OPINION AND AWARD

In the matter of Voluntary Arbitration

Between 

West Chester Township Local 3518
International Association of Fire Fighters

And

The West Chester Township Trustees

Regarding

AAA Case Number 52 390 00479 06

Date of Hearing
December 11, 2006

Date of Award
March 15, 2007

 

APPEARANCES:
FOR THE UNION:  Henry A. Arnett, Esq. Jeffrey Moore, President    Todd Wilson	FOR THE BOARD: Donald L. Crain, Esq. Judith Boyko, Administrator James C. Detherage, Fire Chief David F. Rinderle, Consultant

An arbitration hearing was conducted December 11, 2006 at the Headquarters of the West Chester Township Trustees.

The Union proposed that the issue to be decided by the Arbitrator should be stated as:

“Did the Township violate Article 20 of the collective bargaining agreement by using the total cost of health care for employees, rather than the monthly health care premium for the base plan, in calculating the amount of contribution for health care insurance coverage to be paid by bargaining unit employees?  If so, what is the remedy?”

The Township phrased the issue a bit differently:

“Whether Article 20 requires the covered employees to pay up to ten percent of the employer’s monthly billed premium or total monthly cost for health insurance, which includes both an insured billed premium and an HRA funding for the self-insured portion of the plan?”

            Both parties were given full opportunity to examine and cross-examine witnesses, pose arguments and present their respective cases.  Both advocates presented their cases competently and professionally.  Both parties submitted post-hearing briefs, which convincingly summarized their positions.  All evidence, arguments and views were considered by the Arbitrator in reaching the decision stated herein.

At the hearing the parties agreed that the matter was properly before the Arbitrator for determination.

            Relevant provisions of the Collective Bargaining Agreement include:

Article 10, Arbitration

4.            Powers of the Arbitrator:

(a) The arbitrator shall not have the power to add to, subtract from, or modify any of the terms of this Agreement.        \

Article 20, Welfare

1.  The Employer will provide major medical health insurance coverage at current levels throughout the term of the Agreement from a carrier of its choice on the following basis:

(a)           At no cost to the Employee for single coverage under the Employer Plan during the term of this Agreement so long as the Employee is actively at work, on vacation or on approved sick leave and so long as the Employer's monthly per Employee costs do not exceed the following:

(i)            Family $850

(ii)           Single $325                                                     

(iii)      Employee and child(ren) $525 (if offered)

(iv)          Employee and spouse ($575) (if offered)

(b)       Provided, further, that if the Employer's monthly cost for such Base Plan exceeds the above caps, the Employee will pay, via payroll deduction, up to a maximum of 10% of the Employer's total monthly health care premium for such Base Plan.

(c)                   Any Employee may decline major medical health care coverage and receive One Thousand dollars ($1,000) in additional compensation payable on or before the last regular payroll in December of that year for a full year of such waived coverage or pro-rated on a monthly basis if less than one (I) year.   

(d)       In the event that escalations in major medical insurance premium costs exceed the ability of the Employees to continue to make the required premium or co- payments, the Employer and covered Employees will discuss and, upon mutual agreement, consider adjustments to deductibles, co-pays, and coverage levels in an effort to contain costs for both the Employees and the Employer. Any such agreements will be reduced to writing, signed by both parties and maintained as a record of the current coverage level for purposes of this Agreement.

(e)       Insurance coverage disputes are to be resolved exclusively by the insurance carrier or plan administrator.

2.         During the term of the Agreement the Employer will continue to provide forty thousand dollars ($40,000) in term life insurance for each Employee and Accident & Sickness Coverage at the levels provided on the effective date of this Agreement, so long as said coverage remains available to the Employer at a reasonable cost

3.         From time to time, and at its discretion, the Employer may provide to bargaining unit members, additional supplemental health and welfare benefits generally afforded to other Employees of the organization that are not specifically delineated in this contract document. It is recognized that such allowances are provided apart from this Agreement, and when provided will be done so at the sole discretion of the Employer and for whatever period of rime the Employer deems appropriate.

