City Must Arbitrate Grievance Over Retirement Benefits

The City of Portland, Oregon has had a pension fund for police and fire employees for many years. In 2006, following public criticism of the Fund and its board, the City’s voters approved a ballot measure that, among other things, would restructure the Fund’s board and require new employees to become members of the statewide PERS system.

After the election, the new Fund board determined that the Fund’s administrator had been using an incorrect “lookback period” to calculate retired employees’ benefits. The Board described the issue as follows: “The City Charter specifies that the lookback period ends in the month preceding an employee’s retirement date; the Fund Administrator instead used the actual month the employee retired. As a result, any salary increase in the final month of work was typically included in the pension calculations.” The Board ordered the fund’s administrator “to end the lookback period in the month preceding the month the employee retired.

The following month, the Portland Police Association filed a grievance over the changed lookback period, alleging that the City had violated the “existing standards” clause of the collective bargaining agreement, which generally provides that standards of “wages, hours and working conditions which are mandatory for collective bargaining” will not be lessened during the period when the CBA is in effect, except through collective bargaining. When the City refused to process the grievance to arbitration, the Association filed an unfair labor practice complaint against the City.

The question before the Oregon Court of Appeals was whether the grievance was subject to the arbitration process. The Court found that the issue was not a close one: “We first must decide, as a matter of law, whether the contract unambiguously makes the parties’ dispute over retirement-benefit calculations subject to the grievance procedure. It does.

“The City contends that the Board’s method of calculating retirement benefits is not a matter that falls within the scope of ‘wages, hours and working conditions which are mandatory for collective bargaining.’ Thus, the disagreement relates to the scope of the contract – i.e., whether the change in retirement-benefit calculation violates the City’s obligation not to lessen existing standards of employment related to wages, hours and working conditions which are mandatory for collective bargaining.

“That kind of dispute is precisely what the last sentence of the ‘existing standards’ clause of the CBA covers by stating that “any disagreement * * * with respect to this section shall be subject to the grievance procedure.” Our conclusion is bolstered by other CBA provisions that exclude certain subjects (e.g., management rights and death leave) from the grievance process. Thus, the parties knew how to expressly exclude particular topics from the grievance process if they intended to do so. The absence of an analogous exclusion for retirement-benefit decisions, or for decisions related to the Board’s actions, is telling.”

Portland Police Ass’n v. City of Portland, 2012 WL 404533 (Or. App. 2012).