IN THE MATTER OF THE INTEREST ARBITRATION ... Awards Issued 2017/12-29-17...City of Portland/IAFF, Local 43 (2017 Interest Arbitration) 1 | P a g e IN THE MATTER OF THE INTEREST ARBITRATION

City of Portland/IAFF, Local 43 (2017 Interest Arbitration) 1 | P a g e

IN THE MATTER OF THE INTEREST ARBITRATION BEFORE

MICHAEL E. CAVANAUGH, J.D., ARBITRATOR

CITY OF PORTLAND, OREGON,

Employer,

and

PORTLAND FIREFIGHTERS

ASSOCIATION, IAFF LOCAL 43,

Union.

(2017 Collective Bargaining Impasse)

: : : : : : : : : : : : :

INTEREST ARBITRATOR'S OPINION AND ORDER

For the Association: For the Employer:

Barbara J. Diamond Lory Kraut, Sr. Deputy

Diamond Law Portland City Attorney’s Office

1500 NE Irving, Suite 575 1221 SW Fourth Avenue, Suite 430

Portland, OR 97232 Portland, OR 97204

Henry J. Kaplan Diana Moffat

Bennett, Hartman, Morris & Kaplan The Local Government Law Group

111 SW Fifth Avenue, Suite 1650 975 Oak Street, Suite 700

Portland, OR 07204 Eugene, OR 97401

I. INTRODUCTION

The parties’ 2012-2016 CBA expired June 30, 2016, and negotiations for a successor

2016-19 Agreement eventually reached impasse, resulting in an interest arbitration hearing at the

City’s Fire Station 1 spanning twelve days in September and October of 2017. Shortly before the

hearing commenced on September 12, 2017, the parties reached tentative agreements (“TA’s”)

on all of the issues remaining in their respective “Last Best Offer Packages” (“LBO’s”) except

for Article 18, Health and Welfare. See, Exh. J-8 (TA’s on various Articles with dates of August


30, September 6, and September 7, 2017).1 At that point, in light of the parties’ previous TA’s on

numerous other issues, see e.g. Exh. J-2, the only remaining Article on which the parties have

not reached agreement is Article 18. Consequently, this proceeding involves just that single

issue.2

In a nutshell, the dispute is as follows. The Association proposes that funds the City

currently allocates to firefighter health insurance, as well as a pro rata share of the City-wide

Health Reserve Fund attributable to active firefighter employees,3 should be transferred to a

union-sponsored health care trust managed by trustees selected solely by the Association. The

Association anticipates that the trustees will engage experts, such as a Third-Party Administrator

(“TPA”) and a Pharmacy Benefits Manager (“PBM”), to administer the trust and provide quality

health and welfare benefits to City firefighters. Under the Association’s proposal, and unlike a

classic Taft-Hartley welfare trust, the City, as the Employer, would not be represented on the

Board of Trustees and would have no say in the selection of the TPA, PBM, or any other

necessary experts. Nor would the City have a direct voice in plan selection or design issues.

The need for firefighter control over their own health insurance and wellness programs,

says the Association, flows from the fact that firefighters face unique challenges, in both their

physical and emotional health, that differ critically from those of other City employees.4 The

1 The parties have requested that I include these, and the previous TA’s, i.e. those in Exh. J-2—as well as all Articles

that were not reopened—as part of my Award. I will do so.

2 The parties’ Article 18 proposals are detailed and comprehensive, so I do not quote them here in full. The

Association’s Amended LBO appears in the record as Exh. J-3. The City’s LBO is Exh. J-5.

3 Although there are retired firefighters in the City’s health plans, the Association proposal does not contemplate

including them in the trust unless the City elects to do so.

4 Those health challenges will be discussed in more detail in the course of this Award, but for now, it is sufficient to

note increased risks of certain kinds of cancers attributable to toxic exposures routinely faced by firefighters, the

health effects of 24-hour shift work (and consequent irregular sleep patterns) which can affect heart health and

behavioral health, and the emotional toll, sometimes resulting in serious disorders such as PTSD, of responding to

fires and traffic accidents that often involve catastrophic injury or death to citizens of all ages.


Association contends that those needs have not always been fully met by the City’s general

health and wellness programs as applied to firefighters, and from the Association’s perspective,

the City-wide Labor Management Benefits Committee (“LMBC”), which is empowered to make

“recommendations” to Council with respect to health and wellness plan issues (and on which

both employees and managers sit) has not always functioned in a manner that gives sufficient

voice to the firefighters’ concerns.

The City, while not seriously disputing the existence of these unique health and wellness

challenges, contends that its proposal meets those needs in a manner more consistent with the

City’s budget priorities.5 The City points to its “innovative” Wellness Programs that support

healthy lifestyles, physical fitness, and accident prevention, as well as enhanced behavioral

health services through its “Employee Assistance Program (“EAP”). In addition, the City argues

that its proposal would provide free annual NFPA 1582 Physicals6 to Association members—a

core preventive health tool for firefighters, and thus a focal point of much of the parties’

evidence during the hearing.

In light of the sheer volume of evidence in the record, much of it highly technical in

terms of benefits law and practices, as well as firefighter health issues, I asked that the parties

prepare written closing arguments which I received electronically on December 11, 2017.

5 The Current Council has designated homelessness, affordable housing, and infrastructure as its priorities in the

near future.

6 The National Fire Protection Association (“NFPA”) has developed standards for annual firefighter physical

examinations that go well beyond standards applicable in general medicine, i.e. 1582 calls for additional tests

designed to screen for potential elevated health risks in the firefighter occupation as compared to the broader

population. See, e.g. Exhs. A-27 and A-28. For example, the exam is designed for early detection of unusual cancers

that may result from the firefighters’ unique toxic exposures in the course of their work. Although the City has

provided those NFPA examinations from time to time over the years, often with short-term grants to cover the cost,

in the absence of stable City funding, which has not to this point been contractually required, some individual

firefighters have had difficulty convincing their primary care physicians (“PCP’s”) to order the additional tests—and

even when the PCP’s have agreed to order those tests, the individual firefighter has often had to pay the cost because

the City’s insurance plans have not always covered them.


Having now carefully considered the evidence and argument in its entirety, I am prepared to

render the following interest arbitration Opinion and Order.7

II. LEGAL FRAMEWORK

The statutory provisions governing this proceeding appear in ORS 243.746:

(3) The arbitrator shall establish dates and places of hearings. Upon the request of

either party or the arbitrator, the board shall issue subpoenas. Not less than 14

calendar days prior to the date of the hearing, each party shall submit to the other

party a written last best offer package on all unresolved mandatory subjects, and

neither party may change the last best offer package unless pursuant to stipulation

of the parties or as otherwise provided in this subsection . . . .

(4) Where there is no agreement between the parties, or where there is an

agreement but the parties have begun negotiations or discussions looking to a new

agreement or amendment of the existing agreement, unresolved mandatory

subjects submitted to the arbitrator in the parties’ last best offer packages shall be

decided by the arbitrator. Arbitrators shall base their findings and opinions on

these criteria giving first priority to paragraph (a) of this subsection and secondary

priority to paragraphs (b) to (h) of this subsection as follows:

(a) The interest and welfare of the public.

