2 CIR 117 (1975). Affirmed. 194 Neb. 436, 231 N.W.2d 710 (1975).



Plaintiff, |
v. |
a Municipal Corporation, |
Defendant. |



James Costello, of Costello & Dugan, for plaintiff.

Thomas Young, Assistant City Attorney, for defendant.

Heard before Judges Kratz, Wall, and Green.



This case brings before us the Omaha Association of Firefighters, Local 385 (hereafter Union) the bargaining agent for employees of the Fire Division of the Public Safety Department of the City of Omaha, which seeks a determination from us of wages and certain conditions of employment pursuant to Section 48-818 of the CIRA. A number of issues are in dispute between the parties. We address them one by one. We begin with wages.

In support of what it deems to be an appropriate level of compensation under the standards of Section 48-818, plaintiff submitted the testimony of James J. Kilgallon, a statistician specializing in manpower, labor-management relations and related areas. Kilgallon's testimony essentially consisted of an array of starting salaries, maximum salaries without longevity, and maximum salaries after 21 years for firefighters in seven cities: Cincinnati, Minneapolis, Toledo, Saint Paul, Wichita, Akron, and Dayton. These cities were selected by Kilgallon because their population was similar to that of Omaha, and they were within the Bureau of Labor Statistics North Central Region, the region which contains Omaha.

The central premise of Kilgallon's testimony is that there should be equal pay for equal work. Thus, his comparison of cities is based solely on a comparison of factors which he deems indicative of firefighting conditions. That is the population of the city would be an indicator of firefighting conditions which would be encountered in that community, while the common geographic area would be an indicator of similarity of weather conditions, an important hazard in firefighting.

While Kilgallen testified that the common grouping of the communities be utilized in the same Bureau of Labor Statistics area was indicative of economic similarity, and while he testified that similarity of population was probably indicative of similarity of level of unionization and of wage rates, it is clear that his testimony is bottomed on the premise that economic circumstances in the communities compared are irrelevant to wage determinations under Section 48-818. He, therefore, makes no effort to demonstrate any comparability of the communities he utilized with Omaha, other than his demonstration of comparability of firefighting circumstances.

In opposition to Kilgallon, the defendant advanced the testimony of Donald R. Connell, an associate professor of economics at the University of Nebraska at Omaha. The thrust of Connell's testimony was that the communities selected by Kilgallon were so economically disparate from Omaha that they did not provide a valid basis for determination of appropriate wage rates for Omaha firefighters. All but one of the cities utilized by Kilgallon, Wichita, is located either in the State of Minnesota or in the State of Ohio. Utilization of these States tends to produce a significantly higher wage rate, in Connell's opinion, than would otherwise be the case because of the significant difference between levels of unionization in these states versus the level of unionization and prevalent wage rates in Nebraska. Thus in 1966-1967, apparently the last year for which data was available, the level of unionization of the population in Ohio was 35%, that of Minnesota was 32%, while that of Nebraska was only 19%. Connell testified that a highly unionized work force tends to have a higher level of wages than a less unionized work force.

Connell also testified that wage levels in Ohio and Minnesota are significantly higher than those in Nebraska. In addition to the factor of unionization, he attributes this difference to the concentration of heavy manufacturing as a source of employment in these States. This concentration of manufacture contrasts with the Omaha situation where wholesale and retail activities tend to be a much higher source of employment. Again, the thrust of Connell's testimony is that the prevalence of manufacture in Ohio and Minnesota tends to make wage levels in those States generally higher than levels in Nebraska.

In rebuttal Kilgallon critiqued the testimony given by Connell. There are weaknesses in Connell's testimony, particularly the fact that in many instances he was required to make state-by-state comparisons rather than comparing communities. Nevertheless, the central thrust of Connell's testimony remains unimpaired. If any circumstances other than conditions of employment are relevant to a determination under Section 48-818, then Kilgallon's testimony would seem to form an inappropriate base for making a direct determination, since his testimony does not address these factors. Particularly, if we are required to determine that the communities being compared are similar in economic circumstances which affect levels of compensation as a condition to utilizing wage rates in such communities as a basis for a determination under 48-818, then Connell's testimony establishes that the cities utilized by Kilgallon are economically dissimilar to Omaha, and that their wage rates cannot be directly utilized as indicative of an appropriate level of compensation for employees in the City of Omaha.

