BEFORE THE ARBITRATOR
In the Matter of the Arbitration of a Dispute Between
LAW ENFORCEMENT EMPLOYEE RELATIONS
DIVISION OF THE
WISCONSIN PROFESSIONAL POLICE
VILLAGE OF REDGRANITE
Mr. Mark R. Hollinger, Staff Attorney,
Wisconsin Professional Police Association, 340 Coyier
Lane, Madison, Wisconsin 53713 appearing on behalf of the Law Enforcement Employee
Division, Wisconsin Professional Police Association, referred to below as the Association.
Mr. William G. Bracken,
Employment Relations Services Coordinator, Davis & Kuelthau, S.C.,
Attorneys at Law, 219 Washington Avenue, P.O. Box 1278, Oshkosh, Wisconsin
appearing on behalf of Village of Redgranite, referred to below as the Village or as the
The Village and the Association are parties to a collective bargaining agreement
in effect at all times relevant to this proceeding and which provides for the final and binding
arbitration of certain disputes. The parties jointly requested that the Wisconsin Employment
Relations Commission appoint an Arbitrator to resolve a dispute reflected in grievance
number 00-147, filed on behalf of the entire local. The Commission appointed
McLaughlin, a member of its staff. The parties submitted written stipulations, including
the Commission on September 1, 2000, and requested that the grievance be resolved on the
stipulation and their written briefs. The parties submitted briefs, and waived the filing of
on October 16, 2000. In a letter to the parties dated November 6, 2000, I stated:
You submitted the above-noted file on a written stipulation,
including exhibits and written
briefs. I write this letter to ask you two questions to make sure I resolve the matter within
of your agreement.
The Association's brief (at 7) states: "The Village chose a
that required deductions when
other retirement plans would have required no such deductions." The Village's brief (at 6)
"There is no escaping the fact that taxes are inevitable and the Village has no choice but to
with the tax laws and withhold the appropriate taxes on its $2,000 contribution to an
Regarding the assertion made by the Association, Item 17 of the Stipulations addresses the
parties' consideration "during the negotiations for the 2000-2002 Collective Bargaining
of "other retirement plans." Can I treat as fact the Association's assertion that retirement
and are available to the Village, that do not require the payroll deductions at issue here?
My question regarding the
Village's assertion requires a bit more background. Item 16 of the
Stipulations notes that the "maximum allowable contribution to an Individual IRA is $2,000
year." The Village adds, at 10 of its brief, that "past practice cannot be used to prevent the
from complying with state and federal tax law." My question concerns the scope of this
It is apparent the Village contends that State and Federal law compel it to deduct payroll
taxes on its
$2,000 contribution. Beyond this, it is apparent the Village contends that it cannot be
under the contract, to grant an "after tax" benefit of $2,000, since that would require a
exceeding $2,000 by "about $153 per person" (Item 9 of the Stipulations) in FICA and
taxes. The contractual component of this argument is apparent, but I am concerned about its
statutory ramifications. Does the Village contend that the Association's attempt to require a
"after tax" retirement benefit in itself violates State and Federal law?
In a conference call conducted on November 13,
2000, the parties answered the questions posed by
my letter of November 6.
The parties did not stipulate the issues for decision. I have determined the record
Did the Village violate Section 13.2 by contributing less than
amount to equal $2,000
yearly, in principal, into a bona fide retirement plan maintained for regular full-time
If so, what is the appropriate remedy?
ARTICLE 3.0 MANAGEMENT
3.1 Except as expressly modified by
other provisions of the contract, the Village possesses
the sole right to operate the Village and all management rights repose in it. These rights
are not limited to, the following:
. . .
. . .
g. To take whatever action is necessary to comply with State or Federal law;
. . .
ARTICLE 13.0 FRINGE
. . .
p. To determine the financial policies of the Village;
13.2 Retirement: The
Village shall provide retirement benefits to regular full-time
employees to equal $2,000 yearly, paid in equal monthly installments, paid into a bona fide
plan adopted by the Village. The Village may change the retirement plan to an equivalent
. . .
ARTICLE 16.0 GRIEVANCE
. . .
16.7 Decision of the
Arbitrator: The decision of the Arbitrator shall be in writing to the
Employer and the Union. The Arbitrator's decision shall be final and binding upon the
The decision of the Arbitrator shall be
limited to the subject matter of the grievance and shall be
restricted solely to interpretation of the contract provision allegedly breached. The Arbitrator
not modify, add to or delete from the express terms of the Agreement.
. . .