(b) The reasonable financial ability of the unit of government to meet the costs of

the proposed contract giving due consideration and weight to the other

services, provided by, and other priorities of, the unit of government as

determined by the governing body. A reasonable operating reserve against

future contingencies, which does not include funds in contemplation of

settlement of the labor dispute, shall not be considered as available toward a

settlement.

(c) The ability of the unit of government to attract and retain qualified personnel

at the wage and benefit levels provided.

(d) The overall compensation presently received by the employees, including

direct wage compensation, vacations, holidays and other paid excused time,

pensions, insurance, benefits, and all other direct or indirect monetary benefits

received.

7 In response to the Association’s concerns that should its trust proposal be awarded, a prompt decision in this matter

is necessary in order to allow sufficient time to complete the administrative tasks necessary to have the trust up and

running by mid-2018, I agreed to render my decision prior to the end of 2017. Because of that compressed time

frame, and in order to provide my decision at the earliest possible time, I have attempted to focus on the dispositive

questions in this Opinion, although I have carefully considered all of the parties’ arguments and all of the issues

raised.


(e) Comparison of the overall compensation of other employees performing

similar services with the same or other employees in comparable communities. As

used in this paragraph, "comparable" is limited to communities of the same or

nearest population range within Oregon. Notwithstanding the provisions of this

paragraph, the following additional definitions of "comparable" apply in the

situations described as follows:

(A) For any city with a population of more than 325,000, "comparable" includes

comparison to out-of-state cities of the same or similar size;

(B) For counties with a population of more than 400,000, "comparable" includes

comparison to out-of-state counties of the same or similar size;

* * * * *

(f) The CPI-All Cities Index, commonly known as the cost of living.

(g) The stipulations of the parties.

(h) Such other factors, consistent with paragraphs (a) to (g) of this subsection as

are traditionally taken into consideration in the determination of wages, hours,

and other terms and conditions of employment. However, the arbitrator shall not

use such other factors, if in the judgment of the arbitrator, the factors in

paragraphs (a) to (g) of this subsection provide sufficient evidence for an award.

(5) Not more than 30 days after the conclusion of the hearings or such further

additional periods to which the parties may agree, the arbitrator shall select only

one of the last best offer packages submitted by the parties and shall promulgate

written findings along with an opinion and order. The opinion and order shall be

served on the parties and the board. Service may be personal or by registered or

certified mail. The findings, opinions and order shall be based on the criteria

prescribed in subsection (4) of this section.

(6) The cost of arbitration shall be borne equally by the parties involved in the

dispute.

ORS 243.746.8

As I have previously noted,

[s]ince the passage of SB 750 in 1995, an interest arbitrator has been required to

select either the City’s or the Union’s final LBO ‘package,’ i.e. the Arbitrator is

8 Although, to provide context, I have quoted all of the “secondary factors” set forth in the statute, the parties have

stipulated that factors (4)(d)(e) and (f) “are not at issue in this case.” See, the written Stipulation between the parties

in the record.


not allowed to evaluate the parties’ offers on an issue-by-issue basis, selecting the

proposal (or crafting a different contract clause) that best serves the interests of

the parties and the public.

City of Roseburg and IAFF, Local 1110 at 5 (Cavanaugh, 2007); see also, AFSCME (Security

Unit) and Department of Corrections at 2-3 (Cavanaugh, 2010). A necessary corollary of that

rule is that a party is generally not allowed to alter its final LBO once presented. See, ORS

243.746(3). Both parties recognize the statutory prohibition of late changes to their LBO’s as

well as the limits on the Arbitrator’s authority. There is some discussion in the briefs, however,

about whether a party may “explain” the intent of portions of its LBO that might be said to be

“ambiguous”9 without committing the violation of attempting to alter its final LBO after the

statutory deadline. I will deal with those issues, as necessary, in the course of the Opinion and

Award that follows.

III. The Parties’ Article 18 LBO’s

A. The City’s Proposal

Turning to the merits of the single issue before me, the City’s Article 18 proposal would

maintain the firefighters’ current health benefits within the City-wide health plans with some

9 See, e.g. City Brief at 5; cf. Association Brief at 71 et seq. The Association contends that the City’s LBO Article 18

offer is unambiguous with respect to NFPA 1582 exams, i.e. in proposing that they be covered “in the same manner

as the existing annual preventive wellness exam.” The Association contends that the current “manner” of “covering”

the cost of wellness exams is reimbursement of the cost of an exam by an individual employee’s PCP. Therefore,

says the Association, the City’s LBO in this respect, considered as written, offers something less than a full

commitment to provide free, comprehensive NFPA 1582 exams to each member of the unit, which the Association

argues should be conducted by an expert “fire doctor” who examines all members of the unit, does a comprehensive

debrief with each employee, and aggregates data to look for health trends that can be taken into account in ongoing

plan design and wellness efforts. On the other side of the coin, however, the Association contends that its demand

for an amount “equal to a pro rata share” of the Health Reserves to be contributed to the trust, which the

Association’s LBO specifies as an amount “anticipated not to exceed $1.9 million dollars,” was appropriately

“clarified” during the hearing as intending a hard “cap” on the City’s obligation. See, e.g. Tr. at 1227 (Kaplan). The

City argues, by contrast, that the proposal must be interpreted “as written,” which the City says provides only an

“estimate” of the City’s monetary obligation with respect to the Health Reserve—an estimate that could turn out to

be significantly lower than the actual pro rata share of reserves ($4.1M if the Association’s LBO were applied as

written). See, City Brief at 47-48.


additional features.10 First, the City proposes that the firefighters participate in the City’s

“wellness incentive,” designed to encourage employees to have a preventive exam at least every

other year. Employees who meet that standard would retain the 95%/5% premium share, but

those who do not would have their 5% share increased to 10%.11 In addition, the City offers to

“cover the cost” of an annual NFPA 1582 exam for the members of the unit, which—as an

aside—would be a qualifying exam for the incentive. The City’s LBO, however, preserves

individual choice as to who performs the 1582 exam—a PCP or an experienced “fire doctor.”

See, e.g. City Brief at 26 (“[The City’s proposal] does not address, much less restrict, how

members obtain those physicals”).12

Next, the City proposes enhancing EAP benefits for the unit by waiving co-insurance for

drug and alcohol treatment and other behavioral health issues. City LBO, Article 18(B)(15).

Further, the City pledges to meet with Association representatives at agreed times “to discuss

and improve access to preferred providers who may specialize in the unique needs of first

responder professionals,” including a commitment to work with vendors to establish a “preferred

list” of such providers “in network” that may be communicated to firefighters. City LBO, Article

10 The City’s proposal appears at Page 22 of 46 et seq. of Exh. J-5.

11 Whether this proposal reflects an “incentive” to have a physical each year or a “disincentive” to skip a required

exam may be in the eye of the beholder, but it seems to me the practical effect of the proposal is clear, and it would

be beneficial to firefighter health as compared to the status quo.

