Status of Binding Interest Arbitration in California

2010 witnessed several changes to the binding interest arbitration landscape in California. I thought it would be helpful to review those changes and take a look at the status of binding interest arbitration in California.

June 2010: Vallejo Repeals Binding Interest Arbitration

In June 2010, voters in the City of Vallejo passed Measure A which repealed the binding interest arbitration requirement from the City’s charter. This was a watershed event as Vallejo was the .first local entity in California to establish binding interest arbitration in 1970.

November 2010: Stockton Repeals Binding Interest Arbitration; San Jose Amends It

In November 2010, voters in the City of Stockton passed Measure H which repealed the binding interest arbitration requirement for firefighters. Also in November voters in the City of San Jose passed Measure V, which amended the city’s binding interest arbitration provision to require arbitration decisions to be based primarily on the City’s ability to pay and prohibit any decision from creating an unfunded liability.

So where do things stand? There are now 23 local entities in California that have some form of binding interest arbitration. Those entities are:

1. Alameda
2. Anaheim
3. Gilroy
4. Hayward
5. Modesto
6. Monterey
7. Napa
8. Oakland
9. Oroville
10. Palo Alto
11. Petaluma
12. Redwood City
13. Sacramento City
14. Sacramento County
15. Salinas
16. San Francisco
17. San Jose (Amended 2010)
18. San Leandro
19. San Luis Obispo
20. Santa Cruz
21. Santa Rosa
22. Stockton
23. Watsonville

Of these 23:

• Sacramento County is the only county with binding interest arbitration (unless you count San Francisco, then there are 2);
• Anaheim is the only public entity in Southern California with binding interest arbitration;
• San Francisco is the only public entity with binding interest arbitration covering non-safety employees. Vallejo had it too, but Vallejo repealed binding interest arbitration in 2010.
• To my knowledge, binding interest arbitration has actually been used in 13 of the 23 entities. They are: Alameda, Anaheim, Gilroy, Hayward, Modesto, Oakland, Palo Alto, Redwood City, Sacramento City, Sacramento County, San Francisco, San Jose, and San Luis Obispo.

Subtle Footnote … Has PERB Changed its Discrimination Standard?

Fontana Unified School District (2010) PERB Decision No. 2147-E (Issued on 12/10/10)

This case is a run-of-the-mill appeal of a Board agent’s dismissal. What caught my attention was what the Board put in a footnote:

“The Board does not adopt the references to Campbell Municipal Employees Assn. v. City of Campbell (1982) 131 Cal.App.3d 416 and San Leandro Police Officers Assn. v. City of San Leandro (1976) 55 Cal.App.3d 553 at p.3 dismissal letter and pp. 3-4 warning letter, as support for the well-established discrimination test set forth in Novato Unified School District (1982) PERB Decision No. 210 (Novato).”

The footnote was in reference to the following statement by the Board agent in the warning and dismissal letters:

... to state a prima facie case for unlawful retaliation, the charging party must show: (1) the employee exercised rights under EERA; (2) the employer had knowledge of the exercise of those rights; (3) the employer took adverse action against the employee; and (4) the employer took the action because of the exercise of those rights. (Novato Unified School District (1982) PERB Decision No. 210 (Novato); Campbell Municipal Employees Assn. v. City of Campbell (1982) 131 Cal.App.3d 416 (Campbell); San Leandro Police Officers Assn. v. City of San Leandro (1976) 55 Cal.App.3d 553 (San Leandro).

The Board agent cited to Campbell and San Leandro as support for PERB’s standard on establishing a prima facie case of discrimination. This was nothing new. A quick Westlaw search reveals that the exact language used by the Board agent in this case has been used in at least 27 ALJ and Board decisions in the past few years. In fact, the exact language used by the Board agent has been cited by the Board in at least 7 precedential decisions (See PERB Decisions Nos. 2112, 2091, 2086, 2065, 2057, 2021, 2020.) So what does this footnote mean?  It’s not entirely clear. 

Certainly, Campbell and San Leandro don’t enumerate the elements for establishing a prima facie case of discrimination.  Campbell and San Leandro arguably deal more with how to establish a case of interference, as opposed to discrimination.  So I think the Board is just saying that in the future Campbell and San Leandro should not be cited as support for the Novato elements.  The confusing part is that there still remain at least 7 precedential decisions using the exact same language the Board chose not to adopt in this case.  The Board didn't explicitly overrule those prior decisions.  So without a more thorough explanation it's difficult to tell what the Board intended to be the effect of the footnote.

My personal opinion is that the footnote is just an instructional comment from the Board to its Board agents.  I don't think there is any intent to change the Novato standard or somehow alter it by removing Campbell and San Leandro as supporting decisions.  I think the Board just realized, perhaps belatedly, that Campbell and San Leandro are unnecessary citations to support the Novato elements.

PERB Agrees to Judicial Review of Noon-Duty Aides Decision

Castaic Union School District (2010) PERB Decision No. J025-M (Issued on 12/7/10)

PERB has granted a request for judicial review by the California School Employees Association (CSEA) over the Board’s decision in Castaic Union School District (2010) PERB Decision No. A384E (“Castaic”).  In Castaic, the Board overturned longstanding precedent by holding that school district employees in part-time playground positions, also referred to as "noon-duty aides," who do not otherwise hold a position in the classified service, are not covered by the Educational Employment Relations Act (EERA).

Under EERA, PERB decisions on unit determination issues are not reviewable by the courts unless PERB grants a request for judicial review. (Gov. Code, § 3542.) It’s a procedure that is rarely requested. Here, PERB held that the unit determination issue was a “novel” one and of “special importance.” Accordingly, PERB granted the request for judicial review.  CSEA is now free to file a petition for relief with the courts.

Court: Right to Privacy Prevents Release of Employee Addresses to Union

County of Los Angeles v. Los Angeles County Employee Relations Commission (Court of Appeal Case No. B217668) (Issued on 12/14/10)

Facts:

The Service Employees International Union, Local 721 (SEIU) represents several bargaining units in the County of Los Angeles (County). The Memorandum of Understanding (MOU) between the County and SEIU contains an agency-shop agreement. In order to collect its agency fees, SEIU sends an annual Hudson notice to all employees. Historically, the union prepares the Hudson notice, the County prepares the mailing labels, and the County’s Employee Relations Commission (Commission) mails the notices. Using this process the union does not have access to the addresses of agency fee payers.

During negotiations in 2006, SEIU proposed that the process for mailing Hudson notices be changed so that SEIU would be provided the names and home addresses of the agency fee payers in the bargaining unit. The County refused. The Union then filed an unfair practice charge with the Commission.

Following a hearing, the Commission held that agency fee payers’ personal information was presumptively relevant to SEIU’s representation and therefore the union had a right to the information. The Commission rejected the County’s argument that the disclosure of agency fee payers’ personal information would violate their privacy rights.  Although the Commission acknowledged that privacy interests were at stake, it relied on NLRB and PERB precedent—including Teamsters Local 517 v. Golden Empire Transit District (2004) PERB Decision No. 1704-M (Golden Empire Transit)—to hold that the interests of the union outweighed that of the agency fee payers.

The case eventually went before the court of appeal. The court acknowledged that federal and state labor law recognized that employee home addresses of constituted information that is necessary to the collective bargaining process. (See, e.g., United States Department of Defense v. Federal Labor Relations Authority (1994) 510 U.S. 487, 493; Golden Empire Transit.) However, the court held that these authorities did not control over California’s constitutional right to privacy.

The Court held that under California’s right to privacy, County agency fee payers have a reasonable expectation of privacy that their personal information will remain confidential. Citing to Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, the Court held that agency fee payers are entitled to notice and an opportunity to object to the disclosure of their personal information. Responding to SEIU’s arguments, the Court held that:

“This opt-out notice procedure does not provide an unfair advantage to the County or a disadvantage to the Union in collective bargaining matters. (Citations omitted.) Rather, it recognizes the previously overlooked individual rights of the County employees. If, as the Union represented during oral argument, non-member County employees will not respond to the opt-out notice, the Union will obtain the personal information it wants and will do so in accordance with California’s privacy laws. In sum, we conclude before the County discloses the personal information of non-member County employees, it must give them notice and an opportunity to object.”

Comments:

1. This case highlights the unique structure of the MMBA. Los Angeles County is subject to the MMBA. However, the County is expressly exempted from PERB. An unfair practice charge involving the County goes to the County’s Employee Relations Commission, not to PERB.  
2. The Court’s holding in this decision is far-reaching.  The decision essentially overturns PERB’s Golden Empire Transit decision for all of California’s public employers. This is because the court based its decision on the right to privacy under the California constitution. The California constitution trumps the MMBA and all the other labor relations statutes governing public employers. Therefore if the California constitution requires an opt-out procedure before disclosing employee addresses to a union, that would trump any contrary decisional law by PERB.
3. What should public employers do? Under court precedent, an individual may bring a cause of action for damages for a violation of the constitutional right to privacy.  (Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 39-40.)  That’s why employers must be extremely cautious when dealing with issues involving privacy.  Employers would be wise to err on the side of caution.  Under this decision, employers who have provided employee addresses to the union in the past must consider implementing an opt-out system before making such disclosures in the future.

Why You Need Local Rules….

