California Supreme Court Hears Furlough Case

As has widely been reported, the California Supreme Court yesterday heard arguments in Professional Engineers in California Government et al. v. Schwarzenegger (Case No. S183411). The issue before the Court is whether the Governor legally imposed furloughs on state employees. This was one of the rare cases that the Court televised so I was able to watch the arguments. (To watch the arguments, click on this link). Here are my thoughts:

Does the Governor Have the Inherent Power to Furlough?

The Governor’s attorney argued that the Governor has the inherent authority to unilaterally furlough employees during a fiscal emergency. The unions’ attorneys argued that there wasn’t any constitutional or statutory authority for such an assertion. The justices – including Chief Justice George and Justice Corrigan – appeared skeptical to the Governor’s argument. Justice Corrigan described an inherent power to furlough as “CEO-type” powers. Based on the questions asked, I’m not sure the Court is prepared to give the Governor such “CEO-type” powers.

Are Furloughs a Lesser Form of Layoffs?

Justice George asked whether furloughs are a less drastic measure than layoffs and Justice Chin repeated that question at the end. In essence, the thinking of the Justices may be that if the Governor has the authority to lay off employees (which no one disputes) then shouldn’t he have the authority to furlough. The union attorneys vigorously disputed that furloughs are a lesser harm than layoffs and also disputed the argument that the state statute authorizing layoffs implicitly authorizes furloughs.

I thought this was an interesting line of questioning by Chief Justice George. In the realm of public employment, there certainly is the concept of “temporary layoffs.” I know of at least one major arbitral decision holding that temporary layoffs are just a form of layoffs and holding that it’s a management right. But I don’t think the Court will issue such a holding.

However, the policy implications behind this question may drive the Court’s decision. This is because if the Court says the Governor can’t furlough, then the only way the Governor could have achieved the salary savings in the budget was through layoffs. From the Court’s questioning, it seems they are bothered by the unions’ arguments which would essentially force layoffs over furloughs; when to the casual observer furloughs are far less drastic.

Did the Legislature Ratify the Governor’s Furloughs?

The Court asked a lot of questions about whether the Legislature ratified the Governor’s furloughs when it adopted a budget that relied upon salary savings in the exact amount of the anticipated furlough savings. Several commentators have suggested that the Court may take this approach to resolving the case. After listening to the oral arguments, I have to agree that this appears very likely. I personally don’t like this approach since it doesn’t answer the central question of whether the Governor has the authority to furlough employees during a fiscal emergency. Under such a holding, this exact situation could arise again in the future. But it’s a way for the Court to resolve this case without addressing the more difficult constitutional questions regarding the Governor’s authority.

Would Back-pay be a Gift of Public Funds?

I thought the most interesting comment came from the Controller’s attorney at the very end of her argument. She said that even if the Court finds the Governor’s furlough order illegal, the issue of back-pay needs to be briefed; and she specifically mentioned the issue of “gift of public funds.” Under the California constitution, it’s illegal to make a gift of public funds. So I guess the argument would be that giving back-pay to employees for time they did not work would be a gift of public funds. That’s certainly a novel argument. In the context of wrongful termination cases, public employees have been able to obtain back-pay just like private employees and I’m not aware of back-pay ever being prohibited as a “gift of public funds.”