12 By contrast, as previously noted, the Association contends that the City’s NFPA 1582 proposal, i.e. to cover the

cost “in the same manner as the existing . . . preventive exam” must be read as limiting reimbursement to exams

performed by an individual employee’s PCP. In addition, the Association contends that the physicals, to be fully

compliant with NFPA standards, should be conducted by (or under the direct supervision of) an experienced “fire

doctor” on a unit-wide basis so as to facilitate early detection of potential cancers and/or behavioral health issues

unique to first responders. In addition, that approach facilitates the aggregation of health data that can be utilized in

plan design, including targeted wellness initiatives. Thus, argues the Association, the City’s proposal does not

actually provide “true” NFPA 1582 exams for all firefighters.


18(B)(16). Finally, the City proposes to increase the number of annual allowed EAP visits for

employees and covered family members to 8 per year per individual. City LBO, Article 18(K).13

In these proposals, says the City, it:

[a]ddresses the issues PFFA raised during mediation. It provides for free, annual

NFPA physicals. It commits to identifying physicians and mental health providers

that understand the fire service and the health effects on firefighters. It removes

financial barriers for members who need alcohol or drug treatment. The City’s

LBO is aligned with Chief Myers’ objectives to improve the health and wellness

of PF&R firefighters.14 The City’s LBO serves the interest and welfare of the

public by emphasizing prevention and providing special benefits designed to meet

firefighters’ unique health needs.

City Brief at 31.

B. The Association’s LBO15

The Association notes that firefighter trusts, such as the one it proposes, are not unique.

In fact, trusts already exist in several jurisdictions surrounding Portland, e.g. Clackamas Fire &

Rescue, Tualatin Valley Fire & Rescue, and the City of Vancouver, as well as more distant

comparable jurisdictions such as Seattle, Nevada’s Clark County (Las Vegas), and Boise. Prior

to and during negotiations, the Association has engaged experts and has laid the groundwork it

says can result in a union-sponsored trust being up and running within six months if approved in

this arbitration, providing benefits on a par with the existing City Kaiser Plan (fully insured) and

a self-insured trust plan equivalent to the City’s self-insured City Core plan. Eventually, the trust

13 The City’s LBO also contains a proposal eliminating a waiting period for reinstatement of City paid benefits for

employees who have temporarily lost coverage due to loss of eligibility. Article 18(L). I do not understand the

Association to object to this proposal—in fact, according to the City, it was made in response to concerns raised by

the Association during mediation.

14 The record reflects that Chief Myers has prepared a detailed plan with respect to PF&R’s response to firefighter

health and wellness. See, Exh. E-84 (a three-year health and wellness plan labeled a “coggle”).

15 The Association’s extensive Article 18 proposal is contained in its “Amended LBO” dated August 30, 2017. See,

Exh. J-3, beginning at Page 12 of 27 and continuing through Page 22 of 27.


envisions developing an overall approach to annual NFPA physicals for all members of the unit,

perhaps even delivering them through a private clinic operated by the trust itself,16 presumably

sharing space with the Association’s offices (where a significant percentage of the unit members

already travel for various purposes such as Union meetings). The trust could also develop, or

provide access to, an EAP counseling provider well-versed in the specific needs of firefighters.17

To fund these services and plans, the Association proposes that the City pay into the trust

the per-employee amount it has budgeted to contribute to the Health Operating Fund for the fire

unit in 2017, plus a medical inflation escalator for future years. Association Amended LBO at

13-14 (Exh. J-3). The City currently “budgets” or “allocates” these per employee costs by

department within the City, taking account of the various tiers of coverage in each department

(e.g. employee only, employee plus spouse, employee plus family). The contributions, however,

are not segregated by department, nor are they calculated on a departmental basis. Rather, the

contribution rates are developed in light of the anticipated costs of health claims (and appropriate

reserves) City-wide, and all amounts are deposited in the City-wide Health Operating Fund out of

which claims for paid for all covered City employees.

16 Both Seattle and Boise have gone that route, and the Association believes that a private clinic would encourage

participation in health and wellness programs by firefighters in the unit, a number of whom are reluctant to seek help

for substance abuse issues through the City’s EAP program, for example, for fear that (despite rules about

confidentiality), their condition could be discovered by representatives of the City, potentially impacting their

careers.

17 The evidence established that many EAP counselors available through the City’s EAP program are unfamiliar

with the nature of a firefighter’s work and the unique stresses they encounter. The need to explain those matters to a

counselor, sometimes over multiple sessions before in-depth counseling can begin, has reportedly deterred some

members from seeking EAP assistance, or from continuing the process. There is also some evidence that a

firefighter who encounters that sort of counseling experience and finds it unhelpful may be deterred from seeking

counseling elsewhere. See, Tr. at 1439 (Dr. Suzy Gulliver). On the other hand, there is an excellent specialized

substance abuse counseling center for firefighters endorsed by the IAFF, The Center for Excellence, in Maryland.

Tr. at 1440 t seq. (Dr. Gulliver). It is not currently “in network” under the City’s plans, but I note that the City’s

Benefits Office has successfully worked with the insurer on behalf of at least one firefighter to cover the counseling

at in-network rates.


Because firefighters have historically had a better claims experience than the general City

population (although, to complete the picture, they may also have undiagnosed conditions or

latent health effects from exposures that would increase their claims experience in later life, e.g.

as retirees), the contributions “budgeted” annually for the firefighter unit substantially exceed the

current firefighter claims actually paid by the City. That excess, argues the Association,

essentially constitutes a “subsidy” flowing from the fire unit to cover health and wellness care

and service for other City employees.18 Consequently, the Association proposes that the entire

“budgeted” 2017 amount for firefighter health and wellness (plus, as noted, an escalator in future

years tied to medical inflation) is an appropriate measure of the amounts to be transferred to the

trust to fund firefighter specific health benefits.19

In addition, the Association’s LBO provides for the City to transfer to the trust “an

amount equal to a pro-rata portion of its health care reserve for the ongoing payment of health

care benefits.” See, Association LBO Article 18A(4)(c).20 The language of the proposal goes on

18 The City responds that if anyone is “subsidizing” those other employees, it is the City itself because the City

makes contributions to the Fund to provide insurance and pay health care claims. Allocating contributions to the

PF&R unit, says the City, is simply a “pass-through” to get money into the Health Operating Fund with some

transparency about the cost of benefits.

19 The Association’s proposal includes in that amount a “City fee” or “City administration fee” that allocates to City

employees a share of the cost of administering the benefits, i.e. the operation of the Benefits Office. Although this

City fee amount is added to the per employee premium budgeted to departments, such as Portland Fire, it is

deposited in a separate account which is used to pay the administrative expenses of the City, not claims. Bless, Tr. at

1139. Because, says the City, those administrative services provided by the Benefits Office are unlikely to diminish

in the absence of the firefighter unit (for example, the consultant, AON, charges on an hourly basis, not per

employee, and many of the software and administrative programs will still be necessary at present levels and cost),

the Association’s proposal would result in “redundant administrative expenses” to the City.” That is, the City would

be contributing funds to the trust to administer health and wellness benefits, services that the City could continue to

perform itself without increased costs. In addition, the loss of the City Fee from the fire unit would impose a

significant financial burden on other employees whose City fee assessment would need to increase to cover the

deficit. See, City Brief at 51. On the other hand, the employees’ current share of the administrative fee is minimal

under the 95%/5% share—"about a dollar per pay period.” Bless, Tr. at 1694.

