After declaring a fiscal emergency, the City of Los Angeles adopted a mandatory furlough program for its civilian employees. Many employees represented by unions filed grievances against the City, arguing that the furloughs violated memoranda of understanding (California’s equivalent of a collective bargaining agreement) governing the terms and conditions of their employment. When their grievances were denied, these employees requested arbitration, and when the City refused to arbitrate, their union petitioned the Court for an order compelling the City to arbitrate the furloughs dispute.
Eventually, the dispute made its way to the California Supreme Court. In a 4-3 decision, the Court ruled that the City was obligated to arbitrate the grievances.
Most of the City’s arguments relied on the management rights clause found in Article 1.9 of its MOUs. Article 1.9 reads in part: “Except as specifically set forth herein no provisions in this MOU shall be deemed to limit or curtail the City officials and department heads in any way in the exercise of the rights, powers and authority which they had prior to the effective date of this MOU. These rights, powers, and authority include but are not limited to, the right to relieve City employees from duty because of lack of work, lack of funds or other legitimate reasons, and to take all necessary actions to maintain uninterrupted service to the community and carry out its mission in emergencies.”
The Court started its analysis with the proposition that “in deciding whether the dispute at issue is one concerning the interpretation of the MOUs, we are mindful that where the collective bargaining agreement provides for arbitration of all disputes pertaining to the meaning, interpretation and application of the collective bargaining agreement and its provisions, any dispute as to the meaning, interpretation and application of any specific matter covered by the collective bargaining agreement is a matter for arbitration. In deciding whether there is a contractual duty to arbitrate a labor dispute, courts have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim.”
The Court described the grievances as challenging the legality of furloughs under the wage and workweek provisions of the MOUs. The grievances cited a contract article that “employees shall be compensated for 40 hours per week at the regular hourly rate for their class and pay grade,” and pointed to salary schedules that are based on a work year consisting of 52 weeks of 40 hours each.
The Court concluded that “without question, the employee grievances at issue present a dispute concerning the interpretation of the MOUs. Specifically, it is a dispute concerning interpretation of the MOUs’ provisions generally establishing a 40-hour workweek, reserving to the City the right to relieve City employees from duty, reserving to the City the right to take all necessary actions to maintain uninterrupted service to the community and carry out its mission in emergencies, and allowing the City to exercise its reserved management rights except as specifically set forth herein. Because the dispute concerns the interpretation of the MOUs, the dispute is one that the City is contractually obligated to arbitrate unless the dispute falls within an express exemption from arbitration.
“In summary, the City argues that because imposing employee furloughs during a fiscal emergency is a reserved management right, and because as to such reserved rights arbitration is limited to the consequences of the decision rather than the decision itself, the employees cannot challenge the City’s furlough decision through arbitration. The City’s argument fails because the contractual language on which it relies as establishing an express exemption from its general obligation to arbitrate contractual interpretation disputes is not free from ambiguities and because resolving those ambiguities would draw us into the merits of the parties’ underlying dispute. Pertinent here is the United States Supreme Court’s observation that if courts, in order to determine arbitrability, were allowed to determine what is permitted under a management rights clause and what is not, the arbitration clause would be swallowed up by the exception. Of course, the City could enter into MOUs expressly excluding furlough disputes from arbitration, but the MOUs at issue here do not unmistakably and beyond any doubt provide for such an exclusion.”
The dissenting judges argued that the Court’s decision “deprives the City of Los Angeles (the City) of its rightful authority to act in a fiscal emergency. Only a specific contract provision could restrict the City’s exercise of its prerogative. There is no such provision. Therefore, the decision to impose furloughs was a reserved management right, beyond the scope of arbitration.”
City of Los Angeles v. Superior Court, 302 P.3d 194 (Cal. 2013).