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IN THE MATTER OF THE GRIEVANCE ARBITRATION BETWEEN

School Service Employees Union

Local 284 a/k/a Service BMS Case No. 17-PA-0025

Employees International Union,

Local 284,

Union, DECISION AND AWARD

-and-

Independent School District No. 2687,

Howard Lake-Waverly-Winsted,

Employer.

Name of Arbitrator: George Latimer

Arbitration Assistant: Jan Humphrey

Date and Place of Hearing: November 22, 2016

Howard Lake, Minnesota

Briefs Received: December 12, 2016

Date of Award: January 19, 2017

APPEARANCES:

For the Employer: Bradley Joseph Sellner, Superintendent

Michelle Heurer, School Board Member

Michael Hennek, Four Point O School

Services, Inc.

Jennifer K. Earley, Attorney, Ratwik, Roszak &

Maloney, P.A.

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For the Union: Laurie Stammer, Regional Contract Organizer

Charlene McKeown Hillmyer

Marson Edward Kottke

Kristen Lynn Sanderson

Jeff Leys, Contract Organizer, Attorney

PRELIMINARY STATEMENT

This is a grievance arbitration between the School Service Employees Union

Local 284, a/k/a Service Employees International Union Local 284 (“Union”) and

Independent School District No. 2687, Howard Lake – Waverly–Winstead (“School

District”). The parties are signatories to a collective bargaining agreement (“CBA”), with

intended effective dates of July 1, 2014 through June 30, 2016.

On September 14, 2016, the School District made a Motion for Summary

Disposition. Memorandums of Law in support and in opposition to that motion were

submitted by the School District and Union, respectively. The School District’s Motion

was denied on November 2, 2016, and the arbitration was scheduled for November 22,

2016. The arbitration hearing was held on that date, at Howard Lake, Minnesota. Both

parties had full opportunity to submit evidence and examine witnesses. Post-hearing

briefs were received by the Arbitrator on December 12, 2016, and the record was

closed.

JURISDICTION

The School District argues that this matter is not within the jurisdiction of the

Arbitrator for the following reasons:

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The Union’s grievance is not ripe for determination because no action has been

taken by the School District that affects the positions of its transportation

employees.

If the Arbitrator finds that the grievance is justiciable, it is untimely because the

Union waited for over one and a half years to file the grievance.

STATEMENT OF THE ISSUES

Jurisdictional

(a) Is the Union’s grievance ripe for determination and subject to arbitration?

(b). If the Union can grieve a proposed action of potential subcontracting, did

the Union waive its right to grieve by failing to timely file its claim?

Contractual

(a) Is the School District’s decision to subcontract subject to arbitration?

(b) Did the School District violate the collective bargaining agreement by its

unilateral act to subcontract all work performed by the bargaining unit, and

If so, what is the appropriate remedy?

RELEVANT CONTRACTUAL PROVISIONS

Article II, Recognition of Exclusive Representative

Section 1. Recognition: In accordance with the PELRA, the School District recognizes School Service Employees Local 284, SEIU, as the exclusive representative for employees that are covered by this contract and that are employed by the School District which exclusive representative shall have those rights and duties as prescribed by the PELRA and as described in the provisions of this agreement. Section 2. Appropriate Unit: The exclusive representative shall represent all such employees of the district contained in the appropriate unit as defined in Article III, Section 2 of this agreement and the PELRA and in certification by the Commissioner of Mediation Services, if any.

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Article III, Definitions

Section 1. Terms and Conditions of Employment: Terms and conditions of employment shall mean the hours of employment, the compensation therefore, including fringe benefits, and the employer’s personnel policies affecting the working conditions of the employees as set forth in this agreement.

Article IV, School Board Rights

Section 1. Inherent Managerial Rights: The exclusive representative recognizes that the School District is not required to meet and negotiate on matters of inherent managerial policy, which include, but are not limited to such areas of discretion or policy as the functions and programs of the employer, its overall budget, utilization of technology, the organizational structure and selection and direction and number of personnel.

Section 2. Management Responsibilities: The exclusive representative recognizes the right and obligation of the School Board to efficiently manage and conduct the operations of the School District within its legal limitations and with its primary obligation to provide educational opportunity for the students of the School District.

Section 3. Effect of Laws, Rules and Regulations: The exclusive representative recognizes that all employees covered by this Agreement shall perform the services prescribed by the School Board and shall be governed by the laws of the State of Minnesota, and by School Board rules, regulations, directives and orders, issued by properly designated officials of the School District. The exclusive representative also recognizes the right, obligation, and duty of the School Board and its duly designated officials to promulgate rules, regulations, directives and orders from time to time as deemed necessary by the school board insofar as such rules, regulations, directives and orders are not inconsistent with the terms of this agreement and recognizes that the school board, all employees covered by this agreement and all provisions of this agreement are subject to the laws of the State. Any provision of this agreement found to be in violation of any such laws, rules, regulations, policy promulgated by the school board as required by the laws of the State of Minnesota, shall be null and void and without force and effect.

Section 4. Reservation of Managerial Rights: The foregoing enumeration of rights and duties shall not be deemed to exclude other inherent management rights and management functions not expressly reserved herein, and all management rights and management functions not expressly delegated in this agreement are reserved to the School District.

