The news of the eye-popping overtime figures is being seen as salt in the wound by riders, with the MTA releasing the figures just days after the agency hiked fares and tolls for the seventh time since 2008. The $418 million in extra OT more than eats away at the $336 million the MTA expects to raise each year from this fare hike. The topic has garnered significant news coverage in recent weeks, including four front page stories in the New York Post, as well as coverage in most other papers and local TV stations.
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The growing public backlash over excessive OT has prompted MTA and government officials to face a problem that is definitely not knew. MTA overtime continues to grow year over year, with overtime on the LIRR increasing by 111% since 2012 (while the number of trains the railroad operated increased by just 7% during that time). This also comes as the MTA's headcount continues to push upwards (the LIRR employs 13% more people today than it did in 2012)—belying the common notion that OT is just a way to control headcount and overall payroll costs. Excessive overtime also has various potential safety, productivity, and quality issues, as discussed previously.
Foye starts probe
Recently appointed MTA Chair and CEO Patrick Foye is taking aim at dramatically increased overtime payments, launching a review of overtime payments over the last year. Mr. Foye said in a statement that "[t]he recent reports on excessive overtime payments throughout our system are extremely concerning. Some overtime is to be expected at any public transit agency, in order to keep up with critical repairs and maintenance, especially at a time of extraordinary work being done around the system. But the accumulation of so many hours of overtime raises serious questions, including potential safety issues such as exhaustion."According to the statement, the presidents of the LIRR, Metro-North, and New York City Transit have been directed to conduct a full review of OT procedures and regulations currently in place, as well as review the last year's worth of OT claims to make sure all hours paid were earned and are appropriate. Mr. Foye added that if that investigation suggests they need to look back further than the last year, then the MTA will do so.
Mr. Foye has also requested the MTA Inspector General's office conduct their own full review of excessive overtime payouts to ensure everything is in line.
The probe may also consider possible safety and discrimination concerns, a source told the New York Post. As mentioned last time, under most labor agreements, OT assignments are handed out in seniority order, meaning those taking home the biggest checks are a mostly senior and not very diverse group.
Three major factors
On Friday, the MTA Board held a special meeting at which the topic of overtime was discussed at great length. There are lots of different factors that have played into the MTA's ballooning overtime problem, and its important to give each one its due scrutiny, and not harp on one more than the others:- Terms of labor agreements that either dictate how overtime is to be used, or various conditions that trigger overtime or other penalty payments.
- Isolated fraud and abuse, where employees submit claims and are paid for more time than they are actually work, and management's failure to have proper controls in place to prevent fraud and abuse
- General overstaffing/low productivity/misuse of overtime, not required by labor contracts
The topic of fraud and abuse of overtime by employees has been talked about a lot in the news and at was discussed at great length at the special MTA Board meeting. I included in the list above isolated fraud and abuse, because that is what I believe to be the extent of it—I do not believe there is rampant overtime fraud systemwide, and to paint with a broad brush and suggest either implicitly or explicitly that is the case is, in my opinion, inappropriate. Most overtime paid was very likely duly earned—and if the OT was unnecessary or unjustified because of some managerial fumble, we shouldn't fault the employees for answering the call.
That is not to say, however, that the workforce deserves full absolution. The MTA is on the brink of financial crisis (if they are not there already). LIRR and Metro-North fares are the first and second most expensive rail fares in the United States, the MTA just a few weeks ago raised fares for the seventh time since 2008, and the agency is staring down tremendous deficits in the next couple of years (coming close to $1 billion by 2022) unless they can deliver significant new economizations. Labor contract deals that continue to exceed the rate of inflation, continue to exceed the rate of fare and toll increases, and continue to include little give from the various collective bargaining units on archaic and out of date work rules and contract terms play no small part in bringing the MTA to, and the worsening of, this financial crisis. At Friday's special MTA Board meeting, the representative for the LIRR unions on the MTA Board, Vincent Tessitore, said in passionate remarks that board member Larry Schwartz (who requested the special meeting and had just finished regaling the board with various press clippings and oversight reports about potential fraud and abuse) "just called out your entire workforce...you pointed fingers, at every single worker in the MTA system...". But fingers do need to be pointed at every worker—and every manager, and every executive, and everybody in between. It continues to be abundantly clear that doing what's best for the riders, doing what's best for the taxpayers, and doing what's best to promote the economic growth of this region has not been on the minds of anyone at the MTA.
