Expired Contracts, The ‘Status Quo,’ And Health Insurance Premiums

When a collective bargaining agreement expires without a new contract being reached, the employer is required to maintain the wages, hours, terms and conditions of employment – usually referred to as mandatory subjects of bargaining – that existed while negotiating a subsequent agreement. Under almost every collective bargaining law, health insurance benefits are mandatory subjects for collective bargaining. At times, though, there are disagreements about exactly what the status quo is that an employer must maintain after a contract expires.

Police officers for the City of Mukilteo, Washington are represented by Teamsters Local 763. The health insurance clause in the contract provided that the City’s Health Insurance contribution increases shall be limited to a maximum increase of 11.0% above 2001 rates in 2002, 10% above 2002 rates in 2003, and 10% above 2003 rates in 2004. Any increases that exceed these amounts in 2002, 2003 and 2004 were to be paid by the employee via payroll deduction.

When the contract expired on December 31, 2004, the City announced that it would continue paying the 2004 rates in 2005. Local 763 responded by filing an unfair labor practice charge against the City, contending that the City should be obligated to either pay all future health costs in full or adopt the 10-percent formula used in 2004 to the 2005 rates. The Washington Court of Appeals upheld the City’s decision.

The Court found that the contract “required that during the first year of the contract, the City would pay the entire amount necessary for employee health benefits. After that first year, however, the City’s contribution level was ascertained by using a formula capped at a certain amount with the employees being required to cover any additional costs for those health benefits. The key part of the formula is that the contractual language used tied the percentage-based increase to a specific rate paid in a specific time period. The only ‘fixed’ amount was the employer’s contribution.

“Clearly, the amount an employer contributes to health care is something that is bargained for. The amount of the City’s contribution cannot be considered superfluous. The test for determining whether a specific practice is sufficiently established should, like the contract, be objective. The focus is whether the status quo would have been clearly apparent to an objectively reasonable employer at the time in question. To require the City to pay increased premiums beyond the specified years contained in the expired contract changes the existing relationship in the context of the terms and conditions that are subject to the bargaining process.”

Teamsters Local 763 v. Public Employment Relations Comm’n, 2010 WL 4400031 (Wash. App. Div. 1 2010).

This article appears in the January 2011 issue