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ARTICLE XIV, GRIEVANCE PROCEDURE

Section 1. Grievance Definition: A “grievance’ shall mean an allegation by an employee resulting in a dispute or disagreement between the employee and the School District as to the interpretation or application of terms and conditions. . . .

Section 3. Definitions and Interpretations:

Subd. 1. Extension: Time limits specified in this agreement may be extended by mutual agreement.

Subd. 2. Days: Reference to days regarding time periods in this procedure shall refer to working days. A working day is defined as all week days not designated as holidays by state law.. . .

Subd. 4. Time Limit and Waiver: A grievance shall not be valid for consideration unless the grievance is submitted in writing to the School District’s designee, setting for[th] the facts and specific provision of the Agreement allegedly violated and the particular relief sought within twenty (20) days after the date of the first event giving rise to the grievance occurred. Failure to file any grievance within such period shall be deemed a waiver thereof. Failure to appeal a grievance from one level to another with the time periods hereafter provided shall constitute a waiver of the grievance. An effort shall first be made to adjust an alleged grievance informally between the employee and the School District’s designee. . . .

Section 8: Arbitration Procedures: In the event that the employee and the school board are unable to resolve any grievance, the grievance may be submitted to arbitration as defined herein.

Subd. 1. Request: A request to submit a grievance to arbitration must be in writing signed by the aggrieved party and such request must be filed in the office of the superintendent within ten (10) days following the decision in Level III of the grievance procedure. . . .

Subd. 7. Jurisdiction: The arbitrator shall have jurisdiction over disputes or disagreements relating to grievances properly before the arbitrator pursuant to the terms of this procedure. The jurisdiction of the arbitrator shall not extend to proposed changes in terms and conditions of employment as defined herein and contained in this written agreement, nor shall an arbitrator have jurisdiction over any grievance which has not been submitted to arbitration in compliance with the terms of the grievance and arbitration procedure as outlined herein; nor shall the jurisdiction of the arbitrator extend to matters of inherent managerial policy, which shall include, but not limited to such areas of discretion or policy as the functions, and programs of the employer, it’s overall budget, utilization of technology, the organizational structure, and selection

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and direction and number of personnel. In considering any issue in dispute, in its order the arbitrator shall give due consideration to the statutory rights and obligations of the School Board to efficiently manage and conduct its operation with the legal limitations surrounding the financing of such operations.

ARTICLE XVII. DURATION

Section 1. Term and Reopening Negotiations. This agreement shall remain in full force and effect for a period commencing July 1, 2012 [sic] through June 30, 2014 [sic] and thereafter until modifications are made pursuant to PELRA. If either party desires to modify or amend this Agreement commencing at its expiration, it shall give written notice of such intent no later than ninety (90) days prior to said expiration. Unless otherwise mutually agreed, the parties shall not commence negotiations more than one hundred and twenty (120) days prior to the expiration of this Agreement. In the event that negotiations are not completed by June 30, 2014 [sic], terms of this contract will remain in full force and effect.

BACKGROUND AND FACTS

The parties are Independent School District 2687, the Howard Lake-Waverly-

Winsted consolidated school districts and School Service Employees Union Local 284,

a/k/a Service Employees International Union Local 284. SEIU Local 284 is the

Exclusive Representative for bus, van and charter drivers employed by ISD 2687

On the date the grievance was filed, the bargaining unit was comprised of 21

drivers for the School District.1 The drivers transport approximately 700 students in the

school district as well as students outside of the school district residing in Lester Prairie

and Montrose to two elementary schools, a middle school, and a high school. In

addition, the School District provides transportation of students attending two to three

private schools located within the School District and of students enrolled in vocational

and special education programming offered by Meeker and Wright Special Education

1 On September 30, 2016, 14 bargaining unit members resigned to work for vendor Four Point 0 who is under contract with the School District to provide transportation services.

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Cooperative. There are 115 square miles of roads that buses and vans travel using 27

vehicles on 11 to 13 routes. The routes include a.m., p.m. routes; a.m., p.m. and noon

preschool routes, activity buses, extracurricular buses, summer school routes and vans

for special education routes.

The School District has been considering alternatives for the School District’s

transportation services for several years. In 2014, the School District raised the

question of subcontracting the work performed by the bargaining unit. A June 12, 2014

letter from Superintendent Brad Sellner (“Sellner”) to Union representative Laurie

Stammer (“Stammer”) reads in part,

“. . . The District is in the process of conducting a management and cost analysis of the School District’s transportation services. . . . The School District may be contacting potential vendors . . . to discuss their interest in and the cost of having them directly provide all or part of the School District’s transportation services. . . . No decision has been made at this time to contract with a vendor for transportation services. As the School District considers these options, it is interested in discussing the possibility of subcontracting transportation services with Local 284. If Local 284 wishes to meet and confer with the School District to discuss the possibility of the School District subcontracting transportation services, you should notify the School District’s chief negotiator [insert name] as soon as possible. We also wish to advise you that the School District is considering the possible sale of the School District’s bus fleet. . . . . If the School District sells its buses, it would continue to employ and utilize the services of its own bus drivers . . . while we discuss with Local 284 the effects of subcontracting transportation services. Again, no decision has even been made at this time to subcontract transportation services.” . . .

