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Reform of the Industrial Relations in the Ontario BPS:Any Lessons from Michigan?

Richard N. BlockArbitrator

Professor and Director EmeritusSchool of Human Resources and Labor Relations

Michigan State UniversityFor

Prospects for Reform of Industrial Relations in the Ontario Broader Public Service

Toronto, OntarioJune 22, 2012

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Basic Characteristics of Michigan Public Sector Bargaining

• Statute covers county, township, school district, and local employees– State employees covered under Michigan Civil

Service Law• Strikes are illegal

– Statutory penalties only for strikes by school district employees

• Interest arbitration available only for uniformed public safety employees (primarily police and firefighters)

• http://legislature.mi.gov/doc.aspx?mcl-Act-312-of-1969

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Context• Since the 2010 elections, a political movement in the United States to limit public

sector collective bargaining in the states in which it exists• Legislation at state-level has placed constraints on

– Unions and bargaining – arbitration

• Wisconsin• narrowing of bargaining rights for non-public safety public employees

• Ohio (statute repealed by vote)• Elimination of arbitration• New Jersey• Limits on arbitrators

– 45-Day Limit to Issue Awards– $1,000 fine on arbitrators who are late

• Numerous states considering bills• Can be traced to 2009 debate on Employee Free Choice Act in U.S.

– First contract arbitration provision heavily criticized by employer community– Expanded into general skepticism about arbitration

• Local government employment dropped from 14.57M in 2008 to14.16M in 2011 (U.S. BLS)

– Economic Stagnation– Tax Policy

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Michigan

• General – Has had interest arbitration in lieu of right to strike for uniformed

public safety employees (police and fire) and EMS since 1969

• Followed national trend in 2011– Decade-long campaign by public employers and conservatives

to eliminate arbitration but without providing a right to strike• Detroit News• Mackinac Center

– Conservative “research” center

• Many public officials• In 2011, “surgical” changes• Not “slash and burn” • Likely influenced by persons who knew quite a bit about interest

arbitration

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Michigan Local Government Employment

Michigan Local Government Employment, 1990-2011, Annual Average

340.0

360.0

380.0

400.0

420.0

440.0

460.0

480.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

SOURCE: U.S. Bureau of Labor Statistics

2003: 459,100

2011: 388,800

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Michigan Public Sector Arbitration Law – Statutory Factors

• 1969– Ability to Pay– Comparability– Consumer prices– Overall level of

compensation– Lawful authority of the

employer– Stipulations of the parties– Changes in circumstances

during proceedings– Other factors traditionally

taken into account

• 2011– Ability to Pay– Comparability– Consumer prices– Overall level of

compensation– Lawful authority of the

employer– Stipulations of the parties– Changes in circumstances

during proceedings– Other factors traditionally

taken into account

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Michigan Public Sector Arbitration Law - Ability to Pay

• 1969– (c) The interests and

welfare of the public and the financial ability of the unit of government to meet those costs.

• 2011– (a) Financial ability of unit

of government• Financial impact on

community• Interests and welfare of

public• All liabilities, whether or

not they appear on the balance sheet of the unit of government

• Any laws or directives issued under emergency financial management act

– Under certain circumstances, EFM may terminate CBA’s

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Importance

• In Michigan, substantial reductions in local budgets– Declining property

values• Property tax revenues

YEAR LOCAL PROPERTY TAX COLLECTIONS IN 2010 DOLLARS

2001 $12.6 Billion

2002 $13.4 Billion

2003 $13.35 Billion

2004 $14.1 Billion

2005 $14.3 Billion

2006 $14.7 Billion

2007 $15.0 Billion

2008 $14.3 Billion

2009 $14.3 Billion

2010 $13.4 Billion

Source of Table: Center for Michigan, at http://bridgemi.com/2011/11/1-6-billion-shaved-off-michigan-property-tax-bills/

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Importance (continued)

– Declining revenue sharing• from 2001 to 2009, total statutory revenue sharing

(from state to localities) from the retail sales tax went from $1.55B to $1.045B, due to declining sales tax revenue and legislative and executive decisions (Michigan Department of Treasury)

• Constitutional revenue sharing constant at 15% of sales taxes

• Not unusual in the public sector in the U.S.– Economic stagnation– Tax policy (political climate)

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Michigan Public Sector Arbitration Law - Weighting of Factors

• 1969– Statute silent on

weighting

• 2011– The arbitration panel

shall give the financial ability of the unit of government to pay the most significance, if the determination is supported by competent, material, and substantial evidence.

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The Actors

• True actors are – Attorneys– Arbitrators who are primarily attorneys

• Both comfortable with applying rules and statutory criteria but less so with accounting

• Ability to pay evidence often minimal– City manager or treasurer would offer the

municipal budget

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Michigan Public Sector Arbitration Law - Comparability

• 1969– (d) Comparison of wages,

hours and conditions of employment of the employees involved in the arbitration proceedings with the wages, hours and conditions of employment of other employees performing similar services and with other employees generally:

– (i) In public employment in comparable communities.

– (ii) In private employment in comparable communities.

• 2011– (d) 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 in both of the following:

– (i) Public employment in comparable communities.

– (ii) Private employment in comparable communities.

– (e) Comparison of the wages, hours, and conditions of employment of other employees of the unit of government outside of the bargaining unit in question

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Assumption

• Non-arbitrated, collectively bargained outcomes in the absence of a strike threat are the “correct” or “market” outcomes

• Arbitrated outcomes are “incorrect” or “above-market” outcomes

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Other Important Attributes of Statute

• Issue-by-Issue– Economic issues (money) – Final Offer– Non-economic issues (non-money) – Conventional

• Pre-Hearing Conference• 180-day Limit on Issuance of Award

– New in 2011

• Prohibition on ordering retroactivity for wage increases – New in 2011 (P.A. 54)

• In general, Michigan has placed statutory constraints on the arbitrators

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Conclusion for Michigan

• Michigan still has a fairly healthy interest arbitration system that functions well

• Michigan has placed statutory constraints on the arbitrators

• 2011 amendments to statute have tilted arbitration a bit toward employer interests

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Lessons for Ontario?• General

– Interest arbitration exists to serve the public purpose• When public comes to distrust the arbitration process it will have negative

consequences for arbitration and collective bargaining– Distrust for legitimate reasons– Distrust for political expediency and gain

• Arbitrators must make sure to keep their house in order

• Criteria– If the province wants arbitrators to consider certain factors, write that in the

legislation– Require arbitrators to consider each of the criteria in their awards

• Imposes a legal structure on the arbitrators and constrains their authority• Parties’ advocates know what they must do

– Pre-hearing conference• If possible, obtain agreement on the comparables prior to the hearing• Narrow number of issues

• Required Arbitrator Training in Michigan– Basics of Municipal Finance– Pensions