BEFORE THE ARBITRATOR
In the Matter of the Arbitration of a Dispute Between
AMERICAN FEDERATION OF STATE, COUNTY AND
AFL-CIO, WISCONSIN COUNCIL 40, LOCAL 244-A
SUPERIOR HOUSING AUTHORITY
(Grievance dated 11/08/00;
Health Insurance Change)
Mr. James E. Mattson, Staff Representative, Wisconsin Council
40, AFSCME, AFL-CIO, 1701 East Seventh Street, Superior, Wisconsin 54880, appearing
on behalf of the Union.
Hendricks, Knudson, Gee, Torvinen & Weiby, S.C., by Attorney Kenneth
A. Knudson, 1507 Tower Avenue, 312 Board of Trade Building, Superior,
Wisconsin 54880, appearing on behalf of the Employer.
American Federation of State, County and Municipal Employees, AFL-CIO,
Council 40, Local 244-A, hereinafter the Union, with the concurrence of Superior Housing
hereinafter the Authority, requested the Wisconsin Employment Relations Commission to
a member of its staff to serve as arbitrator to hear and decide a grievance dispute concerning
insurance change and in accordance with the grievance and arbitration procedures contained
parties' collective bargaining agreement, hereinafter the Agreement. The undersigned,
Bohrer, was so designated. On May 17, 2001, a hearing was held in Superior,
hearing was not transcribed. On August 13, 2001, and upon receipt of the last of the parties'
briefs, the record was closed.
On the basis of the record submitted, the Arbitrator issues the following Award.
The parties did not agree on a statement of the issues. The Union would state the
1. Did the Employer violate the terms of the collective
bargaining agreement and the long
standing past practice when it unilaterally and arbitrarily changed to a different health
(mid contract) offering lower benefits to represented employees than the prior health
2. If so, is the appropriate remedy for
the Employer to reinstate the prior level of health
insurance benefits and to make bargaining unit employees whole for any and all extra costs
employees experienced due to the lower level of health insurance coverage?
The Authority did not submit a statement of the issue(s).
The Arbitrator frames the issues for determination as follows:
1. Did the Authority violate the parties' 1999-2001
collective bargaining agreement when it
changed the level of health insurance benefits available to Union employees effective May 1,
2. If so, what is the appropriate
ARTICLE 5 - MANAGEMENT
The rights, powers, duties and authority of management shall not
be affected by the provisions
of this Agreement, except in those respects specifically referred to herein or which may be
implied from the language of this contract.
. . .
ARTICLE 11 - HOSPITAL INSURANCE
The Employer agrees to contribute on
behalf of all eligible employees the full cost of the
. . .
The Authority is a municipal employer with offices at 1219 North Eighth Street,
Wisconsin. The Authority maintains and operates various rental residential apartments for
eligible citizens in Superior, Wisconsin. The Union represents all regular full-time and
regular part-time employees of the Authority excluding managerial, supervisory and
confidential employees. The
Authority and the Union are parties to a collective bargaining agreement from January 1,
through December 31, 2001.
Atrium Health Care, Inc., hereinafter Atrium, has been the health insurance carrier
by the Authority and its employees for a number of years leading up to the instant grievance.
of 1999, the Authority received notice from Atrium that the cost for continuation of the
plan was going up by 26%, effective May 1, 1999. The Authority decided to continue with
Atrium health insurance plan and absorbed that cost increase. In April of 2000, the
received notice from Atrium that the cost for continuation of the insurance plan was going up
25%, effective May 1, 2000.
Shortly after Atrium's notice to the Authority in April of 2000, the Authority changed
insurance plans within Atrium to one that was less costly, effective May 1, 2000. The
change to the
new Atrium plan resulted in a 5% increase in cost to the Authority for fiscal year 2000-2001.
change to the new plan also resulted in a reduction of health insurance coverage for the
Union employees. At about the same time that the Authority made the health insurance
Authority offered to Union employees a Section 125 Plan. Although the Union did not
the Authority's offer, the Section 125 Plan was later implemented by the Authority.
On November 8, 2000, the Union filed a grievance alleging that the Authority
Agreement when it decreased health insurance benefits effective May 1, 2000. The parties
advanced their dispute to arbitration.