ARTICLE 22.0 WAGES
. . .
22.2 The salary schedule shall be:
2000 Probation . . . Step 3
. . .
Utility Operator 9.98
The parties' written stipulation of fact (Stipulation) reads thus:
The parties hereby stipulate to the
accuracy of the following:
Grievance 00-147, Case 12, No. 58915, MA-11108 is arbitrable and timely.
2. That Grievance 00-147 is a matter concerning the
interpretation of the 2000-2002
Collective Bargaining Agreement, and thus, a matter properly within the jurisdiction of the
3. That no deduction of payroll taxes (FICA and
Medicare) on the retirement plan
provided to employees by the Village occurred prior to the completion of the
negotiations for the 2000-2002 Collective Bargaining Agreement.
4. That deduction of payroll taxes (FICA and
Medicare) on the retirement plan provided
to employees by the Village occurred after the completion of the most recent
negotiations for the
2000-2002 Collective Bargaining Agreement.
5. That prior to the Wisconsin Professional Police
Association (WPPA) first representing
the Water Utility and Wastewater Treatment Plant Employees in 1997, the Village of
unilaterally selected and provided the employees with a Personal Individual Retirement
(IRA) as the retirement plan adopted by the Village.
the Water Utility and Wastewater Treatment Plant Employees were not
represented by any union prior to 1997, nor were they organized into an independent union
purposes of collective bargaining prior to 1997.
the parties did not discuss whether, or not, payroll taxes would be deducted from
employees' paychecks for the $2,000 contribution made by the Village into each employee's
IRA during the most recent collective bargaining negotiations, nor did the parties discuss this
of the employees' retirement plan during the previous negotiations for the 1997-2000
the $2,000 contribution made by the Village into the employee' Personal IRA is
treated as employee income for tax purposes, and requires that the Village deduct payroll
state and federal income taxes for such a contribution.
payroll taxes (FICA and Medicare) on the Personal IRA retirement plan provided
to employees by the Village equals approximately One Hundred Fifty-Three ($153) per year
should the Arbitrator sustain the grievance, the Arbitrator shall retain jurisdiction
over the implementation of the remedy.
the Village's legal counsel advised the Village to withhold appropriate payroll
taxes including state and federal income taxes on the Village's IRA contributions made on
the Village Advised the employees in early 2000 of the option of submitting
revised W-4 forms so that employees could adjust their federal income tax withholding to
more immediate tax benefit.
employees may be able to deduct the Village's contributions to his/her IRA
depending upon his/her federal adjusted gross income, tax filing status and whether or not
actively participates in an employer-sponsored retirement plan.
beginning in the year 2000, the Village has made contributions, on a monthly
basis, to the employee's IRA account in equal installments that will total $2,000 on an annual
the IRA plan currently in place is a bona fide retirement plan which began in
during the 2000-2002 Collective Bargaining Agreement negotiations, the Union
proposed that the Village adopt the state's WRS Retirement Plan. No agreement was
its place the parties amended the 1997-2000 contract to increase the Village's retirement plan
contribution from 4 percent of the employee's annual gross earnings as provided in the
contract to equal $2,000 yearly paid into a bona fide retirement plan adopted by the Village.
maximum allowable contribution to an Individual IRA is $2,000 per year.
the Union requested during the negotiations for the 2000-2002 Collective
Bargaining Agreement, and the Village explored, other retirement plans but for various
Village concluded, and the Union eventually agreed, to continue with the same individual
that had been in existence since approximately 1985.
the Arbitrator shall formulate the issue. The parties suggest the issue is as
A. Association: Did the Village violate Article 13.0 (Fringe Benefits), Section
13.2 (Retirement), of the Collective Bargaining Agreement by failing to provide
retirement benefits to regular full-time employees to equal $2,000 yearly? If so, what
is the appropriate remedy?
B. Employer: Did the Village violate Article 13.2 (Retirement) by providing
retirement benefits to regular full-time employees to equal $2,000 yearly, paid in equal
monthly installments, paid into a bona fide retirement plan adopted by the Village?
If so, what is the remedy?
The IRA referred to in the parties' stipulation is referred to below as the Plan.
Grievance No. 00-147 was included with the Stipulation. It reads thus:
. . .
GRIEVANCE: Violation of Article 3.0 - Management Rights, Article 13.0 -
Fringe Benefits; Section 13.2 Retirement, Article 22.0 - Wages, and any other relevant
Sections of the Agreement.
