Court Rules NLRB Appointments Unlawful, Calls Into Question 200 Decisions

In Noel Canning v. National Labor Relations Board (D.C. Cir., Jan. 25, 2013, 12-1115) 2013 WL 276024, the Court of Appeals for the D.C. Circuit ruled President Obama's January 4, 2012 recess appointments to the National Labor Relations Board were unconstitutional.   As a result, the NLRB's decisions since that time are now being called into question and may be unenforceable.  

The Recess Appointments Clause is part of the federal Constitution.  It says, "The President shall have power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session."  This case was about what counts as "the Recess of the Senate" and what does not, with the President arguing the Senate was in recess on January 4, 2012 and the petitioner arguing it was not.  Ultimately, the Court decided the Senate was not recess, reasoning that "The Recess" means only breaks between official sessions of Congress and not other breaks during a session.  As a result, the Court found the Senate was not in recess on January 4, 2012 and the President's appointments to NLRB are therefore invalid.

The affects of the decision on unclear.  The NLRB's official position is that the ruling only applies in one case.  However, others believe it calls into question most of the NLRB's 2012 decisions, including several involving social media.

Michigan Voters Considering Constitutional Right to Collective Bargaining

After a string of stinging defeats at the ballot box, labor leaders in Michigan are trying to turn the tide by establishing a state constitutional right to collective bargaining.  Next Tuesday, Michigan voters will go to the polls to decide Proposal 2, which would create a state constitutional amendment locking in union rights in the state.  Proposal 2 would:

• allow police officers and firefighters to negotiate safe staffing levels
• establish a constitutional right to form a union and bargain collectively
• invalidate any attempts by the state legislature to limit collective bargaining rights
• override state laws about employees hours and conditions of employment 
• mandate binding arbitration for some police groups

If passed, Proposal 2 would be the first of its kind in the country.  The campaign to pass Proposal 2 got a big boost earlier today, when President Clinton endorses the measure.  

Court Finds Impairment of Pension Benefits Unconstitutional Under Contract Clause

In Cherry, Jr. et al. v. Mayor and City Council of Baltimore City, et al., (D. Md., September 20, 2012), Case No. MJG-10-1447, a federal judge ruled Baltimore's plan to impair firefighters' and police officers' pensions is unconstitutional under the Contract Clause of the federal Constitution.  The Contract Clause provides that "No State shall...pass any...Law impairing the Obligation of Contracts..."  The Clause frequently comes into play when the government tries to pass laws to get out of its own contractual obligations, including collective bargaining agreements.

To pass muster under the Contract Clause, a law that impacts the government's contracts has to pass several tests.  The test at the center of the Cherry decision is the "reasonable and necessary" test.  To pass this test, there have to be unforeseeable consequences to the contract and the law impairing the contract must be the least drastic impairment.  In Cherry, the Court ruled the City failed this test because the unions offered more balanced approaches.

While the ruling in Cherry decision vindicates public employees in Baltimore, several California cities are trying to impair their contractual obligations.  Mastagni Law attorneys David E. Mastagni, Isaac S. Stevens, and Jeffrey R. A. Edwards are litigating similar challenges against the cities of Los Angeles, Stockton, and Pacific Grove.

Supreme Court Vindicates Unions' Free Speech Rights

The Supreme Court recently upheld union free speech.  The Court struck down a Montana law restricting the ability of unions and other corporations to expend funds for political purposes. The Montana law stated a corporation may not “make an expenditure in connection with a candidate or a political committee that supports or opposes a candidate or a political party.” A small group of organizations including Montana Shooting Sports Association filed a lawsuit arguing that the law interfered with their First Amendment right of free speech.

In American Tradition Partnership, Inc. v. Bullock, the Court agreed, holding Montana's law directly conflicts with the U.S. Constitution. The Court’s decision relied heavily on the prior decision of Citizens United v. Federal Election Commission. In Citizens United, the Supreme Court ruled the First Amendment prohibited the government from overly restricting independent political expenditures by corporations and unions. The ruling effectively frees unions to spend money on elections and to directly advocate for the election or defeat of candidates (although not to contribute unlimited amounts directly to candidates or political parties). The Court’s decisions validate the reason why people formed unions in the first place: to give workers the freedom to come together to voice their concerns and fight for their members.

Lawsuits Filed to Stop Attacks on Retirement Security

Legal challenges are already underway to local pension initiatives passed by voters Tuesday in San Diego and San Jose.  The initiatives, both named "Measure B", attack public employees' pensions in those cities.