(Jt. Ex. 12). On August 1, 2014, the School District sold its fleets of buses and vans to

4 Point O School Services, Inc. (“4.0”). (Jt. Ex. 38) and then leased them back.

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On December 15, 2015, the School District provided the Union with written notice

of the School Board’s decision to consider subcontracting the transportation services

provided by the SEIU bargaining unit. Sellner stated in the letter:

“. . . The School Board determined that the School District may be able to provide these [transportation] services more efficiently and could experience substantial savings if certain services were subcontracted. The School Board adopted a resolution stating that it is considering subcontracting transportation services currently being provided by SEIU members for economic reasons and directing me to give SEIU notice of this action . . . At this time, the School District is asking [if] SEIU is interested in meeting with administration before a final decision is made on whether to subcontract these support staff services. If SEIU wishes to meet to discuss the possibility of the School District subcontracting these services, it will have the opportunity to do so and to submit a recommendation to the School Board before a final decision is made. In the event the School Board decides to subcontract, it will meet and negotiate with SEIU regarding the effects of the subcontracting. . . . ”

(Jt. Ex. 14).

On December 22, 2015, Union attorney Brendan Cummins responded in writing

to the December 15th letter which stated in part:

“. . . Local 284 strongly objects to any attempt by the District to subcontract the work of the entire bargaining unit of bus, van, and charter drivers and related employees. Such an attempt to subcontract the work of an entire bargaining unit would not only violate but also subvert the applicable collective bargaining agreement and would constitute a repudiation of the bargaining obligation in violation of the Public Employment Labor Relations Act . . . If the District proceeds with its subcontracting plan, Local 284 will pursue a grievance for violation of the applicable collective bargaining agreement and, if necessary, a lawsuit for violation of PELRA.”

(Jt. Ex. 15).

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On January 5, 2016, the School District’s superintendent, Brad Sellner,

responded to Attorney Cummins letter of December 22. The letter to union

representative Laurie Stammer, with enclosed documents, stated in part:

“At the outset, I feel it is necessary to clarify for the Union the School District’s intent in this process. Based upon the adversarial tone taken by the Union’s attorney, it appears you clearly misunderstood the School Board’s actions and my letter to you. It is the School District’s position that it has the unilateral right to decide whether or not to subcontract all or a part of the bargaining unit work of bus, van and charter drivers. This does not mean that the School District intends to implement any such decision prior to the expiration of the current applicable collective bargaining agreement or prior to negotiating the effects of its subcontracting decision in good faith, assuming such a decision is even made. I also wish to make it clear that the School District is in a very preliminary stage of this process. No decision to subcontract has yet been made. As a result, no offer to bargain the effects of this decision has been made. Rather, my communication to you was a non-mandatory offer to provide the Union an opportunity to present any relevant information or concerns it may have to School District administration and the School Board as the School District’s options are considered. This is not an offer to negotiate but to exchange information, answer questions and discuss the issue.” . . .

(Jt. Ex. 16).

On January 25, 2016, the Union filed a grievance which stated as follows:

“Nature of Grievance: On about January 5, 2016, the District announced that it would refuse to bargain regarding the decision to subcontract transportation services and eliminate the entire bargaining unit in violation of the Recognition and Duration Articles of the collective bargaining agreement as interpreted under applicable law.

When was your first knowledge of the above noted grievance?: January 5, 2016

Specific Article(s) of Contract Violated: Article II (Recognition of Exclusive Representative), Article XVII (Duration) and any other provisions that may apply.

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Specific Remedy Sought: Cease and desist from its plan to unilaterally subcontract the work of the bargaining unit and make whole all affected transportation employees for any financial losses or other losses..”

(Jt. Ex. 2). On February 4, 2016, and March 7, 2016, the School District and Union met to

discuss the Union’s Level 1 and Level 2 grievances. During these meetings some

discussion transpired about transportation issues. (Jt. Ex. 19).

On March 14, 2016, the Board adopted a resolution authorizing subcontracting of

all of the transportation services performed by all of the SEIU bargaining unit and gave

the Union notice of the resolution on March 15, 2016, and requested the Union to

negotiate over the effects of the decision and the continuation/termination of the current

collective bargaining agreement. (Jt. Ex. 20).

On April 1, 2016, the Union served notice to the School District to begin

negotiations for a successor CBA. (Jt. Ex. 28).

On May 5, 2016, the parties agreed to hold the grievance in abeyance. (Jt. Ex.

8).

On May 24, 2016, the parties met to negotiate the terms of a new contract (Er.

Ex. 4, Jt. Ex. 25).

On June 6, 2016, the School District provided the Union with reasons why the

solutions offered by the Union did not fully address the problems over its transportation

services and expressed the School District’s willingness to negotiate other terms related

to the termination of the CBA and termination of the employment of the bargaining unit.

(Jt. Ex. 26).

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On June 13, 2016, the School District entered into a 6 month lease agreement

with 4.0 effective July 1, 2016 for the lease of buses to transport students. (Jt. Ex. 40).

