18 Compensation and Working Conditions Winter 1998

MICHAEL H. CIMINI

Michael H. Cimini is an economist in the

Division of Compensation Data Analysis and

Planning, Bureau of Labor Statistics.

Telephone (202) 606-6275

E-mail: Cimini_M@bls.gov

Looking Back at the

SEPTA Transit Strike

On June 1, 1998, Local 234 of the Transport Workers

Union struck the Southeastern Pennsylvania Transit

Authority. The strike, which was the seventh since 1975,

reflected the parties’ tumultuous bargaining history.

On July 10, 1998, negotiators

for the Southeastern Pennsylvania Transit Authority

(SEPTA) and the Transport Workers

Union (TWU) agreed to a tentative 3-

year contract that ended a 40-day strike

that had snarled Philadelphia area traffic since June 1. The strike featured

emotional rhetoric, mass demonstrations, lawsuits, court injunctions, and

roller-coaster bargaining.

Unlike previous TWU-SEPTA disputes, it was not a battle over traditional economic issues like wage increases and health insurance benefits.

Instead, the struggle was prompted by

the company’s desire to change work

rules and other terms of the contract.

Doing so would help it streamline its

operations by gaining more flexibility

in a wide range of contract areas, including the right to assign work, hire

part timers, contract out work, and dismiss workers who violated the

company’s drug and alcohol policy.

Under the terms of the settlement,

SEPTA agreed to binding arbitration

of its proposal to use 100 part-time

drivers to operate small buses in the

City Transit Division. In exchange,

the union agreed to accept SEPTA’s

position on half a dozen other issues

ranging from work rule changes to

benefits. In addition, the union staved

off SEPTA’s efforts to introduce a

sweeping management rights provision.

In the workers’ compensation area,

the parties agreed to set limits on how

long employees with work-related injuries will receive health and pension

benefits. New employees will be eligible for up to 1 year of benefits, while

current employees will receive up to

1 year of benefits plus 9 weeks of benefits for each year of service.

SEPTA and TWU adopted contract

language that gave the transit agency

more latitude in conducting drug and

alcohol testing following an incident.

SEPTA also gained the right to immediately fire drivers who failed a

drug test after violating certain safety

rules. In contrast to these employees

who would be tested for “cause,” the

parties agreed to a second chance for
 Compensation and Working Conditions Winter 1998 19

SEPTA Transit Strike

workers who had already failed a random drug or alcohol test.

The negotiators agreed to economic

terms that call for general wage increases of 3 percent each year, boosting top pay from $38,000 to $42,000

annually; to an additional, immediate

1-percent wage increase for workers

in the Victory and Frontier lines to

bring them up to the wage levels of

their counterparts in the City Transit

Division; and to early retirement incentives. The parties adopted contract

language stipulating that normal pension benefits will be calculated based

on an employee’s highest wages for 3

of his or her last 6 years of employment (previously was the last 3 years),

increasing the average monthly pension benefit by 32 percent. They also

agreed to increase the time it takes new

hires to reach top pay—from 30 to 48

months.

Parties to the dispute

SEPTA. An instrumentality of the

Commonwealth of Pennsylvania,

SEPTA operates transportation facilities in the 5-county Philadelphia metropolitan area. The company operates 2,358 buses and rail vehicles and

employs about 8,100 unionized workers in three divisions: City Transit,

Regional Rail, and Suburban Operations (Victory and Frontier lines). The

City Transit Division serves the city

of Philadelphia with a system of 84

subway-elevated, light rail, trackless

trolley and bus routes, accounting for

some 554,000 passenger trips daily.

The Regional Rail Division operates

7 commuter rail lines in the 5-county

area, accounting for some 79,000 passenger trips daily. The Suburban Operations Division serves the western

and northern suburbs with a system

of 41 interurban trolley, light rail, and

bus routes, accounting for some

44,000 passenger trips daily.