San Diego's Measure B creates a new retirement tier replacing defined benefits with a 401(k) and lowers public safety's maximum retirement benefit to 80% of salary.  The measure also caps city payroll at 2011 for five years, risking massive layoffs for the city.  

The legal challenge to the San Diego measure started even before the election.  Unions filed an unfair practice charge with PERB in February because city leaders refused to meet and confer about the changes.  PERB quickly granted their request for injunctive relief and filed a lawsuit in San Diego to stop the measure from going before voters.  While the court initially ruled against PERB, the case was promptly appealed and oral arguments are scheduled for June 13, 2012.  PERB also issued a complaint against the city.

The San Jose measure seeks to shift the city's contributions to the pension system to employees, likely 16% of their salaries.  It also provides that if the cost-shifting provision is struck down, as many expect it will be, the city can dramatically slash salaries to make up the difference.  The plan also limits disability retirements, lets the city council take away retirees' cost-of-living-adjustments, and prices retirees out of the city health insurance plan.

San Jose police and firefighters immediately filed lawsuits in state court to stop enforcement of the measure.  The firefighters lawsuit, Robert Sapien et al. v. City of San Jose et al. seeks declaratory and injunctive relief and a writ of mandate prohibiting enforcement of Measure B.  It argues the measure violates California state constitutional protections related to due process, the prohibition on breaking public contracts, and restrictions on seizing property.  The POA's lawsuit, San Jose Police Officers' Association v. City of San Jose et al. makes similar claims and also alleges violations of freedom of speech, separation of powers, the MMBA, the parties' MOU, and the California Pension Protection Act.  The City of San Jose also filed a preemptive lawsuit in federal court seeking a declaration that the measure is not unconstitutional.

Court Rules Stockton POA Likely to Succeed in Contract Impairment Case

The Stockton Police Officers Association returned to court Friday for a hearing on its application for a preliminary injunction requiring the City to cash out paid leave for officers retiring or leaving the City for new jobs. At the hearing, San Joaquin Superior Court Judge Lesley Holland found that the POA was likely to succeed on the merits of its claim that the City of Stockton unlawfully impaired its contract. Judge Holland ultimately denied the POA’s application on the grounds that the case was stayed while the Third District Court of Appeals considered an appeal of the court’s ruling on the POA’s special motion to strike two of the causes of action alleged in the City’s cross-complaint.  Mastagni Law attorneys David E. Mastagni, Alan Davis, Isaac S. Stevens and BJ Pierce represent the Stockton POA in the matter.

US Supreme Court: Warrant Required for GPS Tracking

In a 9-0 decision, the Supreme Court held that attaching a GPS device to a vehicle, and using it to monitor the vehicle’s movements on public streets, constitutes a search under the Fourth Amendment.  As a result, the Court held it is unconstitutional to attach a GPS device to a vehicle without a warrant or consent.

The case started after the FBI obtained a warrant, but the warrant only authorized installation of the device in the District of Columbia and within 10 days of when the warrant was issued.  Instead, agents installed the device on the 11th day and in Maryland.  Consequently, the Court treated the case as though there was no warrant.

The agents tracked the vehicle’s movements for 28 days.  Later, they secured an indictment of the defendant and others on drug trafficking conspiracy charges based in part on evidence obtained with the GPS device.  The District Court suppressed the GPS data obtained while the vehicle was parked at the Defendant's residence, but decided the remaining data was admissible because the Defendant had no reasonable expectation of privacy when the vehicle was on public streets.  The Defendant was convicted and appealed.

Justice Scalia, writing for the majority, reasoned one's vehicle is a type of personal "effect" the Fourth Amendment specifically mentions, and that, therefore, attaching a GPS device to one's vehicle is the type of encroachment that would count as a search under the Fourth Amendment at the time it was adopted.  The Fourth Amendment protects the “right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.”  Justices Roberts, Kennedy, Thomas and Sotomayor joined his opinion.

Justice Alito wrote an opinion reaching the same result from a different perspective.  He decided the use of the GPS device was unconstitutional because the length of the monitoring made it a degree of intrusion that a reasonable person would not have anticipated.  Justices Kagan, Ginsburg, and Breyer joined his opinion.

Fox40: Stockton's "fiscal emergency declaration may come back to bite the city big time"

Fox40 reporter Rowena Shaddox reported Friday about the Stockton Police Officers' Association major court victory over their right to enforce their contract. The report includes interviews with Sgt. Bill Hutto and Ofc. Mark McLaughlin. See the entire video below and here.

