PERB Issues 2008-2009 Annual Report

PERB released its annual report for fiscal year 2008-2009 back in October. (The report is available here.) I’ve been remiss in reporting on it; but better late than never. Here are the highlights for 2008-2009:

Unfair Practice Charges

868 unfair practice charges (UPCs) were filed in fiscal year 2008-09. This represents a 6.3% increase from the 816 UPCs filed in 2007-08. Since PERB assumed jurisdiction over the MMBA in 2001, UPC filings have been averaging over 800 a year, roughly double the number before 2001.

The increase in UPCs for 2008-09 can be largely attributed to the Dills Act and MMBA. The Dills Act went from 137 UPCs in 2007-08 to 167 in 2008-09; a 22% increase. The MMBA went from 261 UPCs in 2007-08 to 310 in 2008-09; a 19% increase. All the other statutes only increased or decreased nominally.

The increase in UPCs for 2008-09 is consistent with what I predicted last year. For the coming year, I predict that UPC filings will rise again. However, I believe the big increase will come under EERA, and to a lesser extent, the MMBA. This is because the budget situation appears to be just as bad this coming year as last. And unlike last year, there will be no stimulus funds to save the day for schools and in all public jurisdictions the less-painful cuts have already been made. That combination is going to create a lot of tension between management and labor as both sides search for money to close the budget gap.

ALJ Proposed Decisions

In 2008-09, the ALJs at PERB issued 52 proposed decisions; taking an average of 94 days for each decision. This is an increase from the 44 decisions issued in 2007-08. However, the length of time it takes to issue a decision stayed the same. I expect these numbers to remain at these levels in 2008-09.

Year: # of Proposed Decisions (Average # of Days)
2008-09:  52 (94)
2007-08:  44 (94)
2006-07:  41 (85)
2005-06:  46 (100)
2004-05:  49 (63)
2003-04:  47 (53)
2002-03:  52 (53)

Board Decisions

For 2008-09, the Board itself issued 89 decisions. It also considered 19 injunctive relief (IR) requests. The 89 decisions issued represent a 37% increase from the 65 decisions issued in 2007-08.  For 2009-10, I don’t expect the number of Board decisions to increase much, if at all, since the 5-member Board already has one vacancy and could possibly see another in early 2010.

The chart below lists the number of decisions issued by the Board since 2001. In past years, the Board has sometimes included IR requests in its decision count. So to make things easier, I have listed the number of Board decisions, IR requests, and the total.

Year: # of Board Decisions/IR Requests/Combined Total
2008-09:  89/19/108
2007-08:   65/28/93
2006-07:  87/16/103
2005-06:  80/23/103
2004-05: 142/14/156
2003-04:  128/13/141
2002-03:  73/14/87
2001-02:  44/23/67

So as you can see, the number of decisions issued by the Board this past year is the highest it has been since the 2003-04 and 2004-05 years. As I mentioned above, I don’t expect the number of decisions to increase in 2009-10 because of the Board member vacancy.  So far this year (2009-10), the Board has issued 38 decisions and I expect a few more will come out before the end of the calendar year.  That’s right on track for approximately 80 decisions this coming year.

Governor's Communication to Employees was Permissible

State of California (Department of Personnel Administration) (2009) PERB Decision No. 2078-S (Issued on 11/24/09)

Facts

This unfair practice charge arose out of bargaining between the State of California (State) and the Stationary Engineers Local 39, International Union of Operating Engineers, AFL-CIO (Local 39) in 2008. Local 39 alleged that the State committed an unfair practice by: (1) failing to make or respond to economic proposals during bargaining; (2) failing to respond to information requests; (3) making bargaining proposals directly to employees; and (4) claiming it had no authority to bargain over economic items after stating at the outset of negotiations that it had such authority.  The Board agent dismissed the charge in its entirety.  Local 39 appealed the dismissal to the Board on all its allegations, except for allegation number 2 (failure to provide information).

The parties began bargaining in April 2008.  According to the charge, negotiators from the Department of Personnel Administration (DPA) told Local 39 that they had authority to negotiate over all issues.  However, in May 2008, Local 39 alleged that DPA negotiators told it they had no authority to address economic proposals until after the State budget was passed.  Even after the budget passed, Local 39 alleged that DPA negotiators continued to claim they had no authority to negotiate over economic items.

