PERB Reaffirms its View on Test for Whether Managerial Decision Is Subject to Bargaining

12.05.2022

On November 17, 2022, the Public Employment Relations Board (“PERB” or “Board”) clarified its view on the appropriate legal standard or test for evaluating whether a managerial decision remains subject to bargaining under the Meyers-Milias-Brown Act (“MMBA”) for cities, counties, and special districts.[1]  (City and County of San Francisco (2022) PERB Dec. No. 2846-M.)  This area has been rapidly evolving over the last few years, culminating in a noteworthy appellate court decision in June 2022. The Court of Appeal issued a rare reversal of the Board, finding that PERB had misstated the law on this subject.[2]  (County of Sonoma v. Public Employment Relations Board (2022) 80 Cal.App.5th 167, reversing in part County of Sonoma (2021) PERB Dec. No. 2772-M.)  The Board chose not to defer to this ruling, and instead interpreted the holding narrowly and reaffirmed that parties should follow a multi-step legal standard when evaluating their bargaining obligations as to managerial decisions.  Employers should closely monitor this subject, as it not only involves a core labor concept — but involves an active disagreement between PERB and the reviewing appellate courts.

History of Test for Evaluating Negotiability of Managerial Decisions

PERB last provided guidance on this issue in its underlying decision in the County of Sonoma dispute.  The Board interpreted four decades of California judicial case law involving unfair practice litigation, and concluded that the California Supreme Court had articulated a multi-step test for evaluating bargaining obligations as to managerial decisions.  In the first step of this new framework, the parties first assigned a particular managerial decision to one of three categories, with different bargaining obligations involved for each.  Specifically, the Board interpreted the Supreme Court’s decision in International Association of Firefighters, Local 188 v. Public Employment Relations Board (“Richmond Firefighters”) (2011) 51 Cal.4th 259 as providing the following three categories:

(a) decisions that have “only an indirect and attenuated impact on the employment relationship”, which are not negotiable; (b) decisions that directly define the employment relationship (e.g. wages), which are always negotiable; and (c) decisions having a “direct impact on employment” which may not be negotiable if they involve a change in the scope and direction of the agency’s operations. 

(County of Sonoma, supra, Dec. No. 2772 at p. 36, citing County of Orange (2018) PERB Dec. No. 2594-M, p. 18.)  For managerial decisions in the first or second categories, the analysis ended — with a duty to bargain for the first, or no duty to bargain for the second. For managerial decisions in the third category, the Board indicated that the parties would then proceed to the next step in this framework — and use the balancing test found in the Claremont Police Officers Assn. v. City of Claremont (2006) 39 Cal.4th 623 (“Claremont”) decision.

The Court of Appeal concluded that the Board applied the wrong legal standard, and should have used the three-prong test provided by the Claremont decision to determine if the underlying managerial decision (i.e. county initiative Measure P) triggered bargaining obligations.  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.

As detailed in our earlier alert, the Court’s decision suggested that this three-prong test would apply to any management decision to assess if it involved an obligation to bargain.

Board Decision

In this case, the City and County of San Francisco’s (“City”) Health Officer issued a Public Health Order on June 11, 2021, requiring governmental entities to ensure employees in certain work environments obtained one of the FDA-approved COVID-19 vaccine shot series by a specified deadline.  Between June 22 and October 27, 2021, the City unilaterally adopted and began enforcing a policy requiring City employees to either obtain the COVID-19 vaccine or apply for an exemption.  The City kept SEIU apprised as these policies, procedures, and supporting documentation were updated, but did not offer to bargain about this decision before implementing it.  As a result, SEIU filed an unfair practice charge contesting the City’s actions.

The Board’s Office of General Counsel dismissed the charge in part, as it found that the underlying decision to implement a COVID-19 vaccine policy was outside the scope of representation.  The Board’s Office of General Counsel relied in large part on PERB’s recent decision in Regents of the University (2021) PERB Dec. No. 2783-H, in which the Board had found that the decision to implement an influenza vaccine policy was non-negotiable.  On appeal, PERB reversed the Office of General Counsel’s partial dismissal, as it erred in concluding that the City’s COVID-19 vaccine policy was not outside the scope of representation. 