 

California Supreme Court Upholds Abolition of Redevelopment Agencies

In an opinion sure to have state-wide impact on the nearly 400 existing redevelopment agencies, the California Supreme Court held, “Redevelopment agencies ... do not have protected right to exist that immunizes them from statutory dissolution by the legislature.”  The ruling in California Redevelopment Assn. v. Matosantos (Cal., Dec. 29, 2011, S194861) 2011 WL 6822391, has broad implications for for public safety services.  Redevelopment agencies had been used to siphon local revenue away from core services, such as law enforcement and fire protection, but Thursday’s ruling makes it much more difficult for cities and counties to continue the practice.

The Court ruled on two state laws addressing so-called “Redevelopment Agencies.”  The Court held, “Assembly Bill 1X26, the Dissolution Measure, is a proper exercise of the legislative power vested in the legislature by the State Constitution.”  The Court explained that the power to create entities such as redevelopment agencies carried with it the corollary power to dissolve those entities.  However, the Court invalidated the measure’ companion bill, A.B. 1X27, which conditioned further redevelopment agency operations on additional payments by the agencies’ community sponsors to state funds benefitting schools and special districts.  The Court found this mandate violated Proposition 22, which amended the Constitution to prevent the state from redirecting redevelopment funds.

The opinion also chronicles how community redevelopment agencies, formed to combat urban decay, developed into the principal instrument of economic development for most cities.  These agencies principally acquire and transfer property on favorable terms for residential or commercial development.  Unable to levy taxes, the agencies rely on tax increment financing, whereby the property tax revenues for government entities other than the redevelopment agency are frozen, while revenues from any increase in values are awarded to the redevelopment agency on the theory that the increase is the result of redevelopment. The tax increment financing has, “sometimes been misused to subsidize the city’s economic development through the diversion of property tax revenue for other tax entities.”  The agencies are used to shield property tax revenue from other governmental agencies and create a shell game amongst local governments with respect to property tax funds.

The tax increment financing is a hot political issue because of the arguable unfair advantage it provides cities over school districts and local taxing agencies, and the loss of revenue to the state’s general fund.  While Governor Brown considered eliminating redevelopment agencies altogether as a partial mean of closing the state’s projected budget deficit, the legislation enacted “freezes” conditions by placing restrictions on modification of existing plans and barring creation of new agencies.  The legislation was intended to preserve redevelopment assets and revenues to fund core local services, i.e. public safety and education.  The dissolution component transfers control of redevelopment agency assets to the local public entity that created the agency and requires performance of existing obligations.  The Court invalidated the provision that created an exemption for agencies that agreed to make specified payments to other governmental funds.

Governor Releases "Twelve Point Pension Reform Plan"

On October 27, 2011, Governor Edmund G. Brown Jr. released his 12 proposed major reforms for state and local pension systems. The governor stated the proposals “would end system-wide abuses and reduce taxpayer costs by billions of dollars over the long term” and cut in half the cost to tax payers of state employee pensions.

The “Twelve Point Pension Reform Plan” and its explanation are set forth as follows:

1. Equal Sharing of Pension Costs: All Employees and Employers: Will require that all new and current employees transition to a contribution level of at least 50 percent of the annual cost of their pension benefits.

2. “Hybrid” Risk-Sharing Pension Plan: New Employees: The “hybrid” plan will include a reduced defined benefit component and a defined contribution component. The hybrid plan will be combined with Social Security to provide an annual retirement benefit of about 75 percent of an employee’s salary. The 75 percent target is based on 30 years for safety employees and 35 years for non-safety.

3. Increase Retirement Ages: New Employees: For most new employees, retirement ages will be set at the Social Security retirement age, now 67. The retirement age for new safety employees will be less than 67, but commensurate with the ability of those employees to perform their jobs.

4. Require Three-Year Final Compensation to Stop Spiking: New Employees: Eliminates one-year rule to discourage efforts in the last year of employment to increase the compensation used to determine pension benefits.

5. Calculate Benefits Based on Regular, Recurring Pay to Stop Spiking: New Employees: Will require that compensation be defined as the normal rate of base pay, excluding special bonuses, unplanned overtime, payouts for unused vacation or sick leave, and other pay perks.

6. Limit Post-Retirement Employment: All Employees: Will limit all employees who retire from public service to working 960 hours or 120 days per year for a public employer. It also will prohibit all retired employees who serve on public boards and commissions from earning any retirement benefits for that service.