FOR GRIEVANCE: The Employer shall immediately repeal its decision to
assess additional FICA and Medicare Tax deductions from the grievant's paycheck for
contributions toward the grievant's retirement plan. Furthermore, the Employer shall pay
the grievant, any relevant FICA and Medicare Tax assessments to date.
. . .
Also included with the exhibits submitted with the Stipulation is the parties' 1997-99
Section 13.2 of that agreement states:
Retirement: The Village shall provide retirement
benefits to regular full-time employees at the
rate of four percent (4%) of the employee's annual gross earnings, paid into a bona fide
plan adopted by the Village. To be eligible for this benefit, employees must contribute a
of twenty dollars ($20) per month into their own retirement account. The Village may
retirement plan to an equivalent plan.
In the November 13 conference call, the parties agreed that I could treat as fact the
assertion that retirement plans exist, and are available to the Village, that do not require the
deductions at issue here. The parties also noted their understanding that the Village was not
contending that the Association's attempt to require a $2,000 "after tax" retirement benefit in
violates State and Federal law.
THE PARTIES' POSITIONS
The Association's Brief
After a review of the record, the Association contends that Section 13.2 governs the
grievance, and that resolution of the grievance demands that "the arbitrator . . . determine
out the mutual intent of the parties." Here, the "language of Section 13.2 is clear and
and requires that employees are to receive not less that $2,000 annually toward the Plan.
The Village's Plan "is the same as has been in effect since at least 1985, and . . .
payroll taxes be deducted." That the Village never deducted taxes from its contributions to
until after the negotiations for a 2000-2002 labor agreement demonstrates that the parties
understood Section 13.2 to set a contribution level not to be reduced by any necessary taxes.
support for this is demonstrated "by the dictionary definition of the word 'equal'." The
deduction for payroll taxes reduces the $2,000 requirement set by Section 13.2 by $153.
The Association contends that the Village's obligation under Section 13.2 cannot
be analogized to "its legal requirement to deduct payroll taxes on employee wages." The
language of 13.2 and the record of the last fifteen (15) years" undercuts the analogy. That
is not required to adopt a retirement plan requiring payroll deductions underscores this
The Village's unilateral choice of a plan requiring payroll deductions cannot be held against
or be used as a basis to reform Section 13.2.
Any possible ambiguity in Section 13.2 can be resolved by demonstrated past
Stipulation establishes that the "Village has never deducted payroll taxes without
its retirement plan contributions, nor has it ever raised the specter of such unreimbursed
The Village "cannot reasonably argue that it did not accept its own actions over the many
If the Stipulation fails to establish a binding practice, it must be found to establish a
waiver of "its right to hold employees responsible for the payroll deductions on retirement
Village failure to act prior to the time at issue here constitutes a
"waiver . . . by the tacit consent or
failure of an employer . . . for an unreasonable length of time, to act upon rights of which it
knowledge." The Plan was unilaterally adopted by the Village no later than 1985, and
to in negotiations." At no time prior to the conclusion of bargaining for the 2000-2002 labor
agreement did the Village act to assert the right challenged here. That right must be
The Association concludes that the grievance must be sustained, and that "the
the Village to reimburse the costs of all payroll deductions taken from employees on their
contributions." The Association further requests "that the Arbitrator either order the Village
reimburse the costs of retirement plan payroll deductions prospectively, or order the Village
a retirement plan that requires no such deductions."
The Village's Brief
The Village contends that Item 14 of the Stipulation establishes that it is providing
contributions to the Plan totaling $2,000 annually. This figure "is the maximum allowable
contribution the Village can make into an employee's personal IRA account." From this it
that "the Village has complied with the specific requirements contained in Section 13.2 of the
contract." Those requirements must be considered clear and unambiguous, and the grievance
therefore, be denied.
Section 3.1 provides the Village the authority to determine financial policies and to
action required by State or Federal law. The Village contends that it erred in not deducting
deductions in the past, and acted promptly to correct that error. This action was authorized
Nor can past practice evidence be used to reach a contrary result. The Village's legal
supercede the contractual significance of past practice, and past practice cannot be used to
an error once it is discovered by an employer." Because the Village did no more than
the law in a fashion not violating the contract, past practice affords no basis to resolve the
The Village further argues that the Association's contention that Section 13.2
"after tax" benefit is inconsistently advocated and must be rejected. That the Village
employees the opportunity to submit revised W-4 forms "to receive a more immediate tax
rather than wait until the employee filed his/her tax return" establishes the Village's good
addressing the error. Depending on the individual employee's personal circumstances, "the
Federal taxes that have been withheld will eventually be recovered by employees, in most
More significantly, the Association has failed to submit evidence "that the parties ever
'after tax' or 'net' benefit arrangement on the Village's retirement contribution." The
position is inconsistent with other agreement provisions. Section 22.2 specifies wage rates,
can be no serious argument that these wage rates are "net" of taxes. Arbitral authority
The language of the labor agreement is, in any event, clear and unambiguous and
perception of the "equities" of the grievance affords no basis to overturn that language.
specifically restricts an arbitrator to the language of the agreement, and the Association's
pull arbitral review beyond it must be rejected.
