The Empire State was a scene of growing public-sector labor unrest in the mid 1960s. Government employees from Long Island to Buffalo were lobbying for the same organizational and collective bargaining rights as private-sector workers. Municipal unions in New York City had been negotiating contracts since the late 1950s, yet essential city services had been repeatedly interrupted by strikes or threats of strikes-culminating in a disastrous walkout by transit workers in January 1966.
From this atmosphere of recurring crisis would arise a trailblazing new statute establishing the ground rules for unions to organize public employees and collectively bargain contracts with New York's counties, cities, towns, villages, school districts, public authorities and special districts.
The Taylor Law was designed to create a comprehensive framework for orderly resolution of labor-management disputes in state and local government. After a rocky start, it succeeded. Strikes by public employees in New York are now rare. The vast majority of contract negotiations are settled without resort to third-party intervention.
But New Yorkers have paid a steep price for labor peace. Over the past 40 years, the number of state and local government jobs has grown at more than twice the rate of private-sector employment in New York, and the average pay of state and local government workers is higher than that of private-sector workers in most regions of New York.
Personnel costs are a major element in what Governor Eliot Spitzer has described as a "perfect storm of unaffordability" threatening the state's future. Employee salaries and benefits-which account for 71 percent of municipal government operating expenses and fully three-quarters of school district expenditures across New York-are a key ingredient in the nation's heaviest state and local tax burden. Efforts to reduce this burden are hampered by aspects of the Taylor Law that have evolved to the distinct disadvantage of management.
Informed by the perspective of an experienced labor negotiator, this paper reviews the background of the Taylor Law and highlights Taylor Law provisions and precedents in need of reform. These include:
Compulsory "interest arbitration" for police and firefighters, which has tended to drive up salaries for uniformed services while hindering creative approaches to improving efficiency and reducing costs. The primary issue in binding arbitration should be a more rigorous standard of "ability to pay" on the part of the affected community, and the option of "last-best-offer" arbitration should be introduced.
The Triborough Amendment, which has perpetuated generous pay arrangements, especially for teachers. The law should be amended to prevent automatic pay increases in an expired contract from continuing in the absence of a new contract.
Public Employment Relations Board (PERB) rulings on "mandatory items of negotiation" that restrict the ability of government employers to pursue subcontracting of services and other cost-saving alternatives.
The 40th anniversary of the Taylor Law also is an appropriate time for state officials to strongly reaffirm their commitment to the law's prohibition on strikes by public employees. Any weakening of the law's penalty provisions for unions and employees who participate in illegal strikes clearly would be against the public interest.
This paper is organized into three sections. The first reviews the background and development of the Taylor Law. The second explains how subsequent amendments and PERB rulings have limited management options. The third recommends needed reforms to better balance the playing field between the legitimate interests of government employees and broad public interest. Interspersed throughout are narrative exhibits and charts illustrating the cost and consequences of the Taylor Law.
Government with a Union Label
The nearly 2 million New Yorkers who are union members comprise 24 percent of the state's workforce-the highest rate of unionization in the country, double the average for all states, although New York has tracked the national decline in union membership over the past 35 years.
Fully half of all union members in New York State work in the public sector. Although most states allow at least some government workers to unionize and collectively bargain, New York has the most heavily unionized public-sector workforce of any state. At least 69 percent of New York government workers-including a small component of federal employees-are union members, compared to a national average of 36 percent.
These estimates probably understate the true extent of unionization in New York's state and local governments and school districts, where supervisors (such as principals, police sergeants and maintenance foremen) as well as line workers commonly are unionized. at least one out of every eight workers in the empire State is a unionized government employee; in the rest of the country, the ratio is roughly one out of 19.
1. The Backdrop
Employees in New York were granted the right to organize and collectively bargain under Article 1, Section 17 of the state Constitution, adopted in 1938. At that point, however, government employers were under no reciprocal obligation to negotiate with their worker organizations. Prior to the 1950s, courts across the country generally held that collective bargaining by government employees could be denied under the common-law doctrines of sovereign immunity  and illegal delegation of powers. As late as 1937, even President Franklin D. Roosevelt opposed public-sector unionism.
