Title: Hawaii Medical Center and Hawaii Teamsters and
Allied Workers, Local 996
BEFORE ARBITRATOR MICHAEL F. NAUYOKAS
STATE OF HAWAII
ARBITRATION DECISION AND AWARD
Michael F. Nauyokas
Attorney, Mediator & Arbitrator
Telephone: (808) 538-0553
Attorney, Mediator & Arbitrator
Telephone: (808) 538-0553
IN THE MATTER OF
THE ARBITRATION BETWEEN
(REGARDING THE LAYOFF OF EMPLOYEES)
(REGARDING THE LAYOFF OF EMPLOYEES)
came to arbitration before the Arbitrator, Michael Nauyokas, in a series of
hearings that were held at the Offices of Marr Hipp Jones & Wang, in
through their attorneys, stipulated that the issues being presented arise
from layoffs that occurred, and the propriety of those layoffs, at
The stipulated issues to be determined by the Arbitrator are:
1) Whether there was a breach of an agreement not to lay off for a year;
2) Whether Bargaining Unit work can be given to non-bargaining unit employees;
3) Whether Bargaining Unit work can be given to other Bargaining Unit employees.
The parties requested that the Arbitrator issue a short form award within five days of the receipt of the parties’ closing briefs, to be followed by a full reasoned award at a later time. Based upon the evidence adduced at the hearing, and the arguments presented at the hearing and in the briefs, the Arbitrator issued a short form award as to the three issues before him, and now issues the full reasoned award as follows:
Arbitration arises from events at Hawaii Medical Center East, which provides
inpatient services, a skilled nursing facility, and various outpatient
facilities were previously owned by St. Francis Healthcare System of Hawaii
("St. Francis") and were operated as the "Liliha" and "West" campuses of St.
Francis Medical Center, as nonprofit corporations.
HMC purchased St. Francis’ general acute care hospital operations
pursuant to an Asset Purchase Agreement that was completed on
At all times relevant to this arbitration, ownership in the Employer was held by CHA Hawaii (CHAH), and a local physician group that CHAH formed to allow some investors to participate in the HMC project without participating in all other CHAH projects. Cardiovascular Hospitals of America (CHA) is the majority owner of CHAH.
The record reflects that for several years prior to its acquisition by the Employer, the St. Francis Medical Center operations had been financially troubled and that its lenders were concerned about the organization's ability to meet its payment obligations. These concerned lenders required St. Francis to retain independent consultants. The consultants retained recommended that the operation address its financial problems by undertaking such measures as laying off employees and selling the medical centers.
management team proposed layoffs to solve some of the financial concerns on
several occasions, however the
Chief Executive Officer, Sister Beatrice Tom, would not order employee
layoffs. Sister Beatrice
instructed management to explore other potential options for cutting costs
and/or increasing revenues. In
June 2005, St. Francis entered into a letter of intent to sell its hospital
facilities to Employer, which at the time consisted of CHA, accompanied by a
group of local physicians, and other unnamed investors.
The letter of intent, specified that all of the St. Francis employees
were to be terminated upon the completion of the sales transaction, although
specifying that the purchasing entity e.g. Employer, indicated that it would
hire those employees deemed necessary for its daily operations based on the
projected volumes. The letter
also indicated that Employer would exercise "reasonable efforts" to
employ for one year those employees who were retained.
St. Francis employees, Ms. Sphar, Ms. Sue Bias and Mr. Fred Tokoro, the bargaining agent for St. Francis, but acting as HMC representatives, met with Union President-elect Ron Kozuma and Union representations on November 15, 2006. Mr. Kozuma recalled that Ms. Sphar stated that HMC would be retaining all employees for a one year period. Ms. Sphar does not recollect this comment having been made, and other than the St. Francis Newsletter, there is no written verification that such a representation was ever made by the Employer.
