Collective Bargaining Reporter articles on privatization

Transcription

Collective Bargaining Reporter
articles on privatization and contracting out
Fighting Contracting Out
Contracting Out: It’s Not a Panacea
How Cities Cope with Cutbacks
Fighting Contracting Out: Who’s Bidding?
Legal Challenges to Contracting Out
Successorship Clauses
Private Profit, Public Risk: The Contracting Out of Professional Services
Impact of Privatization on Women and Minority Workers
Keep Fighting: What to Do After Jobs Are Contracted Out
Contingent and Alternative Work Arrangements: A New Strain of Contracting Out
Alternative Service Delivery
When Public Services Go Private: Protecting Members and the Union
Fighting Contracting Out: Lessons Learned
Law Requiring Contractors to Hire Predecessor’s Employees Stands
Competitive Bidding
New Study Indicates that Privatization Hurts Minorities
CoDective
~ inthepublie~
®
Bargaining Renorter
FIGHTIIII CIIITIACTIIIIIIT
MARCH-APRIL, 1981
,.,._
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Contracting out public services to private companies is a growing practice in many
jurisdictions. Not only are AFSCME locals
facing contracting out in the traditional areas
of consulting services and industrial sanitation, but also in services such as building
maintenance, security, health care, transportation and engineering. The myth is "the private sector can do it better."
However, the private delivery of public
services has in many cases resulted in increased costs, poorer services, corrupt activities, decreased public accountability and problems with contract preparation, administration and monitoring for the employer.
The following approach may be helpful
in developing arguments against contracting
out, when it is under consideration by a jurisdiction.
Information Gathering
Determine the current cost of the service
to be contracted and compare it with the contractor's estimates. Often, jurisdictions will.
finance a feasibility study that compares public versus private delivery. Check for answers
to these questions:
e Has the city included the costs of
contract preparation, administration
and monitoring in the cost of having
a private contractor?
e Are the government's estimates for
the current cost of the service accurate?
• Does the contractor's cost estimate
cover exactly the same services as
are performed now?
e How much increase is the contractor
allowed per year? How is it justified?
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NUMBER 2
e Will the contractor use the govern-
ment's equipment or its own? What
kind of leasing arrangements are
made?
e Does the contractor have to post bid,
performance, and payment bonds?
e Has the. union participated in the
feasibility study?
Most jurisdictions have specific regulations for bidding procedures. Check for the
following:
e Has there been public bidding? Is it
competitive? Is it required by law?
e Was there wide ranging advertising
for bids?
e How was the bidding procedure performed and who controlled it?
Background information on contractors
obtained through local sources can help discredit companies with histories of questionable activities. Concentrate in the following
areas:
e Who are the owners of the company?
What relationships do they have with
government officials? Are there conflicts of interest?
• What is the firm's financial condition?
• What are the contractor's past and
present business practices? (Check
with local consumer advocacy groups
and current or former customers.)
e If it is a local company, does it own
property? If so, check the clerk's or
deed office for tax liens, judgments,
code violations, etc.
e If the contractor is a national firm,
the International's Research Depart(continued on page 2)
A newsletter from AFSCME Research and Collective Bargaining Services to assist AFSCME negotiators in securing better contracts.
(continued from page 1)
ment may have additional
ground material.
may
on the .
Publicity-Get The Word Out
· The ability to influence public optmon
may determine the success or failure of th~
fight to halt contracting out.
e Use internal union communications
to inform all members of the current
situation and how it affects their job
security. If some local members are
laid off, others may be affected as
bumping rights under the contract
are exercised. An informed and active membership is the most effective
weapon the union has.
• Contact the local media: newspapers,
magazines, radio and television
stations. Supply them with information about the dangers of contracting out in general, and specifically on the local contractors under
consideration. Ask to participate in
local talk shows and interviews. Emphasize the ways in which contracting out can hurt the jurisdiction. It
may be necessary to buy advertising
space and time in the local media;
lea.fletting may be a less .(}xpensive
approae;h. Advice is· •{lvaiJa.ble from
the International's Public Affairs
D~partment.
Use The Political Process
The union's political leverage may be a
major factor in fighting contracting out. The.
elected representatives should be supplied
with information which defends maintaining
the service as public. Members, their families and friends should write letters and make
phone calls to the officials. They should a:ttend and participate in council and finance
committee meetings.
Coalitions with community and neighborhood organizations, church groups and
other local unions to fight contracting out
may be helpful. Raising funds, getting pub7
licity and pressuring elected offici(tls may qe ·
easier with a broad based coa.lition, ratnet
than the union appearing to be defending i'ts··.
own narrow interests, A petition demanding·
2/AFSC.lv!E (;ollective Bargaining Reporter
"'J."''-''"~"' require
"·"·"''"'~·~·......
cost sav. . ..
prior notification to the union. ·. . .•
management rights
clauses may includ~ the right to contract out
as management's alone. Obviously, any progress on:improving contract language will be
very difficult if management is considering
contracting out during negotiations.
Use Legal Remedies
In states with collective bargaining laws
patterned after the National Labor Relations
Act, it is possible that the contracting out of
bargaining unit work without prior negotia-
tions may be an unfair labor practice because
the employer has a duty to bargain. In juris.dictions with strong civil serviCe laws, contracting out may also ]Je .limited. Some courts
have ruled that contracting out is not permissible if the work has been traditionally performed by civil service employees. Check with
tlie locall{igal coupsel for advice.
Help Creat¢ M;ore Efficient Services
If mapftgem~p.~ sa.ys it wishes to provide
more effi.c:ienf s~rvices, the union can offer to
makesug~estions±qjpcrease productivity and
improve "',€rrkin~ ~<:mli tions. Some of the best
idea,sfor i1)lP.i~x4·~i~HrE!ll:U.ctivity and working
conditions.o'P.Yi~1\l:sJ.y¢qmefrom those who actually perforln. t~8.\v()rk.. A joint labor management .corrimitt~e may help .workers have
more inpt1t ~nto gerr~ral working conditions,
as well as improve productivity.
Resources. A:yaila:ble
uw:Qn F .. '~sttthe Research Department
can pr~~gl¢'
;e.;.J.;c~sources which may be
ll;~~f_!il.,> ~ti¢1 ..· { ·g~~Yra.l argUJ,1).ents against
conttaytil1g,:;,qt,JJ, fh~ ~ook Government For
Sale and .sa!)J:p)e contract language.
I
Collective
. futhepuMk~
Bargaining Renorter
•
NUMBER 12
NOVEMBER-DECEMBER, 1982
COHTRACTIHG OUT
As the national economy remains mired in the
deepest 'downturn since the Great Depression, state
and local officials across the country are eagerly embracing cost-cutting schemes of many varieties. One
notion that continues to hold a spell over public-sector managers is that money can be saved by con·tracting out almost any service to private, profitmaking firms. Despite examples that contracting out
may be more expensive, usually involves a loss of
public control,. and often invites corruption, government officials continue to express an interest in the
practice.
Renewed Interest
A new book· entitled Privatizing the Public Sector
by E. S. Savas, Assistant Secretary of the Department
of Housing and Urban Development, will be the
source of some justification for renewed attempts
to turn public services over to profit-making concerns. Its publication was sponsored by the Manhattan Institute for Policy Research, . an organization that supports President Reagan's supply-side
economic theories. The author is a controversial figure whose claims AFSCME has questioned before.
In 1975, at the height of the New York financial·
crisis, Savas said that city employees were
underproductive anq overpaid and proposed
shutting down municipal · hospitals. In
1977 he submitted an unsolicited pro....:::;,::::;;;;;;;:;::;::;;;;;;;;=r""fl
posal to then Mayor-elect Koch
which urged that the poor be discouraged from living in New
York City. Most recently,
Savas authored a HUD
report which blamed
many urban problems on financial
aid from the
Federal
Gov-
ernment. The final version of the report deleted
his position.
In his new book, Savas contends that many of
the services presently performed by governments
could be supplied by other means. Although he
recognizes that certain goods cannot or will not be
provided by the private sector, he challenges the
practice of providing them with government em- ·
ployees. He offers a number of alternative arrangements whereby the private sector provides the service, either through letting contracts, granting monopoly rights, providing subsidies to companies, or so- ·
liciting volunteer service agencies. The underlying
justification for his argument is that "private provision is superior to public provision of (these) services.'' In most of the examples Savas cites,
claims of savings are based on projections
from initial contractor bids. As is well
known, those bids do not include
certain hidden costs and are
often increased greatly
in later. years
when the
(continued on page 2)
A newsletter from AFSCME Research and Collective Bargaining $ervices to assist AFSCME negotiators in s~curing better contracts.
I'rovision of
record bear
tenc~f~~ for '-'.'I!··~·"''J.q'-'H th,t)urg,ti•,;,• •
dictiQ11S are .li'LHUHl~
not 1a9 to che~per and ,more
~a~·"'"·"", as Sava.s. contends.;· The contracting-out pamicea. has been a costly experiment for
many governments.
s From May 1976 to June 1979, the City of
Cambridge, Maryland coil.tracted out its sewage
tteatment facilities to a private firm:-Envirotech. At
the expiration of the contract, the. City re-assumed
operation of the plant. The City's .PubLic Works
rector cited several reasops .for not :r~newi11g ·
·OfficialS CleteriffillleCl :LU<>Ui·"•"'>V,.a,r
.
surplti~,
firrri refused to · release
. . .
· in the Center's opera...,
tions, When City·employees moved in to correct the
situation, they found boxes of unpaid bills dating
back a year and over $200,000 in checks that were
never mailed.
0 New York City's Human Resources Admin-:
istration cancelled several contracts with private
vendors for printing and custodial services. The City
21 AFSCME Collective Bargaining Reporter
hired new
pects to save
0 City
officials
against the use of ·nr:oU'>'Oi>
streets and instead ., ..... ,~.-r....;;,.;;
a motorized street paver.
ized to perform the work,
of $160,000.
.
In addition to contending that ·
are cheaper, Savas and other au'·"'"'s .. ;.n.sc
that contracting out will decrease the size n-E·:·n,.,tl>:rn~
ment. They believe tha:t government alWay;; ··and
everywhere restricts the freedom of citizens. While
that idea may be true in extreme cases, it is· illogical
to contend that municipally provided trash collection,
for example, or school food services are damaging
individual liberties. Moreover, it simply isn't true that
the government sector is larger in the U.S. Government purchases as a percentage of GNP is smaller
in tbe U.S. than in France, Italy, Germany and Great
BrJtain .
.Additional Information
T~e Research Department has other instances of
the ;.£allures of contracting out to assist in opposing
its,il1ttodu~tion. Assistance is also available in cbm,..
pa~ii'l~g•.•q.ontraot~d •sosts' with the ,costs' of. in-o~quse
produGtiPJ?•·.Tfris in,{erma.tion, as well as mlHerral on
individuaFfirms,j:;;>a,yailable uponreqm:st
IIIII
• •
•
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State and Local· Gov.ernment
Wage Settlements Average 7Ji%
Major state an.d local gover!lment,.c.ollectixe lJNgaining settlements in the first half of 1982 (covering
5,000 or more workers) provided average first-year
'c'""'''""'''" of ·
·
from 7.8 persettlements in
~O(ll\}~@t. :m1e1re. workers
the first
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HOW CITIES COPE WITH CUTBACKS
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Typical strategies used by management to deal
with financial crisis are documented in a recent
report by the Urban Institute entitled Coping with
Cutbacks: Initial Agency-Level Responses in 17
Local Governments to Massachusetts' Proposition
2~.
In November 1980, the voters of Massachusetts
approved a limitation on property tax levies in the
state. The new law called for limiting property taxes.
to 2~ percent of full assessed value, reducing excess
levies by 15 percent per year until that limit was
met, and limiting the annual growth of the tax levy
to 2~ percent. In addition, the motor vehicle excise
tax, which accounted for about 10 percent of municipal local revenues in Massachusetts, was cut 62
percent. Compulsory and binding arbitration for
police and fire was eliminated.
The initial impact of Proposition 2~, which took
effect on July 1, 1981, was a statewide revenue loss
of $450 million in FY1982. This loss was moderated
by additional state assistance to local governments
totalling $248 million (growing to $456 million in
FY 1983) and reassessment of local property to reflect full market value in some jurisdictions. Proposition 2~ did permit temporary increases in the tax
limit if a local referendum was passed, and the state
legislature later expancied the provisions for the local
override. Local referenda which reduce the man- ·
dated yearly levy .decrease from 15 percent to 7~
percent until the 2~ percent rate is reached, as well
as permit the legal yearly growth in the· levy to
change from 2~ percent. to 5 percent, are now allowed. Only two of the seventeen cities surveyed
took advantage of these provisions.
Which Services Were Cut
The Urban Institute study focuses on local government action in six areas: police, fire, libraries, pa,rks
and recreation, streets, and sanitation. As expected,
police and fire suffered the fewest cuts, with appropriations in FY 1982 reduced an average of 3.4
percent and 2.7 percent, respectively. Sanitation
services were cut overall by 4.3 percent; however,
the range of cuts was greater for sanitation than for
61 AFSCME Collective Bargaining Reporter
any other service, with appropriations varying from
a 50 percent increase to a 100 percent decrease in
FY 1982. The most substantial reductions occurred
in libraries (-12.5 percent), parks and recreation
(-17.4 percent), and streets (-17.9 percent). In
these three departments, every city cut appropriations except one which increased appropriations for
its streets department.
What Kind of Cuts Were Made
According to the Urban Institute, "By far, the
greatest number of responses involved straightforward cost-cutting and reductions in service levels."
In addition to simple budget slashing, agencies sometimes turned to productivity improvement and increased use of the private sector. Several departments, especially parks and recreation, increased
the use of volunteers, while others used creative accounting to shift costs to healthy funds or to establish enterprise funds for activities that generated
their own revenue. Unfortunately, the report does
not provide statistics on layoffs or the use of attrition, although it is clear that this was a common
response.
Some Points to Remember
The Urban Institute report has little good news
for public employees, but it includes some points to
keep in mind (and bring to the attention of management) when facing demands for cuts:
• Contracting out: "All six sites that contracted.
for waste collection prior to Proposition 2~
experienced increased costs during this first year
under 2~. (In the case of Bridgewater, the
increase was viewed by the townspeople as so
exorbitant that they voted to discontinue refuse collection as a public service.) On the other
hand, most sites where waste collection was
provided by municipal employees reduced
waste coHection costs in FY 82. The contract
sites were ·apparently less able to reduce collection costs because of multi-year contracts
and/or the difficulties of getting· private firms
C.
• Equip the sterilizer with a lockout system to
prevent opening of the chamber until it is sufficiently aired out;
Because EtO is absorbed by plastics and rubber, skin
contact with all such items should be avoided. Place
plastic and rubber items in a metal basket before
putting them into the sterilizer. Wear cotton gloves
if any plastic or rubber instruments must be touched.
to reduce prices, especially during inflationary
periods."
!
t
• Contracting in: "Springfield: To avoid having
to eliminate 80-100 public works employees
whom the department felt would be needed in
the future, . . . the public works department
successfully bid against private contractors for
state and federal community development and
UDAG projects . . . .Thus, a large number of
public. works employees are working on park
construction and other work that normally
would have been undertaken by private contractors. Public works officials reported that
the city underbid private firms by 30-35 percent. In order .to avoid unfair competition with
small contractors, the city has hired union
workers at union scale for specialty work."
• Counterproductive budget cuts: "Officials in
many of the agencies we examined reported
that staff morale was very low. Decreased
morale coupled with the frequent need to . assume additional responsibilities and-in effect
-work harder for the same pay, are likely
to result in increased accidents, turnover, and
absenteeism in the long run. Government and
union officials in several municipalities expressed fears that increasing numbers of employees would suffer from occupational bumout. All of these may have a counterproductive
effect on agency pro£fuctivity. Thus, even while
agencies are experiencing fiscal and staff cutbacks, there appears to be a need for some
type of incentive-monetary or otherwise-to
help maintain employee morale and productivity in the face of these changes."
The Urban Institute report provides a wealth of
examples of how cities cope with financial disaster.
Although too many of these examples place the
burden of balancing budgets squarely on the shoulders· of public employees, others show that a commitment to innovation and to quality service can go a
long way toward cutting costs with a minimum impact on current employees. IIIII
3. Aerate Instruments Properly
Some plastic or rubber objects can give off fumes for
days if they are not aerated properly. The aerator
should be located near the sterilizer to minimize
exposure while instruments are being transferred ·
between them.
4. Provide Adequat~ Ventilation
The sterilizer and the aerator should be vented outside-not into other parts of the building: A local
exhaust hood should be located over the sterilizer
door and anywhere else a leak might occur. EtO
should not be vented near the building's air-intake
duct.