The civil service salary grading system, including annual pay increments, was introduced in New York in 1937. By 1941, civil service employees won the right to a hearing if faced with disciplinary charges. In 1955, all competitive class employees were granted tenure. Public pensions, guaranteed by the state constitution, were available to virtually all full-time public employees by the 1950s. In other words, before collective bargaining commenced anywhere in New York's public sector, the floor from which public employee unions would negotiate was already strewn with the kind of benefits that private sector unions had to negotiate for themselves.
Government employee organizations became increasingly assertive in the years immediately following the end of World War II, which saw an increase in labor militancy in all sectors of the economy. A strike by Buffalo teachers precipitated the passage in 1947 of New York's first statutory prohibition on public employee strikes, the Condon-Wadlin Act.
New York State courts historically had treated public-sector strikes as illegal and never hesitated to enjoin unions from striking. Condon-Wadlin, however, created new penalties that would come to be seen as draconian. Under the law, striking workers were automatically fired and could be reappointed only if they derived no financial benefit from the strike. Employee compensation following a strike could be no higher than pre-termination levels for at least three years, and rehired workers were placed on probation for five years.
Adopted the same year as the federal Taft-Hartley Act, which reined in some of the rights granted to private-sector labor unions under the New Deal's Wagner Act, New York's Condon-Wadlin law had mixed effectiveness through the 1950s. However, after a series of strikes including walkouts by New York City teachers in 1960 and 1962, the law came to be widely seen as flawed and unenforceable. In 1963, it was temporarily amended. Striking employees no longer automatically lost their jobs but risked incurring a "2 for 1" penalty-two days lost pay for each day they refused to work. The probationary period for strikers was reduced from five years to one year, and the pay freeze period following a strike was reduced from three years to six months.
The 1963 Condon-Wadlin amendments were due to expire in 1965, at which point the more onerous penalties of the original law would return. That same year, employees of the New York City Welfare Department struck for 28 days-the longest strike in the history of the state at that time. Over 5,000 workers were automatically "terminated," and 19 union leaders were jailed. The law itself became a major obstacle to making a settlement. Consequently, the strike settlement called for: (1) a fact finding panel; (2) the release of the jailed union leaders; and (3) the suspension of Condon-Wadlin until the union could test the law's constitutionality in the courts.
In January 1966, Mike Quill, the President of the Transit Workers Union (TWU), led a 12-day strike in New York City that resulted in economic losses estimated in excess of $100 million per day. The transit strike was the final straw for Condon-Wadlin. The Legislature ultimately granted amnesty from Condon-Wadlin penalties to both the welfare and transit workers. Governor Nelson Rockefeller appointed a committee to "make legislative proposals for protecting the public against the disruption of vital public services by illegal strikes, while at the same time protecting the rights of public employees."
The committee was chaired by Professor George W. Taylor of the University of Pennsylvania, an eminent industrial relations expert and labor arbitrator.
The Taylor Committee
Mayor Robert F. Wagner had granted collective bargaining rights to nearly all of New York City's municipal employees under an executive order issued in 1958. President John F. Kennedy issued an executive order extending collective bargaining rights to federal employees in 1962. But as of 1966, there was still no similar collective bargaining law on the state level in New York. Condon-Wadlin dealt only with strike penalties.
Although New York City employees enjoyed extensive organizational and collective bargaining rights by the early 1960s, the city's public-sector labor relations were in frequent turmoil. This was seen in Albany as evidence of the need to move beyond the purely punitive approach on a statewide basis.
"There is now widespread realization that protection of the public from strikes in the public services requires the designation of other ways and means for dealing with claims of public employees for equitable treatment," the Taylor Committee said in the opening to its March 1966 final report.
Strikes are "an integral part of the collective bargaining process" in the private sector, the committee said, but the same should not be true in government. It explained the difference as follows:
A work stoppage in the private sector involves costs primarily to the direct participants. They also undertake considerable risk in fixing the terms of settlement; the volume of sales and opportunities for employment are at stake. On the other hand, a strike of government employees ... introduces an alien force in the legislative processes. With a few exceptions, there are no constraints of the marketplace. The constraints in the provision of 'free services' are to be found in the budget allocation and tax decisions which are made by legislators responsive to the public will.
While acknowledging that some public services might be viewed as more "essential" than others, the committee indicated that it was unable and unwilling to identify which was which. It ultimately concluded that a strike by any group of state or local government workers was not compatible with the orderly functioning of the democratic form of representative government.