20 The Association’s proposal does not specifically define which portions of the reserve fund are intended to be

included within the phrase “ongoing payment of health benefits.” There are at least four separate elements of the

Reserve Fund. See discussion, infra.


to provide “It is anticipated that the amount of this transfer shall not exceed $1.9M.” Id. The City

raises several objections. First, the City notes that the CBA here, as well as the CBA’s applicable

in many other City bargaining units, requires that Health Fund contributions be “pooled” and

“shall not be allocated on an individual employee or employee group basis.” Article 18F(3).

Consequently, “if the City withdrew a pro-rata portion of the reserve . . . the other unions would

likely litigate the depletion of the reserve under their own contract language.” City Brief at 46.21

Second, as previously noted, the City reads the proposed $1.9 contribution as merely an

“estimate,” i.e. what the liability is “anticipated” to be. And while the Association has expressly

disclaimed any intention to require the City’s contribution under this “pro-rata” language to

exceed $1.9M, the express language of the LBO, says the City, provides otherwise. The actual

total of the various individual elements of the Reserve Fund (e.g. “incurred but not paid,” “risk

based capital,” Voluntary Retirement Incentive Program,” and “unallocated”) total almost $27M,

and thus the “unambiguous language” of the Association’s LBO, according to the City,

unreasonably calls for a “pro-rata share” of more than $4M to go to the trust.

Similarly, the City contends that if I were to award the Association’s LBO, it would incur

substantial new risks, at least some of which could be catastrophic. For example, with the

withdrawal of the healthy firefighters group, the risk of large claims from the remaining City

population would no longer be cushioned by the lower claim participants from the fire unit. The

lower claims experience of the fire unit tends to soften the impact to the Health Operating Fund

of large claims elsewhere in the City. The loss of that cushion, says the City, would require a

revision in its stop loss insurance coverage to provide greater protection, i.e. the stop loss

21 The Association replies, persuasively in my view, that its LBO does not require the City to “withdraw” funds from

the reserve, but only to contribute an amount “equal to” a pro-rata share, which could come from general funds, not

the reserves themselves.


coverage would kick in at a lower amount, which would result in higher premiums than the City

presently pays.22

But perhaps the greatest risk, according the City, is that it could be exposed to a

“sledgehammer penalty” under the ACA, which an expert witness for the City calculated to be in

excess of $1M per month. That penalty could result if the City fails to offer “affordable” and

“minimum essential coverage” to at least 95% of its full-time employees (and their dependents)

and at least one employee who has not been offered qualifying coverage obtains “subsidized”

insurance through an ACA exchange. In that case, the City would be assessed an annualized

penalty of approximately $2300.00 multiplied by the total number of City employees (less 30),

i.e. approximately 5,970 employees, which equals an annual assessment of $13.73M, or $1.14M

monthly. See, Tr. at 1051 (Dauenhauer). Dauenhauer testified that even if a union-sponsored

trust provides affordable minimum essential coverage to firefighter employees, utilizing funds

contributed to the trust by the City under a CBA, the City would not be deemed to have

“offered” that coverage for the purposes of being excused from the sledgehammer penalty. That

is so, he testified, because in order for coverage under a trust to meet ACA requirements, the

trust must be “employer-sponsored,” and the Association’s LBO explicitly designates the

proposed trust as “union-sponsored.” Tr. at 1063. There are additional issues and nuances to be

explored on this critical issue that I will analyze later in detail, but for now, it is sufficient to note

22 It strikes me that this argument, at least to an extent, is inconsistent with the City’s assertion that the firefighter

unit is not “subsidizing” the health insurance for other City employees. That is, if the absence of the lower-claim

firefighters would increase the risk of adverse claims experience, requiring more extensive stop loss coverage, then

the continued presence of the firefighters in the pool is contributing to the maintenance of lower costs for everyone

else—at a time when the firefighters’ unique needs have not always been met because of “budget issues.” See, e.g.

discussion infra at 15.


that the City contends that this issue, standing alone, is sufficient grounds for rejecting the

Association’s trust proposal.23

Finally, the City notes that the precise nature of the programs and plans to be offered by

the trust is not specified in the Association’s LBO. In fact, the Association has not obtained

preliminary quotes from insurers, such as Kaiser, as to the cost of benefits. Consequently,

according to the City, the Arbiter—and the City—are being asked to blindly agree to unspecified

benefits at an unspecified cost. City Brief at 36-37. On the other hand, I find that the Association

has offered substantial testimony from experts it has engaged, as well as evidence of what trusts

in other jurisdictions have been able to do. That evidence, says the Association, establishes that a

range of health and wellness services that meet—or might even exceed—the services that have

been provided (and proposed) by the City are possible under its trust proposal. I note that the

Association’s President, Alan Ferschweiler, in response to a direct question from the Arbitrator,

testified that he is confident the trust could provide benefits equivalent to those currently

provided by the City with the level of funding requested in the LBO. See, Tr. at 2045.

IV. ANALYSIS OF THE PARTIES’ LBO’s

A. Interest and Welfare of the Public

The primary statutory standard for evaluating the parties’ respective LBO’s is the

“interest and welfare of the public.” ORS 243.746(4)(a). This broadly worded and undefined

“standard” is often difficult to apply without considering the “secondary standards” set forth in

ORS 243.746(b)(c)(d)(e) and (f). But the parties here have stipulated that, with the exception of

23 There is a related issue, the so-called “tack hammer penalty,” that arises if an employer does offer 95% of its

employees minimum essential coverage, but an uncovered member of the workforce obtains subsidized insurance on

an ACA exchange. The tack hammer penalty, however, is relatively small—$3,200 per year per employee who has

obtained subsidized coverage. Tr. at 1049. Thus, in my view, it does not significantly alter the evaluation of whether

the Association’s Article 18 proposal is more in the interest and welfare of the public than the City’s proposal.


subparagraphs (b) and (c), those secondary standards are immaterial. Therefore, my analysis will

proceed to consider the interest and welfare of the public, as those standards may be affected by

the City’s “reasonable financial” ability to bear the cost of the parties’ proposals, considered in

light of reasonable legislative priorities as determined by the City, as well as the relative ability

of the City to attract and retain firefighters under the parties’ proposals.

In addressing those issues, I must bear in mind that, given the structure of the statute

which requires that I choose one LBO or the other, the precise question to be answered is which

proposal is preferable, i.e. which one is “more” in the interest and welfare of the public. For

reasons that follow, although I find that a union-sponsored health and welfare trust, properly

structured and funded, could advance the interest and welfare of the public by better serving the

physical and behavioral health needs of first responders, and do so better than the City’s current

proposal, I am not able to award the Association’s LBO at this time.

B. A Firefighter Health Care Trust and the Interest and Welfare of the Public

As noted, I find that a properly constructed and funded trust would better serve the

interest and welfare of the public than the City’s proposal to continue its approach of providing

firefighter health and wellness services within its health care system for general City employees.