In November 2008, DPA told Local 39 that the Governor would be holding a press conference to discuss the State budget crisis. The DPA representatives said the Governor was considering several proposals that would impact State employees, including one furlough day per month, a reduction in holiday premium pay, changes in overtime calculation methods, and the elimination of Columbus Day and Lincoln's Birthday as State holidays.  Also in November, the Governor issued a letter to all State employees informing them of “a projected $11 billion revenue shortfall this fiscal year.”  The letter detailed four measures affecting State employees that would be proposed to the Legislature as part of the Governor's plan to close the budget gap: (1) one furlough day per month for 18 months; (2) elimination of Columbus Day and Lincoln's Birthday as State holidays; (3) increased ability to work four ten-hour days per week (4/10 workweek); and (4) elimination of leave time from overtime calculation.  The letter assured State workers that, “we are working closely with union leadership to achieve results in the least painful way possible.  All the actions we're proposing must first be approved by the Legislature.”

Board's Decision

On appeal, the Board held that DPA’s failure to make economic proposals was not, by itself, sufficient to establish bad faith bargaining.  Importantly, the Board affirmed the principle that, “it is permissible for an employer to defer bargaining over economic items when its financial situation is uncertain.” (State of California (Department of Personnel Administration) (1986) PERB Decision No. 569-S.) The Board also affirmed that it does not constitute bad faith bargaining for an employer to defer making a firm economic proposal until it "has had an opportunity to review the final budget in good faith in order to determine the funds potentially available for salary increases." (State of California, Department of Personnel Administration (1990) PERB Decision No. 823-S.)

Similarly, the Board rejected Local 39’s contention that it constituted bad faith bargaining for DPA negotiators to claim a lack of authority to negotiate economic proposals. The Board affirmed that in the public sector, “it is not an unfair practice for a negotiator to discuss issues and make proposals that are subject to ratification by the employer.” (Oakland Unifed School District (1983) PERB Decision No. 326.)  A negotiator's lack of authority only constitutes an unfair practice when it is used to foreclose the achievement of any agreement.

Finally, the Board addressed Local 39’s contention that the Governor’s communication to employees constituted unlawful direct dealing. The Board found that there was no allegation that the Governor was attempting to bargain directly with employees.  Further, the Governor’s communication did not contain any threats of reprisal or promise of benefit.  The only theory that Local 39 appeared to allege was that the communication “undermined” its authority in the eyes of its bargaining unit members.  The Board noted that it had found a violation under such a theory in only one case, California State University (1989) PERB Decision No. 777-H. 

In that case, the California State University had published an article in its newsletter stating that it had offered a 4% raise and implied that it would take effect.  The Board found that the publication “tend(ed) to diminish the authority of the exclusive representative at the table, as well as in the eyes of bargaining unit employees.” Here, however, the Board distinguished California State University because the Governor’s communication clearly indicated that the State would fulfill its bargaining obligations.  Accordingly, the Board affirmed the dismissal.

Comments:

1. There are several items in this decision that are helpful for public employers.  First, public employers should be pleased that the Board has affirmed the rule that it is not an unfair practice to delay economic bargaining until the budget is passed. This should be especially comforting to schools, local agencies, and universities who all find themselves at the mercy of the State legislature and Governor each year during the budget process.
2. Next, I think the Board’s treatment of California State University is important. In my opinion, that 20-year old decision was wrongly decided and should be overturned.  I have never understood why completely factual information transmitted by the employer to employees should be considered an unfair practice.  It’s not as if the unions are prohibited from responding. To the contrary, unions regularly communicate with employees regarding the status of bargaining.  Often, unions will make claims that the employer feels are untrue.  What happens is that the employees who view those untrue claims then take out their frustration and/or anger on the employer, including supervisors, managers, and governing board members.  It seems only fair that when that occurs an employer should be able to respond with completely factual information.  To the extent such communications may “diminish” the union in the eyes of its members—it seems to me—that is a function of the facts, and should not be an unfair practice.  So I would have preferred that the Board just overturn California State University.  However, I can live with the holding here: that California State University doesn’t apply (at least) where the employer makes it clear in the communication that bargaining is continuing and/or that it will meet its bargaining obligations.