The problem raised by Connell's testimony is one which we have not previously been required to face. The great bulk of our 48-818 determinations have involved public school teachers in the State of Nebraska. None of these cases have required us to depart from Nebraska information in order to make a determination. The relative homogeneity of the Nebraska economy has largely prevented the type of variables which concern Connell from influencing our teacher pay cases. In addition, we have imposed certain controls on the evidence we utilize, which prevent factors other than value of service from influencing our determination. Thus, in the teacher pay cases, we have either utilized the athletic conference to which the school district belongs, Nebraska City Education Assn. v. The School District of Nebraska City , Case No. 116, Findings and Order entered October 23, 1974, or, where an appropriate athletic conference was not available, we have required the information upon which we base our wage determination to come from school districts in close geographic proximity to the litigating district and of comparable size to the litigating district, Scottsbluff Education Assn. v. The School District of Scottsbluff , Case No. 70, Findings and Order entered March 12, 1973. These controls have assured that we will not have to make comparisons of circumstances within school districts, other than those which affect conditions of employment. In addition, where districts are of roughly comparable size and in close proximity, we have presumed comparability of conditions of employment in the absence of evidence to the contrary, Scottsbluff Education Assn. v. The School District of Scottsbluff, supra .

In this case, however, a pool of Nebraska data is not available. The Union takes the position that there are no work conditions in Nebraska comparable to those in Omaha. While the city argues that Lincoln is comparable in work circumstances, it points to no other available Nebraska evidence. Thus, this case poses for the first time the question of what controls we will impose upon data submitted in 48-818 cases in which information from the State of Nebraska is either not available or severely limited.

Once we depart from a case which can be determined solely on Nebraska-based data, the parties have available to them a potential pool of evidence which encompasses the Nation. Presumably there are a large number of cities in the United States whose population, physical configurations, and weather conditions are such as to present firefighters with comparable working conditions calling for similar work skills. Our question then is which of these members of this population may be utilized to establish the range of data upon which we found our 48-818 determination.

The statutory standard requires us to set wage rates "comparable to the prevalent wage rates paid and conditions of employment maintained for the same or similar work of workers exhibiting like or similar skills under the same or similar working conditions...." What the statute does not tell us is where we are to find "the prevalent wage rates." See Fremont Education Assn. v. School District of Fremont , Case No. 50, Findings and Order entered March 14, 1972. If a wage rate is prevalent, it must be prevalent somewhere. Wage levels do not exist in disembodied abstraction from particular places where wages are paid. Unless all communities where comparable work is done are to be arrayed, and then some figure like the arithmetic average of wages paid in these communities selected, we are required to articulate principles for selection among cities to be arrayed. We believe that the appropriate standards for selection are implicit in the statutory scheme.

In an unregulated labor market, labor and management test their relative market power through bargaining. This testing may include resort to the strike or the lockout. However, the Legislature decided that the services provided by employees subject to our jurisdiction were too vital to allow interruption while employer and employees tested the merits of their claims by trial by battle. When discussion is barren, employers and employees in the public sector are routed here. Judicial mandate replaces economic power as the determinate of wages.

However, the Legislature in providing for a judicial determination of wages did not deprive either management or labor of its market power. Rather, it commanded that we so set wages and conditions of employment that employers are required to pay the market price of labor. In other words, we are to set wages at the level on which the parties ultimately would have settled if they were free to exert the range of leverage available in an unregulated labor market.

The "prevalent" then is to be found in the market where the employer before the Court hires labor and in which the employees before the court offer their services.[1] However, in many instances, and this case is one of them, the only employer of a particular service in a relevant market area is the employer before the court. Because of the statutory limitation on the employees' right to strike, the wages paid by such an employer cannot be treated as determinative of the prevalent free market wage rate. In such a situation, we must structure a hypothetical market in order in determine wages.

The construction of such a hypothetical market is not a novelty in the law. Our problem is essentially analogous to that faced by a court attempting to determine the market value of property being taken by condemnation. Since each piece of property is unique, direct proof of market value at the time of taking is not available. However, market value can be established by indirection. This is done by taking the sales price in the open market at which comparable pieces of property within reasonable proximity to the taken property were traded at approximately the time of the taking. Similarly, we are able to infer the market value of the services of employees before us from evidence of wages paid for comparable services in reasonably similar labor markets.

