Title: Basin Electric Power Cooperative and IBEW Local
Federal Mediation & Conciliation Service
This interest arbitration arises pursuant to the expiration of a Collective Bargaining Agreement between the IBEW, Local Union 612, (hereinafter the UNION) and the Basin Electric Power Cooperative, (hereinafter the EMPLOYER or BASIN), under which DAVID GABA was selected to serve as Arbitrator and under which his Decision shall be final and binding between the parties.
A hearing was held before Arbitrator Gaba on August 5th and 6th 2004, in Denver Colorado. The parties had the opportunity to examine and cross-examine witnesses, introduce exhibits, and fully argue all of the issues in dispute. No transcript of the proceedings was provided. Both parties filed post-hearing briefs on or about September 3, 2004.
On behalf of the Union:
C. Brauer III
On behalf of the Employer:
John J. McGirl, Jr.
II. RELEVANT CONTRACT LANGUAGE
The “Agreement Between Basin Electric Power Cooperative and Local Union
612 International Brotherhood of Electrical Workers” contains the following
6. ….The Cooperative and
the Union agree that the decision of the Arbitrator shall be final and binding
on both parties.
The arbitrator shall have no power to change any of the provisions of
this Agreement. He shall, however,
determine disputes submitted to Arbitration as provided herein, including
proposed Amendments to the Agreement submitted in accordance with the foregoing
The expense of the Arbitrator and his incidental expenses shall be borne
equally by both parties hereto.
Electric LRS Final Positions contained in Exhibit J-3a are as follows:
Final Position: Adoption of the Blue Cross/Blue Shield “Classic Blue” health insurance plan for all bargaining unit employees, replacing the present Standard plan; adoption of the two Denta dental plan options, administered by Blue Cross/Blue Shield, for all bargaining unit employees, replacing the present Standard plan.
4% increase for period March 1, 2003 to February 28, 2004
3.25% increase for
period March 1, 2004 to February 28, 2005
3.25% increase for
period March 1, 2005 to February 28, 2006
ISSUE THREE—SPOUSAL SURVIVOR BENEFITS
Final Position: Maintain existing “100 and 50” benefit which provides surviving spouses with a 50% benefit
ISSUE FOUR—PARITY INCREASE
Final Position: Maintain present differential between Instrument I/Electrician I classifications and other journeymen positions
The Final Offer on Open Issues, IBEW Local 612 (Exhibit J-3b) is as follows:
In accordance with the Agreement to Arbitrate, Local 612 submits the following offers for the new contract:
1. Article IX, Paragraph 10 of the Collective Bargaining Agreement concerning health insurance:
Status quo: continue with the current plan.
2. Article XIII, Paragraph 2 of the Collective Bargaining Agreement concerning spousal survival benefits under the pension plan:
For employees who die before retirement, the spousal benefit (i.e., designated beneficiary) would be the same as the benefit of the employee who retired on the date of death. (Currently, if an employee dies before retirement the spousal benefit (i.e., designated beneficiary) is fifty percent (50%) of the employee’s benefit.)
3. Article XVI of the Collective Bargaining Agreement concerning a general wage increase:
Each employee/classification in the bargaining unit shall receive a 4%, 3.25% and 3.25% on March 1, 2003, 2004, and 2005, respectively, across the board.
4. Article XVI of the Collective Bargaining Agreement concerning parity increases for certain journey level classifications:
A one-time wage adjustment (“spot increase”) for the lead and journeymen of fifty cents ($0.50) per hour for employees in the following classifications: mechanic/welders, welder/mechanics, machinists, substation electricians, communication technicians, linemen, mechanic operators, systems’ protection technicians and painter/insulator/metal smith
The Basin Electric Power Cooperative, headquartered in Bismarck, North Dakota, is a provider of electric power to rural customers in over nine states and is wholly owned by its member-customers. The Cooperative presently operates facilities in Wyoming, North Dakota, South Dakota and Nebraska. The Wyoming facility at issue in this matter is the Laramie River Station (“LRS”), located near Wheatland, Wyoming. The Employer employs approximately 315 employees at LRS, of which 251 are members of a bargaining unit represented by the Union. The workforce at the plant is extremely productive and the plant operates at a high level of efficiency. The Employer and the Union have been parties to a series of collective bargaining agreements for the past 25 years, the most recent of which expired on February 28, 2003. The collective bargaining agreement provides that in the event of a bargaining impasse, the parties are to submit any outstanding issues to arbitration, a procedure often referred to as “interest arbitration.”
