Chairman Gramm and Members of the Committee, my name is Lee Gibson and I am Assistant General Manager - Transit and Chief Operating Officer of the Regional Transportation Commission of Clark County, Nevada (RTC). I appreciate the opportunity to testify before the Committee on Banking, Housing and Urban Affairs and offer my views on Section 13(c) labor protection requirements.
In our view, Section 13(c) has mutated far beyond its original legislative intent, and now stands as the most intrusive and costly anachronism in the Federal transit program. Our experience has shown that any public transit agency that attempts to provide innovative services, take advantage of the private market, and provide cost-effective service will inevitably run headlong into Section 13(c). It is a relic of another era and has outlived its usefulness. In fact, I submit that 13(c) stands in the way of the transit industry undergoing a fundamental restructuring into a technologically advanced, customer service driven, cost-effective industry -- a restructuring that would enhance the industry's contribution to our nation's ongoing economic expansion.
In setting forth our views, I would like to provide you with some background information on the RTC, explain the specific 13(c) problems and abuses we have experienced, and offer some thoughts on the significant national policy issues created by the continued existence of 13(c) requirements.
At the outset, however, I would urge the Committee not to be misled into thinking that the problems of 13(c) have been solved by the Department of Labor's 1995 procedural reforms. These reforms, which were driven by the threat of 13(c) repeal rather than any Administration initiative, may have resulted in faster processing of 13(c) certifications, but they have done nothing to alter the substantive policy problems with 13(c), nor have they addressed the fundamentally arbitrary and often secretive nature of the Department's 13(c) process.
The RTC is a public transportation agency created under Nevada state law with responsibility for planning, developing, and operating mass transportation services in Clark County, as well as planning and implementing street and highway improvements in the County. The RTC is the recipient of capital assistance from the Federal Transit Administration (FTA), and also serves as the Metropolitan Planning Organization (MPO) for the Clark County urbanized area. The bus transit system in Clark County, known as Citizen's Area Transit (CAT), is operated for the RTC by a private contractor selected through a competitive procurement process, National Express, formerly known as ATC/Vancom, Inc. (ATC). The CAT system is the largest privately operated system in the United States. The employees of the RTC's private contractor are represented for collective bargaining purposes by the Amalgamated Transit Union (ATU).
The opening of the CAT System by the RTC in November 1992 represented the most significant startup of new bus operations in the United States in the last 20 years. This new system was in response to the dramatic growth in population in the Clark County in the 1980's, and to the growing public demand for better public transportation. Clark County has grown from a population of about 70,000 in the early 1960's to 1.3 million today, not including at least 300,000 tourists on any given day. The explosive growth rate is now nearly 1,500 new residents a week. The patchwork of transit services that existed prior to the CAT startup was clearly inadequate to address this population explosion and to respond to the growing demand for public transit.
The critical event which served as the turning point for improving transit in Clark County was the November 1990 approval of Question 10 by the voters of Clark County, an advisory ballot which lead to the enactment of a tax program which provides a dedicated local funding source for transportation improvements, including public transit funding.
In evaluating the best structure for a new county-wide transportation system, the RTC considered a range of operational and institutional alternatives, and then adopted a Competitive Procurement Plan in April 1991. This Plan contemplated a new transit system in the Las Vegas Valley, with an extensive array of routes and services, to be operated by a private contractor selected pursuant to a competitive procurement process. RTC based its decision to contract with a private operator on its belief that this approach (rather than creating a large public bureaucracy) offered the most cost effective, efficient, and expeditious means for establishing a new startup system and providing transit services for our customers and taxpayers. This privatization effort has proven to be enormously successful, and the RTC has subsequently established a new and expanded ADA paratransit system that is also operated by a private operator selected pursuant to a competitive procurement process.
