Appellate Court Reaffirms Importance of Three-Prong Test for Whether Managerial Decision Is Subject to Bargaining

06.29.2022

On June 23, 2022, the Court of Appeal issued a rare reversal to the Public Employment Relations Board (“PERB” or “Board”) in its evaluation of whether a disputed ballot initiative fell under the duty to bargain.  (County of Sonoma v. Public Employment Relations Board (2022) __ Cal.App.5th ___, 2022 WL 2256036, reversing in part County of Sonoma (2021) PERB Dec. No. 2772-M.)  The Court held that the Board misapplied the three-prong test provided by the Claremont Police Officers Assn. v. City of Claremont (2006) 39 Cal.4th 623 (“Claremont”) decision for evaluating whether a subject lay within the scope of representation.  The Court also found that PERB exceeded its authority by issuing a remedy declaring the voter-approved initiative to be void and unenforceable due to the bargaining violation.  This decision remains of particular note to employers on a core labor concept, as it tightens the standard for finding a managerial decision to be negotiable.

Background on County’s Measure P

The County of Sonoma has an Independent Office of Law Enforcement Review and Outreach (“IOLERO”), providing oversight to law enforcement actions in the County Sheriff’s Office.  In mid-2020, the County determined that it should amend the IOLERO’s policies and practices to increase law enforcement transparency and accountability.  In August 2020, the County Board of Supervisors voted to call a special election, in which local voters would consider proposed initiative Measure P in November 2020.  This initiative proposed to institute several changes to the IOLERO, including: (i) independent authority to investigate certain incidents or complaints involving County Sheriff employees, such as officer-involved shootings and whistleblower complaints; (ii) direct access to sources of evidence obtained as part of County Sheriff internal affairs investigations, as well as body-worn camera video records; (iii) obtain and review confidential County Sheriff peace officer personnel files; and (iv) recommend disciplinary action be taken based on their own investigation, or other material obtained from the County Sheriff.  

Two unions learned about the ballot measure shortly thereafter, and demanded that the County (i) remove Measure P from voter consideration, and (ii) engage in decisional and effects bargaining.  The County refused to remove the ballot initiative, declined to negotiate about the overall decision to place the initiative on the ballot, but offered to engage in effects bargaining.  The County also sought to justify its actions, by insisting that the Board of Supervisors was required to take action in August 2020 to place Measure P on the ballot to comply with statutory deadlines involving voter initiatives for the November 2020. Measure P was subsequently passed in November 2020 by a majority vote.

Board’s Decision

In mid-August 2020, both unions filed unfair practice charges, alleging that the County failed to bargain in good faith as to Measure P.  The Board issued a Complaint, scheduled an evidentiary hearing, and determined that it would rule on the case itself in the first instance (in lieu of an administrative law judge).  The Board concluded that several aspects of Measure P fell within the scope of representation under the Meyers-Milias-Brown Act (“MMBA”). 

PERB found that the California Supreme Court altered its three-part Claremont test for evaluating whether a management decision is negotiable under the MMBA, in its decision in International Association of Firefighters, Local 188 v. Public Employment Relations Board (“Richmond Firefighters”) (2011) 51 Cal.4th 259.  The Board held that the Richmond Firefighters Supreme Court replaced the three-prong test with three categories of managerial decisions: (a) decisions that have “only an indirect and attenuated impact on the employment relationship”, and are not negotiable; (b) decisions that directly define the employment relationship (e.g. wages), and are always negotiable; and (c) decisions having a “direct impact on employment” which may not be negotiable as they impact managerial discretion.  (County of Sonoma, supra, Dec. No. 2772 at p. 36.)  The Board concluded that Richmond Firefighters adopted Claremont’s balancing test for the third type of managerial decisions, i.e. balancing the benefits of bargaining on the decision against the public employer’s managerial interest.  (Ibid at p. 37.)  The Board observed that it had reached this synthesis of judicial case law precedent in prior decisions, and adopted it for resolving scope of representation questions under the MMBA. (County of Sonoma, supra, Dec. No. 2772 at p. 36, citing County of Orange (2018) PERB Dec. No. 2594-M, p. 18.) 

The Board found that various components of Measure P fell into the third category of management decisions outlined in Richmond Firefighters, and concluded that the balancing test favored decisional bargaining.  Given that the County failed to provide notice to both unions before the Board of Supervisors voted on the proposed initiative, the Board found the County violated the duty to bargain.  PERB further found that the County: (i) failed to engage in effects bargaining; and (ii) had not met its burden to establish an exigent emergency affirmative defense to mitigate either bargaining violation.  The County filed for writ relief with the Court of Appeal.

Court’s Analysis

The Court concluded that PERB failed to apply the correct legal standard in assessing whether the County owed decisional bargaining obligations as to Measure P.  First, the Court unambiguously clarified that the three-prong Claremont test remained the operative standard for evaluating whether a management decision is subject to bargaining under the MMBA.  In short, this test considers three questions:

(1) If a management action does not have a significant and adverse effect on wages, hours, or working conditions of represented employees, there is no duty to bargain;

(2) If it does have a significant and adverse effect, one considers whether these effects arise from implementation of a fundamental managerial or policy choice.

