AWC Personnel News - June 2007 (Plain Text Version)

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In this issue:
Legislation Eliminating Gain-Sharing Faces Legal Challenges
Pension System Contribution Rates
Other Personnel & Labor Relations Legislation
CONTRACT LANGUAGE: The Good, The Bad, The Ugly
Latest CPI Data
How Effective is Your New Hire Orientation Process?
Jurisdiction of Human Rights Commission Clarified
Child Support Programs Save Employers Time, Money
Federal Minimum Wage to Increase
Are You on E-mail Overload?
Mark Your Calendars!

CONTRACT LANGUAGE: The Good, The Bad, The Ugly

Ever look at a contract with no clue as to what the parties meant by certain language? Ever leave a bargaining session convinced about the meaning of new language only to discover the union believed the opposite?

We all know that the line between good and bad contract language can be very fine. And when the language is bad, the results can be problematic – and even disastrous.

Participants at last month’s Labor Relations Institute were treated to a very informative presentation on contract language by attorney Bruce Schroeder of Summit Law Group. He shared examples of good, bad and ugly contract language, along with practical and constructive suggestions for getting the language right.

Here are his “hallmarks” for what generally differentiates good contract language from bad or ugly contract language:

The language is straightforward
The terms are defined and consistently used throughout the contract
The language is unambiguous
The language is flexible where flexibility is a virtue, and rigid where rigidity is a virtue

Use of Cost of Living Formulas

Mr. Schroeder pointed out that a real problem in the wage article of many labor contracts involves sloppiness in the use of cost of living formulas. Here’s just one example where “ugly” contract language can have significant financial consequences.

Example of an “Ugly” CPI Formula
Effective January 1, 2007, the Employer agrees to increase wages by 100% of the cost of living, as measured by the CPI for 2006.

Problems with the Ugly CPI Formula

Doesn’t specify CPI-U vs. CPI-W. There is no reference to which CPI index is used – either All Urban Consumers (CPI-U) or Urban Wage Earners and Clerical Workers (CPI-W).
Doesn’t specify which geographical index was intended. There are at least six indices available for employers in various parts of Washington State. Depending on which index is used, the wage adjustment would differ significantly. The Bureau of Labor Statistics recommends that parties use the U.S. All Cities index because it is less volatile than the more limited geographic indices. However, employee groups in high-cost locales may argue strenuously for an index that more closely reflects inflationary pressures in their own backyards.
Doesn’t specify which release date to use. U.S. CPI data is released monthly, Seattle-Tacoma-Bremerton data is released bi-monthly, and Portland-Salem data is released semi-annually.

It is wise to consider a CPI formula that is published early in the budget cycle. For example, if the budget is developed and finalized through the fall and early winter of a calendar year, it is usually good to have a CPI formula drawn from the summer preceding the budget development.

Example of a Much Better CPI Formula
The Employer agrees to adjust the wage table contained in Appendix A by an amount equal to 90% of the percentage increase in the Seattle-Tacoma-Bremerton CPI-W from June 2005 to June 2006, effective with the first pay period after January 1, 2007. [Optional: with a minimum increase of 2% and a maximum increase of 4%.]

Attributes of a Good CPI Formula

Specifies either the CPI-U or the CPI-W and the geographical index to use
Specifies which release date to use
Relies on an index published early in the budget cycle
Uses a CPI formula less than 100% (particularly if the employer pays all or nearly all of health insurance premiums)
May include optional minimum and maximum increases, which can limit volatility

Management representatives who would like to see more of Mr. Schroeder’s suggestions for improving contract language – from management rights clauses to grievance procedures to health insurance issues – can e-mail Deanna Krell, deannak@awcnet.org, for a copy of his presentation.