Side Letters Can Go Sideways Prevent Confusion. By Reanette Fillmer Human Resources Director County of Tehama
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1 Side Letters Can Go Sideways Prevent Confusion By Reanette Fillmer Human Resources Director County of Tehama Introduction This paper discusses the use of side letters in labor settlements. Side letters are not always the best approach. Many times we turn to them as a tool in dispute resolution. However, they may become contractual if not written correctly or placed in the right context. If a matter is so important that it cannot wait for the next round of negotiations then a side letter may be a good idea. But side letters should be limited and, if possible, the issue addressed in the next round of negotiations. A wise counsel told me, Side letters should be completed only in special circumstances. What is a Side Letter? Wikipedia defines a side as, a collective bargaining agreement that is not part of the underlying or primary collective bargaining agreement (CBA), and which the parties to the contract utilize to reach agreement on issues the CBA does not cover, to clarify issues in the CBA, or to modify the CBA (temporarily or permanently). One may distinguish side letters from side settlements or settlement agreement, which settles a dispute arising from the underlying CBA. In rare cases, bargaining parties may use a side letter to adjust the focus of the contract if the parties are not yet ready or willing to adapt the contract formally. (Wikipedia) Note that Wikipedia does state that in rare cases the parties may agree to use a side letter for various reasons. A side letter can be an amendment to the CBA to clarify the intent of the language agreed upon in negotiations. A side letter documents agreement between the employer and the union and, depending on which judicial circuit hears the case (see cases below), may supersede the CBA. Side letter may also supersede or clarify specific language in a contract for its duration. A side letter could create a past practice until it is changed by future negotiations. 1
2 The Dangers of a Side Letter An agency may view the use of side letters as a convenient route to good employee and union relations. However, settling the issue during contract negotiations is preferable. For the union, a side letter may be a way to side step an item to avoid dealing with it during bargaining. Therefore, side letters should be used cautiously and all avenues explored before resorting to one. In most cases, side letters are binding. Pre-approval by legal counsel is necessary to avoid problems later. Tracking side letters. A side letter can become lost in a paper trail as time passes without it being incorporated into the CBA. With turnover, most people will refer to the CBA to decide a matter. If side letters are not incorporated or carefully tracked, a practice can be inadvertently eliminated by a new department head or director who is unaware that a side agreement exists. This commonly happens when a new director takes over a position and starts to make changes hours and working conditions. Be sure to create a tracking mechanism for side letters. Bargaining for a new CBA should include dealing with existing side letters. Too many side letters. A multitude of side letters creates confusion about what is in effect and what is obsolete in the CBA, especially if the intent is not clear. Side letters that are lost in translation can become past practice that would then require the time to meet and confer before making changes to a practice even if it has long been obsolete. Side letters should only be written for items within the scope of representation under the Milas Meyers Brown Act (MMBA). Union tactics. When a union orchestrates side letter language the intent could be broader than the employer perceives. It is natural to look at a side letter and believe it will resolve the immediate situation rather than cause further problems. This is why it is so important that it be reviewed by county counsel, personnel, the department head it affects, and possibly the Office Manager. Sometimes personnel who deal with the particular item can help determine if a side letter is the best solution or if a practice just needs to be changed. Terms used in a side letter can bring problems later if not written properly. The bottom line is to make sure the agency s intent and conditions are clearly stated if the Union writes the side letter to be sure there are no hidden agendas, research the issue with affected departments. Subsequent negotiations. Following up on side letters before the next round of negotiations is very important. Some side letters may have expiration dates, or they may include date certain incrases or other provisions that expire on their own terms. However, side letters in existence for any term should be reviewed to determine if they should be incorporated in the contract. Follow up with all departments to determine what side letters are still being implemented. You may even find obsolete side letters still being followed and you ll need to 2
3 remedy the situation. The negotiating team should be made aware of side letters in use that are causing problems. Side letter wording. Problems with wording often bring misunderstandings and disputes. Beware of: Wall to wall implementation, Indications that anything in the future will be conducted in the same fashion, Agreements to make changes in the future, Language such as, the county will agree that all future tentative agreements will be upheld. This is a good example of language that I review in an agreement with the union via a side letter. The union suggested this language at the end of the side letter on a tentative agreement that was an oversight by both parties during negotiations regarding classifications and compensation study. Obviously, such language may indicate that by signing of, the county would always agree to a tentative agreement, which is not always true. There are cases, in which, an entity may withdraw or not honor a tentative agreement (but that is another paper). Take