Appeals court: Central Point School District broke the law when it outsourced bus service


The Oregon Court of Appeals has ruled that Central Point School District (CPSD) broke state law when it outsourced school bus service to for-profit First Student.

A law passed in 2009 by the Oregon Legislature bars state and local public employers from outsourcing public sector jobs unless doing so saves tax dollars, and the savings can’t come just from slashing worker wages and benefits. Before a public employer can decide to outsource, it has to conduct a detailed cost benefit analysis, including estimates of wage and benefit costs for the agency and a potential contractor.

But that didn’t happen at Central Point, the appeals court concluded in a written decision issued April 22.

Leaders of the 4,400-student district, just north of Medford, decided to explore contracting out in early 2011 after concerns that its aging bus fleet would need to be replaced. To satisfy the state legal requirement, Central Point hired transportation consultant John Fairchild to do a cost analysis. But instead of collecting information on First Student wages and benefits and making an actual estimate, his analysis just “assumed” that a contractor would pay the same wages and benefits as the district.

The school board received his analysis in March, and on June 14, approved a contract with First Student. A week later, the district laid off 38 school bus drivers—members of Oregon School Employees Association (OSEA) Local 6732, an affiliate of the American Federation of Teachers.

First Student hired some of the laid-off drivers, but not all. OSEA filed suit on behalf of  driver Stephanie Hicks, who was not hired. The suit called for the First Student contract to be declared void, and for laid-off employees to be reinstated with lost wages and benefits repaid.

A Jackson County Circuit Court judge ruled in the school district’s favor in 2012, but OSEA appealed, and won.

The state law gives public employers plenty of discretion as to how they conduct the cost-benefit analysis, but it draws the line at analyses that are “clearly erroneous, arbitrary, capricious or contrary to law.”

Central Point crossed that line, the appeals court ruled. The decision doesn’t end the lawsuit. Rather, it overturns the Jackson County Circuit Court decision, and orders the lower court to reconsider the case.


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