Skip to main content

Article Summary

Donovan, Ronald, and Marsha J. Orr. 1982. "Subcontracting in the Public Sector: The New York State Experience." Ithaca, NY: Cornell University.

According to Donovan and Orr, subcontracting brings into conflict two fundamental rights or interests:

  • The employer''s right to manage the enterprise, to determine what services shall be rendered to the public, and to decide how those services can be rendered most effectively and efficiently.

  • The employee''s right to share in the determination of the terms and conditions of employement.

Orr and Donovan review several case studies of privatization of school transportation services. During recent years, intensified contracting has occurred in New York State due to a 1981 state law which created a subsidization formula for the industry that made it more cost-effective to contract. Additional reasons cited for contracting included many of those regularly identified in other industries, including economic savings, greater efficiency fueled by the profit incentive, and the reduced need to negotiate with employees. Opposition to contracting of school transportation services comes from employees who feel threatened by loss of benefits (especially those who have been within the system for a long period of time) and unions. Instances of involuntary layoff were actually reported to be infrequent.

The response of unions to subcontracting varies in intensity and the methods used -- from running an emotional campaign against it, to treating it as a negotiating problem in trying to secure a delay to better organize. The authors feel unions risk a loss of power if they lose the battle, and that ironically, they may be better off dealing with a private contractor.

Although there has been general satisfaction in the three school districts utilizing subcontracting, it still remains unknown whether or not economic returns have been achieved. However, the authors conclude that the structure of the state aid formula is reason enough to conclude that districts do save money at least in the short run. What happens financially in the long run depends upon the state aid formula and whether a high level of competition can be maintained within the industry.

The Taylor Law categorizes subjects of negotiation between employer and labor as mandatory, non-mandatory, or prohibited. A mandatory term or condition of employement is one that, if raised by either party, must be negotiated in good faith even to the point of deadlock. A non-mandatory subject may not be pressed to impasse except by mutual agreement. Although the Taylor Law states that private sector labor law shall not be regarded as a binding or controlling precedent, the Public Employees Relations Board (PERB) and New York State Courts are still watching closely what the National Labor Relations Board (NRLB) says and does. The NLRB regards subcontracting as a non-mandatory subject of negotiations if it meets the following criteria:

  • it is motivated by economic considerations

  • the activity comports with the employer''s customary business operations

  • the activity does not vary significantly in kind or degree from past practice

  • the subcontracting has has no adverse affects on employees in the unit subcontracting follows an opportunity by the union to bargain about changes in existing subcontrating practices at previous general bargaining sessions

In general, there must be a clear link of causation between subcontracting and a substantial adverse, immediate adverse, or significant detrimental effect on employees, and this is difficult to formulate.

There are many different forums in the public sector for challenging decisions by public entities to subcontract. The variety of ways in which people have challenged these decisions, and the rulings on the cases have shown that subcontracting is an extremely complex issue.

The Taylor Law poses a problem of interpretation in determining whether a subject of negotiation is a term or condition of employment, or one which directly affects the terms and conditions of employment. The Saratoga Springs case serves as an example where an employer wanted to subcontract and, in the process, did not plan to change the nature or amount of service, and was to retain ownership over capital and management of employees. Therefore, the only effect of subcontracting was on the employees themselves. In this case, subcontracting was ruled as a mandatory subject of negotiation. In another case in New Rochelle, the employer was actually changing the amount of service to be provided and therefore subcontracting was ruled a non-mandatory subject of negotiation.

If the public employer''s only objective in subcontracting is to save costs while not changing the nature or amount of service, subcontracting is ruled as a mandatory subject of negotiations. Assignment of work to non-unit employees, provided it does not have an effect on or alter the terms of employment, and is considered a redetermination of job qualifications, is deemed a non-mandatory subject of negotiation. Finally, if there exists evidence that subcontracting would result in a departure from past practices, then it is considered a mandatory subject.

The duty to bargain can be waived by employers if there exists either explicit language in the contract giving the employer the right to bargain, or if the employees fail to request a negotiation. Employers also have the right to act unilaterally in a time of compelling urgency. Donovan and Orr believe that identifying a time of urgency poses interpretive problems. The Triborough Doctrine states that negotiating parties are obliged to maintain the status quo during the hiatus between the expiration of the old agreement and the negotiation of its successor.