proper measures to see that staff implements the side letter agreement according to its specific provisions. Most likely the Personnel staff and union developed the side letter so they should understand its intent. If language is included stating that the agency will implement something or pay someone in a certain way, the department along with Personnel should see that it is correctly implemented. Example: a county side letter agreement to pay all Peace Officers in Juvenile Hall in accordance with the Fair Labor and Standards Act (FLSA) 207(k). After nine years it was discovered that the county had not implemented this side letter. When the language was agreed to clear instruction was not provided to the department on how the FLSA 207(k) should be implemented, so they never did it. Side letters gone bad and old. Departments should be notified when a side letter is no longer in effect. In the example above, the side letter was only not implemented, but it also violated what the union originally agreed to. The non-implementation was not brought to the attention of Personnel until it was presented at the bargaining table. This can be not only embarrassing for the agency, but costly in the long run. FLSA 207(k) is a legal requirement so this made the situation difficult to iron out. The reason for the violation: a nine-year old side letter and changes in personnel in the department and the union. No one communicated they were not using the FLSA 207(k) method of calculating time. The department was not aware of the side letter language and made 3
4 interdepartmental changes without consulting Personnel or discussing it with the bargaining unit. The side letter should have been updated periodically or inserted into the contract. The result: contention with the union when it discovered the side letter s terms had not been properly implemented. When to Use a Side Letter Before writing the side letter, review the agency s CBA and zipper clause language. If there is no zipper clause then this may allow the agency to make an amendment to the contract during the term of the contract. If there is a strong zipper clause then it is most likely a side letter is the only alternative to resolving an issue. It would also be wise to review the term of the contract and determine how quickly the issue needs to be resolved. Is it temporary matter? Can it wait until the next negotiating cycle? Is there an urgent need to resolve the matter now? Another part of the decision to employ a side letter, is determining if it is a meet and confer or possibly just a settlement agreement to prevent further union action? For example, employee #1 is hired at A step. Seven months later the department head hires employee #2 at C step. Employee #2 has less experience than employee #1. The department head discovers this oversight. Employee #1 brings this to the attention of the necessary parties, but nothing was done. The department head now wants to pay employee #1 at C step. Would this be a side letter? Or is it a settlement agreement? I recommend a settlement agreement, with Board approval, to prevent further action by the union. This affects one person, not an entire bargaining unit and placing this change in a side letter might be interpreted by other employees as entitling them to a higher step if they believe themselves to be more qualified. During difficult economic times side letters will be an intricate piece of documentation for reopeners regarding take backs, changes to compensation and possible freezes to certain wages and benefits. Side letters work best when the agency does not want to reopen the entire contract, only specific provisions of the contract such as benefits or compensation. Many public agencies have met and conferred over salary reductions, salary delays and possible reductions to work force and recorded those agreements with side letters. Several counties recently agreed to a delay in salary through a side letter agreement for A side letter such as this would carry a beginning and an end date. Side letters should only be used in rare and unusual circumstances. It is a bad habit to for either the union or management to assume, We can just do a side letter, especially with a zipper clause. This fosters the assumption by the union that they can come forth with changes at any time and it may appear to give them more control. 4
5 A Few Points about Side Letters The 9 th Circuit found that, Disputes arising under a side agreement must be arbitrated if the dispute relates to a subject that is within the scope of the CBA s arbitration clause [and] the clause contains no exclusions for disputes arising under side agreements. Inlandboarmens Union of the Pacific v Dutra Group, 279 F.3d 1075 (9 th Cir 2002). It is imperative to assess the consequences before considering a side letter agreement. When entertaining a side letter it should be scrutinized the same as you would a CBA. (LawMemo, 2005) Another case regarding arbitration regarding side letters is an example of how to be precise in your language. Be careful of what the side letter language states and what the CBA says about side letters. Cooper Tire & Rubber Company (Cooper) and United Steelworkers of America Local 207L (Union) entered into a collective bargaining agreement (CBA) containing an arbitration clause. The parties concomitantly implemented a side agreement limiting Cooper s contributions to retiree healthcare benefits. The side letter did not contain a separate arbitration clause. A dispute developed concerning interpretation of the side agreement and Union filed a motion in federal district court to compel arbitration of the grievance. The district court held the grievance arbitrable under the scope of the CBA s arbitration clause. Cooper appealed to the Sixth Circuit Court of Appeals and the Court affirmed. The Court applied the scope test which holds that unless parties indicate otherwise, disputes over a side agreement are arbitrable if the subject matter falls within the scope of the CBA s arbitration clause. The parties arbitration clause covered all disputes concerning interpretation