5. Maintain Equipment
Seals on the sterilizer and aerator, tube connections
and ventilation systems should be checked regularly
and properly maintained at all times.
6. Take Precautions When Changing Cylinders and
Connections
Goggles, heavy-duty gloves and self-contained
breathing equipment should be worn when changing
cylinders or connections. The work area should be
properly vented to the outside.
7. Monitor Exposure
EtO levels in all areas where exposure might occur
should be monitored frequently. Monitors should
be located in the workers' breathing zone ..
8. Provide Training
All employees who work with EtO should be trained
in proper operating procedures and notified of the
symptoms of EtO exposure.
9. Provide Medical Screening and Records
All employees should be provided an annual medical
examination if they are exposed to EtO. The exam
should include a complete physical, blood cell
count, and urinalysis.
10. Offer Alternative Jobs to Workers Allergic to
EtO
Over time, workers may become sensitized (allergic)
to even small amounts of EtO. · If this occurs and
their health is affected, they should be able to· change
jobs. IIIII
AFSCME Collective Bargaining Reporter/ 7
Knowing who is after a contract from a state or local
government could be the key to defeating a contractingout attempt. Information about questionable activities
(such as bid-rigging or bribery) or unsatisfactory performance can be given to local officials or the press to
focus attention on the many problems associated with
contracting out. Even where there is no damaging infor~
mation about a potential contractor, it may be possible
to question the firm's financial strength or ability to
perform the services.
The Research Department maintains files on many of
the nationwide firms heavily involved in public service
contracts in recent years, and will provide this information upon request. But many of the companies bidding
on contracts are small businesses or local subsidiaries of
national firms. In these cases, local sources of information on private companies may be the most useful.
Getting Started
The first step in researching potential contractors is to
get a list of all the firms that bid on the proposed contract (if it is a competitive-bid situation), or that are
negotiating with public officials to provide the service. If
possible, get the actual bids or proposals submittedthey can be more accurately analyzed than a summary
(see Collective Bargaining Reporter No. 2, March-April
1981'-"Fighting Contracting Out"), and may contain
useful information about the firms themselves, such as
other clients or professional backgrounds.
After learning the exact name and address of a bidder, find out who owns the company and whether it is
private or "publicly held" (has more than 500 stockholdsr). Check the Directory of Corporate Affiliations
(Who Owns Whom), Dun and Bradstreet's Million Dollar Directory, and the Directory of Companies Filing
Annual Reports with the Securities and Exchange Commission (available at a public or university library). If.
the company .or its parent is publicly held, the Research
Department may have a file on the company and can
obtain a copy of the parent's 10-K report filed with the
SEC. This report contains useful information on the
finances, structure, business activities, and legal proceedings of the firm.
Assuming that the contractor is not publicly-held (or
that it is part of a publicly-held company, but information about its local operations is necessary), the next
step is to contact the Corporation Division of your Secretary of State's office. This office has the firm's articles
of incorporation-listing its officers, directors, legal
counsel, etc. Companies are usually required to submit
annual reports, some containing financial information,
and copies are available for a fee.
Some states have separate offices for franchises, so if
the contractor falls into this category, ask the Corporation Division if there is such a separate office.
Digging Deeper
After obtaining basic information about who owns
and runs the contractor, try to get a better picture of its
financial condition and possible relationships with pub-
6/ AFSCME Collective Bargaining Reporter
lie officials or managers. The following are potential
sources of information:
The local public library:, Many .libraries maintain
vertical files of newspaper clippings on local business
history, prominent personalities, etc. Area newspapers
may also have public subject and name indexes. Be sure
in any of this research to look for information about
both the firm and all the individuals connected to it.
Newsclips may contain information about other jurisdictions that had problems with a contractor. The library may also have a state or local Who's Who or
Social Register. Finally, many larger cities have. local
business newspapers.
e The local newspaper: Ask at the newspaper to examine the clippings file (sometimes called the "morgue").·
e The local Better Business Bureau: Ask to examine
its files on the contractors.
e The Chamber of Commerce: State, county, and
city chambers may give out limited information about
members, and may have a membership directory.
Looking at local government records may also be useful. Find out from the city or county clerk's office if the
information outlined below is maintained at the municipal or county level.
e Many individuals and companies use fictitious
names for business purposes. These "DBAs" · (doingbusiness-as) must usually be recorded with the city .or
county clerk's office. Check for these first.
e Find out who owns the property of the contractor.
The Recorder of Deeds office will have copies of mortgage agreements and deeds, and the Assessor's office can
provide information on the assessed value of property.
Evidence of tax liens may show that the firm has not
been a good corporate citizen. The existence of a large
mortgage on the contractor's property may mean that,
if it defaults on its service obligations, the city may have
only second claim on the firm's real assets.
e Check partnership records in the city or county
clerk's office. Officers of the . firm may have invested
some of their savings in real estate partnerships-it is
possible that government officials may be members of
the partnership too. It is often difficult to get the name
.of partnerships; possible places to check ihclude the
building directory of the company, its law firm, and the
buildings in which its board members work.
Find out from the local Board of Elections or
county clerk if disclosure of campaign contributions is
required at the local level. Look for contributions by the
contractors and their principals.
e Investigate court records. Check plaintiff and defendant indexes at the circuit, district and probate court
clerks' offices for the county in which the firm is located.
The U. S. District Court records should also be examined. Litigation files may reveal information about company or personal finances, or evidence of discrimination
or unfair labor practice suits against the company.
The Research Department can provide additional information about what to look for in· each of these
sources, as well as help to interpret the findings.
•
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The drive to contract out public services to private,
profit-making firms has intensified. Contracting out can
be fought with a variety of tactics, including cost comparison studies, publicity campaigns, lobbying, community coalitions and legislation. Legal challenges are
another important way to contest the contracting out
of public employee bargaining unit work. Legal challenges may be based on the breach of a collective bargaining agreement, violation of the duty to bargain or
violation of civil service laws and/ or constitutions or
charters.
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Breach of the Collective Bargaining Agreement
Obviously, if the union has negotiated a clause restricting contracting out, that clause can be used to
claim violation of the contract. Courts have considered
such claims to fall within the jurisdiction of arbitrators.
Arbitrators, however, have been far from consistent in
treating these claims.
Even when a contract is silent . on contracting out,
the union still may be able to challenge it. In general,
contracting out has been found to be arbitrable, even
in the absence of an explicit contracting out clause, if
.the agreement contains a relatively broad arbitration
clause.
Where the union is recognized as the exclusive representative of a unit defined by the work performed, contracting out that work to nonbargaining unit employees
over union objection can be a contractual violation.
According to the "implied obligation" theory, by recognizing the union as the exclusive representative of employees in specified jobs, the employer agrees not to
undermine the union's status as the bargaining representative, not to unreasonably reduce the scope of the
bargaining unit and not to effectively nullify the terms of
the contract. Arbitrators have also ruled that contract_.
ing out cannot be used to avoid contractual obligations
or to force the union to accept either contracting out
or wage concessions.
The factors most often considered by arbitrators evaluating a contracting out dispute in the absence of specific contract language include:
1. Whether contracting out was discussed during negotiations;
2. Whether the decision to contract was motivated
by anti-union bias;
3. Whether regular employees were deprived of work;
· 4. The effect of contracting out on the union and/ or
the bargaining unit;
5. Whether the employer possesses the proper equipment, tools, or facilities to perform the contracted work;
6. Whether the contracted work was part of the
employer's main operation;
7. Whether the wo.I,"k contracted out was performed at
a substantially lower cost;
8. Whether any special skills, experience or techniques
were required to perform the contracted work;
•
•
9. The similarity of the contracted work to the work
regularly performed .l>Y bargaining unit employees;
10. Past practice with respect to contracting out similar types of work;
11. Whether any emergency conditions existed; and
12. Whether the contracted work was part of the
duties of a particular job classification.
Violation of the Duty to Bargain
Under. a collective bargaining law that obligates the
employer to bargain over wages, hours, and terms and
conditions of employment, the impact of the decision
to contract out is generally considered a mandatory subject of bargaining. Where the public employee bargaining law is patterned after the National Labor Relations
Act, the decision to contract out, as well as the impact
of that decision, has been considered a mandatory subject of bargaining.
Where the decision to contract out is a mandatory
subject of bargaining and the union has unsuccessfully
attempted to restrict it through negotiations, it may be
held that only the impact of contracting out is arbitrable.
Where the union had the opportunity to demand bargaining prior to contracting out and did not, it has been
held that the union lost its right to require such bargaining. Provisions requiring employers to include job status
protections in contracts with private firms can be negotiated.
Violations of Civil Service Laws and/ or
Constitutions or Charters
In jurisdictions with strong civil service laws, it has
been argued that the principles of selection and promotion on the basis of merit and fitness and just cause in
dismissals enable civil service personnel to retain their
jobs and not give them up to employees of a private contractor doing similar work.
There ma:y be comparable protection against contracting out in a state constitution or a city or county
charter. Constitutions or charters that require employees
to be selected on the basis of merit and fitness have been
interpreted in the same manner as similar statutory provisions.
Remedies
Where contracting out has been found by public employment relations boards, courts or arbitrators to violate collective bargaining agreements or laws, the following remedies have been ordered:
1. Resumption of the discontinued operations;
2. Reinstatement of former employees with back pay
and lost benefits;
3. Posting of appropriate notices;
4. Negotiation in good faith over terms and conditions
of employment, including the decision and effects of
contracting out.
The Research Department has additional information
and specific case cites on the legal challenges to contracting out. This information is available upon request. Ill
AFSCME Collective Bargaining Reporter/7
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Clauses
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D
espite our best efforts, employers are in a headlong rush to privatize their operations. Food service, housekeeping and refuse collection are being
contracted out in many places. Hospitals and correctional facilities are moving from public to private
control in other locations. Privatization is not an issue in other jurisdictions, but legislation is being
passed making university systems, for example,
which are under state control, independent. These
situations call for a variety of responses from
AFSCME.
Strong language prohibiting contracting out will
protect employees and the union when the employer
wants to hire a contractor to perform bargaining unit
work, such as food service, housekeeping or refuse
collection. This language is not always attainable,
however. Moreover, it would not offer protection if an
operation, such as a hospital, correctional facility or
university system, is completely taken over by another employer. A successorship clause prescribes
rights that employees and the union will have if the
employer turns over any of its operation to another
employer.
A successorship clause should ideally require
that the successor will be bound by the current union
contract and will recognize the union and negotiate
with it when the contract expires·~ Following is sample
successorship language:
"If the Employer sells, leases, transfers or assigns
any of its functions or a portion thereof, the Employer
shall inform the purchaser, lessee, assignee, or successor of the exact terms of this Agreement and shall
make the sale, lease, transfer or assignment conditional on the successor assuming all the conditions
and obligations of this Agreement, including but not
limited to the retention of all employees. Any sale,
lease, transfer or assignment shall include a provision requiring the successor to be bound by all the
provisions of this Agreement until its next expiration
date, at which time the successor will recognize and
negotiate with this Union and no other employee or·
·
ganization:' •
(from page 3)
• Labor-management health and safety committees
should develop training programs and establish
and enforce strict guidelines for any work involving exposure to asbestos.
• The EPA, OSHA, and other relevant governmental
agencies must be used to pressure employers into
providing healthful working conditions.
• If other methods have not worked, leafletting, media attention, political pressure, and other union
actions may be necessary to force management to
act.
If you have questions concerning asbestos,
contact OSHA (if applicable), the EPA Asbestos Coordinator for your region or the AFSCME Research DEPARfMENT. •
how to work safely with asbestos. A copy can be obtained from EPA or the AFSCME Research Department.
Primary and secondary schools, as required by
EPA, should already have been inspected for the presence of asbestos and the results must be made available to school employees.
HOW TO PROTECT OURSELVES
Only workers thoroughly trained and using all
necessary precautions should perform any task, regardless of how small, that involv:es asbestos!!!
In buildings, it is advisable to have the abatement work done by a contractor, rather than the
maintenance staff unless the maintenance staff has
been fully trained. "Fully trained" means actually
working with the proper equipment for several days.
Asbestos exposures during automotive brake repairs can be minimized by devices that enclose the
brakes in an air tight container with sleeves that allow
the mechanic to perform repairs.
A variety of strategies can be used to protect
members from asbestos:
• Training: to increase awareness of possible exposure to asbestos before work is done unprotected.
If AFSCME members work where there is an exposure to asbestos, then proper training and other
precautions must be taken to remove the risks.
°Co ecti e
R
E
p
0
R
T
ENGINEERING • ARCHITECTURAL DESIGN • COMPUTERS • MEDICAL SERVICES • SOCIAL
SERVICES • RESEARCH • PLANNING • FACILITIES MANAGEMENT • ENGINEERiNG ARCHITECTURAL
DESIGN • COMPUTERS • MEDICAL SERVICES • SOCIAL SERVICES • RESEARCH • PLANNING •
FACILITIES MANAGEMENT • ENGINEERING • ARCHITECTURAL DESIGN • COMPUTERS • MEDICAL
SERVICES • SOCIAL SERVICES • RESEARCH " PLANNING • FACILITIES MANAGEMENT • ENG!G
PRIVATE PROFIT, PUBLIC RISK:
THE CONTRACTING OUT
OF PROFESSIONAL SERVICES
NEERING • ARCHITECTURAL DESIGN •COMPUTERS • MEDICAL SERVICES· SOCIAL SERVICES •
RESEARCH • PLANNING • FACILITIES MANAGEMENT • ENGINEERING • ARCHITECTURAL DESIGN
• COMPUTERS • MEDICAL SERVICES • SOCIAL SERVICES • RESEARCH • PLANNING • FACILITIES
MANAGEMENT • ENGINEERING • ARCHITECTURAL DESIGN • COMPUTERS • MEDICAL SERVICES •
SOCIAL SERVICES • RESEARCH • PLANNING • FACILITIES MANAGEMENT • ENGINEERING. •
ressure to use private contractors and consultants to provide professional services for state
and local governments continues to grow even as the
evidence of problems mounts. Areas of private sector
involvement include engineering and architectural
design, computers, medical and social services, research, planning and management of various facilities-ranging from prisons to city and county libraries and hospitals to state facilities for the retarded
and nursing homes.
In some instances, the contracting out of a particular service involves only an individual project,
while in other situations the functions of entire departments are contracted out.
Government officials look to contract.out professional services for many reasons-fiscal squeezes on
state and local governments as a result of GrammRudman and the reduction in general revenue sharing programs, government agency hiring freezes, an
alleged lack of special expertise among public agencies' in-house staffs, more aggressive contract seeking by private firms in search of new markets, a desire
by some state and local governmental managers to
weaken or "bust" public employee unions, and finally, ··
strong support by the Reagan Administration for
"privatization:'
The basic arguments against the contracting out
public services, such as higher costs, lower quality of
service, increased chance for corruption, less ac-
countability to the citizenry, and contractor dependency, certainly apply to the contracting out of professional services. However there are some problems
and abuses which are particularly troublesome when
professional services are contracted out.
For example, in bidding or negotiating for professional services contracts, many firms will emphasize
their staff expertise. The problem is that these highlevel experts are often spread thin handling the firm's
various other contract commitments. As a result the
work that is performed under these contracts may actually be done by inexperienced "generalists;' rather
than by experts. Therefore, the quality of the work
cannot measure up to what the firms have claimednor can it measure up to a job that could be performed by experienced in-house personnel.
Related to this problem is that consultants may
not have complete knowledge of an entire project because they are working on only a small part of it. In addition, after the contract work is completed, it is often
impossible to get the consultant to return and make
~epairs and corrections when necessary. As a result,
m-house staff end up being responsible for the problems not foreseen by the consultant.
A further consequence of the contracting out of
professional services is often a decline in in-house
expertise. As more and more services are contracted
out, government officials come to rely more heavily
on private contractors than on in-house professional
(cont. on page 2)
A newsletter from AFSCME Research and Collective Bargaining Services to assist AFSCME negotiators in securing better contracts.
(from page 1)
.•
personnel. As a result of this reliance, advancement,
training and education opportunities for in-house
professional staff are limited because it makes no
sense to train and upgrade these employees for work
they are not likely to perform. As this limited potential for advancement becomes evident to in-house
employees, morale begins in decline. Further contributing to this decline is the likelihood that the more interesting work is being contracted out, while the
"grunt" work remains in-house.
AFSCME has recorded these experiences in a
booklet entitled Private Profit, Public Risk: The Contracting Out ofProfessional Services, and shows cases
where higher costs, lower quality, the loss of in-house
expertise, and corruption have often been associated
with the contracting out of professional services.
