Another issue identified in this analysis is the widespread practice of requiring taxpayers to pay, at least in part, for arbitration costs. Of the contracts we reviewed, all but one featured terms that required this to some degree. Seventy-two percent rely on taxpayers to partially or indirectly fund an employee’s legal challenge to discipline, regardless of the result. The other contracts contained language requiring the losing party to pay both party’s costs, which would only put the taxpayers on the hook if the employer lost the arbitration.
On their face, these contract terms appear neutral, as they require costs to be split evenly between the employer and the union. But these terms place a disguised monetary burden on the taxpayer. If a contract allocates costs equally, police departments must pay half the costs for those arbitrations where the issued discipline is ultimately upheld by an arbitrator as proper. Practically, this gives unions an advantage, since the employer is never the party to initiate arbitration of disciplinary issues, given that it imposed the discipline in the first place. Put another way, taxpayers must subsidize all challenges, even the most questionable and frivolous ones, when a collective bargaining agreement requires the parties to evenly divide costs.
These costs are not minimal. One 2008 study found that arbitration fees for commercial and employment arbitration ranged between $1,300 and $1,800 per day, with an average of $1,700 for employment arbitration.[17] The median attorney’s fees were over $6,200, with an average fee amounting to $14,500. Assuming these reflect only one party’s attorney’s fees, actual fees would be double the cited figures. Thus, in 2008 dollars, a reasonable estimate of the cost of arbitration would be $7,900 for each party — assuming the process takes only one day. Adjusted for inflation, each party would be responsible for more than $10,000 in 2023.
It’s entirely reasonable to expect the employer to bear the cost of arbitration if an arbitrator finds that the discipline it imposed was improper. Such a term incentivizes the municipality to carefully consider the discipline it levies. Similarly, requiring the union to pay for challenges it loses avoids forcing the taxpayer to cover costs for frivolous arbitrations. But the more prevalent arrangement in collective bargaining agreements requires each party to pay their own costs, regardless of the outcome.
This practice benefits officers, including potential bad actors, much more than their tax-funded, municipal employers. Police departments will be less likely to mete out discipline knowing they’ll have to bear the cost of legal challenges. Unions, on the other hand, are encouraged to file more questionable challenges than they might otherwise, since part of the tab is paid by the employer. Ultimately, this works to divert taxpayer resources away from providing public safety.
Of course, shifting to a model where the losing party pays is not sufficient. If the scope of an arbitrator’s authority to overturn discipline is not also limited, a loser-pays model creates a perverse incentive for employers to not discipline employees for fear of later paying costs resulting from a poorly reasoned arbitration decision. Thus, municipalities should not change their fee model unless they also adopt limitations on an arbitrator’s authority.