of the CBA. The Court held that the subject matter of the side letter pertained to the CBA s healthcare benefits provisions and therefore fell within the scope of the arbitration clause. (Recent Developments in Dispute Resolution, 2007) Remember that side letters are negotiable and both parties must agree to the final agreement. Unless language is indluded in a side letter making it not subject to arbitraiton, it is arbitrable. What Should a Side Letter Include? This Side Letter shall expire on June 30, Nothing herein shall be construed as incorporating the provisions of the Oklahoma State Study or the Employee Handbook into the collective bargaining agreement, nor shall the provisions of the Oklahoma State Study or the Employee Handbook be subject to the contractual grievance and arbitration procedure. (Southern Illinois University, 1998) The above statement is included in a side letter. Additional items to include are expiration or sunset dates, expectations to discuss in upcoming negotiations, and a clear outline of the main subject and intent. 5
6 The side letter should be unambiguous and consistent with contract language. It should be clear on who is the moving party, who the agreement represents (employees, employers, etc), who is approving the agreement and what is being agreed upon. Following is am example of a side letter that represents a good example of why a side letter could be used instead of an amendment into the CBA. Side Letter Example: April 2, 1998 Mr. James Sullivan, President SIUC Faculty Association, IEA/NEA 103 Airway Drive, Suite III Marion, Illinois Re: Shared Governance & Salary Equity: Proposed Side Letter to Collective Bargaining Agreement between the Board of Trustees and the Association. Dear Mr. Sullivan: This is a Side Letter to the Collective Bargaining Agreement between the Board of Trustees of Southern Illinois University ("Board") and the SIUC Faculty Association, IEA/NEA ("Association"). The Board and the Association hereby agree as follows: 1. The Board and the Association recognize that the Collective Bargaining Agreement entered into by the Board and the Association forms the primary understanding between the Board and the Faculty on matters contained therein, and that no changes in that Agreement will be made without the express written consent of the Board and the Association. 2. In the event the Board desires to change a provision of the existing SIUC Employee Handbook, in so far as it applies to bargaining unit faculty and insofar as that provision is not governed by the terms of the Agreement, then prior to instituting such change, the Board shall notify the Faculty Senate and offer the Senate an opportunity to discuss and debate the proposed change, as well as the opportunity to suggest constructive alternatives. 3. Following notification to the Faculty Senate, such body shall, with the full support of the Association, consider the proposed change in a timely manner. 4. The Board will not institute permanent changes in the SIUC Employee Handbook, in so far as such a change would directly apply to bargaining unit faculty, unless and until the change has been considered by the Faculty Senate, absent an emergency or the Board s need to make changes due to legal requirements. Following consideration by the Faculty Senate, the Board may institute the proposed change. When necessary, however, the 6
7 Board reserves the right to institute temporary changes to the SIUC Employee Handbook, which would be applicable to bargaining unit faculty, pending a vote by the Faculty Senate. 5. The Board will, during the term of the Agreement, subject to review and comments by the Association and the Faculty Senate, prepare a Faculty Handbook separate from the existing Employee Handbook for distribution to all faculties. 6. In addition to the Board s commitment to the concept of shared governance, the Board and the Association share a desire to address existing salary inequities, and to work toward moving SIUC Faculty salaries to the median of peer institutions, as identified in the Oklahoma State Study. The Salary components of the collective bargaining agreement are acknowledged as a first step toward achieving that shared objective. 7. Annually, the Board shall cause a study to be prepared which monitors and reports the University s progress toward achieving salary parity with our peer institutions identified in the Oklahoma State Study. Such study will be submitted to the President of the Association on July 1 of each calendar year, beginning on July 1, This Side Letter shall expire on June 30, Nothing herein shall be construed as incorporating the provisions of the Oklahoma State Study or the Employee Handbook into the collective bargaining agreement, nor shall the provisions of the Oklahoma State Study or the Employee Handbook be subject to the contractual grievance and arbitration procedure. My intentions regarding this Side Letter and its relationship to the package proposal are further explained in the separate letter addressed to you and dated April 2, My signature represents the official offer of the Board of Trustees, and your signature below represents your agreement with the terms of this Side Letter. This sample letter was taken from the Southern Illinois University website. Conclusion In conclusion, it has been difficult finding concrete information regarding side letters via the worldwide web, negotiations manuals and books. I contacted one of the labor relations negotiators for the State of California. He could only provide me with general knowledge. Side letters seem to be a mechanism that came into use in the early 1900 s. Whatever you decide to use a side letter for, make sure it contains all the information needed. Side letters are binding if they cover a subject within the scope of bargaining. A side 7
8 letter is an opportunity to clarify ambiguity, but do it wisely and include arbitration, mediation or dispute language to prevent further problems. Reanette Fillner Personnel Director Tehama County 727 Oak Street Red Bluff Ca,
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