4.         Prior to any change in insurance camera, the Employer will meet and confer with the Union regarding any proposed changes.

5.         The Employer, at its option, will self-insure or provide general liability insurance coverage for Employees acting in good faith, within the scope of their official duties as assigned by the Employer.

6.         Employees who serve on a Hazardous Materials Team on behalf of the Township shall be given biannual medical examinations at no cost to the Employee.

7.         There shall be a joint Township inter-departmental Safety and Health Committee (Risk Management Committee) established under the sponsorship of the Township Administration. The Fire Department will have one representative on this committee appointed by the Fire Chief. In addition, one representative will be appointed by the union to sit on this committee. The committee member assigned by the union to this position shall sit on this committee without compensation.

8.         The Employer shall provide and make available materials required in the day to         day maintenance and upkeep of all fire stations; i.e. cleaning supplies, toilet tissue, paper towels and the like.

9.         The Employer shall provide, repair, and/or replace as needed for the following equipment for all fire stations: oven/range, microwave, garbage disposal, coffee maker, refrigerator/freezer, free standing ice maker, dishwasher, vacuum cleaner, washer, dryer, lawn mower, and snow blower.

BACKGROUND:

                This dispute centers on the share of insurance costs being charged to bargaining unit members.  Prior collective bargaining agreements have been based upon the Township (employer) paying insurance costs up to a certain level.  The bargaining unit member (employee) was then expected to pay anything above that amount through payroll deductions up to a maximum percentage.

                An example of this expectation is provided in the 2000 – 2002 agreement.  In that contract the language stated that insurance would be provided at no cost to employees “so long as the Employer’s monthly per Employee cost does not exceed “$200 per single coverage or $500 per family coverage.” [1]

                In the 2003 – 2005 agreement the employee’s contribution would kick in after $250 for single coverage or $625 for family coverage. [2]

                In August 2005, the Township changed its purchased insurance plan from one called “Diamond “to another plan called “Emerald B.”  Because the “Emerald B” plan did not provide benefits equal to the previous plan, the Township added a “health –care reimbursement account” (HRA) which reimbursed employees for the differences between what was covered by the previous “Diamond” plan and the new “Emerald” plan. This HRA was self insured by the Township.

                The negotiations that commenced in October 2005 led to a change in the language of the insurance article.  First proposals included a continuation of the same language but differed on the proposed increases in the amount of the caps.

                The Township then proposed different language which eventually went to Fact Finding.

            It is the interpretation of this language that leads to the disagreement between the parties. 

            The language in question is:

            “At no cost to the Employee for single coverage under the Employer Plan during the term of this Agreement so long as the Employee is actively at work, on vacation or on approved sick leave and so long as the Employer's monthly per Employee costs do not exceed the following:

(i)            Family $850

(ii)           Single $325                                                     

(iii)      Employee and child(ren) $525 (if offered)

(iv)          Employee and spouse ($575) (if offered)

(b)        Provided, further, that if the Employer's monthly cost for such Base Plan exceeds the above caps, the Employee will pay, via payroll deduction, up to a maximum of 10% of the Employer's total monthly health care premium for such Base Plan.”

              Until 2006 the Township paid 100% of all health care benefits which included the billed premiums and HRA costs notwithstanding the language about maximums or caps in the collective bargaining agreement.  The Township calculates that these “voluntary” contributions cost the Township more than $10,000 per year.

              At the time the 2006 collective bargaining agreement was being negotiated the Township was paying 100% of all health care benefit costs.  After ratification of the new agreement the Township entered into renewal of the Insurance Carrier contract.  Three options were considered and presented to employees for input.

                  Option 1 was the United Health Care “Tanzanite” plan with HRA reimbursement.  Option 2 was the “Tanzanite” plan without HRA reimbursements which would have led to a decrease in benefits but would be fully paid by the Township.  Option 3 was for the “Tanzanite” plan with HRA reimbursement but with mandatory waivers for any spouse or family member who had other health care coverage.