Beyond Furloughs

I’ve been meaning to write on the issue of furloughs for a while as our firm has been dealing with the issue throughout the state. As I’ve commented publicly, part of the reason we’ve been successful in negotiating furloughs in a number of jurisdictions is because the unions have largely been cooperative.  From the perspective of unions, furloughs allow them to save jobs.  The unions also believe—correctly in my view—that once the economy recovers, it will be a lot easier to end furloughs than it will be to fill positions where people have been laid off.  However, with next year’s state budget not looking that much better, many public agencies are going to have a make tough choices.  Continue furloughs?  Impose layoffs? Cut services? Or something else?

Layoffs v. Furloughs

A recent article out of the Wharton School of Business helps shed some light on why furloughs have been in vogue during this recession. According to the article, in the past the investment community favored layoffs in response to economic downturns. “If you laid people off, it looked like you were taking action. It looked like you were cutting costs, and the investment community used to reward companies every time they announced that.  As a result, there was strong evidence that employers announced more layoffs than they actually executed.”  Thus, by laying-off employees companies were often rewarded by investors (ie their stock price went up).

However, recently that thinking has begun to change.  Many companies have discovered that layoffs extract a heavy price in terms of severance payments, potential litigation, decreased productivity and morale among those remaining, and general dissatisfaction among employees.  According to the article, “many companies have discovered in this most recent downturn that having an effective layoff -- one that actually helps the organization rather than inflicting strategic damage on the organization -- is fairly difficult to do.”  The investment community has also taken notice of the negative side-effects of layoffs. As a result, the investment community does not seem to be “rewarding” companies for layoffs today in the way it did in the past.

With the realization that layoffs may not be the best option in response to an economic downturn, many companies and public entities turned to furloughs as the next obvious choice.

What Happens Next?

However, the notion of furloughs as a better alternative to layoffs necessarily requires that the furloughs be short-term.  If maintained long-term, furloughs become nothing more than pay-cuts that harm employee morale and may cause the best employees to look for jobs elsewhere.  Thus, furloughs only make a lot of sense if you expect your financial problems to only last a year or two.  The problem for public agencies is that economic conditions in California may not improve significantly anytime soon.

According to a Pew study, the recession has been so deep that many states may not see revenues rebound until late in the next decade.  It’s difficult to imagine furloughs lasting that long.  So instead, according to the Pew study, “some states are moving beyond short-term fixes to rethink the role and structure of government with the goal of delivering high quality, but fewer services, at lower costs. Targeted are functions and agencies that overlap or are no longer relevant.”  Thus, cutting services may have to be part of the discussion in California.  Quite simply, as a state we may not be able to afford the level of services that has been provided in the past.

The Pew study also noted that, “After hiring freezes, furloughs are the preferred short-term option for most states, because they preserve morale and keep talented workers on the job for better days ahead.” However, according to the study, “A better way for states to weather fiscal ups and downs is to increase the number of contract workers.”  Most corporations maintain about 25 percent of their workforce through flexible contracts, while most states have a contingent workforce in the single digits.

Thus, in addition to cutting services, contracting out may have to be considered.  Contracting out certainly makes sense economically.  If you maintain a permanent workforce at a level sufficient to handle the “valleys” and contract out temporary employees to handle the “peaks” you can avoid layoffs and furloughs altogether, at least in theory.  However, any discussion of contracting out in the public sector must take into account the role (and opposition) of unions. Contracting out existing bargaining unit work is generally negotiable.  And because unions consider contracting out a direct attack on their very existence, you can expect that they will fight tooth and nail to oppose any contracting out.  More important, in any discussion about contracting-out you can expect unions to use their political might as well.  So it is doable?  Will public agencies go that route?  We’ll have to wait and see …

Pre-Layoff Due Process Hearings: What’s Required?