In accordance with these provisions of the contract, the parties executed an agreement to arbitrate in which they enumerated the four remaining issues to be resolved by an arbitrator. Issue number three did not come before the arbitrator because each party set forth the same proposal respecting a general wage increase for the entire bargaining unit. Also, as noted in the agreement to arbitrate, all other provisions of the 2003-2006 collective bargaining agreement have been resolved.
The last paragraph of the agreement to arbitrate essentially describes issue-by-issue “baseball style” interest arbitration in which the arbitrator must adopt the final position of one or the other party for each individual issue. The agreement as to how the arbitrator decides each issue is an agreement without precedent to the parties for future interest arbitrations.
The Employer has many competitors including Public Service of Colorado (operated by XCEL), Pacific Power & Light, PacifiCorp, and Tri-State Generation. Basin’s financial condition is excellent and the Union’s proposals would not damage the Employer’s financial health. Both parties agree the costs of health insurance are increasing.
With regards to the health insurance offered by its competitors, the Classic Blue plan offered by Basin in bargaining is at least comparable and in some instances more favorable for employees. For example, the health plans used by PacifiCorp, Tri-State Generation, and Pacific Power and Light all require set monthly premium share in the amount of $27 for singles/$83 for families, $137.02, and $36 for singles/$54 for families, respectively. The plan offered by XCEL requires a 20% premium-share, or roughly $260 per month for family coverage. The Basin LRS employees, if under Classic Blue, would still pay no monthly premium-share.
As for other comparisons, Classic Blue has a $250 deductible for single coverage and a $500 deductible for family coverage, along with a co-payment feature between $10 and $50. PacifiCorp’s health plan has a $250 deductible for single coverage and $500 deductible for family coverage, and has a $15 co-payment feature. Pacific Power and Light’s health plan has a $260 deductible for single coverage and $520 deductible for family coverage, and has a co-payment feature between $5 and $17. Tri-State Generation’s health plan has a $260 deductible for single coverage and $520 deductible for family coverage, and has a co-payment feature between $10 and $35. And Public Service of Colorado’s (XCEL) health plan has a co-payment feature between $5 and $50.
It must be noted that, as the Union in its brief pointed out, the change from the Standard Plan to Classic Blue is not “cost saving” but “cost shifting.” The out-of-pocket costs shared by employees under Classic Blue would increase roughly 47.8 percent for average employees. The savings is made on the part of the employer, but the plan itself does not offer a total savings to both parties, the cost is merely shifted to the employees
The Employer presently offers a “spousal survivor benefit” to its employees which offers a “100 and 50” spousal survivor benefit, which provides a surviving spouse with a benefit equal to 50% of what the deceased employee would have received. If a “100 and 100” benefit providing 100% payouts to spouses was offered to the LRS unit, the Employer projects that the anticipated cost to the Employer would be an additional $109,000 per year, or eight-tenths of a percent of the unit’s wages.
The Union also seeks a one-time wage adjustment (“spot increase”) for the lead and journeymen of fifty cents per hour for employees in the following classifications: mechanic/welders, welder/mechanics, machinists, substation electricians, communication technicians, linemen, mechanic operators, systems’ protection technicians and painter/insulator/metal smith. Over the past several contracts the parties have given flat percentage increases to the bargaining unit resulting in an increasing spread between the wages of several classifications. The “spot increase” is designed to remedy this effect.
Each of these three issues is addressed below.
IV. POSITIONS OF THE PARTIES
The Union urges the arbitrator to maintain the status quo and continue the current health insurance program. The Union believes that maintenance of the status quo does not mean that the parties may not, by mutual agreement, improve the plan as the parties move through time in the current contract. Indeed, the union made one such effort with the plan consultant even as the negotiations for the contract proceeded.
