Category Archives: E-Alert

COURT OF APPEAL FINDS NO “VESTED” RIGHT TO RETIREE HEALTH BENEFITS PROVIDED FOR IN FIXED LABOR AGREEMENT

Vallejo Police Officers’ Assn. v. City of Vallejo
(Cal. Court of Appeal, 1st Appellate Dist., Div. 2, Case No. A144987)

On August 22, 2017, the First Appellate District issued an important decision, upholding the City of Vallejo’s decision to reduce its contributions towards police officers’ future, retiree health insurance premiums. In so holding, the court recognized and applied the standards articulated in Retired Employees Assn. of Orange County, Inc. v. County of Orange (2011) 52 Cal.4th 1171 (REAOC), finding that a “vested” right to retiree health benefits may not be inferred from a labor agreement – that is fixed in duration – absent “a clear basis in the contract or convincing extrinsic evidence.”

BACKGROUND
In 2008, the City of Vallejo declared bankruptcy. In the midst of the bankruptcy proceedings, the City and the Vallejo Police Officers Association (VPOA) entered into an agreement for the period of 2009 to 2012 (the “2009 Agreement”) that modified the parties’ existing labor contract. Among other things, the 2009 Agreement provided that VPOA retirees would receive the same direct contribution as active employees and capped the City’s direct contribution toward active employees’ medical benefits at 100% of the Kaiser North rate.When the 2009 Agreement was set to expire, the City initiated negotiations with VPOA over a successor labor contract. The parties eventually reached impasse in negotiations – the main sticking point being VPOA’s insistence that any agreement expressly recognize a vested (i.e., irrevocable) right to a direct retiree medical benefit contribution equal to 100% of the Kaiser North rate.

After participating in state-mandated advisory factfinding, the City unilaterally implemented its final offer on retiree medical contributions, reducing its direct medical contribution to $300 per month for active VPOA members and retirees. Thereafter, VPOA filed a petition for writ of mandate with the Solano County Superior Court, claiming that the City engaged in bad faith bargaining in violation of the Meyers-Milias-Brown Act (MMBA) and unlawfully impaired its members’ vested right to receive retiree health benefits at the full Kaiser North rate. The superior court denied VPOA’s petition and entered a judgment in the City’s favor. VPOA appealed.

COURT OF APPEAL’S DECISION
A unanimous panel of the First Appellate District affirmed the superior court’s decision.
Initially, the First District addressed VPOA’s vested right claim. Applying the standards articulated in REAOC, the court recognized that obligations provided for in labor agreements ordinarily cease with the agreement’s expiration and a party asserting that contract rights survive the agreement’s expiration “must overcome the presumption” that the agreement does not create such rights. Turning to the agreement at issue, the court found that the “language of the 2009 Agreement does not explicitly confer a vested right to retiree medical benefits in the amount of the Kaiser rate, nor does it provide a clear basis for implying such vested right.”

The court also found that VPOA failed to present “convincing extrinsic evidence” of a vested right. During the superior court proceedings, VPOA submitted declarations on behalf of individuals who signed the 2009 Agreement as evidence of the parties’ intent to provide a vested right to fully-paid retiree health benefits. The court, however, held these declarations were irrelevant since under REAOC, only “the City’s intent determines the rights, express or implied, created by the 2009 Agreement” and, therefore, “[t]he subjective understanding of individuals, as well as understandings communicated outside the approval process, are not admissible as evidence of the City’s intent.”

Additionally, the court noted that during the negotiations preceding the 2009 Agreement, VPOA submitted a proposal that “could be read to provide a vested right to the full Kaiser premium.” The court found the City’s rejection of that proposal contradicted VPOA’s claim that in entering into the 2009 Agreement, the City intended to provide a vested right to a retiree medical benefit at the full Kaiser rate.

With regard to VPOA’s MMBA claim, the court found that substantial evidence supported the superior court’s finding that the City did not engage in surface bargaining, noting that “[t]he City stood firm on its position that it would contribute only $300 per month toward retiree medical premiums, but that does not in itself constitute surface bargaining.” Similarly, the court rejected VPOA’s claim that the City prematurely declared impasse, explaining that “[t]he extended period of negotiation, the parties’ exchanges of proposals and the two-month period between the last exchange of proposals and the declaration of impasse constitute substantial evidence that the City did not rush to impasse, but rather declared impasse in response to deadlock.”

IMPACT
Future retirement benefits for active employees – as opposed to employees who have already retired – generally constitute mandatory subjects of bargaining under the MMBA and similar labor relations statutes. As a result, many collective bargaining agreements contain provisions addressing future retirement benefits for active employees. While currently unpublished, the First District’s Vallejo decision is important because it recognizes that the presumption against vesting recognized in REAOC applies to MOUs and other labor agreements that are fixed in time and subject to specific durational limits. Under REAOC (and now Vallejo), the fact that a retirement benefit is provided in a MOU is not sufficient to establish vesting – there still must be clear legislative intent to grant the specific benefit beyond the term of the agreement.

A copy of the Vallejo decision is available here:
http://www.courts.ca.gov/opinions/nonpub/A144987.PDF

For more information contact Jon Holtzman (jholtzman@publiclawgroup.com, (415-678-3807)) or Steve Cikes (scikes@publiclawgroup.com, (415-678-3810)).