Part 1: Terms of Labor Agreements
There is definitely more to excessive overtime payments than just fraud and abuse. It is very likely that most of the overtime paid was legitimate, as the MTA's various labor contracts create no shortage of ways employees can take advantage of the system to clock seemingly excessive amounts of OT. I have written in the past about painful LIRR overtime practices and the prevalence of penalty payment claims at the LIRR.An editorial in the New York Post earlier this week highlighted several of the arcane contract terms that make it easy for certain employees to rack up overtime. You can read the exact terms of the LIRR's labor contracts for yourself in The LIRR Today's document library. Some of the examples cited in the editorial include restrictions that limit the flexibility the railroad has in assigning employees, making it difficult to ensure the proper resources are available to do maintenance work when and where it is needed (and when and where it can allow for the most efficient use of track outages and disruptions to train service).
At the LIRR, assignments are picked in seniority order under most agreements, allowing those close to retirement to pick assignments that are prone to (or even have built-in) extra overtime, as well as take extra shifts. Added OT by senior employees in their last years before retirement frequently pads pensionable earnings, driving up pension and other post-employment benefit costs for many years after the extra time is worked. Some agreements even allow senior employees first pick at overtime assignments, including those outside of their normal scope of work, meaning the person getting paid OT to fix your train or repair the tracks you travel over is decided based on whomever's the most senior, not which employees are the most skilled or proficient at a particular task.
Other examples cited include clauses in most contracts that require workers who temporarily fill the position of an employee who is paid a higher rate to be paid at that the higher rate...but, on the other side of the coin, when they fill the position of a lower paid employee, they get paid their normal hourly rate. Since most of these temporary assignments are providing coverage for others who are on vacation or absent, these are often on OT by default, further accelerating OT costs.
Under most contracts, railroad employees that arrive at work late due to delays on the LIRR are paid anyways for the time they didn't work, unlike most of the railroad's paying passengers who either lose pay (if they're paid hourly) or have to stay at work later to make up the time when their train is late. If the LIRR needs to keep people on extra to cover for late employees, or catch up on work that wasn't done, that means even more overtime.
Certain agreements, like the contract for maintenance of way employees, permit those who do not want to work in the rain the option to simply go home. For their trouble, they receive two hours, 40 minutes of pay (even though no work was done)...then when the sun comes out, there's work that still needs to be done, so the railroad ends up having to pay other crews OT to complete those tasks.
Now, I'm not going to sit here and say every contract clause or pay requirement is wasteful and ridiculous. If employees are working extra hours for legitimate reasons, paying time and a half OT is perfectly reasonable. Similarly, extra pay for those who sacrifice their holidays (that are traditionally observed in this century) or their regular days off should be entitled to additional compensation. But some of these rules are archaic and unreasonable—and it's not hard to see why people paint with a broad brush.
Rationalizing archaic terms and practices
In many cases, MTA labor practices have grown very far apart from what is currently seen in many private sector fields in 2019. In many industries, for a great many people, overtime is simply not a word that exists in their workplace vocabulary. You're a salaried employee...you're paid to do a job, and you work as many or as few hours as needed to complete that job. If there's work to be done, you stay and do it (and hopefully your employer recognizes the work that you do). Now, like I said before, I'm not suggesting we eliminate OT completely and work everyone around the clock for a fixed salary—but to be surprised at the public backlash at these staggering OT payments when most of the MTA's paying customers don't get paid a cent for their ninth, tenth, or eleventh hours at work is rather out of touch.
There's no shortage of terms in the MTA's various labor contracts that bear no resemblance to what the majority of workers in 2019 see. Yes, each and every one of these provisions was bargained at some point in time—they did't appear unilaterally. But many of these contract terms date back several decades, from a time when railroading in the United States was a very different industry. In 2019, there is no shortage of safety regulations and requirements from the FRA, OSHA, state authorities, and others. But the various collective bargaining units have been very slow to let go of practices that faded away in other industries decades ago.