On this date, the Union reactivated the grievance. (Jt. Ex. 9).

On June 14, 2016, the parties met to negotiate the terms of a new contract. (Jt.

Ex. 28)

On June 15, 2016, the School District requested mediation (Jt. Ex. 28).

On July 11, 2016, the School Board adopted a resolution awarding the vendor

4.0 a transportation contract contingent upon negotiations with SEIU as to the effects of

the decision to subcontract. (Jt. Exs. 29, 30).

On July 11, 2016, the Board denied SEIU’s Level III grievance. (Jt. Ex. 10).

A mediation session to negotiate a new contract was held on August 22, 2016.

The School District presented the Union with its Last Best Offer. The Offer was

contingent on the CBA being terminated no later than September 30, 2016. (Er. Ex. 8).

On September 9, 2016, a second mediation session was held to negotiate the

new contract. The School District gave the Union its Last Best Final Offer. (Jt. Ex. 31).

On September 30, 2016, 14 members of the bargaining unit resigned to work for

4.0. (Jt. Ex. 36).

UNION ARGUMENTS

The School District is narrowing the “effects of bargaining” to the components of a

severance package. “Effects” bargaining encompasses a much broader scope of

issues, such as the effects upon the bargaining unit itself.

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The grievance is ripe for arbitration in this case on the basis that a substantial

number of facts are present to allow adjudication and that harm to the bargaining

unit members has occurred and/or is imminent.

The Injury arose on January 5, 201[6], when the School District announced that it

would not negotiate with the Union in making the decision to subcontract

transportation services and thereby violated the CBA under Article II, the

Recognition clause and Article XVII, the Duration clause.

o The underlying injury is the School District’s violation of the CBA (Art. II and

Art. XVII).

o The decision to subcontract compromises the terms and conditions of

employment and whether the bargaining unit remains employed by the

School District.

o The School District’s action is in conflict with labor relations under P.E.L.R.A.

The School District’s act will result in the effective elimination of the

bargaining unit.

The School District’s contention that its decision to subcontract is not final until it

negotiates with the Union over the effects of the decision to subcontract is

misleading.

o On the day before contract negotiations, the School District entered into an

approximately 5-month lease agreement with 4.0 to provide buses and vans

to transport students.

o On or about the third week of September 2016, 4.0 offered bargaining unit

members wages and a sign-on bonus which matched the School District’s

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“last best final offer” of September 9, 2016. On September 30, 2016, 14 of

the 21 bargaining unit members resigned from the School District to work at

the School District for 4.0.

o The School District’s contract with 4.0, gives 4.0 the right to cancel the

contract if the School District does not provide written notice of termination of

the CBA by September 30, 2016. To the date of hearing, there is no record

that 4.0 terminated the contract with the School District.

The School District has effectively privatized and subcontracted all the bargaining

unit work. And it is this that establishes the injury suffered by the Union. The injury

suffered by the employees is eminent if not already effectuated.

The Union, as the exclusive representative for the bargaining unit, had a right to

meet and negotiate with the School District about the terms and conditions of

employment.

The individual employees will lose all benefits as School District employees, lose

stability, just cause protection, will become at-will employees, lose accumulated sick

leave, sick leave benefits, personal leave, holiday pay, health insurance and

disability insurance and P.E.R.A. contributions.

Indep.School Dist. No. 88, New Ulm v. School Service Employees Union Local 284,

503 N.W.2d 104 (Minn. 1993) (“New Ulm 2”) , the Minnesota Supreme Court held

that the recognition clause mandates that the parties are bound by the contract as

long as the contract remains in effect. The employer’s unilateral decision to contract

out the work while negotiations were ongoing violates the recognition clause. The

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duty to bargain the decision to subcontract arises out of PELRA and is reinforced by

the CBA’s “contract in effect” and recognition clauses.

Under the duration clause, the terms of the CBA remain in full force and effect until

modifications are made pursuant to PELRA. (Jt. Ex. 1). Because this matter tracks

New Ulm, under PELRA, the recognition and duration clauses mandate that the

School District must negotiate over both the decision of whether to subcontract and

the effects of the decision to subcontract the entire bargaining unit.

o The School District never intended to negotiate in good faith; its intent was to

destroy both the bargaining unit and the Union. This is evident from the

November 30, 2016 expiration date of the Agreement between the School

District and 4.0.

o The July 11, 2016 contract between the School Board and 4.0 privatizes all

bargaining unit work. (Jt. Ex. 31).

o The Employer’s first offer on August 22, 2016 to the Union was called its “last

best offer” (Er. Ex. 6) and was identical to its September 9, 2016 “last best

final offer” (Jt. Ex. 31). The offers stated that (a) the contract between the

parties would terminate by September 30, 2016, (b) contained 4.0 wage

rates, (c) contained a 4.0 signing bonus and (d) contained a School District

severance pay of $300.

The School District did not meet all four of the mandatory criteria set forth in New

Ulm. They are: (a) the action is performed in good faith. Here, the School District

refused at every point to negotiate about whether or not to subcontract. (b) the

decision to subcontract represents a reasonable business decision. Here, the School

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District’s initial estimate of cost savings was based upon imagined vendors. (Jt. Ex.

