INTEREST ARBITRATIONS

INTEREST ARBITRATION BEFORE ARBITRATOR MICHAEL ANTHONY MARR

SEATTLE, WASHINGTON In the Matter of the Interest Arbitration ) OPINION AND AWARD ) ) Case 26628-I-14-0652 ) between the ) WATCH SUPERVISORS ) COLLECTIVE BARGAINING ) AGREEMENT FOR THE INTERNATIONAL ORGANIZATION ) 2015-2017 BIENNIUM OF MASTERS, MATES, AND PILOTS, ) ) September 16, 2014 Union, ) ) and ) ) STATE OF WASHINGTON, OFFICE OF ) FINANCIAL MANAGEMENT AND ) THE WASHINGTON STA TE FERRIES ) DIVISION, ) ) Employer. ) OPINION AND A WARD · The above-referenced interest arbitration was heard before your Arbitrator on •. August 19 and 20, 2014 in Seattle, Washington. 1 The pro~eedings were transcribed by Katie A. Eskew, a court reporter from Bryers and Anderson. Therefore, as a general rule, the source for a statement of fact or alleged statement of faCt shall be followed by the last name the attorney, witness, or exhibit, shall be in parenthesis, and if applicable, include the page and line number.

1 This decision and award shall refer to many arbitrators. Therefore, the words "your Arbitrator" shall always be in reference to arbitrator "Michael Anthony Marr."

Your Arbitrator was mutually selected by the parties as the interest arbitrator for the above-referenced interest arbitration. Both parties were represented by professional and competent counsel at the arbitration hearing. The International Association of Masters, Mates and Pilots, Watch Center Supervisors, hereinafter sometimes referred to as the "MMPS" 2 or "Union" was represented by Rhonda J. Fenrich, Esq. The State of Washington, Department of Financial Management and the Washington State Ferries Division, hereinafter sometimes collectively referred to as the "WSFD," or "State" or "Employer" were represented by Assistant Attorney General Morgan B. Damerow. During the arbitration hearing 30 State exhibits and 24 Union exhibits were stipulated into evidence. Union Exhibit 1 was the cunent Collective Bargaining Agreement between the parties and shall sometimes hereinafter be referred to as the "CBA." The parties were given full opportunity to present evidence, call witnesses, and cross-examine witnesses. The parties also agreed to make closing oral arguments in lieu of written closing briefs on the second day of the arbitration hearing, August 20, 2014. Your Arbitrator's opinion and award is therefore due on or before October 1, 2014. 3 Your Arbitrator has reviewed the testimony and evidence presented during the arbitration hearing and the written transcripts of the proceedings. Your Arbitrator does not feel compelled to address all of the numerous arguments and issues raised by these professional advocates. Please note that this is not to be interpreted that your Arbitrator has not read and reread his notes, the transcripts and numerous pages of exhibits and carefully considered all arguments of counsel. Rather, your Arbitrator has elected to 2 ·nie acronym "MMPS" shall also refer to "Masters, Mates, and Pilots, Supervisor" or "Master, Mates, and Pilots Supervisors," depending upon the context of the statement in which the acronym is used.

3 RCW 47.64. l 70(c) provides that the resolution of all collect ive bargairing agreements between the Washingtru State Ferry Division and the unions that represent its employees must be resolved, either by way of bargaining or arbitration, no later than October I of each even numbered year.

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address only those elements that your Arbitrator is mandated to consider pursuant to the Revised Code of Washington, Chapter 47.64 which have had a significant impact on his decision-making process. Your Arbitrator, as a general rule, will not comment on matters he believes are irrelevant, superfluous, redundant, or rendered moot by his opinion and award. I. BACKGROUND The International Masters, Mates, and Pilots Union and the State of Washington, Office of Financial Management and the Washington State Ferries Division were unable to successfully negotiate the content of Rule 11.01 , 11.02, and 17.02 to their 2015-2017 collective bargaining agreement using the collective bargaining process. They were also unable to agree during bargaining process whether the relief Watch Center Supervisor is entitled to three percent (3%) premium pay. The issues, positions, and proposals of the parties were eventually set for interest arbitration before your Arbitrator pursuant to RCW, Chapter 47.64. These matters are. more fully discussed below. II. EXHIBITS State's Exhibits in Evidence by Number as Marked. 1. RCW 47.64.005 2. RCW 47.64.006 3. RCW 47.64.320 4. LRS Request to PERC - Interest Arbitration 5. 2014 OFM Transportation Outlook, 6. Operating Budget Instructions Cover Memo 7. OFM Marine Employees Compensation Survey/Durocher PPT KD edits 8. Ops Center Watch Supervisor 9. WSF Watch Supervisors Job Duties Breakdown 10. King County Transit Communications Coordinator Job Description 11. Port Captain - Foss 3

