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IN THE MATTER OF FACT FINDING BETWEEN:

Neshaminy Educational Support Professional


Association PSEA-NEA

and

Neshaminy School District

REPORT OF THE NEUTRAL FACT FINDER

Background

The most recent collective bargaining agreement between the


Neshaminy School District and the Neshaminy ESPA is for the term 2003-2009.
Negotiations have taken place between the parties for a successor agreement,
beginning December 3, 2008. The parties met and exchanged proposals. Both
the District and the Association prepared and presented separate comprehensive
proposals for settlement. None of these efforts so far have resulted in agreement.

On March 12, 2009, the District advised the Association that it would be
exploring the idea of subcontracting out some of the functions performed by unit
employees, specifically work performed in the transportation, custodial,
maintenance and food service operations. Later in negotiations, the District
advised the Association that grounds work was also being considered for
outsourcing. Requests for Proposal (RFP’s) were received from bidders outlining
the potential savings which could be realized through subcontracting.

In an effort to reach agreement, the parties voluntarily chose to enlist the


assistance of a neutral fact finder. The parties agreed that the fact finder would
engage in both mediation, as well as formal hearing, prior to the issuance of a
report containing recommendations. The parties jointly appointed the
undersigned, Margaret Brogan, to act in that capacity. 1 Meetings and hearings
were held between the parties and the fact finder on March 15, March 25 and
April 6, 2010. At that time, the parties presented evidence and argument to
support their respective positions in this matter. The findings of fact and
recommendations below are based upon the information provided to the fact
finder during this process.

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While Act 88 allows for fact finding if either party requests, the parties chose to utilize private fact finding
because the parties found the 40 day period for the issuance of a fact finding report to be too constraining
given the complexities of this matter.

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The District’s Fiscal Position

During this proceeding, the District has presented persuasive evidence to


this fact finder that it is in a precarious fiscal position. The District has
experienced a sharp drop in local taxes and other revenues. State subsidies
represent just a small percentage of total general fund budget revenues. Health
care and retirement system payments have deeply escalated. Act 1 limits the
District’s ability to respond to declining revenues and increased expenditures
because of the statute’s cap on any tax increases. The Act 1 cap presently is
only 2.9%, and may be less for the 2010-11 school year.

The Issue of Subcontracting

The results of the RFP’s indicate that the District could realize very large
savings, perhaps as much as 15 million dollars for the next three years, if
transportation, maintenance, custodial, grounds work and food service
employees were laid off and outsourced. At first blush, subcontracting presents
a savings option for a District that has little to no money to spare, and a limited
ability to find more.

At the same time, subcontracting can have the obvious impact of the loss
of unit employees. A good number of these workers are citizens and taxpayers
in the District. Therefore, their layoff due to outsourcing would have a negative
ripple effect upon the local economy. Moreover, these employees, many with
long tenure, have served the District well, providing invaluable and essential
service to the District’s children.

Putting aside the direct impact on unit employees and their families,
subcontracting, quite simply, does not always “work.” If the District were to
outsource key operations, it may lose control over the quality of those essential
functions. A subcontractor may hire employees who are unqualified. It may give
those employees low pay and benefits, and limited job protections, resulting in
frequent turnover and poor work product. If this School Board takes the knee
jerk response, in an attempt to appease taxpayers today, of jettisoning its
experienced employees and replacing them with the unknown workers of a
subcontractor, it may find itself in a far worse predicament down the road, and
much explaining to do to its taxpayers, when basic services, needed to support
the education of its children, have been compromised.

Moreover, the decision to subcontract will most assuredly result in


litigation, as the Association will question whether the decision to subcontract has
been made in conformance with applicable law. Whatever the merits of each
sides’ respective positions, this litigation will take time and money, and will leave
the entire District -- its employees, its students and its taxpayers -- in a legal
limbo until the issues are resolved by tribunals outside this District. It is obviously

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far better if the parties can reach agreement, allowing the important work of the
District -- the education of its students – to be its focus.

Conclusions of the Fact Finder

Two critical facts have been revealed. The District is entitled to realize
significant savings in this contract in light of the above. At the same time, it is
unrealistic to expect this unit to bear the total cost of the savings potentially
realized by subcontracting given the wages and benefits of this unit. Savings
should be expected in this collective bargaining agreement, but the District also
needs to also find savings elsewhere.

I have evaluated the competing concerns and arguments of the parties in


the light of the above. I considered two avenues to address these problems. I
believe it is educational for the District and the employees represented by the
Association to see both scenarios I have considered and my rationale for why I
am recommending Scenario #2 below.

Rejected scenario #1

Given the problems with subcontracting, and the impact upon the workers,
I first considered a scenario where no subcontracting would be recommended.
However, in order to achieve substantial savings in this contract, cuts would have
to be made across the unit, impacting those employees who are in no danger of
being outsourced.

