Haste Makes Waste: Epilogue

Posted by By at 16 February, at 10 : 27 AM Print

On Aug. 26, 2010, one year and 16 days after the Central Dauphin School Board decided to outsource its bus transportation service, the board approved a settlement with the bus drivers to allow the outsourcing to begin.

Earlier that same day, members of the Central Dauphin Bus Drivers Association overwhelmingly approved the school district settlement and a separate contract with Durham School Services L.P., the Illinois-based company that the school board voted to hire as its bus provider.

The board’s decision to settle came after a series of legal setbacks that included an injunction to prevent the implementation of a contract with Durham (the contract was signed in mid-October 2009) and rulings that thwarted the district’s contention that Act 88 did not govern the bargaining process with the bus drivers.

Under the settlement, the bus drivers became employees of Durham effective Nov. 1, 2010, when their labor agreement with the school district expired. In its place, the bus drivers approved an extended agreement with Durham that will run through June 30, 2012. (The bargaining agreement between the bus drivers and CD was to expire on June 30, 2011.)

As part of the settlement, the school district agreed to continue providing bus drivers their health insurance through the end of October 2010, and will pay the vast majority of their COBRA premiums through June 30, 2011.

In addition, the district agreed to keep six bus drivers on as district employees until they are vested after five years of service. These employees had 4.08 years to 4.5 years of service at the time of the settlement. After they are vested and eligible to participate in the Pennsylvania School Employees Retirement System pension program, the six will become Durham employees.

Those issues addressed a couple major sticking points with private bus companies that serve school districts – health insurance and pension benefits that are typically weaker than what a school district provides its employees.

Donna Ricupero, president of the Central Dauphin Bus Drivers Association, said the union’s intent during settlement talks was to make sure the workers received the “full value of the contract.” The main priorities, she said, were to preserve health care through the end of the contract period of June 30, 2011, and to preserve seniority and bus routes and to have no reduction in wages.

Under the settlement, the bus drivers and school district agreed to drop all pending litigation, including four unfair labor practice cases as well as the lawsuits challenging the Durham contract and the Act 88 authorization.

When those cases were discontinued, the district paid the bus drivers association $372,000 to use as it sees fit. During the one-year legal dispute, the association’s attorneys and business agent received little, if any, payment for their services.

The settlement figure will be increased based on the district’s costs for health care through June 30, 2011. The district estimated it would pay $144,183 in health insurance costs in September and October before its contract agreement ends with the bus drivers. As of Nov. 1, 2010, the district expects to pay $446,288 for its COBRA premium obligations until June 30 2011. If the district spends less that those two amounts, then that money is added to the $372,000 settlement pile. The total settlement package is estimated at $962,470, according to information in the 2009-10 audit conducted by Zelenkofske Axelrod LLC of Harrisburg.

Eric Epstein, business agent for the bus drivers, said the settlement money will pay bills and help drivers with their unpaid sick days and medical opt-out costs. “I expect the settlement will be in excess of the value of the contract,” he said.

Durham, meanwhile, said it planned to hire all the bus drivers that applied, provided they pass certain requirements such as drugs and other background tests. Durham agreed to waive the 90-day probation period and will preserve seniority for drivers, an important issue when it comes to bidding on bus runs and extracurricular assignments.

The drivers, as Durham employees, will be eligible for unemployment compensation in the summer of 2011, and were to be paid for holidays beginning on Thanksgiving and the day after Thanksgiving in 2010. Other paid holidays are Martin Luther King Day, President’s Day and Memorial Day in 2011.

Hourly wages remain the same as in the district contract – $15.50 for the base rate for 2010-11 and $13.50 for the starting rate for new hires. For 2011-12, under the Durham agreement, the base rate will increase to $15.89 an hour and $13.84 an hour for new hires.

Ford Thompson, the school board president and the only board member to vote against the outsourcing commitment with Durham in August 2009, said the settlement was pursued to end the dispute that was costing the district precious resources in both money and staff time. “We were dead in the water on this issue,” he said. “We weren’t getting anywhere.”

Epstein, the union’s business agent, said the settlement was “predicated on saving face” for the board. He said the motivating factors behind the board’s settlement were its public embarrassment, the legal costs and the realignment of the board in late May.

(The bus drivers settlement does not cover the six bus mechanics that work at the district’s terminal. They are represented by a different union and were to work under Durham as part of the outsourcing agreement approved by the district in August 2009.

(Their union, AFSCME Council 90, filed an unfair labor practice charge over the 2009 outsourcing decision.

(On Jan. 24, 2011, the CD school board approved a settlement with the mechanics that will allow them to remain as district employees through June 30, 2012. One of the mechanics can remain a district employee until his 24th anniversary of employment on Nov. 9, 2012, as which time he is to retire.

