Police Union Wins Case That Could Force Akron To Pay Millions Of Dollars In Retiree Health Care

AKRON, OH — In a decision that could cost Akron millions of dollars and strain labor negotiations this fall, an arbitrator has ordered the city to fully reinstate health insurance for retired police, plus pay them back for charging them more for their benefits the past 16 months.

The decision has the potential to affect all city retirees.

Cleveland attorney Hyman Cohen issued the ruling March 27 to end a dispute that began in October 2016. Mayor Dan Horrigan — in his first year on the job — had asked the City Council to curb “an outdated and unsustainable ‘Cadillac’ benefit system” for retirees, estimated to cost $11 million annually by 2026.

That October, the council approved four pieces of legislation that cut retirement health insurance benefits for new hires and made spouses and children pay monthly premiums for secondary insurance. A couple hundred spouses and dependents of nonunion retirees were forced off the city’s primary insurance this February and onto the Ohio Public Employees Retirement System, which charges about $14,000 a year for primary coverage. They’d been getting the primary coverage for free. Union members and their families continue to get primary coverage through union pension funds. But now, they’re paying extra for their families’ supplemental insurance through the city.

Some dropped their coverage. Others tightened their budgets after years of retirement.

Cohen’s ruling says these changes were made in “bad faith.” The arbitrator explained that the city had acted “less than honest” throughout the labor negotiation process in 2016. While the unions said they were open to renegotiating the rising costs of retiree health coverage, the city refused to visit the benefits, which had been offered since 1991. Meanwhile, Horrigan wasn’t sharing the finding of a consulting firm, which said money could be saved by reducing benefits.

Timing of negotiations

The Blue Ribbon Task Force, appointed by the mayor shortly after he was elected to review Akron finances, said the city should work with the unions to trim retiree health care costs. The group issued its report in February 2016.

Horrigan had hired NFP Consulting in March of that year, according to Cohen’s ruling. The firm provided analysis on “a range of issues, including retiree benefits” and was concerned solely with health care, according to the city.

In mid-June 2016, the new three-year labor contract was signed. But union representatives said they were unaware of NFP’s analysis on retiree benefits or any pending changes to benefits for retirees. On the morning of Sept. 12, 2016, just hours before Horrigan publicly introduced the benefit cuts, the mayor invited the bosses of the four city unions.

“Oh, I was extremely frustrated and upset and mad all at the same time,” said Frank Williams, president of the Fraternal Order of Police. “The ink on the contract wasn’t even dry and they were trying to make changes.”

The council reviewed the benefit cost-reductions that afternoon and then debated them for a month. Jeff Fusco, a retired city employee, and Bob Hoch, who has family working for the city, did not vote on them. Of the four proposals, only one received a no vote, from Donnie Kammer, who approved the other three.

The FOP and other unions filed grievances within days of the new laws.

Arbitrator’s ruling

Cohen blasted the city for “deliberately confusing and misleading” the FOP, refusing to negotiate retiree benefits while talking with consultants about cutting them. “After at least 25 years of providing for retiree health insurance benefits, I find that the city’s exercise of discretion to unilaterally impose changes on such retiree benefits, for the first time in 2016, to be arbitrary and an exercise in bad faith,” Cohen wrote.

He’s ordered the city to rescind the 2016 changes to the retirees’ health care benefits and “to make any adversely affected FOP retirees whole for costs incurred as a result of the city’s violations of the 2016 Collective Bargaining Agreement.”

The city, which is estimating the cost of repaying retirees for their extra expenses, said the decision “is wrong on both the facts and the law.” Horrigan’s legal team is exploring options, including a motion to vacate the decision.

“Legacy costs are a threat to Akron’s financial future, period,” Horrigan said in an email. “Times have changed — healthcare costs are exponentially higher now than they were when the current system was put in place decades ago. We care about all our employees, past and present — but we simply cannot continue to provide free benefits forever.

“Many of our residents are struggling just to make ends meet,” the mayor continued. “We cannot ask taxpayers to continue to fund this broken system. My administration will continue to do whatever it takes to implement reform and put our city on a more sustainable and justifiable financial path for this and future generations. We have no other choice.”

Reach of ruling

The ruling covers the 445 active-duty police officers, as well as retirees. Firefighters and service employees, with separate unions that have filed separate grievances, may not be affected by Cohen’s decision, which is subject to challenge but does call for the mayor to rescind the cuts.

Meanwhile, the city has another chance to negotiate retiree benefits in five months as Horrigan and the unions discuss the terms of the next three-year labor agreement. The current contracts expires Dec. 31.

FOP President Williams said he may raise the issue of retiree benefits again. Horrigan’s staff said it’s “too early to say” if they would have that discussion.

Nonunion retirees, who also were subject to the new benefit changes, might get no relief, though some say they’re encouraged by the arbitrator’s ruling against the city.

Doug Powley, a former chief prosecutor who retired as a nonunion employee, is suing over the changes.

The city is not obligated, per Cohen’s decision, to reinstate health care benefits. But that would break with decades of tradition as pay raises and benefits for unions typically extend to all employees, Powley said.

“They’ve always, historically, treated bargaining and nonbargaining the same: equitably. But now it’s a new day at City Hall,” said Powley, who spent the first six years as a city attorney assigned to labor relations, including contract negotiations.

From The Akron Beacon Journal