(3) If both #1 and #2 are met, the decision is negotiable only if the public employer’s need for managerial discretion is outweighed by the benefit of bargaining on the choice.

(County of Sonoma v. PERB, supra, 2022 WL 2256036, at *5, citing Claremont, supra, at 638-39.)  The Court found that the Board’s decision to “skip an assessment of the first prong of Claremont when deciding whether the County’s decision to place Measure P on the ballot was within the scope of representation was clearly erroneous.”  (Ibid, at *9.) 

Second, the Court corrected the Board’s mistaken interpretation of the impact of the Supreme Court’s Richmond Firefighters decision, and explained that this decision did not overrule or supplant the Claremont three-prong test.  That case involved a dispute over decisional bargaining on lay-offs, in which neither party disputed that the decision involved significant and adverse effects (first prong) or a fundamental managerial choice (second prong).  (Id., at *7.)  The Court rejected the Board’s suggestion that its failure to rely on Claremont was harmless, as it would have reached the same result under either formulation of the scope of representation test.  “This argument ignores the importance of Claremont’s first prong — attempting to conflate a significant and adverse effect and a direct effect.  Practically every managerial decision has some impact on wages, hours, or other conditions of employment.”  (Id, at *9, emphasis in original and citations omitted.)

Third, the Court rejected PERB’s contention that its reasoning was justified under these tests, given that Measure P involved changes to disciplinary rules — a traditionally negotiable subject.  The Court observed that Measure P permitted the IOLERO to recommend disciplinary action, but did not involve changes to substantive rules or procedures.  Instead, existing County policies remained unchanged with respect to the Sheriff Office’s decision-making authority and other matters involving disciplinary procedures. Further, the Board could have resolved this issue by applying Claremont’s first prong — and assessing whether Measure P’s proposed changes resulted in a significant and adverse impact on employees’ terms and conditions.

The Court agreed with the Board that the record supported a finding of an effects bargaining violation, and that the County had failed to meet its burden to demonstrate the emergency exception to bargaining affirmative defense.  On those grounds, the Court affirmed PERB’s decision.

However, the Court concluded that the Board exceeded its authority when it declared void and unenforceable the four provisions of Measure P that were subject to bargaining.  While PERB traditionally remedies a unilateral change violation by ordering a public employer to rescind a change, the Board cannot interfere with purely legislative action by prohibiting such acts.  (Id. at *11 [would violate the “separation of powers among the three coequal branches of the government”].)  The Court concluded that the Board misread one of its prior decisions, in concluding that it was nonetheless permitted to declare parts of Measure P to be void and/or unenforceable.  (Id. at *12, citing City of Palo Alto v. Public Employment Relations Board (2016) 5 Cal.App.5th 1271.)   The Court clarified that when the Board finds that a public employer’s governing body failed to satisfy the duty to bargain with respect to a voter initiative, which subsequently is approved by the voters, PERB retains the limited authority to invalidate the resolution and not the underlying voter initiative.  The parties would then be required to pursue a separate quo warranto action in superior court to overturn the election results, as this remained the sole avenue to challenge an initiative’s procedural irregularities.  The Court concluded that the Board misread Palo Alto in issuing its remedy, and should have limited its remedial order to declaring the Board’s resolution void under the MMBA. 

The Court decided to remand the case back to PERB, to re-apply the full Claremont test to Measure P and issue a limited remedy consistent with the court’s summary of the law. The Court left in place the Board’s order for the County to engage in effects bargaining on demand by the unions.

Significance

This case remains noteworthy in several respects.  First, the decision clarifies the relevant legal standard under the MMBA and analogous labor statutes (e.g. the Trial Court Act), for evaluating whether a management decision is subject to negotiation.  The Court streamlined the interaction between the Claremont and Richmond Firefighters decisions, by clarifying that the initial three-prong test remained in place.  Employers should note that the Court’s decision calls into question, if not overrules, other PERB decisions applying a different understanding of the scope of representation test.  (See e.g. County of Santa Clara (2019) PERB Decision No. 2680-M; County of Orange, supra, Dec. No. 2594.)  This legal standard affects the vast majority of labor decisions made by public employers, as it informs which managerial decisions may still involve bargaining obligations.  Public employers should ensure that they ground strategic decisions and responses to bargaining demands on the Claremont three-prong standard, in lieu of prior Board tests rebuked by the Court’s decision.

Second, the decision constitutes a rare result favoring management, and rejecting the conclusions reached by PERB.  The appellate courts regularly defer to the Board’s interpretation and application of state labor law in the vast majority of disputes reaching writ review, in part based on a well-settled understanding that the Board is an administrative agency equipped with specialized expertise in the field of labor law.  Given that context, the decision involves a rare occasion in which a court bluntly and unequivocally rejected PERB’s application of a baseline labor standard — whether a managerial decision is nonetheless negotiable.  Additionally, the decision strengthens management’s ability to assert that a decision is not subject to negotiation.  Contrary to the Board’s expedited analysis in its finding of negotiability, the Court reminded employers and unions that each factor of the Claremont test must be met to justify a demand to bargain on a managerial decision.

Please feel free to contact the Authors of this Alert or your regular AALRR counsel with any questions.

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