The economy is beginning to recover. Public and private sector employers however are still dealing with fallout from this recession. Last fall, I wrote about the impact on cities and counties of a $6 billion dollar budget shortfall facing the State of Minnesota. Our public sector clients have been taking this issue very seriously and attempting to cut budgets in all areas. Everyone knows it isn’t just the salaries paid to employees that affect an employer’s bottom line, but there are also all the benefits, like health and dental insurance, severance packages, and retiree health insurance to name a few, which all add up. More and more, employers have been attempting to get a handle on employee benefits, in order to get budgets under control.

In Minnesota, police officers are considered essential personnel and are prevented from striking. In lieu of a strike, police officers are permitted to go to interest arbitration if a new collective bargaining agreement cannot be reached through negotiations or mediation. In a recent interest arbitration decision (pdf) Arbitrator Richard Miller agreed the City could sunset the retiree health insurance benefit, in order to get a handle on future expenses.

It is a common axiom in arbitration that the party proposing a change to contract language carries the burden of proving their request is necessary and reasonable. I represented the City in this interest arbitration case. The Union’s primary argument against sun-setting the retiree health insurance language was a lack of a quid pro quo from the City. Arbitrator Miller rejected the Union’s argument and agreed with the City; sun-setting the retiree health insurance benefit was not a take-away, no current police officers were losing the benefit, and therefore a quid pro quo was not necessary.

Employers need to look at all avenues available for reducing expenses and controlling budgets. Just because a benefit has previously been provided to employees doesn’t mean it must continue. Public employers must get control of future costs to avoid what some are considering the next major economic tsunami – the bankruptcy of state and local governments.