That is so because the quality and comprehensiveness of the City’s attempts to meet the unique

health and wellness challenges of firefighters has varied historically depending on City budget

limitations, the particular proclivities of whoever happens to be Fire Chief at the time,24 and

similar variables. In other words, funding for firefighter needs has too often had to take a back

seat to other priorities to a greater extent than I believe would have been the case under a trust.

24 It is clear that the current Fire Chief, Chief Myers, is committed to firefighter health and wellness. I note,

however, that Chiefs tend to come and go, and when past Chiefs have been similarly committed, the health and

wellness initiatives they undertook did not always survive when they were succeeded by someone else.


Firefighters, who risk their lives and health on a daily basis deserve better, and it is in the interest

and welfare of the public to improve the delivery of comprehensive health and wellness services

to these vital City employees on an ongoing and stable basis.

To take just two examples of historical shortcomings in firefighter health and wellness,

the comprehensive annual NFPA physicals, an agreed centerpiece of any firefighter health and

wellness program, have sometimes been offered by the City, such as under the PHLAME Study

from 1998 to 2002. That study was conducted by Dr. Kuehl from OHSU, a recognized expert in

firefighter health, under a temporary grant from NIH. See, e.g. Tr. at 2179 et seq. (Woodside

Testimony). I note that following PHLAME in 2003, Dr. Kuehl and his associates contracted

with the City to provide comprehensive physicals and were able to conduct NFPA exams on 403

out of approximately 600 firefighters. See Exh. A-79 at 2; see also, Tr. at 442 (Dr. Kuehl). By

2006, however, that number had dropped to 260. See, Tr. at 2181 (Woodside). Similarly, there

was at one time, under Chief Berry, a proposal to establish a firefighter health and wellness

center at Fire Station 21 with a plan to conduct NFPA 1582 physicals, among other things, but

the original $400,000 budget ran into a “budget crunch” and Chief Schmidt took half the center’s

budget ($200,000) back. Tr. at 2200.

Janet Woodside, an occupational nurse employed in the City’s EMS division, summed up

the City’s recent history:

I mean, it's definitely been a roller coaster over the 17 years, kind of. Sometimes

there's great funding and we've implemented the complete Wellness Fitness

Initiative25 and other years there's close to nothing because it's just a real bad

budget year.

25 The Wellness Fitness Initiative (“WFI”) is a joint product of the International Association of Fire Fighters

(“IAFF”) and the International Association of Fire Chiefs (“IAFC”) designed “as a way to improve the wellness of

fire department uniformed personnel.” Exh. A-60 at 7. It is a comprehensive program, set forth in more than 60

pages, dealing with medical, fitness, injury and rehabilitation, behavioral health, and data collection, among other

aspects of an appropriate health and wellness program for fire personnel.


Tr. at 2187-88. Similarly, Ms. Woodside described the difficulty she has had in providing the

required exercise equipment in the fire stations and in keeping the equipment in good shape:

Well, we try to keep it maintained. And because we don't always have funding,

I'm excited this year we're getting $60,000 for funding. But the treadmills, like

most of them were purchased in 2007. So they're ten years old. They're used a

lot. And so as much as we can maintain and get them fixed, we try to. I know the

steppers are very old. We're trying to get step mills. Fire fighters climb stairs so

it's really important to have equipment that mimics what they do and that they can

train on. Because they can't leave the station, they have to stay there to exercise so

they can respond. So we try as much as we can to get them the equipment that

they want and that they need. There's good years and bad years as far as funding.

So it's tough to get updated equipment.

Tr. at 2207-08.

In light of this sort of testimony, offered by the City’s own witnesses, at the close of the

hearing I asked the City to respond to what is for me a critical issue in this proceeding, i.e. what

level of assurance is reflected in the City’s LBO that the “fits and starts” on firefighter health and

wellness reflected in the testimony of Ms. Woodside and others would be replaced by more

stable City funding? In its brief, the City responded that although PF&R has long wanted to

secure annual NFPA physicals for all firefighters, “it has never had the budgeted funds to obtain

them.”26 City Brief at 29. If its LBO were to be adopted by the Arbitrator, says the City, it would

be contractually required to reimburse firefighters for the cost of an annual NFPA exam.

While that is true in one sense, I am not thoroughly convinced that individual firefighters

will be able to find a physician, perhaps especially a PCP, willing and able to perform the exam

to the necessary standards. See, e.g. Tr. at 2171-72 (Ms. Woodside’s testimony about the

26 I do not doubt that PF&R has genuinely wanted to provide free annual NFPA physicals—the testimony of Ms.

Woodside is sufficient evidence of that desire, at least among those most directly associated with implementing

firefighter health and wellness programs—but as the City’s own statement inherently concedes, that desire has too

often been subjugated to other City budgetary needs.


difficulties firefighters have encountered trying to get NFPA physicals).27 It strikes me as

plausible that a firefighter trust approach might well be much more successful, e.g. by

contracting with medical providers experienced in firefighter health issues to provide NFPA

physicals on a unit-wide basis, rather than relying on the initiative of individual firefighters to

find a physician willing to provide a 1582 exam. See, e.g. Tr. at 466-67 (Dr. Kuehl testimony

that he very well might be willing to bid on a trust proposal to provide comprehensive NFPA

physicals to all PFFA members). In addition, Dr. Kuehl testified that comprehensive NFPA 1582

physicals by trained fire doctors are more cost-effective, e.g. he and his associates at OHSU can

conduct the physicals on a group basis in approximately two hours per employee, whereas the

typical PCP, even if willing to provide the more extensive exam (which some are not), might

require 10 hours to complete the exam. Tr. at 449-50.

I would also note that the City’s response to my question about stable funding only

addresses the issue of the physicals which, while perhaps the most pressing issue for long-term

firefighter health, is not the only important issue here, e.g. providing up-to-date and properly

maintained exercise equipment to assist firefighters in maintaining physical fitness, especially

cardio health, is also critical.28 In my view, these and other firefighter wellness initiatives, such

as improved access to behavioral health and PTSD counseling from sources familiar with the

particularized stresses of first responder firefighters, as well as knowledge of the complicating

factor of traditional firefighting culture (in which admitting to emotional stress might be seen as

27 The evidence suggests that there are a limited number of physicians in the United States who are well-versed in

the unique issues of firefighter health and wellness—perhaps between 25 and 40 in the entire country. See, Tr. at

435; Tr.at 446 (Dr. Kuehl). 28 I understand from Ms. Woodside’s testimony that the current annual budget, at the time of her testimony,

allocated $60,000 for equipment and maintenance, but the City’s LBO does not contain a commitment to maintain

any specific level of funding for that purpose.


“weakness”) would greatly benefit from the stable funding levels associated with a trust and with

program design placed in the hands of those with the greatest knowledge of firefighter needs.

C. Analysis of the Parties’ Respective LBO’s

But while I believe, in the abstract, that a union-sponsored health and wellness trust in the

City of Portland would be in the interest and welfare of the public if “properly constructed and

funded,” I have some significant concerns about the specifics of the Association’s LBO. Before

turning to that discussion, however, I think it is important to provide some context about how I

must approach these issues based on the statutory framework I am compelled to apply in Oregon

interest arbitration.