Historically, the parties have had successive collective bargaining agreements for at
years. The language of Article 11 - Hospital Insurance has beena
part of the parties' successive
collective bargaining agreements during this entire period.
During each of the three prior negotiations for labor contracts since 1993, the Union
included in its proposals for negotiation what both parties characterize as a "maintenance of
type clause. On October 28, 1993, the Union proposed the following addition to Article 11 -
The present level of benefits provided for by the Employer's
Health Insurance plan shall be either
maintained or improved by the Employer. In no case will covered employees or dependents
coverage as a result of changing insurance carriers or policies.
On November 20, 1996, the Union proposed the following addition to Article 11-
In the event the Housing Authority changes health insurance
carriers, the Authority must maintain
coverage at levels equal to or better than the current coverage. In no case will covered
or dependents lose coverage as a result of changing insurance carriers.
On August 24, 1998, the Union proposed a "Maintenance of Benefits Clause" as a new
section to be
added to Article 19 Miscellaneous Provisions:
The Employer will not change any economic benefits enjoyed by
members of the bargaining unit
during the term of this contract, unless inconsistent with other provisions of this contract,
meeting with and securing the consent of the Union.
At the time of each proposal in 1993, 1996 and 1998, the parties discussed the
On each occasion, and following discussion, the Union withdrew the proposal.
Over the years, the Authority has made what the Unioncharacterizes as "minor changes" to
the level of health insurance provided to employees which resulted in a reduction in benefits.
Union has not grieved these instances. There is no evidence that the Union objected to any
Additional background information is set forth in the Positions of the Parties and in
POSITIONS OF THE PARTIES
The Authority's unilateral change of health insurance plans was done without
the Union and was midway through the duration of the Agreement. Historically, the
made minor changes in its health insurance coverage for employees. However, the Union's
acceptance of these minor changes is not a waiver of its right to grieve major changes in
insurance coverage. Had the Authority in the past made such a drastic reduction, as here,
would have grieved those reductions. Just because the Union has not previously grieved the
Authority's minor changes does not mean that the Union has acquiesced to major changes or
is estopped from now grieving a major change.
The absence of a "maintenance of benefits" clause in the Agreement does not provide
Authority with the right to unilaterally alter employee's insurance benefits. Arbitrators have
that where there is a benefit of peculiar personal value that is customarily provided
by an employer, management is not permitted to discontinue that benefit or working
Citing, Elkouri and Elkouri, How Arbitration Works, 5th
Edition, pgs. 639-641 (1997); also citing,
Marathon County, WERC, MA-10462 (Levitan, 6/99), and Ladysmith-Hawkins School
District, WERC, MA-5054 (Burns, 8/89).
The Authority obscures the issue by basing its position of an unfettered right to
insurance upon the Union's unsuccessful proposal of a "maintenance of benefits" clause
contract negotiations. However, such a clause was never incorporated into any of the
bargaining agreements. Further, the Authority never proposed changes in health insurance
during prior negotiations. Status quo on health insurance remained the same
until the Authority
changed it, effective May 1, 2000.
Not only was the Authority's reduction in insurance benefits a major new economic
for employees, but the Authority offered no meaningful compensation for such change. The
Authority's offer to add a Section 125 Plan, with a $600 cap, is nominal and is not a
quid pro quo
for such a change. Citing, Town of Beloit, WERC, MA-7333 (Burns, 4/93).
A decision in favor of the Authority would work a forfeiture, which is to be avoided.
Elkouri, supra, at 500-501. The Authority's assertion that it is free to change
the level of health
insurance without negotiating with the Union is faulty in logic. Taken to its extreme, the
position would mean that it is permissible for an employer to unilaterally institute an
with a ten thousand dollar deductible or a million dollar deductible. A decision favoring the
Authority's position would render employee health insurance meaningless and would erode a
benefit. Employees would never receive an offset for this employer takeaway.