A review of the record substantiates the contractual strength of the Village's action
contractual weakness of the Association's position. The Village concludes by requesting
Arbitrator dismiss the grievance."
The issue for decision does not adopt either statement proposed by the parties. Those
statements presume the violation or compliance put at issue here. The issue stated above
the parties' agreement that Section 13.2 governs the dispute, and notes that Village
non-compliance with the section cannot be presumed.
As preface to addressing the issue, it is useful to stress what is not in dispute. The
of state and federal law is only peripherally posed here. The grievance can be read to seek
the Village decline to pay the disputed tax. As the Village accurately points out, Subsections
p of Section 3.1 preclude this. The taxes must be, and have been, paid. Thus, the
is contractual, not statutory. The issue is whether the $2,000 payment required by Section
a gross or an after-tax benefit to the employees.
The Management Rights specified in Article 3 do not govern this issue directly, since
terms of Section 3.1, they apply "(e)xcept as expressly modified by other provisions of the
Subsections g and p of Section 3.1 thus govern the grievance only to the extent Section 13.2
not. While the parties differ on their views of Section 13.2, it is evident that
the section directly governs the grievance. Contrary to the parties' arguments, the
Section 13.2 cannot be said to unambiguously dictate adoption of either party's view. The
advanced by each party are forceful and plausible interpretations of the section.
The language of that provision, and what can be said of relevant interpretive guides,
the Association's view. Section 13.2 obligates the Village to "provide retirement benefits . .
equal $2,000 yearly". Significantly, the mandate focuses generally on "retirement benefits .
. . to
equal" rather than stating no more than the specific dollar amount. As an interpretive matter,
terms of Section 13.2 must be granted meaning. The Village's view, however, renders
the reference "retirement benefits . . . to equal". Under the Village's view, the first
"The Village shall provide to regular full-time employees $2,000 yearly, paid in equal
installments . . ."
Viewed more specifically, the reference preceding the "$2,000 yearly" payment
Section 13.2 favors the Association's view. The Village forcefully points out that the
be read as no more than a preface to the required contribution. However, the language
Section 13.2 must be contrasted to other references preceding contractual payments. For
Section 22.2 states that "(t)he salary schedule shall be", then specifies the dollar amounts.
would appear to be no latitude in the prefatory statement, and the Village properly notes the
payments are a gross benefit. The prefatory statements in the contract provision governing
the in re
ohio civil service employees association (ocsea) and public employees representatives
union (peru), 97 LA 942 (Brunner, 1991) case cited by the Village are similarly specific.
language provides that "(a)ll employees . . . shall receive a monthly car allowance of
that "each staff representative shall receive a monthly per diem allowance of $185.00".
prefatory reference permits latitude for interpretation. The arbitrator found each to preface a
Here, however, the reference preceding the "$2,000 yearly" payment is "retirement
. . . to equal". Each part of this reference introduces fluidity into the mandated payment.
mandate is thus focused initially on "retirement benefits" and then on a stated dollar amount.
initial focus on retirement benefits must be noted. The reference "to equal", when combined
focus cannot be lightly brushed aside. On a grammatical level, the Association's view
some flexibility into the "$2,000 yearly" payment, since a net benefit of $2,000 will require
than $2,000 gross contribution. This fluidity has some support in the language of Section
More significantly, Section 13.2 deals with a retirement plan, and this lends further
significance to the reference to "retirement benefits . . . to equal 2,000 yearly". As
Paragraphs 15 and
16 of the Stipulation make clear, the retirement plan governed by Section 13.2 is an
IRA subject to
a maximum annual contribution of $2,000. Paragraphs 8
and 12 of the Stipulation further clarify that the contribution is taxable income to
employee. Paragraph 13 makes apparent that, subject to an individual employee's personal
circumstances, the employee may be able to deduct the Village's contribution to the IRA.