PERB expanded on its earlier summary of judicial case law precedent concerning the scope of representation test under the MMBA, specifically by examining four California Supreme Court decisions — Fire Fighters Union v. City of Vallejo (1974) 12 Cal.3d 608, Building Material & Construction Teamsters’ Union v. Farrell (1986) 41 Cal.3d 651, Claremont, and Richmond Firefighters.  PERB found that the California Supreme Court specifically rooted its Building Material decision in U.S. Supreme Court precedent, which in turn led the California high court to outline three categories of managerial decisions in its subsequent Richmond Firefighters decision.  In sum, the Board sought to anchor its view of the bargaining test for managerial decisions in case law, in order to explain why it reached a different interpretation of this test relative to the Sonoma appellate court decision. 

“Against this backdrop,” the Board acknowledged its own view on the legal standard involved as well as the recent County of Sonoma appellate decision.  However, PERB chose to view this appellate decision narrowly, and concluded that it had not invalidated or overruled the Board’s global view of this legal standard.  Rather than negate the Board’s use of a “three managerial categories” test, the appellate court had simply found that PERB had failed to apply each of the three Claremont prongs to a “category three” managerial decision.  In short, PERB found that these two tests could be “harmonized” or reconciled into a two-step legal standard, and that the County of Sonoma appellate court had not overruled this view.  Specifically, the Board reasoned that “to the extent Sonoma suggested that Claremont applies to category two decisions… any such suggestion was dicta.”  (City and County of S. F., supra, Dec. No. 2846, at p. 17.)  Further, the Board observed that the Claremont decision remained consistent with this view, as the high court had applied its three-prong test to a “category three” management decision.  (Ibid, at p. 13, citing Claremont, supra, 39 Cal.4th at 635-37.)

Given this reaffirmed standard, the Board found that the City’s COVID-19 vaccine involved a “category two” managerial decision — and thus, triggered a duty to bargain.  PERB also distinguished the impact of its Regents case on the dispute for several reasons.  For instance, Regents had relied on a developed evidentiary record while the present case remained at the investigatory stage.  Given these distinctions, “we cannot say as a matter of law that SEIU cannot overcome Regents” as “arguable legal and factual disputes” remain.  (Id. at p. 21.) 

Significance

Public employers should take note of this decision for several reasons.  First, while this area of law certainly remains turbulent, the Board’s reaffirmed standard will govern labor disputes in the near future.  We detailed in our prior alert that the County of Sonoma appellate decision provided a new standard on a core labor concept, and called into question recent PERB decisions on the subject.  The Board extinguished this doubt.  PERB chose to frame the appellate court’s decision as correcting its application of this legal standard, rather than overruling the Board’s view or replacing it with a new standard.  Future litigation may bring this issue back to the Court of Appeal, whether through writ review in this case or other unfair practice disputes.  Until then, the Board’s City and County of San Francisco decision supplies the operative legal standard for evaluating whether a managerial decision involves a duty to bargain.

Second, this case remains significant for employers facing unfair practice litigation concerning COVID-19 vaccination policies.  The Board signaled that its prior Regents decision will not necessarily place a COVID-19 vaccine policy outside the scope of representation.  PERB’s reasoning did rely in large part on the lack of developed factual record.  However, its decision signals that changing pandemic circumstances may result in a different outcome in a vaccine-related decisional bargaining dispute.  Public employers would do well to consider the impact of this case on any active disputes involving COVID-19 vaccine policies, including where an employer’s vaccine policy arises from a countywide public health order.

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

[1] The Board uses a different test to evaluate whether a decision lies in the scope of representation under the Educational Employment Relations Act (“EERA”) for school and community college districts.  (See Cerritos Community College District (2022) PERB Dec. No. 2819, p. 20.)  As this decision concerns MMBA-specific judicial and Board precedent, it is unclear the extent to which this new legal standard affects the scope of representation test under EERA.

[2] See a link to our firm’s prior alert on this California appellate court decision. 

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