Debate about cost of interest arbitration rages on

Municipal governments frustrated with lack of transparency around arbitration decisions: AMO

The Ontario government is facing increasing political pressure to deal with interest arbitration — a process to provide a final resolution to bargaining disputes using an independent third party — which some say is increasing costs and delaying labour agreements unnecessarily.

Those in favour of revisiting the process say it’s costly and discourages good collective bargaining practices.

The Association of Municipalities of Ontario (AMO) has been outspoken about changing the system. It has said that the municipal governments it represents are frustrated with the lack of transparency around arbitration decisions and the impact agreements from other communities have on agreements with less regard for local economic conditions.

“In addition, the length of the process can be long, sometimes taking years before a decision is made,” an AMO statement from Feb. 19 reads.

Employers aren’t convinced arbitrators are considering all factors in order to reach an outcome desirable for both sides of the table, said Joy Hulton, a solicitor with the Regional Municipality of York in Ontario.

“We’re not looking for something that is employer favoured, we’ve always said we’re looking for a level playing field, if you will,” she said. “Something that parties will be equally wanting to use or equally reluctant to use. That will actually be an indicator that the system is working.”

For many years, Hulton was the lead negotiator with the police in her region. She works with the Emergency Services Steering Committee, a staff level group from municipalities that work with emergency services. The group has been working with AMO to advocate for changes to the interest arbitration system.

The group has been trying to work with the government and the opposition to get them to see the need for some changes, because arbitration decisions are not reflecting the true fiscal reality in municipalities, she said.

“That, not surprisingly, has become a more pressing issue in difficult economic times,” she added.

Employers believe arbitrators should be looking at those local factors, such as an employer’s cash flow situation, but Hulton said this isn’t happening.

“The decisions time and time again say, you know: ‘the employer has told me about their local problems, but notwithstanding that, this is what I’m awarding,’ and they award something much higher than the local indicators suggest should be the award,” she said.

But there are many who believe the current system works well.

Arbitrators are already taking the employer’s fiscal situation into account, said Bill Cole, an employment lawyer at Nelligan O’Brien Payne in Ottawa, who often represents employee groups.

“(Arbitrators have) been considering ability to pay since the ’50s, with the codification of it in 1996-97,” said Cole.

The Police Association of Ontario, representing 33,000 sworn and civilian police workers, put out a statement that said arbitrators in the province tend to be fair to employers and employee groups.

“We can state with confidence that the collective bargaining process, including interest arbitration, works well in the policing sector,” the statement goes on to say. “Almost all collective agreements are resolved at the bargaining table and ratified by both employees and employers.”

The health-care sector hasn’t been as vocal about changes to the system as municipalities have. Representatives from the Canadian Union of Public Employees (CUPE) say this is because interest arbitration works for health care.

“Our position is, with regards to health-sector interest arbitration, there is no evidence to demonstrate that there is some sort of problem with the way the arbitration system is working. What is fair to say is that in the area of police and fire in Ontario there are issues,” said Michael Hurley, president of CUPE’s hospital division (Ontario Council of Hospital Unions).

Interest arbitration is supposed to reproduce the pattern it sees in the industry, so if the province or the municipalities want lower arbitration awards for police and fire, then the province is going to have to demonstrate moderation in bargaining with its partners, he said.

The province has allowed for higher awards with its police forces, which in turn makes higher awards for municipal forces, said Hurley.

In Ontario’s health-care sector, interest arbitration actually underperforms, compared with freely negotiated settlements, said Hurley. When the teachers were getting three per cent salary increases, hospitals were getting two per cent, he added.

“But we’re not complaining about that,” he said. “We make our best case, the employer makes its best case and then an independent person, who is fair minded, makes a decision and we live with the decision.”

What the union can’t accept is a corruption of the system through an introduction of criteria that would abolish the arbitrator’s independence, he said.

Cole said he doesn’t think there are many issues with interest arbitration in police and fire sectors, and added the rhetoric surrounding the arbitration process is unfortunate.

“I have never seen as great an infusion of politics into dispute resolution processes as I do right now,” he said, adding employers are politically infusing the ability to pay.

“Ability to pay is absolutely a factor,” he said, citing the example of a small municipality in the interior of British Columbia that lost its main lumber industry and effectively devastated the area. “That’s a circumstance when the ability-to-pay argument actually has traction.”

According to Ontario Ministry of Labour statistics, out of a total 112 agreements settled in 2012 that are subject to mandatory interest arbitration, 80 were arbitrated and 32 were settled through negotiation.

These statistics may not be totally complete, Ministry spokesperson Matt Blajer says. Even though parties are required to file their contracts with the ministry, not all do.

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