Even under the value of service approach embodies in Kilgallon's testimony, that like pay ought to be given for like work, some control must be imposed upon the sample utilized. For example, in this case Connell's testimony demonstrates that variables other than value of service determine wage rates in Minnesota and Ohio. Unless we have some control on these extraneous variables, we would not in fact be allowing like pay for like work. Rather, we would be compensating Omaha firemen at a level dictated by economic circumstances which do not affect their wage rates. A hypothetical may illustrate this problem. If the cost of living in an area is much higher than that in Nebraska, presumably employees in that area will have higher wages than those in Nebraska, not because there is any difference in the value of their services, but because, in effect, they are being paid in inflated dollars, vis a vis those paid to employees in Nebraska.

The testimony of Connell demonstrates that wage rates paid in Ohio and Minnesota are significantly higher than those in Nebraska because of the presence of unionization and intensive manufacturing. It is a reasonable inference from his testimony that since wage rates generally are higher because of these factors, the salaries paid to employees in the public sector in those States would likewise be elevated above levels that would prevail in States where neither unionization nor manufacturing were so prevalent. That being the case, the salary levels for firemen in Ohio and Minnesota cannot be taken as determinative of the wage level that would prevail in a free market for such services in the City of Omaha.

Nevertheless, despite the weaknesses in Kilgallon's testimony other factors convince us that it should not be totally rejected as a base for establishing wages in this case. Connell does not indicate the extent to which the economic factors such as unionization and heavy manufacturing would elevate wage rates in Ohio and Minnesota over those in Nebraska. We do not believe that these two factors would totally explain the extremely large difference between the wages paid to firemen in the Ohio and Minnesota cities arrayed on plaintiff's Exhibit 2, Table 2 and those paid to firemen in Omaha. For example, if we begin with the starting salary, the percentage differential is 20.9% below the arithmetic mean of the seven arrayed cities. Since the arithmetic mean of the six Ohio and Minnesota cities is approximately $11,711.00, the presence of Wichita in the array has already deflated the impact of the variables to which Connell points. If we assume that twelve per cent of the difference between Omaha and the average of the Ohio and Minnesota cities is a product of unionization and prevalence of heavy manufacture, nevertheless, this would account for only $1,405.00 of the difference, leaving a differential of $1,042.00 between the average of these cities and the current Omaha start, or approximately an 11% differential.

We have already noted that Connell utilized state-by-state figures in his critique of Kilgallon's evidence. However, Kilgallon's evidence involves a comparison of cities. The evidence in this case demonstrates that the presence of higher levels of unionization or higher wages in one state than in another do not directly lead to higher wages for firemen in cities in the higher state over those paid firemen in cities in the lower state. Connell's testimony indicates that both levels of unionization and wage rates are higher in Ohio than in Minnesota. However, as Table 2 of plaintiff's Exhibit 2 demonstrates, wages paid to firemen in Minneapolis and Saint Paul are higher than those paid to firemen in any of the four arrayed Ohio cities.

Connell's testimony demonstrates that a direct determination of wages for Omaha firemen cannot be made from plaintiff's Exhibit 2, Table 2. Nevertheless, his testimony does not destroy the central point made by that exhibit. Even making due allowance for the variables of unionization and presence of manufacture, nevertheless, Exhibit 2, Table 2, demonstrates that Omaha firemen are entitled to a substantial wage increase.

The City does not dispute the firemen's entitlement to a wage increase. The City regards Lincoln, Nebraska as the only city comparable to Omaha. However, the City concedes that Lincoln is not directly comparable to Omaha. Rather, it is the City's position that wages for firemen in Omaha should be 12% higher than those in Lincoln. Application of this 12% differential to current Lincoln salaries produces an 8.2% increase in wages for Omaha firefighters over existing levels. However, defendant's Exhibit 3, Sheet A-18, demonstrates that over the last three years the average differential between Omaha and Lincoln has been 12.7%. This differential applied to the Omaha starting salary would support an increase in Omaha salaries of 9%.