general background sketches out, in my view, that the "$2,000 yearly" reference is akin to
of a generally understood term of art. Contributions to a traditional IRA may or may not be
deductible, but are capped in any event at $2,000 yearly. The same cap governs the ROTH
which must be funded with after-tax dollars. Thus, the amount of after tax dollars necessary
the $2,000 cap on IRA contributions may vary, but the $2,000 cap is constant and is thus a
to a principal contribution to the retirement account. Put another way, an individual who can
an IRA contribution will suffer less out of pocket expense to reach the maximum contribution
will an individual who cannot. In either event, however, the principal amount contributed to
the IRA retirement benefit would be $2,000. The use of individual IRA plans is fairly
with it, in my view, the common understanding that in the retirement area it may take more
than $2,000 to contribute the maximum amount of principal annually to an IRA. The
maximum is constant, the individual costs to reach it are not.
Against this background, the reference to "retirement benefits . . . to equal $2,000
regard to an IRA plan connotes the maximum annual principal contribution more than the out
pocket expense necessary to reach that contribution. This favors the Association's view of
13.2 over the Village's.
The Village's contention that dollar amounts specified in the agreement are typically
not net, amounts is persuasive. As touched upon above, however, the language of Section
unique. The prefatory reference "retirement benefits . . . to equal" does not mirror the
preface to the
Wage schedule of Article 22. Beyond this, the "$2,000 yearly" reference connotes, in my
different meaning when applied to an IRA than when applied to a salary. Few would
receiving a net benefit from a contract providing "$2,000 yearly" to salary, but that changes
"2,000 yearly" is applied to an IRA. This view is supported by the focus of Section 13.2 on
"retirement benefits" and on the more fluid reference "to equal $2,000 yearly".
What evidence there is of guides to interpreting contractual ambiguity slightly favors
Association's view. The most persuasive of these guides are past practice and bargaining
since they focus on the conduct of the parties whose intent is the source and the goal of
interpretation. As the Village properly points out, the strength of these guides must not be
overestimated. Past practice cannot exempt the Village or the Association from state and
requirements. Section 3.1 g, precludes this. Thus, the prior non-deduction of taxes, even if
characterized a past practice, cannot serve as a tax exemption. As an interpretive matter,
the error has no impact on the labor agreement. More to the
point, the evidence shows at a minimum that the parties have not expressly addressed
the impact of
FICA and Medicare taxes on the contribution mandated by Section 13.2. This increases the
likelihood that when the parties agreed to set a "$2,000 yearly" contribution level, they
understood that $2,000 in principal would be contributed to the IRA.
What evidence there is of bargaining history favors, if slightly, the Association's
Section 13.2 of the 1997-99 labor agreement set the mandated contribution at "the rate of
percent (4%) of the employee's annual gross earnings". Here, the reference to "gross
affords some basis to believe that if the parties saw the "$2,000 yearly" contribution as a
amount, they would have expressly stated this. At a minimum, the evidence of practice and
bargaining history makes it unpersuasive to conclude that the bargaining parties envisioned
other than a "$2,000 yearly" principal contribution to an IRA.
The final consideration worthy of some note is that the Village unilaterally adopted
governed by Section 13.2. The final sentence of the section reserves to the Village the
change the Plan "to an equivalent plan." The Association has noted that the Village chose a
required the taxes at issue here. That other options not requiring these deductions are
the Village makes it difficult to hold the unanticipated tax deductions of the current Plan
In sum, the language of Section 13.2 cannot be considered clear and unambiguous.
the common meaning of its terms favors the Association's view over the Village's. What
there is of interpretive guides does not undercut, and slightly supports that view. Thus, the
of Section 13.2 must be read to impose on the Village a "$2,000 yearly" principal payment
The parties stipulated that I should retain jurisdiction in the event I determined the
violated the labor agreement. The Award stated below notes that retention of jurisdiction,
a flexible period of time to permit the parties to address the issue with or without my
prior to my acting to relinquish jurisdiction. In light of the retention of jurisdiction, and in
presence of the unique language of Section 13.2, further comment on the remedy at this point
advised. The parties should be permitted to address the point mutually prior to any remedial
on my part.
The Village violated Section 13.2 by contributing less than an amount to equal $2,000
in principal, into a bona fide retirement plan maintained for regular full-time employees.
As the remedy appropriate to this violation, the Village shall take appropriate action
affected employees whole for its violation of Section 13.2. As requested by the parties, I
jurisdiction over the grievance to determine the specific remedy. I will retain jurisdiction for
than forty-five days from the date of this Award.
Dated at Madison, Wisconsin, this 27th day of November, 2000.
Richard B. McLaughlin, Arbitrator