12. Operations Superintendent- Port ofTacoma 13. Watch Center Supervisor Duties 14. King County Comparator Email 15. King County Transportation Contract v.2 16. MM&P Ops Watch Supervisors Shift Differential 2014 Final 17. MM&P Watch Supervisors Costing 18. Leave Cash Out Costing 19. Watch Center Schedule 20. Watch Center Log 21. 2009-11 Opinion and Award MM&P MOW 22. 2011-13 Award 23 Sept 10 Decision and Aw ard 23. 2011-13 Award 23 Sept 2010 Decision (Wages) 24. 2013-2015 Opinion and Award 9/21/12 25. WSF Fact Sheet Feb 2014 26. WSF Ferry map regarding terminals, routes, and interstate highways. 27. WSF Ridership History 1951-2013 28. Ferry Fleet Guide June 2011 29. Letter from Michael P. Sellars, Executive Director, PERC, certifying issues. 30. MM&P 2013-15, Rules 8.7, 8.8 and 29. Union's Exhibits in Evidence by Number as Marked. 1. Current Collective Bargaining Agreement 2. MM&P Final Offer 3. 2011 OFM Salary Survey 4. WSF Vacation Comparison Chart 5. IBU Vacation Schedule 6. MEBA Vacation Schedule 7. Terminal Supervisor Vacation Schedule 8. IBU Arbitration Award for 2013-2015 CBA 9. MEBA Arbitration Award for 2013-2015 CBA 10. IBU CBA Salary and Vacation Schedule 11. Executive Salary Increases 12. WSF Strategic Plan on Pricing 13. 2013 WSF Ridership Statistics 14. WSF FY 2012 Route Statements 15. WSF Largest Ferry Documents 16. WSF Fuel Cost Mitigation Report 17. ATU Tentative Agreement 18. King Co. Job Description 19. June 2012 Transportation Revenue Forecast 20. June 2013 Transportation Revenue Forecast 21. June 2014 Transportation Revenue Forecast 22. OFM Projections - 2010 and 2012 23. The Culverts Case Injunction 4

4( 24. Major Transportation Accounts updated June 2010 Revenue Forecast III. THE WASHINGTON STATE FERRJES DIVISION The WSFD is a division of the Washington State Department of Transportation. (State Exhibit 25). It was created in 1951, is the largest ferry system in the United States and the fourth largest in the world. (State Exhibit 25). It is also the largest ferry system in the world in terms of the total number of vehicles (10 million per year) transported. (State Exhibit 25). It has 22 auto-passenger ferries, operates 20 terminals on 10 routes, has 450 departures per day, and approximately 1,800 employees. (State Exhibit 25). The WSFD is specifically designed to accommodate commercial vehicles and is the sole link for goods and services to Vashon Island and the San Juan Islands. (State Exhibit 25). The Seattle/Bainbridge Island route is its busiest route, carrying more than six (6) million riders per year. (State Exhibit 25). IV. THE WATCH SUPERVISORS' JOB RESPONSIBILITIES AND DUTIES The bargaining unit of Masters, Mates, and Pilot Supervisors consists of six (6) employees. (Williams at 126:9). The MMPS work a 24/7 schedule. (Williams at 126:12). They work together as a group to set their schedules and try to keep their overtime down.

(Williams at 126:20). There are times when supervisors work and there is no management official available. (Holder at 213:2-3). The number of hours that a management official would not be available depends on the shift. (Holder at 212:25­ 213: l). The MMPS are dedicated and long-term employees. (Williams at 128:21-25). There are no open positions. (Williams at 128:15-16). Two (2) supervisors are "long­ term" with the WSFD, two (2) have been with the WSFD for approximately nine (9) to 5

( ten (10) y ears, and two (2) have been with the WSFD for less than two (2) years. (Williams at 129:16). Some MMPS are retired, some were tired of working, and one found other employment. (Williams at 129:22-25). No more than one watch supervisor takes vacation leave at a given time unless there are very unusual circumstances. (Williams at 132: 19-20). The MMPS have a wide variety of tasks and responsibilities. (State Exhibit 8, Williams at 123:16-17). They are the focal point between the fleet management and terminals, law enforcement, Coast Guard, aid cars, and different fire departments that connect with the WSFD. (State Exhibit 8, Williams at 123:17-20, 148:21-149:25). The watch supervisors are responsible for disseminating communications between all of these groups. (State Exhibit 8, Williams at 123:20-22). Additional duties were added to the MMPS after September 11, 2001. (Vol 2, Braymer at 8:4-5). These duties included monitoring security issues and responding to the Coast Guard. (Vol. 2, Braymer at 9-13). The Coast Guard watches the MMPS very closely to make certain they respond with proper and timely reports. (Vol. 2, Braymer at 14-16). • . . The MMPS does "massive" amounts of recordkeepi~g which relate to vessels, the

