Local 293 of the International Association of Fire Fighters represents firefighters working for the City of Erie, Pennsylvania. A clause of Local 293’s collective bargaining agreement provided that the firefighters’ pension fund “shall be governed in accordance with statutes of the Commonwealth of Pennsylvania and City of Erie ordinances or regulations now presently in effect and promulgated.”
In 2004, the City enacted an amendment to its ordinances to provide a Partial Lump Sum Distribution Option (PLSDO) pension benefit. While not technically a Deferred Retirement Option Plan (DROP), the PLSDO provided DROP-like benefits in that it permitted firefighters to receive a lump sum payment for a reduced monthly pension benefit. The Plan was structured so that the City would not forfeit state funding for Plan participants. However, the State’s Auditor General later issued a finding criticizing and describing as illegal certain aspects of the Plan that pertained to the City’s election of state aid for Plan participants.
When the City responded by repealing the Plan, Local 293 filed an unfair labor practice complaint with the Pennsylvania Labor Relations Board, alleging that since retirement benefits were a mandatory subject for collective bargaining, the City was not free to change or repeal the Plan without first negotiating with Local 293. When the Board found that the City committed an unfair labor practice, the City challenged the Board’s decision through the court system.
The Pennsylvania Supreme Court affirmed the Board’s order and rejected the City’s appeal. The Court found that by stating that “policemen or firemen…shall…have the right to bargain collectively with their public employers concerning the terms and conditions of their employment, including compensation, hours, working conditions, retirement, pensions and other benefits,” the State’s collective bargaining law clearly made retirement benefits mandatory for collective bargaining. The Court also found that “the fact that a public employer changes benefits through the enactment or repeal of an ordinance does not alter this calculus. Indeed, if this were the case, a public employer could grant benefits through ordinances and simply unilaterally repeal them when so desired. We warned about such a scenario in a prior case where we explained that the law’s specific exercise of the Commonwealth’s police power through the granting of collective bargaining rights is not subservient to ordinances created through general police powers. It cannot be seriously suggested that this authority precludes mandatory collective bargaining over wages, hours of work, and conditions of employment. Indeed, if this were the case, a borough could eviscerate the very essence of statutorily-mandated collective bargaining by legislating in areas which are traditionally subject to mutual agreement through collective bargaining under its power to regulate the health, safety, and general welfare of its citizens.”
The City’s principal contention was that “it was not required to bargain over the rescission of these pension benefits because, according to the City, such benefits were not bargained for, and it cannot be said that the City gained a bargaining advantage that flowed from granting these benefits. In essence, the City suggests that its unilateral repeal of the Plan without bargaining with the Union over the elimination of this benefit is an exception to the general obligation to bargain over mandatory subjects of bargaining.”
The Court was unconvinced by the City’s argument. The Court acknowledged that “when faced with an illegal term or condition of employment, an employer may unilaterally change the term if it is not incorporated into the collective bargaining agreement between the parties, but may not reject such a term if it was part of a collective bargaining agreement, as the employer benefitted during negotiations from agreeing to such benefit. This necessary premise in these decisions of illegality underscores the error in the City’s argument that there is a broad exception to the general obligation to collectively bargain.
“The City betrays no recognition of the crucial distinction between a legal term and an illegal term and instead suggests the legality of the term in question is irrelevant. The City’s novel attempt to extend an exception to legal subjects of bargaining fails to appreciate the unambiguous language of the law and foundational principles of collective bargaining which requires negotiation over mandatory subjects such as pensions. Simply stated, the law expressly and broadly requires that the parties must bargain over legal mandatory subjects of bargaining, such as pension benefits, before a party may unilaterally change such benefits. This fundamental mandate of labor law is applicable regardless of whether the collective bargaining agreement expressly mentions such benefits; whether they have been incorporated into the agreement by reference; or whether the agreement is silent on that mandatory subject of bargaining.”
City of Erie v. Pennsylvania Labor Relations Bd., 2011 WL 5865676 (Pa. 2011).
This article appears in the February 2012 issue.