STATE OF WASHINGTON BEFORE THE PUBLIC EMPLOYMENT RELATIONS COMMISSION ANACORTES POLICE SERVICES GUILD, ) ) Complainant, ) CASE 17453-U-03-4524 ) CASE 17454-U-03-4525 ) vs. ) DECISION 9004 - PECB ) CITY OF ANACORTES, ) ) ) FINDINGS OF FACT, ) CONCLUSIONS OF LAW Respondent. ) AND ORDER ) ___________________________________) Cline & Associates, by George E. Merker, Attorney at Law, for the union. Summit Law Group, by Denise L. Ashbaugh, Attorney at Law, for the employer. On April 21, 2003, the Anacortes Police Services Guild (union) filed two nearly identical unfair labor practice complaints with the Public Employment Relations Commission. The union's complaints named the City of Anacortes (employer) as respondent. The union is the exclusive bargaining representative of a unit of all full and part-time commissioned Anacortes Police Department employees, and a unit of noncommissioned employees.(fn:1) The union filed one complaint on behalf of the commissioned employees and the second complaint on behalf of the noncommissioned employees. ____________________ fn:1 The collective bargaining agreements for both bargaining units exclude the chief of police, assistant chief, captain, and the administrative assistant. Agency staff issued a preliminary ruling on December 29, 2003, finding a cause of action existed under RCW 41.56.140(4)(fn:2) regarding the employer's alleged unilateral changes in employee co-payments for health insurance benefits, without first providing an opportunity to bargain. ____________________ fn:2 The preliminary ruling also found a cause of action under RCW 41.56.140(1) as a derivative interference violation. On March 25, 2004, the union filed amended complaints against the employer. An amended preliminary ruling was issued on August 3, 2004, finding an additional cause of action to exist under RCW 41.56.140(4) regarding the employer's alleged unilateral change in health insurance premiums, without first providing an opportunity to bargain. Agency staff consolidated the two cases for hearing.(fn:3) Examiner Joel Greene conducted a hearing on October 6, 2004. Each party filed a post-hearing brief.(fn:4) ____________________ fn:3 Prior to hearing, the union filed a motion for partial summary judgment. I denied the motion by letter dated September 16, 2004. fn:4 In addition to its post-hearing brief, the employer submitted a pleading titled "Motion to Strike the Guild's Reliance and References to Evidence Not in the Record." When rendering a decision, I can only consider exhibits and testimony offered and admitted on the official record. I will not rely on any statements, declarations, arguments, or other information not contained in the official record. ISSUES PRESENTED 1) * Did the employer make a unilateral change in a mandatory subject of bargaining when it decided to transfer increases in the AWC prescription drug co-payments to its employees? * If the employer made a unilateral change in a mandatory subject of bargaining, does the employer have a valid affirmative defense of waiver by inaction that relieved it from the duty to bargain its decision to increase prescription drug co-payments? 2) * Did the employer make a unilateral change in a mandatory subject of bargaining when it decided to transfer increases in the Association of Washington Cities (AWC) health insurance premiums to its employees? Based on the record as a whole, I find the employer made a unilateral change in a mandatory subject of bargaining when it decided to transfer increases in the AWC prescription drug co-payments to its employees. I find the employer proved a valid affirmative defense of waiver by inaction that relived it from the duty to bargain its decision to increase prescription drug co-payments. Regarding the second issue, I find the employer violated RCW 41.56.140(4) by making a unilateral change in employee health insurance premiums, without providing the union an opportunity to bargain the increase. ANALYSIS ISSUE 1: EMPLOYER INCREASES IN PRESCRIPTION DRUG CO-PAYMENTS Did the employer make a unilateral change in prescription drug co-payments? From January 1, 2001 to December 31, 2003, the employer and the union were parties to collective bargaining agreements with both the commissioned and noncommissioned employees of the City of Anacortes Police Department. These agreements contained virtually identical provisions, particularly with regard to health and welfare benefits. The employer obtained health benefits for its employees from the AWC Benefit Trust. The AWC is an organization of over 280 incorporated cities and towns in Washington. The AWC provides a pooling mechanism that enables its member organizations to purchase employee benefit services. In the fall of 2002, the AWC notified the employer that the AWC would increase co-payments for prescription drugs in 2003. The increase would more than double the cost of prescription drug co-payments for city employees as follows: an increase from $7.00 to $15.00 