The Union also argues that the burden of persuasion is always on the party seeking a change to the collective bargaining agreement, so that party would be required to proceed first. Stated in reverse, if the arguments of each party when weighed on the scales of the mythical blind statute of justice are exactly equal, then there should be no change. If, however, there is any advantage in the weight of the evidence to one side or the other, the arbitrator should adopt that side. In short, the Union proposes that the burden of proof be placed on the party seeking the change from the status quo.
It is also noted by the Union that there are not any “cost savings” to be had by moving from the current plan back to a North Dakota Blue Cross plan, and the so-called “cost saving” is not a true saving as such, but simply a cost shifting from employer to employee. Attention is directed to Union Exhibit No. 12, which is an analysis of what this cost shift means to the employees. What it demonstrates is that for employees of all affected classifications, costs went up and that for the four particular employees chosen, the cost increase was 47.8 percent for out-of-pocket expenses. The Union further argues that while it may well be that when one extrapolates from 4 employees to approximately 260 employees, the employer would “save” a half-million dollars. But that is not real cost saving at all; it is “cost shifting” that does not demonstrate any net cost saving.
The Employer in its brief supports the adoption of the Blue Cross/Blue Shield plan for its Laramie River Station bargaining unit employees. The Employer makes note of the increasing costs of health insurance and related fees, which include administrative fees, reinsurance/stop loss fees, and medical claim costs. The Employer expects to reduce health insurance related costs and risks by eventually moving all of its employees onto the same Classic Blue plan. In addition, the Employer expects the larger pool to increase its leverage in negotiating with plan administrators, brokers, and the plan itself.
The LRS unit employees currently have a health insurance plan administered by Cooperative Benefit Services of America (“CBSA”), which is commonly referred to as the “Standard Plan.” Under the Standard Plan, unit employees do not pay monthly premiums or co-payments and pay little in annual deductibles: $50 for employee only coverage; $100 for employee plus one and employee plus spouse coverages; and $100 for employee plus family coverage. The Employer refers to the Company Exhibit 1, Health Plan Comparison Document for further details of the coverage under the Standard Plan.
The Employer points to increases in the total cost of the LRS unit’s health care expenses between July 1997 and July 2004, citing figures from the Employer’s insurance broker, Intermountain Benefits Administrators (“IBA”) that show a jump of almost $2,000,000—from $1,080,809.81 to $2,996,714.36—during that time period. The Employer references Company Exhibit 2, Standard Plan Costs Document for more figures of medical claim costs that nearly tripled and administrative and reinsurance/stop loss costs that nearly doubled.
More specifically, says the Employer, the associated premiums—the anticipated monthly cost per coverage of the Standard Plan—for single and family coverages also rose significantly between July 1997 and July 2004, from $170.34 in 1997 to $444.93 in 2004 for employee only coverage and from $444.42 in 1997 to $1,091.32 in 2004 for family coverage. (Company Exhibit 3, Associated Premiums Document.) Brent Hillier, the President of IBA, observed the increasing costs of the plan and said that the LRS unit “had it too good.”
The Employer maintains that the Classic Blue plan is competitive and cost-effective, controlling costs through increased deductibles and a cost-sharing co-payment feature that enables the Employer to share a portion of increased costs with high-using participants. The Employer points to Company Exhibit 1 for details of the coverage, which includes competitive deductibles and co-payments, as well as lower coinsurance and out-of-pocket maximums than the Standard plan. The Employer emphasizes that there is still no monthly employee premium under Classic Blue. Company witnesses Tom Fischer and Rosie Schmidt, as well as hearing attendee and LRS plant manager Dallas Wade, feel that their own coverage under Classic Blue is excellent.
Since it is comparable with the health insurance plans provided by Basin’s competitors, the Employer argues the Classic Blue plan is a fair way to share some of the cost of health care between the employer and the employees. The Employer turns to the standard of “external comparison” to prove that its offer of the Classic Blue plan is fair by industry norms. The Employer highlights the fact that its LRS employees would still pay no monthly premium under Classic Blue, a fact which none of the health plans of its competitors can claim.
