Labor Law Changes: The Meltdown of PERA Section 15b (Public Act 54 of 2011)

This article is the second in a series analyzing recent labor law changes. This month’s topic examines the repeal of Public Employment Relations Act (PERA) Section 15b, MCL 423.215b, widely referred to as PA 54. Since June 8, 2011, PA 54 has prohibited public employers from automatically increasing wages and benefits, including step, lane, and longevity increases, during the time between the expiration of a collective bargaining agreement (CBA) and the ratification of its successor. PA 54 also prohibited retroactive increases to wages or benefits.

During its 2023 session, the Michigan Legislature passed, and the Governor signed, House Bill 4044 repealing PA 54 with an anticipated effective date in March 2024 (91 days after the current legislative session adjourns). The repeal of PA 54 will reestablish Michigan labor law as it existed before June 8, 2011, when wage and benefit increases continued past a CBA’S expiration.           

Michigan Caselaw

Before PA 54’s enactment in 2011, Michigan caselaw established that the terms of mandatory bargaining subjects in an expired contract had to continue until there was an impasse or a new agreement was reached. Whether an impasse has been reached is fact specific but, in general, it occurs when, despite both parties’ best efforts to reach agreement, each is unwilling to move from its position. Wages and benefits were mandatory bargaining subjects and, therefore, bargained wage increases though steps, lanes, and longevity continued to be in effect after the expiration of a CBA.

In a 1984 Michigan Court of Appeals decision, a city unilaterally decided that it would not pay Cost of Living Adjustments (COLA) during negotiations. The union filed an unfair labor practice charge alleging that the city failed to meet its duty to bargain. The court upheld MERC’s finding that the city engaged in an unfair labor practice. The court held that because the COLA provision was a mandatory bargaining subject and was in the CBA, it could not be changed unilaterally absent an impasse. 

In a 1988 decision, a union brought an unfair labor practice charge against a county because it unilaterally changed the COLA formula after the CBA had expired. Instead of using the Consumer Price Index (CPI) that was in effect at the end of each quarter when payments were due, the county based payments on the CPI that existed at the time the CBA expired. The court found that when a cost of living provision establishes a practice or policy of making regular cost of living adjustments to wages, this provision survives the CBA’S expiration date under PERA.

The county argued that the union had waived its rights to bargain over COLA payments after the contract expired. The court, however, reasoned that because there was not a “clear and unmistakable” waiver, the union had a continuing right to bargain COLA. The court’s example of clear and unmistakable waiver language was: “Upon expiration of the agreement, COLA payments will no longer be made and shall not be considered mandatory subjects of bargaining.”

Upon PA 54’s repeal, school officials will be required to honor terms in the CBA regarding wages and benefits even after the agreement expires, unless the parties reach an impasse or the CBA contains a clear and unmistakable waiver of this obligation.

Employer Considerations

School officials should consider the impact that PA 54’s repeal will have on the school’s collective bargaining strategies and obligations under PERA.

School officials must grant automatic steps and lanes beyond the CBA’s expiration date unless express language negotiated by the parties prevents automatic increases or until the parties reach an impasse. Members of the school’s collective bargaining team should remember that any waiver of the duty to bargain a mandatory bargaining subject, such as continuing increases to wages and benefits, must be clear and unmistakable. School officials will otherwise be under a duty to bargain such issues.

When preparing for future negotiations, school officials should anticipate the continued cost of wage and benefit terms beyond a CBA’s expiration and should take into account these increased costs when developing financial proposals for a successor agreement.

Expect the unions to request retroactive pay increases beyond CBA expiration. Because PA 54’s repeal results in loss of table leverage in the school’s favor, school officials must consider other strategies to motivate a deal.

Please contact a Thrun labor attorney if you have questions regarding the repeal of PA 54 or the effect it may have on your collective bargaining agreement.