Rationalizing some of these more archaic contract terms that have generally fallen out of common usage in 2019 will require making modifications to the labor agreements between the railroads and the unions. During the 2014 labor contract negotiations, the MTA and LIRR sought to change several of these provisions, but they failed to deliver these econonomizations, and instead more or less extended the status quo.
Overhauling these agreements will be a heavy lift, and I struggle to see how the MTA can deliver substantive changes to contract terms without self-help, and all of the complications that go with that. While MTA management is ultimately responsible for the agreements it makes with collective bargaining units (and the MTA Board must exercise its fiduciary responsibility to ensure that contracts are fair and reasonable to the taxpayers), it's hard to dispute the political element in these negotiations. But MTA management and the MTA Board must put the interests of the taxpayers first, come what may in the political arena.
I do not think it's reasonable to say that collective bargaining negotiations in recent years have been at arm's length. At New York City Transit, the Taylor Law and the Triborough Amendment have effectively tipped the scales in favor of the collective bargaining units since 1982, as state law requires the terms of expired contracts (including any annual rate increases) to remain in effect indefinitely until a new agreement can be reached, regardless of changing fiscal conditions. NYS Law effectively bans self-help by either side, meaning the collective bargaining process can stall completely with continued wage increases but no changes to terms.
On the railroads, collective bargaining is governed by the Railway Labor Act (a federal statue), which defines different procedures for contract negotiations. Unlike the Taylor Law, the Railway Labor Act does allow for self help (a point we nearly reached in 2014) after certain other alternatives have been exhausted. But one or both sides exercising self-help has tremendous political and economic implications, prompting management to make or be pressured to make concessions, prematurely.
While the MTA and other public authorities were created to be independent entities and a couple of steps removed from politics, and management and the MTA Board remain ultimately responsible to assert their independence and fulfill their fiduciary duties, it's hard to deny the significant political forces that surround these negotiations. The transit and railroad unions represent large blocks of votes, especially out in the suburbs where political contests tend to be closer than they are in NYC or upstate. Pushing a cushy contract deal that includes little to no concessions can be an easy way to score votes, then when things start to unravel (like they are now), the fingers get pointed at agency management.
Strangling the golden goose
Like I said above, these contract terms were bargained for at some point in time, and employees are not wrong to take advantage of the terms of their agreement. But I do question the wisdom of the continued undermining of the MTA's financial position. Like I said during the 2014 contract negotiations, the MTA's workforce should have a vested interest in the financial solvency of their employer. The continued growth of labor costs is posing a significant threat to the MTA's near-term financial stability, with expected deficits in the hundreds of millions of dollars just a couple of years away.
The steady wage increases, high OT hours, and extra penalty payments may be nice when the checks clear the bank now, but these ballooning costs will start to cause major trouble for the MTA and its whole workforce about six months into the next recession. The fact that the MTA is in such a precarious financial state now, after an extended period of continued economic growth in this region, really speaks to the fragility of the whole system. During the 2009 recession, the MTA was able to stay relatively afloat by bonding its way out of trouble—the agency took on billions in debt, and once they got hooked on debt, they have never looked back. Now congestion charging, the progressive mansion tax, and the internet sales tax recently passed will add $25 billion more in debt to the MTA's roles, and the MTA has no apparent plan to pay any of this off anytime soon.
Then there is the overall increase in payroll costs, both on straight time and OT. Agency-wide, pay at the MTA increases by about 3.4% each year—that has been far outpacing growth seen in most other industries in this country. While wage growth is again beginning to pick up, for the last several years, the US as a whole has seen wages grow by only 2.0%-2.5% each year since we bottomed out of the recession. MTA Board Member Neal Zuckerman was one of the few attendees of Friday's meeting who picked up on the huge financial implications of these ballooning labor costs, but it's really the heart of this whole issue.