The committee also pointedly rejected compulsory arbitration as a dispute-resolution tool.
Compulsory arbitration is not recommended. There is serious doubt whether it would be legal because of the obligation of the designated heads of government departments or agencies not to delegate certain fiscal or other duties. Moreover, it is our opinion that such a course would be detrimental to the cause of developing effective collective negotiations. The temptation in such situations is simply to disagree and let the arbitrator decide.
Blueprint for a Revolution
The key recommendations of the Taylor Committee in 1966 would form the basis for the law adopted a year later. The committee said the Condon-Wadlin Act should be replaced with a new statute that would, among other things:
grant public employees the right to organize for collective bargaining purposes;
empower state and local governments and other political subdivisions to recognize, negotiate with, and enter into written agreements with organizations representing public employees;
create a state Public Employment Relations Board (PERB), consisting of three "public members" appointed by the governor with Senate confirmation, to assist in the resolution of disputes between unions, public employees and their employers.
continue the ban on strikes, broadly defined as "concerted work stoppage(s) or slowdown(s) by public employees for the purpose of inducing or coercing a change in the conditions of their employment."
The public Sector Compensation Edge
State and local government employees were paid higher average salaries than private-sector workers in eight out of 10 regions of New York as of 2006, as shown in Table 1. Private-sector average salaries were higher only in New York City and in the Southern Tier.
On a statewide basis, the average state and local government salary was only 83 percent of the average private-sector salary. However, excluding the well-paid financial sector, employees of private firms earned slightly less than state and local government employees.
Wages and salaries are only part of the compensation package, however. The public-sector premium is larger when benefits are considered as part of the mix. As shown in Table 2, state government employees-whose benefit package is typical of those available to most public employees in New York-have more paid time off than private-sector workers and are universally eligible for retirement and health benefits not available to all privatesector workers. one additional and invaluable benefit is job security: government workers are tenured in their jobs, and layoffs in government are exceedingly rare and generally affect only on the most junior employees.
The committee recommended that employees who participated in an illegal strike should be subject to misconduct charges under Section 75 of the Civil Service Law-which contains penalties up to and including dismissal, depending on the extent of the misconduct-and that the representation privileges of striking unions, including the valuable dues check-off, should be subject to cancellation by PERB. A union guilty of striking would not be reinstated under the committee's recommendations without agreeing that it would not assert the right to strike going forward.
Underscoring its desire to see the prohibition on strikes enforced, the committee also recommended that it be "obligatory by law" for a public employer's chief executive or legal officer to initiate court action for injunctive relief as soon as it became apparent that a public employee strike was imminent, and to institute a criminal contempt proceeding against a striking union as soon as such an order was violated.
As for the specific steps to be followed in negotiating contracts, the committee recommended that collective bargaining agreements include procedures "developed by the parties themselves" to be invoked in the event of an impasse. In the event these procedures failed to produce a settlement, the committee recommended PERB intervention through a series of steps, proceeding from mediation, through fact-finding and possible voluntary arbitration. If a final fact-finding report was not accepted by both sides, the committee recommended a show cause hearing before the employer's legislative body-usually an elected board or council-with the chief executive officer taking on a negotiator's role separate from the legislative body.
The committee concluded that when all other efforts to resolve an impasse failed, the ultimate determination should rest with the people's elected representatives.
Taylor Law I
In 1967, after a year of political wrangling-and over the strenuous objections of public employee unions angered by the prohibition on strikes-the Legislature passed and Governor Rockefeller signed the Public Employees Fair Employment Act, which immediately became known as the Taylor Law.
The law, which took effect in September 1967, incorporated nearly all the key recommendations of the Taylor Committee Report, including the creation of PERB. However, it left room for substantially equivalent local statutes, which paved the way for a separate but parallel Collective Bargaining Law to be passed and administered by New York City.
Public employee unions received some invaluable benefits in the statute-including the right to automatic dues check-off, and certification on the basis of dues authorization cards alone without a secret-ballot election, except in cases where more than one union was vying to represent a group of employees.