(Upon their June 30, 2012, or Nov. 9, 2012, termination dates, the mechanics will each receive a severance payment of $6,000. They also will receive accrued vacation, sick and personal time. The five affected by the June 30, 2012, date will be entitled to apply for work with the bus contractor at that time. If they leave employment prior to June 30, 2012, Durham will be allowed to hire an employee who will be part of the Durham payroll.

(As part of the settlement, the unfair labor practice is to be dismissed and there can be no challenge to the outsourcing agreement now in effect..)

The district, after its outsourcing decision in 2009, suffered legal setbacks at virtually every corner. After signing the contract in October 2009 (it was to go into effect on Nov. 9, 2009 and continue through June 30, 2014), the bus drivers sought an injunction. On Nov. 5, 2009, Dauphin County Judge Richard A. Lewis granted the request. He also enjoined any sale of the school buses, although the transfer for $2.26 million had already occurred two days earlier. The sale forced the district to pay Durham rental payments to lease the buses, at a cost of $395,655 through June 30, 2010, and then at a rate of $49,000 a month beginning July 1, 2010.

Two weeks after issuing the injunction, Judge Lewis denied the district’s request for a declaratory judgment that Act 88 did not apply to the dispute between the district and the bus drivers.

On May 18, 2010, the Commonwealth Court upheld Lewis’ decision, without dissent, in a 23-page ruling.

Soon thereafter, board president Thompson informed The Patriot-News in Harrisburg that the ruling would not be appealed. The board pursued a settlement with the drivers and an agreement was reached two months later.

There were a number of factors that paved the way for a settlement, although the Commonwealth Court ruling was likely the critical blow. The board underwent a transformation in leadership in the spring. At a meeting on May 24, 2010, the board replaced its president, Christian Malesic, an ardent outsourcing proponent, with Thompson. In the prior month, the board hired a new solicitor, Shaffer and Engle Law Offices LLC, to replace Rhoads and Sinon LLP and its lead school counsel, James Ellison.

“One of the things on my agenda was we need to end this,” Thompson said after he became the board president in late May. “We need to find a reasonable, fair solution that’s fair to us and fair to the drivers.

“I thought the atmosphere was toxic between the sides and I wanted to end that,” he added. “There was so much anger. I wanted to stop that and set a different tone.”

He said he had the support of a majority of the board to resolve the dispute. Many members felt “this is sucking up our resources. It’s draining our staff time … I think there was a collective weariness of wanting to get out from under this.” (Four new members joined the board in December 2009 and were not part of the original outsourcing decision.)

Ricupero said she understood that the new legal team (Shaffer and Engle brought in experts in labor law to handle the bus drivers dispute) had advised the school board that there was virtually no chance that the district would prevail if it appealed the Commonwealth Court ruling.

“The only thing we knew for certain,” Thompson said, “was that it was not going to end anytime soon”

“We had been committed to a legal strategy that wasn’t working for us,” he added. “I don’t know how you change that other than to change the players.”

Epstein said the district’s new labor legal firm, Post & Schell, had an attorney with a good working relationship with Ira Weinstock, the bus drivers’ labor attorney. He noted that Rhoads and Sinon was disrespectful and dismissive toward the union, and “went out of its way to aggravate the situation.”

The irony, Epstein said, is that the district ended up paying for both “bad legal advice and obvious legal advice.” Thompson said the district’s legal costs on this issue were more than $250,000. In response to a right to know request submitted in the summer, the district said it had paid Rhoads and Sinon $279,922.50 from May 2009 to May 2010 for its legal work on outsourcing bus transportation. Other legal costs, obviously, were subsequently incurred by Post & Schell.

According to the school district’s audit for the 2009-10 school year, the district exceeded its budgeted amount for all of its legal services by $619,000. In actual expenditures, the district spent $1 million for legal services in 2009-10, compared with $436,000 in 2008-09, according to the Zelenkofske Axelrod audit.

When settlement talks began, Ricupero said, the district provided the union with virtually all the information it was seeking when it first met with the board a year earlier when outsourcing was being discussed. Eventually, the board proposed a settlement of the lawsuits and labor cases. She said an agreement was reached after three sessions.

The association, she said, has about 80 members out of the 130 bus drivers. Three-quarters of the members attended the meeting where the settlement was approved.

”It was not an easy process,” Thompson said. “It took a long period of time.”