Article 11 states that the Authority shall pay "the" insurance, not "any" insurance.
parties clearly intended not to allow the Authority to offer whatever it wanted in health
Further, the insurance provided by the Authority effective May 1, 2000, is not the insurance
Some of the health insurance benefit changes that occurred effective May 1, 2000,
following: office co pay from $15 to $25; emergency room co pay from $40 to $50;
drugs co pay from $8 to $10; dental care coverage from 100% to 80% after payment of
office co pay;
home health care coverage from 100% to 80% after payment of office co pay; maternity
postnatal coverage from 100% to 80%; outpatient hospital coverage from 100% to 80%;
hospital/facility visits coverage during covered admission from 100% to 80%; anesthesia by
provider other than the operating/delivering/assisting provider from 100% to 80%; allergy
testing/serum and injections from 100% to 80%; surgery including circumcision and
100 % to 80%; assisting physician in surgery from 100% to 80%; radiation therapy from
80%; reconstructive surgery from 100% to 80%; rehabilitation services after payment of co
100% to 80%; skilled nursing facilities from 100% to 80%; and supplies/durable medical
and blood from 100% to 80%.
The parties have had a long history and "meeting of the minds" over the level of
insurance benefits. This level has remained essentially the same and the status
quo has long prevailed.
Past practice has been established and the Authority has only made minor changes to
of health insurance benefits. Any assertion by the Authority that it can make major unilateral
without negotiating with the Union runs contrary to the basic principles of collective
The grievance should be sustained. The requested remedy is for the Authority to
employees' prior level of health insurance coverage/benefits and to make affected employees
for any costs expended due to the change in their health insurance coverage/benefits. The
requests that the Arbitrator uphold the fundamental duty of the parties to bargain and
changes in health insurance benefits.
The grievance should be denied.
The Union's grievance is an attempt to obtain an insurance benefit through arbitration
than through the process of collective bargaining. Executive Director Don Rogers testified
during the 1998 negotiations the Union proposed a "maintenance of benefits" clause to which
Authority responded by asking what the Union would give as a quid pro quo
for such change. The
Union then withdrew its proposal. Rogers' testimony is supported by
the stipulated testimony of
William Fennessey, the Authority's Chairman of the Board of Commissioners, and by the
testimony of Kenneth A. Knudson, the Authority's attorney. Both Fennessey and Knudson
present during the 1993, 1996 and 1998 negotiations and in each instance the Union
"maintenance of benefits" clause proposal when it was determined that the Union offered no
quo for such a change.
The Union's prior proposals for a "maintenance of benefits" clause proves that the
considered them to be a proper subject for negotiations. It is contradictory for the Union to
its proposed language and then to assert through this grievance that which the Union has
The law on negotiations in good faith is clear: there is no duty to bargain for new
there must be a quid pro quo for a benefit sought if the parties do not
An adverse ruling to the Authority would substantially limit an employer's
to control its budget and to obtain something in return for a substantial benefit. Employers
Authority need the right to change health insurance providers or to change health insurance
unless that right has been bargained away. Common sense dictates that the only control an
has on the rising cost of insurance premiums is the flexibility to change health insurance
and/or to change the level of a carrier's benefits.
The Union's requested remedy is unreasonable in that insurance coverage cannot be
The Union is not attempting to gain a new benefit through the arbitration process.
Union is attempting to maintain a benefit, i.e., employees' health insurance benefits, which
Authority unilaterally changed without negotiations. Further, the Authority's major changes
insurance coverage is a mandatory subject of bargaining.
The fact that the Union withdrew its "maintenance of benefits" clause proposals
negotiations does not mean that the Union agreed to allow the Authority to change health
benefits to whatever level it chooses. Had the Authority previously proposed a huge
health insurance coverage during prior negotiations, the Union would not have agreed
without a quid
The Authority is attempting to secure a gain without negotiating a quid pro
when employers are faced with increased costs, they negotiate the impact of those costs with
union and do not resort to unilateral and arbitrary changes in benefits. In this case, the
received a benefit without a quid pro quo and it failed to bargain in good
faith without the Union's
consent. The Authority has a duty to bargain over a change in benefits.
The Section 125 Plan provided by the Authority in the current Agreement does not
compensate employees for their reduction in health insurance benefits. Local President
testified that the Union never bothered to act upon the Section 125 Plan because it was
to offset employees' added health related costs.
