Appellate Court Upholds City of San Diego’s Pension Reform Measure Against Unfair Labor Practices Charge

by Reed Smith
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In City of San Diego v. Public Employee Relations Board (April 11, 2017), the Fourth District Court of Appeal considered an unfair labor practices challenge brought by unions against the city of San Diego under the state’s Meyers-Milias-Brown Act (“MMBA”). The unions alleged that the city’s mayor’s involvement with a 2012 pension reform initiative converted a citizen-sponsored initiative (“CPRI”) to a city-sponsored measure, thereby requiring the city to engage in meet-and-confer under MMBA before placing the measure on the ballot, which the city failed to do. The initiative mandated that new city employees, except police officers, be provided with a 401(k)-style defined contribution plan, rather than the city’s traditional defined benefit retirement plan.

The mayor was involved in initiating, sponsoring, promoting, and implementing the CPRI. The union’s challenge was originally filed in the state Public Employee Relations Board (“PERB”), with jurisdiction over public employee labor disputes. The PERB issued an administrative decision siding with the unions, finding that the initiative qualified as a city-sponsored measure, and that the city had violated its meet-and-confer obligations. On appeal, the Fourth District Court of Appeal disagreed with nearly every factual and legal determination made by the PERB, and reversed the agency’s determination. The court concluded:

[A] city has no obligation under the MMBA to meet and confer before placing a duly qualified citizen sponsored initiative on the ballot, and only owes such obligations before placing a governing-body-sponsored ballot proposal on the ballot. We further conclude PERB's fundamental premise—that under agency principles [Mayor] Sanders's support for the CPRI converted it from a citizen-sponsored initiative on which no meet-and-confer obligations were imposed into a City Council-sponsored ballot proposal to which section 3504.5's meet-and-confer obligations became applicable—is legally erroneous. Opinion at 65.

The court found that the City Council was not bound by the mayor’s actions despite his apparent authority to speak on behalf of the city in labor matters, and despite the fact that the mayor announced his plans for a citizens’ initiative at a press conference at City Hall; sent out emails as mayor to voters; gave media interviews; formed a support committee to raise campaign contributions; attended strategy sessions with proponents for another similar pension reform ballot measure; and publicly campaigned for the measure. He often identified himself not as a private citizen but as mayor, and used the services of city staff to promote the measure. Nevertheless, the court determined that these actions were within his rights as a private citizen and an elected official, and could not be attributed to the City Council as official acts of that governing body.

Although several people occupying elected and nonelected positions in City's government did provide support for the CPRI, we conclude PERB erred when it applied agency principles to transform the CPRI into a governing-body-sponsored ballot proposal. Because we conclude that, notwithstanding the support given to the CPRI by Sanders and others, there is no evidence the CPRI was ever approved by City's governing body (the City Council), we hold PERB erred when it concluded City was required to satisfy the concomitant "meet-and-confer" obligations imposed by Seal Beach for governing-body-sponsored charter amendment ballot proposals.” Opinion at 6.

Comment

The decision plows no new ground in California pension law—it has always been the case that a state or local legislative body is free to offer prospective new employees any retirement benefits it wants, or none at all. The decision is also unremarkable in its interpretation of the California labor laws.

What is remarkable, and portentous, is the court’s parsing of the degree to which courts should defer to the determinations of state and local administrative agencies, like our retirement boards. For disputed factual questions, the court applied the most deferential standard of review (Opinion at 22), but in this case found the material facts largely undisputed. For questions of law, however, the court referred to this as a “complicated question” that requires a court to “distinguish between two classes of interpretive actions by the administrative body—those that are ‘quasi-legislative’ in nature and those that represent interpretation of the applicable law.” Opinion at 23-24. For the former, the court sustained the level of deference afforded under the prevailing Yamaha standard, stating that its scope of review is narrow and limited to the question of whether the administrative rule lay within the lawmaking authority delegated to the agency by the Legislature. When engaged in rule-making, an agency is acting as a legislative body creating rules with the dignity of statutes, and courts regularly defer to the discretionary actions of the legislative branch. Not so, however, when the agency is “construing a controlling statute” that governs the agency’s activities. Opinion at 24-25. For an agency’s interpretation of the laws it is charged with enforcing, the court departed from the Yamaha standard, and held that the standard of judicial review is independent judgment. Opinion at 24. With legal interpretations, the judicial branch is afforded ultimate authority. Because an interpretation of law is only an agency's legal opinion, however "expert" the agency may be in the field, the court held that it commands a commensurably lesser degree of judicial deference.

Where dispositive facts are undisputed and purely legal issues remain requiring interpretation of a statute an administrative agency is responsible for enforcing, courts exercise independent judgment, and an agency's interpretation is one of several interpretive tools that may be helpful. In the end, however, the court must independently judge the text of the statute, citing Azusa Land Partners v. Department of Indus. Relations (2010) 191 Cal.App.4th 1, 14 (internal marks omitted). Opinion at 27.

In affording scant deference to the determinations of the state administrative agency charged with primary responsibility for interpreting the state’s labor laws, the Fourth District Court of Appeal erodes a key aspect of the long-respected Yamaha doctrine. The ruling is sharply at odds with that of the First District Court of Appeal in City of Pleasanton v. Board of Administration (2012) 211 Cal.App.4th 522, 539:

Where our review requires that we interpret the PERL [Public Employees Retirement Law] or a PERS regulation, the court accords great weight to PERS interpretation….This is in recognition of the fact that as the agency charged with administering PERL, PERS has expertise and technical knowledge as well as an intimate knowledge of the problems dealt with in the statute and the various administrative consequences arising from particular interpretations. (internal marks and citations omitted).

Click here to view the decision.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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