As far as most non-governmental employers are concerned, the Republican sweep of the Nevada Legislature will likely be known for what laws won’t be passed. I think employers will not see new or stricter laws in the following areas:

• Protections for employees using medical marijuana.
• The availability of bigger dollar damages in discrimination cases under state law.
• The definition of or regulation of independent contractors.
• Changes to the state wage/hour/overtime law.

I do predict serious debate and probable action on laws dealing with:

• Whether local governments should still be obligated to engage in collective bargaining with employees.
• Even if collective bargaining is required, which subjects will not be subject to bargaining but will be left to the discretion of the local government employer.
• No matter what public employee unions can bargain over, will all automatic wage and benefit changes continue to occur even after contract expiration (the “evergreen doctrine”).
• Whether public employee contracts should permit employees to use paid time to carry out union business.
• Will public employee unions be required to annually disclose financial information. (See why this issue is important here and in the next bullet point).
• Whether taxpayer paid local government payroll systems should be used to provide unions with free payroll deduction services for union dues and political contributions. (Of course without transparency of union finances that innocent-sounding “dues” deduction could include money the unions use for political purposes.  See the preceding bullet point on the transparency issue).
• Whether and how the public employee pension statute (PERS) is changed.
• Whether union protesters should be given a pass on complying with the Nevada stalking laws. (See NRS 200.575 (g)(1).)
• Whether contractors (and ultimately the taxpayers) working on Nevada public construction projects must pay the union dictated “prevailing” wage and benefit rate.
• Whether employers should be subject to the risk of a defamation suit just because they try to tell their side of the story. (See why this issue is important here.)

The public employee collective bargaining reforms will be in play because conservatives will insist on changes in return for supporting any tax proposals.  The debate will be off to a good start especially thanks to some excellent ideas set out in Las Vegas Review Journal editorials here and here.  In addition, the assembly caucus has hired a former NPRI staffer and he will have a serious game plan.

Expect unions to mobilize quickly—especially the large international unions that represent both local government employees and private employers. The ones to watch are the SEIU, Teamsters,  Operating Engineers and of course the Firefighters.  Even if the unions feign a willingness to agree to certain “reforms” Republicans will be very cautious.  The last time there were “compromises” the very adept union lobbyists who know every nuance in NRS 288 were able to avoid giving up anything significant.

Stay tuned!

A new lawsuit recently filed by a local union might be overlooked as just another dispute over money.  But what makes the case noteworthy is the fact that unions rarely air their dirty laundry in public–especially when it involves the alleged misappropriation of the union’s money.

The Service Employees International Union (SEIU) Local 1107 represents a number of Clark County employees including those working at UMC, the RTC and the LVCVA.  Local 1107 sued its former President, Chief of Staff and Financial Officer for the alleged conversion and misuse of over $47,000 in union funds.  The union also seeks punitive damages in excess of $140,000.00.  You can read the lawsuit here.

It’s pretty serious stuff for a union to sue one of its union “brothers” or “sisters” just because they allegedly compensated themselves too well.  Wouldn’t it have been easier and less embarrassing to just sweep it under the rug—especially when this particular union took in nearly $5 million in dues last year and on December 31, 2013 had nearly $300,000 in cash on hand?

Well, either the current leadership of the union was intent on doing the right thing or perhaps the union felt it had to go after the money because its finances are subject to public scrutiny.  SEIU Local 1107 is one of the few public employee unions that also represents employees in the private sector—notably most of the large for-profit hospitals in town.  Because it represents private sector employees a federal law, the Labor Management Reporting and Disclosure Act (LMRDA), regulates it.

Congress believed unions needed regulation for a very good reason. “Like any functioning organization, a union must make financial decisions on a constant basis. The ability of the union to perform its representational functions depends on the availability of sufficient financial resources. Also, like any other institution, concentration of authority over the management of money entails the risk that authority will be abused. Unlike their commercial counterparts, unions do not have a tradition of hiring financial experts to manage their affairs. Workers who have had no financial training before their election to union office become, upon election, responsible for managing funds and property in amounts beyond their experience. As one court has acknowledged, union officials ‘are neither accountants nor controllers: Their positions as union leaders demonstrate their organizational rather than financial expertise.’”  Labor Union Law and Regulation (2003),William W. Osborne, Jr.(Editor).

