County in Economic Dire Straits: Bargaining to avoid sour grapes

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1 County in Economic Dire Straits: Bargaining to avoid sour grapes Pablo Pineda SUMMARY Santa Clara County is facing one of its worse budget deficits in history of million for FY09. The sharp decline in the national economy and the real estate market are a serious threat to the County s financial stability. Under these circumstances, the Labor Relations Department faced the daunting task of renegotiating and extending 17 bargaining agreements. The main problem was how to achieve this goal and avoid sour grapes that would poison relationships between the Unions and the County for years to come. Budget Solutions There's no such thing as a free lunch -- Milton Friedman Financial problems are not new to Santa Clara County which has had budget reductions since FY03. In the last part of 2008, the County addressed budget issues by hardening the hiring freeze already in place and curbing non-essential spending. This hiring freeze prohibited external hiring for all but the most essential County positions (Memorandum from Gary Graves, Acting County Executive to Department Heads, January 6, 2009). The picture was already bleak in January of 2009 and worsened even further in February. On February 2, 2009 Gary Graves, Acting County Executive, sent a memorandum to the Board of Supervisors with alarming news, It is only in the past week that we have seen our indicators plummet at rates that we could not anticipate Two specific issues are creating a big deal of concern at this time: 1) The apparent plan by the state to defer payments to the County by as many as seven months; and 2) Our current estimate for FY 2009 of a negative general fund, net of contingency, of $65 million (Letter from Gary Graves, Acting County Executive to Board of Supervisors, February 2, 2009) At the December 9, 2008 Board of Supervisors meeting, Acting County Executive, Gary A. Graves, expressed his desire to reach agreement with collective bargaining units to 1

2 roll the contracts forward with no change in salaries or benefits (FY 2010 Projected Deficit and Proposed Solutions, December 9, 2008). On February 10, 2009 the County Executive expressed his desire to roll the contracts forward. This statement triggered the events that led the Labor Unions to ask for clarification and started informal talks. The Labor Union The County has seventeen bargaining units 1, of which nine had contracts expiring during Services Employees International Union (SEIU), Local 521 (formerly 715, 535Worker and 535 Supervisor) represents more than 50% of the County s workforce. The SEIU contract expired in June of SEIU Local 521 is a merger of five locals. The SEIU International appointed Kristina Sermersheim as the president for the newly created SEIU 521 local. Informal Bargaining Again and again he tried after the tempting morsel, but at last had to give it up, and walked away with his nose in the air, saying: I am sure they are sour. -- Aesop After the December 9, 2008 statements SEIU Local 521 asked for clarification. Labor Relations started the process of informal talks on February 11, SEIU Local 521 had all its representatives from the different classifications at the table: from Office Specialists to Social Workers; from Janitors to Public Health Nurses; from Information System Technicians to Communication Technicians. Management and Union had experienced negotiators as chairpersons but they had never negotiated a contract with each other. The Union was concerned about the impact of potential layoffs, had the impression that the County had extra money to spend on salary increases, and the notion that the County had too many managers and insufficient workers to do the job. The Union also had the idea that some service agreements were inflated, that they were taking away union jobs, and further were worried about the over usage of extra-help hours in some Departments. The challenges were to seek to understand the Union, build trust, avoid the use of coercion, and have open and frank communications. 1 Engineers and Scientist of California (ESC); Service Employees International Union (SEIU), Local 521 (former 715, 535W and 535S); Probation Peace Officers Union Local 1587; Park Rangers Association (PRA); Union of American Physicians and Dentists (UAPD); Deputy Sheriffs Association (DSA); County Counsel Attorneys Association (CCAA); District Attorneys Investigators Association (DAIA); Building and Construction Trades Council (BTC); Service Employees International Union, Committee of Interns and Residents (SEIU-CIR); Government Attorneys Association (GAA); Engineers and Architects (E&A); County Employees Management Association (CEMA); Correctional Peace Officers Association (CPOA); and the Registered Nurses Professional Association (RNPA). 2

3 In the first and second meetings (February 11 and 25, 2009) the Union position was clear; they thought the County had money to spend. Therefore, they began probing. The Union requested information, including: The salary percent increases for all bargaining units in the last five years; Which bargaining units the County was asking for an extension agreement; How many workers were in those bargaining units; A list of all the service agreements and contracts that the County had with outside vendors; The number of workers in non-union Management positions; The hiring of workers in specific departments while the County had a hard-freeze in place; A list of vacant positions and their status; The status of Department of Correction academies; Health benefits (how many workers, health plan, cost); The total cost of tuition reimbursement for its members. The Union wanted guaranteed no layoff language in any extension agreement. Also they wanted to merge its three Memoranda of Agreement (MOA) into one (715, 535 W, 535 S) to reflect its merger (521) as well as the modification of an existing bargaining unit. The County knew it could not afford a wage increase and the picture for future revenue remains bleak. Therefore it was in the County s best interest to be as open as possible and furnish the Union with all the information they needed to understand the situation and eventually help the Union to sell the extension agreement to its members. The more informed the Union was of the County s financial problems and economic prognosis, the better likelihood of the Union working along with the County to reach agreement. Actions the County took to educate SEIU, Local 521, about the County s economic problems included bringing in an expert, the County Budget Director, to explain the County s budget. She was instrumental in translating ambiguous economic language so the Union could understand it. This changed the Union membership s perception of the County s economic health. The Union asked questions of the Budget Director, many of which were designed to find out if the County had different sources of money and thus could avoid layoffs. Union comments at the table: 1) implied that the County had enough money to spend; 2) were about the perception among the Union membership of County Management and 3) how the County was crying wolf one more time as it hired from the outside and spent money on outside contractors. The Union pointed out that the County had had many layoffs in the last six years yet nobody went out the door. The perception of the County s wealth was one of the most difficult obstacles to overcome. Some of the Union membership giggled when talking about the County s dire straits, evidence that their perceptions were not realistic. 3