Ricupero said Durham set up shop at the CD bus terminal site on Oct. 4, 2010, preparing for the Nov. 1, 2010, start-up of its contract. She said there were difficulties with bus drivers having trouble getting information to help them make informed decisions. “I think the drivers will be working under much different work conditions,” she said prior to the Nov. 1, 2010, start-up.

The transition to Durham appeared to be less than smooth. Ricupero said the district advised the drivers that sick days taken from Oct. 11-Oct. 29, 2010, would not be paid by the district. That money, the district said, could come out of the lump sum settlement of the bus drivers association. The drivers said this was an abridgement of the contract with the district in effect through the end of October 2010. This matter was mostly resolved before the Nov. 1 Durham contract went into effect.

At the Oct. 25, 2010 board meeting, a week before the Durham takeover, Epstein implored the board to make sure Durham was hiring experienced and competent drivers. He noted that as many as 10 current drivers would not make the grade at Durham. At the same time, he said, some drivers previously dismissed by the district because of “inappropriate behavior” were being considered by Durham

”This is a very disturbing trend and I hope you look into it,” Epstein told the muted board.

By the middle of that week, Durham had offered jobs to more than 90 of the drivers. Seven were not offered jobs, five because of their failure to pass a so-called personality test. The other two had traffic violations.

Epstein said the failure to hire the five was a violation of the settlement agreement between the drivers and the district. He said Durham was required to hire all drivers who applied unless they failed drug tests or a criminal background check. After a meeting on Oct. 29, 2010, Durham agreed to hire six of the seven.

Epstein said about 20-30 drivers did not apply for jobs with Durham, some because they were nearing retirement and some because the hassle of the past year was exasperating.

“These guys genuinely love their jobs,” Epstein said, “and that was taken away from them.”

The settlement, he said, “created an opportunity for them to retire or resign on their own terms.”

Epstein added that it was “naïve” for the school board to think that transportation issues are behind it just because of the settlement and the contract with Durham.

Thompson said the board isn’t doing that. With Durham taking over, “we didn’t just step away from this,” he said. He said the district’s transportation director is still on staff  “We’re going to have a transition period which is going to go for months. We’re still very heavily and actively involved in the administration of the transportation program.”

“I have a great respect for the drivers,” he added. “I think the vast majority of our drivers are wonderful people who go above and beyond and they deal with things on the buses everyday and they deal with them extremely well.”

“I can’t think of a more important part-time job.”

Epstein said the union and Durham have held monthly meetings since Durham’s takeover, and the sessions have gone relatively well.

But Ricupero said she expects the public will soon see “the reality of outsourcing. Durham has to make a profit. How are they going to make a profit? What will happen to the services to the customers? Where are the cost savings to the taxpayers?”

Epstein said Durham is doing an audit of the bus routes and “there will probably be some reconfiguring in order to save time.” He said he didn’t see how Durham could make a profit “without taking a scalpel to the routes or a drop-off of the quality of the drivers they hire.”

Cost savings were a big part of the reason for the board’s decision to outsource. When the decision was made in August 2009, the district said it expected the agreement with Durham would save it approximately $775,000 a year. Plus, the district would be selling its bus fleet for $2.26 million and Durham would be purchasing a number of new buses to reduce the average age of its fleet. (The district had not budgeted any new bus purchases for the 2008-09 and 2009-10 school years.)

Under the agreement between the district and Durham, Durham is to purchase 33 new buses this school year and 12 in 2011-12

The bus purchases are probably the biggest benefit from the board’s decision to hire Durham. The district fleet averaged about 11 years of age in the middle of 2009.

“We’re getting buses that we couldn’t have bought,” Thompson said. “Their purchase price apparently is much less than ours because they buy them by the hundreds. And we buy them individually.”

But the district didn’t promote the bus purchases nearly as much as the projected cost savings. And Thompson acknowledged that those cost savings were not realized.

“The five-year savings,” he said,” that’s moot to this point. What it turns out to be, I don’t think we know yet.”

The school board approved a 2009-10 budget that included $6.9 million for transportation. With the planned Durham contract for the year, the transportation impact was reduced to $6.65 million thanks to an additional state subsidy the district was anticipating due to its outsourcing agreement. (The board’s projected $775,000 in savings was based on a normal transportation budget of $7.4 million for a school year.)

According to the 2009-10 audit, the district actually spent $7.7 million in transportation costs for that school year, more than $800,000 higher than the budgeted amount. Transportation costs were over budget in items such as rental/lease of equipment ($452,914); contracted services ($207,518); diesel fuel ($118,478); and repair/replacement parts ($81,964).

For the current 2010-11 school year, the board’s transportation costs include the monetary settlement with the drivers, four months of rent for the buses, expenses for the mechanics and six drivers the district agreed to carry on its books for a while, the health care COBRA premiums through June 30, 2011, and a revised contract agreement with Durham with a slight uptick in costs.

