City Required To Abide By Wage Terms In Contract

The Albuquerque Police Officers’ Association and the City of Albuquerque were parties to a collective bargaining agreement running from July 1, 2008 through June 30, 2011. The contract contained a provision that provided compensation increases for the second and third fiscal years. The City implemented the two salary increases contemplated by the Contract during the 2009 and 2010 fiscal years. However, at the time of the April 1, 2010 submission of the Mayor’s 2011 fiscal year budget proposal to the City Council, the City’s department of finance and administrative services projected a budget shortfall of approximately $66.6 million. As a result of the revenue shortfall carrying into the next budget, City revenues would only support an appropriation level of $455 million. This was $20 million less than the $475 million appropriation level previously anticipated for fiscal year 2011. The 2011 salary increases provided for in the Contract were expected to cost $9.8 million.

The Mayor proposed to balance the budget by utilizing a sliding scale wage reduction plan for all City employees. The City Council adopted the Mayor’s proposal to balance the budget, and enacted a budget for the 2011 fiscal year that did not include funding for pay raises scheduled to begin on July 1, 2010.

The Association sued the City, challenging the City’s failure to implement the negotiated annual salary increase for the 2011 fiscal year. The Association argued that, in approving the Contract in 2008, the City Council implicitly appropriated the funding to cover the entirety of the annual wage increases through fiscal year 2011, or that sufficient funding was appropriated and available for the City to comply with the Contract wage increases in fiscal year 2011.

The New Mexico Court of Appeals held: “We agree with Association that the City adopted the appropriate resolution in 2008 to cover the economic obligation for the new three-year Contract. Multi-year collective bargaining agreements are beneficial to both sides and provide stability and continuity for both management and public employees. The City’s bargaining ordinance does not prohibit the City from adopting a Contract that has fiscal implications over several years. As a fiscal protection to the City, the Contract provides a vehicle to re-open the Contract to address economic items. This re-opening requirement ensures that the City has a mechanism to address unexpected deficit spending or budgetary shortfalls that arise during the subsequent years of multi-year collective bargaining contracts.

“However, the City did not comply with the requirements of its own ordinance. Thus, subject to the City’s absolute right to reopen the Contract for unexpected economic circumstances that occur, we construe the City Council’s approval and resolution to establish a binding Contractual obligation to provide the annual compensation for 2009, 2010, and 2011 that is set forth in the Contract.

“The parties to a multi-year collective bargaining agreement must be able to rely upon the negotiated terms of their initial agreement. As a result, the Association was entitled to the multi-year salary increases specifically set forth in the Contract and appropriated by the City Council’s resolution in 2008. The Association submitted an affidavit as evidence that the City had sufficient available funds to fulfill the contractual obligation at the time the promise was made and approved in 2008. When the Mayor unilaterally chose to exclude the contract salary increases from the proposed budget, he chose to breach the contractual obligation in order to ‘share the burden so that no single class of employee shoulders an unfair share of the City’s budgetary shortfall,’ or otherwise increase the City’s unemployment rate through layoffs. These reasons and goals do not legally justify a departure from the City’s contractual obligation to reopen the contract to address unexpected economic items.

“Because the City did not exercise its right to reopening and renegotiate the economic terms of the contract for fiscal year 2011, the contract does not permit the moneys available to pay the City’s multi-year Contractual obligations to be diverted to other programs and services.”

Albuquerque Police Officers’ Association v. City of Albuquerque, 2013 WL 4675939 (N.M. App. 2013).