 

That is why in 1959 Congress passed the LMRDA, which imposed, among other things, an obligation on unions who represent employees in the private sector to file annual financial reports with the federal government. You can see SEIU Local 1107’s most recent report here.  The federal government does not have the ability to regulate unions that only represent public employees.  Regulation of public employee unions are left to the states.

So therefore, what do the hundreds of members of other Nevada public employee unions know about where their dues money goes?  Nothing.

There are some small pockets of Nevada public employees who are represented by unions subject to the LMRDA, for example: Teamsters (Local 14 in Las Vegas and Local 533 in the North), International Union of Operating Engineers (IUOE Local 501 in Las Vegas and IUOE Local 39 in the North) and of course the International Union of Elevator Constructors Local 18. But the vast majority of Nevada public employees (and the Nevada taxpayers in general) are entitled to no information whatsoever on the how the unions handle their money.  Keep in mind that the large police and fire unions handle massive amounts of dues money and some own substantial buildings and land.

To uncover how a Clark County teachers’ union chief got paid  $632,000 in compensation in one year a lot of digging was necessary—read about it here.  In the rare case there may be a press report on some internal financial impropriety like this: “Case against ex-head of police managers union closed quietly”.   You can tell by the headline itself that the union wanted the public (and maybe the members) to know nothing.  That story was reported by Jane Ann Morrison.  Sadly, Morrison retired this past Labor Day and only a few in the press can dig so well.

Other states have dealt with the problem of invisible union finances by passing a state law similar to the LMRDA.  Alabama, Kansas and South Dakota require public employee unions to file annual financial reports with the state.  Minnesota and New York require the unions to give an annual financial report to their members.  The states use various enforcement tools from barring an offending union from collecting dues to fining the union’s officers.

Shouldn’t Nevada’s public employees have similar protection?  In 2011 Assemblyman Mark Sherwood courageously proposed Assembly Bill 105.  The bill only required the unions to prepare an annual financial report and “make it available for inspection upon request” to any member who paid dues in the prior year.  Of course it would have been better if it required public filing of the report like the LMRDA.  The bill also lacked a good enforcement mechanism.  But at least Mr. Sherwood tried to do something.  Not surprisingly the bill never made it out of committee.

You can expect the unions to complain that finances are an internal matter that does not involve the employer, the taxpayers or the public.  But doesn’t the handling of dues money impact the public?  After all, the local government payroll systems used for dues deduction is owned and operated by the taxpayers.

Also many unions have the right to use local government space for union meetings, and to use local government email systems, or local government wall space for bulletin boards.  Doesn’t that taxpayer provided free stuff permit unions to use dues money for other things?  Shouldn’t unions have to account to the local government how well they are safeguarding and using that dues money?

Plus what about the union business time that many local governments pay for?  Shouldn’t the taxpayers be able to see how the dues money is being spent?  Maybe through better spending habits or by safeguarding against theft there would be plenty of dues money to pay for all of the business that unions do.  Then the taxpayers wouldn’t need to pay any employees for union business time—what a novel concept!

Perhaps in the coming legislature some brave legislator will try again to require some accountability from the public employee unions.

#1       The pace of wage-hour claims did not slow down

We saw continued aggressive enforcement of minimum wage and overtime laws by the Nevada Labor Commission and the US DOL during 2013.  The following issues were the most troublesome for employers:

• Which Nevada Minimum Wage applies?  See this for help.
• When is daily overtime due under Nevada law?  See this for help.
• Can an employer force a tip sharing arrangement on employees?  The answer in Nevada is generally yes.  Despite the 9^th Circuit’s clear holding that the federal tip sharing rules do not apply to non-tip credit states like Nevada, you can expect the DOL to continue to try and meddle in tip-sharing programs.  The most fertile area for litigation in Nevada involves who can particpage in a tip pool.  For now Steve Wynn has cleared the way for certain employees who look like supervisors to participate in a tip pool.

The US DOL has set out its priorities in its 2014 budget justification document:

 

At the FY 2014 Request Level, WHD requests $243,254,000 and 1,872 FTE. These resources will support a continued shift to greater directed and complaint enforcement activity in priority industries and will offer an improved customer service approach to complaint handling in lower priority industries. WHD will continue to increase its number of compliance actions, but anticipates that continued gains in compliance actions concluded will be incremental as WHD maintains its emphasis on conducting quality case work and concentrates on no-violation cases through effective compliance screening and investigation targeting. At the request level, WHD is increasing its percentage of directed investigations. WHD data show a higher number of employees affected and greater back wages on average for directed investigations.