The growth and success of the CAT System in Las Vegas serves as a national model for the significant benefits of competitive contracting and reliance on the private sector. These benefits are dramatically demonstrated by the efficient operating costs of the RTC's bus system. The cost of operating the CAT bus system (including contractor costs and public agency overhead) is just under $60/revenue hour, which is $20 to $30 per revenue hour less than many public transit systems. At the time of the CAT startup in November 1992, the CAT System had 98 buses and provided about 380,000 annual service hours, which was a threefold increase over the prior operator in Clark County, Las Vegas Transit System, Inc. (LVTS). Today, the CAT System operates over 1,000,000 annual service hours, with almost 300 buses. This explosive growth has created over 1,200 new transit jobs on the CAT System, generated hundreds of more secondary jobs throughout the Las Vegas valley, and provided greatly improved transit services to the residents and visitors of Clark County, including access to jobs for the transit dependent in the rapidly growing Las Vegas economy. Ironically, the only factor that has slowed this job creation and economic growth in Clark County is the so-called "labor protection" requirements of Section 13(c).
INITIAL ISSUES: TEAMSTERS DEMANDS
The RTC's 13(c) woes actually began prior to the startup of the CAT System's operations in November 1992. The Teamsters' union, which represented the employees of the then private provider of transit services, LVTS, approached the RTC (as well as its contractor and future service operator, ATC) in mid-1992, demanding that ATC recognize the Teamsters as the collective bargaining agent of the yet to be hired CAT System workforce. Recognizing that such a mandate would violate rights and obligations under the National Labor Relations Act, the RTC refused to cave in to the Teamsters' demands. The Teamsters then requested the negotiation of a new 13(c) agreement and sought, in the context of 13(c) negotiations, guaranteed jobs for LVTS employees on the CAT System (regardless of qualification), the "carryover" of the LVTS labor contract with the Teamsters to ATC (and continued recognition of the Teamsters), and subsequent carryover rights applicable to any contractor the RTC might select in the future. In short, the Teamsters sought the imposition of its workforce, labor contract, and organization on another private operator - rights which do not exist under 13(c). The RTC held firm in its refusal to accept the Teamsters demands, and eventually the Teamsters modified their position and 13(c) negotiations were concluded with an agreement between the parties.
Despite reaching an understanding on the terms of a 13(c) agreement, the Teamsters then filed 13(c) claims against the RTC. Although the RTC provided an employee preference in hiring on the CAT system for former LVTS employees, certain of these employees were either not hired (due to being found not qualified), otherwise failed to accept CAT System employment, or were hired but nonetheless believed they were "worsened" in the process (either though the new wages and benefits were generally better). The RTC was convinced that these 13(c) claims were without legal merit, since as a threshold matter the alleged harm to the employees was not as a result of any Federal project and thus was not covered by 13(c). In fact, the CAT System start-up was locally funded and the Teamsters never identified any Federal project that had allegedly caused the employees' harm. However, the Teamsters let it be known that their 13(c) "sign off" on the pending RTC grants would not be forthcoming until their claims were satisfied. This effectively blocked the RTC from receiving Federal grants. Due to the significant need for grant funds to purchase buses and meet the ever-increasing demand for transit services, the RTC eventually gave into this pressure and settled the claims, at a cost of over $200,000. However, underscoring the fact that there was no legitimate basis for 13(c) liability in this case, when the RTC received claims from other LVTS workers subsequent to the settlement, the RTC proceeded to arbitration and was found to have no 13(c) liability.
Immediately upon receiving their settlement, the Teamsters, in a two-paragraph letter, released their "hold" on the RTC's grants pending at the Department of Labor, and concurred in 13(c) certification of those grants on the basis of already existing 13(c) protections. It should also be noted that after the new contractor ATC commenced operations and the employees of ATC were allowed to select a union, they selected the ATU and not the Teamsters, giving support to the RTC's basic notion that the employees should have a free choice in this matter.
THE ATU CARRYOVER CASE
The RTC's next encounter with 13(c) and the Department of Labor came in the context of a 13(c) certification dispute with the ATU, which arose shortly after the ATU had been recognized as the collective bargaining representative of the employees of the private contractor ATC.