Almost half of SEPTA’s budget

comes from trolley, rail, and bus fares;

the remainder comes from various subsidies. In 1997, SEPTA had passenger revenues of $274 million, of which

approximately 80 percent came from

City Transit Division operations. In

fiscal year 1998, the Federal Government contributed $12.5 million in subsidies (down from $121 million in

1980); the four suburban counties

around Philadelphia, roughly $14 million; Philadelphia, $56 million; and

the State, $200 million.1

Of the 13 SEPTA board members,

Philadelphia and the 4 surrounding

suburban counties each appointed 2,

the State House and Senate majority

leaders and the governor each appointed 1. This arrangement gives the

suburbs a predominant voice in matters relating to the transit company.

TWU. At the time of the dispute,

TWU Local 234 represented about

5,200 vehicle operators, cashiers, mechanics, inspectors, and other vehicle

and facilities maintenance workers in

SEPTA’s City Transit Division under

a contract that expired on March 14,

1998. The union also represented

some 125 drivers and mechanics in the

Frontier portion of the Suburban Division, which serves 2 counties adjacent to Philadelphia, under a contract

that expired on April 7, 1998.

History of the dispute

Both parties point to the departure of

SEPTA’s general manager, Louis J.

Gambaccini in February 1997 as the

starting point of the conflict.2

Gambaccini, who ran the transit company for 81

/2 years, was always successful in convincing top SEPTA

management that it was preferable to

deal with the TWU than take a strike.3

He was replaced by John K. Leary, Jr.,

who inherited a company that was

plagued by financial and operational

problems, and he had a different outlook on negotiations.

The parties’ relationship took a

decided turn for the worse in late

1997, when SEPTA hired David L.

Cohen, Mayor Edward G. Rendell’s

former chief of staff, as its chief bargaining strategist. Cohen was already

disliked by the TWU because of his

prominent role as chief architect of the

1992 municipal contract negotiations,

in which the unions were forced to accept several major concessions.4 To

make matters worse, Cohen “set the

tone” for the upcoming contract talks

in mid-December when he described

labor-management relations at

SEPTA as “the inmates running the

asylum.” The hostility generated by

his comments did not dissipate during the dispute, and Cohen became a

prime target of union members’ wrath.5

SEPTA and TWU opened bargaining talks on December 23, 1997, with

a mutual exchange of contract proposals. SEPTA’s contract demands represented a sweeping change in the existing contract, asking the union to

concede to 47 “take-a-ways” that

would have affected union members’

job security, pay, benefits, seniority,

and working conditions. According

to the union, these proposals included

the right to hire part-time employees,

up to 20 percent of the work force,

without benefits; the elimination of

the no-layoff clause for new hires; the

right to eliminate contractual benefits

and dismiss employees who are out

of work for more than 6 months due

to a work-related injury; and the right

to contract some work or services to

private companies and close down or

relocate company operations.6 Other

SEPTA proposals would have cut

health, dental, and prescription drug

benefits; eliminated family medical

coverage for injured workers and job

picking rights for maintenance workers; and cut the pay of new hires by

$2.66 per hour.

Both SEPTA and TWU painted the

dispute as a fight for their existence.

The company said the “protectionist”

work rules it wanted to change were

“rooted in the 1940s.”7 SEPTA

pointed to its current $150 million

operating deficit, which was projected

to grow to $350 million by fiscal year

2003, and claimed that without these

changes it would go broke.

The company’s opening proposal

shocked TWU. A spokesperson said,

“We expected a proposal. What we

got was a whole new contract. They

presented us with a radically rewritten agreement that [would replace one

that] took 50 years to build. They

wanted to change more than 100 ex-
20 Compensation and Working Conditions Winter 1998

isting agreements, offer us a whole

new document. This is unprecedented

in labor.”8 TWU criticized the company for trying “to strip the union of

its authority and demoralize its workers.”9 The union also disputed

SEPTA’s budget figures saying that the

transit agency had a $118,000 budget

surplus in fiscal year 1997, and was

projected to end fiscal year 1998 with

a balanced budget.

