The Rules Governing Negotiations in a Post-Act 10 Environment
April 10, 2012

By D&K's School and Higher Education Law Team

On Friday, March 30, 2012, Governor Walker approved the administrative rules that provide guidance to municipal employers about how to bargain over "total base wages," under 2011 Wisconsin Act 10. This Client Alert is intended to provide a summary and some practical information regarding these rules, which appear at Wis. Admin. Code § ERC Chapter 90.

It is important to note that the approved version of Wis. Admin. Code § ERC Chapter 90 differs substantially from the draft version of the rules that was prepared by the Wisconsin Employment Relations Commission (WERC) and sent to the Governor's office in February 2012. Therefore, to the extent that municipal employers have relied upon the guidance provided in the draft version of Wis. Admin. Code § ERC Chapter 90, for any purpose, such as planning for negotiations with labor organizations, it will be necessary to revisit and, perhaps, reconsider those plans.

When municipal employees are represented by a labor organization
(a union), for purposes of the Municipal Employment Relations Act (MERA), Wis. Stat. § 111.70, et seq., Wis. Admin. Code § ERC Chapter 90, governs the negotiations between the union and the employer. These rules prescribe the method for calculating "the maximum dollar amount subject to collectively bargained increases in a general municipal employee bargaining unit's base wages" without going to a referendum. The calculation requires that the employer first identify all of the authorized positions that existed 180 days prior to the expiration date of the most recent collective bargaining agreement. It is important to note that Wis. Admin. Code § ERC 90.02(1) defines "authorized positions" as "those positions in the bargaining unit that are filled." Therefore, if a bargaining unit position was vacant on January 2, 2012, even if the school district subsequently filled the position, the school district may not include the salary paid to the employee in the position (before or after January 2, 2012) in the calculation of total base wages.

If an employer is confused about which positions are "in the bargaining unit," for purposes of Wis. Admin. Code § ERC Chapter 90, the recognition clause in the expiring (or expired) collective bargaining agreement should help to provide the answer. If, for example, a school district and the teachers' union previously agreed to exclude school psychologists from the professional staff bargaining unit, the classification of the school psychologist as a non-represented employee will continue. If that same school district were considering adding new positions to the employee complement and is concerned about whether the positions should be included in the bargaining unit, it is advisable to consult with the district's legal counsel before proceeding with such a decision.

Once the authorized positions have been identified, the next step is to determine the hourly or annual, if applicable, base wage rate for each authorized position. Wis. Admin. Code § ERC 90.03(2) provides that: "The hourly, or annual, base wage rate is the hourly or annual rate applicable to the position excluding supplemental compensation which includes but is not limited to, education credits or credentials in pay schedules, overtime, premium pay, lump sum merit pay, performance pay, and extra duty pay."

The new rules are not accompanied by commentary from two of the three WERC Commissioners. However, WERC Commissioner Judith Neumann issued a dissenting memorandum to explain her disagreements with Wis. Admin. Code § ERC Chapter 90. In the absence of a statement from the Commission's majority, it is not clear whether (and to what extent) Commissioner Neumann's dissent can be treated as an authoritative statement on the meaning and application of the rules, but it provides background information that may at least help to illuminate the Commissioners' debate over the rules.

Commissioner Neumann explains in her dissenting memo that, unlike in the original version, the revised version of Wis. Admin. Code § ERC Chapter 90 explicitly requires that the employer exclude from its determination of the hourly or annual base wage rate education credits and credentials in pay schedules, in addition to overtime, premium pay, lump sum merit pay, performance pay and extra duty pay. However, she notes the new rules do not specifically exclude from the determination of the hourly or annual base wage rate seniority and service based increments, or merit pay that is incorporated into an employee's hourly or annual base wage.

Commissioner Neumann illustrates her interpretation of Wis. Admin. Code § ERC Chapter 90 with the following hypothetical scenario. A teacher with 10 years of experience in the school district and a Master's Degree was paid an annual salary of $45,000 during the 2011-2012 school year, based on her placement on the negotiated salary schedule. Without the Master's Degree, based on the negotiated salary schedule, she would have been paid only $35,000. Thus, Wis. Admin. Code § ERC 90.03(2) would require her annual base wage to be identified as $35,000, instead of the $45,000 annual salary she earned during the 2011-2012 school year.