For example:
® A study conducted by the New York City Department of Environmental Protection found that the
cost of engineering consultants doing sewer construction inspections in New York City was 44 percent higher than for a comparable amount of work
done by in~house engineers. Furthermore, the
study found several other disadvantages associated with the contracting out of sewer construction inspections, of which the most "egregious disadvantage was the loss of 'in-house' expertise:'
® Under a no-bid contract entered into by the City of
Philadelphia's Department of Revenue, a private
firm, UNICOLL, had been given the responsibility
for the collection of user and occupancy taxes.
Each year, the costs of the contract increased, until
city officials determined that the municipal government could save $1.5 million annually by bringing the service back in-house, which they did in late
1986.
®
In
aseries of five official audits, released between
1982 and 1986, the Massachusetts State Auditor's
Office found that 122 private contractors providing
social and rehabilitative services had "poor accounting practices, questionable costs, unnecessary charges, and state payments for clients who
did not exist:' For the four year period covered by
the audits, the State Auditor's Office found "financial or management deficiencies involving $19 million:' which amounted to approximately 30 percent
of the $65 million paid out on 486 state contracts
with private contractors.
Given this evidence of the various costs and
problems associated with the contracting out of professional services, public managers should not automatically assume contracting out will provide the
solution to managerial and budgetary problems. Furthermore, public officials should be reminded that in ,
every situation where the contracting out ·of professional services has failed and the quality and efficiency of a public service has deteriorated and the
cost increased, it is the public that endures the consequences and pays the price. Iii
2/AFSCME Collective Bargaining Reporter
PREVENTING
LAYOFFS
Layoffs are not an effective means of dealing with economic
problems, according to a recent study conducted by Professor Gary Hansen of Utah State University for the Department of Labor. Many of the alternatives to layoffs suggested
by Hansen are either harmful to workers or not applicable
to the public sector. Professor Hansen's arguments against
layoffs, however, corroborate the findings of CSEA and the
State of New York in their earlier study of this issue (see
CBR#l5).
Professor Hansen delineated five reasons why employers
should avoid layoffs:
• Layoffs are costly. Costs include severance pay, higher
unemployment insurance taxes and continued benefits for
laid off workers where applicable. In addition, when conditions improve, new employees will be hired and trained,
which is expensive..
• Layoffs entail operational disadvantages. "Bumping" disrupts operations and is.painful for workers. This pain, along
with the fear of losing their job, causes stress in employees,
so those who can find other work may leav-e: Productivity
and quality can suffer with high turnover.
• Job security creates a positive climate. Employers will be
more inclined to train and develop employees who they assume will be around for the long term; and employees may
be more supportive of changes proposed by riia.D.agerii.ent if
they perceive a commitment to the workforce.
• There is a demand for job security. Unions' insistence on
this issue as well as recent court decisions on employment
at will have contributed to this demand.
• Job security helps productivity. Several studies indicate
that job security creates loyalty to the employer and confidence in management, decreases resistance to change, lowers tur.nover and generally improves labor relations.
Some of the study's suggestions for avoiding layoffs are
also worth consideration. To reduce the number of workers
without layoffs, Hansen recommends attrition and hiring
freezes, encouraging leaves of absence with continued
benefits, and early retirement and resignation inducements. The first option enhances morale, but can lead to the
loss of "new blood" and shortages in high-turnover jobs.
Early retirement can provide advancement opportunities
for you11ger workers, although the incentives needed to induce employees to retire early can be costly, thus diminishing some of the savings realized by avoiding layoffs. The
same points apply to voluntary resignation.
If the reductions needed cannot be made by the above
means, Hansen argues that it is in an employer's best interest to provide employees as much advance notice of a layoff as possible and to assist them to find new jobs. The ·
shorter the period of unemployment for laid-off workers,
the lower the costs for the employer.
Copies of the study entitled "Preventing Layoffs: Developing an Effective Job Security and Economic Adjustment
Program," can be obtained from the Research Department. Ill
IMPACT OF P&IVATIZATION
ON WOMEN AND
MINORI1Y WORKERS
hen a government decides to contract out a service or function to the private sector, the cost
W
may appear to be the dollar amount written on the
contract itself. But, in fact, there are many costs to be
paid-and not just in dollars. Some of these additional costs are more subtle, such as the cost in social
terms.
Traditionally, the public sector has provided
greater employment opportunities for women and
minorities, both in terms of absolute numbers and
higher level jobs than the private sector. Professor
Marilyn Dantico of Arizona State University studied
how privatization affects these groups of workers.
Her study, entitled "The Effect of Privatization on
Women and Minority Workers;' reported that in the
past twenty years, either because of continuing discrimination against women and minorities in the private sector, or because public sector employers tend
to have more objective employment and promotion
policies, women and minorities have fared better in
public jobs. In general, women and minorities have
been hired in greater numbers, have attained higher
level positions, and are paid more than those groups
in the private sector.
In a 1985 report funded by the Federal government,
the Joint Center for Political Studies examined the impact on minorities when municipal employment was
reduced through privatization. The report concluded
that privatization significantly diminishes social and
economic opportunities previously available to minorities through government employmentBecause women and minorities are better represented in professional and managerial positions in
government than in the private sector, privatization
tends to contribute to a decline or stagnation in their
careers as these jobs move to the private sector. Up~
ward mobility is greatly reduced and minority and female workers in the supervisory levels will be especially affected.
In addition, women and minorities may find their
opportunities constrained even more severely as privatization tends to occur more frequently in areas
where women and minorities have been concentrated. The private firms which take over public ser- .vices or functions usually have two groups of workers-high-level management and the workers. The
ability to move from lower to higher-skilled positions
is extremely limited since many mid-level positions
are eliminated. Since women and minorities are usu-
ally disproportionately clustered in these low ranking, loWI'S'eniority positions, they are more likely to
lose jobs first.
Women and minority employees often dominate
the departments whose job functions have been targeted for privatization. For example, streets and highways; utilities and transportation; housing; natural
resources (parks and recreation); corrections; and
sanitation and sewage are popular departments for
privatization. In terms of job categories, women and
minority employees are often heavily concentrated
in service/maintenance and office/clerical, two key
areas for privatization. In some jurisdictions and in
comparison with the private sector, women and minorities may be well-represented in professional and
para-professional job categories. Privatization of
professional services has become increasingly popular with state and local jurisdictions. Also, both of
these job categories may include supervisory employees who are often affected by privatization both
in terms of their positions and the employees they
supervise.
To determine if a privatization proposal would
have a negative impact on women and minorities in a
jurisdiction, it is. necessary to perform a workforce
analysis. Using tlie EE0-4 reports, a minority and sex
breakdown by function and job category should be
done. If women and minority employees are a high
percentage of the functions and job categories targeted for privatization, then the potential negative
impact of privatization on women and minority
employees may be a useful argument against privatization.
According to the findings of Dantico and the Joint
Center study, women and minorities will bear the disproportionate burdens that will inevitably result
from a reduction of a jurisdiction's workforce. The effect of privatization will be felt by women and minority employees at both ends of the job category spec:..
trum. Such a situation would nullify a jurisdiction's
affirmative action policy to increase equal opportunity and encourage professional advancement for
women and minority employees.
For a copy of Marilyn Dantico's report, "The Effect
of Privatization on Women and Minority Workers;' or
the executive summary of the Joint Center for Political Studies report, ''Alternative Service Delivery Systems: Implications for Minority Economic Advancement;' contact the Research Department. 1111
KEEPFIG
NG:
WHAT TO DO
AFTER JOBS ARE
CONTRACTED OUT
ou've been involved in a lengthy contracting out battle.
Long hours were spent calculating the cost of in-house·
Y
service delivery for comparison to contractors' bid proposals, writing letters to the media in order to educate the public about the shortcomings of contracting out and lobbying
elected officials. However, for whatever reasons, the jurisdiction decided to sign a contract with a private company.
This shouldn't mean the fight is over.
Once a state or local government contracts with a private
company, the likelihood that other public services will be
· turned over to the private sector increases. After a contract
is signed, the new objective should be to prove to management that the contracting out of the service was a mistake.
Every effort should be made to bring the delivery of the service back in-house, assuming the jurisdiction has retained
the capacity to provide the service or the ability to develop
that capacity. Efforts to reinforce the idea that contracting
out is not the right decision must continue.
Much of the same type of information collected for use in
the contracting out campaign can still be used. The contractor's compliance with the contract, quality of service delivery, actual savings versus cost overruns, and any political
improprieties should be constantly monitored. Explore answers to the following questions:
111 Is the contractor in compliance with the contract?
e Has there been an increase in citizen complaints?
e How responsive is the contractor to citizen complaints?
41!1 Have other government workers been required to support, clean up, or correct the work of the contractor? ,
e Have other government workers been required to supervise or train the contracted workers?
e How do first year actual costs compare with the original estimated contractor's cost?
o How do first year contract costs compare with costs in
subsequent years?
6/AFSCME Collective Bargaining Reporter
e Have labor relations deteriorated in those situations
where management of a service was contracted out? For example, has there been an increase in the number of grievances?
e Has it been necessary to repair or replace government
equipment as a result of the contractor's negligence?
• Are contracts being renewed without a formal bidding
procedure?
c Are key government officials receiving political contributions from· the contractor?
Access to information necessary to ·answer many of these
questions is more difficult once the provision of the service
is transferred to the private sector. However, potential
sources of information might be:
e Displaced AFSCME members assigned to other jobs
within the jurisdiction.
e Workers hired by the private company, including exAFSCME members.
e AFSCME members in jobs affected by the contracting
out of management of a public service.
c AFSCME members in jobs not contracted out but employed in the same jurisdiction.
o Sympathetic citizens and journalists interested in effective and efficient public service delivery.
By collecting information, AFSCME Local 329 in Southfield, Michigan was successful in their campaign to bring
road maintenance service back in-house. The local kept detailed records of the frequency and cost of having members
repair work performed by the contractor. This information
convinced management that it would be more cost effective
to bring the delivery of the service back in-house.
For additional guidance on strategies to prevent contracting
out, contact the Research Department for a copy of "The
Great American Sell Out, Fighting Contracting Out: A Manual
For AFSCME Councils and Locals." ll!l
CONTINGENT AND ALTERNATIVE WORK ARRANGEMENTS:
A New Strain of Contracting Out
new strain of contracting
out is attacking the public
service. Using a variety of
schemes, employers are reducing
permanent employment by the
introduction of contingent or
temporary employment and
uternative work arrangements.
By reclassifying and relocating
positions, they are moving work
beyond the reach of bargaining
agreements and personnel
·
policies.
In 1999, the Bureau of Labor
Statistics biannual survey· of contingent workers found that
approximately 1.27 million workers providing government services considered their jobs to be
temporary. At 6.5 percent this is
considerably higher than the private sector's rate of 4.1 percent:
These contingent employees generally fall into three groups:
direct-hire temporary and on-call
workers paid directly by government agencies; temporary help
agency and service contractor
workers; and individual independent contract employees with
temporary assignments to gov.rnment agencies.
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These 527,000 employees
represented 9.9 percent of
workers providing services for
state governments, 5.4 percent
(589,000) of local government
workers and 4.7 percent
(158,000) of federal. Over 80 percent of these workers were in
professional specialty (645,000),
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administrative support, including
clericals (301,000), and serviceexcluding protective and household- occupations (120,000).
In both public and private
sectors, agency temporaries, oncall workers and direct-hire temporari~s were disproportionately
female and young. Among agency
temporaries, a disproportionate
number were Mrican American
or Hispanic, and a large percent. age of on-call workers were high
school dropouts. Temporary contract company workers and independent contractors were
generally older, male and better
educated.
Seventy percent of agency
temporaries and .50 percent of
on-call workers and direct-hire
temporaries indicated that they
would prefer a permanent or regularly scheduled job.
There are a number of reasons employers choose to use
temporary workers, including
arbitrary caps on "head counts"
in the public sector, lower wage
and benefit costs, and reduced
union power. As a result, the U.S.
Contingent Work Arrangements
General Accounting Office
reports contingent workers: ''are
more likely than workers in more
traditional full-time work
arrangements to have low family
incomes .... Contingent workers
are also less likely to receive
health insurance and pension
benefits through their
employers."
·
The injustices suffered by
contingent workers extend
beyond wages and benefits. Since
most worker-protection statutes
assume a permanent, full-time
workforce, temporary and on-call
workers can find themselves
unprotected. They may not meet
the time-in-service requirements
to be covered by the Family and
Medical Leave Act or may have
insufficient earnings to be eligible for unemployment insurance
benefits.
Public sector collective bargaining laws often exclude nonpermanent employees. Even
where allowed, contingent workers are sometimes excluded from
contract coverage or given fewer
rights than permanent employees
doing the same work.
:
ate level of full-time positions.
Managers frequently claim that
they would prefer to hire permanent staff, but the legislature (or
city council) has capped the
number of employees or won't
pay for permanent staff.
The following collective bargaining provisions and summaries are drawn from AFSCME
and private sector union con-
...
tracts. The underlying concepts
can generally be incorporated
into personnel rules or
legislation.
Restrictions on the Use of.
Contingents
AFSCME' s Response to
Contingent Employment:
Police, Protect and Make
Permanent
Time Limits and No
Displacements
Strategies to address the problems of contingent workers necessa,rily vary bi the category of
worker. Where allowed by law,
collective bargaining agreements
can be used to police the use of
contingent workers, protect contingent workers against abuse
and to establish procedures for
converting contingent positions
to permanen,t ones. In all cases,
legislative action alsp will be necessary to maintain an appropri-
Temporary employees may be
used for a period not to exceed
ninety (90) consecutive days or
less. Any temporary full-time
employee retained beyond ninety
(90) days will be considered a
regular full-time employee with
all rights, benefits, and Union
membership as addressed in the
Agreement.
.
The Employer agrees to use
temporary employees for only 90
days_. aimually. (AFSCME Council
2
2, Local1191-CD and the City of
. Dayton, Wash.)
Intermittent positions are
those _:positions in which work is r""\
of an Irregular and unpredictable\ J
nature and which do not exceed
one thousand (1000) hours per
employee in any 12 month
period. The Employer agrees not
to use intermittent positions to
avoid filling permanent full-time
positions. The allocation and use
of intermittent positions shall be
an appropriate subject for the
Labor-Management Committee.
(OCSEA!AFSCME Localll and
the State of Ohio)
The Company shall have the
right to hire the following temporary employees provided they do
not displace Union employees,
and qualified employees with
recall rights are offered jobs ....
Management will give the Union
forty-eight (48) hours notice of
need of such help.
(1) Summer employees from
the second week of May through
the second week of September ...
(Bailey-Fischer & Porter Co. and
Auto Workers, reported by BNA)
· Numeric Limit
The Union will be advised of.
those employees who are designated as temporary employees
upon their hire. Temporary
employees will be limited to 15
percent of the regular, full-time
employee population (this percentage will be increased to
accommodate vacation replace~
ment). Such employees will be
utilized as replacement under,
but not limited to, the following
circumstances: vacations, daily
absenteeism, long~term disability,
leaves of absence, part-time work
assignments, temporary
increases in the work force.
(Kellogg Co. and Grain Millers,
reported by BNA)
AFSCME Collective Bargaining Reporter
The employer agrees that
limited-term employees shall be
kept to the lowest number to
·· . meet needs and that limited1
·term employees will not be used
to avoid filling positions through
Civil Service. The employer
cannot rotate limited-term
employees in and out of a job to
provide a continuously filled
position. (AFSCME Council 40,
Local 60 and Dane County, Wis.)
Information
The employer must provide
the union with a list of temporary employees every six months
with the date of hire and percentage of time worked. (East
Bay Regional Parks District,
Calif.)
Protection Against Abuse
Coverage under the
Collective Bargaining
Agreement
A temporary employee ...
shall be covered by this agree(--,)ment after 6 months of continu·· _/ ous service, except that a
temporary employee may be ter~
minated at any time by the
Employer without right of
appeal. (AFSCME Coundil 4 and
the state of Connecticut)
Employees working at least
67 days per year and 14 hours or
35% of the normal bargaini:qg
unit workweek are covered by,,
the collective bargaining· agreement. (AFS.CME Council 6 and
the state of Minnesota)
The employees of the state
hired in seasonal, casual, durational, or any status .other than a
Merit full-time who pe:dorm
work of a like or similar nature
to Merit full-time union employees who are covered by AFSCME
collective bargaining agreements
shall be subject to all the terms
of such collective bargaining
)agreements during the periods
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such employees are actually
employed, provided that:
a) Such employees shall not
be subject to contractual rules
governing seniority, transfers,
layoff, recall, or promotional
bidding.
b) Such employees are hired
with the explicit understanding
. that their employment may not
exceed two years in duration,
except if extended at the discretion of the State.
c) Such employees may be
laid off at the discretion of the
State prior to the completion of a
two-year period when their
employment is specified for a
lesser time period,. or due to a
lack of work, or a lack of funds
specified for such positions.
d) The union security provision of collective bargaining
agreements shall apply to such
employees in the same manner
and time as for probationary
employees. (AFSCME Council 81
and the state of Delaware)
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Benefits Provided after a
Minimum Number of
Working Hours
All long-term non-permanent
employees (those who work more
than 120 days) receive annual
and sick leave accrual, health
and life insurance and holiday
benefits. These are pro-rated for
less than full-time work.