As I noted at the outset, in many jurisdictions—and in Oregon prior to the enactment of

SB 750—an interest arbitrator could play a constructive role by making adjustments or

clarifications to the parties’ LBO’s, when necessary, in order to achieve a result that served the

interest and welfare of the public and reflected fairness to the parties. That was perhaps

particularly important when dealing with complex bargaining issues, as the Association’s trust

proposal certainly is, because “adjustments” might be necessary to resolve unanticipated issues

or a party’s reasonable objections to a proposal—perhaps arising for the first time in the interest

arbitration hearing itself—as the intent and effects of the parties’ LBO’s become clearer during

the hearing process. With the flexibility to alter the parties’ proposals to take account of such

issues, an interest arbitrator could effect substantial justice in the resolution of bargaining

disputes, while also ensuring that the interests of the public were appropriately taken into

account.

SB 750 takes a different approach by imposing a primary obligation on the parties to

bargain their issues thoroughly between themselves and not to rely, consciously or


subconsciously, on an interest arbitrator to save them from defects in their proposals that might

become apparent during the course of a hearing. Whatever I might think of the statutory

approach required by ORS 243.746, I am required to follow it, and I note that the law has the

salutary effect of encouraging the parties to bargain seriously, e.g. not to include insufficiently

considered elements in their final proposals that might cause an arbitrator to reject their LBO

“packages.” In my view, it is in everyone’s best interest for the parties to resolve their bargaining

issues themselves whenever possible.

But it is often difficult to apply these standards to a subject as complex and innovative a

as union-sponsored health care trust.29 I had the sense during the hearing that each party, for all

their work on the issue during negotiations and mediation, entered the hearing with significant

misunderstandings of several of the critical details of the other’s proposals. I have alluded to

several of those issues already. When that is the case, an interest arbitrator might seriously

wonder whether the issue should just be sent back to the parties. For example, under pre-SB 750

rules, that might simply have meant declining to award either party’s proposal on a subject,

essentially maintaining the status quo. I no longer have that luxury. That is, under the statute, I

must award one LBO or the other, even if I find both of them to be flawed in one or more

respects. ORS 243.746(5). In that analysis, then, the following issues have influenced me the

most. I will briefly note two issues that trouble me about the Association’s proposal—the City

Fee and the pro-rata share of the Health Reserve Fund30—before turning to an element of the

29 As the City notes in its Brief, the union-sponsored trusts in other jurisdictions reflected in the evidence all came

into existence as a result of successful negotiations, not by order of an interest arbitrator.

30 Although neither of these issues is necessarily dispositive as to which LBO before me should be awarded, I

discuss them for whatever benefit the parties might derive in connection with what I must assume will be future

negotiations over the trust idea. That is, I assume the issue will return in negotiations for the next CBA, and it may

be helpful for the parties to hear my concerns on those two issues.


proposal that prevents me from awarding the Association’s LBO as currently structured, i.e. the

risk to the City of incurring sledgehammer penalties under the ACA.

1. City Fee

I am somewhat troubled by the Association’s proposal to include the City Fee in the

calculation of the “premiums” budgeted by the City for firefighter health care. I found the

testimony of Cathy Bless to be persuasive—the cost of operating the Benefits Office will not

decline even if the firefighter trust is awarded and the City will no longer administer benefits for

the trust participants. In addition, I had the distinct impression that the Association’s proposal did

not necessarily reflect a thorough understanding of the City Fee, how it is calculated, and

precisely what it represents. Nor was much evidence presented as to the relative cost to the trust

of administering health and wellness benefits for the firefighters—e.g. whether it will be more or

less than the amount reflected in the City Fee. I assume either is possible. It could be that the

City, with its bargaining power and economies of scale, may be able to provide those

administrative services at a lower per employee per month (“PEPM”) cost than will be available

to a trust.31 But that is not necessarily the case. For all of these reasons, I am left with uncertainty

as to the appropriateness of including the City Fee, at least in its entirety, in the amounts to be

paid by the City to the trust, and as the proponent of a radical departure from current practice, the

Association bears the burden of proof on this issue. As noted, my uncertainty on this score is not

necessarily sufficient, standing alone, to support rejection of the Association’s LBO. But neither

is this factor clearly in the Association’s favor at present.

31 In addition, as I understand the testimony, one of the components of the City Fee is a share of interest on City

bonds. It is unclear to me why the trust should receive that portion of the Fee even if it would otherwise be

appropriate given the administrative services the trust would provide. As City employees, it would seem to me the

firefighters should not be exempt from contributions other employees make to the interest expenses of the City.


2. Reserves

I am also troubled by the Association’s proposal on transfer to the trust of an amount

equal to a pro-rata share of the health fund reserves. I have previously discussed the parties’

dispute on this issue, e.g. whether the $1.9M is a cap on the trust’s pro rata share, or simply an

“estimate” that could turn out to be substantially higher. I agree with the City that the plain

language of the Association’s proposal, i.e. that the City will transfer “an amount equal to a pro-

rata portion of its health care reserve for the ongoing payment of health care benefits” does not

specify which of the separate components are to be considered part of the “reserve for ongoing

payment of health care benefits.” The Association discounts the City’s fears by noting that the

amount in its proposal is “anticipated not to exceed $1.9 million dollars,” whatever its source. In

fact, Association counsel, at the hearing and in the brief, have stipulated that the “anticipated”

amount of $1.9M was intended to be a “cap.” That “clarification,” says the Association, is not a

“change” in the LBO, and it should dispose of the City’s concerns.

As previously noted, in making this argument, the Association attempts to distinguish its

“clarification” on the reserves issue from the City’s attempts to “clarify” that its proposal on

NFPA physicals was not intended to limit firefighters to reimbursement of the cost of the

enhanced physical only if performed by an employee’s PCP. As noted, the Association reads the

City’s proposal that way because reimbursement of a PCP physical is the current “manner” in

which annual physicals are “covered.” With all due respect, I do not see a meaningful distinction

between the parties’ respective “clarifications.” In my view, if one may appropriately be

“clarified,” the other may as well. Because I am not finding either issue to be dispositive here,

however, the issue is somewhat moot.


On a related issue, there has also been some discussion about whether a party whose LBO

has been awarded might be “estopped” from later contending that the “plain meaning” of a

provision should apply notwithstanding a contrary “clarification” of the “intent” of its proposal

offered during the interest arbitration process. I am more concerned, frankly, with the prospect

that a lax view of the extent of permissible “clarification” of an LBO might lead to a slippery

slope that could easily undermine the approach envisioned by the statute, i.e. a process in which

the parties bargain to a genuine impasse with respect to each other’s clear and unambiguous

proposals. But to return to the estoppel issue for a moment, I must award one of these proposals

or the other. Will the City, after its Article 18 proposal has been awarded here, be estopped from

later claiming that the language of its LBO only covers reimbursement of NFPA physicals

conducted by a PCP, as the Association fears, rather than being applied according to the

“clarification” the City offered during the hearing? I sincerely doubt that the City would make

that argument, but in the unlikely event it did, I assume an arbiter would apply principles of

estoppel under these circumstances.

