Court: Fiscal Impact Of MOU Must Be Presented To Legislature

Cal. Statewide Law Enforcement Assn. v. Dept. Personnel Admin. (Case No. C061102) (Issued on 1/26/11)

This case involved a Memorandum of Understanding (MOU) between the California Statewide Law Enforcement Association (CSLEA) and the State of California reached in 2002. Under the new MOU, CSLEA bargaining unit members were to be reclassified as “safety members” effective July 1, 2004 and allowed to participate in the more generous safety retirement pension plan. A dispute arose over whether the reclassification into safety member status was intended to be retroactive; in other words, whether the employees’ past years of service would also be credited for safety retirement. According to the court, applying the reclassification retroactively would cost the State “[m]any millions of dollars …” The dispute was submitted to arbitration. The arbitrator ruled for CSLEA and held that the safety retirement provision was intended to apply retroactively. Over the State’s objection, the superior court confirmed the arbitration award.

On appeal, the court reversed the superior court’s judgment. The court based its decision on the ground that the bill presenting the CSLEA MOU to the Legislative did not expressly inform the Legislature that safety retirement was being conferred retroactively. Under the Dills Act, any MOU must be presented to the Legislature for approval. (Gov. Code, § 3517.5.) Because the Legislature was never informed of the fiscal consequences of the retroactive provision, the court held that the MOU failed to meet the Dills Act requirement of being presented to the Legislature. The court expressly rejected CSLEA’s argument that it was sufficient that the Legislature knew that there was the potential that safety retirement could be applied retroactively. Instead, the court held that under the Dills Act, “The Legislature had to (1) be informed explicitly that DPA and CSLEA did enter into such an agreement, (2) be provided with a fiscal analysis of the cost of retroactive application of the agreement, and (3) with said knowledge, vote to approve or disapprove the agreement and expenditure.” Because that did not occur in this case, the court held that the “retroactive part of the agreement may be enforced only if it and its fiscal consequences are explicitly submitted to, and approved by vote of, the Legislature.”

Comments:

This is an interesting decision. Presumably, the union can still push to have the retroactive pension provision presented to the Legislature for approval. However, given the fiscal situation facing the state I suspect the Legislature would face pressure to reject it.
This decision also gives state employee unions an incentive to pay attention to the bills presenting their MOU’s to the Legislature. Unions will want to make sure that the full fiscal impact of their MOU’s are clearly set forth so there is no dispute that the Legislature has approved the an agreement.
Finally, it will be interesting to see if the courts give this decision application beyond the Dills Act. For example, section 3505.1 of the MMBA is very similar to section 3517.5 of the Dills Act. Both require that any MOU reached between the employer and recognized union be presented to the Legislature or the governing body for approval. Arguably, the court’s holding that under the Dills Act any presentation must include a full disclosure of the fiscal effects of the MOU should also apply to the MMBA since the statutory provisions are similar. If so, both employers and union will want to keep that in mind during negotiations.