The City's own testimony demonstrates that Lincoln is too low and that an inflator factor would have to be applied to Lincoln wages before they could be treated as comparable to Omaha wages. In its Exhibit 4 the City arrays two other communities, Des Moines and Kansas City. However, the wage levels in both Des Moines and Kansas City are currently lower than those which the City concedes would be proper on the basis of the inflator which it applies to Lincoln wages. While the Union may have presented us an array which is skewed upward, the City's array is skewed downward from the appropriate level.

We recapitulate the discussion thus far. The evidence demonstrates that Omaha firemen are entitled to a substantial wage increase. The array of cities offered by the Union is skewed upward from the prevalent because of economic factors which probably do not operate in Omaha. The cities selected by the City are virtually conceded by the City to be below the prevalent.

The problem which this case presents is probably unavoidable. Unless the City of Omaha could be directly recapitulated throughout the United States, it is impossible to find an array of American cities which have a close congruity with Omaha in all social and economic factors which influence wage levels, while at the same time presenting similar firefighting conditions to those faced by Omaha firemen. We cannot require that the parties present us with data from cities in perfect congruity with Omaha, because such cities do not exist. At the same time, the incongruities in the data prevent the utilization of the type of formula wage determination which we have been able to use in cases involving teachers.

Until the moving party in a 48-818 case has demonstrated that existing wages are not comparable to the prevalent, we have no occasion to enter an order changing existing wages, Nebraska City Education Assn. v. The School District of Nebraska City, supra . However, once it has been demonstrated that existing wages are not comparable to the prevalent, the statute mandates that we "shall establish rates of pay and conditions of employment which are comparable to the prevalent..." In the case before us, it is established that current wages are not comparable to the prevalent. Thus, an adjustment in the firemen's wages is mandated by the statute.

The evidence presented by the parties gives us a range within which we may act. Clearly, the evidence presented by the City sets a bottom line. The City's proposed 8.2% wage increase is too low. Even accepting the City's theory that a differential with Lincoln should be maintained, at least 9% would be justified. On the other hand, the 12% requested by the Union is too high. It finds its base in an array of cities where wages should be higher than Omaha's because of economic circumstances not present in Omaha. Thus, somewhere between 9% and 12% lies an appropriate figure at which to find the prevalent.

Our problem here is analogous to that faced by a regulatory agency in determining a reasonable rate of return upon investment. As with rate of return, so here, "The ascertainment of a fair return in a given case is a matter incapable of exact mathematical demonstration. It is one of reasonable approximation having its basis in a proper consideration of all relevant factors..." Colorado Interstate Gas Co. v. F.P.C. , 142 F.2d 943, 961-962 (10th Cir. 1944). As in a rate of return case, so here, the law cannot fix "Any single formula or combination of formulas." Rather we must "make the pragmatic adjustments which may be called for by particular circumstances." F.P.C. v. Natural Gas Pipeline Co ., 315 U.S. 175, 586 (1942).

In the teacher pay cases, we have traditionally used the mid-point of arrayed data as the basis of decision, Nebraska City Education Assn. v. The School District of Nebraska City, supra . If we added the City's three sample cities to the seven sample cities utilized by the Union we would have a ten-city array. At the starting salary level, the mid-point would lie between Cincinnati with a starting salary of $10,978.00 and Dayton with a starting salary of $10,948.00. This would produce a mid-point starting salary of $10,993.00. That figure is $1,729.00 higher than the current starting salary in Omaha. Thus, at the starting salary level, a combined table would justify an 18.6% increase in starting salary at Omaha. Since the City offered only three cities, the use of a mid-point would distort the figure upward. However, even if we average Lincoln, Kansas City, and Des Moines with the seven cities arrayed by the plaintiff, the average starting salary is still $10,585.00 or $1,321.00 higher than the current Omaha start. That is a wage increase of 14%. Again these figures are distorted upwards because of the fact that the City used fewer cities in its sample than did the Union. Nevertheless, we believe these comparisons fully justify the wage rate which we propose to set.

The differential which we believe to be justified lies in the range from 9% to 12%. The mid-point of this range is 10.5%. If we utilize the City's 8.2% figure as the bottom line, the mid-point of the range from 8.2% to 12% is still 10.1%. We, therefore, believe that a wage increase of 10.2% over existing Omaha wages represents a conservative judgment as to a wage level comparable to the prevalent.