(AFSCME Local 52 and the state
of Alaska)
Temporary employees who
have worked at least 1040 hours
are eligible for retirement benefits. (City of San Francisco)
Mter working 1000 hours in
a rolling 12-month period, "limited appointment" employees
become Retirement Plan members and are retroactively eligible
for retirement plan credits. They
are also eligible prospectively for
medical insurance coverage simi-
Temporary Pool
The Employer agrees to the ·
creation of an employment pool
of temporary employees .... The
employment pool will be administered by the Employer and a .
quarterly rep6rt containing the
name, social security number,
:
home
address, classification and
.. hour worked
to date, will be sup: plied to the Union. The
:
Commonwealth will have the
right to establish reasonable
standards for the work performed by pool employees.
The parties agree that
employees covered by this article
will not be used to reduce the
number of permanent employees
..
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~
2000 Number 3
lar to regular employees. If they
work on average 17.5 hour per
week but less than 1000 hours in
a 12 month period they are eligible for limited health benefits
and participation in the
University's defined contribution
pension plan. (AFSCME
University of California Contract
Campaign, Local 3299 and the
University of California at Los
Angeles)
Seasonal employees continuously employed on at least a halftime basis for six months are
eligible for health insurance coverage. Seasonal employees regularly employed on a full-time
basis for at least 25 days get up
to 8 hours of additional compensation for time worked on each of
the first 3 holidays in their
season. Those that have worked
at least half time for 9 1/2
months receive personal leave
like regular employees. Those
that have 9 1/2 months work in
.each of the last three years, even ·
if not 1/2 time work, receive 3
days of leave per year. (CSEA/
AFSCME LocallOOO and the
state of New York)
..
3
performing the levels of work
existing as of the ratification
date of this Agreement. To that
end parties agree that employees
covered by this article will not be
assigned to perform full-tirrie
duties which are permanent and
full-time in nature.
Salaries and working conditions and other articles of the
agreement which will be
extended to employees of the
pool shall be established by the
parties. (AFSCME Council 13
and the state of Pennsylvania)
Conversion to Permanent
Positions
"Limited term employees" will
be converted to career status
after 1000 hours of work within
a 12-month period (without a
break in service of 120 consecu. tive days or more). Time served
as a limited term employee
counts toward probationary
requirements in the new position. Employees can be converted
retroactively to career status if
they meet the service requirements and were hired after
January 1, 1998.
When a long-term nonpermanent employee works
longer than
.
12 months, the employer must·.
review the reasonableness of ·· :"
establishing a permanent position and if established the position must be offered to the
incumbent employee. (AFSCME
Local 52 and the state of Alaska)
Seasonal and hourly employees who have been employed by
the City half-time or more in a
calendar year shall be considered
to be a non-probationary permanent employee, full-time or parttime ;;ts the case maybe ....
Employees made per;manent by
operation of this provision shall
be entitled to all rights and bene~
4
fits in accordance with the collective bargaining contract. [The
contract also provides a schedule
converting long-term seasonal/
hourly employees to permanent
status.] (AFSCME Council 40,
Local 60 and the City of
Madison, Wis.)
Employees also have success~
fully challenged improper classifications in court,' These
settlement agreements discuss
conversions to permanent
employment:In 1997, King
County, Wash., settled a case
involving approximately 2,500
past and present employees who
were ·miscategorized as "temporary workers" even though they
had worked for the county for
years. As "temporary workers"
they were denied health insurance, paid leave and other benefits. In addition to a financial
settlement for the affected workers, about 500 long-term temporary workers were placed in jobs
with full benefits. The settlement also provided for a procedure and appeal process to
ensure that workers were properly classified. (Logan us. King
County, Wash., State Superior
Court, King County No. 93"-2. 20233-4 SEA, Settlement
Agreement 1997)
Bellevue, Wash., r~cently
agreed to establish a settlement
. fund of $719,000 to compensate
around 90-100 current and past
employees who were denied the
benefits of regular city employees because they were misclassified as "temporary" or "hourly" ·
employees. The agreement calls
for the city to: "conduct an
· annual review of its ongoing
work and utilization of nonbenefited workers, including temporary agency workers, to
determine if there is any body of
work that more appropriately
and effectively could be accomplished through hiring employees
in classifications eligible for partial or full benefits." (Jordan, et
al. us. City of Bellevue, Wash.,
State Superior Court, No. 98-2- { )
21515-1 SEA, Notice of Proposed \
Class Action Settlement)
Alternative Work
Arrangements
"Payrolling" - Using
Temporary Employment
· · and Staffing Agencies to
Avoid Contracts and the
Law
Some public employers use
"payrolling" to keep otherwise
regular employees off the public
payroll. For a fee, temporary
employment and staffing firms
serve as the employer of record.
The temporary employees work
side by side with, and are managed by, public agency staff. In
addition to keeping their personnel count down, public employers
are able to deny these employees
the wages, benefits and rights
they would receive as public
employees covered by a collective
bargaining agreement and public
personnel policies.
Payrolling was recently dealt
a setback when a King County,
Wash., judge ruled that individuals who worked with and were
controlled and supervised by the
government meet the common
law definition of employee, even
though the county classified
them as temporary workers and
paid them· through a private
company. Following this ruling,
the county agreed to settle the
lawsuit and compensate over 500
"permatemps'' for lost pay .and
benefits. Many of these employees had worked for the county
more than five years. The settlement also requires the county
either to establish new positions
or stop doing the work. The
county also must monitor its use
of payroll agencies to prevent
abuses in the future. (Clark us.
King County, King County
__...,, Superior Court No. 95-2-29890r 1 7 SEA)
"Payrolled" employees of the
Metropolitan Water District of
Southern California have a similar class-action case pending, and
AFSCME Locall902 has a grievance pending against this practice. The district has hired
employees through private
employment agencies and is
treating them as if they were
temporary employees of the
agencies. The employees contend
that they are no different than
any other regular employee of
the district. They were hired for
an indefinite period of time and
work side by side with district
employees doing the same work.
Their work is supervised and
dir:ected by district managers.
The only contact most of these
workers ever have with the
~,) e~ployment agency is when first .
J h1red. Nevertheless, they are not
benefiting from the wages, benefits and rights they should have
under the collective bargaining
agreement and the district's
administrative law. (Cargill, et al.
us. Metropolitan Water District of
Southern California, et al., Los
Angeles Superior Court, Case No.
BC 19.1881)
.·~···..:
Beyond Payrolling-
Los Angeles County has taken
"payrolling" a step further by
creating its own third party
employer. Some of the attorneys
and staff working for the Los
Angeles· County Counsel are paid
by Auxiliary Legal Services, a
nonprofit corporation created
and controlled by the county.
Claiming that this payrolling
scheme was set up to evade civil
j service laws, employees of the .
- J corporation have sued the county.
It is also seen as an attempt to
stave off unionization. The workers have charged that their
wages are lower than those of
county employees, in violation of
the law and the county charter.
(Shiell us. Los Angeles County,
Calif., Superior Court, No. BC
208582)
Independent Contractors
Rather than utilize permanent,
direct-temporary or even "payrolled" positions, some employers
utilize workers as independent
contractors. By definition, inde-
Microsoft Corp., 97 F.3d 1187
and Microsoft Corp. us. Vizcaino,
U.S. No. 99-498, cert. denied Jan.
10, 2000)
Unfortunately there is no
definitive test to determine if a
worker is an employee or independent contractor. The criteria
used by courts to determine
employment status vary by
statute since there are different
definitions for tax purposes, minimum wage eligibility and for ·
establishing the right to collectively bargain. One of the _key
factors used to distinguish
between an employer and independent contractor is the degree
· of detailed control the paying
party exercises over how the
·work is undertaken. Other factors include level of skill required
to do the work, the worker's
opportunity for profit or loss
and whether the worker is.
an integral part of the business.
The IRS's 20-factor test can
be found at:
www. workerstatus.com/20factor.
html.
..
Next Steps
pendent contractors are selfemployed. As such, they are
·excluded from collective bargaining and the protection of key
: labor laws. In addition, employers acquiring their services are
not responsible for paying their
Social Security, Medicare or
unemployment taxes. Given
these incentives, it is not surprising that the General Accounting
Office has found that employers
often classify workers improperly.
In 1996 thousands of workers
successfully sued Microsoft over
this issue. The federal courts
found the company had misclassified the workers as independent
contractors and deprived them of
employee benefits. (Vizcaino us.
These are only a sampling of
strategies AFSCME locals and
other worker advocates are using
to meet the challenges of contingent employment and non-traditional working arrangements. If
you haven't previously investigated the use of these arrangements, you may wish to use
bargaining or Freedom of
Information Act requests to collect information on the numbers
and types of workers involved,
their length of employment, and
the conditions under which they
are working. A labor/management committee could also study
the question.
The information can be used
to make the case for restricting
the use of contingent workers
2000 Number 3
5
and for seeking better wages and
working conditions for workers
trapped in these positions. Where
the law allows temporary worke.rs to be represented, an organizing opportunity may exist.
Political and legislative action
can be used to improve their
wages and working conditions
and to gain conversion of temporary positions to permanent bargaining unit positions. Where
there are "living wage" campaigns, these efforts might be
linked. They are both aimed at
insuring that public money is
used to create good jobs.
We are interested in hearing
:
of your experiences with this
:
.issue. If you have information to
,.
share or would like additional
information or assistance, contact
the Department of Research and
Collective Bargaining Services at
(202) 429-1215. The following
reports and Internet sites are
recommended for more detailed
information:
Center for a Changing
Workforce: www.cfwf.org
George Erickcelf and Susan
Houseman. Temporary, PartTime and Contract
•
•
.
.
..
•
•
!
1:
•
Employment in the United
States: www.upjohninst.org/
arrhub.html#reports
Susan Houseman. Flexible
Staffing Arrangements: A
Report on Temporary Help,
On-call, Direct HireTemporary, Leased, Contract
Company, and Independent
Contractor Employment in
the United States. August
1999:
www2.dol.gov/dol/asp/public/
futurework/conference/
staffing/workers.htm
Monthly Labor Review,
November 1998:
stats.bls.gov/opub/mlr/1998/
11/contents.htm
Sharon R. Cohany. Workers in
Alternative Employment .
Arrangements: A Second
Look
Steven Hipple. Contingent
Work: Results from the
Second Survey.
Monthly Labor Review,
October 1996:
.stats.bls.gov/opub/mlr/1996/
10/contents.htm
Sharon R. Cohany. Workers in
Alternative Employment
Arrangements
Anne E. Polivka. Contingent
....:
.:
...
...:
.....
...
.
•
•
.
.
.:..
..
and Alternative Work
Arrangements, Defined
Steven Hipple and Jay
Stewart. Earnings and
Benefits of Contingent and
Noncontingent Workers
Steven Hipple and Jay
Stewart. Earnings and
Benefits of Workers in ·
Alternative Work
Arrangements
Anne E. Polivka. A Profile of
Contingent Workers
Anne E. Polivka. Into
Contingent and Alternative
Employment: By Choice?
·Donna S. Rothstein. Entry
into and Consequences of
Nonstandard Work
Arrangements
National Alliance for Fair
Employment:
www.fairjobs.org
U.S. General Accounting
Office. Contingent Workers:
Incomes and Benefits Lag
Behind Those of the Rest of
the Workforce, GAO/HEHS00-76, (Appendix III offers a
summary of key federal labor.
laws and their coverage of
contingent workers and the
definition of employee under
the various statutes.)
www.gao.gov.A
~
lI
6
\
Researching Tax Exempt
Stop the Pain
found on the AFSCME Web site at
http://www.afscme.org/wrkplace/
'writy.htm. Some states, like
Minnesota, have made searchable databases available on their Web sites.
nomics. The committee shall consist of
an equal number of representatives from
both parties. The committee's purpose is
to develop, implement and monitor the
effectiveness of the ergonomics program.
The ergonomics program includes but is
not limited to the following elements:
training on the causes and prevention of
WMSDs; collecting information on
injuries and symptoms; identifying
ergonomic risk factors; changing equipment and work organization; ensuring
appropriate medical management for
affected employees; identifying lightduty positions and making other job
accommodations; and evaluating the
effectiveness of the ergonomics program.
Contract language can also address
particular working conditions. For
For more information on tax-exempt
organizations, non-profit organizations, for-profit companies and publicly
available information, contact the
Department of Research and Collective
Bargaining Services at (202) 429-1215
or e-mail the department at
[email protected]. @
1999 Number 2
example, language prohibiting single
person lifts would dramatically reduce
back injuries among health care workers. In office settings, AFSCME locals
have negotiated detailed language
about the type of computer equipment
and furniture that is provided. @
7
c
Alternative Service Delivery
lternative service delivery" is a
term used to describe the use
of private firms, community or
nonprofit groups, volunteers or individuals to deliver public services. The
use of alternative approaches to the
traditional delivery of public services
by public employees is not new, but it
is a practice that is receiving an
increasing amount of attention as
1
lpart of the reinventing government
movement.
While AFSCME has long fought
against the displacement of public
employees, the focus has usually been
on contracting out;.where a public
employer hires a private contractor to
deliver a service, with the contractor
taking over the day-to-day management of the operation as well as using
its own employees to perform the ~
work. While this continues to be a··..
common practice, alternative service
delivery approaches also encompass
other ways of involving private companies or individuals in the delivery of
public services. Some of these mechanisms are put in place by employers
as a means of displacing labor, and
are thus opposed by AFSCME and
other public employee unions. Others
are a product of negotiations between
management and labor aimed at protecting the jobs of public employees.
A
SERVICE CONTRACTS,
FRANCHISE AGREEMENTS
AND ASSET SALES
Contracting out continues to be the
most widespread and harmful alternative to traditional public service
delivery. The most prevalent method
of contracting is the purchase of a service contract, where a government
agency pays a fixed price to a private
firm or nonprofit organization to provide a specific service. Citizens,
through taxes or user fees, pay the
government which in turn pays the
contractor. The contractor manages
the work process and work is per• formed by the contractor's employees.
• · For public employees, the primary
threat is that of displacement - public employees are laid off, transferred,
or forced to go to work for the contractor when a public service goes private. Virtually any service can be a
target of contracting out. Janitorial
and grounds maintenance, institutional food services, school bus transportation, and recycling are examples
of services that are frequently delivered on a service contract basis.
Franchise agreements differ from
service contracts. Rather than paying
the contractor a fixed price to deliver
a service, the government agency
instead gives a contractor the right to
provide a public service and the consumers of the service pay the provider
directly. Although the financial
arrangements are different, the
threat to public employees is 'the
Contents
ALTERNATIVE SERVICE
DELIVERY .................................. page 1
WORKING PERSPECTIVES
Health Insurance Portability and
Accountability Ad (HI PM) .......... page 5
AFSCME SETTLEMENTS ............... page 7
THE ECONOMY ........................... page 8
same. Services that are often delivered in a franchise arrangement
include food and beverage concessions, solid waste collection, public
utilities, airport operations, vehicle
towing and storage, and emergency
medical services.
Finally, "true" privatization occurs
when a government sells an asset to a
private concern. Unlike service contracts or franchises, when an asset is
sold it is gone forever - it is not rebid or renewed at certain time intervals, and thus there are no future
opportunities to bring the service back
into the public sector. Thus, the public
employees performing the work are
threatened with permanent displacement. Attempts to sell off government
assets have involved infrastructure
(such as water treatment plants, public utilities and airports) as well as
"non-essential" operations such as
golf courses. Also, the health care
industry has been hit hard by restruc. turing and privatization of public
facilities.
Service contracting, franchising,
and asset sales are three methods of
privatization that AFSCME affiliates
encounter frequently. While AFSCME
is a leader in the fight against the dismantling of the public sector through
these practices, at times privatization
is inevitable despite our opposition. In
order to continue protecting the interests of the workers involved,
AFSCME affiliates are now "following
the work" into the private sector
through successorship agreements or
by organizing contractor employees.
For example, AFSCME Council 93
recently won a representation election
Alternative Service
for school bus drivers employed by
Laidlaw Transportation in Plymouth,
Mass., joining several other AFSCME
affiliates around the country that
have contracts with this company.
