Back to the Sep-Oct 2021 issue

What Are Key Considerations for New Union Contracts?

Union Contracts

Q: We have a new union in our city. What should we think about as we negotiate the first contract?

LMC: Unless the city has someone on staff with experience negotiating a first contract, hiring an experienced labor negotiator is typically a key consideration. In particular, negotiating the management rights clause is very important in the first contract.

Hands holding colorful gears.Unions may seek to have a city agree to language that results in waiving management rights. Learning what must be negotiated and what does not need to be negotiated is an important first step. Wages and benefit goals for cities typically focus on internal equity, while unions focus on external comparables and improvements.

It is also important to understand that the union contract must have a procedure that includes a provision for compulsory binding arbitration of grievances, including all written disciplinary actions.

The parties are subject to the default grievance procedure developed by the Bureau of Mediation Services (BMS) until they agree on another procedure or one is put into place through interest arbitration. Cities should be very careful while this default grievance procedure is in place because it requires the default acceptance of the union position in a grievance if the city does not adhere to the specified timelines.

Answered by Human Resources Director Laura Kushner:

Lawful Gambling

Q: Can a city’s gambling ordinance require that licensed gambling organizations donate their net profits to nonprofits or other organizations of the city’s choice?

LMC: Yes. Minnesota law allows a city ordinance to require specific expenditures of up to 10% of the gambling organization’s annual net profits. Cities should be cautious if considering this option, however, and get specific advice from the city attorney. Requiring the gambling organization to support another organization or cause that it does not agree with may infringe on the organization’s freedom of association and make such a requirement subject to a legal challenge.

Instead of requiring specific expenditures, a city’s ordinance can require the organization to donate up to 10% of its annual net profits to a city-administered fund and/or require the organization to spend all or a portion of its lawful expenditures in the city’s trade area. At a minimum, the trade area must include the city and every city and township contiguous to it.

The city ordinance can also implement a gambling tax of up to 3% per year on an organization’s gross receipts, less prizes actually paid out. The city may only use the gambling tax revenue to pay for the city’s cost to regulate lawful gambling and cannot levy the tax beyond that amount.

The Minnesota Gambling Control Board regulates lawful gambling in Minnesota. Cities with a contribution fund or local gambling tax must file annual reports with the Gambling Control Board.

Learn more about local regulation and find a model ordinance for city use in the LMC Informational Memo, Lawful Gambling at

Answered by Research Attorney Kevin Toskey:

Liability Insurance

Q: What is employer’s liability insurance and should I require contractors to have it?

LMC: When cities hire a contractor, the contractor should be required to have workers’ compensation insurance, which is a statutory coverage designed to protect injured workers and generally pays for medical expenses and wage loss.

Cities should also require contractors to have employer’s liability insurance, which is part of a workers’ compensation policy and is designed to cover employers against lawsuits from injured employees and their dependents. Employer’s liability insurance is often called “Part 2” or “Part B” of a workers’ compensation policy. Employer’s liability insurance includes coverage for claims brought by third parties, such as a spouse who might bring a claim for loss of consortium or other consequential damages.

Requiring contractors to have workers’ compensation insurance and employer’s liability insurance helps prevent a claim against the city if a contractor’s employee is injured while performing services for the city.

A minimum limit should be required for employer’s liability insurance — typically $500,000 or $1 million. LMCIT workers’ compensation program members have employer’s liability coverage of $1.5 million per occurrence.

For sample insurance requirements, contact Chris Smith, Risk Management Attorney, at (651) 281-1269 or

Answered by Risk Management Attorney Chris Smith: