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  • Collective bargaining: The rules governing negotiations in a post-Act 10 environment

    Gov. Scott Walker on March 30 approved the administrative rules that provide guidance to municipal employers on bargaining over “total base wages." In this article, labor and employment lawyers Shana Lewis and Kirk Strang discuss the rules and their implications for municipal parties to collective bargaining negotiations.


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    Shana R. Lewis Kirk D. StrangApril 18, 2012 – Gov. Scott Walker on March 30 approved the administrative rules that provide guidance to municipal employers on bargaining over “total base wages” under 2011 Wisconsin Act 10, which eliminated most collective bargaining rights of public employees.

    This article summarizes the rules, which appear at Wis. Admin. Code section ERC Chapter 90 (generally, the rules), that govern negotiations between municipal employers and municipal employee labor organizations for collective bargaining agreements.

    The rules will become effective after the Wisconsin Employment Relations Commission (WERC) formally promulgates them and they are published in the Wisconsin State Journal. It is important to note that the approved version of the rules differs substantially from the draft version of the rules that was prepared by the WERC and sent to the Governor’s office in February 2012. Also, there are different approved rules for base wage bargaining with general state employee bargaining units that this article does not discuss.

    To the extent that parties have relied upon the guidance provided in the draft version of the rules, it is necessary to revisit and perhaps reconsider those plans.

    Identifying authorized positions

    When municipal employees are represented by a labor organization (a union), the new rules govern negotiations between the union and the employer for purposes of the Municipal Employment Relations Act (MERA), Wis. Stat. section 111.70, et seq.

    The rules prescribe the method for calculating “the maximum dollar amount subject to collectively bargained increases in a general municipal employee bargaining unit’s base wages” without going to a referendum.

    The calculation requires that the employer first identify all of the authorized positions that existed 180 days prior to the expiration date of the most recent collective bargaining agreement. It is important to note that Wis. Admin. Code section ERC 90.02(1) defines “authorized positions” as “those positions in the bargaining unit that are filled.”

    In the context of schools, if a school district employer has a contract with a union that expires on June 30, 2012, and a bargaining unit position was vacant on Jan. 2, 2012, the school district would not be permitted to include the salary paid to the employee in the position (before or after Jan. 2, 2012) in the calculation of total base wages, even if it subsequently filled the position. 

    If an employer is confused about which positions are “in the bargaining unit,” for purposes of the rules, the recognition clause in the expiring (or expired) collective bargaining agreement should help to provide the answer.

    If, for example, a school district and the teachers’ union previously agreed to exclude school psychologists from the professional staff bargaining unit, the classification of the school psychologist as a nonrepresented employee will continue.

    If that same school district considered adding new positions to the employee complement and is concerned about whether the positions should be included in the bargaining unit, consulting with the district’s legal counsel before proceeding with such a decision is advisable.

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    Determining base wage rate

    Once the authorized positions are identified, the next step is to determine the hourly or annual, if applicable, base wage rate for each position.

    Wis. Admin. Code section ERC 90.03(2) provides that: “The hourly, or annual, base wage rate is the hourly or annual rate applicable to the position excluding supplemental compensation which includes but is not limited to, education credits or credentials in pay schedules, overtime, premium pay, lump sum merit pay, performance pay, and extra duty pay.”

    The new rules are not accompanied by commentary from two of the three WERC commissioners. However, WERC Commissioner Judith Neumann issued a dissenting memorandum to explain her disagreements with the rules.

    In the absence of a statement from the WERC's majority, it is not clear whether (and to what extent) Commissioner Neumann’s dissent can be treated as an authoritative statement on the meaning and application of the rules, but it provides background that may illuminate the commissioners’ debate over the rules.

    Commissioner Neumann explains in her dissenting memo that, unlike in the original version, the revised rules explicitly require that the employer exclude from its determination of the hourly or annual base wage rate education credits and credentials in pay schedules, in addition to overtime, premium pay, lump sum merit pay, performance pay, and extra duty pay. 

    However, Commissioner Neumann notes the new rules do not specifically exclude from the determination of the hourly or annual base wage rate seniority and service-based increments, or merit pay that is incorporated into an employee's hourly or annual base wage. She illustrates her interpretation of the rules with the following hypothetical scenario.