MANAGEMENT SERVICES
,~ONTRACTS
With a management services contract,
a public agency hires a private contractor to manage an operation, but
retains the employees. The contractor
is responsible for overseeing service
delivery, and in many cases provides
equipment and training, and makes
staffing decisions. Through this type
of arrangement, a government agency
can conceivably benefit from the
expertise of the private sector while
avoiding the labor displacement
issues that can plague other types of
contracting.
One company, ServiceMaster, is
well-known for this type of arrangement for custodial, landscaping and
energy management services. This
company touts itself as an efficiency
expert and, through the terms of its
typical contract, has a financial stake
in keeping labor costs down. Essentially, labor costs are subtracted from
the total price of the service, and the
company keeps the difference.
ServiceMaster has
its own brand of
equipment, its own
supply deals, and
its own training
programs. The company's managers
set up shop in the
contracting agency,
and supervise the
public employees
doing the work.
Under such an
arrangement, the
government agency
is still the employer
and the parties to
the existing collective bargaining
agreement do not
change, but the
company's influence
is nevertheless felt.
Management services contracts
have several drawbacks for public
employees. First, what is touted as
"efficiency" is often downsizing.
Large staffing cuts are usually built
into the company's proposal when it
seeks to obtain a management services contract. Second, ·most of the
savings from "efficiency improve-
2
ments" (where they are realized at
all) go back to the company in the
form of salaries for their managers
and profits. Finally, private management companies usually have little
knowledge of or regard for the terms
of existing collective bargaining
agreements, resulting in the deterioration of labor/management relations
and an increase in conflict.
In order to fight against management services contracts, it is important to carefully scrutinize the company's proposal, which is often the product of a free "efficiency study." This
proposal should be examined for hidden costs, escalators, staff reductions
and other flaws. For example, in a
recent pitch to the Harford County
(Md.) School Board, ServiceMaster
proposed a large reduction in custodial staff, a switch to using the company's equipment and supplies, and
the introduction of a new energy
management system. AFSCME representatives and line managers from
the school district analyzed the proposal and showed how money saved
from reducing the custodial staff
would be offset by cost increases to
pay for ServiceMaster managers and
the additional office space they would
require. In the end, the school board
decided not to contract with
ServiceMaster.
In the event that a private company does take over the
management of a
public service,
removing it requires
an activist approach.
In Shorewood, Wis.,
the school district
contracted with
ServiceMaster. The
union (AFSCME
Council 48) countered with a comprehensive campaign of
resistance including
flooding the employer with grievances,
documenting every
. management error,
picketing the school
board, and employing other tactics.
The company was
eventually removed.·
ServiceMaster and Marriott had
supervised employees in several Ohio
school districts for many years.
OAPSE/AFSCME Local4 eliminated
this practice through negotiations and
political action.
EMPLOYEE LEASING
Similar to management services con-
tracts, employee leasing is an
arrangement that is designed to protect the employment status of
employees involved in a privatization
situation. While management of an
operation is contracted out, the
(' '\
employees remain on the public pay- .
I
roll but are "leased" to the contractor.
For example, last year the Florida legislature dissolved the Florida
Department of Commerce and shifted
funding and responsibility to
Enterprise Florida, Inc. At AFSCME's
behest, the legislation included a pro. vision for the leasing of state employees to the private organization. While
over 200 employees were placed elsewhere in the state government, 12-16
employees, mostly managers, were
offered the lease option.
Similar arrangements have been
used in the water and wastewater
industry. In Easton, Pa., where U.S.
Water has a 10-year contract to
operate water and wastewater plants,
the employees have remained city
employees with a 10-year "no layoff'
guarantee. U.S. Water also has a fiveyear contract to operate Jersey City's
(N.J.) Water Department. Jersey City
employees continue to work in the
department, and the company reimburses the city for their work.
In the recent merger between the
University of California (UC)-San
Francisco and Stanford University
hospitals, AFSCME Council 57 negotiated an employee leasing arrangement for about one-third of the
affected employees (those who were
50 years old with at least five years of
service, 40 years old with 10 years of
service, or with 15 years of service
regardless of age). These employees
were able to retain their status as UC
employees and be leased to UCStanford Health Care (the new company). They will remain part of the
UC-San Francisco campus bargaining
unit but will work for the new
employer as leased employees. Thus,
they retain their advantageous pension and benefits package, as well as
their status as UC employees and bargaining unit members. The remaining
employees (those ineligible for the
leasing arrangement) will keep their
seniority rights and leave balances,
with an option to cash out carriedover vacation or camp time upon conversion to UC-Stanford Healthcare
employees. Council 57 is currently in
negotiations for a contract that will
cover these employees in the future,
and is planning an organizing drive
targeting the employees from
Stanford, which was non-union prior
to the merger.
.I
EMPLOYEE OWNERSHIP
Employee ownership through ESOPs
(Employee Stock Ownership Plans)
can be found in the private sector. For
example, United Airlines is a union·~"""'\zed, employee-owned company. In
(
W94, United's unions agreed to a
recapitalization plan that gave
employees a 55 percent stake in the .
airline in exchange for wage and work
rule concessions worth $4.9 billion
over six years. At the time, the company was having a financial crisis and
needed to make a radical change to
ensure its long-term viability. Rather
than eliminating thousands of jobs,
the airline and its unions crafted the
employee buyout.
The notion of employee ownership
is very rare in the public sector, but it
is an idea that is being discussed more
frequently. The general idea is to
form an employee-owned company
and contract out a service to that
company, with the affected public
employees becoming owner-employees
in the new enterprise. One case where
a public service was contracted out to
an employee-owned company took
place last year in the federal government. An office that conducts background investigations for the Office of
Personnel Management (OPM) was
transformed into a private, employee- owned operation, U.S. Investigative
"')Services, Inc. To launch the new
__.company, OPM selected (through a
competitive process) a bank, an
investment banking firm, and a law
firm with experience in ESOPs to act
as trustees. USIS was given a threeyear contract which will be competitively re-bid at expiration. The
American Federation of Government
Employees (AFGE) at first argued
against the privatization scheme, but
when it was apparent that the priv¥ization plan was going forward despite
their resistance, AFGE worked to :,·~·
obtain the best possible terms of
,_.
employment for those moving to the
new company, and outplacement assistance for those electing not to take jobs
with USIS. In May 1996, RIF notices
went out to 706 members of the OPM
investigations staff. Within 24 hours,
all of these employees received job
- offers from USIS, at comparable pay
and benefits. Of the 706 employees,
681 accepted employment with the
new company.
INDEPENDENT
CONTRACTORS
The business community has long
f been in favor of changing long./ standing laws to make it easier to
classifY workers as "independent
FALL 1997
contractors" rather than regular
employees. Employers seek to classify
workers as independent contractors
in order to have more "flexibility" and
to avoid paying Social
Security and
Medicare premiums,
unemployment insurance taxes, or workers compensation premiums. Furthermore,
"independent contractors" are considered self-employed
individuals, and thus
not covered under
labor relations laws
that grant workers
collective bargaining
rights.
A recently proposed provision in the
tax bill would have
eased the rules for
determining who is
an independent contractor, but it was
defeated thanks to the
efforts of organized
labor. Nevertheless, this practice is
already a significant problem for large
numbers of workers. Like private
·
companies, some public employers
also use "independent contractors" to
.perform work that otherwise could be
performed by public employees. For
example, for years the state of
Maryland has used "contractual
employees" in a wide variety of jobs.
State agencies have operated under
personnel caps that limit the number
of regular employees they may have,
so they hire contract employees to
augment their "official" workforce.
These employees perform the same
work as the official employees, but do
not receive benefits or civil service
protections. AFSCME is currently
bargaining for improvements for
these employees.
In the Milwaukee County
Department of Social Services,
employees were offered early retire. ment packages and then hired back
with personal service contracts. Local
64 (Council48) fought against this
practice using contract language and a
state statute restricting the use of contract employees. The local prevailed
and the county stopped using the independent contractors.
In California, about 200,000 homecare workers are classified as "individual providers" by the state. These
workers, who provide in-home assistance for the elderly, are typically
paid minimum wage and receive no
benefits. Even thoughthey submit
time sheets to the counties and
receive their paychecks from the
state, they are considered to be
employed directly by their clients.
Needless to say,
union organizing is
next to impossible
within this framework. The AFSCMEaffiliated United
Domestic Workers
(UDW) represents
the home-care
workers who are
employed by private
and nonprofit agencies, but these
workers perform
only a fraction of
the home-care services overseen by
the county - the
majority is done by
individual providers. UDW's strategy
has been to pressure the counties to
increase the. number
of cases handled by
the agencies and thus reduce the use
of the individual providers.
CONTINGENT EMPLOYEES,
VOLUNTEERS AND OTHER
NON-BARGAINING UNIT
PERSONNEL
The use of "contingent" workers is a .
practice that is growing throughout
the economy. Temporary or limitedterm employees can either be hired
out of an agency or employed directly
by the jurisdiction. In either case, prolonged use of temporary employees
can be an employer strategy for gradually reducing the "core" workforce.
For example, four out of every 10
health care workers are contingent, a
figure that has been increasing in
recent years. Historically, hospitals
have always used registry or agency
employees to augment their core
workforce at times of high volume.·
However, as changes in the administration of health care has caused inpatient volume to shrink, hospitals have
sought to reduce their core workforces and shift to greater use of contingent workers.
The use of volunteers or other
types of non-bargaining unit person. nel (such as inmates or workfare participants) to perform work alongside
regular employees raises concern
about the excessive use of cheap or
unpaid labor as a substitute for bargaining unit jobs. As states scramble
to meet the work requirements in the
welfare reform law, the full impact of
3
the influx of 1 to 2 million welfare
recipients into the workforce has yet
to be felt but is coming soon.
Many AFSCME contracts have language that protects the integrity of
the bargaining unit and/or addresses
the use of contingent
workers, volunteers
and other non-bargaining unit personnel. At the state
level, the master
agreement between
Council 31 and the
state of Illinois provides that "the
Employer recognizes the integrity
of the bargaining
unit and will not
take any action
directed at eroding
it" and that "the
Employer will continue to endeavor to
assign bargaining
unit work to bargaining unit
employees. The hiring of temporary or
emergency employees to supplement bargaining unit
employees' work on a temporary basis
... shall not be considered erosion of
the bargaining unit."
In addition to language protecting
the integrity of the unit, the agreement between Council 25 and the
state of Michigan regulates the use of
"student work experience programs,
patient/employee programs, JTPA
program employees, volunteer programs, or seasonal, recreational programs of the kind currently employed
in Agencies in this BargainingJJnit.
The primary purpose of such programs shall be to supplement oJ:~going
activities or solely to provide tr9'!ning
opportunities." The clause also protects against the use of such employees in an agency with an active recall
list, to avoid recalls, or to provide
vacation relief.
At the muniCipal level, the contracts between Councils 33 and 4 7
and the city of Philadelphia provides
that: "The City shall notify the
District Council before beginning a
program to use volunteers, probationers, or parolees, members of the
National Guard or other armed
forces, or ot:P.er governmental agencies' workforces to augment the current bargaining unit work. Such use
shall not be considered as contracting
out. Volunteers shall not be used to
displace the bargaining unit workforce, nor shall volunteers be used to
do work which otherwise would be
4
.
'.
done by the then-existing bargaining
unit workforce. However, volunteers
may be used to do work identical to
the work done by bargaining unit
employees so long as the volume of
work done would exceed that which is
being done by the then
existing bargaining
unit workforce."
In school districts, the use of volunteers is typically a
long-standing practice that can be beneficial to a community. Nevertheless,
appropriate contractual protections are
needed to protect
against abuse of the
practice. For example a clause in the
agreement between
OAPSE/AFSCME
Local 4 and the
Parma City School
District specifies ·
that "the parties recognize that the use
of volunteer workers
in the schools is
essential to good community relations. However, the Board intends to
utilize volunteer workers on a supplementary basis and not to replace present employees."
Volunteer labor is also widespread
in the health care industry. The contract between AFSCME/NUHHCE
District 1199C and Greenwich
Services Inc., covering licensed practical nurses, aides, ward clerks, and secretaries specifies that "no work currently performed by bargaining unit .
employees shall be performed by a volunteer" and provides for notification .
of all tasks performed by volunteers
and informing all volunteers about the
collective bargaining agreement and
the policy of not substituting volun-·
teers for paid employees. The clause
also specifies that "additional work
resulting from expansion or reorganization shall not be performed by volunteers if such work includes tasks or
responsibilities performed by bargain.
ing unit employees."
While controlling or limiting the
use of contingent or volunteer workers is a strategy for protecting bar-.
gaining unit work, another approach
is to organize these employees in
order to ·bargain for livable wages and
benefits as well as to provide a bridge
from temporary to permanent
employment. An example of this is
the clerical/custodial pool in Council
13's master agreement with the commonwealth of Pennsylvania. Created
in 1991 in response to the employer's
increased reliance on temporary help
contracts, the pool provides temporary clerks, typists and custodians to
state offices. Contract language specifies that the pool cannot be used to / -'\
reduce the number of permanent
)'
employees. Since the inception of the
program, over 700 participants have
been placed into full-time positions.
Overall, the program has been an
asset to Council13 as it has allowed
the union to exercise some control
over the use of temporary workers,
and has virtually eliminated private
contracts for temporary clerical and
custodial workers.
In 1995, Local 372 (DC 37) negotiated a Work Experience Program with
the New York City Board of
Education. A joint training and job
placement program for workfare participants was established to provide a
bridge to full-time employment.
Participants receive specialized training sponsored by the board of education followed by one-on-one mentoring
with Local372 members. According to
a recent report, 71 workfare participants had been promoted to permanent, bargaining unit positions out of
a training population of 74, with 23
new trainees in the program .
The recently enacted federal budget contains $3 billion to support
states' efforts to putwelfare workers
to work. Roughly 75 percent of this
money will be divided between the
states through formula grants, with
the rest being distributed through the
Department of Labor through competitive grants. AFSCME is committed
to working With the Clinton
Administration and local government
officials to design and implement
programs that provide workfare
participants with meaningful work
opportunities and union benefits.
IN CONCLUSION
.
..
These are turbulent times for
.AFSCME members. Today's trends
toward restructuring, reinvention and
experimentation with new organizational structures can only be expected
to accelerate in the future. As new
means of delivering services evolve,
employment relationships will change,
and new mechanisms for employee
representation will be necessary. The
union's involvement in structuring
these new mechanisms is essential for
protecting the interests of the workers
involved. For more information on the
alternative service delivery methods
examined above, contact the
AFSCME Department of Research
and Collective Bargaining Services at
(202) 429-1215.@
'
When Public Services Go Private:
Protecting Members and the Union
Supported by pro-privatizavatization. However, the trends
. in privatization are motivating
tion think tanks, private sector
many AFSCME affiliates to refinancial interests, and "pro-competition" consultants, leaders of
evaluate our strategies and tac.. tics as we protect the interests of
both political parties now champion privatization and competiour members.
tive bidding. While espousing the
The privatization of public
services presents challenges to
promise of better government,
the proponents of privatization
workers and the union. Workers
are concerned with continuity of
have other motives. Some are driven. by an anti-public employee
employment, benefits, pay and
ideology while others find it politrepresentation. For the union,
ically expedient to reduce personissues include continued recogninel costs tq provide tax cuts.
"
tion, private sector representaMany officials promote privatization, first contract campaigns,
tion to avoid responsibility for
and the union's strategic planmanaging public programs or
ning. Changes in the political and
facilities. And one cannot under~
economic environment mean that
estimate the role of paybacks for
we must change our orientation
friends and political contributors
from a focus on the public sector
-"pinstripe patronage"- in
to a focus on public services.
the rush to privatization.
AFSCME remains the
WORKER ISSUES
nation's leading opponent ofpri-
irtually all AFSCME members, regardless of their
profession, are at risk of
having their jobs privatized. In
fact, the threats posed to public
workers by privatization and con/acting out of public services
nave grown more significant during the past two years.
• Managed health care systems
and restricted public health budgets have strained public sector
hospitals to their limits, resulting
in significant and accelerating
privatization in this industry.
V
• Changes in the tax code and.~
public officials' desire to avoid ·...
borrowing money for capital
·
. investments make wastewater
treatment plants a target.
• Changes in federal law now
allow private administration of
Temporary Assistance to Needy
Families.
JOB SECURITY
., '.' I .' !' ·.-' ...., '
' .;.; .·c·
.. ;·. -.....
• Well-funded prison privatizers
continue to make inroads in this
once totally public industry: A
total of 132 prisons are now privately operated.
I
~·' '
• -. ~ ., '
' ·• '., i . '' -'·;I .c I: I I -::- ·'
."...