Negotiations continue

During the next 2 months, SEPTA and

TWU held low key and basically unproductive talks, with the parties making little or no progress on the major

issues. In mid-February 1998, the

parties began holding more frequent

and intensive contract talks in an attempt to reach an agreement before the

March 14th expiration date of the City

Transit Division’s agreement. But

negotiations stalled during the next 3

weeks, and both parties expended considerable resources in publicity campaigns—launched earlier in the

month—to win public support. The

publicity campaigns demonstrated just

how “rancorous” the heated contract

talks had become.10

With time quickly running out and

the parties still far apart on major issues, TWU and SEPTA continued intensive negotiations into the early

morning hours on both March 13 and

14. They deadlocked, however, over

the company’s continued demands for

sweeping changes in the contract.

SEPTA said its focus in the negotiations centered on reducing absenteeism, gaining more flexibility in assigning work, forcing employees to share

health insurance costs, tightening

drug-testing, restricting the no-layoff

clause to current employees, and other

changes that would enhance the transit company’s ability to invest in capital projects.

An hour before the City Transit

Division’s agreement was set to expire,

the union agreed to delay strike action

on a day-by-day basis and keep its

members on the job as long as contract talks were progressing. At this

point the parties had only reached

agreement in “some minor areas.”11

After a week of marathon bargaining, where proposals and counterproposals were exchanged, SEPTA and

the TWU halted negotiations because

the talks stalled. The parties resumed

bargaining on March 25, and held a

brief meeting on March 26. They returned to the bargaining table on

March 31, but halted negotiations because SEPTA was facing an April 1

strike threat by the United Transportation Union (UTU), another union on

the property.12 TWU and SEPTA resumed formal contract talks on April

8, at which time the parties discussed

several noneconomic issues, adjourned, and reconvened bargaining

on April 13.

Until mid-May, the parties met several times a week, but made little

progress on major issues such as work

rules, workers’ compensation, pensions, health care, and wages. On May

15, TWU made a comprehensive offer, which the company rejected. That

offer included, according to the union,

a zero tolerance drug and alcohol testing policy for employees in safety-sensitive positions and significant concessions on work rules, pay rates for new

hires, attendance policies, grievance

and arbitration procedures, jobs for

disabled workers, and health care cost

containment.

The company insisted its own offer

was fair. The proposals included the

following:

• A 9-percent wage increase over

3 years, boosting the average

hourly rate from $17.80 to $19.45

• No-layoff protection for all union

members, including new employees

• An “unprecedented” early retirement incentive for most senior

employees, including an additional $500 monthly payment in

effect until age 62

• A 32-percent increase in monthly

pension benefits for a typical

new retiree

• Fully company paid family health

insurance under a home maintenance or preferred provider

plan, plus a $1,000 bonus for

employees switching from the

traditional indemnity plan

• A zero tolerance drug and alcohol policy, and

• Limited use of a “small number”

of part-time workers whose assignments would be decided by

a joint labor-management committee.

Strike announced

On May 21, TWU announced its intention to strike on June 1, if an agreement was not reached. Hours before,

the union filed an unfair labor practice complaint with the Pennsylvania

Labor Relations Board, alleging that

SEPTA failed to bargain in good faith

by not moving from its initial demands

and by refusing to drop any of its 47

take-a-ways.

With a strike deadline in sight, the

parties reconvened negotiations on

May 30, the first time the two sides

had formally met since May 19, but

the talks faltered. The complexity of

the issues continued to divide the parties and stymie the negotiators.

Strike ensues

On June 1, the union struck, shutting

down subways, buses, and trolleys in

Philadelphia (City Transit Division)

and in suburban Bucks and Montgomery counties (Victory lines). The shutdown forced thousands of passengers

to find alternative modes of transportation and was particularly hard on the

city’s poor, many of whom are completely dependent on public transportation.13

According to union leaders, the

strike was timed to disrupt the busy

summer season, which was to include

several tourist events and conventions.

