Update by Ed Jacques.
Effective July 1, 2001, the City of Saginaw and its police officers agreed to contractual language which included educational incentive payments made in lump sums annually. While employees were obligated to make contributions to the pension fund for compensation received, no employee deductions were taken from the lump sum payment. In 2011, a member of the police department who was preparing for retirement made the usual inquiry about his Final Average Compensation (FAC) and the amount of his benefit. It was at that point that the union became aware that the education incentive annual lump sum payments were not being considered as part of FAC and that the pension contribution for members regarding this incentive payment was not being withheld.
The City agreed to develop a contribution system of deducting for such incentive payments moving forward, but there still existed the problem of the ten years during which those payments had been made but contributions not deducted on behalf of the individual employees.
The parties could not agree to a resolution and a grievance was filed by POAM and the matter submitted to arbitration. POAM President and Business Agent Jim Tignanelli argued that member contributions should have been deducted and applied over the years and it was not the fault of the union or members of the Department that they failed to realize that the City had not carried out its obligation in that respect. Upon such pension contributions being made by members, this compensation should be included for purposes of calculating Final Average Compensation. There had been a long standing practice of doing just that before a modification of the incentive program took place in 2001. There was nothing in the negotiations of that contract that would indicate an intent to change the process as previously followed.
The employer argued that the fact that employees were not charged contributions during the period between 2001 and 2011 is proof that the employer so regarded the incentive and that the Union and employees recognized and accepted it. Because no grievances were filed over the practice of not withholding contributions from pay, employees were acquiescing to that fact.
Arbitrator William P. Daniel disagreed in his opinion, stating that the process of paying individual members for obtaining college degrees was long-standing. He noted that these were not just educational credits, but rather courses that were job related, which would seem to denote that the parties agree that there is a job benefit by having these individuals better educated and hence better qualified to do the work that they were assigned. In other words, in agreeing to this initially in the contract, the employer intended to get a benefit from it, it wasn’t simply a windfall for certain individuals. When collective bargaining unit members went to college or attained a certain level of education, they were, in fact, accepting the employer’s offer.
The contract itself was silent as to defining the status of such lump sum payments for purposes of pension, so Arbitrator Daniel had to consider the history of the initial institution of the program to show its intention. There was a long-standing history of such and nothing in the collective bargaining agreement that specifically excluded such payments from being considered as a part of compensation. Finally, Daniel opined that a letter from the employer conceding that it had made errors in regard to FAC and that it failed to follow the agreed-upon practice of making contribution deductions needed to be given full weight and consideration because that recognition by the employer indicated that the initial complaint had merit.
The grievance was granted and in his award, Arbitrator Daniel ordered that such payments under the specific terms and practice of the parties constituted compensation for services rendered and therefore should be considered as part of the calculation of final average compensation. Those employees who retired may be credited upon payment by them into the pension fund of any contributions not previously made. Current employees are required within 90 days to make arrangements for contribution payments, and upon doing so, their compensation levels shall be duly credited. The City of Saginaw was also ordered to restore the Educational Incentive Program as set forth in the contract and make such deductions from employees’ pay as to be appropriate for future payments and arrange with employees the attainment of prior pension contributions which have not been made.
Jim Tignanelli was pleased with the decision.
“I knew what the past practice was and what the contract said,” stated Tignanelli. I was a little concerned about the outcome because Saginaw has experienced some financial challenges, but so have our police officers. I was relieved that the arbitrator wasn’t swayed by financial challenges, but rather focused on the verbiage and intent of the contract.”