Since the RTC had recently concluded 13(c) negotiations with the Teamsters and with another union, the SEIU, and thus had new 13(c) agreements in place, the RTC saw no reason to negotiate yet another set of protections for the ATU and risk additional delays in Federal grants. However, this common sense approach was simply not to be. The ATU insisted on its own set of 13(c) protections, and under Department procedures at the time this was enough (without any showing of inadequacy of existing terms) to require the negotiation of separate protections.
From the beginning of the ATU 13(c) negotiations, it was apparent that the central dispute between the parties would be the issue of 13(c) "carryover" protections. The ATU sought protections (similar to those originally demanded by the Teamsters) which would have mandated that existing employees have a guaranteed jobs in the event of any change of system contractors (i.e., resulting from a competitive bidding process); that the employees carry with them the wages, benefits, and working conditions under their existing labor contract, to be imposed on the new contractor; and that (most importantly for the ATU) the existing labor union thereby continue in its role as the bargaining representative for those employees, even though there would be a new employer and a new employment relationship.
The RTC's position on the carryover issue was quite clear, and was consistent with the policy the RTC had adopted when it started the CAT System and the prior operator (LVTS) went out of business. The RTC adopted the general policy that existing transit employees should be given a preference in hiring for jobs with a new contractor, but that the RTC should not impose an existing union on a new contractor's workforce or dictate imposition of the existing employment terms and conditions. As noted, the RTC believes that the new contractor's employees should have the freedom, consistent with the principles of the National Labor Relations Act, to select a bargaining representative of their choosing, and to bargain over wages, benefits, and other terms of employment.
Actually, in discussions with the ATU, it became quite obvious that the real issue was not the protection of employees in a change from one contractor to the next, but rather the preservation of the ATU as the permanent bargaining representative of CAT System employees, without regard to who that contractor might be.
Since the parties were unable to resolve this issue, the matter was submitted to mediation at the Department of Labor, and failing resolution through mediation, the parties were required to submit briefs and reply briefs to the Department for its determination. Following this extensive process, the Department rendered its decision on September 21, 1994, setting forth the labor protection that would be applicable to the receipt of the RTC's pending grant. On the critical issue of ATU's proposed carryover, the Department determined that the guaranteed employment rights and related union protections sought by the ATU were not required under Section 13(c), finding no basis for guaranteed job rights in a "non-acquisition" case. The Department's September 21 determination was a clear, legally supportable, and fair rendering of the issues in dispute in the adjudicatory proceeding.
With the September 21 ruling, the RTC had a brief hope that this 13(c) debate had been finally resolved. However, immediately on the heels of this decision, the ATU (supported by other elements of organized labor) mounted a major political offensive in an effort to overturn the Department's September 21 decision. Faced with this intense pressure, the Department agreed to "reconsider" its September 21 decision, even though certification decisions have historically constituted final agency action and no reconsideration procedures existed for the 13(c) program. While the RTC was never able to ascertain the full extent of the communications between the Department and the unions after the September ruling, it is apparent on the factual record that the unions had significant ex parte communications on the substance of the September 21 ruling, and used all the political leverage they could to get the decision overturned.
Even acknowledging the normal ways of Washington, the unions' overtly political efforts to overturn a valid agency adjudication were an affront to the objective administrative decision making process required under the APA and an assault upon the integrity and fairness required in the administration of Federal laws by an executive department.
During this process, the RTC utilized every means at its disposal to place a "spotlight" on the Department's reconsideration and to attempt to assure that the integrity of the September 21 ruling was maintained. Among other things, the RTC, through the Clark County District Attorney's Office, requested an Inspector General investigation of the ex parte communications between the unions and the Department of Labor, and wrote repeatedly to the Office of the Solicitor pointing out the fundamental legal flaws in the reconsideration process. At the end of this intense reconsideration period, the Department, in a letter of November 7, 1994, affirmed its original finding that the facts of the RTC case did not give rise to assurances of employment under Section 13(c)(4) of the Act and that therefore the carryover job protections and union preservation sought by the ATU were not legally required as part of the 13(c) protections.
The RTC was fortunate to have won this significant 13(c) case. Had the union prevailed, locking the RTC forever into existing labor cost structures, the benefits of competitive contracting would have been greatly diminished or even eliminated, and the CAT system might not have enjoyed the same significant growth and success.