City of Lodi (2010) PERB Decision No. 2142-M (Issued on 11/16/10)

I recently participated in a seminar sponsored by the California Public Employee Relations Program on local rules under the MMBA. One piece of advice I gave to the audieence was that every local entity in California should have its own local rules. Surprisingly, there many local jurisdictions that have not adopted local rules under the MMBA. By not adopting local rules, the PERB model rules (2 Cal. Code of Regs., §61000 et. seq.) apply to the local jurisdiction by default.

One important point to remember is that if you are a local entity subject to PERB's local rules by default, PERB will decide unit determination issues and conduct elections - not you.  One huge disadvantage to relying on PERB is that you have little control over how long the process takes. The recent City of Lodi decision is a great example of this.  PERB got involved in the City of Lodi case because the City's local rules didn't have a severance provision.  Here is the timeline in the Lodi case:

City of Lodi Timeline:

1. March 19, 2008: Severance petition filed
2. April 14, 2008: PERB determines there is sufficient proof of support
3. May 6, 2008: Settlement conference held
4. August 15, 2008: Formal hearing held
5. October 28, 2008: Transcripts completed. (PERB noted that the transcripts were delayed due to the lack of a state budget).
6. November 27, 2008: Closing briefs filed.
7. December 17, 2008: Proposed decision issued. Appeal filed.
8. November 16, 2010: Board decision issued.

Granted, I don’t know the background facts. Some of the delay may have been by mutual agreement or caused by circumstances that no one could control.  But the reality is that most cities and counties could have issued a decision on a severance petition faster than nine (9) months. So if you’re a local entity and you want to control your own destiny – I strongly advise you to adopt local rules.

PERB Issues 2009-2010 Annual Report

PERB recently released its annual report for fiscal year 2009-2010. (The report is available here.) Here are the highlights for the 200-2010 fiscal year:

Unfair Practice Charges

802 unfair practice charges (UPCs) were filed in fiscal year 2009-10. This represents a 7.6% decrease from fiscal year 2008-09 in which 868 UPCs filed. It’s also the lowest number of UPCs filed since 2002, when 802 UPCs were also filed.

The decrease in UPCs can be attributed to the Dills Act (82 UPCs versus 167 in 2008-09) and MMBA (267 UPCs versus 310 in 2008-09). UPCs under EERA stayed roughly the same (308 UPCs versus 303 in 2008-09) and actually increased under HEERA (117 UPCs versus 72 in 2008-09).

The decrease in UPC filings goes against the prediction I made last year. I had thought that with the economic situation UPCs would increase under EERA and the MMBA. That turned out not to be the case. However, I know many local entities entered into short-term deals requiring furloughs and temporary concessions. Many of those deals will need to be renegotiated this year. So I anticipate UPC filings in 2010-11 under EERA and MMBA will at least stay the same if not increase.

In contrast, I think we will see a continued decrease in UPCs under the Dills Act and HEERA. This is because the largest state employee unit, SEIU, now has a contract. Similarly, several large units in the UC system now have contracts too. So the level of UPCs will likely continue to drop under those two statutes.

ALJ Proposed Decisions

In 2009-10, the ALJs at PERB issued 57 proposed decisions. This is an increase from the 52 decisions issues in 2008-09. The average number of days to render a decision in 2009-10 was 86 days, a decrease from the 94 days on average it took to render a decision in 2008-09.

Year: # of Proposed Decisions (Average # of Days)

2009-10: 57 (86)

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 2009-10, the Board itself issued 79 decisions. It also considered 13 injunctive relief (IR) requests. The 79 decisions issued represent an 11% decrease from the 89 decisions issued in 2008-09. Unfortunately, for 2010-11 I expect the number of Board decisions to further decrease. This is because the Board has only three members currently with two vacancies. Even if new members are appointed, it will take some time for them to get up to speed. Current statistics bear this out. With almost half the fiscal year over, PERB has issued 30 Board decisions. Even if a few more decisions are issued before the end of the year, and assuming PERB can remain just as productive during the second half of the fiscal year, I would expect the number of Board decisions for the full fiscal year to be in the mid- to high-60’s.

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

2009-10: 79/13/92

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

PERB: Minimum Job Requirements Not Within Scope of Bargaining

City of Alhambra (2010) PERB Decision No. 2139-M (Issued on 10/26/10)

Facts

The City of Alhambra (City) operates under a merit system that requires competitive employment examinations. The City’s municipal code requires that any classification plan be adopted by the City Council. Under the City’s local employer-employee relations rules, the City retains the right to “establish and determine job classifications.”

In 2005, the City proposed and the City Council approved changes to the class specification for Fire Captain. Previously, the job classification for Fire Captain required both an Alhambra Fire Department Fire Engineer certification and Driver 1A and 1B certification for current fire engineers employed by the City. The change in 2005 made the requirement an Alhambra Fire Department Fire Engineer certification or Driver 1A and 1B certification for current fire engineers employed by the City. The City's goal was to expand the pool of potential applicants for Fire Captain.

The City did not notify the union of the proposed changes or seek to negotiate them. Instead, the City believed that pursuant to its local rules, it retained the management right to make changes to job classifications. The ALJ found that the change to the Fire Captain job classification involved a matter within the scope of bargaining. Because the City did not give the union notice of the change and an opportunity to bargain, the ALJ found that the City committed an unlawful unilateral change.

On exceptions filed by both parties, the Board reversed. The issue before the Board was whether the change fell within the scope of bargaining. In deciding this issue, the Board relied upon the three-part test set forth in Claremont Police Officers Assn. v. City of Claremont (2006) 39 Cal.4th 623 (“Claremont”). Under Claremont, the first inquiry is whether the management action has a significant and adverse effect on the wages, hours, or working conditions of the bargaining-unit employees. If so, the second inquiry is whether the significant and adverse effect arises from the implementation of a fundamental managerial or policy decision. If not, then the meet-and-confer requirement applies. However, if both the first two factors are present, the third inquiry is whether the employer’s need for unencumbered decisionmaking in managing its operations is outweighed by the benefit to employer-employee relations of bargaining about the action in question.

Significant and Adverse Effect

Addressing the first inquiry, the Board held that the change did not adversely impact wages or hours. The Board noted that the City’s change actually expanded the pool of potential applicants. In reaching this holding, the Board distinguished several prior precedential decisions finding changes to job classifications within scope. The Board held that those prior decisions must be read in light of Claremont. Under Claremont, the Board held that changes to the minimum qualifications for a job may be within the scope of bargaining if the change has a significant adverse impact. Here, the Board found that it did not.

Fundamental Managerial or Policy Decision

Even though it answered the first question in the negative, the Board considered the other two factors. The Board held that the “establishment of minimum [job] qualifications” was a fundamental managerial or policy decision under the MMBA. In reaching this decision, the Board drew a distinction between “promotional procedures, which are bargainable, and job qualifications, which are not.” The Board also considered that the position of Fire Captain affects the health and safety services provided by the City to the public.

Balancing Test

Finally, the Board held that even if the first two factors were present, it would find that the employer’s need for unencumbered decision making in this situation outweighs the benefit of bargaining over the decision. Specifically, the Board held that:

“This standard is not met in this case, as there is no evidence that bargaining over the expansion of the candidate pool for fire captains would outweigh the City’s need to determine the qualifications necessary to provide public fire protection services to its citizens. Accordingly, the charge and complaint must be dismissed.”

Comments

1. Prior to this decision, if you had asked me whether changing the minimum qualifications of an existing job classification in a bargaining unit was within the scope of bargaining, I would have answered yes (with rare exceptions; e.g. state mandated licensing requirements, etc.) Certainly, I would have advised notifying the union of any changes in case there were any negotiable effects. So at first blush, this decision seems to be a significant departure from existing PERB precedent. While the Board went to great lengths to argue that there was no precedent on the specific subject of “minimum qualifications” versus promotional procedures, the rationale underlying PERB’s existing decisions certainly pointed towards a change in minimum qualifications being negotiable. So I do believe this decision represents a departure; if not in actual precedential authority, then certainly in direction by the Board
2. That said, when you read the decision carefully it’s potentially much more narrow than at first blush. First, on its face it only applies to minimum qualifications versus promotional procedures. Obviously, there is a gray area between these two subjects and what happens in that gray area will have to be litigated in the future.
3. However, even though the holding is narrow, I believe this decision does represent a significant change in Board “direction”. The way the Board analyzed the second and third factors can be applied to many other areas that many people currently consider within the scope of bargaining. For example, grounds for discipline, including certain work rules, and other aspects of the disciplinary process would arguably satisfy the second and third Claremont factors under the Board’s analysis. In contrast, this decision suggests that the disciplinary process itself would be within the scope of bargaining.
4. While this decision may represent a change in Board “direction,” how long it will last remains to be seen. This decision was issued only a week before the November election. There are currently three Board members and one Board member’s term expires at the end of 2010. Therefore Governor Brown can appoint three Board members—a majority—immediately upon taking office.  So while this decision may represent a change in direction, employers would be wise to consider that it's coming at the end of an administration and that another "change" could be on its way. 