Wis. Admin. Code § ERC 90.03(2) does not prohibit a school district from paying that same hypothetical teacher an annual salary of $45,000 for the 2012-2013 school year. According to Commissioner Neumann, however, it does prohibit the school district from treating $45,000 as that teacher's annual base wages for purposes of calculating the maximum dollar amount subject to negotiations for the 2012-2013 collective bargaining agreement.

After identifying the authorized positions, and determining the base wage rate for each authorized position, if the base wage rate is an hourly rate, the next step is to multiply the hourly base wage rate by the annual number of regularly scheduled hours for each authorized position. If the base wage rate is an annual rate, this step is unnecessary.

The final step is to total the annual base wages for all authorized positions. Once the sum of the annual base wages for all authorized positions is calculated, the next step is to multiply that amount, (the total the annual base wages for all authorized positions) by the consumer price index change, which will be published by the WERC, as necessary. For purposes of collective bargaining agreements beginning on July 1, 2011, that amount is 1.64%. For purposes of collective bargaining agreements beginning on July 1, 2012, that amount is 3.16%. The resulting dollar amount is the maximum amount subject to collective bargaining.

It is important to note that the new version of Wis. Admin. Code § ERC Chapter 90 addresses the issue of the scope of permissible bargaining. Wis. Admin. Code § ERC 90.02(4) explains that the phrase "subject to collective bargaining" includes both the dollar amount and the distribution thereof to employees in the bargaining unit. As a result, municipal employers will have an obligation to negotiate over the total amount available for distribution, as well as the manner in which the amount is distributed at the bargaining table.

The method for distributing the total base wage increase is not set forth in Wis. Admin. Code § ERC Chapter 90. As such, there are many different ways in which the total base wage increase may be distributed among the staff. For example, the amount could be distributed equally among the existing employees, the amount could be distributed in favor of more highly paid employees, or the amount could be used to bolster the salaries provided to recently hired staff. The difficulty with evaluating distribution issues and proposals, however, lies in the fact that the statute the rule is based upon excludes matters such as pay schedules, merit pay, or performance pay from the definition of "total base wages" and, consequently, a number of factors that might ordinarily be used to decide how available dollars are distributed are not appropriate subjects of bargaining. Wis. Stat. § 111.70(4)(mb)1.

When the parties reach a voluntary agreement, the 2012-2013 collective bargaining agreement will be reduced to writing. The final document will set forth the total base wage increase for the 2012-2013 contract period and the manner in which the increase shall be distributed among the bargaining unit positions.

It is important to remember that Wis. Admin. Code § ERC Chapter 90 has no bearing on any decisions that the municipal employer makes with regard to compensation and benefits for employees outside of the "total base wage" increases that are subject to negotiations. Thus, for example, a school district or other municipal employer may continue to utilize a salary schedule that contains automatic pay progressions and credit for educational achievement. A municipal employer may choose to offer compensation to employees for merit, extra duties, educational achievement, overtime, premium pay, longevity, or another reason. Moreover, the municipal employer may provide additional compensation to employees, such as a salary additive, or as a one-time stipend or bonus, or through another system or structure (though caution in how these compensation features are presented is important to maintain the distinction between wages that are bargained and those that are conferred by the employer).

As long as this compensation is not negotiated with the labor organization representing the employees, such compensation is permissible and not subject to the maximum amount calculated using the procedure in Wis. Admin. Code § ERC Chapter 90. The same is true with regard to any fringe benefits, such as insurance coverage and premium contributions, paid leaves, and tuition reimbursement. As long as the employer offers such benefits on a unilateral basis, Wis. Admin. Code § ERC Chapter 90 is not applicable.

The attorneys at Davis & Kuelthau, s.c., are prepared to assist you in negotiations with labor organizations representing your employees. We are also ready to help develop and evaluate new methods for compensating employees. If you have questions about this topic or if you wish to discuss the details of Wis. Admin. Code § ERC Chapter 90, please contact your Davis & Kuelthau, s.c. attorney.

 

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