PERB Provides Clarity on Risk for Repeated Labor Violations in Context of Interest Arbitration Bargaining Dispute

05.05.2023

On April 26, 2023, the Public Employment Relations Board (“PERB” or “Board”) provided additional guidance on how a previous Board decision can impact a public employer’s subsequent liability for an unfair practice charge.  Specifically, the Board returned to consider whether the City and County of San Francisco (“City”) had violated the Meyers-Milias-Brown Act (“MMBA”) based on how it interpreted its local rules (specifically, interest arbitration rules contained in the City Charter) and applied those rules at the bargaining table.  (City and County of San Francisco (“CCSF II”) (2023) PERB Dec. No. 2858-M.) Ultimately, the Board found that the City violated the MMBA, by refusing to negotiate over retroactive wage adjustments based on its view of its local rules.  

The Board rooted its conclusion in its previous consideration of the same interest arbitration “local rules” in City and County of San Francisco (“CCSF I”) (2020) PERB Dec. No. 2691-M, signaling to parties of the importance of considering previous Board decisions involving the same policies and/or legal issues when taking action at the bargaining table. The Board’s decision in CCSF II also contains unique guidance on how previous litigation history, and a party’s subsequent decision to come into compliance with labor law, impacts the Board’s assessment of remedies.

CCSF I: Prior Decision on City’s Interest Arbitration Provisions

The City Charter contains interest arbitration provisions, which govern negotiations. Section A8.409-4(k) sets deadlines for submission of bargaining agreements to the Board of Supervisors, namely: (1) if an agreement is submitted on or before May 15, the agreement shall be effective upon ratification as of July 1 of the same calendar year; (2) if an agreement is submitted after May 15, the agreement shall not be effective until July 1 of the next calendar year.  This provision also specifies that an agreement reached during the term of an existing labor contract which results in a net reduction (or no net increase) in cost to the City may be effective at any time.

In 2014, the City and SEIU engaged in expansive negotiations covering numerous bargaining units and thousands of employees.  The City maintained that under Section A8.409-4(k), it was required to complete or cease negotiations by May 15 of a “negotiation cycle” in order to ensure a collective bargaining agreement would be effective that same calendar year.  SEIU countered by pursuing an unfair practice charge, alleging that the City’s interpretation of Section A8.409-4(k) violated the Meyers-Milias-Brown Act (“MMBA”).  PERB considered whether, on its face or as applied under the facts of the case, the City’s interpretation violated the duty to bargain in good faith — among other things, by setting arbitrary deadlines on the bargaining timeline, imposing a “one way ratchet” favoring management’s priorities (cost savings allowed at any time, while limiting mid-contract negotiations), and by foreclosing good faith participation in impasse resolution procedures.[1] After citing a history of judicial and Board case law involving interpretations of the City’s interest arbitration provisions[2], the Board held that the Section A8.409-4(k) of the Charter was valid on its face, only to the extent that the City interpreted i.e. applied it to avoid favoring its own interests in bargaining and permit enough time to bargain in good faith.  (CCSF I, supra, Dec. No. 2691 at p. 23.)  The Board also found that as applied, the City’s interpretation violated the MMBA.  (Ibid, at p. 42.)  Further, the Board’s Order provided specific direction to the City, to ensure that it complied with the MMBA in how it applied this Charter provision during subsequent negotiations with SEIU or other unions.  Specifically, the Board directed the City to interpret this Charter provision, so as to allow mid-contract negotiations which result in cost increases (such as those resulting from wage increases) which take effect mid-year or retroactive.  (Ibid, at pp. 31, 36, 42-47.)

The City filed a petition for writ of extraordinary relief with the Court of Appeal in early 2020, seeking to reverse the Board’s CCSF decision.  On October 28, 2021, the appellate court summarily denied the City’s petition.  The City then sought relief from the California Supreme Court, which was denied on December 15, 2021.

Background for CCSF II

In early 2019, the City and Operating Engineers Local Union No. 3 (“OE3”) began bargaining for a new memorandum of understanding (“MOU”) for a supervising probation officers unit. The parties reached an agreement, which took effect shortly thereafter on July 1, 2019.  The MOU contained a mandatory mid-contract reopener, requiring the parties to bargain on a single outstanding economic issue (i.e. compensation for investigators engaged in firearm training).  In the course of re-opener negotiations, OE3 proposed retroactive compensation, while the City did not. During the parties’ December 5, 2019 session, the City advised that it had not proposed retroactive compensation, as it believed that the Charter barred retroactivity in this instance. 

On February 10, 2020, the City issued another economic proposal which (if agreement were reached) would go into effect on July 1, 2020.  The City cited the Board’s Order in the CCSF I decision, but observed that it was being appealed, that a retroactive proposal violated the Charter, and that it would maintain “status quo” on the issue.  Following additional discussions in which the City refused to consider a retroactive economic offer, OE3 filed an unfair practice charge on March 17, 2020.  Shortly thereafter, on April 21, 2020, the City shifted direction and presented a proposal with a retroactive element. The parties reached agreement in early May 2020, with a lump sum payment covering a retroactive period (FY 2019-2020).

An administrative law judge dismissed the complaint, based on an analysis of CCSF I’s order and the facts of the case.  The Board agent reasoned that the City’s bargaining stance was excused by its having appealed PERB’s decision, and subsequent agreement to a retroactive wage increase.  OE3 filed exceptions to contest this dismissal. 

