MERC Upholds Unilateral Imposition of Insurance Cap

On January 21, 2014, the Michigan Employment Relations Commission (“MERC”) upheld an Administrative Law Judge’s Decision and Recommended Order finding that school districts have the right to impose the “cap” option under the Publicly Funded Health Insurance Contribution Act (PA 152 of 2011). Decatur Pub Schs -and- Van Buren Ed Ass’n, Case No. C12 F-123 and Case No. C12 F-124. MERC also found that school districts have no duty to bargain over the method used to comply with PA 152. Thrun Law Firm represented the District for this matter.

PA 152 requires public employers to limit their contributions to employee medical benefit plans by implementing either a “cap” or “80/20” cost-sharing arrangement. Compliance with PA 152 is mandatory for medical benefit plan coverage years beginning on or after January 1, 2012, at the point when the existing collective bargaining agreement expires.

In Decatur, the District’s collective bargaining agreement with the teachers’ union expired on June 30, 2012. Thus, the District had to comply with PA 152 on July 1, 2012. The union demanded to bargain over health insurance, including the cap or 80/20 option. The District agreed to bargain and on May 14, 2012 notified the union that it would implement the cap on July 1, 2012. The union wanted the District to agree to the 80/20 option, but the District refused.

To comply with PA 152 after June 30, 2012 (when the CBA expired), the District then implemented the cap effective July 1, 2012. The union filed an unfair labor practice charge (“ULP”), alleging that the unilateral implementation of the “cap” violated the District’s duty to bargain under PERA.

The ALJ concluded that the decision whether to implement the cap or 80/20 was a mandatory subject of bargaining, but given the impending deadline to comply with PA 152, the District had to ensure compliance with the law to the “statutorily imposed impasse.” Thus, the ALJ dismissed the ULP charge.

On appeal, MERC upheld the ALJ’s decision to dismiss the ULP charge, but disagreed with the ALJ’s reasoning. The District argued that the ALJ incorrectly concluded that the choice between implementing the cap or 80/20 limitation to comply with PA 152 is a mandatory bargaining subject. MERC agreed, concluding that school districts may bargain over the method to implement PA 152, but the choice between the cap or 80/20 limit is within the school district’s discretion. MERC reasoned that “the finding of a statutorily imposed impasse was unnecessary since the choice between the hard caps and 80% employer share is not a mandatory subject of bargaining.”

MERC also rejected the union’s argument that the District should have delayed implementation of the cap while the parties continued to bargain. MERC determined that the District did not have to delay compliance with State law and that the choice of how to comply with the law was within the District’s managerial prerogative.