16). The School Board’s methodology is in question. The School District projects

savings of $65,000 in costs for no longer employing a Director of Transportation (Er.

Ex. 3, p. 8). However, 4.0 intended to hire its own facilities manager and this cost is

rolled into 4.0’s contract, negating savings to the School District. The School District

sold its fleet of buses and vans to 4.0 then leased the vehicles back. There appears

to be no cost savings with respect to bargaining unit labor and benefits. The 4.0

wage rate is equal to employee’s base wage with the School District plus an

additional amount to reflect the economic value of benefits received by the employee

with the District. (Hillmeyer, Sanderson) (c) it does not result in the subversion of

the labor agreement; and (d) it does not have the effect of seriously weakening the

bargaining unit or important parts of it. The subversion of the entire bargaining unit

and a breach in the CBA occurs when as here a school district’s actions effectively

eliminate the entire bargaining unit while the contract remains in effect.

The School District refused to negotiate and would only “discuss the decision to

subcontract with the union, not an offer to negotiate but to exchange information,

answer questions and discuss the issue”.

The School District established an artificially short timeline for the Union to request

commencement of negotiations. The March 24 date the School District gave was

outside the window for reopening the CBA. (Stammer Testimony).

The March 14, 2016 School Board action shows bad faith. The School Board

passed a resolution that directed the District to meet with 4.0 to renegotiate the

contract to lease school buses from 4.0 for a period of time contingent on the award

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of the transportation services contract and the termination of the CBA. (Jt. Ex. 21, p.

3) This demonstrates that the School District had determined that it would privatize

all bargaining unit work and would adopt bargaining tactics necessary to terminate

the CBA.

o The School District showed bad faith in negotiations which began on May 24,

2016. The Union made an opening proposal (Jt. Ex. 25, Stammer

Testimony). The School District did not respond to the opening proposal nor

make its own proposal. (Er. Ex. 4).

o On June 13, 2016, the night before the second negotiating session, the

School District signed a five month “Vehicle Lease Agreement” with 4.0 with

an expiration date of November 30, 2016. (Jt. Ex. 40).

The Grievance was timely filed under the terms of the grievance procedure.

o The event giving rise to the grievance occurred on January 5, 2016, and not

on December 15, 2015, as the School District contends. The December 15

notice merely informed the Union of discussions regarding possible

subcontracting. It was the School District’s January 5th letter which informed

the Union that it would not negotiate the decision to subcontract. (Jt. Ex. 16).

The grievance was filed within 20 working days from January 5, pursuant to

the CBA (Jt. Ex. 1, p. 14).

EMPLOYER ARGUMENTS

The grievance is not ripe for determination because the School District has not taken

any action that affects the bargaining unit and has made no changes to the terms

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and conditions of employment. In fact, in the subcontracting contract with 4.0,

transitioning transportation services of Union employees was subject to negotiations

with the Union as to the effects of the decision. (Jt. Ex. 30). The Union’s grievance

is based upon the School District’s notice of intent to potentially subcontract

bargaining unit work. It was uncontested at the hearing of this matter that the 2016-

2017 school year started out with no change in the terms and conditions of

employment for the bargaining unit.

If the grievance is ripe, it is untimely because the Union waited for over a year and a

half to file the grievance from the date it first received notice of the School District’s

intent to potentially proceed with subcontracting its transportation work. Prior to

selling its bus and van fleet and leasing newer and safer equipment, on June 12,

2014, the School District informed the Union in writing of its intent and that it was

reviewing the feasibility of having a vendor provide all or part of the School District’s

transportation services. (Jt. Ex. 12). The School District stated in this letter that if a

decision was made, it would negotiate the effects of its decision to subcontract. (Jt.

Ex. 12). The Union did not grieve the School District’s actions to subcontract some

or all of the transportation services. (Jt. Ex. 12). Neither did the Union object to nor

grieve the School District’s decision to sell its buses and vans and lease new ones.

The Union next received notice of intent to subcontract without prior consent of the

Union on December 15, 2015, in a letter from Sellner to Stammer informing the

Union that the School Board resolved that for economic and efficiency reasons, it

was considering subcontracting the transportation services provided by the

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bargaining unit. (Jt. Ex. 14). The School District made it clear it was only willing to

negotiate the effects of its decision, if one was made.

Union attorney, Brendan Cummins’ letter of December 22, 2015 to the School Board

shows that the Union understood and recognized but failed to grieve the School

Board’s refusal to negotiate its decision until January 25, 2016. (Jt. Ex. 15).

To grieve now is not only untimely but unfair to the School District since it has

already sold its bus fleet. Had the grievance been timely filed, the School District

could have considered all of its options, including retaining its bus fleet. The delay

has caused extreme prejudice to the School District.

The School District’s decision whether to subcontract its transportation services and

to manage its organizational structure and to assign and determine the number of

personnel are inherent managerial rights, not subject to arbitration under the terms

of the CBA or under PELRA. (Art. IV, Sec. 1; Art. XIV, Sec. 8, subd. 7). The CBA

contains no provision limiting its right to subcontract. Inherent managerial rights are

not terms and conditions of employment under PELRA. As such, PELRA also limits

the arbitrator’s right to hear this matter. (Jt. Ex. 1 (Art. IV, Sec. 1).

