A Little Background on Arbitrator John C. Wells

Op-Ed Questions Tobacco Settlement Arbitrator's Motives

In a WALL STREET JOURNAL op-ed, Holman Jenkins Jr. suggests that John Calhoun Wells, a tobacco settlement arbitration negotiator, may not have been acting neutrally when voting an .2 billion award to lawyers in Florida, Texas, and Mississippi. Jenkins writes: "Mr. Wells has been called a 'masterful negotiator' . . . . He just quit a four-year stint as Bill Clinton's head of the Federal Mediation Service, as he explained in a letter to the President, so he could 'attend to building financial security' for his family. Certainly a man on such a mission can do himself no harm by making a bunch of millionaires very, very grateful. . . . Where did Mr. Wells come from? He was proposed by Walter Umphrey, famed Texas trial attorney, who owns a large piece of the Texas settlement and sizable chunks of the Florida and Mississippi deals. In fact, his firm owns chunks of dozens of states, making him the guy with the most money on the hook in the arbitration process."

Source: Holman Jenkins Jr., "Secret Lives Of The Tobacco Arbitrators," WALL STREET JOURNAL, December 23, 1998, p. A15.

(Post Date: 12/23/98)


FOR IMMEDIATE RELEASE
Tuesday, March 17, 1998 CONTACT: Dave Helfert
(202) 606-8100

Nation Chief Mediator Announces Return to Private Sector
The nation top labor-management mediator has notified the White House of his intention to resign as Director of the Federal Mediation and Conciliation Service (FMCS) and return to the private sector. John Calhoun Wells told the President in a letter that his charge to "take an organization with a distinguished history of service to our nations collective bargaining and labor-management communities, and prepare it for an even more crucial role in Americas 21st Century economy, is largely complete."

Dr. Wells referred to the strategic redirection of FMCS which he said, "has been driven by a vision of a customer-focused, performance-based organization, with 360-degree mediators providing a full range of labor-management mediation and conflict resolution services at least the equal of the best in the private sector. The redirection has required a quantum change within FMCS, including more flexible hiring criteria and more rigorous mediator selection; restructured field operations and a redefinition of field and National Office leadership roles and responsibilities; recruiting and promoting a higher-qualified, more diverse workforce; major investments in employee education and training, in technology modernization and major workplace redesign. We have learned to "listen to the marketplace," through the agencys first National Customer Survey, customer focus groups and an emphasis on customer outreach by field mediators and managers."

The Strategic Redirection of FMCS was recognized last fall by Vice President Gore and the National Performance Review with the Hammer Award, given to agencies for outstanding efforts in building a government "that works better and costs less."

Wells said, "The most important thing I have done is use my position as a forum to articulate an enlightened construct in collective bargaining in which the labor-management relationship, itself, is recognized and promoted as a means for improved economic performance and competitive advantage, leading to the inter-related goals of profits and jobs. This is a partnership for the future."

Wells was appointed by President Clinton in November 1993. He has led mediation teams in the settlement of some of the largest, most difficult labor disputes in modern history, including United Parcel Service and the International Brotherhood of Teamsters (1997), McDonnell Douglas Aircraft and the International Association of Machinists and Aerospace Workers (IAM) (1996), The Trucking Industry and the Teamsters (1994), Boeing Aircraft and the Machinists (1995), and Caterpillar Inc. and the United Auto Workers (UAW) (1993- ).

Wells said the long dispute between Caterpillar and the UAW has given him both his greatest moments of satisfaction and frustration. "I was proud of the role FMCS was able to play in reaching a tentative agreement on February 13," Wells said. "When that tentative agreement was not ratified by UAW local union members, I was very disappointed. But yesterday, in a conference telephone call with the Caterpillar and UAW chief negotiators, the company offered a modified contract proposal to the union, and I am once again hopeful that a final settlement might not be too far away."

Wells also pointed to FMCS role in helping some of the countrys largest corporations begin to move workplace relationships with their employee unions from adversarial to partnership.

