Saturday, April 25, 2009

Court of Appeal Holds Interest Arbitration Statute Unconstitutional

In 2000, the Legislature passed a statute, known as SB 402, which required local governments to engage in "interest arbitration" after bargaining with local public safety unions to impasse over wages, hours and other terms and conditions of employment. ("Interest arbitration," as opposed to "grievance arbitration," is a process where an arbitrator actually determines the substance of a contract between an employer and an employee organization.) Local governments felt that this statute unconstitutionally impaired their power to set employee salaries. Eventually, after a good bit of litigation, the California Supreme Court declared SB 402 unconstitutional under two provisions of the California Constitution: Article XI, Section 1 (which gives county boards of supervisors power to set county employee salaries) and Article XI, Section 7 (which forbids the delegation of "municipal functions"). County of Riverside v. Superior Court, 30 Cal. 4th 278 (2003). (I represented the County in the case.)

In response to County of Riverside, the Legislature passed a new statute ("SB 440"). SB 440 retains interest arbitration, but provides that the arbitrator's decision can be overturned by a unanimous vote of the local governing body. The Court of Appeal, First Appellate District, Division Five, has now held the statute unconstitutional, holding that it suffers from the same constitutional defects as its predecessor. The case is County of Sonoma v. Superior Court, and is available here.

With respect to Article II, Section 1(b), the court reaffirmed the holdings in County of Riverside that that provision gives county board of supervisors exclusive power over the salaries of county employees (both Sonoma County and Riverside County are general law counties) and that the amount of these salaries (as opposed to the process by which they are set) is a matter of local, not statewide, concern. Although the statute gave a unanimous board the power to overturn an interest arbitration award, the court held that this amounted only to a veto--i.e., the board had no power to set salaries itself, but could only veto the decision made by the arbitrator. The court also held that the reference to "governing body" in Article XI, Section 1(b) meant a majority of the governing body, so that giving a single board member the power to impose an arbitrator's award violated that provision. Indeed, because the statute required a unanimous vote of all members to overturn an award, the award would become binding if a board member couldn't vote because of illness. This, the court said, was the kind of substantive interference with the board's power to set salaries that was unconstitutional. Finally, the court rejected the claim that the unanimity requirement could be severed from the rest of the statute, because it couldn't say with confidence that the Legislature would have enacted such a measure.

With respect to article XI, section 11(a), the court held (as had the court in County of Riverside), that the interest arbitration statute impermissibly delegated to a private arbitrator power over county money and the power to set county employees salaries.

It's hard to see why the California Supreme Court would take this case, even though the issue is important. The Court laid down the governing law in County of Riverside and this decision largely follows it.

Congratulations to Jeff Sloan and his firm for an outstanding victory.

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