                  The Township reports that most employees preferred Option 1.

                  In July of 2006 the Township made an appeal to all bargaining units for a voluntary contribution of 6%.  The Township believed that a 6% contribution would provide a uniform amount of contribution for all employees.  All bargaining unit agents rejected this request.

                  The Township began deducting up to 10% of the total cost of health care benefits (billed premiums plus HRA contributions) and the Union filed the grievance that has led to this arbitration.   The Union Grievance states:

Explain Nature of the Grievance and Facts:

“On or about Wednesday, August 1, the Union received a letter from Township Administrator Judy Boyko, that described the Township's interpretation of the CBA regarding the employee's monthly contribution for health care. The grievance is being filed based upon, but not limited to, Article 20 - Welfare. The language in the CBA (Article 20, par 1 a and I b) refers to a "Base Plan" for health care. The Union maintains that the "Base Plan" refers to the health care plan purchased by the Township (United HealthCare "Tanzanite Plan") and its associated monthly premiums. Using the "Tanzanite Plan" monthly premiums, most employees are below the defined health care caps in the CBA and not required to contribute. The exception is for those under the 'employee / spouse' plan, the only group over their cap. The Township maintains that the "Base Plan" includes the monthly premiums plus the cost of the health care reimbursement account (HRA). The addition of the two costs place most employees over the CBA health care caps. The exception is for those under the 'single' plan, the only group under their cap. On Friday, August 4, all employees, who were over their cap by the Township's standard, had a health care contribution deducted from their pay.

Relief Requested:

That the Union's position prevails, and those employees who were not required to contribute for their health care plan be reimbursed for the payroll deductions already taken.”

POSITION OF THE UNION

               The Union notes that previous collective bargaining agreements focused on the “Employer’s monthly per Employee cost” in calculating whether the employees would pay a portion of the insurance costs.  The Union points out that the language changed in 2006- 2008 as a result of a Township proposal to say “The Employer’s monthly per Employee cost for such Base plan.” 

               The Union asserts that at fact-finding the Township drew a distinction between the premiums for the health insurance plan while concentrating on the cost saving aspects of the HRA. 

               The Union notes that within days after the effective date of the new collective bargaining agreement the Township proposed  scrapping the contractual language and replacing it with a flat 6% contribution. 

               Once Local 3518 rejected the 6% proposal along with all other bargaining agents, the Township Administrator notified the president of the Local that the Township would be considering the total costs when calculating the amount due by bargaining unit members.

               The Union believes the employee’s share of insurance should be based on the premium and not the total costs.  The Union notes that the language was changed in 2006 based upon a proposal of the Township.  It notes that Elkouri & Elkouri in How Arbitration Works, 6^th Ed., 2003 at page 453, states “when parties have changed the language of their agreement, arbitrators presume that they intend a changed meaning.”

               The Union argues the contract interpretation axiom that “ambiguous language will be construed against the party that drafted the language.

               The Union notes that during bargaining there was never any reference to total costs vs. premium.

               Based upon the language of the current agreement the Union urges the Arbitrator to grant the grievance.

POSITION OF THE TOWNSHIP

               The Township argues that in contract interpretation cases the Union bears the burden of proof to show that the Agreement has been violated.  It contends that the Township has the right under the collective bargaining agreement to include the total cost of its healthcare program when applying the caps included in the agreement.  The Township does not believe the 2006 revisions eroded this right.

               The employer believes the language is clear and unambiguous and notes that when the language is such the Arbitrator must apply that language notwithstanding the gravity of the consequences. 

The Township believes it has the right to include both billed premium and HRA costs even though they may not have been fully discussed in bargaining.  The Township cites several arbitration cases that it believes to be on point including Dublin Unified School District (121 LA 1178) and American Standard (119 LA 578).