The School District’s decision was based on a reasonable business decision. The

costs of operating transportation services was a consideration but not a primary

factor in pursuing subcontracting and did not include labor costs of union member

drivers. The safety and administrative issues were the more important factors in the

decision making process.

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The School District has attempted for years to find a solution other than

subcontracting. The issues, problems and concerns the School District faced and its

efforts to resolve them include:

o Safety concerns arose because of the School District’s lack of resources to

purchase new buses and maintain its own transportation system.

Nine years ago the School District sought and received a levy to

replace its aging bus and van fleet. The levy did not cover the full

cost of the equipment and the School District had to use funds in its

general fund.

The School District incurred increasing costs to perform regular and

necessary diesel engine maintenance on buses logging over 200,000

miles.

It is difficult to find diesel mechanics to do work that the School

Board cannot do internally, that is to make major repairs and perform

the 200,000 mile inspections and maintenance on aging buses.

In 2011, six of the 27 vehicles inspected did not meet State

requirements. In 2014, the year the School District sold its bus fleet;

most of the buses were over 8 years old.

o The centrally located bus garage was costly to operate requiring repairs and

enhancements. In addition to the cost of maintaining the property, the School

District spends over $6,500 per year for heat, water and electricity. (Jt. Ex.

16, Er. Ex. 3).

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o The School District would have to pay an annual salary of $56,000 to hire a

transportation services director to replace the retired transportation

supervisor. The pool of candidates is limited (especially for an outstate

Minnesota school district) because there is much competition for those

possessing the necessary mechanical expertise, technological skills, financial

abilities and the knowledge of the transportation industry.

o Approximately 7 hours a week, secretarial and business services staff have

had to fill in to do transportation department work due to absenteeism and

overflow work of the transportation services director. (Jt. Ex. 16).

o Few if any vendors will agree to lease school district vehicles without using its

own drivers.

o Fuel costs for vehicle transport of students ranged between $122,000 and

$158,000+ a year depending on the cost of gas.

o There have been difficulties in maintaining a sufficient number of

transportation employees. Increasingly, the School District has been unable

to consistently hire and retain qualified drivers. There were three to five

vacancies at any given time. The School District has used substitutes to fill

the positions.

o During the past four years, the School District has incurred annually between

$4,300 to over $14,500 in costs from hiring transportation workers, including

costs due to mandatory criminal history background checks, drivers’ license

verification, drug testing and mandatory yearly training. (Jt. Ex. 16).

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o With 700 students being transported on routes covering 115 square miles a

day, the School District lacked expertise to operate its bus fleet efficiently.

The School District received complaints from parents about the

inordinate amount of time (60-90 minutes) that students had to spend

on the bus in transit.

o The School District invited the Union to make suggestions to resolve

transportation problems but the Union’s input did not take into account that

the School District has already tried those suggestions.

o The Union never followed through with providing answers to efficiency issues

as they had promised they would.

o The School District has tried but has not been entirely successful at finding

resources to use internally. The School District purchased a computer

software program to assist with providing transportation services but found

that a computer program cannot replace a person who drives the roads for

hazards and route efficiencies.

Based on the above, the School District began to examine whether outsourcing

transportation services and equipment could (a) improve efficiencies in routes and in

staffing; (b) decrease the cost of maintaining buses; (c) increase student safety and

satisfaction.

Even with the sale of the bus/van fleet to 4.0, some problems remained and

escalated. They are: (a) Staffing is still an issue. Vacancies have had to be filled

by hiring temporary substitutes. Increasing drivers’ wages and benefits did not

resolve the issue. (c) Parents still had complaints about the length of time their

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children were on the bus to and from school, some for more than 60-90 minutes. (d)

Staff outside of the transportation services department still had to fill in to do

transportation department work.

The Union’s claim that the School District did not negotiate in good faith is not

subject to arbitration. It is an assertion of an unfair labor practice under PELRA and

the proper jurisdiction is the Minnesota judicial system’s district court. (Minn. Stat.

179A.13, subd. 1)).

The School District acted in good faith by offering to discuss any and all possible

alternatives, such as severance packages, transitioning its employees, offering a

sunsetting of the CBA or retaining certain positions. It was the Union that refused to

consider any of these options. The School District further offered the Union

employees positions with its vendor, with equivalent pay and benefits and a

severance package. (Jt. Ex. 31).

The Union is trying to grieve what amounts to an unfair labor practice in violation of

PELRA (Jt. Ex. 2). The claims involve legal questions, not related to any term or

condition of employment or contract provision, and thus, not subject to arbitration.

The Union’s claims contain allegations of unfair labor practices with respect to

attempting to grieve labor negotiations process rather than the substantive terms

and conditions of the CBA. The Minnesota judicial system not the arbitrator has

jurisdiction over such claims.

If the School District’s decision to subcontract was subject to arbitration, the Union

did not show at hearing that the decision violated the rights of the bargaining unit.