Plan to Attend CPER Seminar on MMBA Local Rules

Do your local rules address unit modification petitions and other second generation representation issues?  Do they still require a majority of the unit vote for an amendment of certification?  Does amendment of outdated rules seem daunting because so many parties will bargain  over any changes?  Then you should make plans to attend, "Your Local Rules – Is It Time for a Makeover?" sponsored by the California Public Employee Relations Program (CPER).

The seminar is being held on December 3, 2010 in Oakland, California.  (Click here for the brochure).  Registration is only $90 ($110 if requesting MCLE credit).  It should be a great program so sign up early!

PERB: Unfair Practice Charge Does Not Block Election Certification

Salinas Valley Memorial Healthcare System (2010) PERB Decision No. A387-M (Issued on 10/25/10)

This case arose from a decertification election at the Salinas Valley Memorial Healthcare System (SVMHS). The National Union of Healthcare Workers (NUHW) sought to decertify SEIU-United Healthcare Workers West Local 2005 as the exclusive representative and to establish itself as the new exclusive representative. NUHW won the election. SEIU then filed objections to the result of the decertification election. The objections alleged that the SVMHS interfered with employees’ free choice in the election by: (1) changing its access rules for non-employee SEIU representatives; (2) allowing a management employee’s photograph to be used on a flyer supporting the NUHW; and (3) discriminating against, retaliating against, and/or interfering with the rights of several employees who supported SEIU. SEIU also filed an unfair practice charge against SVMHS based on the same allegations. The Regional Director held that SEIU failed to establish that SVMHS’s conduct interfered with employees’ free choice and therefore dismissed SEIU's objections. The Board affirmed.

In its appeal, SEIU argued that its objections to the election should not have been dismissed—and the election should not have been certified—until its unfair practice charge based on the same facts was decided. The Board has never addressed this issue before; namely, whether findings and conclusions in an election objection decision have any preclusive effect on identical allegations raised in an unfair practice charge. Citing NLRB precedent, PERB held that findings and conclusions in an election objection decision do not have preclusive effect in a related unfair practice charge.  PERB emphasized that there are “significant differences between representation and unfair practice proceedings … PERB may refuse to set aside an election even when the employer's conduct constituted an unfair practice if the conduct did not actually affect, or have a natural or probable effect on, employee free choice ... On the other hand, the employer's conduct need not constitute an unfair practice for PERB to set aside an election.”

Here, PERB noted that the Regional Director did not address whether SVMHS' alleged conduct constituted an unfair practice under applicable PERB standards. Rather, the Regional Director only determined that none of the alleged conduct actually influenced, or had the potential to influence, employee free choice in the decertification election. Therefore, PERB held that ruling on SEIU’s objections would not affect the subsequent unfair practice charge.

Comments:

1. PERB’s approach in separating the representation issues from the unfair practice issues makes sense and is practical. PERB has always prioritized representational issues, as it should. Delaying the certification of an election while an unfair practice charge is pending doesn’t make sense if the conduct has already been determined not to have influenced the election.
2. Here, SEIU filed its unfair practice charge two (2) days before the ballots were counted. It is important to note that SEIU apparently did not request that its unfair practice charge be considered a “blocking charge” and that the election be stayed.  Like the NLRB, PERB does allow for “blocking charges” prior to an election. A party must ask that an unfair practice charge be treated as a blocking charge and the Regional Director makes a decision on whether the stay the election.  The test is whether the conduct "will so effect the election process as to prevent the employees from freely selecting their representatives." See Jefferson School District (1979) PERB Decision No. Ad-66.

Court of Appeal Denies CNA's Challenge to Strike Award

California Nurses Association v. Public Employment Relations Board of the State of California (Court of Appeal Case No. A127766)

On October 7, 2010, the First District Court of Appeal summarily denied a challenge by the California Nurses Association (CNA) to PERB’s decision in California Nurses Association (2010) PERB Decision No. 2094-H. In the underlying decision, PERB held that CNA improperly threatened to engage in a pre-impasse, one-day strike against the University of California (University). (Click here for my blog post on that decision.) As a result of CNA’s actions, PERB held that the University was entitled to monetary damages against CNA for the costs it occurred to prepare for the threatened strike.

Although CNA's challenge was summarily denied, the issue is significant enough that CNA will likely file a petition before the California Supreme Court.  So stay tuned ...

California Supreme Court: Past State Employee Furloughs Legal

Professional Engineers in California Govt. v. Schwarzenegger (Supreme Court Case No. S183411)

The Supreme Court issued its decision today on the legality of the state employee furloughs imposed by the Governor. If you haven’t been following this issue, here’s a brief summary of the facts. On December 1, 2008, the Governor declared a fiscal emergency and called the Legislature into special session to address a projected $40 billion deficit by the end of fiscal year 2009-2010. On December 19, 2008, the Governor issued an executive order imposing 2-day per month furloughs on state employees. Several employee unions sued the Governor challenging his authority to unilaterally impose furloughs. In mid-February 2009, the Legislature passed and the Governor signed the revised Budget Act of 2008, which included the savings attributable to the 2-day per month furlough program.

Supreme Court’s Decision

In an 81-page decision authored by Chief Justice Ron George, the Supreme Court concluded that the Governor did not have unilateral authority to impose furloughs on state employees, but that the furloughs were nevertheless legal because they were “ratified” by the Legislature via the revised Budget Act of 2008. In its analysis, the Court considered two broad questions: 1) On December 19, 2008, did the Governor possess authority to impose unilaterally a mandatory two-day-a-month unpaid furlough for state employees by issuing an executive order? 2) Did the Legislature’s enactment in February 2009 of the revised 2008 Budget Act and the initial 2009 Budget Act affect the validity of the Governor’s executive order or the remedy that the employee organizations may be entitled to obtain in the present proceeding?

Issue 1: Did Governor Possess Authority to Unilateral to Impose Furloughs?

Court’s Answer: No.

The Court quickly rejected the Governor’s contention that he possessed inherent authority to impose furloughs on state employees as a function of his constitutional powers. The Court affirmed that under the state constitution, “it is the Legislature, rather than the Governor, that generally possess the ultimate authority to establish or revise the terms and conditions of state employment through legislative enactments.” The Court also rejected the Governor’s argument that the Legislature had delegated to the Governor the power to impose furloughs through specific statutory provisions—specifically, Government Code sections 19851, 19849, and 3516.5.  The Court held that section 19851 was not relevant to furloughs as imposed and that 19849 did not confer any substantive authority to the Governor. Similarly, the Court held that section 3516.5 of the Dills Act did not give the Governor authority to impose furloughs; it merely provided a method to avoid the collective bargaining process.

 In conclusion, the Court held that:

“[W]ith regard to represented employees we are of the view that clearly, unless the Governor or the DPA had been granted the authority unilaterally to impose a mandatory unpaid furlough on affected represented employees by the terms of an applicable MOU, the Governor and the DPA lacked authority unilaterally to institute such a furlough through the December 19, 2008, executive order with respect to those employees.”

“Accordingly, unless the MOU’s specifically authorized the mandatory unpaid furlough imposed by the executive order, it would appear that at that time the executive order was not valid.”

Issue 2: Did the Legislature “Ratify” the Furloughs in the revised Budget Act of 2008

Court’s Answer: Yes.

After concluding that the Governor did not have the authority to unilaterally impose furloughs in December 2008, the Court examined the language of the revised Budget Act of 2008. Section 3.90 of the Budget Act of 2008 provided:

“Sec. 3.90. (a) Notwithstanding any other provision of this act, each item of appropriation in this act, with the exception of those items for the California State University, the University of California, Hastings College of the Law, the Legislature (including the Legislative Counsel Bureau), and the judicial branch, shall be reduced, as appropriate, to reflect a reduction in employee compensation achieved through the collective bargaining process for represented employees or through existing administration authority and a proportionate reduction for nonrepresented employees (utilizing existing authority of the administration to adjust compensation for nonrepresented employees) in the total amount of $385,762,000 from General Fund items and $285,196,000 from items relating to the other funds. It is the intent of the Legislature that General Fund savings of $1,024,326,000 and other fund savings of $688,375,000 in the 2009-10 fiscal year shall be achieved in the same manner described above. The Director of Finance shall allocate the necessary reduction to each item of appropriation to accomplish the employee compensation reductions required by this section.”

In examining the impact of this language, the Court found that the amount of reduction in employee compensation clearly included the savings from 2-day per month furloughs. The Court then cited several budget documents that referenced the continuing furloughs imposed on state employees. Based on these facts, the Court concluded that:

"[I]n view of the exigent circumstances facing the Legislature, it intended to permit the then-existing furlough program to be used as an alternative to other means that might be agreed upon through the collective bargaining process, without regard to whether the appellate courts ultimately determined that the Governor or the DPA possessed the authority to impose an unpaid furlough program unilaterally.”

“Accordingly, we conclude that the phrase “existing administration authority” — as used in section 36 of Senate Bill 3X 2 — was intended to encompass the then-existing furlough program. By enacting this provision, the Legislature, through the exercise of its own legislative prerogative, authorized the substantial reduction in the appropriations for employee compensation, mandated in the revised budget legislation, to be achieved through the two-day-a-month furlough plan.”

Thus, even though the Governor lacked the authority to impose furloughs initially, the Court concluded that the Legislature approved the furloughs when it enacted the revised Budget Act of 2008.