The Township argues that the definition of “premium” includes total costs.  To support this argument it cites the testimony of Benefit’s Consultant David F. Rinderle who testified that in the health care field a “premium” refers to the total cost of all benefits.

Further the Township argues that the         the Federal requirements of ERISA and COBRA legislation require both amounts (billed premium and HRA) to be reported as “premium”.

The Township argues that the new reference to “Base Plan” is undefined and subject to at least two interpretations.  Neither can be considered as more credible than the other.

The Township notes that no other bargaining unit has objected to the inclusion of the HRA in the calculation of total premium cost.

The Township notes the hardship that would be presented if the Union were to prevail including the possibility of a reduction in benefits.

DISCUSSION AND OPINION

This is a challenging case in that the position of each respective side can clearly been seen and understood.

The Township has worked hard to maintain insurance costs at a level where health benefits can be provided to employees without contribution but no longer feels it can afford that option. 

The increasing costs of health care have forced the Employer to look for cost saving ways to manage the situation.

While this Arbitrator clearly understands the dilemma and might, if this were a fact finding hearing, look for ways to remedy some of those concerns, this matter is one in which I am engaged to decide with the language means.

Likewise, the actions of other bargaining unit representatives are instructive but I have not been asked to rule upon matters pending before them. 

I have carefully examined the Dublin case [3] submitted by the Township.  Arbitrator Riker clearly based his decision on the clear unambiguous language of “$50,000 total cost” to the Board.

Likewise, a careful review of the American Standard case [4] rendered by Arbitrator Richard Colvin, again shows that the language was, in the mind of Arbitrator Colvin, very clear in that it stated: Employees will pay 10%/12%/15% monthly contribution starting 1/1/03.  He found no ambiguity in the language presented to him.

I do not find the language in this case to be nearly as clear.  While the Township argues the clarity and lack of ambiguity of the language the argument in the Employer’s post hearing brief partially repudiates its own position. 

When discussing the definition of “base plan” the Employer states: “First and foremost, the new term “Base Plan” is not defined in the Agreement, and it is susceptible to at least two different interpretations.” [5]

In the mind of this Arbitrator this is de facto evidence that an ambiguity exists.  I am in agreement.  The language in Article 20 is unclear and ambiguous.

Further evidence of ambiguity can be found from a careful reading of Section 1 of the Welfare Article.

If one reads Section 1 a in a vacuum the position of the Township prevails. 

In pertinent  part that section states:  At no cost to the Employee for single coverage under the Employer Plan during the term of this Agreement so long as the Employee is actively at work, on vacation or on approved sick leave and so long as the Employer's monthly per Employee costs  (emphasis added) do not exceed the following:

                        But when one goes on to examine Section 1 b the new term of “Base Plan” is introduced.  The Employer would proffer the interpretation that this “base plan” refers to the possibility that at some time in the future, the Township might offer a second “richer” plan.

                        Township Administrator Boyko testified that the Township had conducted serious discussions regarding this possibility at the table including offering more than one insurance option.

                        This argument does not meet the test of reason.  At a time when the Employer is doing everything possible to contain health care costs, it is highly unlikely that the Township would be considering the addition of a second plan.  If such a plan was being considered then it would incumbent on the party proposing this new language to have offered a clear explanation at the bargaining table since the addition of other plans would most certainly require the agreement of the Union and a change in collective bargaining language.

                        I am not convinced that such a clear discussion ever took place.  It is much more likely that the discussion of the three options took place at the employee meetings held soon after the effective date of the collective bargaining agreement.  Arbitrator John J. Murphy noted the standard commonly used by arbitrators in considering this issue, in a case in 1984 when he said:  “The intent manifested by the parties to each other during negotiations by their communications and by their responsive proposals -- rather than undisclosed understandings and impressions -- is considered by arbitrators in determining contract language.” [6] 

The Union cites authority (Central Realty Co. v. Clutter (1980), 62 Oho St. 2d 411) which suggests “Ambiguous language will be construed against the party that drafted the language. “  This Contract Interpretation axiom is known as “contra proferentem.”