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The School District’s intent is not to eliminate the Union. Subcontracting will not

necessarily result in the subversion of the CBA or unreasonably weaken the

bargaining unit. The reasons for moving to a private vendor relate to a number of

issues that have nothing to do with the quality or cost related to bargaining unit work.

The School District undertook efforts to discuss various options to maintain all or a

portion of the CBA for some or all of the Union members. However, the Union would

not discuss these options.

If the School District has a right to subcontract, it would be inconsistent to hold that

eventual termination of the contract or a reduction of the contractual terms is not

possible at some point in the future. Although union membership will not be retained

if the School District subcontracts all of its positions, the School District has sought

to preserve the employment of its employees by obtaining the agreement of 4.0 to

continue the employment of all School District transportation staff who apply for

employment and who pass a criminal background check

The Union’s claim that under the recognition and duration clauses of the CBA, the

School District is not entitled to subcontract is not subject to arbitration. The School

District had not made a decision to subcontract at the time the grievance was filed

on January 25, 2016. The School District’s exploration of subcontracting was

contingent upon negotiations with the Union as to the effects of the decision to

subcontract.

New Ulm 2 held that the decision to subcontract is the employer’s decision alone to

make. The only issue subject to negotiation or arbitration is the effect of the decision

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to subcontract, such as severance pay, pension benefits. The Union is not grieving

the effects of bargaining; it is grieving the School District’s right to subcontract.

The grievance seeks relief outside of the Arbitrator’s jurisdiction. (Jt. Ex. 1 at 16, Art.

XIV, Sec. 8, subd. 7). The provisions of the CBA limit the scope in its definition of

“grievance” to mean an “allegation by an employee resulting in a dispute or

disagreement between the employee and the School District as to the interpretation

or application of terms and conditions.” (Art. XIV, Sec. 1). The dispute must

genuinely involve the “interpretation or application” of a specific term of the CBA.

The School District is entitled to dismissal of this matter based upon lack of

jurisdiction and on the merits of the Union’s claims.

Side discussions at the February 4 and March 7, 2016 grievance meetings involved

trying to find a resolution to the transportation issues. Union suggestions either

didn’t withstand scrutiny or were not backed up with evidence.

The Union refused to discuss the issue of the effects of subcontracting.

The School District denied the January 25, 2016 grievance on the basis that the

claim was not ripe for determination because the School District had not made a

decision to subcontract or, if the claim was ripe then the grievance was untimely for

failing to file within the time set forth in the CBA. Denial was also based on the

grounds that the claims were not subject to the terms of the CBA and was without

merit because of the School District’s unilateral right to subcontract and that it had

not violated its obligation to negotiate the effects of its decision with the Union.

The School Board passed a resolution on March 14, 2016 authorizing

subcontracting to proceed and directing Sellner to notify the Union. (Jt. Ex. 20). The

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Board required that solicitation of bids must contain terms that any contract with a

vendor would be conditioned upon the termination of the CBA with the Union and the

hiring of current School District transportation service employees.

At a May 24, 2016 negotiation session, the School District informed the Union that it

wanted to negotiate the effects of subcontracting. (Er. Ex. 4).

Having reviewed the Union’s May 24, 2016 suggestions, on June 6, 2016, the

School District provided the Union with reasons why the solutions offered did not

fully address the School District’s concerns over its current transportation services.

(Jt. Exs. 25-26). The School District informed the Union of the problem with hiring

and retaining drivers and the administrative burdens and equipment problems, and

asked the Union to provide offers to address the effects of subcontracting.

The Union cannot show a direct and imminent injury. The Union has grieved the

School District’s decision to conditionally subcontract. Conditionally subcontracting

cannot be considered a current controversy between the parties. Thus, the

grievance is not ripe and must be dismissed.

Even if the School District’s decision was considered to be imminent, any injury

cannot be deemed forthcoming if the Union were to negotiate the effects of the

School District’s decision. The ripeness doctrine is governing here because it is

incorporated into the CBA. Under the CBA, the grievance must follow an act or

event and therefore it would be improper to file a grievance in anticipation of such an

act or event. (Jt. Ex. 1 at 14, Art XIV, Sec. 4; Art. XIV Sec 8, subd 7). “The

jurisdiction of the arbitrator shall not extend to proposed changes in terms and

conditions of employment.”

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PELRA does not preclude school districts from subcontracting. At best, courts only

require negotiation as it affects the wages, benefits and future employment of

employees, not the actual management right to make this decision. Here, the

School District has attempted to negotiate these issues in good faith. The arbitrator

lacks the authority to provide a remedy because no harm has occurred to the Union

members.

No Union member has suffered any loss of jobs or benefits.

The CBA prohibits the arbitrator from amending or modifying its provisions. (Jt. Ex. 1

at 16, Art, XIV, Sec. 8, subd. 7). The grievance here is outside the scope of the CBA’s

arbitration clause.

This matter should be dismissed based upon a lack of jurisdiction and on the merits

of the Union’s claims.