Taylor-Made Trends: wages, Salaries and Employment
The state and local government share of total public-and private-sector wage and salary disbursements reflects the relative size of government payrolls. In New York, this percentage began to rise significantly above the national average around the time the Taylor law was passed in 1967, as shown in Figure 2. By the mid-1970s, the state and local government share of wages and salaries in New york was 20 percent above the national average. While this difference narrowed slightly during subsequent economic expansions, the empire State remained significantly above the national average by this measure for the next two decades.
Wages and salaries for state and local government workers in New York represented 12.8 percent of the total paid to employees in all sectors of the economy in 2006, compared to a national average was 12.4 percent.
There appears to have been a convergence between New York State and the rest of the country since the mid-1990s, when state and local government salaries in the empire State began dropping relative to wage and salary totals for all industries. However, this trend is misleading. New York's pay equation has been increasingly distorted by a significant increase in the share of all wages and salaries flowing to employees of finance, insurance and real estate (FIRE) firms-especially since the stock market boom of the 1990s. as of 2006, the FIRE sector employed only 8 percent of New York workers but accounted for nearly 22 percent of total wages and salaries in the state. By comparison, FIRE firms account for only 10 percent of total U.S. wages and salaries.
Adjusting the totals to exclude the FIRE sector, public-sector pay in New york has remained significantly higher than the national average throughout the past four decades. as of 2006, state and local government accounted for 16.3 percent of all non-FIRE wages and salaries in New York, compared to a national average of 13.7 percent. Among the 10 most populous states (including New York), which have the most mature and diversified economies, the next-largest public-sector payrolls were found in California, where 14.9 percent of all non-FIRE wages and salaries flowed to state and local government workers.
Since 1967, state and local government payrolls in New York have grown by 53 percent, adding 472,000 jobs. The private sector added 1.3 million jobs, a growth rate of only 23 percent. In other words, the growth rate for government was more than twice the growth rate for the private sector in New York. State and local government employment also increased throughout the country during this period-but only 20 percent faster than private payrolls. Private-sector employment in New York experienced sharp ups and downs during the 1970s and in the wake of recessions in 1990 and 2001. But state and local government employment has been less volatile.
The Taylor Law granted state and local government employees the right to collectively bargain with their employers over "terms and conditions of employment," including wages, salaries and hours. However, in line with the Taylor Committee Report, the law did not otherwise specify what government employers had to negotiate ("mandatory" subjects), what they need not negotiate ("nonmandatory" or "permissive" subjects), and what they could not negotiate ("prohibited" subjects). The answers would evolve over the next several decades on the basis of PERB decisions.
Less than two years after it first took effect, in the wake of strikes by New York City teachers and sanitation workers in 1968, the Taylor Law was amended to revive the "2 for 1" penalty that had been part of the 1963-65 version of the Condon-Wadlin Act. Consistent with the Taylor Committee recommendations, the 1969 amendments also lifted the ceiling on fines against unions involved in illegal strikes and provided for legislative determinations as the ultimate end of unresolved impasses.
Impasse procedures under the Taylor Law, as amended in 1969, consisted of four successive steps that would become familiar to New Yorkers following the twist and turns of local government and school labor relations over the next few years:
3. superconciliation (i.e., post-fact finding mediation or voluntary arbitration); and, if all else failed,
4. legislative determination (i.e., a final settlement by vote of the local school board, city council or other elected body with budgeting power).
New York's Tax Burden
New york as of 2005 had the nation's second heaviest state and local taxes relative to income, according to unadjusted Census Bureau data. (Wyoming, which taxes minerals more heavily than people, was highest.) New York's taxes per $1,000 of personal income were 34 percent heavier than the 50-state average. But the difference wasn't always so great. As recently as 1962, state and local taxes were only 9 percent above average, placing New York well down on the list of states ranked by overall tax burdens. The upsurge in New York's relative tax level in the mid-1960s followed two key events: the establishment of the state's Medicaid program, and the passage of the Taylor law.
2. Revision and Wrong Turns
Within eight months of its enactment, the Taylor Law was described as having an "almost revolutionary effect" on public-sector labor relations. By the fall of 1968, an additional 360,000 state and local government employees had been unionized, in addition to the roughly 340,000 (mostly in New York City) who were already engaged in collective bargaining before the law passed.