There are only limited areas where savings can be found: through a
reduction of the labor costs of wages, current employee benefits and retiree
benefits. To achieve significant savings, in exchange for a no-subcontracting
promise, the following would be reasonable: 1) a 5% pay cut across-the-board
each year of the proposed collective bargaining agreement; 2) the Health plan
proposed by the District (Blue Cross Personal Choice C3-F3-01 or comparable
plan along with the proposed dental, vision, and prescription plans); 3) Health
care premium co-shares of 10%, 11%, and 12% starting with the 2010-11 school
year; and 4) retirees going forward would have to pay the same health care co-
shares as the unit, with no retiree benefits for employees hired after July 1, 2010.
It is obvious that this proposed contract would be painful for all unit employees,
and retirees, and it seems inequitable that those employees who are not
threatened with subcontracting should bear such a heavy burden.

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Recommended scenario #2

However, a solution to this apparent dilemma of finding significant


savings, while at the same time providing equity and job protection to unit
employees, may be possible. A review of the RFP’s for subcontracting of
transportation reveals the components of what might be a palatable answer. The
lowest bid promises that it will provide preferential hiring of current staff at the
current wage rate, along with a $3000 summer unemployment eligibility per
driver, and medical benefits with employer contributions. At the same time, the
District will realize not only the reduction of the labor costs, but also the sale or
rent of the bus inventory of the District, bringing about significant revenues. This
would provide job protections to the transportation employees, so long as the
District makes these stipulations part of any deal it makes with a subcontractor.

Along with job protections in the short term, unit employees should be
granted the right to protect their jobs and benefits in the long term, through
representation of the employees by the Association. In very persuasive court
precedent, which reflects a similar situation to the one before us, a federal court
upheld the decision of the National Labor Relations Board, which found that a
subcontractor was required to recognize the union that had previously
represented the school district’s bus drivers when the sub took over the provision
of school bus transportation. 2 Rulings by the NLRB are dependent upon the
facts of each case, but given the circumstances presented here, this precedent
appears to be applicable and provides a very appealing option. In order for the
District to be fair and equitable to its transportation employees, any outsourcing
contract the District pens with a subcontractor should include job and union
protection guarantees.

While subcontracting of the transportation employees is far from a perfect


solution, the outsourcing of those individuals, so long as jobs and union rights are
protected, would provide the significant savings of approximately $8,500,000
over the term of the proposed four-year collective bargaining agreement. With
these savings realized, the rest of the unit would not be as negatively impacted,
and, indeed, could be the beneficiaries of a wage increase and better health
benefits. In addition, current retiree benefits would remain in effect. Finally, the
District should promise not to subcontract any other services during the life of the
agreement, granting job security to those still employed.

2
Dean Transportation, Inc. and NLRB, 551 F.3d 1055 (D.C. Cir., 2009).

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FORMAL RECOMMENDATION OF THE FACT FINDER

Accordingly, based upon all of the above, I recommend that the


following be the basis for a new collective bargaining agreement between
the parties:

• A four year contract (2009-10 through 2012-13) in order to provide needed


labor stability.

• Article 1, paragraph 1.6: amended to include provision that District may


not subcontract out any unit work, other than transportation services,
during the life of the collective bargaining agreement.

• Article 7, paragraph 7-1: amended to include across the board increases


of 0% for the current year, 3% for 2010-11, 3% for 2011-12, and 3% for
2012-13.

• Article 8: amended to indicate that the District will provide PC 20/30/70


Health plan with 10% premium co-share each year, beginning 2010-2011.
Clause will include “me-too” provision that if the teacher unit, which is
currently in bargaining, gets a better health plan or lesser premium co-
shares, then this unit will be accorded the same deal.

• Article 8: All current retiree benefits remain intact, with the exception, if it
not already the status quo, that retirees be placed on the same health plan
as current employees. Amended to state that no retiree benefits will be
provided to those employees hired after July 1, 2010.

• Appendix B is deleted.

• Appendix C, Memorandum of Understanding, is to be amended so as to


delete the following paragraphs: 3, 4, 6 and 10.

• New provision: District is entitled to subcontract out transportation


services to a subcontractor so long as the following provisions are
contained in the contract between the District and the subcontractor:

1. All transportation employees currently employed by the District


will be offered employment by the subcontractor; and if they
accept, will be hired.

2. All hired employees will be maintained at their current wage


rate, and benefits will be granted with a significant amount of the
premium paid by the subcontractor.

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3. All hired employees will be entitled to $3,000 of summer
unemployment benefits.

4. The subcontractor will purchase the bus inventory of the District.

5. In accordance with applicable law, and upon the hiring of a


majority of the District’s employees performing transportation
services, and upon a proper demand for recognition and
bargaining by the PSEA, the subcontractor will promise that it
will recognize and bargain with the PSEA as the collective
bargaining agent of the employees previously employed by the
District and hired by the subcontractor.

• New provision: Transportation employees laid off as a result of


subcontracting will be granted a severance benefit of $74 per sick day.

All other contract provisions, not referenced above, will remain the
same as reflected in the 2003-09 agreement.

____________________________
Margaret R. Brogan, Fact Finder

Date: April 29, 2010