4 The County provided almost all the information the Union requested but new meetings brought new requests for information. Generally, these requests were to satisfy the Union membership s curiosity and focus on departments represented on the Union side at the table. These requests exposed internal struggles in the Union. For example, the Social Services Agency was a constant at the bargaining table. The Union asked about ongoing issues at the agency: the upcoming closer of the Children s Shelter and the impact on its members, the hiring of new Social Workers and Eligibility Workers. At the second and third meetings (March 5 and 11) the Union insisted on the no layoff language for any extension agreement. They asked questions about all the information the County provided, specifically discussing information on service agreements between the County and independent contractors. In the next two meetings (March 19 and 26) the Union wanted to know about the status of other bargaining unit contract extension talks. SEIU did not want to be the first one without knowing that the County was asking the same of all bargaining units. On the afternoon of March 19 the Union gave a subtle message of urgency to settle: they talked about proposing replenishing and updating funds for contract and licensure. However, they also requested more information: records on the last three years of extra help hours, the latest list of approved Freeze Exemption Review Committee (FERC) requests. At the March 26 meeting, the Union revealed that their problems in agreeing to a contract extension came, mainly, from the fact that its law enforcement classification salaries were tied to wage increases of some other bargaining units contracts and that health related classifications salaries tied to the Registered Nurses contract. They were adamant about having the same expiration date for all the SEIU contracts. The matter of layoff proved difficult: the County responded that it could not agree to no layoffs but expressed that it was in its best interest to have as many in-placements as possible to reduce the effects of layoffs. After a long caucus, the Union presented its first Off the record written proposal. This Off the record written proposal reflected all the informal talks since February. The Union addressed the layoff issue and proposed that layoffs be as equitable among manager and worker bargaining units as possible. Some of the proposals were still outside the scope of bargaining (i.e. hiring practices, settlement of the bargaining unit modification). Whether or not this proposal was the real deal for the Union was hard to tell. We seemed to be going backwards. The County expressed its disappointment because the Union was asking for contract changes. The threat was explicit: we would need to convene full bargaining. We met again April 3. The County responded to the Union s Off the record written proposal by offering a simple extension agreement with the following elements: Replenishing all cyclical items in the MOA; 4

5 Salaries tied to other bargaining units to follow the other MOA s and any extension agreement they reached; Zero general wage increase with the exception of Board of Supervisors salaries and recruitments into single executive position vacancies. The County Executive position was vacant and the salary for it had been adjusted upwards for recruitment purposes. The Union expressed its disappointment with the County s proposal. At a meeting on April 9 the County and the Union reached agreement. The agreement contained mainly the same terms we offered in our April 3 proposal. However, the difference was that the Union concerns and solutions were memorialized in a letter to the Union president. This letter addressed the Union concerns about layoffs and its effects on its membership. CONCLUSION For of fortunes sharp adversitee The worst kinde of infortunate is this, A man to have ben in propsperitee, And it remembren, whan it passed is -- Geoffrey Chaucer Several factors helped us reach agreement with the Union: We worked to build trust by following through; We did not coerce the Union with empty and unnecessary threats, We made the reality of no money evident; We had an open and honest communication process, We provided as much information as possible; We sought first to understand the other side. I believe we settled this contract during bad economic conditions because we focused on building trust. The County followed through on its promises of providing as much information as possible in a timely manner. We backed up every statement of the County economic struggle by providing documents, bringing in experts and showing the Union the overall picture. Time was of the essence. When the Union presented its March 26 proposal, the Board of Supervisors was not scheduled for another closed session until the end of April. This fact would have pushed the contract talks into full MOA bargaining, raising the specter of possible takeaways. The County communicated openly and honestly with the Union. The offer the County made at the first meeting did not change through out informal talks. The Union could see there was no possibility of movement because we did not bluff and all relevant facts were made available to the Union. Ultimately, the openness translated into a settlement 5

6 agreement for the County and a letter addressing the layoff and non-layoff concerns for the Union. Both instruments fulfilled the goals for both sides of the table. Submitted by: Pablo Pineda, MPA, Labor Relations Representative, County of Santa Clara Office of Labor Relations 70 W. Hedding St., 8 th Floor, East Wing San Jose, CA, (408) (ph) (408) (fax) pablo.pineda@esa.sccgov.org August

7 REFERENCES Documents Letter from Gary Graves, Acting County Executive to Board of Supervisors, February 2, Memorandum from Gary Graves, Acting County Executive to Department Heads, January 6, Santa Clara County (2009), Fiscal Year 2010 Recommended Budget. Santa Clara County Board of Supervisors meeting of December 9, Item 45, FY 2010 Projected Deficit and Proposed Solutions. 7