Our 10.2% figure results in an increase of $945.00 in Omaha's starting salary. This produces a starting salary of $10,209.00. This figure is $993.00 less than the $11,202.00 average starting salary shown by the plaintiff for its seven arrayed cities. It is thus 8% less than that average. This figure is $1,501.00 less than the $11,710.00 average of the six minnesota and Ohio cities. It thus deflates the average of those cities 12.8%. We believe this deflation factor more than compensates for any impact upon wages in those cities caused by unionization or the prevalence of heavy manufacture at this level.

Neither party has questioned the existing differential among ranks of firemen or the existing differentials within ranks among grades. We, therefore, believe that it would be more appropriate to apply this 10.2% figure to each rank and to each grade within rank than to attempt to arrive at different percentage figures for different ranks or different grades within ranks with the attendant danger of distortion of differentials which, on the evidence presented, are appropriate and in conformity with statutory norms.

We turn then to the other matters in dispute between the parties. On these matters, it would appear that Connell's critique of the Kilgallon evidence is irrelevant. The other matters in dispute concern fringe benefits. While fringe benefits are part of compensation, the Connell testimony was directed only to wage rates. He did not indicate that the factors he adumbrated would directly influence fringe. While an inference that these factors would influence fringe might be reasonable, that inference alone would not justify rejection of the Kilgallon exhibit on these issues. Particularly is that the case, since as our discussion will show. Wichita generally is near the median with regard to those items on which we find favorably to the Union.

We turn then to the remaining issues. Items 2,5,10, and 13 have been withdrawn by the Union with the understanding that they shall remain as they were in the existing contract. We dispose then of the remaining items. We first deal with the economic issues, and then we address non-economic issues.

The first matter is hours of work. The Union requests us to change the current hours, as well as rules for call-in time, overtime and injured on duty pay. The only evidence submitted is the current contract and the average weekly hours arrayed on Table 5 of plaintiff's Exhibit 2. The City's hours do not diverge from the usual practice displayed on Table 5. Thus, there is no showing of divergence from the prevalent. As to the other matters, since "the norm in the trade is not proved by the party seeking an order, we are not in a position to grant him relief." Nebraska City Education Assn. v. The School District of Nebraska City, supra .

The next matter is holiday pay. Table 5 of Exhibit 2 shows that Omaha has 96 paid holiday hours a year. The cities arrayed on that table vary from 80 hours to 144 hours. Wichita which is slightly below the median grants 108 hours. We find that an increase in paid holiday hours to 108 would be justified.

The next matter is longevity. Omaha currently pays longevity on seven-year increments with a maximum of $180.00. The range of longevity paid displayed on Exhibit 2, Table 2, (maximum after 21 years column-maximum without longevity column) ranges from a high of $1,055.00 to a low of $150.00. All but one of the seven cities arrayed is higher than Omaha. Wichita, the median city, is at $360.00. We believe $360.00 is the prevalent maximum longevity pay. Backing this figure through the grades produces longevity pay as follows:

0-7 years ...............= $0

7-14 years ..............= $120.00

14-21 years .............= $240.00

21 years and over .......= $360.00

With regard to insurance, Table 5 of Exhibit 2 shows that Omaha currently pays 55.5% of family hospitalization coverage for its firefighters. Cities arrayed varied from 66.3% to 100% of cost borne by the city. Four of the seven cities pay 100% Thus, more than half the arrayed cities pay 100%. Wichita pays 75%, and one other city pays 72%. The average percentage paid is approximately 87%. We believe that the use of the arithmetic average of 87% here rather than the mean of 100 would be more appropriate. Life insurance coverage among the cities ranges from $1,100.00 to $20,000.00, while Omaha provides no such coverage. In each instance the arrayed cities pay 100% of the cost of the coverage provided. Three of the arrayed cities provide 45,000.00, while one provides $6,000.00. Thus, five of the seven cities provide $5,000.00 or more of coverage. We direct that the City provide the median of $55555,000.00 of coverage with 100% premium payment.

