Compulsory Arbitration PDF Print E-mail

The Mandate: While the Taylor Law is a comprehensive labor relations statute that provides many important privileges for public sector employees -- including the right to organize and to negotiate the terms and conditions of their employment -- it has the effect of increasing employer costs by placing key decisions concerning the salary and benefits of local public safety employees outside the control of local officials and local taxpayers. In the event an impasse is reached in negotiations between a municipality and a police or firefighter union, the final step in the impasse resolution procedure is the use of compulsory (or binding) arbitration.  A three person panel of state-approved arbitrators convenes to consider the issues which have led to the impasse and the positions taken by both parties.

The hearing produces verbal testimony and documents to support each party. The panel then meets to decide how each outstanding issue will be resolved and issues a written report containing its award. An arbitration panel has significant power and can issue an award which requires an increase in taxes. However, an arbitration panel is not responsible for its award and is not accountable to taxpayers. Over the years that the compulsory arbitration law has been in existence, many unions have sought to rush to arbitration and avoid substantive negotiations.

The Cost: As one might expect, an unelected panel of non-residents of a community are not going to be sensitive to the financial capacity of local taxpayers when it issues compulsory arbitration awards. As a result, the binding arbitration system in New York leads to contracts that are more expensive for taxpayers than they would otherwise be without such a system.  The impacts of binding arbitration on police and firefighter salaries and benefits are described in this Empire Center for New York State Policy report.

The Solution: While this statute imposes an unfunded mandate upon municipalities and, ideally, should be repealed, an acceptable first-step would be to amend the statute in those areas that municipal officials have identified as most problematic for taxpayers:

Definition of ability to pay. The statute has no definition of its phrase "ability to pay." It should be amended to require that an arbitration panel accord substantial weight to "ability to pay" when making an award and the term should be defined as the ability of a public employer to pay all economic costs imposed on it by an arbitration award without requiring any new or increased level of taxation, or a reduction in municipal services, for each year or years addressed by the award.

It should be noted that Chapter 67 of the Laws of 2013 amended the statute to say that for those municipalities deemed "fiscally eligible," the arbitration panel is compelled to "first and foremost," give 70% of its weight and consideration to the local government's "ability to pay." The panel must also "recognize and take into account" the constraints imposed by the 2% property tax cap. A municipality is considered fiscally eligible if it meets one of the following two criteria:
  •  A 5-year average full value tax rate in the top 25% statewide (i.e., above $6.57 per $1,000)
  • A 5-year average General Fund fund balance as a % of General Fund expenditures that is less than 5%

Final offer arbitration. Under the current arbitration process, each party submits their most recent bargaining demands to the arbitration panel and offers evidence in support of the demands presented. The arbitration panel has the authority to make an award as it deems appropriate and is not required to accept either party's position on a particular matter at impasse. Some states use a different process and require that an arbitration panel pick the final offer of either party.  Some practitioners who are familiar with both types of compulsory arbitration contend that the "final offer" requirement forces a convergence of bargaining demands, as opposed to what is currently used in New York. The compulsory arbitration law should be amended to require that the arbitration panel select the final offer of one of the parties.