I find that the City’s proposal on how it will cover the cost of NFPA physicals could be

clearer, e. g. it leaves questions about whether the cost of physicals performed by other than the

employee’s PCP will be covered. I also find that the Association’s reserves proposal is

ambiguous as to whether the $1.9M is a cap or an estimate. Again, these ambiguities, standing

alone, are insufficient in my view to compel a rejection of either LBO, but it is a troubling sign

to me that perhaps neither party’s Article 18 proposal was as well thought out, and/or as clearly

bargained during the pre-interest arbitration period, as an interest arbitrator would hope.32

32 I mean no criticism of the parties. The issues presented here are extremely complex, and it is not surprising that

unforeseen issues might crop up, even as late as the interest arbitration hearing itself.


3. The Sledgehammer Penalty Issue

Finally, I turn to the City’s objection that the trust would subject it to an unreasonable

risk of a catastrophic financial penalty under the ACA (in excess of $1M per month) because

insurance offered to firefighters through the trust would not meet the City’s obligations under the

ACA. In the end, I find that the Association’s LBO does not adequately protect the City against

this potential penalty, and in light of the level of financial risk involved to the City, I have

reluctantly concluded that I cannot award the trust proposal for that reason, if for no other.

a. Would Health Insurance Offered by the Trust Meet the City’s ACA Obligation?

At the outset, I agree with the Association that the likelihood of an ACA penalty against

the City is small, and the potential for such liability is based on a technical reading of the statute

that seems divorced from the overall policy goals of the ACA. To recap, the concerns described

in Dauenhauer’s testimony flow from his legal opinion that insurance offered by the trust, as

proposed, would not meet the City’s obligation under the ACA to offer affordable coverage with

minimum essential benefits. Even if the trust offered coverage that otherwise met the

affordability and essential benefits requirements, Dauenhauer contends, the City would

nevertheless still be at risk because those benefits had not been offered under an “employer-

sponsored” plan, but rather under a “union-sponsored” plan as set forth in the Association’s

Article 18 LBO. Tr. at 1052 (Dauenhauer) (“if the Union is sponsoring the plan, that means it's

not employer-sponsored. If it's not employer-sponsored, then coverage under this plan would not

be treated as satisfying the City's coverage requirements”).33 Because the fire unit represents

33 The Association appears to contend that the only issue is the “affordability” prong, e.g. it argues that

approximately half of the City’s firefighters would have to find the coverage offered by the trust as unaffordable in

order to fail the 95% test. See, Brief at 139-40. This argument, in my view, does not adequately refute Dauenhauer’s

analysis that all 600 firefighters—approximately 10% of the City’s overall workforce—would be deemed not to

have received an offer of qualified coverage because insurance was offered through the trust, not by the City.


approximately 10% of the City’s workforce, it would be impossible for the City to meet its

obligation to offer qualifying coverage to 95% of its employees, thus opening the door to

sledgehammer liability if a fire unit employee obtained subsidized coverage.

The record reflects two ways in which the Association’s LBO might have insulated the

City from the risk of a sledgehammer penalty, effectively removing this objection. First, had the

proposed trust included employees of more than a single employer, it would be considered a

“multi-employer plan,” and offers of insurance under a multi-employer plan are treated as offers

made by “an employer.” See, Tr. At 1082 (Dauenhauer).34 A second approach would have been

for the City, as part of the trust creation process under the Association’s LBO, to first offer

qualifying coverage under its plans, e.g. the City’s fully-insured Kaiser plan, to all firefighter

employees. Those who accepted could stay on a City plan, while those who chose to go to the

trust would be considered to have been offered qualifying coverage by the City, thus avoiding

potential City sledgehammer penalty liability. Neither of these strategies to protect the City were

made part of the Association’s LBO.

As an aside, I asked at the hearing why health insurance benefits offered by the trust, but

paid for entirely with contributions from the City, would not be considered an offer of qualified

coverage by the City. Tr. at 1061-63. How is that approach different, I asked, from the present

Kaiser situation in which Kaiser pays benefits to the employees based on funds provided by the

City? Dauenhauer explained his legal opinion that the trust situation differs from the City’s fully-

34 Here, the Association, which also represents firefighters at the Port of Portland, says that it is possible that

firefighters in the two units would eventually participate in the same union-sponsored trust. In fact, as of the time of

the hearing, one aspect of negotiations between the Association and the Port of Portland (represented by

Dauenhauer) included the possibility of a trust for the Port of Portland firefighters. As of the hearing in this matter,

the subject had been under discussion by Local 43 and the Port for some time (at least since approximately late

March or early April of 2017). See, Tr. at 1055. At present, however, no joint trust exists, and thus the City could not

take advantage of the multi-employer plan exception to the general rule that qualified coverage must be offered by

an “employer.”


insured plan because the City has a contractual relationship with Kaiser to provide benefits to the

employees on the City’s behalf. The trust could not follow the same approach, he explained,

because benefits paid by a union-sponsored trust could not legally be considered an “offer” of

benefits on behalf of an employer. Tr. at 1063. While I find that answer less than fully

satisfying,35 there are provisions in the regulations, see 79 Fed Reg 8543 at 8566, that although

not directly on point, tend to support Dauenhauer’s analysis:

Commenters requested that the final regulations treat an offer of

coverage made by the employer during the collective bargaining process

between an employer and a union that is not accepted by the union as an

offer of coverage to all employees covered by the collective bargaining

agreement. However, even where an offer to the union has been made and

rejected, the affected employee has never been provided a chance to

accept an offer of coverage in these circumstances. Accordingly, the

final regulations do not adopt this suggestion.

If an offer to a union during bargaining does not meet the “qualifying offer” standard, it is

difficult to see how benefits actually provided through a union-sponsored trust, created as a

result of bargaining, could be deemed to do so. In either case, individual employees have not had

an opportunity to accept or decline qualifying coverage. Thus, at the very least, it is arguable that

the trust, as proposed, would not insulate the City from a potential sledgehammer penalty.

Again, to deal with this issue in the Port of Portland negotiations, the parties discussed

having the Port make an offer to all unit members of coverage under the Port plans at the time of

creation of a union-sponsored trust. See, Tr. at 1054 et seq. Had the Association’s trust proposal

required the City to offer unit members the choice of staying with a qualified City insurance

35 It seems to me that one could argue that the trust, just as in the City’s relationship with Kaiser, would be providing

benefits on the City’s behalf pursuant to a contract (a CBA) between the City and the trust. I understand that the City

retains some contractual control over Kaiser plan design issues, e.g. if the City does not find Kaiser’s offerings to be

acceptable, it can negotiate changes in plan design or seek other contractual partners to cover employee health and

welfare benefits, whereas in the case of the proposed trust, the City is ceding complete control over plan design,

both now and in the future, to the trust. Perhaps that difference is enough for ACA purposes, I do not know. But,

because I am not an expert in insurance and/or ACA matters, I defer to Dauenhauer’s expertise on this issue.


option or receiving health insurance coverage under the trust, it appears that the City’s potential

ACA liability would not have been an issue here.