ANALYSIS

On November 2, 2016, I issued an Order dismissing the Employer’s Motion for

Summary Disposition. As stated in the Order, the dismissal of the Motion was based on

my belief that the central question of arbitrability rested on a need to elicit testimony

from witnesses, with the right to cross-examine those witnesses. Prior to my ruling, the

Employer argued as it does now, that the matter was not ripe for determination and that

even if it was ripe, the Union was untimely in filing the grievance. The Employer further

argues that even assuming arbitratility, the School District in this case complied with the

terms of the Collective Bargaining Agreement. For reasons which will follow, I find that

the Employer’s actions were in compliance with the terms of the Collective Bargaining

Agreement and that given the facts adduced at hearing, the decision to subcontract was

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made for valid business reasons related to the central mission of the School District to

serve the education and safety of all of its students.

Both parties have relied upon Independent School District No. 88, New Ulm v.

Sch. Serv. Employees Union Local 284, 503 N.W.2d 104 (Minn. 1993). The essence of

the Court’s ruling was that although it was the School District’s inherent managerial right

to subcontract, the District must negotiate over the effects of its decision and “may not

unilaterally contract out the work until impasse has been reached . . . “ The Chief

Justice added that this was particularly necessary in the case before it, because the

contracting out had resulted in the elimination of the entire bargaining unit.

Applying Chief Justice Keith’s opinion to the facts of this case, I find that the

School District and the Union have reached impasse. When the parties’ negotiations of

the new contract stalled, two mediation sessions were held after the School District

petitioned the Bureau of Mediation Services. Mediation also proved fruitless. The Union

did not respond to the School District’s offer during the first mediation, nor provide a

counter-offer. The parties held a second mediation session, and the School District

provided the Union with its best final offer. The Union rejected the offer and proposed

no counteroffer. It is absolutely clear that there is an unalterable conflict between the

parties in which the Union insists on negotiating the Employer’s decision to subcontract

and the Employer consistently rejects, based on its understanding of the law, any

obligation on its part to negotiate over its management decision to subcontract its

transportation services. Therefore, I conclude that impasse has been reached.

As to the ripeness issue, the facts are that 14 of the employees have chosen to

be employed by 4.0. The Chief Executive of 4.0, Michael Hennek, testified credibly that

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he met with School District employees at their request and at that meeting agreed to

compensation which would make the employees whole from the loss of the value of the

fringe benefits enjoyed as employees of the School District. The majority of the

bargaining unit has left School District employment. That seems pretty ripe to me. This

matter has gestated since 2014. It flies in the face of reality to claim at this stage that

the District would reverse its decision to subcontract.

As to the timeliness of the Union’s grievance, in a complex important process

such as presented here, the triggering event for the filing of the grievance is not always

clear. In this case, I find that the Superintendent’s letter of January 5, 2016 was that

triggering event. In that letter, Sellner stated:

“At the outset, I feel it is necessary to clarify for the Union the School District’s intent in this process. Based upon the adversarial tone taken by the Union’s attorney, it appears you clearly misunderstood the School Board’s actions and my letter to you. It is the School District’s position that it has the unilateral right to decide whether or not to subcontract all or a part of the bargaining unit work of bus, van and charter drivers. “ . . .

(Jt. Ex. 16).

The grievance filed on January 25, 2016 therefore was filed in a timely manner well within the 20 work days prescribed by the CBA. Superintendent Sellner credibly testified that the School District tried to make

decisions on what was best for the effective operation of the School District’s

transportation services. No hasty decisions were made here to sell the bus fleet or to

subcontract any of the transportation services. There were a multitude of reasons why

the School District’s transportation services were problematic, and became increasingly

so. The School District carefully studied these reasons and all of their ramifications.

Sellner testified that more than nine years ago, the School District recognized that its

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aging bus fleet meant additional costs and increased safety issues. More and more

buses in the School District’s fleet were not passing state inspections. A levy to defray

the increasing transportation costs of the School District’s aging bus fleet was only a

temporary solution. Eventually, the School District had to go into its General Fund to

pay transportation costs. Then there were difficulties in finding hard-to-come-by diesel

mechanics to repair aging buses, hiring and retaining drivers, having to use other staff

to perform job duties of the Director of Transportation whose duties had increased over

the years and also included transporting students as needed, and difficulties for some of

the students who were on the bus 60 to 90 minutes to and from school.

The purpose of the hearing on this matter was to ascertain whether the facts

supported the District’s decision to subcontract for sound business reasons and that the

decision was not driven by an ant-union animus, and therefore a violation of the

recognition clause of the CBA. Absent from the record is any evidence of anti-union

animus. Equally clear is the abundance of evidence supporting the sound business

reasons for that decision.

To sum up, the CBA has no language prohibiting the District from subcontracting.

The decision to do so would be on its face well within the prerogatives of management.

On that basis, the District has argued the issue is outside the jurisdiction of the

Arbitrator. That notwithstanding, the Union is entitled to argue, as it has in this case, that

the decision is arbitrary and without basis in sound business reasons. The Union

further argues that the consequence of the District’s action leads to the destruction of

the bargaining rights of the employees in violation of the recognition and duration

clauses of the CBA.

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As noted above, the hearing in this case was held to determine whether facts

supported the Union’s claim. I hold that the facts fail to support the Union’s claim, and

for the reasons given above, the grievance is denied.

AWARD

The grievance is denied.

s/George Latimer Dated: January 19, 2017 George Latimer, Arbitrator