During the negotiation of the final sale, Employer determined that St. Francis' staffing level was excessive in relation to its patient volume. At the time the staffing level was determined to be approximately 1,250 to 1,300 full-time equivalents ("FTEs"), which was in excess of the 1,100 FTE figure contemplated on the basis of financial modeling performed by Employer’s CFO, Douglas Kell. It was determined that approximately 150 FTEs needed to be eliminated prior to closing. The parties eventually agreed that St. Francis would make the reduction in FTEs via the process of attrition. St. Francis represented to the Employer that the attrition rate was normally about 25% a year. The parties to the sale therefore contemplated that the reduction would be reached by attrition before the sale was completed.
Unfortunately, the record demonstrates that St. Francis continued to fill its employee vacancies with new hires, which did not allow the reduction in force by attrition. During the same time period, the operation also experienced a notable decrease in patient volume and the number of admissions ran below projected figures, and even below the previous year's admissions. The rate at which the medical centers were losing money greatly exceeded what had been anticipated and budgeted by the Employer.
Unlike its predecessor in interest, St. Francis, the Employer is obligated to pay general excise taxes in the context of healthcare, Medicare, Medicaid, and most commercial insurers do not include GET in their reimbursements and/or payments. "Private pay" (i.e., self-paying) patients, constitute only 2% of Employer’s business. The payment of excise taxes is expected to add $8-9 million a year in new costs to the operation.
control of the operations following the sale, on
layoffs went into effect on
It is clear
from the record that the layoff resulted in the reduction in the number of
Bargaining Unit workers in the Employer’s workforce and also resulted in a
reduction in the hours of the remaining members.
Bargaining Unit workers in the "Patient Care Technician" position
("PCT") were laid off in all but one area of the hospital.
Employer also created, without bargaining with the
The record also demonstrates that the Cashier Clerk's position was eliminated and some of those job duties were transferred to a non-bargaining unit employee in part and the remainder of the duties were absorbed by other Bargaining Unit employees. The Admission Registrar's position also had its job duties increased because of the layoff. In addition, the position was moved to a public area and required to staff an information desk.
Also, a Dietary Aide was laid off and one Dietary Aide had hours reduced to part-time status. The Cook’s hours were reduced to part-time and there was some evidence that a supervisor was performing the work of both the Dietary Aide and Cook. The Employer also used "Call-ins" to perform Bargaining Unit work. Further, a Special Department Aide's position was eliminated and the work was performed by a non-bargaining nurse. A Material Management Clerk was laid off, however the employee returned, was doing the same work, but the position was changed to a non-bargaining position.
the Union business representative, attended the
UNION’S POSITION AND ARGUMENTS
1. The layoff violated the parties' agreement because Employer promised to retain
Agreement because even if the Arbitrator finds that there was no promise by HMC to the Union, HMC's agreement with St. Francis stated that HMC was to use "reasonable efforts to continue to employ each such hired employee for a period of no less than one (1) year." The Union argues that the evidence is clear that HMC made no effort, let alone a reasonable effort, to retain these employees, and that the St. Francis employees were third-party beneficiaries to the Asset Purchase Agreement. The Union therefore argues that, as a third-party beneficiary, the Union and its members are entitled to the employment protection contained in the Asset Purchase Agreement; that the Employer failed to offer any evidence that the Employer used any effort, reasonable or otherwise, to retain employees for a one-year period; and, that the Employer was required to meet and confer with the Union on whether there was a solution aside from this layoff to address the Employer’s financial problems.
which specifically and unequivocally provides that the
Employer is to notify and discuss with the
bargaining employees to perform Bargaining Unit work in
violation of Section 2.3 of the CBA, which precludes excluded employees from
performing Bargaining Unit work if that performance leads to a reduction in
force or a reduction in hours for Bargaining Unit employees.
a job classification and replace it with a lower paying
classification. This is clearly
a mid-term modification of the Agreement and violates Section 36 of the
Agreement and federal law. The
Union argues that such unilateral changes to mandatory subjects of
bargaining during the term of a collective bargaining agreement are a
violation of the Employer's duty to bargain pursuant to Section 8(a)(5) of
the National Labor Relations Act.
EMPLOYER’S POSITION AND ARGUMENTS
For its part, the Employer argues as follows:
The Employer did not guarantee that any of the
employed for a year, and did not violate any alleged
promise when it made the decision to conduct layoffs.
