EdLawConnect Blog

Article 11, Section 10 of the California Constitution prohibits public agencies from granting extra compensation to officers or employees after service has been rendered.  Employee salaries subject to collective bargaining are often not determined until later into the fiscal year. When an increase in employee salaries is negotiated during the school year, retroactive pay at the increased rate (or a decreased rate) may violate this constitutional prohibition.

Courts have consistently held public employers may retroactively pay employees in situations where the “adjusted salary rates were made retroactive to a date when the salary rates were indefinite and subject to future determination.” (San Joaquin County Employees’ Assn., Inc. v. County of San Joaquin (1974) 39 Cal.App.3d 83; Goleta Educators Assn. v. Dall’Armi (1977) 68 Cal.App.3d 830.)

The governing board may, before the first day of the fiscal year, take formal action (typically by adopting a resolution) declaring salaries “indefinite,” and avoid the constitutional proscription against “extra compensation” when adjusting salaries retroactively. This requirement differs for represented (bargaining unit) and unrepresented employee salaries.

Retroactive Salary Adjustments for Represented Employees

For employees represented by bargaining units, salaries become indefinite upon expiration of a collective bargaining agreement or the compensation provisions of the agreement. Thus, under these circumstances governing boards need not declare these salaries indefinite. However, the time at which salaries become indefinite varies depending on whether a contract reopener is in place.  Salaries are considered indefinite and board action is not required when a contract reopener on salaries becomes operative on a specific date and was agreed to on or before that date.

By contrast, salaries become fixed when (1) the governing board approves the agreement; (2) there are no reopeners on salaries; and (3) contract reopeners have no specified effective date. When a contract reopener has a specified date, a later agreement for salary adjustments may apply retroactively to any time after the established reopening date.

Where the employer wants to be able to retroactively adjust compensation, regardless of the status of reopeners, the governing board should adopt a resolution that declares “indefinite” the salaries of represented employees. This resolution can be combined with the declaration of indefinite salaries for unrepresented employees. The resolution must be adopted before the first day of the fiscal year (i.e., by June 30).

The employer must then give notice of the resolution to the exclusive representatives of the affected bargaining unit employees.

Retroactive Salary Adjustments for Unrepresented Employees

Unlike represented employee salaries, which are uncertain pending negotiations, the compensation of unrepresented employees is not subject to bargaining.

If unrepresented employee salaries are not fixed before the first day of a fiscal year, and the governing board seeks to increase (or decrease) these salaries retroactively any time during that year, the board must adopt a resolution declaring unrepresented employee salaries “indefinite.” This resolution must be adopted before the first day of the fiscal year (i.e., by June 30).

The resolution should specify which unrepresented employees are affected, including any individual contracts. The employer must then give notice of the resolution to the affected employees. Because these employees are not represented, each employee should receive individual notice.