for name-brand prescriptions (34-day supply), and from $14.00 to $30.00 for name-brand prescriptions obtained by mail-order (90-day supply). The employer implemented the increases on January 1, 2003. Co-payments for generic prescriptions and prescriptions at the Group Health Cooperative remained the same. RCW 41.56.030(4) requires an employer and exclusive bargaining representative to bargain in good faith on personnel matters, including wages, hours, and working conditions. A party to a collective bargaining agreement commits an unfair labor practice if it unilaterally changes these mandatory subjects of bargaining without exhausting its obligation to bargain the changes. City of Pasco v. Public Employment Relations Comm'n, 119 Wn.2d 504 (1992). The Commission has long recognized that health benefits are mandatory subjects of bargaining. Spokane County, Decision 2167-A (PECB, 1985). Prescription drug co-payments fall under the umbrella of health benefits and are mandatory subjects of bargaining. City of Kirkland, Decision 8822 (PECB, 2004). Because prescription drug co-payments are mandatory subjects of bargaining, the employer had a duty to bargain with the union over the proposed changes in co-payments. The employer failed to negotiate before it decided to transfer increases made by the AWC to its employees. I therefore find the employer violated its duty to bargain a change in a mandatory subject. However, if the employer can prove an affirmative defense, the employer is relieved of its obligation to bargain and did not commit an unfair labor practice. Employer's affirmative defense of wavier by inaction. Absent the existence of a waiver or impasse, a unilateral change in a mandatory subject of bargaining constitutes an unfair labor practice. City of Wenatchee, Decision 2194 (PECB, 1985). Commission rules require the moving party, here the union, to carry the burden of proof that the employer committed an unfair labor practice. WAC 391-45-270(1)(a). The responding party, here the employer, carries the burden of proving an affirmative defense. WAC 391-45-270(1)(b). In the instant case, the employer asserts a "waiver by inaction" defense. The employer claims the union never requested to bargain the increase in prescription drug co-payments. An affirmative defense of waiver by inaction exists when an employer proposes a change in a mandatory subject of bargaining, provides an opportunity to bargain, and yet the affected party does not request to bargain in a timely manner. Whatcom County, Decision 7643 (PECB, 2002). An employer must give adequate notice to the union in advance of making a change in a mandatory subject. Once an employer provides sufficient notice, the union must show it made a timely request to bargain. The request must signify a desire to bargain the issue. The union's filing of an unfair labor practice complaint does not constitute a valid bargaining request. Clover Park Technical College, Decision 8534-A (PECB, 2004). The union argues that the employer presented the union with a fait accompli, thereby eliminating the union's obligation to request bargaining. A fait accompli occurs when the employer makes a change at the same time it provides notice of the change. City of Kirkland, Decision 8822. The notice requirement is the critical distinction between fait accompli and waiver by inaction. Richland School District, Decision 8454 (PECB, 2004). At the hearing, Emily Schuh, the human resources director for the employer, testified that after the AWC notified her of the expected increases in prescription co-payments she prepared an open enrollment memorandum, dated October 23, 2002. In this memo, Schuh outlined the anticipated increases in prescription drug co-payments and health insurance premiums. Schuh sent the memo to each employee. In addition, Carol Wilmes, program coordinator for the AWC Employee Benefit Trust, testified that the AWC sent a wellness newsletter to each employee's home. The newsletter outlined the increases in prescription drug co-payments. The employer's memo and the AWC newsletter effectively put the union on notice the employer intended to increase prescription co-payments. Lou D'Amelio was the union president during the time in question. On November 6, 2002, D'Amelio sent Schuh an e-mail responding to Schuh's memo and objecting to the increase in insurance premium costs. D'Amelio did not mention or object to the increase in prescription drug co-payments. Schuh testified that, prior to the union's filing of these unfair labor practice complaints, the union did not bring any concerns about the increased co-payments to her attention. The union presented no evidence to the contrary during the hearing. I find that the employer met its duty to provide adequate notice to the union regarding its decision to transfer increases in the AWC prescription drug co-payments to union members. The union received the notice and failed to raise a timely objection. The employer carried its burden of proving the union waived its bargaining rights by inaction under RCW 41.56.030(4), relieving the employer of a "refusal to bargain" violation related to increases in prescription drug co-payments.