The Employer points out that there is no written documentation of the
promise alleged by the
beneficiary of the agreements between St. Francis and HMC fails for the following reasons:
letter of intent nor the Asset Purchase Agreement set forth a one-year
guarantee of employment and merely indicated that the Employer would use
"reasonable efforts" to continue employment for a year after closing; the
Employer's agreement not to automatically terminate its predecessor’s
employees and to use reasonable efforts to continue to employ all interested
employees was based on the Employer's understanding that the predecessor’s
workforce would be reduced by 150 FTEs prior to closing; given the financial
pressures the Employer is attempting to address, there can be no suggestion
that the layoffs are the result of some failure to exercise "reasonable
efforts" to preserve jobs; and, finally on this point,
the Employer argues that the Union has conceded the non-existence of
a one-year guarantee by claiming to be concerned that its employees might
not be employed for the full year necessary to be eligible for the
Employer's 401(k) contributions.
For these reasons, the Employer argues that it is clear that
The Employer also argues that the
State Agency decision to grant HMC a Certificate of Need because: the decision is neither an agreement nor a basis for private contractual/enforcement rights; any workforce-related representations made by HMC in the course of the application process were based on Employer's understanding that because of the anticipated decrease caused by workforce attrition, it would be assuming a workforce of approximately 1,100 FTEs; and, the decision does not contain the purported representation.
4. The Employer also argues that it has not improperly transferred Bargaining Unit
work to any employees outside of the Bargaining Unit and has therefore not violated Section 2.3 of the CBA because that section states;”. . . included personnel shall not perform bargaining unit work if it results in a reduction in force. . . " and it was Employer's financial problems that led to the reduction in force; not excluded personnel doing Bargaining Unit work. The Employer also argues that there was no evidence of what constituted "bargaining unit work" that was performed by excluded personnel. The Employer reasons that the CBA "covers" employees identified in the NLRB certification which lists a number of different positions that were certified and are thus now covered but, the evidence does not establish what defines or constitutes "bargaining unit work" and the evidence establishes that the work at the hospital was performed based on the needs of the patients and that particular tasks are performed by personnel from both within and outside the bargaining unit. Therefore, Employer posits, there was no violation when other non-bargaining unit employees were required to do some tasks that were also performed by Bargaining Unit members when those positions were reduced or eliminated. The Employer argues that because so many responsibilities are shared among team members of varying classifications, it is neither reasonable nor realistic to find that an increase in work accompanying a reduction in staff size somehow constitutes an improper transfer of work violating the contract.
5. On the issue of whether it violated the CBA by failing to bargain prior to the
layoff, the Employer argues that the CBA does not require
any negotiation over layoffs.
The Employer argues that the parties have agreed in the CBA that Employer's
duties were to: (1) ". . . notify the
6. The Employer argues that it has not improperly transferred Bargaining Unit work
to any other members of the Bargaining Unit, arguing that
if the remaining Union employees should be required to take on additional
work that was previously performed by the laid off employees, there are no
conceivable contract violations because the Employer is clearly permitted to
conduct layoffs and to manage the assignment of work within a particular job
classification under the CBA.
The Employer further argues that it is clearly permitted under Section 12.9
to create new job classifications, and that it clearly satisfied the
requirements of the contract by promptly notifying the
The Arbitrator has seldom been faced with a situation of greater gravity and with more compelling and complex countervailing concerns and issues. While sympathizing with the Employer’s significant financial problems and concerns involved in the conversion of the formerly non-profit medical center to a commercially viable operation, the Arbitrator is limited to an analysis of the terms and conditions imposed upon the parties by the clear language of the CBA, and notes that as the successor-in-interest to St. Francis Medical Center, it clearly assumed those duties pursuant to the terms of its acquisition of its predecessor’s assets and liabilities. The Arbitrator sympathizes with both parties, particularly given the statements made by the Employer’s predecessor-in-interest regarding the one year guarantee; and, given the Employer’s currently severe financial situation.
