By Jim Cline
The Kitsap Deputies Guild last week prevailed on their motion for Summary Judgment before Pierce County Judge James Orlando, that an arbitrator imposed health insurance employee contribution increase should be stricken from an interest arbitration decision. He agreed with the Guild’s claims that the contributions were an unconstitutional “taking” and a violation of the state wage withholding law. Although the County vows to appeal, this case becomes the first known instance in which binding interest arbitrator decision has been modified by a Court.
In March 2013, Arbitrator Howell Lankford issued an order covering contract years 2010-12. The County had asserted a budget crisis interfered with its ability to pay a wage increase, something Lankford largely bought, and both parties extended bargaining efforts out, apparently hoping for a budget recovery. The deputies also had agreed that their contract could be arbitrated after the Corrections arbitration in early 2012. The net effect of these delays is that by the time the parties arrived in arbitration by October 2012, with a stipulated duration set to expire on December 31, 2012, the Guild advised the County of something that it had failed to be aware that – that since the Award (following post hearing briefs and drafting) would not be released until early 2013, the health insurance changes proposed by the County would necessarily be fully retroactive, something the Guild asserted was completely unlawful.
Undaunted by the Guild’s legal arguments, the County persisted in arguing for retroactive insurance changes. To the Guild’s great surprise, Arbitrator Lankford rejected the Guild’s detailed legal argument and imposed effective July 2012, a 3% mandated contribution on the previous fully paid employee only rate and increased the employee’s contribution from 10% to 15%. After freezing wages for 2010 and 2011, he increased wages 2% on January 2012, and added .5% in wages on July 2012 which he said was his “answer” to the Guild’s insurance retroactivity concern. Of course, for most deputies the half percent wage increase added less in wages than the out of pocket cost of the health insurance increase took away.
The Guild filed a challenge on its behalf and on behalf of its individual members in Pierce County Superior Court invoking venue rules allowing a filing in an adjacent County court. After, the County unsuccessfully tried to remove it to Kitsap County, oddly claiming that their Superior Court judges “wanted” to decide this case, the Guild moved for summary judgment.
Judge Orlando agreed with the Guild’s main contentions:
- Insurance, like other forms of compensation, cannot be reduced after the fact because this is an unconstitutional “taking”, in violation of the Constitutional Due process requirement;
- The State Wage withholding law which requires employees to consent in writing to a wage deduction, bars unconsented deductions to pay for retroactive insurance premium charges;
- The Arbitrator’s award was internally inconsistent and “arbitrary and capricious” in that Deputies were provided no opportunity to opt out when the increase was imposed retroactively in contradiction to a separate existing term of the Kitsap CBA that permitted Deputies an annual open enrollment period to change coverage.
Interest arbitration awards are deemed final and binding, but are subject to a very narrow court review. Such awards are rarely challenged and we are aware of no Washington case revising an Award.
Here, the County argued that the court should “defer” the arbitrator’s conclusions. The Guild pointed out, successfully, that any “deference” owed to the decision would not extend to permitting the arbitrator to impose unconstitutional mandates on the parties. The Guild noted, that the state law expressly identifies as a factor limiting arbitrator discretion, that it issue an award consistent with the employer’s legal and constitutional authority. Or as the Guild put it, the arbitrator can’t impose something that the County couldn’t do on its own. The Guild also noted that individual deputies had legal rights separate and apart from whatever the parties could or could not collectively bargaining and that extended to their right not to have compensation taken after the fact.
Retroactive insurance increases have been proposed before. It’s not clear that all unions are aware that such increases are likely unlawful and may be missing a way to block such proposals. Most arbitrators only impose such increases prospectively, perhaps for practical or equitable reasons. Usually there is some unexpired CBA term available for an arbitrator to make the increase prospective. But in the Kitsap case, any increases were going to be retroactive or not at all. The County worked itself into a position where it was simply out of time.
Insurance will continue to be a contentious issue in bargaining. Employers continue to seek “internal” rates for their own non-interest arbitration units as a justification for their proposals. Most arbitrators rely on comparability but some have found “internal equity” arguments on health insurance persuasive. Pressure on comparables to increase premiums or reduce benefits will continue to reshape the “comparability” analysis. But at least now, unions have authority for an argument that any changes should only be adopted in the future, not imposed after the fact. As Judge Orlando indicated in his bench ruling here, such an approach seems required by common sense.