ATU OBJECTION TO THE RTC'S NEW START FUNDING
The RTC is currently conducting preliminary engineering (PE) on a proposed fixed guideway system in the Resort Corridor and downtown areas of Las Vegas. The RTC has witnessed continued growth of CAT system ridership, at an annual rate of 35%, and expects the fixed guideway system alone will carry over a million passengers annually. The RTC also anticipates that bus operations will continue to expand with the construction of the fixed guideway system, doubling both the existing bus fleet and bus system employment.
Under State law, the RTC has authority to use a turnkey procurement method for the design, construction, and operation of the proposed fixed guideway project. As a result, the RTC anticipates that the operation and maintenance of the fixed guideway system will be contracted to the private sector. The RTC's contractual relationship with the future operator of the fixed guideway system will be separate and distinct from that with the operator of its bus services, and the fixed guideway operator will employ a separate workforce.
In May 1998, the ATU filed an objection with the Department of Labor to the RTC's grant application for PE funds for the fixed guideway project. The ATU argued that the grant "implicated unique employee protection considerations." Loosely translated, this meant the ATU wanted a guarantee of the rail jobs on the RTC's fixed guideway system. Specifically, the ATU claimed that the employees of the bus contractor had a right to "bid" into the rail positions and demanded that the RTC negotiate additional 13(c) protections that would afford those jobs, with a binding process to determine terms of employment. The ATU's proposal was a blatant effort to expand its "rights," under the guise of 13(c), without ever identifying any potential harm that would even result from the operation of fixed guideway services. The jobs the ATU was seeking were with a yet to be identified third party with whom they obviously have no employment relationship.
The RTC's position in the certification dispute before the Department of Labor was that 13(c) provides no right to claim new jobs, and that the existing 13(c) protections (providing monetary allowances and protection of collective bargaining rights) were sufficient to protect employees in the event of any adverse impacts that could theoretically result from rail operations. As a practical matter, since RTC bus services are expected to continue to expand to accompany the initiation of rail services, the ATU could not identify any potential harm that would go unaddressed under the existing 13(c) protections. Nor could the ATU show any legal right to rail jobs under the statutory language of 13(c) or its legislative history.
In a decision issued in August 1998, the Department of Labor rejected the ATU's additional protections, finding that the existing 13(c) protections provided the "requisite protections against impacts occurring as a result of the [rail] project." The Department held that 13(c) does not support a right to priority consideration in new jobs created by a Federal project in the absence of a negative impact caused by the project.
While the RTC prevailed in this dispute, the ATU's effort delayed the release of grant funds and was nothing more than an attempt to use 13(c) to guarantee future ATU members jobs with an unnamed employer in an yet to be built transit system, and to superimpose "labor protections" in an instance where no harm was even alleged to occur. It is a stark example of the overreaching that can occur in the 13(c) program, particularly where the unions seek to acquire "rights" that have no relationship to Section 13(c)'s original intent.
OVERVIEW OF MAJOR 13(c) PROBLEMS
The RTC's frustrating experiences with 13(c) have provided us with some genuine perspective on just how serious an impediment the program can be to the efficient delivery of grant funds and to the effective operation, growth, and expansion of transit systems nationwide.
The Cost of 13(c): There has been considerable debate in the past about the specific cost of complying with 13(c) obligations -- that is, whether a specific dollar amount can be identified as the cost resulting from this Federal requirement. One of the arguments for preserving 13(c) is that it has no "real" cost to transit agencies. As a matter of fact, the most pervasive and significant cost impact resulting from 13(c) requirements is probably quite difficult to measure, in that it is the cost of opportunities lost, efficiencies foregone, service restructurings not undertaken, and technologies not deployed. For almost thirty years, transit agencies have operated all too often on the basis of preserving the status quo, in large part with the belief that 13(c) would preclude or frustrate any meaningful efficiencies or changes in operations. Accordingly, the cost savings inherent in competitive bidding, contracting out services, restructuring routes and schedules, utilizing more cost effective equipment, or deploying automated systems have been foregone time and time again, and thus represent a major opportunity cost for public transit operations. One of the fundamental reasons for this opportunity cost, real or imagined, is the 13(c) requirement of preserving existing employee rights and not taking actions that might "worsen" employees.
