In City of Los Angeles v. Superior Court (Engineers & Architects Association) (June 20, 2013) --- P.3d ---, 2013 WL 3064811, the California Supreme Court ruled charter cities with binding arbitration cannot refuse to arbitrate contract grievances. The ruling overturns an earlier Court of Appeal decision that decided charter cities cannot “delegate” wage and hour disputes to arbitrators.
The case centered on the City of Los Angeles’ unilateral decision to implement furloughs in 2009. The Engineers & Architects Association was in contract and filed a grievance challenging the furloughs. But, even though the contract had binding arbitration, the City refused to arbitrate, claiming it had special powers to impose furloughs and the arbitration clause did not apply. The union sued and won at the trial court, but the Court of Appeal intervened and ruled it was illegal for the City to delegate its power to set wages to an arbitrator, citing cases that require the governing body of a city or county exercise its discretion to set employee wages.
The Supreme Court overturned the Court of Appeal. The Court ruled that by ratifying the MOUs, the City made discretionary choices in the exercise of its salary-setting and budget-making authority and was therefore bound by the MOU. The Court also rejected the City’s claim it could not agree to an MOU which would impair its ability to take all necessary actions to carry out its mission in an emergency.
The City also claimed that, because the mayor has to propose a budget annually, and the Council has to enact it annually, the MOU cannot restrict the choices available to the mayor and Council in later years. The Court quickly dispatched with this claim, pointing out that the City’s position, if correct, would make any multi-year deal with contractors, creditors, and vendors unenforceable.