The next matter concerns uniform allowance and turnout gear. With regard to uniform allowance, the range on Exhibit 2, Table 5 is from $100.00 to $240.00 with one city furnishing the uniform. An allowance of $140.00 would approximate the median, and would require a $20.00 increase in uniform allowance from the City. We believe such an increase is appropriate. With regard to turn-out gear, the practice is uniform that the city provide such gear. Omaha does not. Omaha should be directed to provide it. In order to phase-in this provision, the City shall be required only to replace existing privately-owned equipment as it becomes unserviceable, to furnish a complete set to new employees, and then to replace City-owned equipment as it, in turn, becomes unserviceable.

The foregoing paragraphs dispose of the economic issues which we decide favorably to the Union. Since our decision in Milford Education Assn. v. The School District of Milford , Case No. 43, Findings and Order entered July 15, 1971, in teachers pay cases we have used the total cost of the compensation package in making our determination of wages and economic benefits. We do this because of the technique we utilize in teachers 48-818 cases. Having established our array in those cases, we then determine as to each member of the sample, the total level of compensation which the teachers in the litigating district would receive if they were paid according to the base salary, salary design, and fringe benefits schedule in each such district. Having established this array, we consider a total compensation comparable when it is at the approximate mid-point of the array of total levels of compensation. Nebraska City Education Assn. v. The School District of Nebraska City, supra .

Here, however, we do not believe that an attempt to cost out the total compensation package is necessary. The total compensation approach in teachers' cases is dictated by the integrated character of the total wage structure produced by index wage design. However, in this case, we believe that it is not necessary to compute total compensation costs. Since the wages we have allowed, and each of the other economic issues which we have resolved favorably to the Union are resolved in conformity to prevalent practice, and since no showing has been made that any other economic benefits provided to firefighters are out of line with the prevalent, the total compensation package is a composite of practices comparable to the prevalent, and, is, therefore, in total, comparable to the prevalent.

We turn to the non-economic issues. The Union contends the preamble to the contract should be worded in a certain way. Under Section 48-810.01, we cannot compel the defendant to enter into a written contract. We cannot direct the form of the preamble to a contract whose execution we cannot compel.

The Union seeks an order directing that it be allowed to conduct union activities on the City's time and premises. The Union, which has the burden, has not provided us with any pool of practice against which to measure the existing contract. We, therefore, are not positioned to direct change.

The Union also seeks pay for Union officials, delegates and negotiating teams while they are conducting Union business with the City. The prevailing practice among the cities arrayed by the Union is informal agreement. The particulars of these informal agreements are not specified. Thus, there is a failure of proof on this issue. In addition, we entertain doubt that an order by us on this issue would come within the scope of our authority to make orders establishing "The scale of wages, hours of labor, or conditions of employment..."

The Union seeks payment for college credits in firefighting courses attended by firemen. It provides no evidence of a trade norm of making such payment. We cannot direct change in existing practice in the absence of such evidence.

The City currently allows payroll deduction for Union dues. The Union wishes the right to change to a percentage dues structure from a flat dollar amount. As we understand the representation of the parties and the evidence, this was agreeable with the defendant, but became an item of dispute when other items were not settled by negotiation. We are unable to discern any practical difference between programming the payroll computer to deduct a percentage or a flat amount. Nor can we see any advantage for labor peace in permitting the employer to intervene in internal union affairs to the point of dictating dues structure. We, therefore, find that automated deduction of Union dues from members' paychecks should continue, and that upon notification from the Union that it has changed its dues structure, the defendant should modify its deduction as well as the deduction authorization form to conform.

The final matter in dispute concerns the "prevailing rights" provision of the contract and the contract duration. Both parties introduced the same evidence--the current contract. We, therefore, find that the current "prevailing rights" provision should continue, and that the duration of the settlement of this dispute by this Court shall be one year-from January 1, 1975 to December 31, 1975.

IT IS THEREFORE ORDERED THAT the dispute between the parties be resolved in accordance with the foregoing findings.

ENTERED this 20th day of January, 1975.


1 As our opinion in Fremont Education Assn. v. The School District of Fremont, supra , demonstrates, the 1969 amendment to the CIRA which removed the reference to market area from the statute did not remove the market area concept from the statute. Rather, what the Legislature did in 1969 was on the one hand abandon an effort to define with particularity the geographic contours of a market area and on the other hand abandon geographic limitations on sources of evidence which could be utilized to prove market wage rates.