EPA, and oil spills. (Williams at 123:23-25). They are also responsible for tracking revenue trips that are lost and ones that are regained due to service disruptions or a breakdown in the system. (Williams at 123:25-124:3). They track 835s, which are similar to deficiencies which the Coast Guard issues for repairs, and make certain that the 835s are closed in a timely manner. (Williams at 124:4-6). They work after hours with the dispatch department when it is necessary to contact Captain Williams, their supervisor, or

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a port captain for advice. (Williams at 124:7-10). Other duties of the MMPS include assisting the captains, after hours between 10:30 pm until 6:00 am, with dispatch. (Williams at 124: 10-12). The watch supervisors make everyone's life easier as they each are a jack-of-all-trades. (Williams at 137:1). The MMPS are evidently the eyes and ears of the decision makers in the absence of a port captain. (Vol. 2, Saffle at 43:11). The MMPS have saved Captain Saffle many sleepless hours at night. (Vol. 2, Saffle at 2-3). No other group of WSFD employees has the scope of authority that the MMPS has except for the port captain who is their supervisor and the crew resource manager who is in charge of the dispatchers. (Vol. 2, Braymer at 30: 17). V. WITNESSES During the arbitration hearing the State called six (6) witnesses, Dwayne E. Hanson, 4 Captain Pete Williams, 5 Kamaron Durocher, 6 Kim Grindrod, 7 Matt Hanby, 8 and Jerry Holder. 9 The Union called three (3) witnesses, Scott Braymer, 10 Marie Waterman, 11 and Captain Tim Saffle. 12 4 Mr. Dwayne E. Hanson has worked as a budget assistant to the Governor of the State of Washington, Office of Financial Management (Hanson at 20:8-10). One of his duties is to assist the Governor who in tum submits a budget to the Legislature regarding transportation finances. (Hanson at 20: 11-13). He has held this position for six (6) years. (Hanson at 20:25). 5 Mr. Pete Williams has been a Captain with the Washington State Ferry System for the last three (3) to four (4) years. (Williams at 122:22-23). He oversees supervisors. (Williams at 122: 18-19). 6 Ms. Kamaron Durocher has been employed for approximately two (2) months in the State's Human Resource Department and does salary compensation reports. (Durocher at 141 :25). 7 Ms. Grindrod has been employed since October, 2013 with the State as a compensation and policy analyst. (Grindrod at 172:3-4). 8 Mr. Matt Handy has been an operating budget program manager for the State for ten years. {Hanby at 198: 17-18, 20). 9 Mr. Jerry Holder represents the Governor's office as the lead negotiator for the State with the Union. (Holder at 202:25-203:3). IO Mr. Scott Braymer is the senior MMPS with 17 years ofexperience in the positon. (Vol. 2, Braymer at 5:2). 11 Ms. Marie Waterman has been with the WSFD for I 5 years, the last seven (7) to eight (8) ofwhich has have been as a watch center supervisor. (Vol. 2, Waterman at 35: 19). 12 Mr. Tim Saffie is the regional representative for the International Organization of Masters, Mates & Pilots for the last five (5) years. (Vol. 2, Saftle at 41 :9-10, 12). He also worked for the WSFD for 35 years, the last nine (9) years in various port captain positions. (Vol. 2. Saffie at42:20-19).

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VI. STIPULATIONS Most of the following stipulations were preliminary matters pnor to taking evidence: 1. All exhibits were admitted into evidence. (Arbitrator at 64: 1-5). 2. Mediation as required by RCW 47.64.210 had been met or waived pursuant to RCW Chapter 47.64.230. (Fenrich at 4:18-19, Damerow at 4:21).

3. The interest arbitration was properly before your Arbitrator pursuant to RCW 47.64. (Fenrich at 4:25, Damerow at 5:1).

4. The interest arbitration before your Arbitrator is governed by the RCW Chapter 47.64. (Fenrich at 5:5, Damerow at 5:6).

