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February 21, 2013

PERB Judge Concludes that the City of San Diego was Legally Obligated to Bargain with Its Employee Unions Regarding a Citizen Sponsored Pension Reform Initiative

On February 11, 2013 Administrative Law Judge Donn Ginoza of the Public Employment Relations Board (“PERB”) issued a Proposed Decision that concluded that the City of San Diego violated its statutory obligation to meet and confer with its unions over a July 2012 pension reform ballot initiative.  In San Diego Municipal Employees Association, et al. v. City of San Diego, ALJ Ginoza determined that, based on the law of agency, when a Mayor announces his endorsement of a citizen’s ballot initiative, the statutory obligation to meet and confer under the Meyers-Milias-Brown Act (“MMBA”) is invoked.

ALJ’s Factual Findings
ALJ Ginoza described the factual background as follows.  To begin, the city of San Diego has a long history of pension reform predating Proposition B which was passed in July 2012 and at issue in this dispute.  As a result of the “strong mayor” form of government adopted by the city in 2006, Mayor Jerry Sanders was tasked with developing proposals and strategies for collective bargaining with represented employee organizations.  In 2006, Mayor Sanders developed propositions affecting pension benefits for city employees which were passed in an election that year.  In 2008, after bargaining to an impasse with the city’s unions, the Mayor developed another ballot measure and presented it to the City Council for approval.  The unions and the City eventually came to an agreement on pension reform and there was no ballot measure that year.

In 2008 then-City Attorney Michael Aguirre issued an opinion which was significant in the ALJ’s reasoning.  In that opinion letter, Aguirre outlined four scenarios for achieving pension reform.  First, the City Council has a constitutional right to present a ballot initiative subject to presentation of the proposed ballot measure to the unions for negotiation.  Second, the Mayor is empowered to propose a ballot measure to amend the Charter provisions pertaining to retirement benefits subject to negotiation with the unions.  Third, the Mayor does not give up his constitutional rights upon becoming elected; however, the initiation or sponsorship of a voter petition drive would be considered as acting with apparent governmental authority and the City would have the same duty to meet and confer with the unions.  Finally, an amendment can be proposed by citizens using the initiative process.

In late 2010 Mayor Sanders began developing a plan to propose and promote a voter campaign for a ballot initiative to achieve pension reform.  The Mayor’s proposal involved replacing the defined benefit plan with a 401(k) style plan.  Eventually, a competing proposal was developed by Councilmember Carl DeMaio, which was similar to the Mayor’s proposal but also included a hard cap on pensionable pay.  The two camps ultimately agreed on a single proposal and a citizen’s petition was circulated starting in April 2011.  In July 2011, an attorney for the San Diego Municipal Employees Association (“SDMEA”) issued a demand to the Mayor to meet and confer over the pension reform ballot initiative.  The SDMEA’s requests were denied and the ballot initiative was passed in the June 2012 election.  Four unions filed unfair practice charges under the MMBA alleging that the Mayor sponsored a ballot initiative while failing to meet and confer with the unions; all four actions were eventually consolidated.

As discussed above, the ALJ was asked to determine if the City, through its agents including Mayor Sanders, violated the MMBA by failing to meet and confer with the unions about the pension reform ballot initiative.  The ALJ noted that the third scenario outlined by City Attorney Aguirre, as discussed above, was directly applicable in this case.  The unions argued that Mayor Sanders developed and promoted a campaign that was designed to avoid the City’s obligation to meet and confer.  Further, the unions contended that the City could not avoid its duty to meet and confer on the basis that the Mayor acted as a private citizen, because the City is liable for the acts of the Mayor through the law of agency.  In response, the City argued that the Mayor was acting as a private citizen and he was lawfully entitled to pursue the citizen’s initiative strategy.  Therefore, according to the City, it was not required to meet and confer.

The ALJ first analyzed whether a unilateral change in the terms of employment had occurred.  He concluded that a unilateral change occurred because the Mayor acted on his intention to pursue pension reform, satisfying the requirement for taking concrete steps towards implementation of a new policy.

Next, the ALJ analyzed whether the City had a duty to meet and confer because of the Mayor’s sponsorship of the ballot initiative.  First, the ALJ determined that by virtue of the MMBA the City and its representatives are required to meet and confer with unions.  The ALJ concluded that the Mayor is unquestionably such a representative because he acts as the City’s chief negotiator.  Moreover, based on the legal principle of agency liability, the Mayor was acting with actual and apparent authority on behalf of the City.  In reaching this conclusion, the ALJ determined that the Mayor was acting within the scope of his employment with the goal of improving the City’s financial health and the City Council ratified the Mayor’s actions by consenting to the initiative and placing it on the ballot.  In addition, the ALJ made a finding of apparent authority based on the Mayor’s numerous public pronouncements in support of the ballot initiative, and also found ratification because of the City’s failure to repudiate the Mayor’s actions.

This Proposed Decision is significant because of the potential implications it has for other cities that are grappling with pension reform stemming from the recession.  For the most part, the Proposed Decision does not discuss the constitutional rights of citizens to pursue ballot initiatives.  For now, because it is a Proposed Decision, it does not invalidate the citizen-passed Proposition B.  Going forward, the City Attorney has vowed that the City will appeal the Proposed Decision to the full PERB Board, and if necessary, the California Court of Appeal and beyond.  As the case is litigated, it will present fascinating and novel issues arising out of the tension between the duty to bargain and the constitutional initiative process.

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