The moment the economy starts to turn south you can bet the bondholders will come knocking—and the MTA's bond covenants require the agency to make its debt service payments first, before spending a cent on service and before paying its employees. When the economy and employment slow down, ridership and revenue will shortly begin to suffer, and debt service will consume an even larger portion of the MTA's operating budget...and the MTA will need to cut service to balance its budget (and since the bonds are backed by the MTA's transportation revenue, any threat to that revenue will lower the MTA's credit rating and further increase debt service costs). Service cuts result in further ridership losses, and you can see how the cycle can quickly spiral out of control from there. And with billions more in bonds on the books now than the MTA had in 2009, this next time around will be a whole lot worse.
At that point, we won't be worrying about overtime or double time, there will be zero time for a lot of employees as service cuts and budget strain will inevitably result in layoffs or furloughs as the financial position of the agency worsens. Yes, the employees are in their right now to take advantage of the system that's in place, but you can only squeeze the golden goose so hard before it drops dead.
It was mentioned before that the MTA's payroll increases have generally exceeded wage increases seen in other industries in this city or nationwide—and in those other industries or the private sector, you typically only get those increases if you're company is performing reasonably well. If you work for a private company that is consistently posting significant losses or staring down deficits as large as the MTA, chances are you're not getting a raise at all...or you might have to even take a reduction in pay to keep your job. The increases in payroll costs have beared no relation to improvements in operating performance, improvements in service levels provided, or improvements in the MTA's financial state.
Part 2: Isolated Fraud and Abuse
While it is not appropriate to paint with a broad brush and suggest that there is widespread fraud and abuse, thinking there is no fraud or abuse is a little off the mark too. This is not the first time the MTA's OT practices have been under the spotlight, particularly at the LIRR. In 2006, the MTA Inspector General issued a report on overtime practices at the LIRR (as well as penalty payments). You can read the original report in The LIRR Today's document library.Proper controls not in place
The Inspector General's report (which was focused on solely the LIRR's transportation department, not any of the other departments where OT is also rampant), chided the railroad for not having proper controls in place to effectively manage overtime, and not maintaining proper records documenting what work was actually being done while the OT clocks were running. The OIG found that after its initial report, the railroad did implement some record management efforts, but that "records recently implemented to improve control and accountability were not accurate", and that the railroad's failure to adequately track OT and penalty payments makes it to assess the veracity and justification for claims.
Progress has been slow, if not non-existent. In 2009 (several years after the MTA OIG's audit), NYS Comptroller Thomas DiNapoli issued a report on management and control of employee overtime costs at the MTA, and found that the MTA was not effectively managing and controlling its overtime costs. At the time, the Comptroller said that "there has been a culture of acceptance among MTA mangers regarding overtime, and no real efforts were made to make significant changes in longstanding practices that resulted in routine, and often unnecessary, overtime".
In 2012, another audit from the Office of the State Comptroller, this time focusing on Metro-North and its use of federal American Recovery and Reinvestment Act dollars, found that Metro-North officials could have better monitored OT to mitigate instances of fraud, waste, and abuse of federal recovery funding. The Comptroller admonished Metro-North for not having proper timekeeping controls in place to make sure that employees were actually working the hours it claimed. For example, Metro-North's Crew Management System required train service employees to sign in manually on a log book at the start of their shift, and then sign-in to the CMS at one point anytime during their shift—there was no requirement for employees to sign-out at the end of their shift, nor did Metro-North have any records of when employees actually left railroad facilities. Therefore, Metro-North had (still has?) no way to actually verify how long employees actually worked, aside from self-reported OT claims.
The LIRR did not fare any better. The same type of investigation conducted by the NYS Comptroller in 2010, this time into the use of certain federal funds by the LIRR's engineering department, found that in certain instances the LIRR "did not effectively mange its Recovery Act funds to ensure that they were used for authorized purposes" and that the railroad did not have controls in place to "prevent fraud, waste, and abuse". Specifically, the report cited poor controls over time and attendance after finding that engineering department management did not always know where their employees were located to confirm they are actually working. A supervisor misinformed auditors saying that employee was working when he was, in fact, not at work. As part of that report, the Comptroller recommended making improvements in controls to promote accuracy in reporting staff attendance, and monitoring employees to ensure they are only paid for the time they worked.
Management asleep at the switch?
All of these reports come back to the same basic themes: management is not doing a good job effectively monitoring the usage of OT, and the railroads do not have proper systems in place to accurately track OT and verify the veracity and justification of OT claims. Without adequate systems in place to track the exact times employees start and finish working (with regular checks to make sure they are actually working in-between), the MTA is effectively handing employees a blank check.