The city government and employers

responded by implementing contingency plans, which included the use

of private buses, extra cars on the re-
 Compensation and Working Conditions Winter 1998 21

SEPTA Transit Strike

gional railroads that continued to operate,14 and free parking throughout

the city. SEPTA also had developed

contingency plans to use management

employees to operate some subway and

bus lines if necessary.

Philadelphia Mayor Edward G.

Rendell, who followed the dispute

closely, had pressed the union to accept SEPTA’s “outstanding offer.”

The mayor said that the transit authority could not agree to a contract that

would result in increased fares—

which were already the highest in the

country—or cuts in transportation services that would harm the city’s poor.15

The mayor also pointed out that

SEPTA’s proposal offered the same

terms as were accepted by UTU in

April.

After the strike began, the parties

held sporadic contract talks. They

went 4 straight days without bargaining. On June 4, they held a perfunctory 5- to 10-minute meeting, in which

they “hurled obscenities at each

other.” 16 On the same day, TWU volunteered to end its strike if SEPTA

would agree to binding arbitration of

the dispute—an offer the company refused.

On June 9, SEPTA announced that

it dropped its plan to have managers

operate subway and elevated trains.

Press reports indicated that the company feared fierce protest by union

members and possibly violence.17

On June 15, the City Council announced plans to sue both SEPTA and

TWU in State court and ask the court

to order the parties to immediately resume negotiations and continue talks

until an agreement could be reached.

Mayor Rendell, who throughout the

dispute politically aligned himself with

SEPTA, attacked the action, saying the

lawsuit wouldn’t require strikers to

return to work.18

Later that same day, the parties held

their first formal talks since May 30.

They met again on June 17 and 22-

30, with the assistance of a State mediator and made significant progress

in whittling down the issues. On June

30, the talks fell apart. The union

abruptly walked out of the meetings

because, they said, SEPTA had reneged on a deal to pull five key issues

off the table. Press reports indicated

that at this time the parties had narrowed

their differences down to five or six issues, depending on the source: Part-time

workers, discipline policy, wage progression, pay increases, workers’ compensation, and management rights.

On July 2, SEPTA and TWU met

separately with a State mediator who

engaged in shuttle diplomacy in an

attempt to bring the two sides together.

The mediator was unsuccessful in trying to restart face-to-face talks.

On July 7, the parties held their first

formal meeting in 7 days. On the same

day, at a union rally, TWU vice-president Sabin Rich accused Democratic

State Senator Vincent J. Fumo, one of

Philadelphia’s most powerful politicians, of offering money to TWU local union president Steve Brookens to

end the strike. Fumo denied the

charge, saying he only offered to find

more money for the union’s pension

fund. During the previous week, when

contract talks stalled, Fumo blamed

Brookens, saying he was more concerned about being reelected to his

post than in reaching an agreement

for his members. The incident created a publicity furor for the union.

Just when it looked like the dispute

would drag on for months, a settlement

was reached. But, it took an outsider,

Robert Brady, the Democratic Congressman from the 34th ward in Philadelphia, to break the stalemate. Mr.

Brady, formerly an official with the

Carpenters union and now chairman

of the local Democratic Party, was

known as a deal maker.

Around 9:30 P.M. on July 7, Mr.

Brady met with Steve Brookens to see

what it would take to reach an agreement. At that meeting, Mr. Brady offered to “mediate” the dispute by acting as a go-between for the parties.

By the morning of July 10, Mr. Brady

began communicating separately with

Mr. Brookens and Mayor Rendell, relaying each side’s negotiation position. Mayor Rendell, in turn, spoke

to SEPTA’s general manager John K.

Leary, Jr., SEPTA’s chief labor strategist David L. Cohen, and SEPTA

board members. Mark Lamont, chief

of Pennsylvania’s Bureau of Mediation, also assisted the parties by relaying messages to the negotiators.

