Mendocino Attorneys Not Entitled To 1% Raise Under Former MOU

[UPDATE (5/20/10): Just received word that MCPAA has filed an appeal of this decision, so it's not yet final.]

County of Mendocino (2010) PERB Decision No. 2104-M (Issued on 4/21/10)
Facts:

In 2006, the Mendocino County Public Attorneys Association (MCPAA) successfully petitioned to remove several attorney classifications from bargaining units represented by two other unions, the Mendocino County Management Employees Association (MCMEA) and Service Employees International Union (SEIU). Under the MCMEA and SEIU contracts, the attorneys would have gotten a 1% salary increase effective September 2006 if they had remained in those bargaining units. The County’s position was that the attorneys were no longer entitled to the 1% salary increase since they were no longer part of the bargaining units represented by MCMEA and SEIU; and because the MCPAA had not yet negotiated a similar raise for its new unit.

However, in September 2006, all the attorney classifications nevertheless received a 1% salary increase. The County claimed that the increases were given by mistake and stopped them after 3 months. The County also took steps to recoup the mistakenly granted increases but stopped those efforts in response to objections from the MCPAA. MCPAA then brought this unfair practice charge alleging that the County committed an unlawful unilateral change by refusing to give attorneys the 1% salary increase. MCPAA also argued that the County’s efforts to recoup the money constituted a separate unlawful unilateral change.

Decision:

With respect to the denial of the 1% salary increase, PERB affirmed the ALJ’s proposed decision dismissing that charge. PERB held that since the attorneys were no longer in the bargaining units represented by MCMEA or SEIU, they were not entitled to the raises negotiated by MCMEA or SEIU. Specifically, the Board affirmed the ALJ’s finding that:

“Not inconsistent with the same line of authority, the NLRB has found that absent other proof [of] interference with employee free choice an employer is entitled to withhold benefits that employees would have obtained had they remained unorganized so long as the employer engages in good faith bargaining. (Chevron Oil Co. (1970) 182 NLRB 445, 449, citing Shell Oil Co. (1948) 77 NLRB 1306; McGraw-Edison Co. (1968) 172 NLRB 1604, 1609-1610.)”

With respect to the County’s attempted recoupment of the mistakenly given increases, PERB also affirmed the ALJ’s dismissal of that charge. In the proposed decision, the ALJ held that:

“Although the complaint alleges that the recoupment action constituted another aspect of the unilateral change, I find no violation because the County in reasonably short order desisted from collection of the overpaid compensation. The evidence does not demonstrate a change of generalized effect or continuing impact (i.e., a conscious creation of a new policy). [citations omitted]”

Comments:

1. This case is instructive because it involves an issue that arises fairly often in the public sector, but not too often with any single employer: what happens when there is a change in representation? Here, PERB affirmed that employees must take the bad along with the good when it comes to exercising free choice in representation. In this case, because the attorneys chose to create their own bargaining unit with a new exclusive representative, they weren't entitled to the salary increases due under their prior contract. That makes sense but its something employees, and employers, often don't realize.
2. My only other comment is on the issue of the County’s attempted recoupment of the money. The ALJ dismissed that charge—and the Board affirmed—because the County never actually recouped the money so there wasn’t any “unilateral change.” However, given that PERB had already held that the attorneys were not entitled to the money, and especially since everyone agreed that the raises were given by mistake, why would it have been a unilateral change if the County actually recouped the money? Seems to me the County would have been within its right to recoup the money; and arguably had a duty to the public to do so. So that part of the decision doesn’t make sense to me. However, one can argue that since PERB found no change, it didn’t have to reach the issue of whether the subject matter (ie recoupment of mistakenly given money) was within the scope of representation. That’s true; and that’s how I think that portion of the case should be interpreted.

PERB: It's Interference To Offer Better Benefits to Non-Union Members

State of California (Department of Personnel Administration) (2010) PERB Decision No. 2106-S (Issued on 4/30/10)

Facts:

The contract between the State of California (State) and the California Correctional Peace Officer Association (CCPOA) provided that dental and vision benefits would be provided to bargaining unit members through the CCPOA Benefit Trust Fund, an independent corporation established by CCPOA.  Through the CCPOA Benefit Trust Fund, an employee with two dependents would pay $41.80 per month for the dental benefit.

In October 2007, CCPOA informed the State that non-members (ie fair share fee payers) would no longer be provided dental and vision benefits through the CCPOA Benefit Trust Fund. As a result, the State informed the fair share fee payers that they would automatically be enrolled in the state-sponsored dental and vision plans. Under the state-sponsored dental plan, an employee with two dependents would pay $30.94 per month.  CCPOA then filed an unfair practice charge alleging both discrimination and interference. CCPOA asserted that the State unlawfully offered a lower cost dental benefit not provided to CCPOA members.