Alameda County Management Employees Association v. Alameda County Superior Court (Alameda Superior Court Case No. RG09-464432) (Tentative ruling issued 12/9/09)

In 2008, the Ninth Circuit Court of Appeal issued a surprise ruling in Levine v. City of Alameda, 525 F.3d 903 (9th Cir. 2008) suggesting that a public employee who is laid-off from work is entitled to a pre-layoff due process hearing.  That decision shocked public employers because no other decision had suggested such a requirement.  Levine also seemed to conflict with Duncan v. Department of Personnel Administration, 77 Cal.App.4th 1166 (2000), a California appellate decision which held that pre-layoff due process hearings are not required.  After Levine became final, the consensus among most public practitioners was that pre-layoff hearings are only potentially required in situations where the employee argues that he or she has been targeted for layoff, in lieu of discipline.  In situations involving mass layoffs, it was believed that Duncan would still apply.  However, because of the uncertainty and risk, many public agencies decided to offer pre-layoff Skelly-type hearings just to be safe.

Recently, the court in Alameda County Management Employees Association v. Alameda County Superior Court issued a tentative ruling on whether pre-layoff hearings are required.  To my knowledge, this is one of the first times any court has addressed this issue.

Are Pre-Layoff Hearings Required?

In considering whether pre-layoff due process hearings are required, the court quoted extensively from Duncan. The court seemed to agree with Duncan that a layoff, unlike a disciplinary action, carries no “stigma” that attaches to the employee. This is especially true in the case of mass layoffs. The court also agreed with Duncan that, “It is one thing for the State to provide a predeprivation hearing for a single employee who has been demoted because of misconduct. [Citation omitted] It is quite another to require the State to conduct pre-layoff hearings for 95 employees in the midst of a financial crisis.  Indeed, the cost of such hearings would simply exacerbate the crisis, primarily because the State would have to keep the affected employees on the payroll pending the outcome of the hearings.”

However, despite this favorable language from Duncan, the court noted that Levine held that an employee selected for layoff is entitled to a pre-layoff hearing where there is evidence that the employee was targeted for layoff.  Here—not surprisingly—all the employees in the lawsuit were alleging that they were targeted for layoff as a pretext for discipline.

If so, What Exactly Is Required?

Instead of ruling on whether pre-layoff hearings are required, the court was able to avoid the issue by finding that even if a pre-layoff hearing was required, the employees here received that.

Specifically, that court noted that due process in these situations does not require a full trial-type evidentiary hearing. Instead, the court held that as a minimum, what was required was, “notice of the proposed action, the reasons therefore, a copy of the charges and materials upon which the action is based, and the right to respond, either orally or in writing, to the authority initially imposing discipline.” Here, all the employees received the following notice with the layoff paperwork:

“If you think that the [Employer] has incorrectly determined to lay off your position, you may within three (3) working days from receipt of this notice, submit an explanation in writing to the Assistant Executive Officer.”

The court held that such notice and the opportunity to respond in writing was sufficient to meet any pre-layoff due process rights. This was especially true, according to the court, since the employees all had the right to a post-layoff evidentiary hearing.

Comments:

1. This is a tentative ruling in a superior court case, so you can’t read too much into it.  However, it should be noted that the ruling was authored by Justice Mallano, the Presiding Justice of Division One of the Second District Court of Appeal. (He was appointed to avoid a conflict of interest by the Alameda superior court judges)
2. The tentative ruling largely confirms the consensus among practitioners that Levine kicks in only when there is an allegation that the layoff is pretextual.  Of course, the problem is that unions aren’t stupid and that given Levine, they are going to advise employees to argue pretext in every layoff situation.  This case is a prime example of that.  Here, the layoffs were done by seniority. Nevertheless, all 13 of the laid-off employees argued that they were “targeted.”
3. So what’s an employer to do? Well, if you want to play it absolutely safe, an employer should give employees some opportunity to respond to the layoff notice.  This ruling says that the response can be in writing, which certainly makes things easier.  But again, it’s just a tentative ruling in a non-precedential superior court case so you can’t read too much into it.  Hopefully, in the near future we’ll get some more clarification from the courts.

If You Don't Want to Bargain Over a Permissive Subect, Say So...

State of California (Department of Personnel Administration) (2009) PERB Decision No. 2081-S (Issued on 11/24/09)

This case involved an appeal from a dismissal. The California Correctional Peace Officers Association (CCPOA) alleged that the State committed an unfair practice by insisting to impasse on a permissive subject of bargaining. Specifically, CCPOA asserted that the State included several provisions in its last, best and final offer that constituted waivers of employee rights. For example, the State proposed a continuance of a contract provision whereby CCPOA agreed that it would not directly bring an action against the State for violations of the Fair Labor Standards Act. The Board agent dismissed the charge on the ground that CCPOA failed to make known its objections to the State’s proposals on such permissive subjects of bargaining.

