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Arbitration Panel Awards New Haven the Right to Privatize a Substantial Portion of School Custodians

 In what will no doubt be viewed as a landmark decision, an interest arbitration panel has issued an award which will allow the New Haven Public Schools to privatize 86 of the 186 positions in its custodial and maintenance union, and in the process save nearly $4 million dollars.

Faced with skyrocketing pension and health insurance cost which are expected to outpace the growth in revenues over the foreseeable future, the City of New Haven and its Board of Education were forced to look for ways to substantially cut operating costs.  Having already laid off nearly 300 employees over the last two fiscal years, the Board and the City began to look at other options.

Among the options considered was outsourcing services that could continue to be provided at a substantial savings.  An option that emerged was the outsourcing of school custodial and related services, which cost the Board $16 million per year.  As a result of an RFP, the Board found a national firm willing to perform the same services for just $8 million, which would mean a net savings to the budget of $8 million per year. 

 Although the Board had contract language which arguably provided it with the right to unilaterally subcontract this work, given the State Board of Labor Relations propensity to require that such language be crystal clear, and the consensus that the language could be construed as less than so, the Board made the tactical decision to propose in negotiations clearer language which unequivocally gave it the right to subcontract union work.

Not surprisingly, the union, an AFSCME Local, refused to engage in any meaningful discussion of the issue, and as a result, the case went into binding interest arbitration.  What followed was a nearly year- long battle, complete with picketing featuring the likes of Al Sharpton, and which included angry outbursts during the proceedings.  

In the end, the Board’s last best offer proposed that 86 of the 186 jobs would be outsourced, rather than the entire unit.  In other words, a core component of district employees would remain in place and be supplemented by non-union employees.  Faced with a choice between the compromise position of the Board, and the refusal of the Union to offer any meaningful solution, the Panel selected the Board’s position. 

In addition to the right to subcontract a substantial number of positions, the Board also won the elimination of a number of contract provisions which were considered impediments to operating efficiently.  It also achieved a number of material changes in the areas of pension and healthcare, including the elimination of retiree health insurance for new hires. 

The decision is notable in that it is one of, if not the first time, a state arbitration panel has awarded sweeping rights to a municipality to privatize union work in an effort to save money.  Whether the New Haven award is the result of the proverbial perfect storm, or is a harbinger of things to come, has yet to be seen.  It does, however, provide strong precedent for other Towns/Cities and Boards of Education looking for ways to deliver services in a more economical way in these difficult economic times.