It was inevitable that the new law would undergo a period of trial and testing-in and out of court. Municipal officials and school boards were often less well prepared to begin collective bargaining than professional union negotiators. Misunderstandings and miscalculations were frequent during a period when negotiators on both sides were still trying to establish the law's limits.
Newly empowered teachers' unions around the state proved especially willing to flout the law's anti-strike penalties during the first decade-and-a-half of the Taylor Law's existence. Indeed, the majority of public employee strikes in New York during the 40-year history of the Taylor Law have involved teachers. In the law's early years, many were undoubtedly influenced by the example of New York City's militant United Federation of Teachers (UFT) and its nationally prominent leader, Albert Shanker, who led several strikes during the 1960s and 70s.
In 1973, the Taylor Law was amended to specifically exclude retirement benefits from the definition of "terms and conditions of employment" considered mandatory items of negotiation. As explained in the most authoritative legal treatise on the law, "this provision was included because of growing concern over the cost of public employee pensions and the excessive burden they were putting on taxpayers, particularly because of their open-ended costs."
The 1973 amendment marked the last major legislative change to the Taylor Law that was specifically designed to protect taxpayers from rising employee compensation costs.
Interest Arbitration Arrives
The Taylor Law was in existence for only seven years when, in 1974, the State Legislature adopted amendments making binding "interest arbitration" by a tripartite panel the final step in resolving police and fire impasses. There was no evidence unions representing uniformed services were having an exceptionally difficult time settling contracts without the ability to strike or to invoke arbitration. Rather, the changes more likely reflected the lobbying effectiveness of police and firefighter unions in a statewide election year. The law was regarded as an "experiment" when enacted, but it has been extended every two years for the past 33 years.
Big Government, Big Headcount
With 62 employees per 1,000 residents, New York's state and local government workforce is 14 percent larger than the New York has a bigger state and local national average. As shown in Figure 5, government workforce than any of the 10 most populous states. The Empire State ranks 11th overall on this measure.
Armed with the right to seek compulsory arbitration of contrast disputes, police and firefighter unions would ultimately start winning bigger percentage pay increases than other municipal employees. The average salaries of police and firefighters over the past decade have risen faster than those of non-uniformed state and local government employees, other than teachers, outside New York City. Their salaries are now considerably higher, without even factoring in costly added benefits (see Figures 7, 8 and 9 in "The Police and Fire Pay Premium").
The Strike-Out Record
The Taylor Law was designed to prevent the kind of public-sector strikes that periodically disrupted public services in various New York State cities in the 20 years following the end of World War II. However, once the new law had opened the floodgates to mass unionization of New York's public sector, strike activity and job actions by government workers sharply increased. In the first 15 years after the Taylor Law was enacted in 1967, the state Public employment relations Board was asked to intervene in 299 walkouts, the vast majority involving teachers' unions. Strikes averaged 20 a year in the 1970s, despite PERB's willingness to impose the Taylor law's full sanctions on striking workers and their unions in roughly two-thirds of those cases.
The trend abruptly changed in the early 1980s. Since 1983, PERB has recorded only 41 strikes of government workers in New York-an average of fewer than two per year. Compared to the tumultuous 1960s and 70s-with some significant exceptions-the last quarter-century has been an era of labor tranquility in the state and local government throughout New York.
Does the Taylor Law-and in particular the 1982 Triborough amendment freezing salary increments in the absence of a contract-deserve credit for the change?
Some-but clearly not all. In fact, federal labor statistics show that strikes of all sorts, in both the public and private sectors, decreased sharply across the country in the 1980s. (See chart.) Analysts have offered a variety of reasons for the trend, including corporate restructurings and increased global competition affecting the once heavily unionized manufacturing sector. a watershed event in the history of american labor relations came in 1981 with President ronald Reagan's tough response to a strike by federal air traffic controllers. Overwhelming public support for Reagan's decision to fire and replace all the striking workers played an important role in changing the climate of labor relations across the country.
Another possible explanation for the decrease in New York public-sector strikes: The walkouts of the 60s and 70s succeeded in winning enriched pay and benefits for the vast majority of state and local government employees in New York. Increasingly shielded from management pressure by Taylor Law amendments, court precedents, and PERB rulings, the state's public-sector unions by the 1980s no longer had much to strike over.