…

 The agency will continue to use its directed investigations to increase WHD presence in high risk industries, i.e., those industries with high minimum wage and overtime violations and among vulnerable worker populations where complaints are not common.

For more good information follow the Fisher & Phillips Wage and Hour Blog.

#2       The scrutiny of employers who use independent contractors did not stop

While state coffers continue to hurt, various agencies continue to aggressively audit employers who use independent contractors.  See this for assistance.

The US DOL also aggressively investigates misclassification issues.  In fact, in its budget justification document, the DOL requested $3.8 million in its FY 2014 budget to, among other things, hire 35 FTEs for increased enforcement related to misclassified workers.  In an effort to help out the states and put employers under further pressure the DOL also promised to “leverage its relationships with other federal, state, and local agencies and with worker, employer, and community organizations.”

For more good information follow the Fisher & Phillips Wage and Hour Blog.

 

#3       The NLRB did not formally issue its “quickie election” rules

 After a federal court quickly struck down the NLRB’s proposed quickie election rules nothing much happened.  However the proposed rule is still on the NLRB’s official agenda.  With a full and legally appointed and confirmed NLRB you can count on this rule be officially reissued during 2014.  Here (see Step #3) is how to start getting ready.

 

#4       A number of public sector unions in Nevada did not get the memo that local government budgets are in still in horrible shape

Some local governments are seeing their way to modest COLAs and some unions are getting them in arbitration.  But as for the long term structural changes that must be made to public sector compensation many unions just don’t get it.  Look for upcoming fact-finding and interest arbitration proceedings made necessary by unions who refuse to give up the kinds of benefits which are disappearing across the state and the country:

•  Longevity
• Automatic (“springing”) raises to pay the employees’ portion of PERS increases
• Employer payment of retiree health benefits

 

#5       The EEOC did not shrivel up and blow away

The EEOC did not stray much from its previously stated enforcement priorities.  It did have a setback in court when it tried to challenge an employer’s right to use criminal conviction information in hiring.  While the EEOC’s broad attack was unsuccessful in that particular case, you must exercise care not to make hiring decisions based solely on a criminal conviction without looking at the specifics of the situation.  See this for assistance.

Even in light of the recent decisions in favor of Clark County and the Clark County School District, cases where unions and local governments actually go to hearing and get a decision in interest arbitration are still relatively infrequent.   I believe there have been less than a dozen in the last twenty years in Southern Nevada and probably even fewer in the rest of the state.  On February 4, 2013 arbitrator Jay Fogelberg issued this decision in favor of the Clark County School District and against the Clark County Education Association.  Here are two lessons we can glean from the decision.

Lesson #1:    Consider the Local Government’s Entire Mission When Arguing Ability to Pay

 

Too often, the arbitrator simply looks at whether the local government has money in its budget to pay the requested wages and benefits.  Cases like that have historically been relatively easy for unions to fight.  The expert accountants hired by the unions seem to be able to find piles of cash in nooks and crannies throughout a budget.  But the real question for the arbitrator should be whether the local government could use the money in its budget to pay the wages and benefits and still accomplish the tasks it is mandated to carry out.

Under the school district section of NRS 288 when considering ability to pay an arbitrator must give due regard to:

“…[T]he obligation of the school district to provide an education to the children residing within the district.”

For all other local governments the arbitrator or fact finder must give due regard to:

“…[T]he obligation of the local government employer to provide facilities and services guaranteeing the health, welfare and safety of the people residing within the political subdivision.”

Arbitrators usually look at revenue and expenses and in the Clark County School District case Arbitrator Fogelberg did the same. He duly noted that the Great Recession had created serious problems in Nevada and observed “While there is currently some evidence of an upturn in the economy nationwide, there is little effort to support a finding of significant improvement in Nevada at this time.”

In his written decision Fogelberg discussed the challenges the School District had on the revenue side.  However he spent nearly half of the analysis section of the written decision discussing the School District’s inability to carry out its obligation to provide an education to the children residing in the district.  He cited test scores, class sizes and even quoted a statement made by the President in the first debate.

How can other types of local governments convince arbitrators to consider how granting wage or benefit increases could impair the local government’s ability to provide facilities and services guaranteeing the health, welfare and safety of the residents?  In fire and police cases the focus is many times on the safety of the residents in terms of fires, EMS calls or criminal acts.  Thus the unions usually trot out statistics showing fire call volume or crimes or police officers per 10,000 residents.

