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.