7. Felons Forfeit Pension Benefits: All Employees: Will require that public officials and employees forfeit pension and related benefits if convicted of a felony in carrying out official duties, in seeking an elected office or appointment, or in connection with obtaining salary or pension benefits.

8. Prohibit Retroactive Pension Increases: All Employees: Will eliminate unfunded liability from increased pension benefits.

9. Prohibit Pension Holidays: All Employees and Employers: Will prohibit all employers from suspending employer and/or employee contributions necessary to fund annual pension costs to avoid repeat of past where many public employers stopped making annual pension contributions during wall street boom years.

10. Prohibit Purchases of Service Credit: All Employees: Will avoid the investment risk associated with allowing purchase of service credit for time not actually worked.

11. Increase Pension Board Independence and Expertise: Will add two “independent” persons with financial expertise to the CalPERS Board and require that persons and their family are not eligible for CalPERS pension. Will also replace State Personnel Board representative on the CalPERS board with the Director of the California Department of Finance. Intended to achieve greater independence and greater sophistication.

12. Reduce Retiree Health Care Costs: State Employees: New state employees will be required to work for 15 years to become eligible any retiree health care and required to work for 25 years to become eligible for the maximum state contribution. Will encourage local governments to make similar changes.

These proposals will have to be debated and passed by the California Legislature before Governor Brown can sign them into law.

CalPERS: "We are back"

CalPERS posted a gain of 20.7% in its investment portfolio for the fiscal year ending June 30, 2011, marking its largest market gains since 1997.  CalPERS investments grew across the board: stock value is up 30.2%, private equity stakes increased 25.3% and real estate assets increased 10.2% in value.  CalPERS investments now stand at $237.5 billion, up from $200.5 billion last year and $165 billion in 2009.

The average annual growth rate of CalPERS' investments plays a critical role in the cost of participation in the plan and employer contribution rates.  CalPERS' critics regularly attack its target growth rate of 7.75% and make forecasts assuming a growth rate as low as 2-3%.  However, as a result of its higher-than-expected growth, CalPERS now stands at 8.38% growth averaged over 20 years despite the big hits to the fund in 2008 and 2009 and appears well on its way to being fully recovered from the effects of the recession.

CalPERS Takes a Stand on Vested Pension Rights

On Thursday, July 14, 2011, CalPERS released a position paper on the status of pension benefits earned by public servants under the system. The paper, Vested Rights of CalPERS Members: Protecting the pension promises made to public employees, interprets sections of the Public Employment Retirement Law (PERL) CalPERS enforces and related state and federal constitutional provisions. The position paper explains CalPERS pensions are vested rights under the federal and state Contract Clauses. It also explains CalPERS' fiduciary duty to members and cautions CalPERS may take legal action "[i]n the event CalPERS questions whether changes in the PERL or other applicable law may cause an unconstitutional impairment of its members’ vested rights..."

Little Known Group Seeks to Ban Collective Bargaining, Slash Pensions in California

A Santa Barbara-based organization calling itself the California Center for Public Policy recently announced it has submitted three proposed California constitutional amendments to the California Attorney General to begin the process for qualifying for the ballot. The first amendment would prohibit public sector collective bargaining in California, the second amendment would increase taxes on retired public servants receiving more than $100,000 in pension benefits and the third amendment would raise the CalPERS retirement age to 65 for most employees and 58 for public safety employees. It would not make any change to the retirement age in systems organized under the County Employees Retirement Law of 1937 (CERL). The little known group is not widely believed to have the resources to successfully qualify these initiatives for the ballot.

Proposed Initiative Would Cut Pensions, Raise Retirement Age

Former Assemblyman Roger Niello submitted a proposed initiative to the California Attorney General, the first step toward getting on the ballot in a statewide election.  If approved by voters, the "Public Employee Pension Reform Act" would amend the California Constitution to:

• Prohibit collective bargaining over pensions.
• Raise the retirement age for current and future employees to 62.
• Ban retroactive increases in pension benefits.
• Cap retirement benefits at 60% of employees salary based on a three-year average.
• Require pensions be calculated on base pay only.
• Force employees to pay at least half of retirement contributions.

To pass, the proposed initiative requires a simple majority (50% + 1) and would go into effect immediately.  It has no exceptions for public safety professionals, but exempts members of the Legislature.  The author of the initiative served in the Legislature from 2004 to 2010.   


Before the Public Employee Pension Reform Act can get on the ballot, proponents must collect signatures from approximately 800,000 registered voters, a number equal to 8% of those who voted in the last election for Governor.  The full text of the proposal is below.

- Public Employee Pension Reform Act Proposal -