    A teacher with 10 years of experience in the school district and a master’s degree was paid an annual salary of $45,000 during the 2011-12 school year, based on her placement on the negotiated salary schedule.

    Without the master’s degree, based on the negotiated salary schedule, she would have been paid only $35,000. Thus, section ERC 90.03(2) would require her annual base wage to be identified as $35,000, instead of the $45,000 annual salary she earned during the 2011-12 school year.

    Section ERC 90.03(2) does not prohibit a school district from paying that same hypothetical teacher an annual salary of $45,000 for the 2012-13 school year.

    However, it does prohibit the school district from treating $45,000 as that teacher’s annual base wage for purposes of calculating the maximum dollar amount subject to negotiations for the 2012-13 collective bargaining agreement.

    Computing total base wages

    After identifying the authorized positions, and determining the base wage rate for each authorized position, if the base wage rate is an hourly rate, the municipal employer must multiply the hourly base wage rate by the annual number of regularly scheduled hours for each authorized position. If the base wage rate is an annual rate, this step is unnecessary.

    The final step is to total the annual base wages for all authorized positions. Once the sum of the annual base wages for all authorized positions is calculated, municipal employers must multiply that amount (the total the annual base wages for all authorized positions) by the consumer price index change, which will be published by the WERC, as necessary.

    For purposes of collective bargaining agreements beginning on July 1, 2011, that amount is 1.64 percent. For purposes of collective bargaining agreements beginning on July 1, 2012, that amount is 3.16 percent. The resulting dollar amount is the maximum amount subject to collective bargaining.

    Distribution of total base wage

    Section ERC 90.02(4) explains that the phrase “subject to collective bargaining” includes both the dollar amount and the distribution thereof to employees in the bargaining unit. As a result, municipal employers have an obligation to negotiate with the union over the total amount available for distribution, as well as the manner in which the amount is distributed at the bargaining table.

    The method for distributing the total base wage increase is not set forth in the rules.

    As such, there are many different ways in which the total base wage increase may be distributed among the staff. For example, the amount could be distributed equally among the existing employees, the amount could be distributed in favor of more highly paid employees, or the amount could be used to bolster the salaries provided to recently hired staff.

    The difficulty with evaluating distribution issues and proposals, however, lies in the fact that the statute the rule is based upon excludes matters such as pay schedules, merit pay, or performance pay from the definition of “total base wages.”

    Consequently, a number of factors that might ordinarily be used to decide how available dollars are distributed are not appropriate subjects of bargaining. Wis. Stat. § 111.70(4)(mb)1.

    When the parties reach a voluntary agreement, the collective bargaining agreement will be reduced to writing. The final document will set forth the total base wage increase for the contract period and the manner in which the increase will be distributed among the bargaining unit positions.

    The rules have no bearing on any decisions that the municipal employer makes with regard to compensation and benefits for employees outside of the “total base wage” increases that are subject to negotiations. Thus, for example, a municipal employer may continue to use a salary schedule that contains automatic pay progressions and credit for educational achievement.

    A municipal employer may choose to offer compensation to employees for merit, extra duties, educational achievement, overtime, premium pay, longevity, or another reason. Moreover, the municipal employer may provide additional compensation to employees, such as a salary additive, or as a one-time stipend or bonus, or through another system or structure (though caution in how these compensation features are presented is important to maintain the distinction between wages that are bargained and those that are conferred by the employer).

    As long as this compensation is not negotiated with the labor organization representing the employees, such compensation is permissible and not subject to the maximum amount calculated using the procedure in the rules.

    The same is true with regard to any fringe benefits, such as insurance coverage and premium contributions, paid leaves, and tuition reimbursement. As long as the employer offers such benefits on a unilateral basis, the rules are not applicable.

    About the authors

    Kirk D. Strang, U.W. 1985, and Shana R. Lewis, U.W. 1999, are shareholders with Davis & Kuelthau S.C., Madison. Strang chairs the firm’s school law practice group and has extensive experience in school, labor and employment law issues, including labor relations, collective bargaining, family and medical leave, arbitration, employment policies and contract negotiations. Lewis practices in the areas of labor and employment, school and municipal law, representing public and private sector employers in issues of labor and employment law.