Illinois Appellate Court Sets “Road Map” For How To Legally Negotiate Subcontracting Arrangements For Right-To-Strike Units
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Illinois Appellate Court Sets “Road Map” For How To Legally Negotiate Subcontracting Arrangements For Right-To-Strike Units
September 2014
As Illinois public employers struggle to identify new ways of improving efficiency of operations in our post-recession world, attention often turns to subcontracting opportunities. Subcontracting, however, can be a complicated proposition, especially in the unionized context where allegations of union discrimination and bad faith bargaining are always a possibility. The Illinois Appellate Court for the Fourth District recently addressed a fact pattern that provides helpful guidance to Illinois public employers who are seriously considering outsourcing bargaining unit work to third party contractors. In Community Unit Sch. Dist. No. 5 v. Ill. Educ. Labor Relations Bd., 2014 IL App (4th) 130294, the employer had considered subcontracting its bus services at various times between 2003 and 2009, and even hired a consultant in 2009 who recommended outsourcing as a viable cost-saving option. In 2010 and 2011, the school district regularly received complaints from parents and the public regarding the school district’s transportation services, including for example late school arrivals, students missing class time, and students being dropped off at the wrong location. The employer attributed part of the problem to difficulty in hiring a sufficient number of proficient bus drivers, which often led to staffing bus routes with office personnel and bus mechanics. State funding had also decreased by 23% between 2009 and 2012 at a time when student enrollment was steadily increasing.
In October 2011, AFSCME was certified as the exclusive bargaining representative of the school district’s 215 bus drivers and bus monitors. AFSCME replaced a prior so-called “meet and confer” committee that served as a bargaining representative for the district’s bus drivers.
Negotiations began in December 2011 for a new contract between the district and AFSCME. Around the same time, the district informed the union that it was considering outsourcing the entire transportation department because of operational issues, including absenteeism, turnover, and frequent late buses. During the course of negotiations, the district solicited bids from interested third parties who would be willing to offer bus services to the district. The district ultimately contracted with a third party bus provider when it was determined that AFSCME’s economic proposals would cost the district more than what the contractor was charging. At one point during negotiations, AFSCME filed an unfair labor practice charge, alleging that the district was engaging in bad faith bargaining and discrimination against employees for their decision to select AFSCME as their exclusive bargaining representative.
During the unfair labor practice hearing, the Illinois Educational Labor Relations Board and its Administrative Law Judge found that the school district had violated Sections 14(a)(5) and (a)(3) of the Illinois Educational Labor Relations Act. Specifically, the Board found that the district had bargained in bad faith by “improperly and unfairly using [the contractor’s] bid to gain bargaining power over [AFSCME] and force[d] [AFSCME] to bargain against itself.” The Board also concluded that the timing of the outsourcing decision suggested improper union animus, because it followed on the heels of AFSCME’s selection as the employee’s exclusive bargaining representative.
On appeal, the Fourth District reversed the Board’s decision in its entirety. Beginning with the discrimination allegation, the Court disagreed that the record contained sufficient evidence of union animus. While acknowledging that the bus drivers and bus monitors had engaged in protected activity when they selected AFSCME as their exclusive bargaining representative, the Court concluded that AFSCME failed to prove any nexus between the district’s outsourcing decision and the union election. In a rather harsh critique of the Board’s analysis, the Court rejected the notion that the district’s stated outsourcing reasons were a pretext for discrimination:
The reasons proffered by the District were legitimate and bona fide. The ALJ found the cost savings lacked legitimacy because it was not proffered by the District until April 2012 when it received First Student’s bid and the District did not establish it was experiencing significant financial problems. We disagree with this reasoning. The District could not have known the amount of cost savings before it solicited and opened bids in April 2012. Moreover, it goes without saying that the State of Illinois is currently experiencing dire financial problems. The District has an obligation to be good fiscal stewards when it comes to costs, and a finding that significant cost savings lack legitimacy is oblivious to the current financial situation of this state and its effect on school districts. The evidence is also clear that the decision to terminate the employment of the bus drivers and monitors would have occurred notwithstanding their union activity.
Id. at ¶¶ 65, 68.
The Court similarly rejected the Board’s bad faith bargaining analysis. The Court explained an employer’s bargaining obligation in the subcontracting context as follows:
In the subcontracting context, the requirements of good-faith bargaining on the decision to subcontract are [1] notice of the consideration of a subcontract, before it is finalized; [2] meeting with the union to provide an opportunity to discuss and explain the decision; [3] providing information to the union; and [4] giving consideration to any counterproposals the union makes.
Id. at ¶ 82 (quoting Service Employees Int’l Union No. 316 v. Ill. Educ. Labor Relations Bd., 153 Ill. App. 3d 744 (4th Dist. 1987)). Needless to say, the Court found that the school district had complied with all four of these factors.
The Court noted that the IELRB had found “bad faith” based on the school district’s pronouncement to AFSCME that the union needed to provide at least $1.5 million in cost savings through wage and benefit concessions in order to make subcontracting economically less attractive to the district. According to the Board’s ALJ, this approach was a “close-minded act of bad faith.” The Court disagreed, noting that good faith bargaining did not require the district to compromise its position:
Under the Act, in a subcontracting situation, it is not bad faith for either side to refuse to compromise its original position. The duty to bargain in good faith does not require an employer in a subcontracting situation to go above the potential subcontractor’s price or to meet the union “half-way.” A subcontractor’s bid is a legitimate “bottom line” proposal and adherence to it does not mean that the employer had a closed mind or does not sincerely want to reach an agreement. It also does not mean that the employer improperly “maintained a fixed unyielding negotiations position” or engaged in bad faith, “take-it-or-leave-it” bargaining.
Id. at ¶ 85. For these and other reasons, the Fourth District reversed the bad faith bargaining allegations against the district.
The editors respectfully submit that Illinois employers can draw two lessons from this decision. First, even when an employer “does everything right” in terms of bargaining over a subcontracting decision, Illinois labor boards may nevertheless still find ways to invalidate the decision. As such, it is extremely important for public employers to seek the guidance of labor counsel before pursuing an outsourcing strategy.
Second, and more troubling, is the recent series of judicial reversals of the IELRB’s administrative decisions. By the editors’ count, 9 out of 10 reported appellate court decisions have reversed the IELRB’s legal analysis and interpretation of the Illinois Educational Labor Relations Act. These reversals date back to 2009. This whopping 90 percent reversal rate does not include unreported appellate court decisions, which may include even more reversals. How the IELRB and its administrative law judges can possibly get so many cases “wrong” is unclear. Time will tell whether these appellate reversals will prompt the IELRB to take a more even-balanced approach to decision-making, just as its sister agency the Illinois Labor Relations Board has done in the wake of its own unusually high appellate reversal rate from the mid-2000’s.
*As published in the IPELRA Newsletter.
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