Arbitration Award Can Retroactively Increase Employee Health Premiums

The last contract between the Kitsap County Deputy Sheriffs’ Guild and Kitsap County, Washington was effective from 2008-2009. Under that CBA, deputies were not required to pay for their own health insurance premiums, but were required to pay 10% of their dependents’ premiums.

During negotiations for the 2010-2012 CBA, the County proposed a shift in premiums such that employees would have to pay 3% of their own premiums and 15% of their dependents’ premiums. The Guild rejected this proposal, and the parties were unable to reach an agreement. Because of the lengthy negotiations between the parties, an arbitration panel did not issue its award until February 2013, after the end of the 2010-2012 CBA term, which was the subject of the interest arbitration. Between the expiration of the 2008-2009 CBA and the issuance of the arbitration award, the County maintained the same level of pay and benefits provided under the 2008-2009 CBA.

The arbitration award adopted the County’s proposal to increase the employees’ share of health care premiums. The arbitration award applied these increases retroactively to the last six months of the contract period (July 2012 – December 2012). To offset the cost of the retroactive increase, the award also granted an additional 0.5% increase in wages for the same period as the retroactive premium increase.

The Guild challenged the arbitration award, arguing that the award violated the due process clause of the Fifth and Fourteenth Amendments to the United States Constitution by retroactively increasing employees’ health insurance premiums during a period where the parties had no effective contract.

The Washington Supreme Court rejected all the Guild’s claims and upheld the arbitration award. The Court found that the collective bargaining law’s “plain language authorized the CBA here to be effective the day after the 2008-2009 CBA expired. Because the Legislature did not intend statutory interest arbitration to displace the negotiating process it is more appropriate to view interest arbitration not as a substitute for collective bargaining, but as an instrument of the collective bargaining process itself. Viewing the arbitration award this way, and recognizing that parties to collective bargaining may agree to make increases to health care premiums retroactive, so too may employees be required to concede to such increases.

“Because the 2008-2009 CBA was no longer effective after it expired, it did not create a protected property interest in compensation for work performed in 2010-2012. Further, the parties did not have any mutually explicit understanding that subsequent CBAs would contain the same compensation package. To the contrary, given the nature of the collective bargaining process, both parties knew that any employment terms were subject to change in subsequent CBAs. Finally, there were no procedural guaranties that would give rise to a property interest.”

Kitsap County Deputy Sheriffs’ Guild v. Kitsap County, 2015 WL 3643476 (Wash. 2015).