NEW LAW MANDATES UNION ACCESS TO NEW EMPLOYEE ORIENTATION

NEW LAW MANDATES UNION ACCESS TO NEW EMPLOYEE ORIENTATION

The 2017-18 state budget includes a new requirement that public employers allow union representatives to meet with employees during new employee orientation. The bill, AB 119, appears to be an attempt to insulate unions from the potential loss of agency or fair share fees should the U.S. Supreme Court declare those fees unconstitutional. And because it passed as part of the budget, the new law takes effect on July 1, 2017.
WHAT AB 119 REQUIRES

  • The public employer must provide the union with 10 days’ notice of a new employee orientation except when the need for orientation is urgent and unforeseeable;
  • Public employers must meet and confer with unions over the structure, time, and manner of union access to new employee orientation;
  • If no agreement is reached, the dispute will be resolved through compulsory interest arbitration;
  • The arbitrator’s decision will be final and binding;
  • The parties must reopen their contract or execute a side letter agreement to incorporate their union access agreement or an interest arbitration decision;
  • The employer must provide unions with the name, home address, personal email address, and personal cell phone number of all new employees within 30 days of hire; and
  • The employer must provide unions with the name, home address, personal email address, and personal cell phone number of all employees at least every 120 days.

 

POTENTIAL ISSUES IMPLEMENTING AB 119

  • If the employer doesn’t get all new employees in a room for an orientation meeting, what qualifies as “new employee orientation”? Although AB 119 provides a general definition, it seems this is something to be worked out in negotiations or interest arbitration, or through litigation.
  • What if employees don’t want to meet with the union? Employees have a right not to participate in union activity. But AB 119 doesn’t contain an opt-out provision to exercise that right so presumably uninterested employees will have to sit through the union’s pitch involuntarily.
  • What if employees ask the employer’s representative(s) during orientation about things the union said? Could the employer follow the union’s presentation with a presentation about what it means for them not to join the union? These situations likely fall under the rule that the employer can speak freely as long as the speech doesn’t make a threat or promise a benefit. But would PERB apply the rule the same in the orientation setting where the union has just spoken?
  • In interest arbitration under AB 119, a party cannot submit a proposal that was not its final proposal in negotiations. But AB 119 doesn’t require the parties to reach impasse before demanding interest arbitration. What if you haven’t made your final offer when the other party demands arbitration? Are you stuck with whatever your last offer was?
  • The arbitrator’s decision must issue within 10 days of the close of the hearing. It is almost impossible for an arbitrator to render a decision within the timelines specified for compulsory factfinding under the MMBA. Perhaps because this is a limited issue, 10 days is enough time for a decision. But expect the arbitrator to ask for more time.
  • AB 119 says the personal employee information that employers must give the unions is subject to privacy protections under the California Supreme Court’s County of Los Angeles decision. That decision allows employers and unions to negotiate procedures where employees can opt-out of having their personal information given to the union. Is this an option for the information that must be provided under these new bills?

Because the law is unclear on these issues, and potentially others, we recommend consulting with experienced labor counsel before initiating negotiations with your employee organizations over new employee orientations.

Supreme Court Refuses to Review Flores v. City of San Gabriel

The U.S. Supreme Court has denied the petition for writ of certiorari filed by the City of San Gabriel in Flores v. City of San Gabriel. The petition sought to reverse the Ninth Circuit’s ruling with respect to two issues: 1) the inclusion of cash paid to employees in lieu of health benefits contributions from the regular rate for purposes of calculating overtime under the Fair Labor Standards Act (FLSA), and 2) the standard for finding a “willful” violation of the FLSA, which increases the statute of limitations from two years to three years. As is customary, there was no explanation provided by the Court in denying the petition for writ of certiorari.

The denial of review means that the Ninth Circuit’s ruling remains binding on all employers in California. More discussion of the Ninth Circuit’s ruling can be found here. For more information contact Jon Holtzman (jholtzman@publiclawgroup.com, 415-678-3807), Art Hartinger (ahartinger@publiclawgroup.com,510-995-5805), or Kevin McLaughlin (kmclaughlin@publiclawgroup.com 510-995-5806).

Briefing on Petition for Writ of Certiorari Now Complete in Flores v. City of San Gabriel

On April 25, 2017, the City of San Gabriel filed its reply brief in support of its petition for writ of certiorari to the U.S. Supreme Court, in the case known as Flores v. City of San Gabriel.  Briefing on the petition is now complete.  It is anticipated that the petition will be considered at the Court’s May 11, 2017 conference, with a ruling on the petition or call for the views of the Solicitor General to follow shortly thereafter.  Art Hartinger, Jon Holtzman, and Kevin McLaughlin from Public Law Group are co-counsel representing the City in the Supreme Court proceedings.

The petition seeks to reverse the Ninth Circuit’s ruling with respect to two issues.  First, the City contends that cash paid to employees in lieu of health benefits contributions should be excluded from the regular rate for purposes of calculating overtime under the Fair Labor Standards Act (FLSA).  Second, the City contends that the Ninth Circuit’s standard for finding a “willful” violation of the FLSA, which increases the statute of limitations from two years to three years, fails to comply with Supreme Court precedent.

The City’s Petition for a Writ of Certiorari is available here. The City’s reply brief is available here.  The amici curiae brief filed by the International Municipal Lawyers Association, International Public Management Association for Human Resources, National Public Employer Labor Relations Association, National School Boards Association, California State Association of Counties, League of California Cities, and California Special Districts Association in support of the City’s petition is available here.  The amici curiae brief filed by the Chamber of Commerce of the United States of America and the National Federation of Independent Business in support of the City’s petition is available here.

For more information contact Jon Holtzman (jholtzman@publiclawgroup.com, (415-678-3807), Art Hartinger (ahartinger@publiclawgroup.com,510-995-5805), or Kevin McLaughlin (kmclaughlin@publiclawgroup.com 510-995-5806)