Over the long term, the dollar amount of this lost opportunity has to be staggering. On the issue of contracting out (or privatization) alone, there are significant economic savings available to transit agencies that often cannot be pursued or realized because of 13(c) and related labor obstacles. For example, for a transit agency with an operating budget of $200 million, the savings that could be generated from the privatization of services could be conservatively estimated at about 10-20%, thereby saving as much as $20-40 million per year. If you take those potential savings and multiply them on a system-by-system basis around the country, the resulting amounts could easily fund significant growth and expansion in transit services nationwide, including better transit access to jobs and more extensive ADA services. The unfortunate fact is that hard cost numbers often do not exist because 13(c) has blocked the opportunity to engage in the very types of restructuring that might demonstrate available cost savings.
A distinct and more quantifiable 13(c) cost is the actual cost of labor protection claims. Under Section 13(c), an employee who is adversely affected by a Federal project (that is, dismissed or laid off) is entitled to up to 6 years full pay and benefits. Unlike the difficulty in measuring lost opportunity cost, this is a significant contingent liability that is quite possible to quantify. For example, if a transit agency initiates service changes or efficiencies which are found to be "as a result of" a Federal project, and those actions result in the loss of employment for 50 employees, with an average wage and benefit level of $50,000 and employment for over 6 years, the cost impact on that transit agency will be equal to $15 million in terms of 13(c) claims payout. Moreover, because of the extremely expansive interpretations of what is "caused" by a Federal project, and because the 13(c) burden of proof places the obligation on the employer to show that other causes resulted in the employee harm, it is quite possible that any range of activities undertaken by a transit agency in an effort to restructure services and provide more efficient transit operations could be found to be "13(c) events" and thereby create liability for 13(c) claims.
In looking at the significant contingent liability for employee protection claims, one cannot help but notice the extraordinary disparity between the treatment of mass transit employees and the treatment of employees in other sectors of the American economy. Our bus drivers and mechanics in Clark County are certainly significant, contributing members of the community, and the RTC is interested in assuring that they have meaningful employment opportunities. However, there can be no national policy justification for giving bus drivers and mechanics a type and level of employment protection that totally outstrips anything available to school teachers, construction workers, truck drivers, and other hard working members of our communities. The restructuring and growth that has occurred in many parts of American economy, such as the telecommunications industry, probably never could have occurred if the employees involved had all be entitled to 6 years pay and benefits. Moreover, at a time when all levels of government must live within their means, it does not seem defensible as a national policy to single out this special interest group as having a Federal entitlement to such extensive and costly employee protection.
Our opposition to 13(c) and these generous protections should not be viewed as animus toward our employees. The CAT system has a group of hardworking and dedicated operators, mechanics, and other employees, and these employees are a primary reason for the system's success and growth. For this reason, it has always been the RTC's policy to assure that the existing workforce is given a priority of hiring in the event of any change in contractors. We believe that we have proven that this type of protection for employees can be provided without forfeiting the benefits, in terms of innovation and economics, of competitive contracting. In other words, it is possible to reconcile these two goals, and with the result being a more healthy and vital transit system. We also believe that it is in the employees' best interest for the CAT system to be financially sound, so that existing jobs will be secure, more jobs will be created, and employees will have the opportunity for growth and advancement.
The Department of Labor's Arbitrary Process: One of the most frustrating and troublesome aspects of the 13(c) program is the biased and often arbitrary administration of that program by the Department of Labor, a problem fueled by the cozy relationship between the Department and the transit unions. It is no secret that the Department has historically been very sympathetic to the interests of organized labor in the administration of the 13(c) program. In fact, to many transit agencies that become entangled in 13(c) disputes, it seems that the transit unions, rather than the Department, basically "run the show." Transit grantees are normally on the outside of the process looking in - and the process that seems to be controlled largely by the unions and characterized by ex parte communications.