During the collective bargaining negotiations of the 1990s, the Authority offered no
in health insurance language. Article 11 clearly states "the" hospitalization insurance, not
hospitalization insurance. If the Arbitrator in this case were to rule in favor of the
insurance language would be rendered meaningless and would result in an overly harsh result
burden for employees. Citing, Elkouri, supra, at 495-497.
Although the Union accepted minor changes in health insurance, this does not negate
Union's right to grieve major changes in health insurance.
The Authority's argument that it must have flexibility to make changes to control the
costs of insurance does not have merit. The Authority must negotiate with the Union over
issues. The Authority's concerns over cost controls are not a license to take away employee
In order to take away employee benefits, there must be mutual consent. Here, there was
Contrary to the Authority's assertion, the Union's proposed remedy is reasonable and
enforceable. Citing, Marathon County, supra; also citing, City of Kaukauna, WERC,
MA-6597 (Nielsen, 5/92), and Town of Beloit, supra. The Union's "make whole" remedy is
unreasonable since employees could submit receipts showing their additional costs incurred
new health insurance plan came into effect.
If the Authority were to prevail and this grievance denied, the Authority could erode
diminish and eventually destroy any financial benefits currently guaranteed under the
Over the years, it has been the parties' past practice and "the meeting of the minds" to
level of health insurance benefits. The Authority's change of benefits in May of 2000 was
to that intended level and was unilaterally determined. The Authority's acts were contrary to
foundation of collective bargaining.
The Union's assertion that there exists a past practice to maintain the level of
benefits or plans is not supported. Union witness Hunter testified that he had no knowledge
occurred prior to the last negotiating session and that he did not remember what occurred
last bargaining session on issues relevant to this dispute even though he was on the Union's
The Union's position is in conflict with its prior repeated attempts to negotiate a
of benefits" clause. The Union was aware of the Authority's past practice of modifying
control insurance costs, otherwise it would not have proposed a "maintenance of benefits"
The Union was also aware that an agreed to "maintenance of benefits" clause would have a
substantial cost impact to the Authority. The Union withdrew its prior proposals probably
it was unwilling to offer a quid pro quo for that benefit.
The Authority agrees with the Union that the duty to bargain in good faith and that
fundamental issues of collective bargaining are issues present in this dispute. However, these
should be applied to the Union. For more than ten years, the Union has sought to obtain that
would have prevented the Authority from doing what it did in this case. The Union is now
in bad faith when it seeks to receive through this grievance that which it did not receive
bargaining. Furthermore, the Authority disputes that it failed to act in good faith by not
something of value to the Union when coverage was changed. The Authority met with the
discussed a Section 125 plan as an offset for the change of coverage. It was the Union that
to talk with the Authority, claiming that the Authority could not modify the insurance plan.
Contrary to the Union's assertion, the word "the" and its use in the phrase "the
insurance" in Article 11 does not define that phrase. "The" is referring to the cost of
insurance and not to a guarantee of a plan or to a maintenance of
benefits of a plan. If the Union is correct, then "the full cost" reference in Article 11
means that there
must be a set premium identified so that there can be no change in the amount of premium
by the Authority. Such an assertion is ludicrous.
The Union only partially compares the old Atrium plan with the new Atrium plan.
under the new plan were not a reduction from 100% coverage to 80/20 coverage. For
new plan has an increase in benefits such as a cap on annual expenditures and the elimination
drug prescription deductible. There are other increased benefits as well. Further, the
comparison of plans demonstrates what the cost would have been to the Authority had the
agreed to a "maintenance of benefits" clause. If the Union prevails, then no change could
would reduce any benefit even if offset by other increased benefits. The Authority would lose
control over the costs of insurance without ever receiving a quid pro quo. In
this case, the cost of
insurance premiums rose by nearly 25% for two consecutive years and were projected to
It is reasonable for insurance companies to change their terms to reflect increased costs.
