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Unilateral Change from “80/20” to “Hard Caps” During Term of a Contract Violates PERA


June 16th, 2014

A Michigan Employment Relations Commission (“MERC”) Administrative Law Judge (“ALJ”) recently held that a school district’s decision to unilaterally change from an 80/20 contribution to a “hard cap” during the term of a collective bargaining agreement, when hard cap was included in the agreement, vio­lated the Michigan Public Employment Relations Act (“PERA”). Garden City Pub Schs, Case No. C13 K-180 (April 25, 2014).

PA 152 requires public employers to limit their contributions to employee medical benefit plans by implementing either a “hard cap” or “80/20” cost-sharing arrangement. In Decatur Pub Schs, a case handled by Thrun Law Firm earlier this year, MERC found that a school district’s unilateral decision to impose the “hard cap” cost-sharing arrangement when its CBA expired did not violate PERA. In Decatur, MERC also found that a school district did not have a duty to bargain over the method used to comply with PA 152. MERC, however, did not identify the selection of a PA 152 compliance method as a prohibited or illegal bargaining subject; deciding in­stead to remain silent on that issue.

In Garden City, the parties’ CBA ran from September 1, 2011, until August 31, 2014. The CBA re­quired the district to provide bargaining unit mem­bers with a specific health care plan and to pay 80% of the premium for the health care plan for the CBA’s term. The district adopted the “80/20” compliance method and continued to renew its “80/20” compliance method annually.

In September 2013, the district sought ways to reduce expenditures after discovering a decline in student enrollment and increases in health insurance rates. Effective January 1, 2014, the district unilaterally changed the health insurance plan specified in the CBA and instituted a “hard cap.” The district at­tempted to select a lower cost health insurance plan with coverage options that would still offer the same level of coverage to bargaining unit members.

The union filed unfair labor practice charges al­leging that the district repudiated the CBA by changing the health insurance plan options available to employees and by adopting a hard cap despite the explicit language in the CBA requiring the district to pay 80% of the health insurance plan premiums.

The ALJ opined that because the CBA named a specific health insurance plan, the district’s decision to unilaterally change the health insurance plan dur­ing the life of the CBA constituted a “repudiation” of the agreement and violated PERA.

The ALJ next analyzed the district’s decision to unilaterally change its compliance method and ignore the CBA in light of MERC’s decision in Decatur. The ALJ noted that if a school district’s PA 152 compliance method is a prohibited or illegal bargaining subject, then the CBA provision at issue would not be enforceable. The ALJ determined, however, that the choice of a PA 152 compliance method is not a prohibited or illegal bargaining subject but, rather is a permissive bargaining subject. The ALJ further held that when a school district agrees to a contract provision that requires it to elect the “80/20” compli­ance method, its repudiation of that contract provi­sion violates its duty to bargain in good faith under PERA. Thus, the ALJ determined that the district unlawfully repudiated its CBA by unilaterally chang­ing its PA 152 compliance method that was specifi­cally named in the agreement during the life of the agreement.

This case is one of the first decisions regarding PA 152 since MERC’s ruling in Decatur. School offi­cials should ensure that CBAs are reviewed and con­sider pre-negotiation revisions to provisions that re­strict how the school district elects to comply with PA 152 if the district wishes flexibility during the term of the CBA.