However, representations made by an absent party that were not incorporated into a letter or memorandum of understanding attached to the CBA, and Employer’s exigent financial circumstances cannot be considered in the Arbitrator’s analysis of the duties imposed on the parties under the CBA.
finds on the record that the Employer did not guarantee that any of the
Arbitrator also finds that on the record before him the
the Employer’s argument that the CBA does not require any negotiation over
layoffs, and that under the CBA that Employer's duties were to: (1) ". . .
As to the
creation of the new classifications and job duties, the Employer’s argument
that it is clearly permitted under Section 12.9 to create new job
classifications, and that it satisfied the requirements of the contract by
promptly notifying the Union of the proposed wage rate and providing two
copies of the new job description, misinterprets the clear language of the
CBA. It was clearly
contemplated that such classifications and changes were intended by the
parties to be part of a negotiated process that entitled the
As to the Employer’s argument that it did not improperly transfer Bargaining Unit work to any employees outside of the Bargaining Unit, the facts lead the Arbitrator to conclude that the Employer may not rely upon the argument that shared responsibilities among some of its employees immunize it from the terms of the CBA. The facts on the record before the Arbitrator demonstrate that Bargaining Unit members were laid off, and that their duties were absorbed by employees outside of the Bargaining Unit. Therefore, the Arbitrator finds that there was a clear cause and effect link between the Employer’s decisions and a loss of Bargaining Unit jobs. This constitutes a violation of the CBA, as will be discussed in greater detail in the decision and award.
DECISION AND AWARD - ISSUE ONE
As to Issue One, the Arbitrator finds that, while there may have been a unilateral assurance issued by St. Francis as to whether or not there would be a year without the layoff of Union employees once Hawaii Medical Center took over the facility involved, the Union has not demonstrated by a preponderance of the evidence that the Employer involved in this grievance, HMC, participated in such an agreement. Even under the Purchase Agreement, HMC was required only to exercise “reasonable efforts” to avoid layoffs. Further, the Arbitrator is bound by the terms of the CBA. There is no addendum, Memorandum of Understanding, side letter agreement, or other mutually executed writing appended to or amending that agreement which
set forth the terms and conditions agreed to by the parties in the CBA. By the language of Section 34 to the CBA:
“This document contains the entire Agreement of the parties and neither party has made any representations to the other which are not contained herein.”
Further, the CBA at Section 30.2 (g) specifically limits the latitude that this Arbitrator has in interpreting the Agreement stating in pertinent part:
“All decisions of the arbitrator shall be limited expressly to the terms and provisions of this Agreement, and in no event may the terms and provisions of this Agreement be altered, amended or modified by the arbitrator.”
Accordingly, the Arbitrator denies the Grievance as to the first issue.1
DECISION AND AWARD - ISSUE TWO
Whether Bargaining Unit work can be given to non-bargaining unit employees?
The terms of the CBA prohibit the Employer from giving Bargaining Unit work to non-bargaining unit employees, while Bargaining Unit employees are laid off. Section 24.3(b)(2), although set forth under the “Low Need day” section, reflects the spirit of the CBA and requires that before laying off members that the Employer cancel all Call-ins. To the extent that the Employer has laid off Bargaining Unit employees and is using Call-ins to perform Bargaining Unit work, the Contract expressly prohibits such conduct under Section 2.3.
Although the Employer argues forcefully that it has not improperly transferred Bargaining Unit work to any employees outside of the Bargaining Unit, and has therefore not violated Section 2.3 because it was financial forces that led to the reduction in force and not excluded personnel doing Bargaining Unit work; and further argues that there was no evidence of what constituted "bargaining unit work" because work at the hospital was performed based on the needs of the patients and particular tasks were performed by personnel from both within and outside the Bargaining Unit; the Arbitrator is forced to disagree. The Union introduced unrebutted evidence at the hearing that work previously done by its laid-off members was being performed by non-bargaining unit employees. The Employer may not rely upon the argument that shared responsibilities among some of its employees immunize it from the terms of the CBA. The facts demonstrate that Bargaining Unit members were laid off, and that their duties were absorbed by employees outside of the Bargaining Unit. Therefore on Issue two, to the extent that such work is being done by Call-ins or other non-bargaining unit employees, the Grievance is sustained.