(fn:5) ____________________ fn:5 In its post-hearing brief, the employer asserted other affirmative defenses. Having granted the employer's defense of waiver by inaction, I need not address the other defenses raised by the employer. ISSUE 2: EMPLOYER INCREASES IN HEALTH INSURANCE PREMIUM PAYMENTS Did the employer make a unilateral change in health insurance premiums? From January 1, 1998, to December 31, 2000, the employer and the union were parties to collective bargaining agreements with both the commissioned and noncommissioned employees. These agreements were virtually identical, particularly with respect to health and welfare coverage. Article 12 of each contract identified health and welfare benefits as follows: Article 12 HEALTH AND WELFARE COVERAGE For the plan year beginning October 1998 the city will contribute $525.00 per employee per month into the costs of the City's Health and Welfare Program for employees and dependents. The extent of coverage, cost containment, the amount of deductible and/or co-insurance and other such issues are negotiable. The City's contribution for plan years beginning October 1999 and October 2000 will be negotiated at appropriate times during the course of this contract. An addendum to the 1998-2000 contract described an agreement to transfer insurance coverage to the AWC Benefit Trust on September 1, 2000. Prior to the transfer to the AWC plan, the employer contributed $525.00 per employee per month into its own medical insurance program, enough to cover the entire cost of insurance premiums. However, due to the rising cost of health insurance, by January 2001, the $525.00 cap was no longer sufficient to cover the actual cost of premiums. In November 2000, Schuh notified D'Amelio that, due to AWC premium increases for 2001, union members would be responsible for costs exceeding the $525.00 cap. At that time, the parties had not yet completed negotiations for the 2001-2003 contract. The 1998-2000 contracts would expire on December 31, 2000. On January 1, 2001, the employer began deducting from employee paychecks premium amounts that exceeded the portion covered by the $525.00 cap.(fn:6) Meanwhile, the parties continued to negotiate a successor agreement for 2001-2003. ____________________ fn:6 Union president D'Amelio testified that the deductions were taken only for a "short period of time" because both sides realized they were close to settling the contract for 2001-2003. Schuh explained that "some months there were deductions made, and some months there were not," depending on the census for the month. The parties had not yet reached agreement on the 2001-2003 contract by the time the AWC premiums increased again in the fall of 2001. Schuh again notified employees of the anticipated increases. As before, the employer continued to pay the negotiated cap, and the employer would deduct the remaining portion from employee paychecks beginning in January 2002. In January 2002, the parties finally agreed upon a new contract for the years 2001-2003. Article 12, which defines health and welfare benefits, changed quite significantly from previous agreements. Instead of agreeing to maintain a defined contribution, or an expressly stated monetary cap (like the $525 cap described above), the employer agreed to pay 100 percent of the health and welfare premiums "[f]or the duration of the contract (beginning in 2002)." The employer reportedly agreed to pay 100 percent of the premiums because the union agreed to change insurance plans from AWC Plan A to a lower-cost preferred provider organization (PPO) plan. The result was a change from a $5.00 co-payment plan to a $10.00 co-payment plan. The employer paid 100 percent of the premiums in 2002. In the fall of 2002, the AWC once again notified the employer of anticipated rate changes for 2003. On October 23, 2002, Schuh sent an open enrollment memorandum to each employee, indicating that the premium rates would be increasing. D'Amelio replied by e-mail on November 6, 2002, stating that because of the 2001-2003 contract language, the employer was still responsible for 100 percent of the health insurance premiums. After looking at the contract, Schuh agreed with D'Amelio, and the employer continued to pay 100 percent of the premiums for 2003. In the fall of 2003, the AWC again notified the employer of further premium increases. On October 14, 2003, after notifying guild president Emerson Nordmark, Schuh sent an open enrollment memorandum to each employee, indicating that the city would continue to pay the same amount toward premiums in 2004 as it had in 2003. However, employees would be responsible for any increases in premiums between the 2003 and 2004 rates. On October 20, 2003, the union's attorney sent a letter to Schuh. The union