On a related question, after the close of the hearing, I asked the parties via email to brief

whether the City could protect itself from sledgehammer liability by unilaterally offering

qualifying coverage to the firefighters, even though not required to do so by the Association’s

LBO. In response, the City pointed out in its brief that matters involving health insurance

benefits are mandatory subjects of bargaining, and thus it would be an unfair labor practice to

make such an offer directly to the firefighters. City Brief at 56-57. The Association addressed the

issue only obliquely in its brief, suggesting in a footnote that the City could protect itself by

offering firefighters qualifying coverage under its Kaiser plan. Association Brief at 138-39, fn.

105.36 I note that the Association’s response does not (indeed, perhaps could not) waive the

potential unfair labor practice,37 and thus I agree with the City that an attempt to unilaterally

protect itself from the sledgehammer penalty by making a direct offer to employees would likely

be unlawful and could lead to protracted and expensive unfair labor practice litigation.

36 It appears to me, however, that the Association’s trust proposal does not contemplate the possibility that some unit

members might opt to remain in the City’s plans. For example, the proposed Article 18(A)(3)(b) would require the

City to make contributions to the trust for “each bargaining unit member that is on the City’s payroll, etc.,” rather

than on behalf of bargaining unit members who “elect health insurance under the provisions of the trust.” In that

sense, at least, the language of the existing proposal seems inconsistent with the notion that the City could

unilaterally offer qualifying coverage to the members of the fire unit in order to protect itself from potential

sledgehammer penalty liability.

37 The statute provides that an unfair labor practice complaint may be filed by “an injured party,” ORS 243.762(3), a

statutory term which is broad enough, at least under some circumstances, to include charges filed by an individual

employee. See, e.g. Rogue River Educ. Assn. v. Rogue River School Dist., 244 Or. App. 181, 260 P.3d 619 (2011).

Thus, any proffered waiver of the potential unfair labor practice at this late date by the Association (even if I could

consider such a waiver not to be a prohibited “change” in the Association’s LBO) might not entirely protect the

City.


b. Is the City’s Fear of the Sledgehammer Penalty Realistic?

Notwithstanding the forgoing analysis, the Association contends that the actual risk to the

City is minimal, especially in light the indemnification provisions contained in the Association’s

LBO. Unfortunately, I cannot accept the Association’s arguments. First, the City has

persuasively demonstrated that an entry-level firefighter with a spouse and two dependents could

easily qualify for a subsidy. City Brief at 54-55.38 Will there actually be such an employee who

applies for and receives a premium tax credit? It seems unlikely to me, but in light of the

catastrophic financial consequences to the City if an employee does receive the subsidy, i.e.

approximately $1.14M per month, if the City has even a slight chance of being required to pay

the sledgehammer penalty,39 I cannot find the Association’s LBO to be in the interest and

welfare of the public unless and until that risk has been eliminated, e.g. through means that have

already been identified.40

38 The City posits a hypothetical entry-level firefighter with a spouse and two children at an annual salary of

$44,459, which is less than 400% of the 2017 poverty level of $24,600 for a family of four, the outer limit of

eligibility for a subsidy. See, Exh. E-48. Consequently, an entry-level firefighter could conceivably qualify for

subsidized insurance under the ACA. It may well be, as the Association argues, that the trust will have every

incentive to offer quality affordable health insurance and to avoid operational failures that might drive an employee

to seek subsidized coverage under the ACA, just as the City would. On the other hand, the trust’s relative lack of

resources, as compared to the City, elevates the risk.

39 The level of acceptable risk to the City that is in the interest and welfare of the public is inversely proportional to

the extent of the harm that is likely to flow from the feared event if it actually occurs. Because the potential harm

would be devastating to the City’s finances, even a low level of risk is unacceptable here and is not in the interest

and welfare of the public.

40 The Association argues that these and other risks, to the extent they actually exist, can be addressed by the parties

in the next round of bargaining, which will likely commence in 2018. See, Association Brief at 143. With all due

respect, I believe the statute requires that I not award a proposal that fails to serve the best interests and welfare of

the public in its present form, even if it could be made to do so through negotiations after being awarded in interest

arbitration. At the same time, I agree that these issues can and should be explored in the next round of bargaining, in

which I assume the Association will renew its trust proposal, and I have hope that the additional information

available to both sides, having now gone through an extensive interest arbitration process, will enable the parties to

reach agreement, or at least to present refined proposals in a potential interest arbitration on this subject in the future.


As to the indemnification included in the Associations’ LBO, I cannot fault the City for

being less than fully assured that the Association will have the financial resources to make good

on its indemnification promise, at least at the levels of funding reflected in the LBO. I note that

over and above the costs of providing health and wellness benefits on a par with (or exceeding)

those presently provided by the City, the trust would need sufficient reserve funds—or a surety

bond—to account for several million dollars in potential ACA penalties to the City, i.e. $1.14M

monthly, or as much as $13.68M on an annualized basis. I do not find, especially under the

Association’s view of its LBO, i.e. that the cap on reserves to be transferred to the trust is $1.9M,

that there would be enough funding to make its indemnification promise realistic without being

backed up by a bond, and there is insufficient evidence in the record that such a bond is even

available—and if it were, that the annual premium (estimated to be 10% of the risk insured

against)— would be affordable by the trust.

D. Conclusion

For the reasons set forth above, I find that the City’s LBO is more in the interest and

welfare of the public than the trust proposal, as currently constituted, in the Association’s

Amended LBO.41 Therefore, I must award the City’s final proposal.

41 That the City’s LBO on Article 18, whatever its shortcomings, nevertheless would be in the interest and welfare of

the public was captured in the testimony of occupational nurse Woodside: “But funding, we just need to -- you

know, in 17 years we've tried a lot of different things. It's taken a lot of time and energy. I'm just excited either way.

I think we're going to get NFPA physicals.” Tr. at 2201.


ORDER

Having carefully considered the evidence and argument in its entirety, I hereby render the

following ORDER in resolution of the 2017 City of Portland/IAFF, Local 43 interest arbitration:

1. The successor CBA will contain the parties’ agreed TA’s as follows: Articles 6-14,

17, 23-25, 27-31, Schedule A, New Article - Overpayment, New Article - Legal Fees,

New Article - Job Share, and TA’d General Order No. 39;

2. The CBA will continue to contain current contract Articles as follows: Articles 1-5,

15-16, 19-22, and 26;

3. With respect to Article 18, I award the City’s LBO as reflected in Exh. J-5; and,

4. Consistent with the terms of the statute, the parties shall bear the fees and expenses of

the Interest Arbitrator in equal proportion.

Dated this 29th day of December, 2017

Michael E. Cavanaugh, J.D.

Interest Arbitrator

Documents

IN THE MATTER OF THE INTEREST ARBITRATION ... Awards Issued 2017/12-29-17...City of Portland/IAFF, Local 43 (2017 Interest Arbitration) 1 | P a g e IN THE MATTER OF THE INTEREST ARBITRATION