee success in bargaining in the education sector brought about similar efforts in other employment sectors, including police and fire.
What is Collective Bargaining?
Statutory requirements mean that both parties must bargain in good faith with the intent on reaching an agreement. This does not mean that the employer must agree to union proposals nor does it mean that the union must agree to an employer proposal. Taking and holding a strong position on any issue (hard bargaining) does not violate the law whereas going through the motions with no intent of reaching a settlement (surface bargaining) or “ take it or leave it” positions are generally considered bargaining in bad faith in violation of the law.
Over time, PERC decisions, legal decisions and legislation have defined three categories of bargaining as mandatory, permissive, and illegal subjects of bargaining. Mandatory subjects of bargaining are issues of wages, hours and working conditions. Permissive subjects may be voluntarily discussed but are not required. Illegal subjects of negotiations are usually issues controlled by law and are outside the scope of negotiations. Even if the parties come to an agreement on an illegal subject of negotiations the provisions are void and unenforceable.
Public Employment Relations Commission
The Public Employment Relations Commission (PERC) is a seven- member commission, established by the New Jersey Employer-Employee Relations Act as an independent neutral agency to foster harmonious public sector relations and to prevent or promptly settle labor disputes. PERC has the authority to:
• Determine the composition of negotiations units, conduct representation elections, and certify exclusive representatives.
• Resolve disagreements over whether a negotiation proposal is mandatory negotiable.
• Appoint a mediator when the parties reach an impasse. If the parties still cannot reach an agreement, PERC can appoint a fact finder who has the authority to issue non-binding recommendations for a settlement.
• Appoint an interest arbitrator to help resolve law enforcement and fire negotiations disputes. The arbitrator may fashion a final award that the arbitrator deems most reasonable given certain statutory criteria and the parties’ evidence and arguments.
• Maintain a panel of grievance arbitrators whose members are available to arbitrate unresolved grievances.
Public Sector Gains
In recent years, state and local employees, unlike those at the federal level, have enjoyed major gains in compensation well ahead of their private sector counterparts. From 2000-2007 state/local employees received a 16 percent increase in pay and benefits, after inflation adjustments, compared to 11 percent for private workers (Milakovick & Gordon, p. 331). As Heritage fellow James Sherk notes, “The average worker for a state or local government earns $ 39.83 an hour in wages and benefits compared to $ 27.49 an hour in the private sector. While over 80 percent of state and local government workers have pensions, just 50 percent of private sector workers do. These differences remain after controlling for education, skills, and demographics”. At the same time, private sector employees have also been losing benefits because companies are reducing pension benefits and requiring employees to pay a greater share of their health care costs.
In New Jersey, PERC reports that the average salary increases for the years 2005 through Sept. 2009 were:
2005: 3.96 percent
2006: 3.95 percent
2007: 3.77 percent
2008: 3.73 percent
2009: 3.86 percent (1-1-09 to 9-1-09)
It must be noted that in many towns the percent of salary increase does not reflect the total compensation increase for the year. Many municipal contracts contain clauses that add additional funds for such items as: longevity bonuses, educational attainment, and the possession of various federal/state licenses or certificates. Thus, an advertised salary increase of 4.0 percent could in fact result in individuals receiving salary increases of more than 6.0 percent.
Salary is only one part of total compensation package employees receive. Other significant components of the compensation package include: pension plan, insurance plans (health, prescription, optical, life insurance), leave days, and educational benefits. In an article on public pensions, The Press of Atlantic City noted that public pensions typically double those in the private sector (Dec. 6, 2009). This is especially true when one considers that 25- year employees receive lifetime health coverage, which in some cases includes the surviving spouse. The pension calculations for law enforcement and fire personnel are far more generous than those for other public employees.
Throughout the state, public sector health plans would be considered “Cadillac plans” under the proposed federal Health Care Reform Act. While most communities participate in one of the three state health plans, some communities provide health plans that cost more than $25,000 for family coverage while the national average is in the $10,000 to $13,000 range.
Comparisons between public and private sector contracts show that public sector employees enjoy far more generous benefits in terms of insurance co-pays and leave plans. Public employees normally receive in excess of 60 days leave per year when vacation, holidays, sick, personal, and bereavement days are combined.
Tom Henry has more than forty years experience in public sector collective bargaining. He has written several articles on the financial impact of collective bargaining on organizations. He has been the President of the New Jersey Association of County College Negotiators.
Click here to read Part 2 of the series.
Click here to read Part 3 of the series.