The lack of modern, robust timekeeping systems also means the MTA does not have audit trails or back history to make analyze OT trends and actually verify whether all of the money they are expending is being put to good use, and if loading up on OT is really a cost effective alternative to increasing headcount, like some often attempt to claim.
Neither the MTA nor the OIG/OSC seem to track progress on any of the recommendations that have been made over the course of time, to demonstrate to the taxpayers that action is being taken to correct issues identified by oversight authorities.
The extent of fraud and abuse
The real extent of fraud and abuse of overtime payments is a big unknown, and not being able to have confidence that people are actually working all of the hours they are getting paid for does not sit well at all with the public. Without proper controls in place, it's impossible to verify whether all of the money the MTA has paid out over the years was genuinely earned. Investigations relying on paper trails will be frustratingly inconclusive, though the increased prevalence of CCTV and railroad-issued mobile devices will hopefully make it easier to verify people were where they said they were.
While I do not believe there is rampant, systemwide overtime abuse where everybody is putting in claims for dramatically more hours than they actually worked, the persistent lack of proper controls to prevent abuse suggests there has to be at least some people taking advantage of the system. Misreporting time and claiming more OT hours than actually worked is likely localized at the crew level, with line managers either not doing due diligence or intentionally looking the other way when claims are submitted.
Then there is the risk of people not actually being at work when they are supposed to. On a big railroad stretching the entire length of this long island, it can be difficult to effectively keep track of where everyone is at any given time. During major trackwork outages when there is a lot of work happening, for example, it could be easy for someone to disappear and leave work unnoticed, while still on the clock (even if they return later to clock out). This can happen with train service employees as well...during service disruptions, the top focus is often running service as close to normal as possible, so management is not paying attention to who is being sent where (and whether those reassignments would result in extra OT or penalty payments) and keeping proper records so they could verify and substantiate claims after the fact. This is likely particularly prevalent with collectors (assistant conductors who are not tied to particular train crew, but rather just provide extra coverage on trains primarily for ticket collection). Since they are not tied to train crews (which on the LIRR consist of an engineperson, conductor, and assistant conductor) and aren't necessary for the operation of a train, they can very often get lost in the shuffle during even relatively minor service disruptions once their schedules get knocked out of whack. During larger incidents, it can become easy to lose track of were people are, enabling "collectors holidays" where people submit fraudulent OT or penalty payment claims, leave work completely (while still on the clock), or both.
At Friday's special MTA Board meeting, MTA Chair and CEO Patrick Foye said that five employees either have been disciplined or are facing discipline for overtime abuse—so there are more than zero examples of potential abuse...and who knows how many we might find once some effort is actually put into looking. But the lack of controls, the lack of proper recordkeeping will make it difficult to conclusively find in many cases whether the time was legitimately earned or not.
Part 3: General Overstaffing/Low Productivity/Overtime Misuse
The LIRR's eye-popping overtime is not strictly a result of management being lazy or pencil-whipping OT claims or employees fraudulently claiming many more hours of pay than they worked. The terms of the LIRR's labor agreements also do not inexorably tie management's hands when they attempt to regulate overtime. While the MTA could dramatically cut down on what instances of fraud and abuse do occur by implementing modern, standardized electronic timekeeping systems that allow them to verify time actually spent working—something commonplace in most other industries with hourly employees—management can also better regulate how much OT is used in the first place by effectively managing employee schedules, controlling absenteeism, and documenting reasons for the use of OT, so the agency can justify whether the use of OT is appropriate in various circumstances.Overtime is talked about a lot in concert with headcounts. Management often claims OT is a good thing to control headcount, since it's cheaper to pay somebody time-and-a-half than hire a whole new employee and pay for training, benefits, etc. The collective bargaining units see high OT figures and say we ought to have more employees.