On appeal, the Board affirmed the well-established rule that a party may not legally insist upon the acceptance of a proposal involving a permissive subject of bargaining "in the face of a clear and express refusal by the union to bargain" over them. (Citing to Lake Elsinore School District (1986) PERB Decision No. 603.) However, the Board held that its precedent also established that the party objecting to a non-mandatory subject “clearly communicate its opposition to further consideration of the proposal.” Once a party makes its objection clear, the party proposing the non-mandatory subject of bargaining may not insist to impasse on it.

Here, CCPOA asserted that its response to that State that, “YOUR CURRENT PROPOSAL HAS SEVERAL SECTIONS THAT REQUIRE US TO AGREE TO WAIVE STATE LAW FOR OUR MEMBERS. THAT IS NOT A LEGITIMATE EFFORT TOWARDS AN AGREEMENT” placed the State on notice of the union’s objection. The Board disagreed, finding that such a response and CCPOA’s other actions failed to communicate “clear opposition” to the State’s permissive proposals.  Accordingly, the Board affirmed the dismissal.

Comments:

This is not a ground-breaking case, but a good reminder that if you don’t want to negotiate over permissive subjects of bargaining you must clearly say so.

The reality is, however, that most permissive subjects of bargaining find their way into contracts as the quid pro quo for a mandatory subject of bargaining.  Most employers also realize that you can’t insist to impasse on a permissive subject of bargaining.  However, nothing prevents an employer from offering something “extra” in exchange for agreement on a permissive subject as long as the employer continues to bargain in good faith over other mandatory subjects.  That’s how most permissive subjects are bargained.

PERB: Complaint Must Issue on Union's Violation of DFR

IBEW Local 1245 (Flowers) (2009) PERB Decision No. 2079-M (Issued on 11/24/09)

Of the 35 Board decisions issued so far this year, 9 have been brought against unions alleging a violation of the duty of fair representation.  That's not unusual as DFR cases typically make up 25% of the Board's caseload.  In eight of the cases this year, the Board affirmed the dismissal of the unfair practice charge. In IBEW Local 1245 (Flowers), the Board actually overturned the Board agent’s dismissal. Getting a complaint issued on a DFR charge is not easy, so I thought this case was worth highlighting.

There are not a lot of facts.  The employee was terminated from his employment.  Under the collective bargaining agreement, the employee’s right to challenge his termination through arbitration was controlled by the union. The union filed a grievance on the employee’s behalf.  However, the employee never heard from the union again until a few months later when a union representative called the employee and said that union would not take the case to arbitration.  The union representative offered no explanation.

Under these facts, the Board held that the employee had stated a prima facie violation of the duty of fair representation.  First, the Board held that it could be inferred from the facts as alleged that the union did not undertake any investigation or evaluation into the merits of the employee’s case.  Second, the Board affirmed that the DFR requires a union to offer the employee an explanation as to why it will not elevate a case to arbitration.  Here, the union allegedly failed to provide such an explanation.  Accordingly, the Board overturned the dismissal and ordered a complaint to be issued.

Comments:

1.  The facts in this case are unusual as most unions are acutely aware of their DFR obligations.  As long as a union does its due diligence and makes an informed decision about whether to take a case to arbitration, getting a DFR complaint issued is virtually impossible.  So congrats to Steve Bassoff for getting the Board to issue a complaint.

2.  However, the employee should not start celebrating just because a complaint has issued.  The hard part is still ahead: the employee has to actually prove a violation of the DFR.  Undoubtedly, the union will come into the hearing and provide an explanation as to why it did not take the case to arbitration.  However, does that cure the fact that the union didn't provide that explanation to the employee at the time?  In my mind it shouldn't.  However, even if it doesn't what's the remedy?  That's the problem with the current DFR jurisprudence - in the extremely rare instance where an employee can actually prove a DFR violation the remedy almost always falls short of making the employee whole.  Hopefully, given the right case, the Board will address this issue sometime in the future.