"These Preventive Mediation services have grown from 10 percent of the agency mediation caseload to nearly one-third during the last four years," he said. "This is a very positive and hopeful course for American business, workers and unions to take. Through our training in cooperative processes, we are able to help them transform their relationship, yielding a more productive and profitable enterprise, and therefore, one that is better able to provide jobs and employment security."

Wells said he would be leaving FMCS in the "not too distant future," and wanted to give the President ample time to consider his successor.

CONTRACT ARBITRATION Day 17

CONTRACT ARBITRATION-JANUARY 22, 2002



Day 17 began with the Postal Services lead legal counsel, Ed Ward, offering some exhibits that the Postal Service had previously committed to producing. He then recalled Mr. Peter Bernstein, Vice President of RCF Economic & Financial Consulting. His firm provides volume forecasts for the Postal Service. He had testified on day 14 but travel commitments shortened his testimony and precluded cross examination. However, it was agreed at that time that he would be made available for cross examination at a later date. An overview of his testimony on day 14 has been published on page 28 of the January 19, 2002 edition of The National Rural Letter Carrier. His testimony on day 17 was more extensive but generally mirrored his remarks on day 14. Among many other things, he said the following:



¡¤ 3.5% of all advertising dollars being spent on the Internet negatively impacts standard mail volume, by 2005 the percentage will rise to 4.5%

¡¤ Standard Mail volume is growing slowly

¡¤ the growth in First Class Mail volume is declining

¡¤ billions of First Class Mail pieces will be lost to technological alternatives

¡¤ the growth in Periodical Mail is declining

¡¤ the growth in total volume is less than the population growth

¡¤ there is little growth in parcels

¡¤ over 90% of all mail is not household to household



Although his forecast seemed gloomy enough, under the direct questioning by Mr. Ward, the witness stated that the predictions were made using data collected prior to the events of September 11th and the anthrax situation; therefore, Postal Service¡¯s financial condition may be even graver. He said that the Postal Service is ¡°facing stagnation¡± and that costs throughout the Postal Service needed to be controlled. The Postal Service needed revenue to finance the costs of additional deliveries and the infrastructure. He stated that mail volume would not be enough to meet the financial needs. He said that rate increases above the rate of inflation result in less volume which in turn requires yet another rate increase, thus a vicious cycle that does not solve the problem. There needs to be rate moderation and cost moderation to stem the tide. Additionally, he said that increased labor costs make rate moderation difficult.



After finishing his direct testimony and undergoing cross examination, the witness was asked by the arbitration panel Chairman, Mr. Wells, what the Postal Service had to do to remain viable. Mr. Bernstein responded by saying that the Postal Service needed to be leaner and smaller, close cost negative post offices, and to embrace business economics.



Next, the Postal Service called former witness, Don Develin, to the witness stand. Mr. Develin had testified on day 16 of the hearings. His testimony that day focused on the projected costs of the NRLCA proposals. A summary of his remarks on that day are published in January 19, 2002 edition of The National Rural Letter Carrier. On this day, he testified that the proposals in the aggregate would cost the Postal Service approximately $ 3.7 billion over four years. The cost of an upgrade to what is referred to as ¡°level six¡± would account for $ 1.55 billion of that amount. He said that from 1971 to the present, carriers have experienced an average of three wage increases a year. Wages have increased by $ 29,149 over that time, ,954 of that coming in COLA increases, ,195 in general increases. The employer believes COLA to be ¡°an outdated wage benefit¡±. Further, nationally only a small number of employees enjoy COLA. He contended that COLA is a ¡°stealth element¡± and should not be a ¡°given¡± in collective bargaining. COLA¡¯s linkage to the CPI-W makes it difficult to plan budgets and to set rates because of its unpredictability. An outside consulting firm estimates that inflation and COLA resulted in a 16.2% increase in wages in the last agreement. He also said that private sector employers who do have COLA obligations in the contracts with their employees have a more modest arrangement. He specifically alluded to UPS and its lump sum based, capped version of COLA. His testimony was in support of the Postal Service¡¯s attempt to eliminate COLA.