The only real remedy in this case is to require the Union to bargain for a
benefits" clause during collective bargaining and not through the grievance arbitration
If the Union wants such a benefit, then it should bargain for it in good faith and it should
offer a quid
pro quo to obtain it. Otherwise, collective bargaining will be through grievance
arbitration and not
Article 11 - Hospitalization Insurance is ambiguous because it does not indicate the
of the health insurance for which the Authority is obligated to pay. It does not state, as
contracts do, that a particular plan is the standard by which the insurance is measured or that
insurance provided shall be comparable to an insurance plan or policy in place on a set date
Further, there is no evidence of what the parties intended this language to mean relative to
of the health insurance when it was written more than twenty years ago. Article 11 is clear
the Authority is mandated to pay for the entire cost of whatever health insurance is to be
However, it is ambiguous as to the type or the kind or the level of health insurance benefits
Authority is required to provide. I disagree with the Union that the reference to "the" in
hospitalization insurance" unambiguously defines the insurance that shall be provided. That
does not unambiguously mean a fixed or firm level of insurance coverage. Moreover, the
over the years the Union did not grieve "minor changes" which resulted in reductions of
benefits, and the fact that there is no evidence that the Union objected to these reductions,
support the Union's contention in this regard.
The issue is whether Article 11 means that the Authority is prevented from reducing
of Union employees' health insurance benefits. This turns on whether, as the Union asserts,
an implied prohibition against reducing insurance benefits. The Union points
to the Authority's past practice of providing health insurance benefits while making
changes in coverage, in support of its interpretation. The Authority disputes this implied
asserts that the Union's repeated and unsuccessful proposals for a "maintenance of benefits"
clause during the last three precontract negotiations undercuts the Union's interpretation and
Union is attempting to obtain through grievance arbitration that which was unsuccessfully
It is generally accepted that precontract negotiations provide a valuable aid in the
interpretation of ambiguous provisions. Elkouri and Elkouri, How Arbitration
Works, 5th Edition,
p. 501 (1997). The most important factor considered by arbitrators on this subject is the
manifested by the parties during negotiations. Id., at 504. More specifically, the Elkouris
If a party attempts but fails, in contract
negotiations, to include a specific provision in the
agreement, many arbitrators will hesitate to read such provision into the agreement through
process of interpretation. Arbitrator Edgar A. Jones explained that "there is a hazard" in
specific contract demand in negotiations:
If the provision gets caught up in the
grievance, the Party who proffers the language will have
to bear the burden of demonstrating in a later arbitration proceeding that its omission ought
not to be given its normal significance. Normally, of course, the plain inference of the
omission is that the intent to reject prevailed over the intent to include.
However, where a proposal is made for the
purpose of clarifying the contract, the matter may
be viewed in a different light. Arbitrator Sidney A. Wolff explained:
[I]t is fundamental that it is not for the
Labor Arbitrator to grant a party that which it could
not obtain in bargaining.
This restriction, however, has its
limitations. If, in fact, the parties were in dispute,
on the proper interpretation of a contract clause and one of them unsuccessfully sought in
collective bargaining to obtain clarification, it would not necessarily follow that the
interpretation sought by the unsuccessful party was wrong.
Then, too, a party's unsuccessful attempt to obtain a clause
severely restricting the other party
does not compel the conclusion that a limited restriction does not inhere in the contract.
The withdrawal or rejection during
contract negotiations of a proposed clause spelling out
a right has been held not to be an admission that the right did not exist without the clause,
proponent stated at the time that it would stand firm on the position that the right existed
without the proposed
clause. A similar result was reached where withdrawal of a
proposal was encouraged by the
other party's statement that the proposal was not necessary.
Elkouri and Elkouri, supra, at 504-505. (Citations omitted). Thus, and in
this case, I adopt the above
rule of interpretation, as stated by Arbitrator Jones, including the above stated arbitral
The evidence shows that the Union proffered additional language to Article 11 in
1996, during separate precontract negotiations, which would have had the effect of
Authority from reducing the level of health insurance benefits. If the 1993 language had
adopted, the Authority would have been required to "maintain or improve" the "present level
benefits." Similarly, if the 1996 language had been adopted, the Authority would have been
to "maintain coverage at levels equal to or better than the current coverage." Authority
Fennessey and Knudson provided stipulated testimony that during each precontract
period, the parties discussed the Union's proposal whereupon the Union withdrew it.
details of what was said during the parties' discussions relating to these proposals are
is no evidence by the Union to contradict that the proposals were duly considered by the
then withdrawn by the Union. Applying Arbitrator Jones' rule, therefore, I find that the
inference is that the parties' intended Article 11 to not include a "maintenance of benefits" or
"maintenance of standards" meaning. If a prohibition in the reduction of benefits was
would have been little need for the Union to propose it.