One of the reasons for this problem is that the Department does not adhere to the principles of the Administrative Procedures Act in carrying out the certification process, so much of the process remains a "black box" to the transit agencies. Further, the Department's decisions in 13(c) certification cases often fail to follow the basic Administrative Procedure Act requirement of explaining the conclusions reached and articulating the agency's rationale or legal basis for the decision. As a result, the Department has been able, often at the urging of the unions, to expand the boundaries of 13(c) protection without any clear legal basis, and grantees are often left with little concrete information on which to base key operating decisions, no real understanding of specific 13(c) requirements, and no meaningful forum to obtain legal review.
The Mutation of 13(c): Over the years, through a series of decisions, the Department has promoted the initiatives of the unions to significantly expand 13(c) protections beyond the original legislative intent. The Department has, for example, required extensive "worsening" protections, provided guaranteed employment and union representation, afforded arbitrators potentially unbounded remedial authority, and expanded reemployment rights with third parties -- all without clear statutory basis or legal authority. By relying on the broad concept of what is "fair and equitable," the Department has expanded 13(c) obligations well beyond the statutory language of 13(c), as well as beyond the standard labor protections for rail employees, even though as a statutory matter 13(c) protection is based upon railroad labor protection.
Finally, the unions have used 13(c) over the years to obtain benefits they otherwise might not receive in an equal collective bargaining process, and to otherwise obtain leverage in the labor relations with their employer. Guarantees of new jobs, restrictions on contracting out, "floors" on wages and benefits, and restrictions on transit operations are prime examples of provisions that, in the absence of the considerable leverage provided by 13(c), would probably have never been freely agreed to by transit management. By affording a "second bite at the apple", 13(c) provides an opportunity to achieve objectives that the union may have been unable to successfully negotiate at the collective bargaining table.
Out-of-Date Requirements and Conflicting Mandates: The current expansions of 13(c) need to be considered and compared to the policy underlying Section 13(c) and the original legislative intent in 1964. It appears from the legislative history (particularly the floor debates and hearings) that the purpose of 13(c) was twofold: (1) to preserve the collective bargaining rights of private transit employees in public acquisitions financed with Federal grants, and (2) to protect employees from the harm that might result from federally funded transit improvements, such as automation or technological change.
Given these original policy objectives, we would submit that Section 13(c) is a relic that has simply outlived its usefulness. Most of the public buyout cases were concluded over 20 years ago, and the need for 13(c) "transitional" protection to protect employee collective bargaining rights simply no longer exists. Moreover, unlike the situation found in 1964, today many States have public sector collective bargaining and labor relations statutes. Further, for private sector transit employees, traditional labor rights are fully addressed by the National Labor Relations Act. Moreover, the fear that Federal funding would cause harm to employees, such as through technological changes, has proven as a historical fact to be totally unfounded, if not ludicrous. Before the Federal transit program came into place, transit employment was in a serious downward spiral nationwide. The billions of dollars of Federal funds pumped into transit capital and operating costs over the past 30 years have essentially created and maintained a substantial, well paid transit workforce throughout the country. The idea that Federal funding harms these employees, or their unions, is totally at odds with reality.
Another reason that the 13(c) requirement has outlived its usefulness is that it now operates at odds with the goals and objectives of later significant enactments of Federal law. For example, 13(c) delays can frustrate or even prevent a transit agency grantee from acquiring equipment to comply with ADA, implementing Access to Jobs projects, or implementing projects necessary for Clean Air Act compliance. In our case in Clark County, we waited for months, due to 13(c) problems, to obtain the necessary grant funds to acquire paratransit vehicles to implement our federally mandated ADA plan. Moreover, since highway projects are not burdened with 13(c), the requirement of 13(c) compliance can directly impact flexible funding choices between highway or transit projects and thus frustrate one of the principal objectives of ISTEA and TEA-21.
Mr. Chairman and members of the Committee, thank you for allowing the RTC to submit testimony on this important issue.
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