Comments

1. As expected, the decision was authored by Chief Justice Ron George. There was a concurrence by Justice Corrigan regarding a technical issue on the “single-subject” rule but she ultimately joined in the majority’s conclusion that the Legislature ratified the furloughs in the revised Budget Act of 2008. Notably, the decision was issued less than a month after oral arguments; an indication, I believe, of the importance of this decision.
2. The majority decision was 81 pages long and Justice Corrigan’s concurrence another 3 pages. I thought the court’s discussion of the Governor’s powers under the constitution and various statutes was extremely thorough. Indeed, the Court spent the first 67 pages of the decision explaining why the Governor does not have the unilaterally authority to furlough state employees. In contrast, the portion of the decision analyzing the language of the revised Budget Act of 2008 only took 13 pages. I believe that’s due largely to the lack of much evidence as to the Legislature’s intent in enacting section 3.90. Further, I don’t believe either of the parties imagined that the case would turn on the language of section 3.90.
3. What is the effect of this decision? Because the 2-day per month furloughs were ratified by the Legislature, they were legal. So state employees will not be getting any back-pay for those furlough days.
4. What about the 3rd furlough day? On July 1, 2009, the Governor issued another executive order imposing a 3rd furlough day on state employees. The Court’s decision did not rule on the validity of this 3rd furlough day. However, the decision noted that on July 24, 2009, the Legislature passed the revised Budget Act of 2009 which contained the same “existing administration authority” language as section 3.90 of the revised Budget Act of 2008. Therefore, even though this decision did not directly rule on the legality of the 3rd furlough day, it’s clear that the 3rd furlough day was also ratified by the Legislature and thus will be found legal.
5. What about the current furloughs? On July 28, 2010, the Governor issued yet another executive order. This order reinstituted 3-day per months furloughs for fiscal year 2009-2010. The Court’s decision expressly does not address the legality of the current furloughs. However, unlike the furloughs in fiscal year 2008-09 and 2009-10, the current furloughs have not been ratified by the Legislature. Thus, I have to assume that the current furloughs will be found to be illegal unless ratified by the Legislature. Whether the Legislature will do so in the Budget Act of 2010 remains to be seen.
6. What didn’t the court address? Although the Court addressed several key issues related to the Governor’s authority, it expressly declined to address others. These include:

• Whether Government Code section 19581 might allow the Governor to impose furloughs at selected agencies for selected employees based on specific needs. The Court concluded only that section 19581 did not authorize “across-the-board” furloughs.
• Whether section 3516.5 of the Dills Act—which provides an emergency exception to the collective bargaining requirement—applies to “fiscal” emergencies, as opposed to only natural disasters such as an earthquake or flood.
• Whether the Governor has the authority to impose furloughs or simlar measures on nonrepresented employees (although the Court strongly suggested that there would be similar limitations with respect to nonrepresented employees).

Supreme Court: State Furloughs Legal

Professional Engineers in California Govt. v. Schwarzenegger (Supreme Court Case No. S183411)

The Supreme Court ruled today that the furloughs ordered by the Governor are legal. The Court's conclusion was:

Although, for the reasons discussed above, we disagree with much of the trial court‟s reasoning, in light of the legislative measures enacted after the trial court‟s ruling we conclude that plaintiffs are not entitled to the relief sought in this litigation. Accordingly, the judgment rendered by the trial court, denying the relief sought in these mandate proceedings, is affirmed.

I'll have more once I've had a chance to thoroughly read the decision.

Governor Vetoes Pay Reform Bills

As I posted earlier (link), only 2 of the 6 bills that comprised the Legislature’s response to the City of Bell salary scandal passed the Legislature. Those two bills were AB 194 and AB 827. On September 30, the Governor vetoed both bills with the following veto messages:

AB 194 Veto Message:

To the Members of the California State Assembly:

I am returning Assembly Bill 194 without my signature.  The bill limits the salary that retirement benefits are based on for individuals, prospectively after January 1, 2011, to 125% of the Governor’s salary, as specified.  The current compensation limit imposed by the federal government to determine public employee retirement benefits is $245,000. Currently, this bill would cap the compensation counted towards retirement at $217,483. While this two tiered cap that would be created by this bill would make a very small dent in the pension problem California faces, it cannot be considered real pension reform. I am still hopeful that the Legislature will pass an acceptable bill that addresses the real cost issues that have driven up the liability in public pension systems.

For these reasons, I am unable to sign this bill.

Sincerely,

Arnold Schwarzenegger

AB 827 Veto Message:

To the Members of the California State Assembly:

I am returning Assembly Bill 827 without my signature.  The scandal with the City of Bell was a disgraceful use of public funds. I share the public outrage expressed over the abuses attributed to the City of Bell’s management of employee contracts. Assembly Bill 827 presents good public policy in that it provides transparency with regards to some municipal personnel contracts, but it should be applied to all public employees, including labor union members and state employees. I encourage the Legislature to enact thoughtful and meaningful solutions rather than a rushed proposal that is severely limited in its application.

For this reason I cannot sign this bill.

Sincerely,

Arnold Schwarzenegger

State Correctly Imposed Last, Best, Final Offer

State of California (Department of Personnel Administration) (2010) PERB Dec. No. 2130-S (Issued on 9/20/10)

The State of California (State) and the California Correctional Peace Officers Association (CCPOA) were parties to a memorandum of understanding (MOU) with a term of July 1, 2001 through July 2, 2006. Negotiations for a successor MOU reached an impasse in May 2007. Mediation was unsuccessful and in September 2007 the State notified CCPOA that it was implementing its last, best, final offer (LBFO) pursuant to Government Code 3517.8.

CCPOA then filed this unfair practice charge alleging, among other allegations, that the State unlawfully imposed its LBFO for a three-year term. The State denied that it implemented its LBFO for any set duration. Based on the evidence, PERB agreed with the State and dismissed the charge.  However, PERB went on to hold that even if the State had imposed a “term” on its LBFO, that in itself was not unlawful.  Citing to Rowland Unified School District (1994) PERD Decision No. 1053, PERB held that, “an employer may lawfully implement a term of agreement provision contained in its LBFO because such a provision, standing alone, does not act as a waiver of the union’s bargaining right for the specified period.” What is prohibited is imposing a waiver on the union; in essence, refusing to bargain during the term imposed.  Here, PERB found that the State never indicated that it was refusing to bargain going forward.  Accordingly, PERB held that even if the State had imposed a term of three years on its LBFO, that by itself was not an unfair practice.

Comments

1. In this decision, PERB has clarified that under the Dills Act, imposing a term on a LBFO is permissible as long as the employer remains willing to bargain during that term should impasse be broken.
2. Is this decision applicable to the other acts administered by PERB? I don’t see any reason why the rationale in this case wouldn’t also apply under EERA and HEERA. The MMBA, however, presents a more difficult question. Under the MMBA, upon impasse an employer may impose its LBFO but “shall not impose a memorandum of understanding.” (Gov. Code 3505.4.)  This is commonly understood to mean that an employer cannot impose a set term on its LBFO whereby the employer refuses to bargain during that term—an interpretation that is consistent with this decision. However, the provision in the MMBA that an employer “shall not impose a memorandum of understanding” could be interpreted to mean that an employer cannot impose any term at all, regardless of whether or not the employer stands ready to bargain. 
3. Practically, there really isn’t a difference between imposing a LBFO without any term versus imposing a LBFO with a term but being willing to bargain at any time. The latter is essentially imposing a contract with a re-opener that can be triggered by the union at any time—it basically renders the term provision meaningless. 

Plan to Attend "The Basics of Practicing Before PERB" Seminar on Oct 12

Would you like to learn more about practicing before PERB?  Here's your chance!  The Labor & Employment Law Section of the State Bar of California, with the participation of the California Public Employee Relations Program (CPER) and PERB, is sponsoring a seminar on "The Basics of Practicing Before PERB."

The seminar will be held on October 12, 2010, at the Sheraton Grand in Sacramento from 9:00 am. to 12:00 pm.  The cost is only $45 for members of the Labor & Employment Law Section and $60 for everyone else.  In 2006 and 2007, PERB sponsored similar seminars that completely sold out.  So if you want to attend, please sign up early!

Click here for a link to the State Bar's website with the registration information.

California Supreme Court Hears Furlough Case

As has widely been reported, the California Supreme Court yesterday heard arguments in Professional Engineers in California Government et al. v. Schwarzenegger (Case No. S183411). The issue before the Court is whether the Governor legally imposed furloughs on state employees. This was one of the rare cases that the Court televised so I was able to watch the arguments. (To watch the arguments, click on this link).  Here are my thoughts:

Does the Governor Have the Inherent Power to Furlough?

The Governor’s attorney argued that the Governor has the inherent authority to unilaterally furlough employees during a fiscal emergency. The unions’ attorneys argued that there wasn’t any constitutional or statutory authority for such an assertion. The justices – including Chief Justice George and Justice Corrigan – appeared skeptical to the Governor’s argument. Justice Corrigan described an inherent power to furlough as “CEO-type” powers. Based on the questions asked, I’m not sure the Court is prepared to give the Governor such “CEO-type” powers.

Are Furloughs a Lesser Form of Layoffs?

