A Reasonable Balance

Ability to Pay
Bargaining Updates 2014

While the parties have agreed on many issues there are a number of issues still in dispute. On some of these issues the parties are likely to engage in further discussion that might lead to resolution, others will have to be decided by an Arbitrator. Please note that any items agreed to at the bargaining table will not be implemented until the interest arbitration is complete. This is the twenty-sixth in a series of blog posts to discuss both the matters that have been agreed and those that are still in dispute, as well as the arbitration process in general.

In the forthcoming arbitration a great deal of ink will be devoted in the Parties’ briefs to the meaning of “reasonable balance” as each party lays out its arguments for the salary increases it proposes. There is a reason for this. Normally in an interest arbitration an Arbitration Board would take into account the employer’s “ability to pay” an award. However with respect to the public sector this concept has proven tricky. As Arbitrator Getz put it in the 1989 UBCFA vs UBC award:

“Arbitrators in interest disputes such as this have found ‘ability to pay’ a troublesome concept. They have devoted a great many words to analyzing and expounding it, and drawing distinctions between its application in the context of employers, such as the University, funded out of public revenues and those who are not so funded.”1

In fact interest arbitrators have largely refused to consider “ability to pay” in the public sector on the grounds that to allow government underfunding to justify the payment of substandard wages is to ask public sector employees to subsidize the rest of the community. As Arbitrator Shime famously put it: “Public sector employees should not be required to subsidize the community by accepting substandard wages and working conditions.”2

However, for better or worse, “ability to pay” in the usual sense does not apply in an arbitration between UBC and UBCFA. This is because our Collective Agreement requires that the Arbitrator give first consideration to “ability to pay” but then defines that ability in terms of the need to preserve a reasonable balance between Faculty Association salaries and other expenditures from the University’s general purpose operating funds (GPOF). In accordance with this criterion, the University is deemed to have the “ability to pay” the cost of an award if, in doing so, it preserves a reasonable balance between the salary of bargaining unit members and other expenditures from the GPOF.

On the face of it, this looks like a criterion easily met. The Association will be proposing a two-year Agreement with a modest 3% general wage increase each year, plus a handful of other low cost items. The University will be proposing a general wage increase of 0% in the first year and 0.9% in the second year of a new Collective Agreement, plus a couple of other low cost items. Really, it’s pretty hard to imagine any award between the Parties’ positions that will perturb a reasonable balance. Nonetheless a lot of effort, on both sides, will go into the “reasonable balance” analysis. This is not work that the bargaining committee will undertake. We’re not accountants and, in any case, we are hardly unbiased or independent. Our legal counsel has contracted with the accounting firm PwC to provide the analysis.

One of the peculiarities of the 2012 arbitration is that the university took the position that it did not have the ability to pay one cent more than their offer of 1.95% and 1.9%, plus minor other cost items. On the face of it this seems unlikely. One of the proposals they claimed not to have the ability to pay was our proposal to allow enrolled children of faculty members to maintain their tuition waiver in the event of the death of the faculty member, a proposal the University costed at $704/year. For the entire bargaining unit. That left them to argue at arbitration that an additional $704 per year in costs would disrupt the reasonable balance because the proposed salary offer of the University had taken it to “the limit of its ability to pay.” How was this possible? They appear to have come by this conclusion with two arguments that can best be described as strained.

First, in the University’s original brief (paragraph 59) it states that:

“Prior arbitration boards have held that a ‘reasonable balance’ is the balance derived from the previous negotiated collective agreement. In other words, the product of the parties’ own negotiated agreement is the best evidence of the reasonable balance.”

This suggests that the arbitrator should view the actual ratio of salaries to expenses (as defined in the Agreement) in the previous year as the rigid and fixed definition of “reasonable balance.” Obviously if you have a rigid definition of “reasonable balance” any cost over that, no matter how small, would be unreasonable.

However the University’s statement in paragraph 59 is not quite accurate. Prior arbitration boards did not hold that a “reasonable balance” is the balance derived from the previous negotiated Collective Agreement. Only the 1989 Getz award, mentioned above, held that a “reasonable ratio” should be so defined. None of the subsequent arbitration boards did so.

The University seems to have overlooked that subsequent to the 1989 award, the language in the Agreement changed from “reasonable ratio” to “reasonable balance,” specifically to allow more flexibility in the definition, and there are now three arbitration awards (1994, 1997, and 2013) that have relied on reasonable balance. In the most recent arbitration (2013) Arbitrator Taylor ruled that the most relevant comparison was to consider the ratios every year from 2006 to 2012. Those ratios show a slight secular increase, with significant variation from year to year. In this the Arbitrator appears to agree with the view of the Association that a reasonable balance is consistent with a range of ratios, not a reliance on just the previous year’s ratio.

The University’s second point occurs in paragraphs 36 and 37 where they state:

“In other words, where the University can show that its allocation of funds, from its general purpose operating funds, preserves a reasonable balance of expenditures, then it has no ability to pay more, as doing so would force a re-allocation of expenditures. Where the Faculty Association can show that the funds allocated to faculty salaries do not preserve a reasonable balance, then the University has the ability to pay more. Where the converse is the case and a reasonable balance is preserved, then by definition there is no ability to pay more as the reasonable balance would be altered in doing so.”

This is an interesting argument. The University is arguing that its salary proposals, whatever they might be, are by definition at the limit of their ability to pay as long as they do not disrupt the reasonable balance. This is most certainly not what the Collective Agreement says. It merely says that the cost of an award must preserve a reasonable balance. There are a range of costs that would preserve a reasonable balance and the arbitrator is obliged to make an award that is within that range. In the 2012 arbitration Arbitrator Taylor made that point clearly when he pointed out that just because the Association’s proposal of 5% and 5% general wage increase would disrupt the reasonable balance did not mean that the University’s proposal would be automatically awarded.

“The merits of the appropriate award (provided it is within the University’s ability to pay) are determined on the four enumerated criteria in the second half of Article 11.02(e)” (paragraph 85 of the award).

Those four enumerated are a) the need for the University to maintain its academic quality by retaining and attracting Faculty Members, Librarians, and Program Directors of the highest caliber, b) changes in the Vancouver and Canadian Consumer Price Indices, c) changes in British Columbian and Canadian Average Salaries and Wages, and d) salaries and benefits at other Canadian universities of comparable academic quality and size.

The Association is convinced that our proposals do not disrupt the “reasonable balance” between salaries and other expenditures. We also believe that our proposals are fully justified by the four enumerated criteria.

1. Quoted in Arbitrator Taylor’s award, UBC and UBCFA, 2013, paragraph 25.
2. McMaster University and McMaster University Faculty Association, 1990, pg. 8.

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