Public Employer’s Refusal to Bargain Impact of PA 54 Implementation Violates PERA

The Michigan Employment Relations Commission (“MERC”) recently adopted (in the absence of an ap­peal) an Administrative Law Judge’s (“ALJ”) ruling that a public employer’s refusal to bargain over the “impact” of implementing Public Act 54 of 2011 (“PA 54”) violated the Michigan Public Employment Relations Act (“PERA”). City of Flint, Case No. C11 K-188 (July 9, 2014).

The ALJ’s decision relies on the distinction between a public employer’s right to unilaterally make certain decisions without bargaining and the related, but sepa­rate, duty to bargain over the “impact” or “effects” that such decisions may have on employees. Although this case is only an ALJ decision and recommended order adopted because there was no appeal, it is instructive on how MERC may address similar issues that will in­evitably arise as public employers implement PA 54 and PA 152.

After the expiration of a collective bargaining agreement (“CBA”) and until a successor agreement is in place, PA 54 prohibits public employers from paying wages or providing benefits to employees at a greater level than the wages and benefits reflected in the CBA at expiration. This means that employees who receive health, dental, vision, prescription, or other insurance benefits under the expired CBA are responsible for any and all cost increases associated with those benefits between the time that a CBA expires and a successor agreement is ratified. PA 54 authorizes public employ­ers to make payroll deduc­tions associated with these increased costs. The Legislature did not make PA 54 a prohibited bargaining subject, nor did the Legislature prohibit bargaining as to the “impact” of a public em­ployer’s “decision” to implement PA 54.

In City of Flint, the parties’ CBA expired in June of 2009. PA 54 subsequently went into effect two years later on June 8, 2011. Before the City’s implementation of PA 54, the open enrollment period for the 2012 medi­cal benefit plan year for the parties’ health insurance expired on May 27, 2011. On July 8, 2012, the City noti­fied the Union that the cost of the health insurance coverage was increasing for the 2012 plan year and that, pursuant to PA 54, the increased costs would be de­ducted from the employees’ pay. Instead of demanding to bargain over the City’s decision to implement PA 54, the Union demanded to bargain over the “impact” of the increase in health insurance costs. In particular, the Union requested that its members be allowed to switch to a lower cost health insurance plan or make other arrangements to help offset the out-of-pocket expense. The City refused the Union’s demand to bargain over the impact of the increased health insurance costs and unilaterally implemented PA 54.

The Union then filed an unfair labor practice charge against the City asserting that the City had a duty to bargain over the impact or effects of the City’s decision to implement PA 54. The City contended that implementation of PA 54 and its refusal to bargain over the impact of that decision were consistent with PA 54 and that IRS rules would nonetheless prohibit the em­ployees in the bargaining unit from changing health insurance plans outside the open enrollment period.

Despite the City’s defenses, the ALJ found that the City violated PERA when it refused to bargain over the impact of implementing PA 54. Under PERA, public employers have a duty to bargain in good faith over wages, hours, and other terms or conditions of em­ployment. Health insurance benefits contained in a CBA are mandatory bargaining subjects. Even after a CBA expires, it is generally a violation for a public em­ployer to unilaterally change a term that is a mandatory bargaining subject. The City did not dispute that it uni­laterally made the decision to pass the increased health insurance costs along to the Union’s members. The City, however, claimed that it did not have a duty to bargain its decision or the decision’s impact on em­ployees because the City needed to comply with PA 54.

The important distinction in this case is between the duty to bargain over the “decision” to implement PA 54 and the separate duty to bargain over the “im­pact” and effect the decision to implement PA 54 has on the employees represented by the Union. Relying on well-established case law, the ALJ found that even when there is no duty to bargain over a particular decision, a public employer may still have an obligation to give a union an opportunity to bargain over the effects or im­pact of the decision. PA 54 is not a prohibited bargain­ing subject under PERA, and further, unlike some of the prohibited bargaining subjects contained in Section 15 of PERA, PA 54 does not specifically prohibit “impact” bargaining.

Additionally, the ALJ found that the City did not investigate in good faith whether the relevant IRS rules actually prevented the employees from changing health insurance plans during the coverage year. The ALJ de­clined, however, to address whether IRS regulations prevent a mid-plan year change in health insurance coverage as urged by the City. Because of the City’s duty to bargain the impact and effects of its decision to im­plement PA 54, the ALJ opined that the City should have engaged the Union in good faith bargaining re­lated to the decision’s impact and effects rather than simply rejecting the Union’s request to bargain. The City had authority to unilaterally implement PA 54 but, after implementation, should have bargained about the impact and effect of the implementation.

This case highlights a critical distinction in PERA between bargaining over decisions and bargaining over the impact and effect of decisions. The same reasoning may affect how public employers are required to bar­gain over the implementation of PA 152 (Michigan Publicly Funded Health Insurance Act) and the impact and effect of such implementation.

As previously reported in the January 30, 2014 edi­tion of School Law Notes, MERC ruled in Decatur Pub Schs, Case No. C12 F-123 and Case No. C12 F-124, that a school district did not have a duty to bargain over the decision to implement PA 152 or the decision whether to use the “hard cap” or “80/20” method of compliance. However, MERC did not address in Decaturwhether a public employer has a duty to bargain the impact of a decision to implement PA 152 or to use the “hard caps” or “80/20” method of computation. Based on City of Flint, school officials should carefully consider a de­mand to bargain over the impact of the decision wheth­er or how to comply with PA 152. Such a de­mand should not, however, stop a public employer from complying with the law.