The Employer also conducted an “internal comparison” of the health plans offered within the company, citing Elkouri & Elkouri, p 1413, which says that benefits issues “are often resolved through a review of internal comparables.” With the exception of the LRS unit employees, all of the other employees of the Employer have been offered health insurance under a Blue Cross/Blue Shield administered plan since 1994, and all but the Dakota Gassification unit and the LRS are already covered by the “Classic Blue 250” Plan being offered to the LRS group. The Employer has determined to move all of its employees onto one cost-efficient health plan in an effort to more effectively provide insurance in light of the increasing costs.
Spousal Survival Benefit
The Union favors changing the Spousal Survival Benefit detailed in Article XIII of the CBA. The Union notes that under the current provisions of the contract the spousal benefit is fifty percent of the employee’s benefit and finds that there is no rational reason for not making the benefit equal for both the employee who retires and dies and for the spouse who receives a benefit for the employee who dies the day before retirement. The Union argues that it is necessary for the company to fund its retirement plan based on the assumption that its employees may retire before they die. Since this assumption of a fully funded retirement plan is logical, says the Union, and provided for under ERISA (29 U.S.C. §1001 et seq), the Union finds no reason for a surviving spouse to be denied fifty percent of the employee’s benefits.
Furthermore, the Union argues, bargaining notes from April 23, 2003 would show that the Employer offered “the spot increase also to the spouses the 100% spousal benefit” (Union Exhibit 6) and that the last written proposal (Union exhibit 7) reflected the same intent on the part of the employer.
The Employer would like to retain the status quo for the spousal survival benefit, but agrees to disregard this issue should its position on the health insurance be adopted.
C) Spot Wage Differentials
The Union requests spot increases for certain classifications in the amount of fifty cents ($0.50) in order to close the gap caused by years of straight percentage-based wage increases. The Union explains that the classifications of electrician and instrument are the highest maintenance classifications but that some of the lower classifications, whose pay is much lower due to the percentage-based increases, may be required to perform similar or identical tasks. Moreover, the Union contends that Mr. Fischer indicated during negotiations that he would agree to the spot increases. The Union references the bargaining notes from April 23, 2003 for this issue.
The Employer opposes the Union’s request for spot increases for the specified classifications. It maintains that the request is just another attempt to secure an additional wage increase. The Employer points to the percentage-based increases that the Union has usually asked for as the source of the disparity between certain classifications. The Employer presents internal and external comparisons to show that the wage differentials seen in the LRS unit are consistent with other facilities in the industry.
presented with the facts and arguments from both parties, the Arbitrator must
determine what reasonable agreement the parties should implement.
In evaluating the evidence and positions of both parties, the Arbitrator
must keep in mind prevailing practice in similar cases, previous agreements or
concessions made by either party prior to arbitration, and external comparison
of the parties’ requests with the standards of the industry.
Union presented a compelling argument for the retention of the current health
plan. The employees in the unit
have been faithful, diligent, and deserving of optimal compensation.
Their attachment to the Standard Plan is quite expected and
understandable—who wouldn’t want to maintain such an excellent plan?
The plan is so favorable to the employees, in fact, that it cannot form
the basis of a standard for the future; it is simply too good, and too
Since the rural power industry was deregulated nearly a decade ago, the Employer has faced increasing competition from its competitors. Those competitors include: Public Service of Colorado, operated by XCEL; Pacific Power & Light; PacifiCorp; and Tri-State Generation. As a participant in a competitive industry Basin must offer its employees fair wages and benefits comparable with those offered by its competitors. If Basin offers its employees too little, it will begin to lose its highly skilled and motivated workforce. However, if Basin’s costs begin to exceed those of its competitors, its competitive position will be eroded.
The Employer in this matter argues forcefully that the Arbitrator should
be bound by an internal comparison of Basin’s other health plans. It is
undisputed that the only group of employees at the Cooperative who presently
have coverage under the Standard Plan is the Laramie River Station unit.
