Category Archives: E-Alert

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)

California Supreme Court Accepts Review of Second Case Holding: Public Employers May Make “Reasonable” Modifications to Vested Pension Benefits, Without Requiring a “Comparable” New Benefit

Cases To Be Discussed At State Bar 2017 Labor And Employment Public Sector Conference, Friday, April 21, 2017, 10:25-11:40 am, Claremont Resort, 44 Tunnel Road, Berkeley.

On April 12, 2017, the California Supreme Court accepted review of Cal Fire Local 2881 et al. v. California Public Employees’ Retirement System, et al, 7 Cal.App.5th 115 (2016).

This is the second case the Court has accepted for review that involves California’s “vested rights” doctrine. Last year, the Court accepted review of Marin Association of Public Employees v. Marin County Employees’ Retirement Association, 2 Cal.App.5th 674 (2016). Historically, some courts have invoked the vested rights doctrine to limit the ability of public employers to alter pension benefits for public employees, even when the benefits became financially unsustainable.

In the Marin case, the Court of Appeal, First Appellate District, Division Two, held that the decision by the Marin County Employees’ Retirement Association (MCERA) to prospectively eliminate pension benefits attributable to “stand by” and other time was “reasonable.” Contrary to plaintiffs’ contentions, the Court found that MCERA was not required to offer a “comparable” new benefit to employees.

In December 2016, in Cal Fire Local 2881, Division Three of the First Appellate District joined Division Two, and held, as an alternative holding, that the state had the power to eliminate the purchase of “air time” because the modification was “reasonable” and did not require the offer of a “comparable” benefit to employees.

The California Supreme Court may hear the Cal Fire case first, because the Court is holding the Marin case until the Court of Appeal decides a trio of other cases involving AB 197, the statute at issue in the Marin case.

These cases will be the topic of a panel discussion at the State Bar 2017 Labor and Employment Public Sector Conference, Friday, April 21, 2017, 1:25-11:40 am, Claremont Resort, 44 Tunnel Road, Berkeley.

Background – Purchase of “Air Time.”

Under Government Code section 20909, enacted in 2003, eligible public employees had the option to purchase at cost up to five years of service credit. Purchase of this service credit, called “air time,” enabled employees to increase their pensions.

As of 2013, the state legislature eliminated the option to purchase “air time” as part of the Public Employees’ Pension Reform Act of 2013 (PEPRA), designed to strengthen the state’s public pension system by eliminating pension “spiking.”

A number of unions sued, claiming that the elimination of the option to purchase “air time” violated their vested rights under the contracts clause of the California constitution. (Cal. Const., art. 1, section 9.)

The Court found no “clear” intention to create a vested right to “air time.”

 In Cal Fire Local 288, the Court of Appeal first applied the standards enunciated in Retired Employees Assn. of Orange County, Inc. v. County of Orange, 52 Cal.4th 1171, 1186, 1189, which held that plaintiffs carry the “heavy burden” of “clearly” proving that the legislature intended to grant a vested right.

 The Court of Appeal found that there was “nothing in either the text of the statute … or its legislative history” that unambiguously stated an intent to create a vested benefit. Rather the Court held that Section 20909, “does no more than permit an eligible member” to “elect” to make the additional contributions to purchase airtime. (Cal Fire at 126.) The Court declined “to add to this straightforward reading of this statutory phrase any promise by the Legislature not to modify or eliminate the option to purchase service credit” and stated that the legislature would have “used much clearer language if it had in fact harbored such intent.” (Id. at 127.)

The Court found a “reasonable” modification, with no requirement to provide a “comparable” new advantage.

 The Court of Appeal also held that, under Supreme Court standards, a public employer had the right to make “reasonable” modifications to an employee’s pension rights. Quoting Betts v. Board of Administration, 21 Cal.3d 859, 864 (1978), the Court stated that: “To be sustained as reasonable, alternations of employees’ pension rights must bear some material relation to the theory of a pension system and its successful operation, and changes in a pension plan which result in disadvantage to employees should be accompanied by comparable new advantages.”