Justice George asked whether furloughs are a less drastic measure than layoffs and Justice Chin repeated that question at the end. In essence, the thinking of the Justices may be that if the Governor has the authority to lay off employees (which no one disputes) then shouldn’t he have the authority to furlough. The union attorneys vigorously disputed that furloughs are a lesser harm than layoffs and also disputed the argument that the state statute authorizing layoffs implicitly authorizes furloughs.

I thought this was an interesting line of questioning by Chief Justice George. In the realm of public employment, there certainly is the concept of “temporary layoffs.” I know of at least one major arbitral decision holding that temporary layoffs are just a form of layoffs and holding that it’s a management right. But I don’t think the Court will issue such a holding.

However, the policy implications behind this question may drive the Court’s decision. This is because if the Court says the Governor can’t furlough, then the only way the Governor could have achieved the salary savings in the budget was through layoffs. From the Court’s questioning, it seems they are bothered by the unions’ arguments which would essentially force layoffs over furloughs; when to the casual observer furloughs are far less drastic.

Did the Legislature Ratify the Governor’s Furloughs?

The Court asked a lot of questions about whether the Legislature ratified the Governor’s furloughs when it adopted a budget that relied upon salary savings in the exact amount of the anticipated furlough savings. Several commentators have suggested that the Court may take this approach to resolving the case. After listening to the oral arguments, I have to agree that this appears very likely. I personally don’t like this approach since it doesn’t answer the central question of whether the Governor has the authority to furlough employees during a fiscal emergency. Under such a holding, this exact situation could arise again in the future. But it’s a way for the Court to resolve this case without addressing the more difficult constitutional questions regarding the Governor’s authority.

Would Back-pay be a Gift of Public Funds?

I thought the most interesting comment came from the Controller’s attorney at the very end of her argument. She said that even if the Court finds the Governor’s furlough order illegal, the issue of back-pay needs to be briefed; and she specifically mentioned the issue of “gift of public funds.” Under the California constitution, it’s illegal to make a gift of public funds. So I guess the argument would be that giving back-pay to employees for time they did not work would be a gift of public funds. That’s certainly a novel argument. In the context of wrongful termination cases, public employees have been able to obtain back-pay just like private employees and I’m not aware of back-pay ever being prohibited as a “gift of public funds.”

A Tribute to Bernard McMonigle

I was greatly saddened today to learn that Chief Administrative Law Judge Bernard McMonigle passed away this weekend. Bernie was both a friend and mentor to me at PERB. I first met Bernie when he was a Regional Attorney at PERB and I was an attorney at the Department of Personnel Administration. I later had the pleasure to appear before him when he was an Administrative Law Judge and was working at PERB he when was promoted to Chief ALJ.

Bernie was a great attorney and ALJ. He knew the law, but more importantly he understood the realities of the workplace.  You could also be assured that you would get a fair hearing in front of him.  Because of that, he was greatly respected by both unions and management.

One my fondest memories of Bernie doesn’t involve PERB; but rather seeing him regularly at the Gym. He and Bob Thompson, PERB’s former General Counsel, were religious about going to the gym everyday at lunch. Even when he turned 50 years old, Bernie could still bench press 225 lbs, six times – a fact that he took great pride in taunting me over …

I know I’m not alone in saying that I’m going to greatly miss Bernie.

Only 2 of 6 Pay Reform Bills Pass Legislature

The 2009-2010 Legislative session is officially over. Of the six bills that comprised the Legislature’s response to the City of Bell salary scandal, only two bills made it out of both the Assembly and Senate: AB 194 and AB 827.

AB 194 (Limits on Pensions) was passed without any major amendments. The only change was that urgency language was added so that the law will take effect as soon as it is signed by the Governor.  For a description of what AB 194 entails, see my blog post on August 27, 2010.

AB 827 (Limits on Local Employment Contracts) was substantially amended. The bill still prohibits both automatic renewals of contracts and automatic increases in salary above the cost-of-living. However, the bill was amended to allow for automatic cost-of-living increases. The bill also still requires a performance review for any salary increase, except a cost-of-living increase. Most significantly, the bill was amended to eliminate the requirement that performance reviews be conducted in open session. This change eliminates the privacy issue I highlighted in my prior blog post.  Finally, the urgency language was also added.

UPDATE: I should add that even though AB 827 contains urgency language, the bill itself states that it only applies to contracts entered into or renewed on or after January 1, 2011.  Thus, the urgency language in AB 827 appears to be meaningless.

AB 194: Limits on Pensions

AB 194 is part of a six-bill package of legislation in response to the salary scandal at the City of Bell. AB 194 would cap compensation that could be considered in calculating a public employee's pension at 125% of the Governor's current salary, which is $173,987.  (The Governor's salary was $212,179 but the Citizen's Compensation Commission voted on May 20, 2010 to reduce that salary by 18%, to $173,987, effective December 7, 2009.)  So the cap would be $217,483.75.  The cap would only apply to individuals joining a pension system on or after January 1, 2011 and the cap would be subject to an annual cost-of-living increase. 

This bill isn't all that radical as there is already a federal IRS rule that limits the amount of compensation that can be considered in calculating a public employee retirement benefit to $245,000.  (IRC section 401(a) (17).)  (There is apparently a special provision that allows some governmental plans to consider up to $360,000 of compensation provided certain requirement were met in 1993 - but I don't think that applies to any governmental plan in California).  But the federal rule doesn't apply to individuals who were part of the pension system prior to 1996.

AB 827: Limits on Local Employment Contracts

AB 827 is part of a six-bill package of legislation in response to the salary scandal at the City of Bell. AB 827 would prohibit any employment contract for a local, unrepresented employee from including: 1) an automatic renewal provision; 2) an automatic raise in excess of a cost-of-living adjustment; or 3) an automatic compensation increase, including any increase that is linked to a third-party contract. The bill itself is a “gut and amend” of a prior bill dealing with the archival of county records. Perhaps because the bill was so quickly written, the language – although extremely short – contains several ambiguities.

1. The bill would add to the MMBA the following language:

“3511.1. For the purposes of this chapter, "excluded employee" means any unrepresented individual who is or will be employed by, and report directly to, the legislative body of the local agency. "Excluded employee" includes any person contracted with the local agency as well as any person who is considered an at-will employee.”

The first question that arises is whether the second sentence modifies or adds to the first. Specifically, the first sentence says that an “excluded” employee is any unrepresented employee who reports directly to the legislative body. The second sentence says that “excluded employee” includes contract employees and at-will employees. Does that just clarify what is an “unrepresented” employee in the first sentence? In other words, unrepresented employees, whether contract or at-will, who report directly to the legislative body are covered.

You could read the second sentence as being in addition to the first. In other words, unrepresented employees who report directly to the legislative body are covered. And in addition, any contract or at-will employee is also covered, regardless of whether that employee reports directly to the legislative body. Given the history behind this bill, I don’t think the latter interpretation is correct. I believe the bill was only intended to apply to the few individuals who report directly to a legislative body. However, the language is certainly less than clear.

2. The bill also adds the following to the MMBA:

“3511.2. For any contract executed or renewed on or after January 1, 2011, an excluded employee's employment contract shall not include any clause that provides for any of the following: (a) An automatic renewal. (b) An automatic raise in excess of a cost-of-living adjustment. (c) An automatic compensation increase, including any increase that is linked to a third-party contract. (d) Notwithstanding Section 53260, a severance payment greater than 12 months' salary."

I’m not sure why you need (b) when you have (c). If you prohibit all automatic increases, why do you need to say that automatic increases above the cost-of-living are prohibited? It doesn’t make sense.

Other than that, the language of 3511.2 is clear. What I find confusing is why this language is being placed in the MMBA. Because excluded employees are not represented, this isn’t an issue related to collective bargaining. Perhaps because it deals with the terms and conditions of employment, the Legislature thought it made sense to include it in the MMBA. However, it seems to me that it would be better placed in the part of the Government Code dealing with local compensation.

3. Finally, the bill would add the following to the Government Code:

“54957.05. (a) For any unrepresented individual who is or will be employed by, and report directly to, the legislative body of the local agency, before implementing a raise in excess of a cost-of-living adjustment, the following requirements shall be met: (1) A performance review of that individual shall be completed. A completed summary of the performance review shall be discussed at open session. The performance review shall be publicly available upon request. (2) The vote to implement the raise in excess of a cost-of-living adjustment shall be conducted in an open session meeting. (b) For the purposes of this section, the board shall use the Bureau of Labor Statistics' Consumer Price Index to determine the cost-of-living adjustment each year.”

The big change here is the requirement that any performance review of an unrepresented employee who reports directly to a legislative body be conducted in open session of the legislative body. The issue that comes to mind is whether such individuals have privacy rights preventing a performance evaluation from being discussed in open session. In California, the right to privacy is constitutionally protected and could potentially trump any legislation. However, because this bill only applies to the very few individuals who report directly to a legislative body – people who are usually very high in the chain of command – I think this requirement is probably permissible. This is because the right to privacy must be balanced against the public’s right to information about its government. For the people at the very top, the courts have generally found that the public’s right to information generally outweighs any individual right to privacy. However, it’s certainly a balancing act. To the extent a performance evaluation touches on highly personal areas (for example, if a City Manager who is HIV positive has to take time off for medical treatment and that affects his attendance), I’m not sure that such issues should be aired in public. So even if this bill passes, there may be some areas related to an individual’s performance that are not properly subject to the provisions of this bill requiring a public hearing.