After lunch, Mr. Develin addressed ¡°quit rates¡± and wage rates for rural carriers. The quit rate for regular rural carriers is .9%. It was his testimony that the current quit rate for full time employees in the private sector was well above 10%. The quit rate for RCA¡¯s in Fiscal Year 2000 was 12.9%. This is comparable to similarly situated employees in the private sector. Although he threw out several statistics with narrative testimony on this issue, his conclusion was that the quit rate is low because the jobs in the rural craft and the Postal Service generally, are good jobs with generous wages and benefits with a no lay off protection for regular rural carriers.



His testimony was replete with statistics on the wage and benefit issue comparing postal employees, and specifically rural carriers, to private sector workers. He stated that in Accounting Period 7 Fiscal Year 2001, the cost per hour to the employer for a regular rural carrier was .04 compared to the private sector at .55. Additionally, the weighted average for RCA¡¯s was .54 an hour as compared to .65 an hour for a similarly situated employee in the private sector. Mr. Develin also addressed the issue of HCR contractors. There are 5,758 box delivery HCR¡¯s. The weighted average hourly remuneration is .64.



Mr. Develin was cross-examined by NRLCA lead legal counsel, Bill Peer. Due to the fact that part of Mr. Develin¡¯s direct testimony had referenced the UPS contract, Mr. Peer concluded his cross-examination of this witness by requesting that the NRLCA be provided with a copy of that document. The witness promised to do so.



At this point Mr. Ed Ward, the Postal Service¡¯s lead counsel, was prepared to take the witness stand. However, the NRLCA made a motion to the arbitrator that Mr. Ward¡¯s testimony was not necessary because Mr. Ward was going to recount and analyze all of the past postal arbitration awards and interject editorial comment throughout the presentation. The NRLCA¡¯s position was that the arbitrator only need look at the printed contracts. Within those booklets, one can find the manifestation of the decisions of previous arbitrators. After the motion was considered by the arbitration panel, the motion was denied. Postal Service attorney, Jon Saperstein, asked Mr. Ward to give some background as to his education and postal service employment. Mr. Ward provided an impressive educational and employment resume¡Ç to the panel.



Sprinkled throughout his testimony were references to virtually all of the arbitrators who have issued decisions in Postal Service disputes with its major unions during the last twenty five years. He referenced the Volz Award-Mr. Volz was the arbitrator in the 1984 USPS/NRLCA interest arbitration proceeding-in which the arbitrator had concluded that approximate parity existed between the rural carriers and the other major postal unions. This was in reference to the attempt of the NRLCA to ¡°catch up¡±, i.e., recover the approximately difference in salary that resulted because of the capped COLA provision that was negotiated and subsequently ratified in 1978. He also pointed out to the panel that the rural carriers had ratified negotiated agreements in recent years by overwhelming margins, agreements that did not include the ¡°catch up¡±. He cited the ratification of a negotiated agreement by 99.23% and then, almost mockingly, noted that a later ratification of a tentative agreement had squeaked by with only a 99.11% approval rating. The 99.11% reference was the ratification of the 1995-1999 National Agreement with only the state of Arizona voting against ratification. All of this was to show the arbitrator that apparently rural carriers have been happy with their lot.



Despite the angry denunciation by NRLCA arbitrator, past president Steve Smith, of the Postal Service¡¯s tactics on an earlier day of the proceedings, Mr. Ward read articles from The National Rural Letter Carrier that were published during the two instances when the NALC was attempting to decertify the NRLCA as the collective bargaining agent for the rural craft. He also recounted the efforts of another union, the NPMHU (Mail Handlers) that attempted to, at a later date; remedy what was perceived to be a very unfavorable negotiated agreement. He quoted the arbitrator in that arbitration as having said, ¡°A deal is a deal.¡± This quote and the related testimony was the last of many times that the Postal Service has told the neutral arbitrator, Mr. Wells, that he should not grant the rural carriers something that was negotiated in 1978 and something that the NRLCA has not been successful in achieving in negotiations since that time.



