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American Federation of State, County & Municipal Employees, Council 81 v. State

Court of Chancery of Delaware

July 31, 2013

AMERICAN FEDERATION OF STATE, COUNTY & MUNICIPAL EMPLOYEES, COUNCIL 81, Appellant-Below, Appellant,
v.
STATE OF DELAWARE, Appellee-Below, Appellee.

Submitted: March 7, 2013

CITATION ON APPEAL FROM THE DECISION OF THE PUBLIC EMPLOYMENT RELATIONS BOARD DATED DECEMBER 28, 2011 (BIA NO. 08-05-625)

Perry F. Goldlust, Esq., PERRY F. GOLDLUST, P.A., Wilmington, Delaware; Attorney for Appellant-Below, Appellant.

William W. Bowser, Esq., Scott A. Holt, Esq., YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; Attorneys for Appellee-Below, Appellee.

MEMORANDUM OPINION

PARSONS, Vice Chancellor.

Pending before this Court is an appeal, brought pursuant to 19 Del. C. § 1309, from an order by the Public Employment Relations Board (the "PERB"). After negotiations over a new collective bargaining agreement failed, the appellant, a union representing the employees of the Delaware Department of Corrections, and the appellee, the State, invoked a binding interest arbitration process. The arbitrator appointed to oversee the dispute decided in favor of the State, and the union sought review before the PERB. The PERB upheld the arbitrator's decision, and the union now asserts that the PERB erred as a matter of law because the arbitrator lacked subject matter jurisdiction to pick the proposal the State made in the arbitration. The core issues presented in this case are: (1) whether the union waived its purported subject matter jurisdiction argument by failing to raise it before the arbitrator; and (2) whether the PERB erred as a matter of law in finding that the arbitrator had subject matter jurisdiction. I uphold the PERB's decision, concluding that the union waived the arguments it failed to raise before the arbitrator, and that in any event, the PERB did not err as a matter of law.

I. BACKGROUND

A. Facts[1]

1. Failed negotiations

The American Federation of State, County & Municipal Employees, Council 81, ALF-CIO ("AFSCME") is the exclusive bargaining representative of the approximately 190 workers employed by the Delaware Department of Corrections who hold supervisory positions in the bargaining unit defined in 19 Del. C. § 1311A(b)(11) as "correctional lieutenants, staff lieutenants, correctional captains, and similar occupants" ("Unit 11"). In February 2008, AFSCME and the State of Delaware (the "State") began negotiations for a new collective bargaining agreement ("CBA"). The negotiations lasted approximately three years, and the parties reached tentative agreements on numerous issues, but ultimately they could not agree on three items: wages, a physical performance requirement ("PPR"), and the term of the agreement.

2. Binding interest arbitration

To resolve the impasse, the parties initiated a binding interest arbitration process under 19 Del. C. § 1314 by submitting the matter to mediation. After the mediation failed, an arbitrator, Ralph H. Colfesh, Jr., Esq. (the "Arbitrator"), was appointed by the PERB and charged with choosing either the State's or AFSCME's last, best, final offer ("LBFO"). Both parties' LBFOs incorporated the tentative agreements they had reached on various provisions of the CBA, and both came to agree that the term of the agreement should be for two years. But, the parties' wage proposals varied. AFSCME based its proposal for wage increases in each of the two years of the contemplated contract on the percentage increase of the general fund revenue estimate as adopted by the Delaware Economic and Financial Advisory Council ("DEFAC"), not to exceed a year-over-year increase of 3.75%. The State proposed wage increases in terms of fixed percentage increases varying from 1% to 1.5%. The State's proposal also mandated that any future employee hired into or promoted to a correctional officer series position in Unit 11 must pass a PPR to receive any annual contractual pay increase. According to the State's LBFO, the PPR test would be offered on an annual basis and any employee who did not pass the test would be permitted to re-take the test once within six months of the first test. If the employee was successful on the re-take, he would receive the annual contractual pay increase, pro-rated to the date of the re-take. Finally, all employees in Unit 11 before the date of the Arbitrator's award would be exempt from the PPR. During the arbitration proceedings, neither party objected to the propriety of the other party's LBFO.

The Arbitrator conducted a three-day evidentiary hearing to determine which party's LBFO was most consistent with the statutory factors contained in 19 Del. C. § 1315(d).[2] During the hearing, the State argued that its PPR was in the best interests of the public as it addressed operational and safety concerns at the Department of Corrections. AFSCME responded that the State's inclusion of a PPR supported the award of AFSCME's LBFO because such a requirement would promote a "divisive atmosphere" in the correction facilities as the PPR test would not be required of other correctional employees. As such, AFSCME asserted that Section 1315(d)(7), which allows the Arbitrator to consider factors "which are normally or traditionally taken into consideration in the determination of wages, hours, and conditions of employment, " compelled the Arbitrator to select AFSCME's LBFO, which did not contain the divisive PPR.

Ultimately, the Arbitrator, charged with the task of picking either the State's or AFSCME's LBFO in its entirety and without modification, [3] chose the State's LBFO. In his written findings of fact, the Arbitrator stated that AFSCME's variable wage increase proposal was not in the best interest of the public, [4] was not supported by comparisons of wages to similarly situated workers, [5] and prevented the consideration of the "overall compensation" of Union 11 employees because it blindly linked wages to the DEFAC revenue projections without regard to actual revenue growth.[6] Conversely, the Arbitrator found that the State's proposal was supported by the factors specified in 19 Del. C. § 1315(d).[7] The Arbitrator also noted that the State's PPR proposal could affect Unit 11 wages "because repeated failures of the PPR test could result in withholding of a wage increase.[8] Though the Arbitrator questioned the wisdom of the PPR, he nonetheless found the State's proposal on the whole to be superior to that of AFSCME, and he awarded the State's LBFO.

3. The PERB's Decision

On October 20, 2011, AFSCME appealed the Arbitrator's decision to the PERB under 19 Del. C. § 1315, arguing that the Arbitrator had exceeded his jurisdiction by accepting the State's LBFO. Specifically, AFSCME asserted that the State's PPR proposal was not a permissible subject of bargaining as it was not related to "compensation" as that term is defined in 19 Del. C. § 1311A(a)(1), [9] but rather affected "position classification, " which is excluded from the permissible scope of bargaining under Section 1311A(a). AFSCME also argued that the PPR proposal would effect an illegal amendment on the CBA, and would thereby place an impermissible burden on correctional officers in other units who wanted to be promoted into Unit 11.

On December 28, 2011, the PERB unanimously affirmed the Arbitrator's decision. First, the PERB concluded that the State's PPR proposal constituted a matter "concerning compensation" because it addressed conditions under which an annual wage increase could be earned.[10] Next, the PERB explained that the PPR proposal did not place an impermissible prerequisite on correctional officers seeking to join Unit 11 as it neither altered the minimum qualifications for a Unit 11 position nor affected the classification of unit positions or the application process.[11] Finally, the PERB held that the Arbitrator had provided sufficient information in his decision to enable the PERB to determine that the award was not "arbitrary, capricious, ...


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