Proposed Legislation in Response to City of Bell Scandal

The Legislature has unveiled a six-bill package of legislation in response to the salary scandal involving the City of Bell. The six bills are:

• AB 827: Prohibits any employment contract for a local, unrepresented employee from including an evergreen provision, severance payments greater than 12 months in salary, automatic compensation increases, and automatic raises that exceed the cost of living.
• AB 192: Requires cities to pay for any higher pension payments that stem from their luring a municipal employee away from another city by offering exorbitant pay. 
• AB 194: Establishes a cap on the total compensation that can be used to calculate a pension benefit. 
• AB 1955: Requires charter cities to be penalized by the state if they pay city council salaries higher than allowed in general-law cities. Councilmembers would be slapped with a 50% personal income tax on any ”excess” amounts and the city's redevelopment agency would be restricted from approving new plans or issuing new debt. 
• AB 2064: Requires the Legislature to post on its website the salaries of its elected members and employees. The bill also requires cities, counties, special districts, school districts and joint powers authorities to post the salaries of its elected officials and key employees.
• SB 501: Requires officials of cities, counties, special districts, school districts and joint powers agencies to file an annual statement that discloses their compensation to the public.

Comments:

I’m going to try to provide comments on these bills over the next couple of weeks. I’m going to start with AB 1955 because I think it’s the most interesting.

1.  This bill would slap a 50% tax on the amount of a Councilmember’s “excess” salary. According to the Senate analysis, taxing income based on source is “unusual” in California. However, the analysis notes that the tax is similar to the “AIG bonus tax” passed by Congress.

2.  Under this bill, a charter city would be deemed an “excess compensation city” if Councilmember pay exceeds the statutory limit for general law cities. What is the limit for general law cities? Under Government Code section 36516, how much a general law city may pay a Councilmember depends on the city’s population. Here is the chart:

Up to and including 35,000 residents = $300 a month
Over 35,000 and up to and including 50,000 = $400 a month
Over 50,000 and up to and including 75,000 = $500 a month
Over 75,000 and up to and including 150,000 = $600 a month
Over 150,000 and up to and including 250,000 = $800 a month
Over 250,000 residents = $1,000 a month

3.  However, it’s not as simple as just looking at the chart. The amounts in section 36516 have not changed since 1984. However, the statute allows a city to increase Councilmember salaries by ordinance up to 5% a year. (In addition, council salaries can be increased beyond these limits if submitted to and approved by the voters.) So what effect does that 5% annual increase have? If a general law city paid  a Councilmember $1000 a month in 1984, and increased that amount 5% every year, Councilmember pay would be approximately $3556 per month (or $42,672 annually) today. That amount would be the maximum amount a general law city could pay a Councilmember under section 36516 without submitting the issue to the voters.

4.  Now, here comes the big caveat. Under AB 1955, an “excess compensation city” by definition cannot be a charter city with a population over 285,000 individuals. In other words, any charter city with a population over 285,000 is exempt from this bill.  How many cities are there with more than 285,000 people?  There are 13 cities in California with populations over 285,000:  Los Angeles, San Diego, San Jose, San Francisco, Fresno, Long Beach, Sacramento, Oakland, Santa Ana, Anaheim, Bakersfield, Riverside, and Stockton.  All 13 of these cities are also charter cities.  Under AB 1955, all 13 would be exempt from this bill.

Dismissals Not Entitled to Preclusive Effect

Grossmont Union High School District (2010) PERB Decision No. 2126E (Issued on 8/13/10)

This case involved an employee who alleged that he received a negative performance evaluation and was demoted because of protected activities. Specifically, the employee alleged that the adverse actions were taken after he wrote a letter to the principal accusing the principal of violating the applicable collective bargaining agreement and because he requested union representation during a meeting with his manager. The Office of the General Counsel issued a complaint. After a formal hearing, the ALJ found no nexus between the adverse actions and the protected activities, and on that basis, dismissed the complaint.

Of interest was the fact that the employee had filed an unfair practice charge against his union for breach of the duty of fair representation (DFR) arising from the same set of facts. (See Service Employees International Union, Local 221 (Meredith) (2008) PERB Decision No. 1982.) In the DFR case, the Board found that the employee failed to state a prima facie case that his union caused or attempted to cause the District to reject him on probation. Relying on that decision, District in this case moved to dismiss the complaint.

In its decision, the Board declined to give preclusive effect to the prior DFR decision. Here’s what the Board held:

“In City of Porterville (2007) PERB Decision No. 1905-M, the Board, citing the "doctrines of res judicata and collateral estoppel," gave preclusive effect to a Board agent’s dismissal of identical allegations in a separate unfair practice charge. However, a Board agent’s review of a charge to determine whether it establishes a prima facie case of an unfair practice does not meet the "actually litigated" requirement for collateral estoppel. To be "actually litigated" for purposes of collateral estoppel, an issue must have been decided based on the presentation of evidence at a hearing. (Groves v. Peterson (2002) 100 Cal.App.4th 659, 668.) The Board has consistently held that the function of a Board agent’s investigation is not to resolve the merits of the case because such resolution is reserved for PERB ’ s hearing process. (Golden Plains Unified School District (2002) PERB Decision No. 1489; Eastside Union School District (1984) PERB Decision No. 466.) We therefore overrule City of Porterville, supra, to the extent it granted preclusive effect to a dismissal of an unfair practice charge based solely on a Board agent’s charge investigation.”

Thus, the Board has overruled City of Porterville and will no longer give preclusive effect to a dismissal. This issue doesn’t arise very often but practitioners should take note of this change in law.

PERB: School Noon-Duty Aides Not Covered by EERA

Castaic Union School District (2010) PERB Decision No. A384E (Issued on 8/09/10)

In an unexpected decision, PERB has held that school district employees in part-time playground positions, also referred to as "noon-duty aides," who do not otherwise hold a position in the classified service, are not covered by the Educational Employment Relations Act (EERA). This decision overturns the Board’s holding in Pittsburg Unified School District (1976) EERB Decision No. 3 (“Pittsburg”). What is significant is that the Pittsburg decision has been binding precedent for over 30 years; indeed it was the third decision ever issued by PERB (then known as EERB).

The Board based its decision on the language of Education Code section 45103, subdivision (b)(4), which states:

Part-time playground positions shall not be a part of the classified service, where the employee is not otherwise employed in a classified position. Part-time playground positions shall be considered a part of the classified service when the employee in the position also works in the same school district in a classified position.

Then Board then compared Education Code section 45103 with Government Code section 3540.1, subdivision (e), which states:

“Exclusive representative means the employee organization recognized or certified as the exclusive negotiating representative of certificated or classified employees in an appropriate unit of a public school employer.”

The Board interpreted the “plain language of the statute to mean that an exclusive representative may only represent a bargaining unit of certificated or classified employees and, therefore, cannot represent employees who do not fall into one of those two categories.”  According to the Board, the definition of "exclusive representative" limits the definition of "public school employee" to certificated or classified employees.  Thus, part-time playground employees are not considered “employees” for purposes of EERA.

As a result of the Board’s holding, the petition in this case to add part-time playground positions to an existing unit was dismissed. However, in the interesting move, PERB stated that it would only apply the holding in this case prospectively. Specifically, the Board stated that:

“We recognize that classified bargaining units may currently exist which include parttime playground positions. Because of the potential disruption to stable employer-employee relations that would result from application of this decision to such units, PERB will only apply this decision prospectively. (Palo Alto Unified School District, et al. (1979) PERB Decision No. 84; Peralta Community College District (197 8) PERB Decision No. 77.) Consequently, this decision does not affect existing units that include part-time playground positions.”

Member Wesley dissented from the Board’s decision that EERA does not cover part-time playground positions. Member Wesley argued that the definition of “employee” under EERA does not limit it to classified or certificated employees. Further, Member Wesley asserted that being excluded from the classified service has little bearing on whether an employee should be covered by EERA, as the purposes of the two statutory sections are different.

Comments:

1. It is fairly rare for the Board to overturn one of its prior decisions. It probably occurs once a year on average; perhaps a little more when there is a change of Governor. However, I can’t remember the Board ever overturning a decision as old as Pittsburg. As mentioned above, Pittsburg has been around for over 30 years and it was only the third decision ever issued by the Board. In terms of the merits of the decision, I think both sides have valid points. But given how long Pittsburgh has been around, I’m sure CSEA will appeal this case. It will be interesting to see how the Court rules.
2. For me, the really interesting portion of this case was the Board’s guidance on how this decision will be applied in the future. The Board acknowledged that many districts have part-time playground positions in bargaining units and that this decision could cause substantial disruption to those districts and employees. Therefore, the Board stated that it would only apply this decision prospectively. However, can the Board do that? I personally think it’s questionable. Here, the Board said that the plain language of the statute required that it hold that part-time playground employees are not covered by EERA. However, PERB cited to a couple of prior cases where it declined to apply a statutory interpretation retrospectively where such an application would “cause disruption and instability.” I think those prior decisions are distinguishable. But in its basic form, the legal question is this: Can an administrative agency charged with enforcing a statute decide not to enforce the plain language of the statute because it would cause disruption and instability?  I believe the answer is no; such a decision is one for the Legislature. My view is that if PERB says that under the plain language of EERA that these positions are not covered, it has no choice but to enforce that interpretation. Any “disruption or instability” in this situation is caused by the language of the statute, which is something for the Legislature to address.  I certainly understand why PERB only wants to apply this holding prospectively, I just don't know that it can do that when it says that the language of the statute is plain and clear.