5. The parties agreed to submit the interest arbitration dispute for consideration and determination by a single arbitrator, that arbitrator being your Arbitrator, pursuant to Section the RCW 47.64.300(1)(2). (Fenrich at 5: 12, Damerow at 5:13).

6. The parties agreed that the classification of Ferry Employees covered by the interest arbitration are the Watch Center Supervisors, Relief Watch Center Supervisors, and On-Call Watch Supervisors. (Fenrich at 5: 17, Damerow at 5:18).

7. Executive Director Michael Sellars certified specific issues for the interest arbitration. (Fenrich at 5:23-25, Damerow at 6:4-5, State Exhibit 29).

8. None of the certified issues have been settle~ by the parties. (Fenrich at 6:10, Damerow at 6:11).

9. The parties agreed to oral closing argument in lieu ofwritten closing briefs. (Vol. 2, Fenrich at 63:10, Vol. 2, Dar:nerow at 63 :11).

VII. APPLICABLE LAW As noted above, the parties stipulated that the interest arbitration before your Arbitrator is governed by RCW 47.64. The policy declaration for RCW 47.64 is set forth in RCW 47.64.005 and provides as follows:

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The state of Washington, as a public policy, declares that sound labor relations are essential to the development of a ferry and bridge system which will serve the interests of the people of the state. RCW 47.64.006 further sets forth several public policy considerations for RCW 47.64:

The legislature declares that it is the public policy of the State of Washington to: (1) Provide continuous operation of the Washington state ferry system at reasonable cost to users; (2) efficiently provide levels of ferry service consistent with trends and forecasts of ferry usage; (3) promote harmonious and cooperative relationships between the ferry system and its employees by permitting ferry employees to organize and bargain collectively; ( 4) protect the citizens of this state by assuring effective and orderly operation of the ferry system in providing for their health, safety, and welfare; (5) prohibit and prevent all strikes or work stoppages by ferry employees; (6) protect the rights of ferry employees with respect to employee organizations; and (7) promote just and fair compensation, benefits, and working conditions for ferry system employees as compared with public and private sector employees in states along the west coast of the United States, including Alaska, and in British Columbia in directly comparable but not necessarily identical positions.

Also, RCW 47.64.320 (3) provides that your Arbitrator must be "mindful" of the legislative purpose and public policy set forth in RCW 47.64.005 and RCW 47.64.006 and is directed to consider the following factors: (a) The financial ability of the department to pay for the compensation and fringe benefit provisions of a collective bargaining agreement;

(b) Past collective bargaining contracts between the parties including the bargaining that led up to the contracts;

(c) The constitutional and statutory authority of the employer; (d) Stipulations of the parties; (e) The results of the salary survey as required in RCW 47.64.170(8);

(f) Comparison of wages, hours, employee benefits, and conditions of employment of the involved ferry employees with those of the public and private sector employees in states along the west coast of the United States, including

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Alaska, and in British Columbia doing directly comparable but not necessarily identical work, giving consideration to factors peculiar to the area and the classifications involved;

(g) Changes in any of the foregoing circumstances during the pendency of the proceedings;

(h) The limitations on ferry toll increases and operating subsidies as may be imposed by the legislature;

(i) The ability of the state to retain ferry employees; G) The overall compensation presently received by the ferry employees, including direct wage compensation, vacations, holidays and other paid excused time, pensions, insurance benefits, and all other direct or indirect monetary benefits received; and

(k) Other factors that are normally or traditionally taken into consideration in the determination of matters that are subject to bargaining under this chapter.

Accordingly, your Arbitrator has applied the declaration set forth in RCW 47.64.005, the public policy considerations set forth in RCW 47.64.006, and the factors set forth in RCW 47.54.320 (3) to the certified issues that are the subject of this Opinion and Award as set forth below. VIII. CERTIFIED ISSUES . Michael P. Sellars, Executive Director of the Public Employment Relations Commission, by letter dated July 23, 2014 (State Exhibit 29) certified the following issues for interest arbitration: Rule 11 Classification of Wages Rule 11.01 Basic Wage Rate Rule 11.02 Shift Premium Rule 11.03 ReliefPosition Premium Rule 17 Vacations Rule 17.02 Vacation Leave 10

