Posted by: Jennifer Foley Posted date: October 18, 2013
MICHIGAN LAW RULINGS
Unions challenge Republican laws in court
— By Jennifer Foley, POJ Editor with excerpts from Karoub Associates and media reports
Higher courts will likely have a lot of hot topic issues to decide which affect labor unions in the months to come.
Recent legislation, passed by the Republican Legislative majority, continues to be challenged in court, including Detroit’s bankruptcy filing, the new pension contribution requirement and right-to-work legislation.
DETROIT BANKRUPTCY CONSTITUTIONAL
Detroit’s bankruptcy filing, which was declared unconstitutional by Ingham County Circuit Judge Rosemarie Aquilina, was later overruled and declared constitutional by a Court of Appeals panel.
“I think some of the union attorneys plan to appeal to the Supreme Court. But I don’t think the Supreme Court is any hurry to take it up,” said Jim Curran, partner at Karoub Associates, a legislative consulting firm.
Judge Aquilina declared P.A. 136, which permits the Governor to authorize an Emergency Manager to proceed under Chapter 9 bankruptcy, unconstitutional and barred Detroit Emergency Manager Kevin Orr and Gov. Rick Snyder from taking any further action that may cause accrued financial benefits of the retirement system from being diminished or impaired. Michigan Attorney General Bill Schuette filed immediate appeals and motions to stay the trial court rulings and any future proceedings while the appeals proceed. U.S. Bankruptcy Judge Steven Rhodes will oversee the process.
The City of Detroit denied in court documents that its bankruptcy plan violated state protections for pensioners. The 135-page response to objections to bankruptcy protection for the city said neither the Chapter 9 bankruptcy petition nor Snyder’s approval of the petition had any effect on pensions. “These are simply steps that begin the bankruptcy process, where pensions may be impaired by order of a federal bankruptcy court at some later date,” city lawyer Bruce Bennett wrote.
Bennett discounted claims by city unions that Snyder was obligated to protect pensions from being slashed under the terms of the state constitution. Detroit faces an estimated $3.5 billion in unfunded pension liabilities, and legal observers expect retired city workers to face a major reduction in benefits.
PENSION CONTRIBUTION UNCONSTITUTIONAL
Another Court of Appeals (COA) panel unanimously upheld a lower court ruling that P.A. 264 of 2011’s requirement that state employees either choose to contribute 4 percent to their defined benefit pension plan or move to a defined contribution (401k) plan was unconstitutional.
The COA found that only the Civil Service Commission (CSC) could make a decision on state employee compensation. “Changing the nature of the plan changes the nature of the benefit, and thus it amounts to a change in the rate of compensation or in the conditions of employment. This is within the authority of the (Civil Service) Commission, not the Legislature…,” Appeals Court Judges Donald S. Owens, Elizabeth L. Gleicher and Cynthia Diane Stephens wrote.
The appellate judges also ruled the Legislature’s changes to how overtime is computed for final average compensation for pension benefits “improperly invades the authority of the (Civil Service) Commission and therefore is unconstitutional.”
However, it did not throw out the new law completely. The COA reversed a trial court’s ruling that the entire law should be voided, remanding the lawsuit back to Ingham County Circuit Court to determine whether the unconstitutional provisions could be severed from the rest of the law, which included changes in health insurance for retirees and workers covered by the 401(k)-style retirement system.
Gov. Snyder and the Republican-controlled Legislature passed the measure in 2011 as part of an effort to slash $5.6 billion from a $15 billion unfunded liability in the pension fund that supports about 56,200 retired state workers. When Ingham County Judge Joyce Draganchuk ruled the law was unconstitutional in September 2012, approximately $20.2 million had been deducted from paychecks of state workers affected by the law since it had taken affect in April 2012, according to the Michigan Department of Technology, Management and Budget.
“Currently, the state budget director John Nixon has indicated he will not return the money until all legal issues have been resolved,” Curran said. “So I think the state is planning an appeal to the Supreme Court.” In the meantime, Curran said, the state is holding onto the money it has already withdrawn from employees’ checks and drawing interest on those funds.
RIGHT TO WORK
Michigan Supreme Court unanimously denied a request from Gov. Snyder to issue an advisory opinion on whether right to work is constitutional. That leaves the controversial law open to court challenges, the most recent being right to work’s inclusion of civil service workers. A different Michigan Court of Appeals denied the challenge in a 2-1 spilt ruling. The decision disagrees with the state employee union’s argument that the CSC is constitutionally bound to handle all matters regarding state employees.
“Michigan case law fully supports the principle that the Legislature, as the policy-making branch of government, has the power to pass labor laws of general applicability that also apply to classified civil service employees,” Appeals Judges Henry Saad and Pat M. Donofrio wrote in their 21-page majority opinion. “For these reasons, we hold that (the right-to-work law) is constitutional as applied to classified civil service positions in Michigan.”
Nearly 36,000 Michigan unionized workers are subject to the new right-to-work law, which means those employees are not required to pay union dues when new contracts take effect after Jan. 1, 2013. Police officers and firefighters are exempt from the law.
Ken Moore, president of the Michigan State Employees Association, said he believes the ruling will not stand on appeal. “The ruling by the Court of Appeals that right to work applies to all state employees in the civil service is clearly unconstitutional,” Moore said.
Curran agrees and said the case will definitely be going to the Supreme Court. “In the employee deduction case (pension contribution), the Court of Appeals ruled it’s unconstitutional because the legislature can’t change employee contracts. It has to go through the Civil Service Commission,” Curran said. “(For) right to work, different Appeals judges ruled the constitution doesn’t matter — that legislators can do this. You have two different Appeals Court panels coming up with two different interpretations of the constitution.”
“So basically what you have is 40 years of case law that says the Civil Service Commission determines all contractual and work-related issues for state employees, then one Appeals Court panel, with very partisan Republican judges, that says ‘oh no the legislature can do this,’” Curran said. “This is the first time any judges say the constitution doesn’t apply. It’s pretty striking that this ruling is so far out of the mainstream of court rulings over the past 40 years.”
Passage of the law during a lame-duck session in December inspired over 10,000 protestors to show up during a five-day period with no committee hearings or public input. A coalition of state employee unions, representing 90 percent of the state’s unionized workforce, filed suit challenging one of the two laws, Public Act 349, in February. The laws took effect in March, making Michigan the 24th right-to-work state.