Arbitrator Can Consider Unfunded Pension Obligation In Deciding Sick Leave Issue

Local 49 of the International Association of Fire Fighters represents firefighters working for the City of Bloomington, Illinois. Since 1992, the parties’ various collective bargaining agreements included a sick leave “buy-back” provision, pursuant to which the City would compensate retiring firefighters for unused sick leave time. The 2009 to 2012 contract allowed Union members to receive payment from the City for 100% of their unused sick leave, up to a maximum of 1,800 hours. That payment would be placed into a retirement health savings account to pay the firefighter’s health insurance costs during retirement.

During the 2012 collective bargaining, the City proposed reducing the breadth of the buy-back provision. Under the City’s proposal, the buy-back program would not change for firefighters hired prior to June 17, 2013. However, firefighters hired after June 17, 2013 would receive only a 50% conversion rate. In addition, the City would make a one-time $1,000 payment to all firefighters employed in a bargaining unit position as of June 17, 2013. In response, the Union’s final offer was to maintain the status quo as to the buy-back provision.

An arbitrator adopted the City’s proposal. In rendering his decision on a variety of issues, the Arbitrator observed that “this case mainly turns upon how much weight, if any, must be given to the City’s projection that it faces a $37,600,000 shortfall in its firefighters’ pension liabilities.” The Arbitrator concluded that he could consider the City’s pension obligations and shortfall when deciding the buy-back issue.

Local 49 challenged the Arbitrator’s decision through the court system. An appeals court recently turned away the challenge.

The Court held that “an arbitrator’s order can be disturbed for only the following reasons: (1) the Arbitrator was without authority or exceeded his or her authority; (2) the order is arbitrary or capricious; or (3) the order was procured by fraud, collusion, or other similar and unlawful means. An arbitrator’s action is arbitrary or capricious only if the Arbitrator does one of the following: (1) relies on factors that the legislature did not intend for the Arbitrator to consider; (2) entirely fails to consider an important aspect of the problem; or (3) offers an explanation for its decision that runs counter to the evidence or that is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

“In this case, the Union argues that the Arbitrator’s award was arbitrary or capricious because the Arbitrator improperly considered the City’s pension obligations when reaching a decision. However, the Arbitrator did not make pension funding an issue of arbitration. The issue before the Arbitrator was the sick leave buy-back program, not the level of pension funding. In reaching a decision about the sick leave buy-back program, the Arbitrator considered the City’s pension obligations and its financial ability to meet those obligations. The collective bargaining law requires an arbitrator to consider the interests and welfare of the public and the financial ability of the unit of government to meet those costs. The Arbitrator, by considering the City’s pension obligation and its financial ability to meet those obligations, did exactly what was required of him under the law. The Arbitrator considered pension funding as merely one factor in reaching a decision about the issue at hand – the sick leave buy-back provision.”

International Association of Fire Fighters, Local 49 v. City of Bloomington, 2016 IL App (4th) 150573-U (Ill. App. 2016).