After several ups and downs during the day, including a time when it

looked like the settlement had unraveled, SEPTA and TWU reached a tentative agreement in principle, when

the three remaining issues on the

table—part timers, workers’ compensation, and aspects of the pension

plan—were resolved. According to

press reports, the end came when the

parties agreed to submit the issue of parttime workers to binding arbitration.19

Later on, however, when the parties tried to reduce the details to writing, they had different recollections

of the terms to which they had agreed

on two key issues. The first issue dealt

with the exact language to submit to

an arbitrator concerning the transit

agency’s proposal to hire part-time

drivers to operate small buses to be

used in the City Transit Division. The

second issue concerned how long employees on workers’ compensation

would receive health and pension benefits. SEPTA claimed that TWU

agreed that an employee would receive

10 weeks of benefits for each year of

service; the union said it agreed to 10

weeks per year worked, plus an additional year.

Meanwhile, the strikers returned to

their jobs and the rank-and-file approved the agreement on July 24.

SEPTA’s board members approved the

settlement 3 months later.
22 Compensation and Working Conditions Winter 1998

1 The Philadelphia Tribune, February 6,

1998, p. 3. 2 The Philadelphia Inquirer, March 15, 1998. 3 The Philadelphia Inquirer, July 9, 1998, p. 9. 4 The Philadelphia Daily News, March 11,

1998. 5

 According to Robert Bussel, professor of

labor studies and industrial relations at Pennsylvania State University, who has extensively followed negotiations at SEPTA, “That’s a pretty

poisonous thing to say, unless your goal is to throw

down the gauntlet and antagonize them (the union)

from the start. That set a tone from the very beginning that was confrontational and signaled

where management was coming from.” (The

Philadelphia Inquirer, July 12, 1998.) 6

 SEPTA’s proposal also included a “zipper

clause,” which stated that any new contract would

contain a full and complete understanding of the

terms and conditions of employment in one document. In effect, the clause would have wiped away

all previous agreements, side letters, or informal

practices agreed to in the past, unless they were

included in the new agreement.

7 Daily Labor Report, No. 107, June 4, 1998,

p. A-2. 8 The Philadelphia Tribune, December 26,

1997, p. 4. 9 The Philadelphia Tribune, February 6,

1998, p. 3. 10 The Philadelphia Inquirer, February 3,

1998. 11 The Daily Labor Report, No.51, March 17,

1998, p. A-3. 12 UTU, which represented 280 bus drivers and

trolley operators employed on the Victory District

routes in Delaware and Chester counties, struck a

deal with SEPTA on April 5. That agreement subsequently served as a coercive comparison for the

TWU-SEPTA negotiations. 13 With 38 percent of its households without

an automobile, Philadelphia is the second most

transit-dependent city in the United States. (The

Philadelphia Tribune, June 30, 1998, p. 3.) 14 The regional rails, which were manned

by UTU-represented workers, continued to

operate with a few service interruptions caused

by TWU strikers picketing the lines; these service interruptions were quickly halted by court

injunctions. 15 Between 1988 and 1997, SEPTA’s ridership plunged 21 percent, which represents about

$75 million in lost revenues. 16 The Philadelphia Inquirer, June 6, 1998, p. 1. 17 The Daily Pennsylvania, June 11, 1998. 18 On June 26, the City Council filed the suit,

which was subsequently denied by the Pennsylvania State Supreme Court. 19 How important was this issue to the parties? Bruce Bodner, business agent for the

union, said, “Part-time workers represent the

introduction of cheap labor into the City Transit Division bargaining unit. That undermines

the job security of all of our members.”

Michael Burns, SEPTA’s chief operating officer, said, “It’s an industry response to the

changing demographics of the business—a recognition that for every time you want to put a

bus out on the street, you just can’t pay an 8-

hour day with full benefits. We just couldn’t

continue to run a business that way.” (The

Philadelphia Inquirer, July 10, 1998, p.1.)