A Guide to PERB Abbreviations

Have you ever wondered what the letters and numbers in a PERB charge mean?  Here's what you need to know.  All PERB charges follow the same rule:  The first two letters denote the PERB office where the charge was filed; the next two letters denote the type of case; next the number is the number of the charge under the Act; and the last letter is the Act under which the charge was filed.

Here's a guide to the abbreviations used:

Location:

• SA = Sacramento
• SF = San Francisco (Note: For those of you wondering, yes, PERB's office is in Oakland.  But it used to be in SF)
• LA = Los Angeles

Charge types:

• AC Amendment of Certification Request
• AR Arbitration Request
• CE Unfair Practice Charge against Employer (Note:  Most common type of charge)
• CO Unfair Practice Charge against Employee Organization  (Note:  Second most common type of charge)
• DP Decertification Petition
• FS Financial Statement Complaint
• HS HEERA Student Participation Complaint
• IM Impasse Request (Mediation and Factfinding)
• OS Organizational Security Election Request
• PC Petition for Certification
• PN Public Notice Complaint
• RR Request for Recognition
• SV Severance Request or Petition
• UM Unit Modification Petition

Acts:

• E = EERA
• H = HEERA
• S = Dills (Note:  It was initially referred to as "SEERA" before being renamed for the late Senator Ralph Dills)
• M = MMBA
• C = Trial Court Employment Protection and Governance Act
• I = Trial Court Interpreter Employment and Labor Relations Act
• T = Los Angeles County Metropolitan Transportation Authority Transit Employer-Employee Relations Act

PERB’s End of Fiscal Year Numbers

Fiscal year 2009-2010 is over. PERB’s annual report for 2009-2010 is not due until October 1, 2010. However, I have been keeping track of PERB’s decisions throughout the year. So unless there are additional cases issued before June 30th that PERB has not posted on its website, I have the final tally for the year.  For fiscal year 2009-2010, PERB issued 79 decisions.  The year before, fiscal year 2008-2009, PERB issued 89 decisions. However, PERB had five board members in 2008-09, while it had only four board members for most of 2009-2010, and ended the last few months with only three board members. So given that PERB only had about 3.5 board members this year, and was subject to 3-day a month furloughs, 89 decisions is not bad at all.

Here are some other statistics for the 2009-2010 fiscal year:

Decisions by Statute:

• MMBA: 33
• Dills Act: 17
• EERA: 15
• HEERA: 12
• Court Interpreter: 2

Decisions by Type:

• Appeals from Dismissals: 49 (15 of which were DFR’s)
• Exceptions to ALJ Decisions: 23
• Approval of Settlement: 1
• Administrative Appeal: 2
• Reconsideration: 2
• Unit Modification: 1
• Amend Certification: 1

Decisions by Outcome:

• Dismissal Affirmed: 44
• Dismissal Overturned/Partially Overturned: 5
• ALJ Decisions Affirmed: 14
• ALJ Decision Overturned/Partially Overturned: 9

Decisions by Board Member:  

• Dowdin: 29 
• Wesley: 20 
• McKeag: 15 
• Neuwald (Term ended 2/28/10): 15 

Other Interesting Facts:  

• There were 5 dissents in the last year: 2058M (Neuwald); 2107H (McKeag); 2106S (McKeag); 2103M (Dowdin); 2094H (Neuwald).

Comments: 

1. I need to confirm this, but I believe this is the first year that the MMBA has generated the most cases from the Board. Last year, the MMBA and EERA were tied at 34 each. I believe that before that EERA has always been the dominant Act. This year, it wasn’t close. The MMBA generated 33 cases while EERA only generated 17.
2. The only other major statistic that stands out to me is the Board’s affirmance rate. The rate that dismissals were affirmed by the Board was 89.7%, which is consistent with the historical average of 90%+. However, what is surprising to me is that only 60.8% of the proposed ALJ decisions were affirmed in their entirety. 9 out of 23 proposed ALJ decisions were partially or completely overturned. This is a significant statistic because I think it will only drive more cases to the Board.  As a litigant, I’m much more likely to appeal a case to the Board if I have a 40% chance of success (even if it's only a partial success) versus only a 10% chance.  40% isn’t good, but it’s a whole lot better than 10%.

PERB: State Properly Imposed Layoffs Prior to Completion of Effects Negotiations

State of California (Department of Corrections & Rehabilitation, Department of Personnel Administration) (2010) PERB Decision No. 2115-S (Issued on 6/10/10)

Facts

This case stems from the State’s decision to close the El Paso De Robles Youth Correctional Facility (El Paso) and the DeWitt Nelson Youth Correctional Facility (DeWitt) in response to an anticipated drop in the juvenile population held by the Department of Corrections and Rehabilitation (CDCR) resulting from the passage of SB 81. In November 2007, CDCR developed preliminary plans to close both the El Paso and the DeWitt facilities effective July 31, 2008. Given the language of SB 81, CDCR determined that closure of these two facilities was required in fiscal year 20082009.  The Governor incorporated the closure of these facilities into his proposed budget in January 2008 by not including funding for juvenile services at those facilities.

On March 24, 2008, the State gave written notice to the California Correctional Peace Officers Association (CCPOA) that the two facilities were closing and that affected employees would be subject to layoff. The parties then met and conferred over the effects of the layoffs on six occasions prior to the July 31, 2008 implementation date.  When no "effects" agreement was reached by July 31 the State went ahead and imposed the layoffs.

Decision

In its decision, PERB affirmed that the decision itself to lay off employees is a fundamental management right that is not subject to bargaining. At the same time, PERB affirmed that the “effects” of a layoff are subject to bargaining. In terms of timing, PERB held that in such a situation the notice, “must be given sufficiently in advance of a firm decision to make a change to allow the exclusive representative a reasonable amount of time to decide whether to make a demand to negotiate."

However, PERB then noted that there is an exception to this rule. Specifically, PERB has held that it is permissible to implement a managerial decision before the completion of bargaining over “effects” where:

1. The implementation date is not an arbitrary one, but is based upon either an immutable deadline or an important managerial interest, such that a delay in implementation beyond the date chosen would effectively undermine the employer’s right to make the nonnegotiable decision;

2. Notice of the decision and implementation date is given sufficiently in advance of the implementation date to allow for meaningful negotiations prior to implementation; and

3. The employer negotiates in good faith prior to implementation and continues to negotiate in good faith after implementation as to those subjects not necessarily resolved by virtue of the implementation.

Here, the Board found all 3 factors present. The Board also rejected the union’s contention that the State negotiated in bad faith. Accordingly, the charge was dismissed.

Comments

Many public agencies are currently considering layoffs because the budget situation for this fiscal year is not much better than last year. When public agencies do seek to impose layoffs, some unions adopt a tactic to try to delay the layoffs for as long as possible in the hope that the public agency will change its mind due to external political pressures. These unions will submit voluminous information requests, refuse to meet promptly, and/or otherwise engage in tactics to prevent the employer from quickly reaching impasse on "effects" negotiations. In these situations, employers should remember that is it possible to impose a managerial decision, such as a layoff, even when effects negotiations have not been completed if the elements in this case are present.  Obviously, it’s better to have reached agreement and/or impasse prior to implementation.  However, it’s good to keep this exception in mind.

Supreme Court: PERB Has Initial Jurisdiction Over Strikes

City of San Jose v. Operating Engineers Local Union No. 3 (Case No. S162647) (Issued on July 1, 2010)

The California Supreme Court has just issued its decision in City of San Jose.  The key holding is as follows:

"California allows public employees to go on strike to enforce their collective bargaining demands unless the striking employees perform jobs that are essential to public welfare. But whether a particular employee’s job is so essential that the employee may not legally strike is a complex and fact-intensive matter, and one on which public employee organizations and public entities may disagree.


Here, we address this issue: If a public entity is of the view that a threatened strike by its employees will be unlawful because a strike by some or all of the employees creates a substantial and imminent threat to public health and safety, must the public entity first file an unfair labor practice complaint with PERB and await PERB’s adjudication of the complaint before asking a court for an injunction prohibiting the strike?

We agree with the Court of Appeal that PERB has initial jurisdiction over a claim by a public entity that a strike by some or all of its employees is illegal. In addition, we conclude that a public entity must exhaust its administrative remedies before PERB before seeking judicial relief unless one of the recognized exceptions to the exhaustion of administrative remedies requirement is established."

I'll try to have more on this decision tomorrow.

California Supreme Court to Decide “Vesting” Issue Regarding Retiree Health Benefits

Retired Employees v. County of Orange (9th Cir. 09-56026 6/29/10)

Since approximately 1966, Orange County has provided health care benefits to its retired employees. In 1985, the County began “pooling” the retired employees with the active employees in the rate-setting process. Because retirees generally require more health services than active employees, who are generally younger and healthier, pooling the two groups allowed retirees to pay lower premiums and receive greater coverage than they otherwise would. As the cost of health care continued to rise over the years, the County found its employee health plans underfunded and needing adjustment. On September 12, 2006, the
Board of Supervisors approved a resolution to “split the pool,” which created different premium pools for active and retired employees and became effective on January 1, 2008. Retirees then faced significantly higher health insurance premiums.  A group of them brought a lawsuit against the County.