Decision:

In its decision, the Board affirmed the dismissal of the discrimination charge based upon its finding that there was no adverse action. However, the Board reversed the dismissal of the interference charge. The Board stated:

“[T]he lower cost dental benefit was not offered to union members. Providing benefits at a lower cost to non-union members, while excluding union members from this option, tends to result in at least slight harm to employees who choose to exercise the right to join a union. A reduced benefit cost available only to non-union members may influence an employee’s decision to join the union. Accordingly, the charge states a prima facie case of interference.”

The Board noted that because the only issue was whether CCPOA stated a prima facie case, the issue of whether the State’s actions were justified due to operational necessity and/or circumstances beyond the employer’s control would be addressed at a formal hearing.

Member McKeag dissented from the majority opinion. In her dissent, she stated:

"In the instant case, CCPOA members continued to enjoy the exact same dental benefits after the implementation of the State’s last best and final offer. When CCPOA Benefit Trust Fund refused to provide dental benefits to the former CCPOA agency fee payers, the State was faced with a choice to either offer these employees the dental benefit currently offered to non-CCPOA members or to provide no dental benefit. Clearly, the latter option was untenable and would have likely resulted in litigation. Therefore, the State had only one legitimate option, benefits available to other non-Bargaining Unit 6 members simply does not constitute a harm in this instance.”

Comments:

1. My initial reaction was that CCPOA had a lot of nerve bringing this case. This whole situation was started when CCPOA kicked its fair share fee payers out of the CCPOA Benefit Trust Fund. CCPOA had a right to do this—and maybe it even had a good reason—but clearly CCPOA itself was “discriminating” against non-union members. For CCPOA to then bring a charge against the State for “discriminating” against union members is a classic case of the pot calling the kettle black.
2. With respect to the interference charge, it’s a close call if you’re solely focused on the prima facie case. Is it interference for an employer to offer non-union members a better benefit than union members? Sure, by itself that’s a problem. However, here the State had to provide the fair share fee payers a dental plan. Could the State have also offered its plan to union members? We need more facts but that likely would just have brought a separate unfair practice charge by CCPOA.
3. Regardless, it seems clear to me that the State is going to prevail at hearing based on its legitimate business reasons. I’m assuming that the dental-plan the State offered to the fair share fee payers was the same plan offered to other State employees. If so, there’s nothing the State can really do if it just happens that its own plan is cheaper than CCPOA’s.
4. The dissent would have short-circuited the formal hearing by just ruling on the State’s legitimate business reasons at the charge review stage. As a management attorney, I certainly see the benefit of taking that approach. There are a lot of cases where I would like the Board agent to consider my client’s legitimate business reasons before deciding whether to issue a complaint. However, as it stands, the rule is still that a respondent’s affirmative defenses are to be considered at the formal hearing state, and not at the charge review stage.

Oral Argument Held in San Jose Case

City of San Jose v. Operating Engineers Local Union No. 3 (Case No. S162647)

Oral argument was held in the San Jose case on May 5, 2010.  The issue in this case is: 

Does the Public Employment Relations Board have the exclusive initial jurisdiction to determine whether certain "essential" public employees covered by Meyers-Milias-Brown Act (Gov. Code, sections 3500 3511) have the right to strike, or does that jurisdiction rest with the superior court?

Practically, the dispute is over whether employers must initially go to PERB when seeking injunctive relief against an essential employee strike or whether the employer can go directly to court.  Employers have taken the position that they should be allowed to proceed directly to court, while the unions have argued that PERB has initial jurisdiction.

The case is incredibly important to those of us who practice public sector labor law.  However, the case is apparently a sleeper for the Supreme Court.  I heard from those in attendance that the justices only asked two substantive questions.  And not very probing ones at that.  One question was from Justice Moreno who asked whether the doctrine of exhaustion of administrative remedies has an emergency exception.  Justice Chin asked whether strikes are "arguably" potential unfair practices.  Those in attendance, both from the union and management, told me that the questions didn't really reveal how any of the justices were leaning.

So we'll have to wait.  A decision is expected in 90 days.

One final note - a congratulations to both Ari Krantz from Leonard Carder and Rob Fabela from the City of San Jose for jobs well done in arguing before the Court!