Mr. Ward went on to discuss the Fleischli Award. This is the award that gave the city carriers ¡°level six¡±, although it is now called ¡°grade 1¡±. After stating that, ¡°We lost, big time¡±, Mr. Ward went on to describe the process that followed the issuance of the award, a process in which he stated that the NALC made concessions related to work methods which save the USPS -100 million a year. Next, he discussed the recent Goldberg Award, the award for the APWU. Although he spent considerable time in doing so, the summation of his comments is that the award was a favorable one for the USPS. He was particularly pleased that Mr. Goldberg rejected the APWU¡¯s parity argument. From 1907 and until the Fleischli Award, the NALC and the APWU had experienced wage parity. Although there were some 58,000 upgrades granted in the recent APWU decision, most from level 4 to level 5, Mr. Goldberg did not grant an upgrade to the overwhelming majority of APWU members. Mr. Ward did not want that point lost on the neutral arbitrator.



Mr. Ward gave testimony concerning EVA over the last five years. Managers have to meet goals regarding service, finances, and employee satisfaction in order to receive this pay. He pointed out that the EVA payments are in lieu of step increases, general increases, and COLA. He said that the percentage of payout has diminished over time. He also discussed the cost of retirement and health benefits. The Postal Service pays billions of dollars related to retirement. Contributions to the health care premium are also a concern. The employer desires to decrease the amount of employer contribution.



Before ending his direct testimony, Mr. Ward stated that the Postal Service was million below plan for Quarter 1 Fiscal Year 2002. Volume is down 2.8 billion pieces (5.5%) as compared to SPLY (Same Period Last Year). He said that this was the single largest drop in recent history. In addition, revenue is $1 billion short despite the decrease in 16,000 full time employees in the last 18 months.



Mr. Ward was cross-examined at length by NRLCA legal counsel, Bill Peer. After some brief re-direct questioning he was excused from the witness stand.



The Postal Service then called Ms. Andrea Wilson, USPS Contract Administrator NRLCA/NPMHU, as its next witness. Ms. Wilson was asked to give a summary of her employment background with the USPS. She has been an employee for 34 years, starting as a clerk in Baltimore. She has been involved with the NRLCA at the Headquarters level since 1984 and was the chief spokesperson for the Postal Service in the 1999 and 2000 negotiations with the NRLCA.



She began her testimony by saying that the evaluated system is ¡°not an incentive system¡±, but there were some incentives in the system. She spoke of the short-lived S.E.T. program of a few years ago. She then listed ¡°advantages¡± that rural carriers have over city letter carriers. She gave the following:

(1) Time standards for raw letter casing are better than the city carriers¡¯ have-16 as opposed to 18,

(2) A better time standard for pull down-60 as opposed to 70;

(3) Option of casing DPS mail;

(4) 71% of rural carriers have Saturday as their off day compared to 18% of city carriers;

(5) Rural carriers only have to work relief day on their own route and know one route;

(6) One relief for each route gives better chance to get leave;

(7) Only charged 8 hours of leave when on leave;

(8) Overtime built into retirement;

(9) PTF¡¯s guaranteed number of weekly hours, city PTF¡¯s are not;

(10) No Sunday or Christmas work; and

(11) Rural carriers are compensated for additional duties.