Compulsory arbitration promoted this salary surge in several ways:
As the Taylor Committee had predicted, the ability to turn to compulsory arbitration created an incentive for many government employers and their unions to simply "disagree and let the arbitrator decide."
Arbitration made it possible for some government employers to steer contract talks towards "imposed" settlements with costs that otherwise would have been difficult to defend before voters. Elected officials could thus avoid direct responsibility for big pay increases-pinning the blame on the unelected arbitrator-while avoiding tension with police and fire unions.
Employers have settled on terms they would otherwise find unacceptable out of fear that an arbitrator would award an even worse result. Affluent communities, in particular, have less difficulty settling for what seems to be the going rate in arbitration awards to police and fire unions-even if this rate is somewhat inflated by the fear of arbitration. This ignited a vicious cycle: since arbitrators often attached insufficient importance to a community's ability to pay higher salaries, poorer municipalities suffered from the ripple effect of generous precedents set by richer areas.
Because many communities-for better or worse-engage in some form of pattern bargaining, whereby the settlements of every unit have a significant impact on the settlements with other units, generous awards to police and fire unions also have had a way of driving up salaries for other employees. In a poor community where the police might get a 4 percent raise from an interest arbitration panel, public employers have felt pressure to give the same raise to blue collar, white collar and even non-union workers.
In addition, arbitrators in police and firefighter cases generally have not been inclined to address creative means of financing pay increases through concessions in other areas, such as employee health insurance contributions. Meaningful contributions have rarely been awarded in interest arbitration. While health insurance contributions for newly hired workers have been awarded in some cases, these contributions have generally ended as the employees climb the pay ladder. Such agreements therefore produce little long-term savings for the employer.
Public employers have had much more success negotiating increased health insurance contributions in contracts with teachers and other non-uniformed employees not subject to the compulsory arbitration provisions. Bargaining units unable to lean on the crutch of compulsory arbitration are more willing to consider alternatives when an employer is sufficiently determined to win offsetting savings from other areas of the contract.
The Police and Fire Pay Premium
Salary statistics indicate that police and firefighter unions outside New York City have used their access to compulsory arbitration to build a significant edge in salaries over other state and local government employees.
Between 1997 and 2007, the average salary for police officers and firefighters outside New York City rose 59 percent, from $54,308 to $86,099, according to data from the state retirement system.[1 ]Police and firefighters now earn more than twice as much as other state and local employees, whose average salary during the same period rose 33 percent, from $31,829 to $42,408, closely tracking the inflation rate. The added compensation costs for police officers and firefighters are even higher once pensions are considered. Because PFRS members can retire younger-after as few as 20 years in the system, compared to no fewer than 30 for most erS members-the required employer pension contribution is 16.6 percent of pay for police and firefighters, compared to 9.6 percent of pay for other employees.
The most highly paid public employee union members in New York are county police officers, whose average salary as of 2006-07 was a whopping $121,608 (including overtime). This group consists mainly of Nassau and Suffolk County police, who have benefited from a series of exceptionally large compulsory arbitration awards over the past 20 years. New York State police-mainly state troopers-are the second best-paid group, with an average salary of $95,103. The average state police salary has doubled since this group was granted the right of compulsory interest arbitration in the mid-1990s.
1.Members of the New york State retirement System include all state and local government employees, except teachers and other educational professionals belonging to the New York State Teachers retirement System, and employees of New York City, which has separate retirement systems. The state system in turn has two components: the Police and Fire retirement System (PFRS), which includes all firefighters and most law enforcement officers, other than corrections officers and county sheriff's department employees; and the Employees' Retirement System (ERS), which includes everyone else. Both the PFRS and ERS also include employees of public authorities, including the bistate Port authority of New York and New Jersey.
Some recent interest arbitration awards have included permanent contributions to health insurance for new hires; a longer salary schedule to get to top rates; and additional "tiers" of benefits. However, historically, the interest arbitration process for police and firefighters has remained far more favorable to the interests of employees than of taxpayers.
The 1974 amendment to the Taylor Law also eliminated the legislative hearing step from impasse procedures for school districts. This meant that boards of education would no longer have the ultimate say in deadlocked contracts talks. However, since that provision was seldom invoked in teacher contract disputes, its elimination did little to stem the tide of teacher strikes during the 1970s.
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