At its Sept. 13, 2010 meeting, the school board approved the revised contract with Durham. Under the new agreement, Durham is to provide bus transportation services for a period ending June 30, 2012, a termination date two years earlier than the original contract. Durham can notify the district by Dec. 31, 2011, whether it wants to renew the agreement for an additional three years.

Under the new agreement, the Durham rates are about 1.36 percent higher than the original contract approved in October 2009. The original contract provided for a daily school bus cost of $218.05 (per bus) in 2010-11, while the new agreement calls for a rate of $221.03. The rate will go up 3.2 percent in 2011-12.

Annual rates can go up anywhere from 2 percent to 4 percent in the ensuing three years if the parties agree to extend the contract past June 30, 2012.

The union also will have to negotiate a new agreement with Durham in 2012 should Durham remain CD’s bus provider. But will the independent bus drivers union explore aligning with a larger organization before those talks begin?

The Teamsters has been conducting an aggressive national campaign, called Drive Up Standards, to organize bus drivers at companies that are providing outsourcing services to school districts.

Locally, Teamsters Local 776 in Harrisburg has been active with the Durham drivers serving five separate school districts in York County. Ed Thompson, a business agent and organizer at the Teamsters local, said it won an election with Durham’s Spring Grove drivers. He said last fall that about five negotiating sessions have been held and the boilerplate language has been agreed to. He said the talks are now centered on economics.

He said the Teamsters won by one vote in the Eastern York district, but six votes have been challenged. The matter is in the hands of the National Labor Relations Board.

He said the Teamsters lost an election in the Central York district. That vote came after Durham filed a unit clarification challenge. The Teamsters prevailed in that challenge, but Thompson believes the delaying tactic helped Durham win the election.

Thompson said a campaign at West York was discontinued due to lack of interest, but there is an active campaign at Dallastown.

He said “favoritism is a big deal with Durham” when it comes to assignments and extra runs. He added that Durham challenges elections and the make-up of a bargaining unit, but “they are not difficult” at the bargaining table if an election succeeds.

“Once you get past the election, they’re halfway decent,” he said.

Ford Thompson, the board president, said it was hard to gauge what individual board members learned from the outsourcing decision. But he added that “I think there’s a different atmosphere on this board. I think it’s more congenial; I think it’s much more constructive together.”

Epstein commented that “this was a how-to primer on how not to outsource.” He added, “It’s disappointing that no apparent lessons were learned by the district.”

But Thompson said the board did learn from the experience, “When you have an agreement, I don’t care what it is, you adhere to the agreement until it expires,” he said. “I don’t think this board or any future board will ever make this same mistake again. I really don’t … There’s been a lot of self reflection on that.”

He noted that most of the district’s employees are covered by collective bargaining agreements, and the teachers’ contract expires in 2013.

Thompson conceded the dispute has affected relations with the district’s constituents. “The public was just aghast that we were doing this,” he admitted. “And I heard that over and over again.”

“I don’t think you repair it in the short term any way at all,” he said. “I think you repair it over a protracted period of time.”

He said he’s tried to get the community involved with task forces designed to address various school issues to help cut expenses and find revenue-enhancing programs. “I’m hoping we can engage the public more,” he said.

On another matter discussed in last year’s Haste Makes Waste report, the Williamsport School District is still squabbling with the union that represented its bus drivers over its decision to outsource in the summer of 2009. Unlike Central Dauphin, Williamsport waited unit the expiration of its contract with the drivers to pursue outsourcing. (It didn’t award a contract until nearly a year after the contract’s expiration in 2008.)

On Feb. 2, 2010, a hearing examiner for the Pennsylvania Labor Relations Board found that the Williamsport district committed an unfair labor practice when it decided to outsource since an impasse had not beech reached in negotiations. That decision was upheld by the board on April 20, 2010.

Cary Kurtz, a PSEA Uniserve representative for the bus drivers, said the Williamsport School Board appealed the ruling to Commonwealth Court. He said legal briefs have been filed, but no decision has been rendered.

He said the district did offer a settlement averaging about $1,500 per worker. He said the offer “was so woefully inadequate” that it wasn’t considered.

To keep reading about privatization of the bus service click on Rock The Capital

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Tom Dochat was a newspaper reporter for more than 32 years, with most of that time at the Harrisburg Patriot-News. He received or shared journalistic awards for his work on the hostile takeover attempt of AMP Inc. in 1998, the manufacturing restructuring plan at The Hershey Co. in 2007, and the botched retrofit project at the Harrisburg incinerator. - Email tdochat

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