AFSCME's Leafletting Was Not an Unfair Practice

AFSCME, Local 3299 (2010) PERB Decision No. 2105-H (Issued on 4/21/10)

Facts:

This case involved an unfair practice charge filed by the University of California (UC) against AFSCME. During bargaining, AFSCME began leafleting in front of several medical centers at various UC campuses. The expired contract between UC and AFSCME required the union to abide by specific access guidelines promulgated at each campus. Those guidelines set forth exactly where AFSCME could engage in leafleting and where it couldn’t (for example, because of patient access issues). During the leafleting at issue, it appears undisputed that AFSCME violated the access guidelines by leafleting in prohibited areas.  According to the PERB decision, UC officials asked the AFSCME members engaged in the leafleting to move, which they did.

AFSCME then went to court to seek a temporary restraining order (TRO) to enjoin UC from prohibiting the leafletting. The court granted the TRO but later denied a preliminary injunction on the ground that PERB had initial jurisdiction.

In its decision, PERB assumed that AFSCME was in violation of the contract when it engaged in leafleting in areas where the guidelines prohibited such conduct. However, because AFSCME agreed to move when confronted by UC officials, PERB held that AFSCME’s conduct was just an isolated breach of the contract, and not a repudiation of the contract that would constitute an unlawful unilateral change.

Comments:

1. First, I thought it was ironic that the union went straight to court to seek injunctive relief instead of going to PERB. As many of you know, the issue of whether PERB has exclusive jurisdiction over essential employee strikes is before the California Supreme Court in City of San Jose v. Operating Engineers Local Union No. 3 (Case No. S162647). (In fact, oral argument in San Jose occurred on May 5, 2010—but more on that tomorrow.) The unions have all lined-up solidly in favor of PERB having jurisdiction so that employers cannot go directly to court for injunctive relief.  So it’s ironic that the union here went straight to court.
2. With respect to the merits of this case, the key holding was the Board’s finding that because the union stopped the “breach” (ie stopped leafletting) when asked by UC, it was just an isolated contract violation and not a complete repudiation of the contract.  Because isolated breaches do not constitute an unlawful unilateral change, PERB affirmed the dismissal of the charge.  By itself, I don’t have a problem with this holding.
3. I’ve argued before that there should be some type of “safe harbor” provision whereby a party can correct a breach and not be guilty of an unfair practice. For example, in County of Sacramento (2008) PERB Decision No. 1943-M, the Board found a violation even though the County rescinded the change before it ever took effect. My position was that given the rescission, PERB should not have found that the County committed an unfair practice.
4. Indeed, it’s worth taking a look at what PERB said in County of Sacramento: 
   

   “The County argues that by rescinding the ordinance, there is no longer any policy change even arguably subject to meet and confer requirements, and the issue is now moot. In Amador Valley Joint Union High School District (1978) PERB Decision No. 74, however, the Board held that the later reversal or rescission of a unilateral action or subsequent negotiation on the subject of a unilateral action does not excuse a violation. [Citation.] … The fact that the County reversed its position and restored the status quo before the new policy went into effect, does not cure the unlawful unilateral change.” 

5. It’s difficult for me to square what PERB said in County of Sacramento with what happened in this case.  I believe the two cases are inconsistent.  Here, there was an undisputed breach. It was actually worse than in County of Sacramento since AFSCME actually did engage in leafleting in areas where it was prohibited. In contrast, in County of Sacramento the County rescinded the change before it ever took effect. Yet PERB found a violation in County of Sacramento but not one here.  Nevertheless, if I had to choose which holding I like better, it's the one in this case.  Even though the union prevailed in this case, in the future this will benefit employers more than unions since the vast majority of unfair practice charges alleging unlawful unilateral changes are directed against employers.
6. Lastly, in the interest of full disclosure, I must note that I currently represent the University of California in several PERB cases; although I was not involved in this one. As for the remainder of this case, I do think that there was sufficient evidence that AFSCME improperly disrupted university operations so that a complaint should have been issued. However, that was not the main focus of the Board’s decision so I didn’t delve into that aspect of the case.

AB 1744: Public Employees' Bill of Rights Act

AB 1744 (Portantino)—the “Public Employees' Bill of Rights Act”—recently passed the Assembly Committee on Public Employees, Retirement and Social Security and is now headed to Appropriations. AB 1744 is a “gut and amend” that started out as a bill on enforcing monetary judgments. As currently written, the bill sets forth a “Bill of Rights” that applies only to state civil service employees. Most of the bill just reaffirms existing law. However, there is one significant change. Currently, the statute of limitations for taking disciplinary action against a state employee is 3 years from the date of the misconduct. (Gov. Code 19635.) AB 1744 would amend the limitations period to be 1 year.

