SB 440 Interest Arbitration Statute is Unconstitutional

County of Sonoma v. Superior Court (Sonoma County Law Enforcement Association) (Case No. A122450) (Issued on 4/24/09) ("County of Sonoma")

This is the first appellate decision on the constitutionality of SB 440. SB 440 provides for compulsory binding arbitration of labor disputes between employee organizations representing firefighters and law enforcement officers and the local agencies employing them. In County of Riverside v. Superior Court (2003) 30 Cal.4th 278 ("Riverside"), the California Supreme Court held an earlier version of the statute (SB 402) unconstitutional because it impermissibly infringed upon home rule powers reserved to local governments by article XI of the California Constitution. In response, the Legislature enacted SB 440. The primary change was that under the previous version (SB 402), the arbitration panel’s decision was binding on the public entity. Under SB 440, the arbitration panel’s decision is binding unless the governing body unanimously rejects it. The court in County of Sonoma found that even with this change, the statute is still unconstitutional.

Decision:

At issue in County of Sonoma were two provisions of the California Constitution: Section 1(b) of Article XI and Section 11(a) of Article XI. Those sections state:

Section 1(b). “. . . The governing body shall provide for the number, compensation, tenure, and appointment of employees.”

Section 11(a). "The Legislature may not delegate to a private person or body power to make, control, appropriate, supervise, or interfere with county or municipal corporation improvements, money, or property, or to levy taxes or assessments, or perform municipal
functions."

The first issue the court considered was whether SB 440 involved a matter of “statewide concern.” The court acknowledged that on matters of statewide concern the Legislature may infringe “to a limited extent” on the power the Constitution reserves to counties and charter cities. However, as the court did in Riverside, the court in County of Sonoma rejected the union’s argument that SB 440 involved a matter of statewide concern. Instead, the court affirmed the principle that compensating county employees is a municipal function.

[Side note: The union argued that SB 440 addressed the issue of police and firefighter strikes which was a matter of statewide concern. It was an odd argument since—as the court noted—police and firefighters do not legally have a right to strike. In rejecting the union's argument, the court stated, “We are unwilling to base a finding of statewide concern on the assumption that police officers and firefighters will disobey the law.”]

After finding that SB 440 did not involve a matter of statewide concern, the court then turned to whether the statute violated sections 1(b) and 11(a) of Article XI of the California Constitution. In discussing Section 1(b), the court noted that the purpose of the provision was to limit the power of the Legislature. The court affirmed that Section 1(b) is a “home rule” measure designed to deprive the Legislature of the power to set compensation for county employees and to entrust that authority to county governing bodies. In analyzing SB 440, the court focused on the term “governing body” and what that meant. After discussing a variety of cases and secondary sources (including a reference to Madison, Federalist No. 10), the court concluded that the term “governing body” must mean a majority of that body. Specifically, the court held that:

“Although the constitutional provision does not specifically say that only a majority of the governing body, as opposed to a minority thereof, may set compensation, for the reasons we discuss below, no other construction of section 1, subdivision (b) is reasonable, or indeed even permissible. Permitting a minority of a governing body to set the compensation of county employees by making the arbitration panel’s decision binding on the county would be inconsistent with both longstanding statutory rules of interpretation and established California case law, as well as deeply offensive to basic principles of representative democracy.”

Next, the court turned its attention to Section 11(a). The court had little trouble finding that SB 440 constituted an unconstitutional delegation of the County’s powers to a private body. The court rejected SCLEA’s argument that the County’s ability to reject an arbitration decision cured the unconstitutional delegation.

Comments:

1. This case is a great victory for cities and counties. The court’s decision was detailed, thorough, and—in my humble opinion—absolutely correct.

2. Assuming this case stands, it will effectively end the efforts of unions to achieve binding interest arbitration through the Legislature. The court’s holding that “governing body” means a majority of the governing body will prevent the unions from amending SB 440 to require a supermajority instead of an unanimous vote. Also, even if SB 440 is amended to allow rejection of an arbitration decision by a simple majority vote, it would still be an unconstitutional delegation of the County’s powers under Section 11(a), as I read the decision.

3. I expect unions will now turn to localized efforts to achieve binding interest arbitration. Many unions took that approach after the initial Riverside decision. Indeed, the voters in many cities and counties (mainly in Northern California ) have already adopted binding interest ordinances. However, given the current economic environment, my gut feeling is that getting voters to approve binding interest arbitration ordinances will be next to impossible.

4. There is no doubt that the union in this matter, the Sonoma County Law Enforcement Association, will petition to the California Supreme Court for review. I wouldn’t be surprised if the Court granted review to settle this issue once and for all. My expectation is that if the Court granted review, it would affirm.

5. One final note, the court’s decision contains a good discussion of the difference between “interest” and “grievance” arbitration with citations to cases in other states and secondary sources. So if you’re looking for a case to cite on that issue, take a look at the decision.