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March 7 2013

Restrictions to Interest Arbitration

ILR's Adler and Kaplan examine proposed Taylor Law changes

Slow recovery to the financial crisis, decreased state support, the continuing financial burden of unfunded economic mandates such as Medicaid and increased pension costs, and limitations to increasing local tax revenues, cumulatively, challenge New York governments' ability to balance their budgets.In his 2013 Budget Message, Governor Cuomo proposes new changes to New York's Taylor Law which would limit wage increases to firefighters and police officers outside New York City.Specifically, the proposed changes restrict interest arbitration panels from awarding increases of more than 2% annually when bargaining with "distressed communities".Interest arbitration is used when unions and employers reach impasse during their collective bargaining process.

In response to Governor Cuomo's proposed changes to the Taylor Law, ILR lecturer Lee Adler and Cornell ILR senior Ariel Kaplan have researched whether these proposals would be of help to New York's governmental entities that are truly in financial distress. Adler and Kaplan conclude that the changes would not offer financial relief to these communities. "(T)he proposed changes in New York interest arbitration law, if passed, would constitute the most sweeping restrictions ever imposed upon public sector collective bargaining since the Taylor Law was passed in 1968,"says Adler.

In the paper, Adler and Kaplan examine the existing research on interest arbitration and review New York state interest arbitration decisions since 2010.The following is a summary of the paper's main observations:

  • Research conducted over the last 40 years reveals that when comparing collective bargaining and interest arbitration the wage increases resulting from these differing processes are virtually similar.
  • Interest arbitration is not frequently used.Since 2010, police and fire unions in New York have used interest arbitration to solve their bargaining only 33 times.
  • A review of interest arbitration decisions reported by the New York State Public Employment Relations Board showed that less than a quarter of all interest arbitration awards since 2010 resulted in wage increases greater than 3 percent per year. 
  • High fire and police earnings, often used to justify cuts to public safety workers' wages and benefits, are best explained by a decline in the number of actual full time workers, and a continuing high level of service calls which require assignment with overtime pay of additional police and fire than normally scheduled.Payment of increasingly significant amounts of overtime payments to a shrinking number of emergency service workers results from strapped communities' unwillingness to hire sufficient numbers of emergency service providers. It does not occur from the wage increase results of interest arbitration decisions which have consistently been aligned with the wage increases that flow from collective bargaining.

Adler and Kaplan conclude that these restrictions, if passed, will negatively impact tens of thousands of emergency service providers without providing the financial relief that local governments need.According to the paper, "there is neither research nor credible explanation(s) for the governor's radical proposals, and they evidence an approach that ensures that our local governmental subdivisions will not receive from Albany the mandate relief they so desperately need." In short, the proposed changes will "end meaningful collective bargaining for these public safety workers, all without a good reason to do so," says Adler.

To read the full paper, click here.