Rule 11 Classification and Rates of Pay IX. OVERVIEW OF BARGAINING HISTORY RCW 47.64.320 (3) (b) provides that a factor that your Arbitrator must be mindful of in awarding or denying any proposal is past collective bargaining contracts and bargaining that led to those contracts. The Watch Center Supervisor classification was created in 1995. (State Exhibit 21-3). At this time they were paid under the regular government employee schedule. (State Exhibit 21-2). In October of 2004 the International Organization of Masters, Mates, and Pilots became the bargaining unit for the MMPS. (Employer Exhibit 21-3). The 2005-2007 and 2007-2009 collective bargaining agreements were negotiated by the Union on behalf of the MMPS. (State Exhibit 21-3). Since 2007, the State an.d the MMPS have been unable to successfully negotiate their differences regarding Rules 11.01, 11.02, and 17.02. Each round of bargaining has led to interest arbitration proceedings and arbitration awards regarding each Rule. In the interest arbitration proceeding before your Arbitrator the Union proposed for the first time that the Watch Center Supervisor working the relief position receive a premium of an additional three percent (3%) pay. The State in each interest arbitration argued that it had an inability to pay. The first interest arbitration award was issued by Arbitrator Michael H. Beck who issued a decision and award on September 26, 2008. (Employer Exhibit 21). The second interest arbitration award was issued by Arbitrator Timothy D. W. Williams on September 23, 2010. (Employer Exhibit 22). The third interest arbitration award was issued by Arbitrator Luella E. Nelson on September 21, 2012. (State Exhibit 24). The awards of

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Arbitrators Beck and Williams were never implemented due to the State' s financial situation. The award of Arbitrator Nelson was implemented and is part of the current CBA. Each arbitrator's award regarding the proposals of the parties as they relate to the interest arbitration before your Arbitrator shall be discussed more fully below. X. OVERVIEW OF ABILITY TO PAY RCW 47.64.320 (3) (a) provides that a factor that an interest arbitrator must be mindful of is the financial ability of a department to pay for compensation and fringe benefits. The record of testimony indicates that the financial ability of the WSFD to pay for compensation and fringe benefits is largely dependent upon the financial condition of the State of Washington, the actions of the Governor, and the approval of the Legislature. The ability to pay is most certainly a paramount consideration that an interest arbitrator will consider in determining if .a proposal for either the Union or the State should be awarded. The burden of proving the inability to pay in this is on the State. As noted in Elkouri & Elkouri, How Arbitration Works, (7th Edition, 2012), at page 22-97: Employers who have pleaded inability to pay have ·peen held to have the burden of producing sufficient evidence to support the plea. The alleged inability must be more than speculative and failure to produce sufficient evidence will result in a rejection of the plea.

While an employer who claims "inability to pay" has the burden of proof on the issue, if financial exigency appears to be continuing and the employer is using reserves to pay for current costs, arbitrators will temper any wage increase. But even if past dismal financial results support the employer's position, the claim may be discounted if the evidence shows that the employer's fiscal prospects are improving.

An employer's deteriorating ability to pay may be established by financial projections of future expenses and income. An arbitrator observed that interest arbitration awards that are issued in the present period and that

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cover wage and benefits paid out over future periods must rely on financial data that are prospective in nature.

The WSFD's inability to pay argument was presented by Mr. Dwayne E. Hanson, a budget assistant for the Office of the Governor. He began by explaining exhibits and data through an impressive power point presentation that related to the State's operating budget ($67.6 Billion Dollars), its Capital budget ($3.6 Billion Dollars), and the transportation budget ($9.3 Billion Dollars). The evidence indicates that the State of Washington and the WSFD has budget problems. (State Exhibit 5). The Legislature has restricted portions of the Ferry System budget for specific uses such as $113.2 million dollars strictly for fuel. (Hanson at 39:5-13). Capital expenditures, by statute, cannot be used for operating expenses. (Hanson at 39:14-24). Seventy-five percent (75%) of the transportation budget is supported by a gas tax. (Hanson at 27:20, State Exhibit 5). Gas tax revenues are expected to drop. (Hanson at 47:5-10). Gas taxes are the largest source of revenue for the transportation budget. (Hanson at 28:2-3). The Legislature funds the transportation budget. (Hanson at 30:12­ 25). The transportation budget includes 1.2 billion dollars in bond retirement and interest payments. (State Exhibit 5). Although there is a directive to look for ways to conserve and cut expenditures up to 15%, all transportation agencies were specifically excluded from the directive. (Hanson at 69:22). Ferry fare box revenues are not enough to fund the ferry account. (Hanson at 28: 19-23). Other revenue sources include taxes, fees, permits, and tolls. (Union Exhibits 19, 20, 21, and 22). While discretionary ferry trips declined after fare increases they are beginning to rise again but peak usage has not been reached. (Hanson at 34:13-14, State Exhibit 27).