I have several major objections to this change. First, the change is purportedly modeled after the Public Safety Officers Procedural Bill of Rights (PSOBOR) (Gov. Code 3300 et. seq.) and the Firefighters Procedural Bill of Rights Act (FPBOR) (Gov. Code 3250 et. seq.) It’s true that both the PSOBOR and FPBOR have a 1-year limitations period for bringing disciplinary actions. However, those statutes differ significantly from the proposed language in AB 1744. For example, the 1-year limitations period under both the PSOBOR and FPBOR is triggered by the date of discovery of the underlying misconduct, not that date the misconduct actually occurred. In contrast, under AB 1744 the limitations period is based on when the misconduct actually occurred.  The difference is significant since misconduct is not always discovered right away, even with due diligence.  Indeed, that's the reason why the current limitations period is 3 years.  If the Legislature wants to shorten the limitations period to 1 year, it should also change the triggering event to be discovery of the misconduct, instead of when the conduct actually occurred.

Second, the current 3-year limitations period under Government Code section 19635 expressly recognizes the problem of late discovery by providing that disciplinary actions, “based on fraud, embezzlement, or the falsification of records shall be valid, if notice of the adverse action is served within three years after the discovery of the fraud, embezzlement, or falsification.” (Emphasis added.) AB 1744 completely erases this sentence from Government Code section 19635. Thus, under AB 1744, an employee can commit fraud against the state, and as long as he or she hides it for more than a year, no discipline can be brought.

Third, AB 1744 does not provide for any “tolling” of the 1-year limitations period. Generally, I do agree that 1 year from discovery should be sufficient time to investigate and bring a disciplinary action. However, there are certain situations where it may not be enough time. This primarily occurs where the misconduct has also triggered a criminal investigation. In that situation, the employer often has to wait to take any administrative action pending completion of the criminal proceedings. Both the PSOBOR and FPBOR provide that the 1-year limitations period is “tolled” in the event of any criminal proceeding. AB 1744 does not provide this same protection.

I can certainly understand an employee’s frustration with being served a notice of discipline for misconduct that occurred 3 years earlier. From a human resources perspective, discipline is most effective if given close in time to the misconduct or performance problem. So as I mentioned above, I generally don’t have a problem with a 1-year limitations period. However, I do have a problem with how AB 1744 is written since it is based on when the conduct actually occurred instead of discovery, and doesn’t provide for tolling where necessary.

AB 1744 is sponsored by various state employee unions, such as the Union of American Physicians and Dentists, Service Employees International Union Local 1000, and American Federation of State, County and Municipal Employees. As of this date, there is no recorded opposition.

AB 155 Bankruptcy Bill is Back

AB 155 has gotten a lot of press lately. The measure recently passed the Senate Local Government Committee where it had been stalled for over a year. As written, AB 155 would require a local agency to obtain permission from the California Debt and Investment Advisory Commission (CDIAC) before filing for bankruptcy. The obvious effect of AB 155 would be to make it much more difficult for local agencies, like the City of Vallejo, to declare bankruptcy. I first commented on AB 155 in April 2009 (click here for the post), when I called it an overreaction.

However, now that AB 155 has passed its first hurdle, it's worth taking a look at the merits of the bill.  Under AB 155, a public entity must demonstrate to the CDIAC several factors, including: 1) that it cannot pay its debts, 2) that it has exhausted all other options; and 3) that it has a plan for restoring itself to fiscal health. However, those are all factors that are already considered by the bankruptcy court in any bankruptcy filing.  Is there any reason to believe that the CDIAC, which has no experience dealing with Chapter 9 bankruptcies, can evaluate these factors better than a bankruptcy court? I think not.  To the contrary, because the CDIAC is comprised of 7-9 elected officials, politics will invariably come into play in any decision of the CDIAC.

That begs the question, why is AB 155 needed?  In the Senate analysis, the primary justification for AB 155 is the idea that a local bankruptcy has statewide ramifications, and thus, the state should regulate a local agency's ability to seek bankruptcy protection.  As stated in the Senate analysis, "…local and state finances are inextricably linked, the state has a direct interest in the fiscal health of its local governments. A municipal bankruptcy can have statewide repercussions, including higher borrowing costs for other local entities and the state.”  Well, that certainly seems plausible.  However, I wonder if that has been the case.  For example, has the City of Vallejo's bankruptcy filing adversely affected its neighbors?  I'm sure Vallejo's bankruptcy caused all the various bond rating agencies to take a closer look at the finances of California local agencies.  However, apart from that stricter scrutiny I'm not sure that Vallejo's bankruptcy has had the statewide ramifications prophesied by AB 155.