Ms. Wilson stated that the Postal Service is not willing to continue MOU .2 (the MOU wherein the parties in the past have agreed that the time standards, taken collectively, represent a fair day¡¯s pay for rural carriers) because the Postal Service believes the ¡°time standards are not appropriate¡±. She said that rural carriers work ¡°substantially below the evaluated hours¡±. To support that contention the Postal Service had looked at a 5 year period from FY 1997 through FY 2001. The data indicates that, on average, the actual work hours were 9.4% below the standard hours, with the breakdown being 9.8% for non-L routes and 9.0% for L-routes. In the most recent year, FY 2001, all routes were 10.4% under with L-routes being 10.1%. She noted that in FY 1997 L-routes were working 8.9% under. In 1984, the ¡°bump¡± was 3.3%. She told the arbitration panel that carriers on a 44-K route, the average route, are being paid for 4 ¨ö hours of overtime for which they are not working, this while volume is declining. She said that the NRLCA proposals would increase the evaluations of routes by 288 minutes which would increase the ¡°bump¡± by 96.3%.



As she continued her testimony, Ms. Wilson said that the USPS proposals on mail count and time standards would ¡°fix¡± the problem of the inappropriate bump. She testified that a two-week count is ¡°as accurate and reliable as a four-week count¡±. There has been no change to the time standards, yet the carriers have been the beneficiaries of new equipment and improved work methods, she said. She stated that the current time standards are ¡°too liberal¡± and that the ¡°outdated standards must be adjusted.¡± This has given rural carriers a ¡°windfall¡±. The definition of a letter and a parcel are ¡°unreasonable definitions¡±. The Postal Service is proposing to change the definition of a parcel to be only those items that would not fit into a standard #1 mailbox. Also, the USPS is proposing to change the definition of a letter from 5 inches to 6 1/8 inches.



In response to the union¡¯s observation that the rural craft proportionately generates significantly fewer grievances, the Postal Service¡¯s witness stated that this was the case because of the hard work of both parties in seeking innovative ways to resolve disputes. Additionally, she said that there are less grievances concerning overtime. However, the relationship has not been without a cost to the Postal Service. Most notably, millions of dollars are spent to maintain QWL/EI, a process that nurtures the relationship that exists between the parties. She asked the panel not to penalize the Postal Service for the cooperative relationship that the Postal Service has already paid for at a considerable cost.



Ms. Wilson then spoke on the relief system saying that there had been some problems in hiring and that the system was difficult to maintain. Hiring TRC¡¯s had helped. She gave a breakdown of the various leave replacement designations: 117 substitutes (73¡¯s), 444 RCR¡¯s (75¡¯s), 476 PTF¡¯s (76¡¯s), 10,827 TRC¡¯s (70/70-1¡¯s), and 47,162 RCA¡¯s (78¡¯s). Comparing PTF¡¯s to the other leave replacements was comparing apples and oranges. Acknowledging several NRLCA proposals that would enhance the position of the non-career leave replacements, she stated there was never any intention to grant career benefits to any classification other than the PTF¡¯s.



Before finishing her direct testimony, the witness repeated the main points on which she wanted the arbitration panel to focus. She stated that the evaluated system had advantages for both parties. (However, no one on the NRLCA team can recall any listing by the witness of the advantages for the Postal Service.) Bill Peer, NRLCA legal counsel, then cross-examined Ms. Wilson. During the cross examination she simply restated what she had testified to earlier. Mr. Peer suggested that some of the ¡°benefits¡± to rural carriers alluded to by Ms. Wilson were mandated by law and were not the product of negotiations between the parties. NRLCA panelist, Steve Smith, commented that it was the first time in his experience that he had ever heard the Postal Service say that the evaluated system was not an incentive system. He also stated that the most major change in time standards had been the DPS time standard, a standard for letters that resulted in the Postal Service getting more work done for less time credit; and, the carriers¡¯ extra effort was the logical explanation for the bump continuing to increase in the face of the diminished time standard.



Counsel for the Postal Service, Jon Saperstein, questioned Ms. Wilson about the 1990 MOU in which the USPS and the NRLCA agreed to hold in abeyance three provisions of the National Agreement in anticipation of the negative impact of DPS on route evaluations. Following testimony regarding that issue, NRLCA panelist, Steve Smith, made it clear that those carriers who agreed to carry overburdened routes exceeding 57:00 standard hours did the work at no additional cost to the Postal Service.



Ms. Wilson was then excused from the witness stand and the day ended.