·>;. ;. :.... :, 1•
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:<.-: -. :.! ·-.. ·.; ;_:· ... :~--~ . . .=.... __: ·: .•• ,·~·. :· ,:· .·: .;".: :_:· :._.~.·-.· .~:.•.~.·.·.,. .~.:_},: _.~-.-.·.•.·-
:;·;.·: ··ontents< .-:':-':Y:?:::;ii<'· .:.. ,, ... ,
0
• The movement of the develop- · ·
1entally disabled and mentally
~11 from state institutions to privately operated group homes is
now almost complete.
'i' ~ ' ..'. ;--
-
~!~i~i~:~~:;:~:s~~:'C. Pt;}~i~l
'-'
E~ma1l
-·.
At Work .....................• ,. ...... page.3,., .. :
,
!·-\',:; ..'
.. •AFSCME SETTLEMENTS .:: ............ page
s·i/;
RECENT PRIVATIZATION
.
DEVELOPMENTS .: ..... ::·... :: .... :.... page
i'>'
THE ECONOMY. .. :;; .... ::~:•)· ..... :... page ~ •.-.·
. .:
'"
.•
The most serious effect of privatization is on the job security of
the workers. Even where employ. ees are given jobs with a contractor, there is no guarantee that the
workers will hold on to their jobs,
· especially when the function is
subject to a second round of competitive bidding.
Where employees are hired .
Privatization
by contractors, they still face
the loss of civil service protection which includes removal
only for cause and provides
bumping rights in the event of
layoff.
AFSCME affiliates have
addressed these threats to
employment security through
collective bargaining, legislation
and the procurement process.
Continued Employment
• The Request for Proposals
(RFP) issued by the City of
Bridgeport, Conn., Water
Pollution ControlAuthority
(WPCA) for operation and maintenance of the wastewater system
provides that: "The City intends
that the successful Contractor shall
retain all qualified, presently
employed OM&M personnel at their
present or improved compensation
'
and benefit levels."
• The contract
between WPCA
and the successful bidder provides: "PSG
[Professional
Services Group]
will offer
employment at
its own cost to all
perso:i:mel of
WPCA assigned
full-time to the
Project. PSG
staff reductions
will be effectuated by early
retirement programs, normal
attrition and con.sensus transfers and consensual promotions to other PSG
operating facilities."
Right of First Refusal for Jobs
with a Contractor
• Federal Government Circular
A 76 requires contractors to offer
federal employees adversely
affected by the contracting the
right of first refusal to jobs with
the contractor. ·
• Legislation establishing
2
Maryland's child support enforcement privatization pilot program
requires: " ... any private contractor
to offer employment upon terms
deemed ... to be fair and equitable
to any employees who are affected
by the transfer of child support
enforcement responsibilities ... and
to retain any employees who accept
the offer for the duration of the
pilot program unless there is cause
· for dismissal and at a salary and
benefit level comparable to the
salary and benefits to which they
were entitled at the time of the
transfer." The law also requires
contractors to adopt a grievance
procedure for employees.
· Policies for Succeeding
Rounds of Competition
• Washington, D.C., and Los
Angeles have adopted displaced
worker ordinances which are crucial to job security for employees
and for organizing among new
contractors if successorship
recognition is not
achieved. While the
covered employees
vary, both ordinances require that,
when a contract
changes hands, the
new contractor hire
only from among
the employees of
the old contractor.
Employees may be
discharged only for
cause during the
initial 90-day
employment period.
• Executive Order
12933 requires that
contractors for federal government
building services
offer employment under the contract to workers who worked for
the previous contractor at the
federal building.
WAGE AND BENEFIT
PROTECTIONS
State and local legislation and
RFPs require contractors to offer
employees the same wages or
require the payment of prevailing
wages.
Wages
• Living wage ordinances set
minimum wages and sometimes
benefits for employees working
on municipal contracts. In Los --~- ..
Angeles, the law requires that con\
tractors pay their workers at least
$7.25 per hour with health benefits or $8.50 per hour without. It
also requires that employees
receive 12 paid days off per year.
A discussion of living wage campaigns is in the Spring 1996 CBR.
• The federal government's
Service Contract Act requires
that federal contractors pay at
least the prevailing wage as
determined by the U.S.
Department of Labor area wage
surveys for covered services.
Rhode Island and other jurisdictions have prevailing wage laws
covering some, or all, services
and other contracts. Prevailing
wage and benefit policies are discussed in the Spring 1996 CBR.
Health Benefits
As noted above, some RFPs,
: privatization legislation and liv. . ing wage laws require contractors to provide health benefits.
Where benefits are provided, the
possibility of pre-existing condition exclusions remains a problem. However, under the Health
Insurance Portability and
Accountability Act (HIPAA), preexisting conditions are generally
covered under a new insurance
plan if the condition was covered
under a previous plan and the
employee participated in the previous plan for at least 12 months.
Pensions
Loss of the pension plan is
perhaps the most difficult problem to resolve when an employee
changes from public to private
sector employment. Because public plans generally cannot include
private sector employees and
because defined benefit plans are
not portable, employees typically
lose eligibility to participate in
the public plan.
Privatization
ERISA Issue
In Ohio, state law requires all
non-teaching public school
employees and school boards to
contribute to the State Employees Retirement System
(SERS). In a 1996 U.S. District
Court decision, the court found
that school boards and nonteaching school employees must
continue to participate in SERS
even when the non-teaching personnel are hired by a contractor.
The school board may require the
contractor to pick up the employer contribution. This issue
remains in litigation; a contractor contends the Ohio law violates ERISA.
One solution that avoids
ERISA issues and preserves pension benefits is to require the
contractor to establish a defined
benefit pension plan with the
same benefit formula as the public plan and to credit employees
with full "prior service credit"
back to their original date of par-.
ticipation in the public employer's
plan. The private plan benefit
formula can include an offset
whereby benefits otherwise
earned are reduced {offset) by the
benefit received from the public
employer plan.
Multi-employer Pension Plan
Another option is to require
that the contractor participate_ain .
the National Industrial Group'.;.
Pension Plan (NIGPP), which li:?'a
multi-employer plan sponsored
and administered jointly by the
employers and the unions representing their employees. The
NIGPP is fully portable, which
means that participation can continue uninterrupted should the
government agency award the
contract to a new contractor in
the future.
Defined contribution/401(k)
Although virtually all public
employers have defined benefit
pension plans, defined contribution plans are typical in the private sector. Oftentimes these are
4
401(k) plans or similar "employer-matching" arrangements.
Employees must contribute their
own money in order to receive
matching contributions (typically
25 to 50 percent of the employee
contribution) from the employer.
One way to improve the benefit
for privatized employees moving
into this type of plan is to require
employer contributions whether
or not the employees contribute
anything themselves.
UNION ISSUES
SUCCESSORSHIP
The only effective way to
maintain other established working conditions once a function is
privatized is to require the contractor to recognize the current
collective bargaining agreement.
Requiring the contractor to recognize and bargain with the union,
but not adhere to the terms of the
old agreement, is a worthy fallback position.
Mfiliates have used political
and bargaining strength to provide for the continuation of union
recognition and contract conditions when work goes from public
to private. These protections have
been included in RFPs, contracts
between the public agency and ·
the private provider of services,
mandated by law, and collectively
·
bargained.
Through Collective Bargaining
• The agreement between
Michigan Council25 and the City
of Detroit provides that: "This
agreement shall be binding upon the
successors and assignees ofthe parties hereto, and no provisions, terms
or obligations herein contained shall
be affected, modified, altered, or
changedto the detriment of the other
party in any respect whatsoever by
the consolidation, merger, sale,
transfer, lease, or assignment of·
either party hereto."
Through RFPs
• RFPs issued by the indianapolis Advanced Wastewater
Treatment Facility and the Storm
and Wastewater Collection
System have both contained language stating: "It is also expected
that the selected Contractor will recognize the existing union and bar( }. .
gain accordingly as required by
applicable law."
li The RFP issued by New
Haven, Conn., Wastewater
requires the bidding companies to
agree to the following neutrality
provision: "The company recognizes
the employees' rights to organize and
shall not oppose any attempts to
organize employees."
Through Impact Bargaining
• Council 8 won successorship
plus protections and improvements for the University of
Cincinnati Hospital bargaining
unit in the course of negotiating
the impact of privatization.
• District Council37 also won
successorship recognition from
Primary Health Systems, the
buyer ofNewYork City's Coney
Island Hospital, while supporting
legislation that killed the deal.
ByLaw
• State and local laws establishing Public Benefit Corporations,
public authorities or similar entities have included provisions
requiring the continued recognition of existing unions. Examples
include recent New York state
legislation creating the PBCs for
Nassau and Westchester County
hospitals and the law covering
the University of Wisconsin at
Madison hospital transfer.@
For m·ore information on securing
union and member protections
when public services go private,
contact the Department of
· Research and Collective Bargaining Services at 202/429-1215..
I
. i
'
SUMMER 1997
7
fighting Contracting Out: Lessons Learned
FSCME has long led the
opposition to the vocal,
well-financed pro-privatization movement. In the words of
Professor E.S. Savas, a leading
advocate of contracting out, "the
biggest barrier to privatization of
~xisting public services is the
opposition of public employee
unions." AFSCME's years of
building this "barrier" have
yielded stra,tegies to carry out
this fight at various stages of the
contracting out process.
A
THE CONTRACTING OUT
PROCESS
~
Although circumstances vary ··..
from place to place, contracting:
out often proceeds from an idea
to a proposal to an established
policy in predictable stages:
1. work is being performed inhouse by public employees;
2. warning signs that contracting
out is being considered appear;
3. a general proposal in favor of
· contracting out is forwarded;
4. the private service provider is
selected, usually through a
competitive bidding process;
). the service is contracted out.
At each stage of the process,
there are certain general strategies to prevent contracting out.
Stage 1: The Work is Being
Performed "In-House"
Due to the widespread and persistent nature of the pro-privatization movement, public employee
unionists should be ever vigilant.
Even when a privatization proposal has been soundly defeated
in the past, it is likely to resurface again and again in subse.quent years. Private companies
continue to aggressively market
their services, politicians continue to seek ways of cutting
costs, and countless ideologues
continue to fuel the debate with
pro-privatization propaganda.
Given the endless nature of the
assault on public services, it is
never to early to take action.
At Stage 1, where a service is
being delivered by public employees, the union's job is to ensure
that contracting out will not be
considered in the first place. The
Contents
Fighting Contracting Out ............ page 1
WORKING PERSPECTIVES
Debate Closed: Public and
Private Pay is Comparable ......... page 3
AFSCME SETTLEMENTS ............... page 4
THE ECONOMY ........................... page 8
goals at this stage are fourfold:
1. to project a positive image of
government services;
2. enhance members' pride in
public service;
3. establish and maintain legal or
contractual obstacles to contracting out; and
4. educate union members and
local activists about contracting out and how to fight back.
Most importantly, decisionmakers and the general public
need to be "inoculated" against
pro-privatization propaganda.
Activities that support these
goals include:
·
liB lobbying for policies and legis-
lation that impede or prevent
contracting out, such as "living
wage" ordinances, civil service
protections or procurement
standards;
II monitoring pro-privatization
initiatives within the executive
or legislative branches of government, or the deliberations of
government-appointed "commissions" that examine the
delivery of government services;
II bargaining for contract language that inhibits contracting
. out;
Ill
enhancing the image of public
employees through positive
communications; and
• pursuing labor/management
partnerships to address longterm cost concerns and
improve the effectiveness of
public services.
Stage 2: Warning Signs
Usually privatization initiatives
do not come "out of the blue."
Typically a variety of warning
signs tip union members that
plans are afoot. If the union is
aware of warning signs then the
union is in a better position to
respond quickly and effectively to
stop contracting out before there
is a tangible proposal. Typical
warning signs include:
•. vendors visiting worksites;
• an "efficiency study" being
done by a private company;
• replacement of employees who
resign or retire by temporary
workers;
• increased anti-government or
pro-privatization rhetoric in
political campaigns or by
elected officials;
• recurrent discussions of
"restructuring" or "reinventing" government;
II hostility -in bargaining
or labor/management
relationships;
II frequent complaints about
problems of high cost or.ppor
quality of services by public
officials or top management;
and
II legislative initiatives that support or promote privatization.
In many cases the warning
signs are not subtle. However, in
some cases decision-makers will
try to keep their plans under
wraps to avoid public debate. One
tactic is the "stealth initiative,"
where groups of council members
or commissioners meet in cau~
cuses, with group sizes being just
small enough to avoid having to
hold a public meeting. They
might discuss a privatization ini2
Key to all these activities is
educating all union members not just those who would be
affected by the current initiative
- about the dangers they face, (
and mobilizing them to participate in the effort.
tiative, study the targeted service, write a request-for-proposal,
and/or meet with prospective vendors. When all of the elements of
the plan are in place, the initiative is introduced at a public
meeting, with the intention of
passing it at the very same meeting. This tactic is designed to
limit public debate and give those
:. who are opposed to contracting
out little, if any, time to respond.
Stage 4: The Contractor
Selection Process
The process of selecting the service provider usually involves the
issuance of a "request-for-proposal" (RFP), which.is a description of the work to be done and
guidelines for submitting a bid
for the work. The RFP is advertised and interested companies
use it to guide them in submitting bids for the work. Typically,
interested parties submit sealed
bids that are opened at a predetermined time. The lowest
responsible bidder usually gets
the work. Sometimes, a privatization proposal might not involve
bidding at all, instead it could be
a proposal to contract with a particular company.
The union can use the contnictor selection process as a forum
to fight privatization, with two
goals: first, attack the bidding
process and the companies vying
to take over the work; second,
develop an alternative plan to
keep the work in-house. Here are
some activities that support these
goals:
Stage 3: A General
Proposal is Made
At some point after the warning
signs become evident, somebody
will typically forward a general
proposal in favor of contracting
out a particular service. The
amount of time between making
the general proposal and the
beginning of the contractor selection process varies considerably.
The union's goals at Stage 3
are to defeat the proposal before
the contractor selection process
begins, and prevent more proposals in the future. Activities that
support these goals include:
II distributing anti-privatization·
II
II
II
II
II
materials to policy-makers and
their staff, community groups,
and other interested parties;
seeking out allies, building
coalitions and strengthening
existing coalitions with others
who have a stake in the services that would be contracted
out;
lobbying the decision-makers to
whom the proposal is directed,
and packing legislative sessions
with union members and allies;
exploring legal action under
the union contract, civil service
or other relevant regulations;
formulating a "counte:r:-proposal" that forwards an alternative course of action for
addressing problems of cost
and/or efficiency; and
engaging in a media campaign
in favor of public services and
against contracting out through
advertisements, letters to the
editor, newspaper stories and
other means.
....
.
..
Analysis of the RFP and/or
contractor proposals. Often,
the work that is being bid out
or proposed is not the same as
the tasks currently being performed by the public employees
doing the work. Not adequately
accounting for omitted tasks
can lead to hidden charges for
extra work, so cost comparisons
are not accurate. This is important when decision-makers
claim that significant cost savings can be realized through
contracting out.
II Company and industry
research. Once the bidders
are known, information on
II
. (continued on page 5)
their past performance and
company history may be
obtained in order to challenge
their fitness for performing the
work in question. Some industries are replete with horror
stories involving contractor
., neglect and abuse. Corporate
research can also reveal a comparry's experience with unions,
which can be used to assess
whether a labor/management
relationship is possible, should
the service be privatized.
• Submitting an in-house bid.
In some cases, employees and
managers work together to submit a bid to compete with the
contractors' bids. Some
AFSCME affiliates have been
successful in keeping work inhouse through this last-ditch
effort.
Stage 5: The Work is
Cont~acted Out
If all efforts fail; the work will be
.
.::
:
:
:
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.
.::
...
..
...
..
.:
....
:
..
.:
:
.....
.:....
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contracted out to a private company or, in some cases, a nonprofit organization. It is not
unusual for a service contract to
require preferential hiring of displaced public employees. In some
cases AFSCME affiliates have
"followed the work" into the private sector by securing representation rights for the contractor's
employees, either. through suecessorship provisions or a representation election. Where public
employees are not covered by
collective bargaining legislation,
privatization would give these
employees new rights under the
National Labor Relations Act.
Even if the union does not represent the contractor's employees,
there may be ways to use the privatization experience to help
future efforts. There may be
glitches in implementing a contract, a decline in the quality of
the service or unanticipated costs
after a contractor has taken over.
The situation should be moriitored closely, so that problems
.
:
...
....
.
..
..
.
....
...
..
...
....
...
.....
...:
..
:.
...
.
The ·Contract,ing Out :Process and Tactics
.
'
can be reported to public officials,
the media and other interested
parties. Simultaneously, the union
can work on plans to "contract in"
the work should the contractor
not work out .