The reality is that AB 155 remains a special interest bill designed to help unions at the bargaining table during these tough economic times.  As I mentioned last year, the possibility of more local agencies actually filing for bankruptcy is fairly remote. However, that hasn’t stopped many local agencies from threatening to “do a Vallejo.”  And that’s really what is driving this bill.  The unions want to prevent cities and counties from using the threat of bankruptcy to leverage concessions.  While the unions' position may be understandable, it doesn't make this a good bill—which it isn't.

PERB: San Diego City Attorney Improperly Bypassed Union

City of San Diego (Office of the City Attorney) (2010) PERB Dec. No. 2103-M (Issued on 3/26/10)

Facts:

This case arises from the pension funding crisis in San Diego. Very briefly, the crisis resulted from a series of poor decisions by City officials and trustees of the San Diego City Employees’ Retirement System (SDCERS) in the 1990’s. The poor decisions included twice delaying the City’s contributions to the retirement system, increasing future benefits for City employees, and underpricing employee purchases of retirement service credits. The net effect of these decisions was to grossly underfund the retirement system. As a result of the pension funding crisis, state and federal officials initiated civil and criminal investigations into the actions of public officials and others. State and federal prosecutors ultimately filed criminal charges against some of the SDCERS trustees, including the Local 145 president.

In 2004, Michael Aguirre (Aguirre) was elected the City Attorney on a campaign promising to clean up the financial mess facing the City. As part of that vow, Aguirre took aim at the underpricing of retirement credits by SDCERS. Specifically, under the union contract with Local 145, employees were allowed to purchase up to five years of retirement service credit at cost. However, in calculating the price for service credits, SDCERS staff grossly underestimated the true cost of the credits. Aguirre estimated it was a $147 million mistake. After he took office, Aguirre filed a civil action in an attempt to reverse the effects of the underpricing of the service credits. In addition, Aguirre issued a press release which gave rise to this unfair practice charge. The press release Aguirre issued directed employees to a form on the internet that they could submit to voluntarily rescind the prior purchase of service credits. Local 145 argued, among other allegations, that Aguirre’s actions constituted “direct dealing” with employees.

Decision:

While PERB dismissed the other allegations, the Board found that Aguirre’s press release constituted an attempt to bargain directly with employees, and was thus an unfair practice. In its decision, PERB held:

“This action goes beyond correcting the price shortfall and disregards the MOU language that expressly authorizes employee purchases of service credit at a price set by the retirement system. By soliciting employees to rescind their purchase of service credits, made in accordance with the MOU, the City has gone directly to the employees to obtain their waiver of a benefit negotiated by Local 145, based on the City’s subsequent determination that the credits were underpriced to the detriment of the City. Consequently, the city attorney’s direct request to employees to rescind service credit purchases, constituted bypass of the exclusive representative in violation of the MMBA.”

Comments:

1. This decision drew a dissent from member Dowdin. It was her first dissent as a Board member and only the 3rd dissent in a decision this fiscal year. (Both the other dissents were by member Neuwald. See PERB Decision Nos. 2058 and 2094.) Dowdin argued that merely informing employees of the rescission option did not interfere with the role of the exclusive representative since Aguirre’s goal was not to change the negotiated contract, but to correct a mistake.
2. I agree. Take, for example, a situation where the contract provides employees with 10 hours of vacation a month. By mistake, an employee receives 30 hours one month. Does the employer have to bargain with the union before it can correct the mistake? I think not. (Arguably, how the time is taken back may be negotiable as an “effect” but the decision itself, in my opinion, is not). In this example, the employer is not changing the terms and conditions of employment; namely, an employee’s entitlement to 10 hours of vacation a month. The employer is merely insisting on that condition by correcting a mistake.
3. In addition, I thought the majority too easily dismissed Aguirre’s argument that he was acting in his capacity as the City Attorney as opposed to acting in the role of the employer. As an illustration, let’s say in a prosecution for workers’ compensation fraud a District Attorney’s Office seeks restitution from the defendant. Let’s say the defendant happens to be an employee of the county. Does that fact mean that the DA must bargain with the union during this criminal proceeding in order to ask for the money back? Again, I think not. In this example, the DA is acting in his official capacity as opposed to an employer for purposes of collective bargaining. Granted, the situation in this case is slightly different, since this was not a criminal proceeding and Aguirre's role as City Attorney versus employer is much more blurred.  However, I thought the argument that Aguirre was acting in his capacity to enforce city laws was persuasive. Certainly, as I read the facts, it was not Aguirre's intent to bargain with employees in order to change a contractual provision. He was merely attempting to correct a mistake; a mistake that appeared to be undisputed.
4. Given how much litigation has already occurred in San Diego on this issue, I wouldn’t be surprised if this case is appealed. So it's not over yet.