“Refusal To Budge” Not Necessarily Bad Faith Bargaining

Following the dot-com booms of the late 1990s and early 2000s, Oregon faced a serious recession. Revenue to the State of Oregon fell far short of previous revenue forecasts.

When a new governor took office in January 2003, the State’s forecasted revenues for the 2003-2005 biennium showed a budgetary shortfall of more than $1 billion. As a result, the governor proposed a budget to the Legislature that included a salary freeze for all State employees during the course of the biennium. The salary freeze budget also called for no advancement through pay steps.

In February 2003, the State began negotiations with the Service Employees International Union (SEIU), which represents about 65 percent of the State’s employees. SEIU fairly quickly agreed to a settlement that incorporated the State’s wage freeze proposals as well as a one-time “workload adjustment” payment of $350.

The State then turned to two of the organizations which represent public safety employees – the Oregon State Police Officers Association and the Association of Oregon Corrections Employees. Both public safety bargaining units are forbidden by law from striking, and have a negotiations process that ends with binding arbitration. The State refused to alter its wage freeze proposal during bargaining and, in the end, convinced the arbitrators for both the troopers and corrections employees that the wage freeze proposal should be adopted.

The two labor organizations filed an unfair labor practice complaint against the State, alleging that the State engaged in “surface bargaining” in violation of its duty to bargain in good faith. The two unions pointed to the fact that when the State settled with SEIU, its lead negotiator told SEIU that “other unions would receive wage freezes because there was no money for COLAs or step increases.” The two public safety organizations argued that “any time an employer makes a deal with a bargaining unit that no other bargaining unit will receive a better economic package, it permits a per se violation of the duty to bargain in good faith with the other units.”

The Oregon Court of Appeals sided with the State, and upheld the Arbitrators’ opinions. The Court found that “parity clauses” or promises of parity along the lines that the State made with SEIU were not a per se violation of the obligation to bargain in good faith. Rather, the Court found that a “totality of conduct” standard should be used to judge whether an employer’s decision to enter into a parity agreement was bad faith bargaining.

In the eyes of the Court, in the light of a provision in Oregon’s constitution that there be a balanced budget, “the Legislature could not have intended that where it deliberately includes no money in the budget for cost-of-living or step increases, a State agency’s decision to stand firm on collective bargaining and not grant such increases constitutes a per se violation of the duty to bargain in good faith. The Employment Relations Board concluded that the State had not violated the good faith bargaining requirement by refusing to budge on the salary freeze issue. The Board reasoned that, although the State’s wage freeze proposals were obviously unacceptable to the public safety unions, the salary freeze proposals must be viewed in the totality of the circumstances surrounding the negotiations – specifically, the budget constraints under which the State was operating. And viewing the content of the salary-freeze proposals, the Board concluded that the State’s harsh decision was not a refusal to bargain in good faith.

“We agree. Given the economic hand it was dealt, the State’s wage freeze proposals cannot be said to have been ‘unduly harsh or unreasonable.’”

Association of Oregon Corrections Employees v. State of Oregon, 213 Or.App. 648 (2007).

This article appears in the September 2007 issue