objected to the employer's open enrollment memorandum. Schuh responded to the union on October 24. Schuh stated that the employer was not obligated to cover any premium amounts that exceeded the 2003 contribution amounts, subject to change depending on the terms of any future agreements between the parties. In January 2004, the employer began deducting excess premium amounts from employee paychecks. As a result, on March 25, 2004, the union filed amended complaints to its original unfair labor practice charges. Did the employer properly preserve the status quo? The employer is obligated to maintain the status quo with regard to all mandatory subjects of bargaining during the hiatus between contracts. City of Shelton, Decision 7602 (PECB, 2002). During this period, any change in practice that is arguably less advantageous (or more favorable) to employees might be seen as a threat (or coercion), in violation of RCW 41.56.140(1). Contract termination rules for noncommissioned employees in this case are governed by RCW 41.56.123. Under that statute, all terms and conditions specified in a collective bargaining agreement must remain in effect until the parties settle a new contract, not to exceed one year from the date the contract expired. RCW 41.56.123(1). For uniformed personnel, mandatory subjects of bargaining must remain in effect while the case is pending before an arbitration panel, unless the parties mutually agree otherwise. RCW 41.56.470. The employer argues that it was not obligated to pay the 2004 premium increases (i.e. 100 percent of the premium amount) because it maintained the status quo by continuing to pay the same dollar amount it paid for 2003 premiums. The employer further insists that the language in the collective bargaining agreement "[f]or the duration of the contract" means that its obligation to pay 100 percent of the health insurance premiums lapsed on December 31, 2003, the date the contract expired. The employer's interpretation of the contract language directly conflicts with statutory mandates. RCW 41.56.123 requires all terms and conditions of an agreement remain in effect until the effective date of a subsequent agreement, or by mutual agreement to exclude provisions with separate and specific termination dates. RCW 41.56.470 applies a similar concept to uniformed personnel. Contrary to the statutory mandates, the employer disrupted the status quo when it began deducting portions of the health care premiums from employee paychecks, an unlawful change in a term of employment. By failing to maintain the status quo, the employer committed an unfair labor practice within the meaning of RCW 41.56.140(4) and (1). I find any facts or arguments presented at hearing that are not addressed in this decision are not persuasive or are immaterial. FINDINGS OF FACT 1. The City of Anacortes is a public employer within the meaning of RCW 41.56.030(1). 2. The Anacortes Police Services Guild is a bargaining representative within the meaning of RCW 41.56.030(3). The union is the exclusive representative of all commissioned and noncommissioned police department employees, excluding the chief of police, the assistant chief, the captain, and the administrative assistant. 3. The parties have a history of collective bargaining and have entered into numerous agreements, including the contracts covering the periods 1998-2000 and 2001-2003, which are referenced in this decision. 4. Prior to September 2000, the employer provided self-insured health insurance benefits to its employees. 5. In September 2000, the employer began providing health insurance benefits to its employees through the Association of Washington Cities (AWC) Benefit Trust. 6. In the fall of 2002, each employee was notified, by memorandum from the employer and newsletter from the AWC, that the employer intended to increase employee costs for name-brand prescription drug co-payments. 7. The union responded to the employer's memorandum but did not mention or object to the increase in prescription drug co-payments. 8. On January 1, 2003, the employer increased the cost of name- brand prescription drug co-payments for employees under the AWC plan. 9. Beginning in January 2002, the employer agreed by express contract language to pay 100 percent of health and welfare premiums "[f]or the duration of the contract." The 2001-2003 contract expired on December 31, 2003. 10. On January 1, 2004, the employer transferred increases in AWC health insurance premiums to employees and began deducting portions of health insurance premiums from employee paychecks. CONCLUSIONS OF LAW 1. The Public Employment Relations Commission has jurisdiction in this case pursuant to Chapter 41.56 RCW and Chapter 391-45 WAC. 2. Under RCW 41.56.140(4), the issues related to increases in employee co-payments for prescription drugs, and increases in employee health insurance premiums, are mandatory subjects of bargaining which must be bargained before the employer implements a unilateral change. 