CCSF II Board Decision

On appeal, the Board reversed and found that the City violated the MMBA.  The Board summarily cited to its reasoning in its prior decision (CCSF I) regarding why the City’s interpretation of Section A8.409-4(k) of the Charter was inconsistent with the MMBA.  Among other reasons previously cited by the Board, PERB found that the City violated the MMBA, by setting an arbitrary deadline for negotiations (based on its view of Section A8.409-4(k)) and declared impasse prematurely.  (CCSF I, supra, Dec. No. 2691 at pp. 39-41.)  The Board had also found the challenged sections of the City Charter to be inconsistent with the MMBA, insofar as the City applied them to allow mid-year cost savings during mid-contract negotiations, while precluding mid-contract negotiations involving mid-year wage increases.  (CCSF I, supra, Dec. No. 2691 at pp. 45-46.) The Board in CCSF II concluded that the City failed to abide by its previous direction, when its “unlawful interpretation caused the City to refuse for more than three months to consider, much less bargain about, OE3’s retroactive pay proposal” — which involved “a per se failure to bargain in good faith.”  (CCSF II, supra, Dec. No. 2858, at p. 12.) 

The Board provided blunt direction on what did not lead to liability in this case.  First, the City’s decision to appeal the CCSF I decision was not one of the reasons for the Board’s finding of liability. Second, the Board did not find the City in contempt for failing to abide by the order contained in its prior decision in CCSF I.  Instead, the Board unambiguously held that the facts of the case alone led to its finding of liability.  The Board reasoned as follows:

The City is not immune from liability for new unlawful conduct vis-à-vis OE3 merely because it had interpreted its Charter unlawfully in an earlier instance involving a different union and had a pending appeal regarding PERB’s decision in that case.  Indeed, if anything, the CCSF [I] decision against the City in January 2020 put it on notice that it was acting at its peril if it continued to engage in the same conduct in negotiations with OE3. (CCSF II, supra, Dec. No. 2858 at p. 13.)

The Board also clarified that “retraction” of previous unlawful behavior “does not immunize a party against liability,” particularly when the employer engaged in three months of bad faith bargaining.  (Ibid.) 

The Board then turned to the question of remedy.  PERB refused the union’s request for attorneys’ fees, as it found that the City raised non-frivolous arguments in the case.  However, the Board chose to issue an award of bargaining costs to OE3, noting that the standard for such a remedy was far lower. The union was required only to show that it was more likely than not that the City’s conduct caused harm, and that it was feasible to estimate the financial impact of this harm.  (CCSF II, supra, Dec. No. 2858 at p. 15.)  The Board observed that bargaining costs were proper in this case, given that the City’s conduct (refusal for three months to discuss retroactive pay proposals) “illegally frustrated negotiations” and caused the union to bear “extra bargaining costs.”  (CCSF II, supra, Dec. No. 2858, at p. 17.)  Finally, the Board warned that this remedy could expand, if the City engaged in an extended dispute over the precise amount owed.

Significance

This case hinges to some extent on the unique aspect of the City’s interest arbitration provisions.  However, public employers should take note of several broad principles contained in this decision, which extend beyond the particulars of the dispute.

First, the Board provided a clear warning to public employers of the need to review previous Board decisions involving the same legal issues and/or policy language.  An employer “acts at its peril” if it chooses to follow a course of action in bargaining, which the Board has previously found to be in violation of the MMBA.  The Board sought to avoid the appearance that the City was being penalized as a “re-offender”, but stressed that its prior decision in CCSF I put the agency on notice that its previous view (of the interest arbitration rules) exposed it to unfair practice liability.  Public employers should consider any prior unfair practice litigation history, and use previous Board rulings as functional guidance to navigate the risk of a similar labor violation.

Second, the Board’s decision illustrates that an employer could be required to bear a union’s bargaining costs, if a recurring unfair practice issue leads to a second finding of liability. The Board in CCSF II explicitly noted that the remedial standard was far lower for a union to obtain bargaining costs, that is, that it is more likely than not that the employer’s unlawful conduct caused the union to suffer harm or incur costs in the context of bargaining. Thus, employers should be mindful that it not only risks a finding of a labor violation if it persists in similar unlawful conduct (such as refusing to bargain on retroactive pay increases), but it may be required to bear the union’s costs in attempting to bargain the issue.  While employers may believe they have a defensible position on a contested legal issue in bargaining, they should consider the possibility of monetary damages in doing so.

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

[1] These theories of liability are known as “facial” and “as-applied” violations.

[2] See City and County of San Francisco (2020) PERB Dec. No. 2691-M, pp. 25-30, citing San Francisco Fire Fighters Local 798 v. City and County of San Francisco (2006) 38 Cal.4th 653, City and County of San Francisco (2007) PERB Dec. No. 1890-M, City and County of San Francisco v. International Union of Operating Engineers (2007) 151 Cal.App.4th 938, and City and County of San Francisco (2009) PERB Dec. No. 2041-M.

This AALRR publication is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law.  Applicability of the legal principles discussed may differ substantially in individual situations.  Receipt of this or any other AALRR publication does not create an attorney-client relationship.  The Firm is not responsible for inadvertent errors that may occur in the publishing process.

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