A Chilling Effect On Union Talks

Larry Price
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Wednesday - August 19, 2009
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It’s sad for public employees to hear that their negotiations are going into binding arbitration on Sept. 4.

A ruling would be forthcoming on or about Dec. 21, at which time the governor will, by law, have to turn over the arbitrators’ruling to the Legislature.

It signals a poor holiday season for the entire state.


Scheduling arbitration hearings while negotiations are still in progress signals a major liability. At a minimum, the scheduling of the involvement of a third party signals a failure of the negotiation process, even if it’s only temporary. It’s also proof that the parties have failed to build any meaningful relationships - said another way, the parties don’t trust each other. Finally, when one of the parties turns to arbitration, it loses its control over determining the future circumstances of its employment with the state.

It’s important to realize, when trying to analyze a negotiation, that a failure to bargain in good faith, which is the accusation the unions have made of the administration’s negotiation team, is a serious charge. Failure to bargain in good faith has been codified as an unfair labor practice under U.S. Labor law (N.I.R.A.,Section 8(a)(5) and 8 (b)(3). Generally speaking, negotiators ask for third-party assistance only when they can no longer handle the situation on their own.

The arbitration panel is usually invited to mold a solution based on evidence provided by both parties. One member is appointed by the administration, one by the unions and one is neutral arbitrator, who usually comes from the Mainland and is divorced from all of the media coverage. It’s all part of the hate and mistrust they have for each other, so it makes sense they don’t believe anything said about either side’s offers and counter offers.

The arbitrators are well aware that their ruling may have strong negative consequences, such as decreasing the ability of the parties to negotiate effectively in the future and make them more dependent on third-party intervention.

One of the accomplishments that can be credited to former Gov. Ben Cayetano was his passage of a reform bill, SB 1096, which authorized privatization and repealed the state’s one-sided mandatory binding arbitration law, because it actually encouraged the unions not to negotiate at the table. The unions were furious, and none of the legislators showed up at the obligatory bill-signing ceremony, demonstrating their anger over passage of the bill. Unfortunately, in the first legislative session after Linda Lingle was sworn in as governor, the Legislature passed another binding arbitration bill.

So it is important that the three-member arbitration panel realizes that the call for third-party involvement has a troubled history in Hawaii negotiations. The guiding rule for arbitrators is borrowed from the medical dictum, “First, do no harm.”

It’s interesting to note that binding arbitration started in the early days of the steel industry, when union leaders were battling owners of the big steel plants over better benefits and safer working conditions. In those days, there wasn’t any arbitration, and when unions went on strike and shut down the blast furnaces, it was a financial catastrophe for the owners, because when the blast furnace cooled, the iron turned into a solid hunk and had to be totally replaced. This was at great cost to the owners, who eventually saw the merit of binding arbitration. And while it might be good for the steel industry, it might not turn out that well for public employees.

What we are witnessing now is the so-called “chilling effect” in negotiations. This is when both sides realize they have failed, then agree to binding arbitration and simultaneously stop working seriously for a negotiated settlement. They stop concentrating on compromises they might have been willing to make earlier in the process, because they fear the arbitrators will just split the difference between the two stated positions. If that’s what they expect the arbitrator to do on Sept. 4, then they will assume an extreme hard-line position.

It’s a very big gamble for both sides, since the arbitrators also can decide to choose one party’s position over the other, and the long-term effects on future negotiations could be enormous.

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