DECISION AND AWARD - ISSUE THREE
Whether Bargaining Unit work can be given to other Bargaining Unit employees?
The Employer argues that the Union has not properly articulated its claim that Bargaining Unit work has been improperly given to other Teamsters, and has not satisfied its burden of proving a violation of the contract because the Employer is clearly permitted to conduct layoffs and manage the assignment of work within a particular job classification and that the Employer's creation of the Patient Support Aide classification satisfied the requirements of the contract. The Arbitrator cannot agree.
The Union introduced unrebutted evidence that Bargaining Unit work was unilaterally reassigned by the Employer and that: 1) A new position description for Bargaining Unit members was created without discussion or negotiation; and, 2) That the duties of the laid-off Bargaining Unit members were redistributed to a certain extent among the remaining Bargaining Unit Workers in other classifications without negotiation; and, 3) That some Bargaining Unit employees’ wage rates were reduced. The Arbitrator finds that this course of conduct violated the requirements of Section 12.9 (b) and (c) of the CBA, and therefore the Grievance is sustained as to Issue Three.
The Arbitrator finds the following remedies appropriate under the circumstances:
1. That to the extent that Bargaining Unit members have been replaced by non-
bargaining unit employees and the Union has been able to demonstrate that previously the Bargaining Unit work following the layoff is being done by non-bargaining unit employees, the Bargaining Unit members reinstated to those positions identified in paragraph 2 of these remedies shall be made whole by the payment of back pay in the amount of hours of Bargaining Unit worked by non-bargaining unit employees, retroactively to the date of the layoff or any cut back in hours;
That prospectively, the Employer, where the
bargaining unit employees have been doing non-bargaining work, shall reinstate Bargaining Unit members most qualified in terms of seniority and qualification to fill those remaining positions that remained following the layoff
3. The Arbitrator instructs the Parties to immediately enter into negotiations with
respect to the wage rates of any New Classifications for Bargaining Unit members or significant changes in job duties and responsibilities that effect the duties and responsibilities of Bargaining Unit employees working in existing classifications;
4. That to the extent that Bargaining Unit members have been replaced by
Bargaining Unit employees in new classifications and the Union has been able to demonstrate that the work following the layoff is being done by Bargaining Unit employees that were previously outside of those classifications for that Bargaining Unit work, the Bargaining Unit members reinstated to those positions identified in paragraph 5 of these remedies shall be made whole by the payment of back pay in the amount of hours of Bargaining Unit work done by the other Bargaining Unit employees in new classifications less any earnings they have received retroactively to the date of the layoff or any cut back in hours. With regard to new classifications, the parties shall negotiate the wage rates pursuant to Section 12.9(b) and if agreement cannot be reached after negotiations, arbitrated under Section 12.9(c).
That prospectively, the Employer, where the
Unit employees have been doing Bargaining Unit work previously done by Bargaining Unit members in other classifications, shall reinstate to fill those remaining positions that remained following the layoff, those Bargaining Unit members in that classification most qualified in terms of seniority and qualification to occupy those positions;
6. The parties shall meet and discuss what the specific remedies detailed herein require. The Arbitrator retains jurisdiction over the remedies if the parties cannot reach an agreement after good faith efforts to resolve the remedies set forth above.
MICHAEL F. NAUYOKAS
On this _____st day of __________ 2007, before me personally appeared Michael F. Nauyokas, to me known to be the person described in and who executed the foregoing instrument and acknowledged that he executed the same as his free act and will.
Notary Public, State of
My Commission expires: _______________
Notary Public, State of
My Commission expires: _______________
1 The Arbitrator must observe that the limitation of the authority of Arbitrators to ruling on matters within the agreement is well settled and continues to be enforced. On May 10, 2007, the Illinois Appeals Court, First District (Chicago) in First Merit Realty Services, Inc. v. Amberly Square Apartments, L.P. 2007 WL 1376227 (Ill.App. 1 Dist.) in a still unpublished opinion, vacated an award based on breach of a written agreement of the parties which the arbitrators reformed based on a finding of a subsequent oral agreement. The Court found that there is NO authority for arbitrators having such power.