But what is frequently lost in these discussions is poor productivity and the extent of overstaffing to begin with. If the MTA assigns more people to do a task than is actually required, then you will inevitably run into staffing issues and drive up OT. There is no shortage of plain overstaffing across the agencies. Whether it is direct operations (where the LIRR puts at least three employees on each and every train when peer railroads elsewhere in the world run trains with just one, or NYC Transit being one of the few major metro systems left in the world that still has two employees on every train) or in the maintenance trades, where overstaffing is even worse, if the MTA were to stop assigning twice or three times as many people as necessary to do tasks, you are going to have OT problems.
How many MTA employees does it take to change a lightbulb?
If you've ever looked out the window during a LIRR service disruption, you get the gist of what I mean. Often there's one guy with a shovel, and a dozen or more people standing around watching. I do not mean to paint with a broad brush, but low productivity on the LIRR (and the MTA overall) has been well documented, and if you want to look at what's a major driver of OT and rising payroll costs, examining and rightsizing crew sizes is a very important first step. I am not saying that the railroads should be sending a single person out to fix the whole railroad with just his two hands, but we don't need to send one guy to swing the hammer, one guy to hold the nails, one guy to work the shovel, one guy to hold the pail, three flaggers, and four supervisors to watch over the whole lot.
17 guys standing around. 1 guy swinging a hammer. C'MON, @lirr! @TomLiodice @News12LI pic.twitter.com/sFNP345CcB
— BeerZombie (@BeerZ0mbie) March 10, 2016
riddle me this...how many people does it take to change a light bulb? pic.twitter.com/PGK3esisQZ
— slitelytwisted (@twisted_alil) June 26, 2018
The MTA and its operating agencies should be challenged to present comparisons of its crew sizes with systems elsewhere in the world (or even other major railroads in the US)—if the Germans or the Dutch can maintain their railroads with crews that are half the size, what is the MTA doing wrong? Productivity improvements and rightsizing crew sizes can deliver OT stabilization results almost immediately—if productivity could be improved so the same work can be done by gangs half the size, then you immediately have twice as many gangs (already qualified and trained) ready to go perform more work elsewhere, significantly reducing the need to keep other gangs on OT. It can work the same way with OTPO on the subways or proof of payment on the railroads...by reducing train crew sizes to one person, the MTA can retrain conductors (who are already qualified on operating rules and physical characteristics) as train operators or enginepeople much faster and for a much lower cost than hiring people off of the street (and then reinvest the savings from OPTO or proof of payment into delivering more service...at a much lower marginal cost).
If the MTA was operating a nearly perfect productivity, then I would say we should entertain the OT vs. headcount debate...but it's premature and rather wasteful to talk about further increasing headcounts while we are still paying three people to do a job that can be handled by one person everywhere else in the world.
Misuse of overtime
Then there are the cases where management keeps employees on OT without having proper justification for using OT. The MTA IG report about overtime payments in the LIRR's transportation department found several instances where managers used OT without documenting what work was actually done or providing a justification for why the OT was needed. Examining procedures to determine what circumstances actually warrant the use of OT, how much OT is needed on projects (and keeping projects on schedule so they don't require additional resources when they run late), and holding managers accountable to substantiate their use of OT can do a lot to help mitigate these ballooning payroll costs as well.
A microcosm of the MTA's problems
The use of OT and all of the hullabaloo surrounding it is very much a microcosm of many of the MTA's structural problems. You have management that is not keeping a close eye on costs and the use of the public's money, collective bargaining agreements that are laden with archaic terms with little effort being made to rationalize, and all the while the riders suffer.Controlling overtime will require controlling costs overall, agency-wide—the answer is not going to be hiring another 10,000 employees, nor will installing biometric time clocks fix OT spending. Only by targeting overstaffing and low productivity—and making sure the public's money is being spent as effectively and efficiently as possible—can the MTA get a handle on OT and payroll costs.
Continued, uncontrolled growth in payroll costs (including OT) can spell financial disaster for an agency facing tremendous deficits over the next few years. Rectifying some of these longstanding issues may require focus and persistence during what will likely be an exceptionally difficult round of labor agreement negotiations, but others can be resolved sooner with more diligence and care using, regulating, and monitoring OT from management. At the end of the day, everyone from the car cleaners at Wassaic to the executives at 2 Broadway need to be reminded that what's best for the riders and the taxpayers needs to be put first.
