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

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.