County of San Luis Obispo v. San Luis Obispo Government Attorneys’ Union, et al.
(PERB Decision No. 2427-M; Case Nos. LA-CO-123-M & 124-M)
On June 3, 2015, the Public Employment Relations Board issued a decision finding that two employee organizations representing attorneys employed by the County of San Luis Obispo violated the Meyers Milias Brown Act (MMBA) when they refused to negotiate over the County’s proposal to evenly split any future increases in pension costs. In so holding, PERB rejected the Unions’ claim that the County’s proposal impermissibly sought to impair their members’ “vested” rights and thus was not a proper subject of collective bargaining.
County’s Pension System
Unlike the vast majority of California counties, San Luis Obispo does not contract with CalPERS, nor does it have a pension system under the “1937 Act.” Rather, since 1958, the County has maintained an independent system (the “San Luis Obispo County Pension Trust”) pursuant to Government Code section 53215 et seq. The Trust is governed by a set of by-laws and retirement plan and is overseen by a seven-member Board of Trustees.
Benefits under the Trust are funded primarily through a combination of County and employee contributions. Unlike other public employment retirement systems, the Trust’s governing documents do not contain a fixed formula for determining employee contributions. Rather, employee contributions are based on “normal contribution rates,” which the Board of Supervisors adopts on an annual or biennial basis pursuant to “recommendation[s]” by the Board of Trustees and its actuary.
Origins of Pension Dispute
The County had historically paid for increases in pension costs, by absorbing them as increases in the County appropriation rate. However, following the downturn in the economy in 2007, the County reached out to its employee organizations in an effort to have employees share some of the responsibility for the resulting increase in pension costs. Although the County was able to reach agreement with most of its employee organizations on a system of pension cost sharing, the Deputy County Counsel Association (DCCA) refused to negotiate with the County over the subject, claiming that under the retirement plan, any increases in employee contribution rates had to be specifically recommended by the Board of Trustees’ actuary and thus the County had no authority to negotiate over and/or impose any such increases.
After over a year and a half of unsuccessful negotiations with DCCA, the County declared impasse and thereafter unilaterally imposed increases on DCCA members’ pension contribution rates. The County also imposed an identical increase on members of the San Luis Obispo Government Attorneys’ Union (SLOGAU) pursuant to a “me too” provision in SLOGAU’s memorandum of understanding with the County.
In response, DCCA and SLOGAU filed a lawsuit against the County in superior court, asserting that the County’s action violated their members’ “vested contractual rights” under the retirement plan. That action is still pending.
Pension Dispute Continues, Resulting in County Filing Unfair Practice Charges with PERB
The County, DCCA and SLOGAU revisited the pension cost-sharing issue in their 2010 successor MOU negotiations. During those negotiations, the County proposed that the parties agree to split, 50/50, any future increases in pension costs (with employee contributions not to exceed the normal cost of the basic pension benefit). The Unions refused to bargain over the proposal, once again claiming that the proposal, if agreed to, would impair their members’ vested rights.
Rather than sit passively by, the County took a proactive approach and filed unfair practice charges with PERB, asserting that the Unions’ refusals to bargain violated the MMBA. In their answers to PERB’s complaints, the Unions admitted that they had refused to negotiate over the County’s pension cost-sharing proposal, but asserted that they were under no obligation to do so since the proposal, if agreed to, would impair their members’ vested rights and hence was not a mandatory subject of bargaining.
The parties then participated in a three-day evidentiary hearing before a PERB Administrative Law Judge. After the ALJ issued a proposed decision in favor of the County, the Unions filed exceptions with PERB, challenging the proposed decision.
On June 3, 2015, PERB issued a decision, affirming the ALJ’s conclusion that DCCA and SLOGAU had violated the MMBA in refusing to bargain over the County’s pension cost-sharing proposal. In its decision, the Board directly addressed the Unions’ vested rights argument.
Initially – applying the standards articulated by the California Supreme Court in Retired Employees Association of Orange County v. County of Orange (2011) 52 Cal.4th 1171 (REAOC) – PERB stated that “unless the Unions can show a clear legislative intent to create vested rights and thereby remove employee compensation or otherwise negotiable subjects from the scope of bargaining, those matters remain subject to negotiation.” The Board then “agree[d] with the ALJ that the governing terms of the Plan do not clearly demonstrate a legislative intent to bind the County with respect to the amounts or distribution of employee contributions towards future retirement benefits.” In particular, in response to the Unions’ claim that only the Board of Trustees’ actuary had the authority to recommend increases in employee contribution rates, the Board stated that “[a]lthough the Plan language speaks of increases in employee contributions based on recommendations of the actuary, it also seems to reserve ultimate authority for making such changes to the County’s Board of Supervisors.”
The Board also found that “[a]lthough the County has historically covered the costs of increased contributions, the Plan does not require it do so.” Accordingly, the Board held that “[t]he Unions have not shown how employee rights to particular rate of contributions or benefits have ‘vested.'”
PERB’s decision in County of San Luis Obispo is significant on three levels. First, it is the most recent application of standards articulated by the Supreme Court in REAOC
(and one that is particularly employer-friendly). Second, it shows that PERB views its jurisdiction as including the right to apply constitutional standards to the extent necessary to resolve claimed unfair practices. The decision is therefore somewhat controversial since some public sector labor law practitioners believe that only a court, and not an administrative agency like PERB, can decide whether a constitutionally vested right exists. (See California Professional Scientists v. Schwarzenegger (2006) 137 Cal.App.4th 371.) And third, the case reflects a relatively rare victory for employers before the union-friendly PERB – rarer still because the decision found the conduct of the employee organizations to be illegal.