NYC Transit Employee Health Contribution and Arbitration Compensation

MTA/OIG #2010-08

MTA Chairman/CEO Walder asked OIG to review the circumstances surrounding a 2008 decision by NYC Transit regarding employee health contributions and NYC Transit’s 2009 compensation arrangement with the neutral Arbitrator.

Regarding the healthcare issue, after the 2005 transit strike the MTA successfully negotiated an agreement obligating NYC Transit employees to contribute to the cost of their healthcare. While the rate of contribution increased in 2007, it was not increased in 2008. The decision not to seek an increase was made by the former President of NYC Transit, who joined the agency after the strike and the agreement on healthcare. In making his decision, the president did not consult with the MTA Labor officials who negotiated the healthcare contribution provision, nor had he informed the Transit Committee and/or the full MTA Board. While we found neither violations of law nor of MTA rules or regulations, our report concluded that the former president’s decision was not fully informed. We also concluded that the issues surrounding the healthcare contribution provision were of such significance that the Board, as policymaker, should have been informed, even in the absence of any technical reporting requirement.

As part of our report, we described the statutory requirements and MTA management and governance structures existing both before and after the 2008 healthcare decision. We noted that at Chairman Walder’s request in December 2009, while our investigation was still in progress, the Board adopted Labor Relations Corporate Governance Guidelines specifically giving an increased role to the Board in its oversight of labor-management issues. The stated Purpose of the Guidelines is to “Ensure that the Board is kept apprised of material developments affecting collective bargaining and in furtherance of the Board’s oversight of MTA management with respect to the collective bargaining matters of the MTA Agencies.” Now that such requirements are in place, the Board should be fully informed whenever significant labor issues like healthcare arise in the future.

Regarding the Arbitrator, in January 2009, eight days before the Transit Workers’ contract was to expire, the MTA Director of Labor Relations and the former union president jointly triggered the creation of an arbitration panel. They selected a particular individual, then employed by a private law firm, as the neutral member of the panel. He said he would compute his and his law firm’s fees using his firm’s discounted hourly rate for non-profit organizations and would then donate his own portion to charity. This agreement was not reduced to writing and no discount was applied.

In our report we criticized MTA/NYC Transit for failing to identify with precision and in writing the actual fee to be charged under the law firm’s discounted rate. Inasmuch as the MTA had not paid the law firm at the time of our writing, we also recommended that before paying the MTA demand a full accounting of all fees and disbursements. The MTA accepted our recommendation and challenged the firm’s undiscounted bill.

The matter is pending.


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