But what if by granting the money demanded by the fire or police unions the city or county’s ability to provide animal control, or lifeguards, or swimming lessons, or building inspections would be impaired?  Or what if there is no money for parks, which give youth an outlet for energy and recreation—don’t those services impact health and safety?

What does mean for a local government to guarantee the “welfare” of the residents?  Webster defines welfare as “the state of doing well, especially in respect to good fortune, happiness, well being, or prosperity.”  Don’t worry—you’ll never hear me argue in favor of a “welfare state”.   I don’t know about libertarians but even fiscal conservatives will agree that it is appropriate for a local government to do more than simply provide for police, fire and trash pickup.

There are ways to measure those other services and how their reduction or elimination impairs the ability of the local government to provide for the welfare of the public.  When preparing for arbitration the parties collect wage data and make detailed comparisons to other local governments.  But these data and comparisons  should be collected for the other services provided by local governments.  Just Google “park playgrounds” and you will find lots of interesting data like this.

The bottom line is that the current economy requires us to look at ability to pay in a different way.

Lesson #2:    Don’t Assume Any Arbitrator is Heartless

 

In its final offer the School District was careful to make its step freeze proposal retroactive but provided that it would forgive any overpayments of salary that occurred between the beginning of the fiscal year and the imposition of the District’s final offer.  The arbitrator found that aspect of the offer, forgiving the overpayments, made the offer more palatable for him.

The union had put on evidence that imposing a retroactive wage freeze would create a hardship for some teachers.  No matter how convincing such evidence is, the arbitrator is human and such evidence would be hard to completely ignore.  Note that arbitrators have in the past ordered retroactive wage reductions that required repayment to the local government—see this decision.  However even if there is a chance that an arbitrator could make such a difficult decision is it best to try and avoid putting him or her in such a tough spot.  (Of course if the “evergreen” doctrine were legislatively abrogated there would be little risk of a retroactive wage reduction.  Something along these lines may occur if the planets align during this legislature.)  Bottom line:  keep the human side in mind.

Nothing in the recent Fogelberg award changes my thoughts on preparing for collective bargaining—see this prior blog post.  But now local governments should remember to be ready to explain in detail at the bargaining table how other services will be affected by the union’s demands.

 

Here is a basic checklist of tasks to accomplish before bargaining begins.  Detailed strategic ideas for use during bargaining will be the subject of other posts.

#1.       Map Out Overall Strategy

You must start out with a plan. The big strategic objectives can be fleshed out before or during a closed session with the elected officials.  Do you need a major reset of wage and benefit levels?  Or are you simply shooting for a one year freeze.

Are there work rules or staffing rules that shackle management? Read and reread NRS 288. 150 paragraphs 3 and 5–are there things you want to do that can fit into the managment rights statute that don’t need to be negotiated?

Think hard about all of these things and come up with an overall plan.  Even if you need a major reset there are two schools of thought:  go for everything you can right now—this economy presents the best climate for local governments to make headway.  On the other hand some folks prefer to avoid a huge battle and chip away at generous contract terms gradually over time.  Local politics, your budget and staff time constraints all weigh into the equation.

How often do you want to meet? Do you expect to end up in fact finding or arbitration and therefore want to get those things scheduled as soon as possible?  Are automatic wage or benefit adjustments looming?  All of these points should be considered.

#2.       Carefully Consider Ground Rules

Ground rules are a tool more often used in public sector bargaining and not used very much in the private sector.  They can play a helpful role in setting up the mechanics/housekeeping parts of the bargaining process and maybe even include a schedule of meetings.  However, ground rules setting up “confidentiality” of negotiations can really hamper the employer’s ability to keep its own employees and the public informed about what is happening, (or not happening) at the bargaining table.  Moreover, ground rules containing union promises to not speak to public officials about bargaining topics are impossible to enforce and there may even be First Amendment arguments unions can make when they get caught.  Here is a basic set of ground rules that should be helpful most situations—be sure to tailor them to your situation.

#3.       Have the Right People at the Table

Who will be the chief negotiator?  There may be a need to bring in outside help to tap expertise or where management simply cannot devote the time necessary.  Sometimes there is a complicated relationship between management and the elected officials and using an outsider to do the bargaining works better.  No matter who the chief negotiator is be sure someone from HR is present at the table as a resource and to take detailed notes.  Having finance and folks from operations on the team, even if just behind the scenes, is critical.  Outside financial experts are widely used by unions.  More local government employers should consider using such an expert—to testify or just for behind the scenes input.