The evidence shows that the Union proffered additional language to Article 19
Miscellaneous Provisions in 1998, during the precontract negotiations period leading up to
Agreement, which would have prohibited the Authority from changing "any economic
without "the consent of the Union." If this language had been adopted, the Authority would
been required to maintain all economic benefits during the term of the Agreement, including
of health insurance coverage, unless the Union agreed otherwise. Authority witness Rogers
testified that the 1998 proposal was discussed by the parties and when the Authority asked
Union was offering as a quid pro quo, that the Union withdrew its proposal.
Although the 1998
proposal, by itself, is not as helpful in determining the parties' intent of Article 11 as the
and 1996 proposals because of the breadth of the 1998 language, such evidence is consistent
prior two precontract negotiations to "maintain" benefits and there is no evidence to indicate
departure by the parties of their intent to the meaning of Article 11.
Looking to the exceptions of the rule, I do not find any evidence that would support
assertion by the Union that its current interpretation of Article 11 was preserved at the time
withdrawing its proposals in 1993, 1996 or 1998. There is no evidence, for example, that
stated it was withdrawing its proposal without prejudice to its understanding of
Article 11 or that the Union's interpretation of its rights in Article 11 are already
inherent in the
collective agreement. Therefore, and because of an absence of this evidence, the rule of
does not apply to this case.
In addition, the evidence of unilateral "minor changes" to health insurance that
resulted in a
reduction in health insurance benefits further buttresses the conclusion that the parties did not
Article 11 to include an implied prohibition of a reduction in health insurance benefits. The
failure to grieve even "minor changes" implies that there never was a "meeting of the minds"
an implied prohibition for the reduction of health insurance benefits.
Consequently, I do not find that the Union has met its burden in demonstrating that
withdrawn proposals in 1993, 1996, and 1998 should not be given their normal significance.
I do not
find an inference that the intent of Article 11 includes a prohibition against the Authority
level of health insurance benefits. Further, I do not find anything in Article 5
that would otherwise restrict the Authority from reducing the level of health insurance
provided to employees. I agree with the Union regarding the basic premise that the absence
"maintenance of benefits" clause in a collective agreement does not necessarily provide an
with the right to unilaterally alter an employee's customarily provided benefit or working
However, in this case the Union's proposals to provide a "maintenance of benefits" type
the last three rounds of precontract negotiations undercuts the Union's interpretation of
While it is true that none of the Union's proposals ever made it into a collective
the fact that these were withdrawn, coupled with a lack of evidence that the Union desired to
its interpretation of rights inherent to Article 11, leave the undersigned with the conclusion
is not the proper forum for the Union to advance its current position. I agree with the
the Union should not be permitted to obtain through grievance arbitration that which it was
unsuccessful in securing through collective bargaining. See, e.g., City of New Berlin (Water
Dept.), WERC, MA-8823 (Yaeger, 1/96). With regard to the Union's argument that the
did not offer a meaningful quid pro quo when it reduced employees' level of
coverage effective May 1, 2000, that is something to be asserted during bargaining and,
the argument does not have merit.
Finally, the Union's argument that an award favoring the Authority will work a
misses the mark. I agree with the Union that health insurance is a vital and important
benefit. However, the issue here is not whether the Authority can eliminate Union
insurance coverage. The Union has not alleged that the Authority has constructively
insurance. The issue, rather, is whether the Authority can change the level of health
benefits with a result in the reduction of benefits. I find that the Agreement does not
Authority from changing the level of health insurance benefits and, therefore, that the
in this case and relative to this grievance do not violate the Agreement.
Based upon the foregoing and the record as a whole, it is the decision and award of
undersigned Arbitrator that the Authority did not violate the parties' 1999-2001 collective
agreement by changing the level of health insurance benefits provided effective May 1,
Therefore, the grievance is denied.
Dated at Eau Claire, Wisconsin, this 7th day of November, 2001.
Stephen G. Bohrer, Arbitrator