As has been chronicled over the past several years, Illinois state and local governments have continually been faced with tremendous financial strain. Recovery from the 2008 financial crises, often referred to as “the Great Recession,” has been slow in coming or seemingly non-existent. As a result, financial strain has been placed at the forefront of collective bargaining negotiations, as Illinois employers have taken the position that wage freezes or below cost-of-living increases are necessary in the current economic climate while unions, on the other hand, have claimed that employers have a sound, stable financial condition sufficient to support multi-year wage increases. Indeed, Arbitrator’s have recognized the current economic climate and have not discounted employer’s positions regarding its financial difficulties. While arbitrators are sympathetic to these genuine concerns, however, recent awards show that arbitrators have not endorsed employer claims of inability to pay. Nor have arbitrators been ready to accept innovative arguments from employers, particularly arguments that retroactive pay is prohibited by state statute and a recent Illinois Supreme Court decision.
In a recent interest arbitration award, County of Kankakee/Kankakee County Sheriff and Illinois FOP Labor Council Lieutenants Unit 150-C, ILRB No. S-MA-15-125 (Arb. Morgan 2017), unique and innovative arguments raised by the employer were rejected, resulting in the arbitrator adopting the Union’s final offer because it complied with the applicable factors prescribed in Section 14(h) of the Act.
By way of background, three represented lieutenants in the Kankakee County Sheriff’s Office had not received an increase in their base pay since 2009, although other bargaining units of the County, including other units in the Sheriff’s Department represented by the Union, had received pay increases. During the negotiations and at interest arbitration, the Union sought a 2% increase per year of the successor contract while the County offered 0% for the first two years of the successor contract and 1% in the final year. At interest arbitration, the County of Kankakee made two unique and innovative arguments that it could not pay retroactive pay to the Union. More specifically, the County claimed that it was prohibited from paying retroactive wage increases because (1) Illinois statute, 55 ILCS 5/6-1000, bars retroactive pay unless the County Board passes it in an annual appropriations bill; and (2) the County lacks lawful authority to pay retroactive wages pursuant to the Illinois Supreme Court’s decision in State v. AFSCME, 2016 IL 118422 that held pursuant to Section 21 of the Illinois Public Labor Relations Act, collective bargaining agreements for state employees are subject to the General Assembly’s appropriations power. In rejecting these arguments, Interest Arbitrator Cary Morgan found that neither Illinois statute nor Illinois case law limited her authority, and as a consequence, she was permitted to award retroactive pay to the Union despite the County’s failure to pass a specific appropriation for two years of retroactive pay. Arbitrator Morgan’s reasoning was based on five principal points, which are as follows:
First, Arbitrator Morgan reasoned that if the County was correct, public employers would never have to give retroactive pay, especially given that contracts are seldom resolved within the first year of expiration, particularly those resolved through interest arbitration.
Second, Arbitrator Morgan stated that in over thirty years of Illinois interest arbitration awards there is not a single case to support the assertion that retroactive pay is barred unless there is an appropriations bill.
Third, Arbitrator Morgan further explained that Section 15 provides that the Illinois Public Labor Relations Act, “or any collective bargaining agreement negotiated thereunder shall prevail and control” in the event of conflict with any other law or executive order regarding wages. Thus, the provisions of the Illinois Public Labor Relations Act preempt the statutes relied upon by the County.
Fourth, Section 14(j) of the Illinois Public Labor Relations Act expressly provides for awarding increases retroactively:
…If a new fiscal year has commenced either since the initiation of arbitration procedures under this Act or since any mutually agreed extension of the statutorily required period of mediation under this Act by the parties to the labor dispute causing a delay in the initiation of arbitration, the foregoing limitations shall be inapplicable, and such awarded increases may be retroactive to the commencement of the fiscal year, any other statute or charter provisions to the contrary notwithstanding. At any time the parties, by stipulation may amend or modify an award of arbitration.
Fifth, Arbitrator Morgan distinguished the interest arbitration from State v. AFSCME. In State v. AFSCME, the dispute arose from an arbitrator’s award to enforce granting a wage increase in a collective bargaining agreement between AFSCME and the State of Illinois. The appropriation authority at issue in State v. AFSCME was that of the General Assembly and not a county as was the case in the interest arbitration.
In view of this award, employers should be mindful that interest arbitration is a very conservative process. It does not reward wishful thinking or “good ideas” or some inchoate desire for “more” (in the case of a union”) or “less” (in the case of an employer). And it rewards those parties advancing proposals that most closely conform to the criteria that arbitrators have articulated over the course of issuing his or her awards. Parties generally know that this is the reality of interest arbitration. Arbitrator Morgan confirmed this logic in the award by stating “It would be for a court to determine whether State v. AFSCME applies to an Interest Arbitration award” and “My authority, jurisdiction, and responsibilities in this Interest Arbitration derive from the Act, the parties’ Collective Bargaining Agreement, and their arbitral Stipulations.”
We will keep you apprised of interest arbitration developments as they become available. As always, please contact us with any questions you may have about this development.