3. Regarding increases to the prescription drug co-payments, the employer did not commit an unfair labor practice and did not violate RCW 41.56.030(4) and (1). The employer provided adequate notice of the increase in prescription drug co-payments, and the union did not request to bargain the issue. 4. Regarding increases to the medical insurance premium payments, the employer committed an unfair labor practice and violated RCW 41.56.030(4) and (1). The employer failed to maintain the status quo when it unilaterally increased health insurance premiums on January 1, 2004. ORDER I ORDER the City of Anacortes, its officers and agents, immediately to take the following actions to remedy its unfair labor practices: 1. CEASE AND DESIST from: a. Refusing to bargain collectively with the Anacortes Police Services Guild on the subject of health insurance premiums. b. Refusing to pay 100 percent of the employees' medical insurance premium payments for employees who are members of the two bargaining units represented by the Anacortes Police Services Guild, beginning on January 1, 2004. c. In any other manner interfering with, restraining, or coercing its employees in the exercise of their collective bargaining rights secured by the laws of the state of Washington. 2. TAKE THE FOLLOWING AFFIRMATIVE ACTION to effectuate the purposes and policies of Chapter 41.56 RCW: a. Reimburse the commissioned and noncommissioned employees represented by the Anacortes Police Services Guild for their portion of health insurance premiums paid as a consequence of the employer not maintaining 100 percent employer-paid insurance premiums beginning on January 1, 2004. b. Restore the status quo ante by reinstating the wages, hours and working conditions which existed for employees in the two affected bargaining units prior to the unilateral change found unlawful in this order. c. Give notice to, and upon request, negotiate in good faith with the Anacortes Police Services Guild before implementing changes in health insurance premiums. d. Post, in conspicuous places on the employer's premises where notices to all employees are usually posted, copies of the notice attached hereto and marked "Appendix." Such notices shall be duly signed by an authorized representative of the respondent, and shall remain posted for 60 days. Reasonable steps shall be taken by the respondent to ensure that such notices are not removed, altered, defaced, or covered by other material. e. Read the notice attached to this order into the record at a regular public meeting of the Anacortes City Council, and permanently append a copy of the notice to the official minutes of the meeting where the notice is read as required by this paragraph. f. Notify the complainant, in writing, within 20 days following the date of this order, as to what steps have been taken to comply with this order, and at the same time provide the complainant with a signed copy of the notice attached to this order. g. Notify the Executive Director of the Public Employment Relations Commission, in writing, within 20 days following the date of this order, as to what steps have been taken to comply with this order, and at the same time provide the Executive Director with a signed copy of the notice attached to this order. Issued at Olympia, Washington, this 24th day of June, 2005. PUBLIC EMPLOYMENT RELATIONS COMMISSION JOEL GREENE, Examiner This order will be the final order of the agency unless a notice of appeal is filed with the Commission under WAC 391-45-350. APPENDIX PUBLIC EMPLOYMENT RELATIONS COMMISSION NOTICE THE PUBLIC EMPLOYMENT RELATIONS COMMISSION, A STATE AGENCY, HAS HELD A LEGAL PROCEEDING IN WHICH ALL PARTIES WERE ALLOWED TO PRESENT EVIDENCE AND ARGUMENT. THE COMMISSION HAS FOUND THAT WE HAVE COMMITTED UNFAIR LABOR PRACTICES IN VIOLATION OF A STATE COLLECTIVE BARGAINING LAW, AND HAS ORDERED US TO POST THIS NOTICE TO OUR EMPLOYEES: WE WILL reimburse City of Anacortes employees, who are members of the bargaining units represented by the Anacortes Police Services Guild, for their portion of medical insurance premiums paid as a consequence of the employer not maintaining 100 percent employer-paid insurance premiums beginning on January 1, 2004. WE WILL NOT, in any other manner, interfere with, restrain, or coerce our employees in the exercise of their collective bargaining rights under the laws of the state of Washington. DATED: _________________ City of Anacortes BY: ______________________________ Authorized Representative THIS IS AN OFFICIAL NOTICE AND MUST NOT BE DEFACED BY ANYONE. This notice must remain posted for 60 consecutive days from the date of posting, and must not be altered, defaced, or covered by any other material. Questions concerning this notice or compliance with the order issued by the Commission may be directed to the Public Employment Relations Commission, 112 Henry Street NE, Suite 300, PO Box 40919, Olympia, Washington 98504-0919. Telephone: (360) 570-7300.