Court Finds That “A Promise Is A Promise” In Striking Down Ordinance Reducing Retirement Benefits

The City of Cranston, Rhode Island collectively bargains with Local 301 of the International Brotherhood of Police Officers and Local 1363 of the International Association of Fire Fighters. Both the City’s police and fire contracts contain provisions over pension benefits. In addition to the contracts, the City has codified in ordinances the pension benefits to be granted officers upon their retirement.

Fiscal instability in the City’s pension plans began to build during the 1980s as the result of a massive unfunded liability in the plan caused by the failure of the City to properly fund it over many years. That instability caused several of the City’s bond rating agencies to warn that the City must address the unfunded pension liability.

In response to that pressure, the City requested that Local 301 renegotiate the collective bargaining agreement that had already been agreed to and was to remain in effect from July 1, 1994 through June 30, 1997. No successful renegotiations happened. In late 1996, the City Council enacted Ordinance 96-56, which unilaterally amended the benefits contained in the prior police pension ordinance. Ordinance 96-56 incorporated provisions of the previous pension ordinance and actually extended some cost-of-living adjustments to pensions.

Eventually, the police contract was resolved through binding arbitration. After the arbitration, the City and Local 301 entered into a memorandum of understanding that incorporated essentially all of the benefits in Ordinance 96-56, as well as a few additional pension provisions that had been provided for in the 1994-1997 collective bargaining agreement.

In January 2003, a new administration took over in Cranston, led by Mayor Stephen Laffey. Shortly thereafter, the City Council, in concert with the mayor, enacted Ordinance 03-32, which repealed Ordinance 96-56 and provided reduced benefits and other terms of retirement. The ordinance did not contain any reference to the memorandum of understanding. Local 301 challenged the ordinance in arbitration. An arbitrator ruled that the City violated the collective bargaining agreement when it repealed Ordinance 96-56, and required the City to “make whole all former employees who were denied the benefits of the cost-of-living escalation clause by action of the City Council when it repealed Ordinance 96-56.”

Very much the same history occurred between the City and the firefighters. An arbitrator eventually ruled that the City’s efforts to retroactively repeal an ordinance granting enhanced benefits violated the collective bargaining agreement. The City then challenged the decisions of the arbitrators in court. A judge rejected the City’s arguments.

At the heart of the City’s claim was the argument that the labor organizations had no standing to file grievances that essentially asserted the rights of retirees rather than active employees. The Court found that “although the City was not obligated to bargain on the subject of benefits for all existing retirees, the mayor, for better or worse, chose to bargain on this permissive subject. It is apparent to this Court that the City cannot now abandon its contractual duties to provide retirees with the pension benefits it promised in collective bargaining agreements because the City regrets its decision to bargain on this matter.”

The Court observed that “in retrospect, this action by a previous mayor and City administration was arguably ill-conceived and detrimental to the long-term fiscal health of the City. However, on the facts before the Court, a promise is a promise – notwithstanding the adverse and unforeseen consequences associated with it.”

City of Cranston v. International Brotherhood of Police Officers, Local 301, 2005 WL 375087 (R.I.Super. 2005).

This article appears in the May 2005 issue