While a helpful concept the Supreme Court in the Westfield Insurance Case,

commented on Central Realty:

 “It is generally the role of the finder of fact to resolve ambiguity, However, where the written contract is standardized and between parties of unequal bargaining power, an ambiguity in the writing will be interpreted strictly against the drafter in favor of the non-drafting party. [Cent. Realty Co. v. Clutter (1980), 62 Ohio St2d 411.] [7]

Clearly in these negotiations there can be no issue of unequal bargaining power and while I do hold the Township to a higher level of responsibility in explaining clearly the impact of language changes that it proposed, I cannot resolve the ambiguity solely on this concept.

The Employer makes the argument that to grant the grievance might lead to a discontinuation of the benefit of the HRA.  That would truly be an unfortunate outcome and one that the Union may want to consider within the context of bargaining, but it is not a matter that I, as an interpreter of the language before me, can consider.

The Employer argues that the Federal definitions of “premium” under COBRA and ERISA include total payments (billed premiums plus HRA costs).  That may very well be the case but this Arbitrator is limited to the application of the collective bargaining language.

To decide what was intended by “base plan” and to resolve this ambiguity, I turn to the report of the Fact Finder for it was his report that was ultimately adopted and became the current collective bargaining agreement.

Fact Finder Howard Silver, in adopting the language proposed by the Township, gives examples that clearly show the comparisons he was relying on in formulating his recommendation.  On page 15 of his report he states:  “The Employer proposes a single coverage monthly premium cap of $325 (single coverage at present is $237.50; a monthly premium cap of $525 for an employee and child coverage if offered by the insurance provider (present cost is $459.07)…”

It is clear that Fact Finder Silver is basing his report on the actual premiums charged by the insurer and not on the total cost to the Employer.

Black’s Law Dictionary (7^th Edition) defines “Premium” as the periodic payment required to keep an insurance policy in effect.  Arbitrators tend to apply the plain meaning of terms.  Certainly there were many different terms of art that could have been employed by skilled negotiators that would convey the interpretation offered in this case by the Township.  Benefits consultant Rinderle used the term “premium equivalent” or the term “total cost” could have been employed.  Either would clearly have conveyed a different meaning if one had been intended.

In order for a neutral Arbitrator to ascribe a different meaning to the term than its commonly accepted one, would require either that the Township could demonstrated that this was an established practice or understanding accepted by both parties.  The record is devoid of any such understanding.  Because the Township had simply assumed all the costs in the past without regarding to the negotiated caps, there can be no reliance on an understanding based on an established practice.

The final determining factor in resolving this ambiguity in the mind of this Arbitrator is based upon the testimony of Administrator Boyko. 

On Cross Examination, Union Advocate Arnett asked Ms. Boyko.

“So during the negotiation process and even at fact-finding you – and I guess “you” being broadly the Township never indicated to the committee members who were negotiating that the contribution that employees would be asked to make would be based on the premium and the cost of the health care reimbursement?”

Ms. Boyko responded: “I’ve never stated anything such because I was not aware that there was a differential.”  (T 123)

In the mind of this Arbitrator clearly the Township cannot ascribe meaning to words if the Chief Executive Officer had not considered the issue of total cost vs premium and is not aware that there is a distinction.

There is only one plan in affect under this collective bargaining agreement so I must conclude that the “base plan” references the product being offered by the insurance company.  Further, the plain meaning of the word “premium” does not, in the opinion of this Arbitrator, include the additional cost of the HRA.

AWARD

For the reasons herein stated the Grievance is granted.

REMEDY:

            The Township shall apply the caps contained in the collective bargaining agreement only to the billed premium for insurance.  Those person who have had an amount above the caps deducted from their check shall receive reimbursement of those amounts.

Issued at London, Ohio this 15^th day of March, 2007

__________________________

N. Eugene Brundige, Arbitrator

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