In federal court, the retirees – in essence – argued that the County’s past practice of “pooling” retirees with active employees created a “vested” right that the County could not now eliminate. The court quickly rejected the retirees’ argument, holding that:

“The law is clear: California courts have refused to find public entities contractually obligated to provide specified retirement benefits like those Plaintiff seeks in the absence of explicit legislative or statutory authority. This law also suggests that the requirement to provide lifetime health benefits does not establish a right to a specific method of rate-setting. Here, Plaintiff has failed to provide evidence of any explicit legislative or statutory authority requiring the County to continue providing retirees the pooling benefit in setting rates.”

The retirees then appealed to the Ninth Circuit Court of Appeal. Today, the Ninth Circuit certified to the California Supreme Court the following question:

"Whether, as a matter of California law, a California county and its employees can form an implied contract that confers vested rights to health benefits on retired county employees.

Defendant-Appellee in this case contends that decisions of the Supreme Court of California and the California Courts of Appeal support a conclusion that an implied contract to which a county is one party cannot confer such vested rights. Plaintiff-Appellant contends the contrary.

We understand that the Supreme Court of California may reformulate our question, and we agree to accept and follow the court’s decision. To aid the Supreme Court in deciding whether to accept the certification, we provide the following background."

Having a question certified to the California Supreme Court is fairly rare. More important, how the Court answers this question may have a tremendous impact on the public sector. Everyone knows that there is a huge unfunded liability for future retiree health benefits in the public sector. Many public employers have begun to address this unfunded liability to cutting back on benefits going forward. If the Court rules that employees and/or retirees have a “vested” right to accrue health benefits at a certain level even absent explicit legislature action, that will greatly weaken the ability of public agencies to scale back benefits.

Vallejo Repeals Binding Interest Arbitration

... But Not All the Votes Are Counted Yet ....


It looks like the voters in the City of Vallejo have repealed the City charter provision requiring binding interest arbitration to resolve collective bargaining disputes.  Although it was initially reported that Measure A had passed, the Times Herald was reporting as of this afternoon that thousands of mail-in and provisional ballots remain to be counted. (See article here.)  According to the Solano County Registrar's website, Measure A is currently ahead by 454 votes (7014 to 6065).
Assuming that the measure passes, it may be a harbinger of things to come.  In 1970, Vallejo became the first city or county in California to pass a local provision requiring binding interest arbitration.  Since then 23 other cities and counties have passed similar measures, the most recent (to my knowledge) being the City of Oroville in 2004.  Now, Vallejo has become the first city or county in California to repeal its binding interest arbitration requirement.  I believe many other local entities will try to follow Vallejo's lead by sponsoring similar measures in the November elections.  Whether those measures succeed or not remains to be seen.  Without a doubt, public employee unions will vehemently oppose such measures.  The unions in Vallejo opposed Measure A, but were greatly weakened financially and had lost a lot of public support by the bankruptcy proceedings involving the City.  Unions elsewhere will not face the same financial constraints.  However, will they face the same public backlash?  We'll have to wait to find out.

Carlsbad Imposes Reduced Pension Benefits on New Firefighters

There was an interesting story out of Carlsbad last week.  (See articles in the North County Times here and here.)  The Carlsbad City Council voted to impose a two-tiered retirement system on its firefighters after reaching impasse in bargaining.  Under the two-tiered retirement system, existing employees will continue to accrue benefits under the 3% at 50 formula that is widely used in public safety.  However, new firefighters will be under a 2% at 50 formula.  According to the article, the move was necessitated to keep Carlsbad in "good fiscal health." 

What is interesting is that the city is also planning a ballot initiative that would require voter approval to increase pensions in the future.  That will likely require additonal bargaining with the union under Seal Beach Police Officers Association v. City of Seal Beach (1984) 36 Cal.3d 591.  However, once bargaining has been completed (or impasse reached) there is nothing preventing the citizens of Carlsbad from adopting such an initiative.  Up in Northern California, Menlo Park is attempting a similar type of initiative.  (See article here.)  There are also several other cities considering similar measures.  It will be interesting to see which of these pass on election day. 

Public Safety Employer-Employee Cooperation Act of 2009: What California Public Employers Need to Know

According to some reports, the Senate may be voting on S. 3194 as early as this week as part of a larger appropriations bill. S. 3194 is titled the “Public Safety Employer-Employee Cooperation Act of 2009” and would establish collective bargaining for state and local firefighters, police officers, and paramedics throughout the nation. Currently, state and local employees are excluded from the National Labor Relations Act (NLRA). Under S. 3194, state and local public safety employees would come under the jurisdiction of the Federal Labor Relations Authority (FLRA). Upon enactment, the FLRA would have 180 days to determine, “whether a State substantially provides for the rights and responsibilities” provided in S. 3194. If the FLRA finds that a state already provides the rights and responsibilities set forth in S. 3194, then the state would be exempted from the requirements of the new law.

Pursuant to S. 3194, a state would have to provide substantially the following rights and responsibilities in order to be exempted from the law:

(1) Granting public safety officers the right to form and join a labor organization, which may exclude management employees, supervisory employees, and confidential employees, that is, or seeks to be, recognized as the exclusive bargaining representative of such employees.

(2) Requiring public safety employers to recognize the employees' labor organization (freely chosen by a majority of the employees), to agree to bargain with the labor organization, and to commit any agreements to writing in a contract or memorandum of understanding.

(3) Providing for the right to bargain over hours, wages, and terms and conditions of employment.

(4) Making available an interest impasse resolution mechanism, such as fact-finding, mediation, arbitration, or comparable procedures.

(5) Requiring enforcement of all rights, responsibilities, and protections provided by State law and enumerated in this section, and of any written contract or memorandum of understanding between a labor organization and a public safety employer, through--

(A) a State administrative agency, if the State so chooses; and

(B) at the election of an aggrieved party, the State courts.

In California, state law (EERA, HEERA, MMBA, and the Dills Act) already provides all of these rights to public safety employees with one possible exception. Under S. 1394, a state would have to make available “an interest impasse resolution mechanism, such as fact-finding, mediation, arbitration, or comparable procedures.” I'm not sure what this means.  The term “interest” when used with “arbitration” has a very distinct meaning in labor relations.  In California, there is a statute providing for interest arbitration for police and firefighters. (See CCP, §1299.) However, that statute has been found unconstitutional by the courts and never enforced. So would S. 3194 require interest arbitration? It’s not clear. What’s confusing is that S. 3194 also allows for “fact-finding” and “mediation.” However, there really is no such thing as “interest fact-finding” or “interest mediation” in the labor relations world.  So it's really not clear from the statute what meaning is attached to the term "interest."  The fear would be that because of the ambiguity, the FLRA might promulgate regulations interpreting S. 3194 as requiring some form of interest arbitration. If so, that would definitely be a change for California public employers.

Regardless of whether S. 3194 requires interest arbitration, it certainly does require some type of “impasse resolution mechanism.” That may be an issue under the MMBA which does not require any form of mediation or anything similar upon impasse. However, the vast majority of local agencies have mediation or fact-finding as part of their local rules. So this particular requirement won’t affect the vast majority of local employers, but may affect a few.

Supreme Court to Review State Furlough Case

California Attorneys, Administrative Law Judges and Hearing Officers in State Employment v. Schwarzenegger (2010) 182 Cal.App.4th 1424, review granted, 106 Cal.Rptr.3d 702.

The California Supreme Court has granted review in CASE v. Schwarzenegger. Pursuant to the order granting review, the issue before the Court is, “Does the Governor have the authority to furlough the state employees at issue in this case by executive order?” While this sounds like something that might have far-reaching effect throughout the state, the reality is that the decision will likely be much more limited. In CASE v. Schwarzenegger, the issue is whether the Governor’s furlough authority extends to employees of the State Compensation Insurance Fund (SCIF). Both the trial court and appellate court held that the Governor could not impose furloughs on SCIF employees because of Insurance Code section 11873, which provides:

“Notwithstanding any provision of the Government Code or any other provision of law, the positions funded by the State Compensation Insurance Fund are exempt from any hiring freezes and staff cutbacks otherwise required by law.”

If this case is decided solely based on Insurance Code section 11873—which is unique to SCIF—then it will have virtually no impact on other public employees.

However, what is interesting is the other part of the Court’s order granting review in which the Court states, “Review in this case may be undertaken in conjunction with possible consideration of similar issues in cases that are pending in the courts of appeal.”  So what does that mean?  It seems like the court is saying that it might extend the CASE v. Schwarzenegger case to include arguments raised in the state employee furlough cases pending in the lower courts.  Those cases directly raise the issue of whether the Governor has the authority to impose furloughs on state employees absent Legislative action.  Thus, CASE v. Schwarzenegger could have far-reaching implications if the Court considers those other cases.

The briefing schedule set by the Court is very quick.  The Governor's brief is due June 9, 2010 and the union's brief is due on June 29, 2010.  With this schedule, we could have oral argument by the Fall.