Importantly, the Court agreed with Division Two of the First Appellate Division in rejecting the contention that the state was required to prove a “comparable advantage” to offset the loss of the benefit: “We agree with this conclusion reached by our colleagues, and as such, reject plaintiffs’ claim that, absent proof that CalPERS members were granted a comparable advantage, the Legislature’s elimination of the airtime service credit must be deemed constitutionally barred.” (Cal. Fire at 131)

The Court concluded with the affirmation that public employees are entitled “only to a ‘reasonable’ pension, not one providing fixed or definite benefits immune from modification or elimination by the governing body.” (Id. at 132.)

For more information, please contact Linda Ross (lross@publiclawgroup.com, 510-995-5807) or Jon Holtzman (jholtzman@publiclawgroup.com, 415-678-3807).

COURT OF APPEAL REJECTS PERB’S OVERRIDE OF CITIZENS’ PENSION REFORM BALLOT INITIATIVE

 City of San Diego v. Public Employment Relations Board
(Cal. Court of Appeal, 4th Appellate Dist., Div. 1, Case No. D069630, __ Cal. App. 5th __. Apr. 11, 2017)

In a long-anticipated decision, the Fourth District Court of Appeal, Division One, ruled that San Diego Mayor Jerry Sanders’ support of a citizens’ ballot initiative to reform the City’s pension system did not transform the initiative into a City Council-initiated measure subject to the meet and confer requirements of the Meyers-Milias-Brown Act (MMBA). The court’s decision overturned a controversial 2015 decision of the Public Employment Relations Board (PERB), which found that Sanders’ position as mayor and his use of City resources and staff in support of the citizens’ initiative were sufficient to trigger the City’s meet and confer obligation. The court’s decision is remarkable on many levels, including its refusal to defer to PERB’s presumed expertise and its resounding rejection of virtually every aspect of PERB’s analysis. Equally important, it reaffirms the constitutional authority of voters to propose and adopt measures to maintain the public fisc, a fundamental democratic process that PERB’s recent decisions have seriously undermined.


FACTS AND PROCEDURAL BACKGROUND

In November 2010, Mayor Sanders publicly announced that he would pursue a ballot measure to amend the San Diego city charter to provide 401(k)-style retirement benefits instead of defined benefit pensions to newly hired employees. In January 2011, a committee was formed to raise money in support of the measure. Three months later, citizen proponents of the measure, called the “Citizens Pension Reform Initiative” or “CPRI,” started gathering signatures to place the measure on the ballot. While signatures were being gathered, Sanders touted the measure in public speeches and interviews.

In July 2011, labor unions representing City employees wrote to Sanders demanding that the City meet and confer before placing the CPRI on the ballot. The City declined the demand, replying that if the proponents obtained enough valid signatures, state law required the City Council to place the measure on the ballot and thus there was no policy decision over which to meet and confer.

In November 2011, the County Registrar of Voters certified that the initiative petition contained sufficient valid signatures. The following month the San Diego City Council passed a resolution placing the measure on the ballot for the June 2012 primary election.

In January 2012, the unions filed unfair practice charges with PERB alleging that the City violated its duty to meet and confer before placing the CPRI on the ballot. Less than a month later, PERB issued a complaint and set an expedited hearing on the charges. PERB also unsuccessfully sought an injunction to keep the initiative off the ballot. In June 2012, a majority of the electorate voted in favor of the CPRI.

After a hearing, a PERB administrative law judge (ALJ) ruled that the City violated the MMBA. According to the ALJ, because Sanders was acting as an agent of the City when he supported the CPRI, the City had an obligation to meet and confer over the initiative. On appeal, PERB affirmed the ALJ’s decision and ordered “make whole” relief that essentially required the City to ignore the city charter provisions that resulted from the voters’ approval of the CPRI.