Where to Go for More
Information
Beyond this general overview of
the types of activities involved in
fighting privatization, details on
particular strategies and issues
can be found in numerous
· AFSCME publications. The list
includes:
• "The Great American SellOut." AFSCME's manual on
fighting contracting out
(Department of Research and
Collective Bargaining Services).
• "Government for Sale." An
educational pamphlet containing arguments against privatization and some horror stories
Collective Bargaining Services) .
fo~r :f:ig:fit:ing Ba~c:l<- ~·-l
.
' ' J
Warning signs that contracting out
is being considered
A general proposal in favor of
contracting out is forwarded
Bids for contracted work are solicited
)
FALL 1996
Work is contracted out to
a private company
Collect company/industry information,
analyze RFP and/or develop
bidding tactics
Develop plan to bring work back to public
sector or organize contractor employees
5
tions in ·order to balance budgets
out a multiple of a worker's salary.
Public employers are more likely
or pay for tax cuts. Since public
employers are not governed by
to provide a policy that pays a
the federal Employee Retirement
small lump sum.
Income Security Act of 1974,
The prevalence of defined ben.;;fit pensions is the biggest advan(ERISA) the adequacy of funding
tage public employees have over
for future obligations cannot be
private sector employees. Yet,
taken for granted by state and
nearly one-third of all public
local government workers.
employees are not eligible for
Many state and local governments now face unfunded liabiliSocial Security benefits and many
rely solely on their pensions for
ties in the millions of dollars. So,
while public employees may have
retirement income.
For example, a public employee
the theoretical advantage of
widespread pension coverage,
earning $35,000 when he/she
retires with 30 years of service
the ability of their employers to
actually pay benefits when they
who is not eligible for Social
come due is not as certain for
Security might get an average
public workers as it is for private
annual pension equal to 60 percent of final earnings. If tha:t
workers.
worker retired from a mid-size or
Conclusion
large private company, his/her
pension plus Social Security
ALEC's conclusions were derived
would average 59 percent of final
from flawed research that exsalary.
posed the organization's ideology.
Public sector employers also
According to recent research,
have changed the way they
when similar public sector and
finance pensions. Since the
private sector occupations are
1970s, public employee pensions
compared, compensation is comhave steadily moved away from
parable. The only advantage
:t~ay-as-you-go to an actuarial. public workers may enjoy relative
B.sed reserve system that mir· to workers in the private sector is
-rors the pension funds of private .· better pension coverage. Given
companies.
their lack of Social Security
In recent years, state and local
coverage, this single advantage
governments have occasionally
does not put public workers
adjusted their actuarial assumpahead of their private sector
tions to reduce pension contribucounterparts.@
Source: Bureau of Labor Statistics, Employee Benefit Survey, 1993-94.
FALL 1996.
Fighting...
• "So What's Wrong With
Contracting Out?" A fact sheet
containing anti-contracting out
arguments and examples
that's suitable for use as a
handout or for talking points
Services).
• "What's Your Bid? AFSCME's
Guide to Public/Private
Competition." This booklet
provides guidance on how to
approach competitive bidding
Services).
• "The Privatization/ContractingOut Debate." A collection of
anti-privatization articles
Services).
• "Contracting Problems." A
series of fact sheets summarizing media reports on horror
stories involving specific com·:
panies (Department of
Research and Collective
Bargaining Services).
• ''At What Cost to the Public?
- The Inherent Risk in
Contracting Out Public
Services." A. summary of some
media accounts of contracting
out horror stories (Public
Mfairs Department).
• "Not in the Public Interest:
Five Faulty Assumptions
Behind Contracting Out
Government Services." A .
response to several myths
about privatization (Public
Mfairs Department).
• "Privatization: Safety Net for
Sale?" Materials on contracting out social services (Public
Policy Department).
Research on specific companies,
assistance in analyzing RFPs or
bids, or general help in fighting
privatizationis available from
the Department of Research and·
Collective Bargaining Services at
202/429-1215. @
...
7
impose more restrictive eligibility requirements on Medicaid than those in existence on
July 1, 1996, except that legal
immigrants are automatically
ineligible for Medicaid.
• State welfare programs may
continue under federal waivers
granted before October 1,
1996, even if they do not comply with all terms of the new
law.
PROTECTING OUR MEMBERS:
AVOIDING PRIVATIZATION
Historically, the AFDC program was largely immune to privatization. To guard against corruption, federal law required the
operation of AFDC by workers
covered under a merit system.
Under the new law, the merit system requirement is eliminated.
States may now contract with
any organization to administer
welfare.
As states design their own programs, they may continue to provide for public administration of
the system or may rely on the private sector. Our task is to protect
our members in state welfare
laws or through the collective
bargaining process. An argument
in our favor is that food stamps,
Medicaid, and foster care programs are not block-granted
(and, therefore, must still operate
under ·a merit-based person:ri~t
system), so it makes little sense
to privatize the eligibility review
function for welfare. This is especially true if a state integrates the
various assistance and employment programs (the one-stop
approach).
States are also required to
establish "state disbursement
units" for the collection and disbursement of child support payments. The units·may be operated
by the state, by contractors or by
local government provided they
are linked by an a11tomated information network. 8ontractors
have been particularly eager to
6
establish a niche in child support
enforcement activity.
Contracting-out protections
range from including the former
federal merit system requirement
in state law or otherwise prohibiting contracting, to protecting members against layoffs or
demotions. Back-up protections
include:
• a requireme~t for competitive
bidding and a level playing
field if consideration of contracting out is inevitable; and
• successorship language to
maintain AFSCME as the
exclusive representative
should work be privatized or
transferred to another layer or
agency in government.
AVOIDING DISPLACEMENT
Although there is near universal agreement that the work
requirements in the welfare bill
are unrealistic, states must nevertheless place recipients in
"qualified" work activities.
Subsidized public and private
sector employment, community
service programs and work experience refurbishing public housing are some of the qualified
activities. AFSCME members
. currently work in these activities
and, thus, face possible displacement by welfare recipients
required to work.
At AFSCME's insistence, the
law includes "anti-displacement"
language. It specifically prohibits
the placement of a welfare recipient in a work activity:
a) when any other individual is
on layoff from the same or substantially equivalent job; or
b) if the employer has terminated the employment of a regular .
employee or otherwise caused an
involuntary reduction of its
workforce in order to fill the
vacancy with a welfare recipient.
In addition to the federal
language, stronger antidisplacement language can be
written into state law or collective bargaining agreements.
Specifically, we should seek
restrictions in state law against
the conversion of a "regular"
position to a workfare position
even when no current employee
would lose a job or is on layoff.
There are various ways to negoti- /"\
ate protections in contracts.
~
I
• Bargaining unit jurisdiction language prohibits work
that is normally performed
within a bargaining unit from
being performed by any
employee outside of the unit.
• Direct anti-displacement
language explicitly prohibits
individuals receiving public
assistance from displacing bargaining unit employees, being
employed in lieu of recalling a
former bargaining unit
employee to work, or being
used to prevent promotional
opportunities, etc.
• Joint labor/management
training programs for
"workfare" allow the placement of welfare recipients in
public jobs for a defined period
(such as. 60 to 120 days), at the
end of which the welfare recipient "graduates" to a regular
bargaining unit job at negotiated wage and benefit levels.
• Notification and concurrence language requires that
the employer notify the union
and obtain its concurrence
when it decides to use workfare placements.
PREPARING FOR THE
WELFARE/WORK PROGRAM
With the new focus on work,
eligibility review will be deemphasized. New jobs will be created in job development and
placement and in case management. As states and counties
develop their new welfare systems, AFSCME needs to be at the
table. A joint labor/management
approach based on employment
security and commitment to the
success of the new welfare system
may be the best way to keep our
Continued from page 5
unit jobs at 14 hospitals in
Philadelphia. Employers with
contracts with the union are
required to hire from this
registry. The service can
verifY employees' prior work
· · performance, licensure and
certification.
~~
As part of their campaign to
secure better paying jobs with
benefits for low-wage workers
in the city of Baltimore, the
Solidarity Sponsoring
Committee, a new organization of low-wage workers
sponsored by AFSCME and
Baltimoreans United in
Leadership Development
(BUILD), is establishing their
own temporary agency. The
rapid growth of the temporary
employment industry overall in Baltimore and the
predominant use of temporaries by the fjtate and city
governments prompted this
move. The agency, WeCare,
will concentrate its efforts in
two specific market niches:
clerical and light industrial
markets. Targeted clients
include the state of Maryland,
the city of Baltimore, as well
as local hospitals. WeCare will
seek arrangements with client
firms that provide secure
f)
temporary employment
opportunities for its members
and pay a living wage and
benefits.
The Department of Research
and Collective Bargaining
Services has ~>Omple contract
Language available on
securing rec:ognition and
benefit~> for part-time and
te1nporary worhers, including those described above.@
La~
e uiring Contractors ino
redecessor's Em loyees Stan
he Displaced Worker
Protection Act in the ·
District of Columbia
became effective in Aprill994.
The law covers contractors with
25 or more employees in food,
janitorial, building maintenance
and health care services. It'
specifies that when a service
contract changes hands, the new
contractor must keep the
previous contractor's employ~es
for a 90-day period if they ha"V:Eil,.,
been employed for eight month's
or longer. At the end of the 90day period, contractors must keep
those employees who receive
satisfactory evaluations. The law
aims to protect workers from
losing their jobs when contractors .
change.
Contractors challenged the law
in court saying it infringed on
.
their rights. A lower court agreed ·
with the contractors saying that
the law "altered the balance of
power between labor and
management," requiring
contractors to bargain with any
existing unions. This decision
was appealed to the U.S. Court of
Appeals for the District of
Columbia Circuit. This court
overturned the lower court's
decisjon saying that the law did
not infringe on contractor's
rights. The Supreme Court
refused to hear an appeal
(Washington Service Contractors
Coalition v. District of Columbia,
US SupCt, No. 95-896, 2/26/96)
and let the decision stand. ®
first time in a long time, California is contributing to national
job growth and this helps boost
the totals. With allthe new jobs,
though, only 26,000 of February's 700,000 were in the
important manufacturing
sector-considered a gauge of the
6
strength of the overall economy.
If job growth is good, why did
the stock market plummet when
the job numbers were released?
Financial analysts worry that if
the economy is growing "too
much," the Federal Reserve Bank
will not reduce, and may even
. raise, interest rates. This means
businesses will have to pay more
to borrow money, which means
they will have less to show as
profits. So February's job growth
made analysts expect higher
interest rates, which triggered
stock and bond market declines.@
•I
ompetitive bidding is being
touted by governors and
mayors across the country
as a way to reduce costs and increase efficiency. In a new twist
on the old theme of simply .contracting out, public employees in
)aany places are now being required to compete with private
companies to win contracts to
provide services. AFSCME does
not endorse competitive bidding,
especially the way it is done· in
many jurisdictions. The soundness of the concept is dehatable,
the sincerity of its proponents •
questionable, and the process '...
rarely unbiased. However, when~
the only other alternative is certain job loss, we must ensure that
the rules and procedures governing competitive bidding are
impartial and fair, that decisions
are based on sound statistical
analysis, and that public employees are treated as equals in the
competition.
When competitive bidding for trash
collection began in Phoenix, public
workers lost several competitions
with the private sector before they
were able to bring the work back inhouse. Recently, after several years of
11--house operation, a private contractor gained a new toehold by underbidding in one sanitation district. In
I•
the union nor management w1ll
have the information to put
together the most cost-effective
bid. The commitment and backing of management is generally
necessary for a bid to be taken
seriously.
Indianapolis, where joint AFSCME-management proposals have a good
win rate, 20% of the bids end up
going to contractors.
LEVELING THE PLAYH~G FIELD
When competitive bidding
can't be avoided, here are some
ground rules to follow:
Access to Resources
Insist That Bids Are Prepared
by Joint Union-Management
Teams
In response to our opposition
to contracting out, an employer
may suggest that the union submit a bid along with potential
contractors. Resist this suggestion. The union is not a business
with the resources and capital to
take over an operation. Moreover,
working independently, neither
®
·.
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":-):~·:. :·:: :·>,- ·.. '~ ·:· :· :::\·~ ,'
... ~· ·'..: :: ·-: ~ .,-: : . ' .
· Co~p~titl~~ Biddirig~:,:::.:::.::.::::pa·g~ 1 .
The Changi~ 9· Face .
.Health ·care;.. :::.~:;·;_.::~;::~ .. ;;;;;,page·,3
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Insist That Bids Are Prepared
on the Employer's Time With
Appropriate Technical
Assistance
Preparing a bid can take weeks.
or even months of work time. It
will require not only the time of
the affected employees and supervisors, but a variety of skills,
knowledge, and specialized assistance from other .in-house staff or
outside consultants. Clerical help
will also be required. It is the
employer's responsibility to make
this assistance available.
Ill
··,
AFSCME smLEMENii:.;,; ..~ ..... pa~e 4 :.
THE ECONOMY ......:.: .. :............ p~~e B.
..
• Training Must Be Provided To
Those Submitting Bids
Employees should be offered ·
training on the agency's competitive process, including budgeting,
cost analysis, and proposal writing. Practice in writing and analyzing non-binding bids is also
helpful. If the employer is unwill-
Continued on page 2
ing to provide adequate training,
an experienced proposal writer
can be assigned to the group submitting a bid.
In Massachusetts, Council 93 negotiated the creation of the Office of Competitive Bidding within the State
Department of Mental Health. The
office, overseen by a joint union-management board, hired a professional
staff to prepare in-house proposals to
compete directly with private mental
health service providers.
....
...
The federal government, the state of
Texas, Cincinnati, Ohio, and
Washington, D.C., have adopted the
10% threshold. The state of Maryland
requires a savings of at least 20% for
any service contract costing up to
$1,000,000.
Responsible Procurement
Practices
•
Contractors Should Be
Required to Pay Fair Wages
and Benefits
Unless contractors are
required to pay their employees
living wages and benefits, those
who pay low wages and provide
no health insurance or other benefits will have an unfair advantage. Taxpayers may well end up
paying for those employees'
health care costs, or for food
stamps, or housing subsidies. In
addition, high turnover rates
associated with low wages could
lead to lower quality services.
This issue has been ad.d.ressed in
several different ways:
a Series of Successful' In• After
House Bids, The Process
Should Stop
If one of the goals of competition is to determine whether the
public sector is the most efficient
provider, a series of wins should
be sufficient to make the point.
The bidding process takes time
that could be used more productively.
After the Indianapolis public works
department won a series of competitions for pothole repair, the city
declared the department the most
cost-efficient provider and has
stopped putting the work out to bid.
Rhode Island's law which requires
contractors· to pay the in-state prevailing wage including benefits f(Jr the
type of work being contracted: ...
. ...:
.
A Baltimore, Maryland, ordinance
requiring all city contractors to pay a
minimum "living wage" starting at ·
$6.10/hour in 1996.
A law in Massachusetts which requires
state contractors to pay the public sector
entry level wage or the average private
sector wage, whichever is lower. It also
requires that health insurance be provided.
Phoeni;; Requests for Proposals
(RFPs) for sanita~ion services which
include a requirement that contractors provide health insurance to their
employees.
Bid Teams Should Have the
Right to Bid on Any Public
Work
Competition is a two-way
street. If public employees are
forced to compete against private
contractors, those functions
already performed by private contractors should likewise be subject to in-house competition.
In-house teams should also have
the right to solicit work from
other agencies.
CD
California's statute which prohibits
contracting based on savings due to
"lower wages and benefits .."
2
The Indianapolis sign shop has
expanded its work to include making
signs for other jurisdictions in the
area.
Contracting Must Be
Restricted to Cases of
Substantial Savings
In the competitive bidding
process, a shift from public to private service delivery should occur
only when a savings of at least
10% can be well documented.
This margin acknowledges the
many risks associated with contracting and. the wide margin of
error of many cost comparison
studies.
til
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The Portland, Oregon, Bureau of
Water Works has a joint labor-management committee, including
AFSCME Local189, charged with
developing methods to prepare inhouse bids for construction work that
has been contracted out.
....
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.
.
e Hiring and Purchasing
Practices Must Recognize the r
Demands of Competition
In a competitive environment,
delays in hiring and purchasing
can make the difference between
keeping work in-house and losing
it to contractors. Tighter staffing
and inventories require organizational commitment to fill vacancies and orders rapidly. Otherwise,
contractual levels of service may
not be met. Purchasing practices
may need to be revised. With
tight cost competition, leasing
specialized equipment is often
more attractive than purchase .