The other four employee groups at the Cooperative—the North
Dakota/South Dakota employees, the Dakota Gassification unit employees, the
Dakota Gassification non-unit employees and the Cooperative administrative
employees—all receive coverage under a Blue Cross/Blue Shield administered
plan. Three of those groups,
including the Employer’s managers, supervisors and administrators, receive
coverage under the same Classic Blue Plan that the Employer is offering to the
Union. However, with an employer
who has operations as geographically dispersed as Basin it makes more sense to
reference the external market.
evaluate the reasonableness of the Employer’s request to change the current
health insurance to the Blue Cross/Blue Shield Classic Blue Plan, the Arbitrator
turns to the standard of prevailing practice.
As summed up in Elkouri & Elkouri,
Without question, the most extensively used standard in interest
arbitration is “prevailing practice.” This
standard is applied, with varying degrees of emphasis, in most interest cases.
In a sense, when this standard is applied the result is that disputants
indirectly adopt the end results of the successful collective bargaining of
other parties similarly situated. The
arbitrator is the agent through whom the outside bargain is indirectly adopted
by the parties.
The evidence introduced at the hearing indicates the Classic Blue Plan is very comparable to the health plans offered by the Employer’s competitors and appears to be superior in almost all respects. Like the Classic Blue Plan, all four of the plans offered by the Employer’s competitors have a co-payment feature. In addition, three of the four competitors surveyed—PacifiCorp, Pacific Power and Light and Tri-State Generation—offer health insurance plans with single coverage annual deductibles of at least $250 and family coverage deductibles of at least $500. The deductibles under Classic Blue for those coverages are $250 and $500, respectively. The lone competitor which does offer a plan without a deductible, Public Service of Colorado, requires its employees to pay 20% of the total health premium, which calculates to over $3,100 per employee each year for family coverage. In fact, all four of the surveyed competitors require their employees to pay a monthly premium-share. Under the Employer’s proposal, however, employees still do not pay any monthly premium-share.
Unions often argue that
changes need to be made in order to address inequalities
and to bring up benefits to meet industry
standards. As stated by Elkouri:
If the terms of employment of a given employer are below the standard set by the prevailing practice of comparable employers and if no basis exists for a differential, an arbitrator may conclude that an inequality exists. Many arbitration awards have undertaken to reduce or eliminate inequalities, such as inequalities between related industries, inequalities within an industry, inequalities between comparable firms or work within a specific area, and inequalities within the plant itself.
In the instant case there has been no showing as to why an inequality exists between Basin’s health plan and its competitors. Indeed, the most notable feature of the Employer’s proposed Health Plan is not that it is less generous than the existing plan, but rather, how generous it remains. The vast majority of unionized workers in this country (including those working for Basin’s competitors) would love to have access to a plan as generous as Classic Blue. It simply remains an unpleasant fact of life that the quality of health-care plans offered by employers in this county have deteriorated due to market forces. The Union argues that the entire notion of shifting costs to employees is bad public policy because it shifts economic responsibility from an employer, which has some bargaining power in dealing with health care providers, to the individual workers who has virtually none. I agree; my decision would be different if it were based on public policy considerations rather than external market comparisons.
The Union also argues that the employer is attempting to make other changes of a much more fundamental nature. For example, if one looks at the third page of the Plan Description there is a sentence noting “employment may be terminated without cause” and “. . . reserves the right, whether in an individual case or in general, to eliminate the Benefit Plan.” The Union agues that “these are outrageous provisions and are sufficient in and of themselves to find the Blue Cross plan unacceptable.” I agree. However, I expressly find that Basin has offered the “Classic Blue Health Plan” to the Union and that the boilerplate language in the plan documents may not modify the collective bargaining agreement and that the “Classic Blue Health Plan” as offered by Basin shall remain in effect for the duration of the contract.
Spousal Survivor Benefit
At the hearing, Mr. Fischer testified that if the Arbitrator adopted the Employer’s position on the health insurance matter, the Employer would grant the Union a “100 and 100” survivor benefit—consistent with its final offer at the bargaining table. The Employer reiterated Mr. Fischer’s position in its brief. Since the arbitrator has adopted Basin’s position on health insurance it is axiomatic that the Union is granted its proposal on Spousal Survivor Benefits.
Spot Increase of Fifty Cents per Hour
When a party proposes a change to the collective bargaining agreement it must explain why it is proposing such a change. The Union makes a number of equitable arguments based on a theory that since most wage increases had been adopted by the parties on a percentage basis, over time this led to a wage gap for a large group of journey level classifications. This argument is unpersuasive as there was no showing of either internal or external market comparisons that would support the Union’s position.