#4.       Prepare Proposals Containing Actual Contract Language

Many employers like to start off by presenting a written list of bullet points at the first meeting.  That is fine to start the discussion of concepts.  But it only works if the union is willing to really talk through the concepts and those talks result in actual draft contract language being prepared, (before impasse)—even if just for further discussion.

Sadly, many times the union just rejects or ignores the bullet points.  Sometimes then the employer just stops there and doesn’t propose actual contract language.  Then when impasse happens the union will argue that the employer cannot offer in fact finding or arbitration a proposal that was not made at the table.  There may be ways around that objection but why put yourself in that position—just get the actual proposed contract language on the table before either party has the right to declare impasse.

#5.       Collect Data To Back Up the Proposals and Present Them with the Proposals

You must proceed into negotiations with the assumption that you will ultimately end up in fact finding or arbitration.  The fact finder or arbitrator will consider three things:  ability to pay, internal equity and external equity.  How much weight will be given to each factor will depend on the circumstances.

I suggest that you collect the relevant backup data when preparing the proposals.  (If you prepared your proposals without doing your homework first you may reconsider some of them when you look at the data.)

It is optimal to present the data collected to the union at the table with the proposal.  The union may look at it and reconsider its position.  Or it may simply fail to refute it—a fact that the fact finder or arbitrator may find significant.  If the union presents data to counter yours for the first time at the hearing the fact finder or arbitrator may well eye it with suspicion.  Bonus: if you have collected this data early you will keep your legal fees down later when your attorneys are preparing for fact finding and arbitration.

Conclusion

You can never prepare too much for negotiations.  Until and unless the legislature makes big changes to NRS 288 the employer will always be behind the eight ball.  Please feel free to make comments with any other ideas that may have worked for you.

The decision is noteworthy for the fact that it awards a pay increase despite the fact that the economy is in shambles and the other Washoe bargaining units had been making concessions.  Also noteworthy is the arbitrator’s stunning assertion that in deciding that the County could afford the raises he considered the fact that County could have implemented a new tax but in the past had refused to do so.  (See pages 27 and 31).  Opining that because the County never explained why the tax could not be implemented the County was merely shying away from a “unpleasant” political decision.  It is true that making largely unemployed citizens pay a new tax so deputies can get 3.125% raises would be “unpleasant” for the County Commission.

Here are some points worth noting:

• The arbitrator did concede that an employer can defend against a proposed wage increase where it can show that “vital programs” are clearly threatened.  (See page 27).
• The County’s ending fund balance exceeded budget by $4.16 million.  (See page 29).
• The County’s movement of $19 million into a fund for payment of retiree health benefits was not legally required therefore that was money that could fund raises.  The arbitrator conceded that funding of the future liability would be “prudent”, but he declined to say what level would be prudent. (See page 30).
• The County historically over estimates expenses when budgeting. (See page 27).   No discussion by the arbitrator regarding the fact that agencies must submit balanced budgets and that if they did the opposite and underestimated expenses they would either be failing to pay bills, cut services on short notice or spend more than budgeted,  (and the person doing the spending would go jail). Concessions by other bargaining units are not very relevant according to Hoh.  External comparability is the most relevant and is “market driven”. (See page 41).
• Any inequities between the bargaining units have been agreed to by the employer over time. (See page 42).  However, the arbitrator did hint that if county had historically treated all the bargaining units exactly the same, that pattern might be more relevant. (See page 52).
• Inequities between the bargaining units are also caused by the fact that non public safety unions don’t get binding arbitration and are therefore “helpless” after impasse. (See page 42).  This is factually wrong—the arbitrator ignored NRS 288.200 paragraph 6 which permits any union to ask that the fact finder’s report be binding on the parties.
• Stunning:  spending more on the deputies’ may negatively impact the morale of other County employees but will not negatively impact existing public service to the community.  Just the opposite—the raises will improve public service because deputies will have improved morale.  Happier deputies are better deputies.  Hard to argue with that!

Of course the County’s case had some problems:

• The County Manager sent an email to employees painting perhaps too rosy a picture of the County’s finances. (See page 29-30).
• The Sheriff himself testified as a witness for the union that the deputies’ wage and benefit package had ranked last or nearly last among the nearby entities.  The arbitrator decided that the wage and benefit package resulted in a significant recruitment and retention problem for the County. (See page 49-50).

The upcoming legislature is likely to again consider changes to NRS 288–this decision is likely to spur proposed amendments.