THE COURT OF APPEAL’S DECISION

The court of appeal “annulled” PERB’s decision, finding that the City had no obligation to meet and confer over the CPRI. First, the court addressed an issue that the California Supreme Court left open in People ex rel. Seal Beach Police Officers Assn. v. City of Seal Beach, 36 Cal.3d 591 (1984) – whether the MMBA’s meet and confer requirement applies to citizens’ initiatives that affect city employees’ terms and conditions of employment. Relying on a long line of cases holding that procedural requirements which apply when a local governing body acts do not apply to citizens’ initiatives on the same subject, and language in the MMBA (Gov. Code §§ 3504.5(a), 3505) imposing the meet and confer obligation on the “governing body,” the court held that a city need not meet and confer over a citizen’s initiative that affects terms and conditions of employment for city employees.

The court next turned to whether the CPRI was truly a citizens’ initiative or, as PERB had found, a city council-initiated measure. If the record had shown (as suggested by the unions) that the CPRI was a sham initiated by proponents acting as “straw men” for the mayor or the City, the legitimacy of the initiative would have been questionable. However, the court noted that PERB did not reach this conclusion because there was no evidence to support this theory.

As it turned out, the lack of evidence of a sham was dispositive. The court rejected all four of PERB’s legal theories, each of which sought to support PERB’s conclusion that the mayor’s participation was attributable to the city council. The court found the mayor’s status as the City’s designated labor negotiator was not enough to transform his conduct in support of the CPRI into conduct of the City. The court also found no evidence that the city council authorized Sanders to support the CPRI, that the city council ever held out to city employees or the public that Sanders was supporting the initiative on the council’s behalf, that Sanders believed he was supporting the initiative on behalf of the council, or that the city council ratified Sanders’ conduct by failing to stop him from supporting the initiative. The court concluded that Sanders was acting as a private citizen, not as an agent of the city council, when he publicly supported the CPRI, and thus no meet and confer obligation arose. Additionally, the court held that Sanders’ conduct was consistent with his right as a citizen to engage in political activities and his right as an elected official “to enter the field of political controversy.”

Importantly, the court’s decision was also based in part on the limited power and special duty that elected officials have in connection with citizen initiatives. The court emphasized that, under the Elections Code, the city council was required to place the initiative on the ballot without alteration, and was not legally authorized to do otherwise. Thus, there was no policy decision over which the City could have met and conferred.


WHY THIS DECISION IS IMPORTANT

Courts need not defer to PERB on non-labor issues

One of the most important aspects of this decision is the court’s rejection of PERB’s mantra that courts must always honor PERB’s legal analysis unless it is “clearly erroneous.” The court did agree this is the appropriate standard when PERB is interpreting and applying the labor relations statutes under its jurisdiction; but it emphasized that PERB’s interpretation or application of other statutes or common law principles is entitled to no deference. Thus, the court reviewed de novo PERB’s legal conclusions, both on municipal/election law issues, and on the various common law “agency” rules that PERB incorrectly applied in determining that the mayor’s conduct was attributable to the city council.

Citizens’ initiatives are not subject to meet and confer requirements

The court’s holding that citizens’ initiatives are not subject to the MMBA’s meet and confer requirements is important and welcome because it resolves an issue that has been open for over 30 years. Yet this holding is not surprising, as the MMBA clearly imposes the meet and confer obligation on a local agency’s “governing body,” not on the voters within the agency’s jurisdiction.

Public officials’ private support of a citizens’ initiative does not automatically implicate Seal Beach

PERB’s underlying decision rested on the facts that Sanders was the mayor and that some of his staff participated in efforts supporting the initiative on their own time. The court concluded this was not enough to make Sanders an agent of the city’s “governing body,” the city council. This decision (unless reversed by the California Supreme Court) stands for the proposition that a public official’s private support of a citizen initiative – without more – does not implicate Seal Beach meet and confer requirements. However, public managers who wish to openly advocate for such initiatives should seek the advice of their appointed legal counsel to assure that their activities are consistent with legal requirements.

This decision cannot be relied on until and unless it is final – and it is very likely that PERB and the unions will seek California Supreme Court review of this decision. If upheld, the decision should rein in PERB’s tendency to overreach in areas beyond its expertise, including most importantly its incursion into local electoral processes.
For more information, contact Erich Shiners or Jeff Sloan.