More problematic was the evidence that indicated that Mr. Fischer offered during negotiations to agree to the spot increase parity proposal if the union would accept the Classic Blue Health Plan. The primary test used by arbitrators in interest arbitrations is to place the parties in the same position they would have been in if bargaining had been completed successfully. As quoted by Elkouri:
examination of the wealth of evidence submitted in this matter in conjunction
with the provisions of settlement worked out by the parties indicates that the
most satisfactory award which the Board could render would be one in general
agreement with those terms on which the parties were able at one time to
substantially agree. Obviously,
these terms are not what either party wanted.
They represent compromise by both parties.
However, since the general terms indicate a meeting of the minds, the
Board considers that they hold the basis of a just award. 
While arbitrators are seldom able to use this test due to the difficulty of predicting the outcome of the parties negotiations, in this case it appears that Basin was willing to accede to the Union’s proposal on “spot increases” in exchange for the Union’s acceding to management’s health plan proposal. The notes of the bargaining session held by the parties on April 23, 2003 sets forth the following statement by Mr. Fischer: “We will agree to the $.50 increase to the TSM group and others . . . .” When confronted with this statement in the joint bargaining notes, Mr. Fischer said that he thought that he was misquoted. While the facts are in dispute in this case, it appears to be more-likely-than-not that Basin was willing to trade the “spot increase” for the “Classic Blue Health Plan” proposal that it was seeking. A preponderance of evidence supports the Union’s position on the fifty-cent spot increase.
The Union also requests that the arbitrator address what it terms the “company’s direct threats to intimidate a witness” and argues:
The conduct of this company with respect to its direct threat leveled at Mr. Hillier are the most disgusting displays of dishonest and perhaps even criminal conduct that the undersigned as counsel to the union has ever encountered. If Mr. Hillier and his company and his right to participate in this hearing is not given direct protection by an order from this arbitrator that the employer not retaliate against him, then the long run impact is people of the ilk of Tom Fischer will rule our society and use brute force, whether economic or physical or political, to obtain any end. That must not be allowed.
While Mr. Brauer raises legitimate issues in his brief, it is also clear that the powers of the arbitrator are limited to those granted him by the parties in their contract. While the arbitrator does have broad power to address issues that occurred prior to and during the hearing, the Union is essentially seeking to have the arbitrator retain jurisdiction over this case to address future retaliation that may occur against Mr. Hillier. I don’t believe that the parties have given me authority to address future acts of retaliation and that I would be doing the parties a disservice by granting the Union’s request. My worst fear is a ruling that would result in a morass of litigation over the powers of the arbitrator and the doctrine of functus officio. I believe that I have no further force or authority after rendering my decision and believe that the Union has adequate remedies to address the situation through the filing of Unfair Labor Practice Charges with the NLRB.
The Union’s proposals on Spot Increases and Spousal Survivor Benefits are awarded. Basin’s Health Plan proposal is awarded.
The collective bargaining agreement of the parties provides that “the expense of the Arbitrator and his incidental expenses shall be borne equally by both parties hereto,” and accordingly the cost of arbitration is too be equally divided.
David Gaba, Arbitrator
September 22, 2004
 Exhibit J-1.
 Joint Exhibit 1.
 Joint Exhibit 2.
 Company Exhibit 4.
The four employees were chosen because they represent employee only coverage (1), employee plus spouse (1) and family coverage (2), thus covering all combinations of coverage.
 Elkouri & Elkouri, How Arbitration Works, p1106
 Employer Exhibit 4.
 Employer Exhibit 1.
 Elkouri & Elkouri, How Arbitration Works, p1107
 It should be noted that the out-of-pocket maximums and coinsurance features of Classic Blue Plan are actually superior to those of the Standard Plan and that some employees will come out ahead under Classic Blue.
 Union exhibit 4.
 Durso & Geelan Co., 17 LA 748, 749 (Donnelly, Curry & Clark, 1951).
 Union Exhibit No. 6.
 Union’s post-hearing brief.