Employers Cannot Impose Terms of Employee Pension Contributions Different From Those Stated in its Last, Best, and Final Offer

In IBEW Local 1245 v. City of Roseville, PERB Decision No. 2505-M, PERB reaffirmed that a public employer commits an unfair labor practice when it imposes terms and conditions of employment different from those stated in a last, best, and final offer (“LBFO”).   Although that general principle is well established, this decision explains how that principle applies to an employer’s proposal regarding pension contributions.

Prior to 2011, the City of Roseville had agreed to pay the entire 8% member contribution to CalPERS on behalf of its employees, making it an “Employer Paid Member Contribution” (“EPMC”).  During negotiations for a successor MOU, the City first proposed to totally eliminate EPMC so that the employees would pay the entire 8% member contribution.  The Union rejected that proposal, so the City then proposed gradually “phasing in” employees paying the member contribution over three years.  The Union again rejected the proposal.  On December 31, 2010, the MOU expired, but the parties continued to bargain.

In April 2011, the City made a LBFO which proposed a one-year MOU with employees paying half of the member contribution (put another way, employees would pay 4% of the 8%) “for calendar year 2011.”  The parties both understood that the contribution would be “annualized,” meaning that if the proposal was not adopted until July, the employer could deduct up to 8% from each paycheck for the remainder of the year in order to make the total deduction 4% for the entire year.

When the Union rejected the LBFO, the employer imposed those terms on the Union and began deducting 8% from each paycheck.  However, when the new calendar year began on January 1, 2012, the City continued to deduct the full 8% from each paycheck, despite the fact that the LBFO explicitly said that employees would pay 4% towards the member contribution “for calendar year 2011.”

The Union filed an unfair practice charge against the City alleging both bad faith bargaining in general and a unilateral change with regard to employee pension contributions.  The Union argued that since the employer’s LBFO was for 2011 only, the employer committed a unilateral change by continuing to make employees pay the full 8% member contribution in calendar year 2012.

Although PERB found that the Employer had not bargained in bad faith, it found that the Employer committed a unilateral change by continuing to deduct the full 8% member contribution from employees’ paychecks beyond calendar year 2011.  Since the LBFO proposed employees pay 4% of the member contribution for calendar year 2011, when the City continued deducting the full 8% member contribution from paychecks into 2012, it was imposing terms of employment worse than what it proposed in the LBFO.

On April 25, 2012 the City and the Union agreed to a successor MOU, so as a remedy, PERB ordered that employees be “made whole” for the member contribution illegally deducted from pay checks between January 1, 2012 and April 25, 2012.  PERB further ordered that the City pay employees 7% annual interest on the amounts illegally deducted.

One lesson from this case is that when the employer’s LBFO states a specific term, it is an unfair practice to maintain takeaways specified in the LBFO beyond that term.  This means that it is very important to study the exact language of an LBFO.

In this decision, PERB also clarified the rules of proof for bad faith bargaining charges.  PERB held that a charging party may rely on conduct alleged in the unfair practice charge, but not mentioned in the complaint, to demonstrate bad faith bargaining.  This holding reinforces PERB’s rule that it analyzes “the totality of the conduct” when considering charges of bad faith bargaining, not just those particular incidents mentioned in the complaint.

For more information regarding public sector law, pensions, and bad faith bargaining, contact your labor law counsel.

By Robert Szykowny | January 9, 2017

Legal Developments