Side Letters Do Not Necessarily Expire When Parties Subsequently Reach Agreement on a Collective Bargaining Agreement

In Palomar Community College District (2011) PERB Decision No. 2213-E, the Public Employment Relations Board (“Board”) clarified that a side letter of agreement between parties does not automatically expire when the parties reach agreement on a subsequent collective bargaining agreement ("CBA").

In Palomar, the employer issued a letter of reprimand based on a 2005 side letter addressing disciplinary procedures for certain employees, which did not contain an expiration clause. The following year the parties reached agreement on a CBA, which did not include a zipper clause or any other provision relating to the existence of the side-letter. The side letter was also not discussed during negotiations. As a result, the issue was whether the 2005 side letter expired and/or was superseded based on the 2006 CBA, making the employer's reliance on the 2005 side letter a unilateral change in policy and thus an unfair labor practice.

The Board, in reaching its decision, reviewed two of its prior cases, Lodi Unified School District (2001) PERB Decision No. 1452 (“Lodi”) and City of Riverside (2009) PERB Decision No. 2027-M (“Riverside”). In reviewing Lodi, the Board noted that the ALJ’s proposed decision provided the following definition of a side letter:

A side letter is an agreement of the parties that occurs during a CBA term.  It usually modifies or interprets an existing CBA provision and remains in effect until that particular CBA term ends.  When the CBA term expires, the side letter expires, unless by its own terms, it continues.

However, the Board further noted that the ALJ’s proposed decision in Lodi was not fully adopted, and thus determined that the ALJ’s statement regarding the duration of side letters was not dispositive in the Palomar decision. In Riverside a memorandum of understanding between the parties contained the following provision, and the issue was whether a particular agreement was a "grievance resolution document:"

This Memorandum of Understanding will supersede all Side Letters. Both parties recognize that this excludes grievance resolutions documents.

Based on this provision, in Palomar the Board interpreted Riverside to hold that absent a provision in a CBA or other agreement between the parties, a side letter does not automatically expire upon the ratification of a subsequently negotiated agreement.

In reaching its decision, the Board issued the following guidance on side letters:

[W]e find a side letter is an agreement between an employer and union that typically: (1) modifies, clarifies or interprets an existing provision in [a CBA]; or (2) addresses issues of interest to the parties that are not otherwise covered by the [CBA].  At its most basic, a side letter is a contract between the parties.  As such, the duration of such an agreement is dictated by the provisions of the side letter itself (either express or implied) or by the subsequent conduct of the parties. (See Riverside.)  Consequently, absent a provision in [a CBA], an agreement between the parties or other evidence demonstrating the parties intended it to expire, a side letter does not automatically expire upon the ratification of a subsequently negotiated [CBA].

Given the decision, employers should bear in mind that side letters may continue to remain in effect despite any subsequent agreements reached, unless the side letter or subsequent agreement specifically addresses the issue.

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