A SAFETY NET: JUST IN CASE
Even the most experienced
competitors can lose. Therefore,
safety nets are necessary to protect workers who may be displaced. The strongest protection,
but the most difficult to obtain, is
full employment security. Affected
employees· can be transferred into
vacant positions. If necessary,
they can be retrained for other
jobs within the jurisdiction. When
: public work is not available, the
contractor can be required to fill
positions
among the dis. placed. Infrom
all cases, emphasis
should be placed on maintaining
existing wage and benefit levels
and union recognition.
..
Washington, D.C., requires that any
city employee displaced by contracting out be hired by the contractor and
be paid wages and benefits comparable to those paid city employees for
the same work.·
The City of Phoenix has an informal
no-layoffpolicy associated with its
competitive bidding program. City
workers whose jobs have been eliminated by losing a competition have
been assigned to other city work.
Indianapolis included in its RFP for
the operation of its waste water treatment plant a requirement that the
successful bidder recognize and negoContinued on page b
/
tiate with the union. As a result,
AJi'SCME now has an agreement
with the contractor. AJi'SCME also
negotiated a memorandum of understanding with the city providing
1~mployment guarantees.
The federal government's Office of
Management and Budget (OMB)
Circular A-76 governing federal contracting procedures requires agencies to
exert maximum effort to find available
in-house positions for affected employees and to pay reasonable costs for
training and relocation. Displaced
employees also have first right of
refusal for contracted jobs for which
they are qualified.
...
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altogether. A carefully written
SOW will deter fly-by-night contractors from bidding and force
contractors to compete on more
equal terms with in-house staff.
Preparing the In-House Bid
The in-house bid should represent the union and management's best effort in competing
with the private sector. Management and labor should use the
. opportunity presented by the bid
writing process to examine existing operations for ways to improve quality and efficiency.
Since the in-house bid repreTHE COMPETITIVE BIDDING
sents a new way of working, the
PROCESS
costs associated with the new
approach need to be calculated.
Once the ground rules for parIn many cases the calculations
ticipating in the bidding process
are
similar to those used in costare established, the bidding
ing
a
labor agreement. Old budprocess itself begins. This process
get
or
expenditure reports may
-has four key steps: shaping the
offer
some
useful cost informastatement of work, preparing the
but
should
never be pretion,
in-house bid, calculating the total
sented as the bid.
contracting cost, and comparing
The total cost of the in-house
in-house costs with the total conbid, which will be compared with
tracting cost.
the cost of contracting out, is the
Shaping the Statement ofWork
sum of two types of costs: direct
) The Statement ofWork (SOW)
and indirect. Direct costs are
---defines the services to be providthose items, like wages, benefits,
supplies, materials, and printing,
ed and standards to be met. Whosolely associated with providing
ever wins the contract, whether a
the service. Only the wages and
private contractor or in-house
benefits or'front-line workers and
staff, will have to provide the sersupervisors who provide the setvices specified in the SOW as it is
vice should be included. Signifiultimately presented in the Invicant cost savings have occurred
tation for Bids (IFB) or Reque11);
for Proposals (RFP).
through
reducing the number of
·'
supervisors as a result of work
When possible, the union .
redesign.
should be involved in drafting the
Wages for vacant staffposiSOW to insure that it accurately
reflects the services being provid- : tions, or for employees who have
not been replaced while on uned. Employees currently doing
paid leave should not be included.
the work targeted for contracting
Benefits should be based on an
should be consulted to clearly
individual accounting for each
determine the services they now
employee, rather than a single
provide. The actual scope of serbenefit estimate for all employees.
vices may be broader than those
Indirect costs, also called oversuggested by individual jobdescriptions.
head costs, are associated with
administrative and support serContracting can be used as a
vices proyided to more than one _
. back door attempt to redv.ce the
quality of services by intentional- . function. These costs are generally narrowing the scope of work.
. . ly allocated among functions by a
formula. Examples of indirect
j:>iscovery of this may help to
/.tight off the contracting effort
costs are payroll services and
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SPRING 1995
legal services.
The in-house bid should only
include those overhead costs
which would be eliminated, or
"go away," if the service were
contracted out. Otherwise, the
bid will overstate the amount of
savings resulting from contracting. The allocation of overhead
should be examined carefully. It
should be kept at the lowest possible level.
Calculating the Total Contracting
Cost
In order to determine whether
cost savings justify contracting
out, the in-house bid should be
compared with the total cost of
contracting out the service. The
total cost of contracting is greater
than simply the lowest contractor
bid. It is determined by the following formula:
Total Contracting Cost =
Contractor Bid + Administrative
Cost+ Conversion Cost- New
Revenue
o The Contractor Bid
The contractor cost is the total
cost the contractor proposes to
charge for the service. When there
_are multiple bids it will typically
be the lowest acceptable bid sub: · mitted by a qualified contractor.
:
..
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..
e Administrative Cost
The cost of administering and
: monitoring the contract should
be added to the contractor's bid.
These costs generally range from
10% to 20% of the bid, with the
high end applying to small dollar
contracts and the low end applying to larger contracts.
o Conversion Costs
One-time costs associated with
the transfer from public to private operation should also be
added to the contractor's price.
These costs include payments to
displaced workers, such as unemployment compensation, accrued
Continued on page 6
5
Competitive Bidding
annual and sick leave, and severance payments. Costs of training
employees to take another position in government may also be
included. Other conversion costs
include fees for terminating leas··es, the cost of unused equipment
and facilities, and the cost of
preparing facilities or equipment
for transfer to the contractor.
• New Revenues
Any new revenues the agency
would receive as a result of contracting out should be deducted
from the contractor's cost. Likewise, proceeds from the sale of
any equipment or facilities whic~
will no longer be needed could be
deducted. These revenues should
not be counted unless it is certain
that they will be received.
Comparing the In-House Cost
With the Total Contracting Cost
Once the Total Contracting
Cost and Total In-House Bid are
determined, the cost savings
associated with contracting out
are calculated by subtracting the
contracting cost from the inhouse bid:
Cost Savings= Total In-House
Bid- Total Contracting Cost
.
savings. The best way to save
money and achieve innovations in
the workplace is to give front-line
workers the flexibility, authority,
and support to make decisions on
the job, and to cut the wasteful
layers of bureaucracy that separate front-line workers from decision-makers.
In many settings, however,
competitive bidding to retain jobs
may well become another front in
the war against contracting out.
Each time the public sector wins
a competition, it provides direct
evidence that public employees .
can provide high quality services
more efficiently than the private
sector. !I
For More Information ...
If you need additional
information on any of the
issues discussed in this article, please contact the
Department of Research and
Services at 202/429-1215.
.
'
Changing Face ofHealth Care
applied to expensive or over utilized procedures like open heart
surgery or caesarean sections.
These parameters, in most
instances, have a sound medical
base. However, they are also the
source of much controversy within the medical community. Critics
note that standardized protocols
may not be appropriate for all
patient populations and. that they
eliminate individual clinical decision-making by doctors and nurses.
The decision whether to retain
work in-house will depend on the ·
jurisdiction's policy on mandatory cost ·savings. In jurisdictions
. without a minimum savings re:
quirement, contracting out can
occur whenever there are any
cost savings, even if only one dollar. In jurisdictions that require a
minimum level (generally 10%) of
cost savings before switching to
contractor-provided services, the
e Information Technology
cost savings must be compared to
Advances in information techthe in-house costs to see if they
:
nology
allow providers to compare
meet that level.
costs department by department.
. Productivity can be measured,
THE ALTERNATIVE:
taking into account staffing levels
REDESIGNING
and the patient census. Personnel
GOVERNMENT :'
costs account for more than 50%
'
Competitive bidding is a risky . . of total hospital costs. If a department has higher staffing costs
and disruptive way to achieve cost
6
relative to the patient load than
similar departments in other
hospitals, management may look
to reduce the number of employees or their skill mix.
Since patients treated at pub.
.lie hospitals tend to be poorer
( ·~
and, consequently, sicker than at
'
suburban community hospitals,
simply comparing census and
staffing does not show the whole
picture. Yet, because these factors are hard to quantify, they
are often not considered.
*
Work Redesign
From 1945 until the early
1980's, when health care dollars
were flowing freely, hospitals
went on a major building spree,
creating tremendous bed capacity. At the same time, registered
nurses' salaries were relatively
low, so providers could afford to
use them more. Hospitals, in
fact, advertised their use of RN s
as a way of drawing patients to
fill the beds they had built.
We are now seeing the effect of
these actions. Nationally, 34% of
hospitals beds are unfilled. Nursing jobs are disappearing through
attrition or layoffs, or these jobs
are being redesigned, often without any input from the nurses.
Duties performed in the past by
nurses are now performed by
fewer, lower paid and less skilled
personnel. Aides are being asked
to perform duties beyond their
traditionaljobs, often without
proper training or compensation.
These changes are sometimes
called "patient-focused care,." a
system where a few nurses oversee care, assisted by teams of
aides and other personnel.
While the redesign of hospital
work can create more interesting
jobs and potential career advancement for some staff, the true
"focus" of these moves is the
bottom line. Management consultants claim that if patient-focused care systems were enacted
across the board, 100,000 nursing jobs would be eliminated and
$2 billion or more a year would
be saved. Hospital staffs could be·
!J
..
cut by one third.
• Nurse Practice Acts
State laws, called nurse practice acts, regulate nursing care.
tJVIodi~cations to ~hese acts have
:.'Jeen mtroduced m a number of
states, usually allowing RN s to
delegate nursing duties to nonmirses. An Oregon bill, for example, would limit situations in
which RN supervision of nursing
assistants is required. Supervision is now required when
"patient care" is being provided.
The bill would require supervision only when "nursing care" is
provided.
e Hospital Utilization
More and more care is now
provided in outpatient settings,
continuing a trend that began
years ago. Propqnents of managed care say that preventive
care leads to improved medical
outcomes and reduces the length
of stay and cost needed to treat
conditions. Some hospitals now
open their administrative department on weekends in order to be
.able to discharge patients sooner.
) Critics charge that there is too
much pressure to push people out
of the hospital too soon-or to not
admit them in the first place ..
Nursing homes and home health
care will continue to see patients
who are sicker than the patients
of only a few years ago.
o Formation of Networks
•
>:
With the growth in managed
care, in which health plans send
.their members only to hospitals
which they are affiliated with, it
is important for hospitals to
become part of a managed care
network in order to maintain a
patient base. Acute care hospitals
are marketing themselves to
HMOs, insurance plans, smaller
hospitals without specialized
facilities, clinics, doctors' groups,
and other sources of patients:
e Growth in For-Profit Health
Care
As h~alth care becomes very
-""mg busmess, and the market
·~.
SPRING 1995
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share becomes increasingly
important, for-profit hospital
chains and managed care companies are taking over. It is estimated that excess hospital capacity
may eliminate as many as half of
the nation's hospitals. The forprofits intend to be in the survivinghalf.
e
.Waivers
Medicaid waivers to provide
home and community-based services have been operational in
some states for many years, allowing those states to fund their
deinstitutionalization efforts and
provide services in the community. A newer approach is for states
to seek waivers to use managed
care to control costs in the Medicaid program and, in some cases,
provide access to people who have
been outside the program.
Since community-based services are typically subject to less
oversight than institution-based
services, the result is that more
and more individuals-elderly, developmentally disabled, mentally
.: ill, and acute care patients-are
being treated in less regulated
: environments.
..
..
...:
What Can We Do?
Bargain for Job Security and
Quality
Recently a precedent-setting
collective bargaining agreement
was reached by AFSCME 1199C,
the National Union of Hospital
and Health Care Employees, and
several Philadelphia hospitals .
The agreement preserves jobs
while permitting the hospitals
the flexibility to adapt to the new
landscape.
The agreement lasts until the
year 2000. It establishes an
Employment, Training and Job
Security Fund to provide services
to meet industry work force needs.
It requires 30 days' notice when
jobs are restructured, with union
membership portable whenever
union and non-union jobs are
combined. Employees who lose
their jobs or are transferred to a
Ell
.
...:
.
:
.
.:
lower paid position are compensated .
• Watch for Waivers
Medicaid managed care
waivers. ("1115 waivers") are now
in effect in 10 states. While they
have often meant trouble for our
members, that need not be the
case. Massachusetts recently was
. required to include the Boston
. City and Cambridge Hospitals
(both public hospitals serving the
. poor and uninsured) as "essential
community providers" in its
. waiver, guaranteeing them some
. funding. Waivers can also be
structured to include employee
protections .
:
States must apply to the federal
government
for a waiver. The
.
responsible state agency can tell
: you whether a waiver application
been filed and may be able to
. has
provide a copy of the state's com: prehensive health plan .
..
.
.
.
.
..
..
.
...
...
.::
...
.
..:
:.
....
..
.,
• Watch for Changes in Market
Share
Health care today is about
attracting the patients who pay
the bills, so every attempt must
be made to draw patients to
AFSCME-represented facilities.
Many health care workers do not
use the facilities at which they
work. Nor do other AFSCME bargaining units, and other unions .
These groups have significant
clout in the health care marketplace. That clout can be used to
ensure that quality (including
adequate numbers of staff who
are adequately compensated) is
as important a factor as cost in
deciding which providers to use.
As managed care, private forprofit corporations, and government cost-cutting transform the .
delivery of health care services,
AFSCME must ensure that our
front-line health care workers are
part of this change and that the
quality of care all of our members
receive through their benefits
plans is protected. liil
7
COLLECTIVE BARGAINI G
SEnLEMENTS
IN PRI
IND
ajor collective bargaining
settlements, covering
1,000 workers or more, reached
in private industry during the
first 6 months of 1989 provided
wage adjustments averaging 3.7
percent in the first contract
year and 3.3 percent annually
over the life of the contract
according to the Bureau of
Labor Statistics.
The last time these parties
negotiated, usually In 1986 or
1987, wage adjustments
(increases, decreases, and
freezes) averaged 2.1 percent
the first contract year and 2.5
percent annually over the contract term. This is the first time
since this comparison was
introduced in 1982 that new settlements specified larger wage
adjustments over their term
than were called for in the contracts they replaced. This
reflects the restoration of wage
· cuts in some industries (for .
example, steel) as well as ware
gains that were sharply higher
than in prior agreements (for:~·~·
example, health care facilities,
primarily for nurses).
. Lump-sum payments were
included in contracts covering
25 percent of the workers under
settlements reached in the first
half of 1989. The proportion of
all workers under major agreements with such provisions was
42 percent. Lump-sum payments
- typically made instead of
wage increases - are not
included in the computation of
wage adjustments.'
Contracts for 8 percent of the
workers under settlements in
the first 6 months of 1989 had a
6
Y
cost-of-living adjustment
(COLA) clause. COLA clauses
were dropped from contracts
covering about 2 percent of the
workers under first-half settlements and no new ones were
negotiated. The proportion of
all workers under major agreements with COLAs was 39 percent. Settlements data exclude
potential wage changes resulting from COLA clauses because
they depend upon future price
changes.
The BLS also measures
changes in. compensation rates
(wages and employee benefits
costs) in settlements covering at
least 5,000 workers. Settlements
reached in the first 6 months of
1989 provided compensation
adjustments of 4.3 percent in
the first contract year and 3.4
percent annually over the life of
the contract.
n
'
.
Third Quarter Private
Sector Bargaining
Activity
There were 939,000 workers
under 137 contracts that had
expired or been reopened, but
had not been renegotiated or
ratified prior to July 1, 1989.
continued on page 7
New
dy Indicates that
Privatization Hurts Minorities
recently released study by
the Joint Center for Political Studies concludes that contracting out hampers the
employment opportunities and
general economic advancement
of minorities. Robert M. Suggs,
associate professor at Arizona
State University College of Law
and formerly a senior research
associate at the Joint Center,
studied 10 cities with a combined black and Hispanic population comprising 20 to 50 ·
percent of its citizenry. The 10
cities were Boston, Newark,
Trenton, Fort Lauderdale, Memphis, Jackson (Miss), Grand
Rapids, Houston, Phoenix, and
Thcson. In the ten cities, privatization tended to reduce the
quality of employment available
to low-skilled minority workers
as well as the quality of public
services available to low-income
citizens. It appears that black
public sector employees have
the greatest cause for worry.
The concentration of black
employees in low-ranking positions makes them especially
vulnerable to layoffs resulting
from contracting out. When·
these workers lose public
employment, the jobs they find
in. the private sector usually
have lower wages and benefits.
In many cases, the st~bility of
subsequent employment is also
reduced. For example, in Theson, Phoenix, and Houston,
when tree planting and trimming were public sector occupations, they were stable and
well-paying. When contracted
out to private firms, the positions were seasonal or part-time
and paid much less.
Copies of the complete report
can be purchased through the
Order Department, Joint Center
for Political Studies Press, 4720
Boston Way, Lanham, MD 20706
or call (;301) 459-3366. •
)

Collective Bargaining Reporter articles on privatization

Transcription

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