Arbitration Could Throw A Wrench In City Labor Settlements

Throughout his campaign and time in office Mayor Bill de Blasio has artfully dodged publicly negotiating New York City’s expired contracts with its municipal unions. All along the mayor has mostly stuck to the same talking point in discussing how he will approach settling the contracts—the first great test of his administration— referring to the billions of dollars that could wind up added to the city’s ledger for salary increases and back pay as “the great unknown.”

Adding to this uncertainty is an element that has largely been ignored in the public discourse, despite the immense attention the looming contract negotiations have received: arbitration.

It is through arbitration that some—or perhaps many—of these contracts might ultimately be settled—a process over which the city would have little control. It is also because of arbitration that no matter how fiscally conservative the mayor seeks to be in tackling the negotiations ahead of him the city will still end up paying out billions.

During his recent analysis of the mayor’s preliminary budget City Comptroller Scott Stringer directed the city to avoid arbitration at all costs— even setting a deadline of June 30 for the contracts to be at least well on their way to being settled.

“Any time that you go to nonbinding or binding arbitration, the city loses control over the process to a certain extent,” Stringer said. “It’s much better if we come to the table, a table where labor and administration can negotiate those contracts, because we have a better opportunity to put all of the cards on the table, we resolve some of these issues, build the trust that we need going forward, and I believe that strengthens our hand for the long-term economically.”

The mechanics of arbitration are complicated; certain public unions are entitled to the process, while other unions can opt into it. Currently the United Federation of Teachers and 8,000 city nurses represented by the New York State Nurses Association are involved in arbitration talks for the collective bargaining round that ended in 2009. For the teachers, the agreement they come to in arbitration is nonbinding—meaning the city is not required to honor whatever recommendation the arbitrator makes. The nurses’ arbitration award is binding: As long as it is ratified by the city’s Office of Collective Bargaining the city has to pay whatever salary increases or retroactive pay the arbitrators feel the union is owed.

Several labor insiders believe that arbitrators will grant both the city’s teachers and nurses the same 4 percent salary increases the other municipal unions received during that last round of collective bargaining negotiations. They also maintain that other public unions such as those representing school supervisors, school custodians, and licensed practical nurses, which did not receive raises from that round of bargaining would get them this time around, judging by the past tendencies of arbitrators.

Arbitrators base their decisions in part upon a practical consideration; in order for them to be hired again in the future for the job of settling a negotiation, their decision has to be guided at least to a degree by precedent. To that end, arbitrators involved in labor settlements hew to broad criteria: an established pattern in the city’s bargaining with other unions, and the city’s ability to pay the salary increases and retroactive raises the unions contend they are owed.

“One common misconception is often that, because the city is running a one-year surplus, this indicates an ability to pay recurring wage increases, and that’s been logic that’s been applied to many of these arbitration settlements,” said Maria Doulis, director of city studies for the Citizens Budget Commission.

In fact, as recently as last year, localities upstate wrestled with the same issue. Because the arbitration process is codified in state law for some unions— notably those of the police and firefighters—certain cities wanted arbitrators to give more weight to their respective fiscal positions in settling the disputed contracts. In response Gov. Andrew Cuomo and the state Legislature passed a law that set up a Financial Restructuring Board for Local Governments, and agreed to establish clear “ability to pay” standards that arbitration panels are obligated to follow.

Adding another wrinkle to the city’s arbitration mystery, in relation to the teachers and nurses, is a recent report that one of the arbitrators assigned to the negotiations, Martin Scheinman, also happens to have been a fundraiser for de Blasio’s campaign. While some believe this could mean Scheinman would settle on a recommendation more favorable to the city, others scoff at the notion.

“I wouldn’t read too much into that; he’s a pro, he’s experienced. If he wants to be chosen [for arbitration panels] in the future, he wants to come out as rooted in reality and fact,” said Ed Ott, former executive director of the Central Labor Council. “He wouldn’t throw his career out the window for one case.”

As for the police and firefighter unions, de Blasio and his director of labor relations, Bob Linn, might very well have their hands tied, regardless of the favorability of the arbitrator. Past observers of arbitration deals note that arbitrators in these negotiations have shown a willingness to break whatever pattern the city sets with other unions’ contracts, giving them higher awards. The uniform (fire, police, corrections) unions typically argue that because of the risk involved in their line of work, they are entitled to higher wage increases than other municipal unions.

“Politically speaking, you want to show that you support the police force, as a public service people care about,” Doulis said. “Mayors have been more willing to give a little bit more to the uniforms for that reason.”

The Patrolmen’s Benevolent Association went to arbitration for the 2004–06 round of collective bargaining, for instance, and ultimately was awarded a 4.5 percent raise in the first year, and a 5 percent raise in the second—greater than the pattern of wage increases of 3 percent and 3.15 percent the city established with firefighters, corrections officers, and sanitation workers.

Several labor sources believe that de Blasio and Linn would be wise to establish a settlement pattern for this current round of bargaining with a union that might be more amenable to a relatively lower wage increase or retroactive pay. One former longtime arbitrator said that DC 37 might be a good place to start, as they are considered weaker politically than UFT.

“The giant amongst them all is the UFT. Mike Mulgrew is a pretty bright guy. Besides that, if you look at the landscape, DC 37 is a shell of its former self,” the former arbitrator said. “They’re not going to play a significant role. … The city could sort of peel them off and use its wiles to get them to settle on a deal that kind of will establish a pattern that the other unions will lock into.”

Other labor sources believe the UFT might set that pattern for the current round of bargaining by accepting a contract that saves the city some money on the front end but is back-loaded with wage increases in later years.

“It becomes a question of what he can sell to the unions in the future,” said Richard Steier, editor-in-chief of the city labor publication The Chief. “My guess is that [the city] will look to do something with the unions where they could find some savings, maybe on health benefits.”

One way or another, with so many expired contracts on the docket, Mayor de Blasio and his budget team are likely scanning the city’s coffers for the billions of dollars that will likely be needed for bargaining. Should many of the city’s unions go to arbitration, the mayor may have to start pinching pennies in order to fully fund his ambitious legislative agenda.