Toledo Not Allowed To Unilaterally Modify Contract Provisions

The Toledo Police Command Officers’ Association represents supervisors in the Toledo, Ohio Police Department. In early 2009, the Association and the City began negotiating for a new contract. One of the issues under discussion was the amount of money the City would contribute to the officers’ pensions and health insurance premiums.

Section 65 of the expired contract detailed a “pension pickup” provision, which described the amount of money the City was to contribute to each officer’s pension fund. Ordinarily, the officers would be required to contribute ten percent of their income toward their pension. However, under Section 65, the City agreed to pay the entire pension contribution in lieu of wage increases. The expired contract also called for the City to pay the entire cost of the officers’ health insurance premiums.

As bargaining progressed, the City became aware of an impending budget deficit, which was largely attributable to declining income tax revenues and a faltering economy. Eventually, the City and the Association reached an agreement on a new contract under which (1) members would be responsible for paying seven percent of their pension pickup for 15 consecutive pay periods; (2) medical copays would be added to members’ health insurance plans; (3) overtime would be reduced; (4) wage increases would be eliminated for 2009; (5) promotions would be suspended; and (6) five positions would be eliminated.

While the agreement was in effect, the City faced increasing financial problems, and a deficit that had ballooned to $44 million. The City told the Association that its membership would need to make concessions in the amount of $902,000 in order to assist the City in addressing the remaining budget deficit. To reach that amount, the City proposed eliminating the pension pickup and requiring Association members to pay 20% of the total cost for their health insurance premiums. The Association rejected the City’s proposal, and suggested that their share of the concessions could be reached by deferring overtime payments to the members and through a hiring freeze that had been implemented.

The City responded by unilaterally eliminating its pension pickup responsibilities and increasing the health insurance copays for its exempt employees and members of six unions, including the Association. When the Association challenged the implementation through filing a grievance, the City refused to process the grievance to arbitration. The Association rejoined by filing an unfair labor practice complaint with Ohio’s State Employment Relations Board. Eventually, the dispute made its way to the Ohio Court of Appeals, which had to decide whether the City faced “exigent circumstances” which would allow it to unilaterally implement the cutbacks.

The Court found that “the exigent circumstances relied upon by the City (i.e. the budget deficit) were foreseeable at the time the CBA was negotiated. Indeed, the City was already facing budget deficits and a flailing economy when it executed the contract on August 18, 2009. An employer can only unilaterally modify a contract based on exigent circumstances that are unforeseen.

“While we recognize that the budget deficits were initially smaller and constantly escalating, the economic indicators that were before the City during negotiations should have led the City to conclude that the deficit would balloon over time. For example, income tax revenues for the City dropped from $169,689,103 in 2007 to $154,475,390 in 2008, a 9.4 percent decline. Thereafter, tax revenue declined another 8.7 percent from 2008 to 2009. Furthermore, the City was well aware of the crippling national recession that hit Northwest Ohio particularly hard. Given the rising unemployment throughout the City due to the recession, it was likely that the City’s revenue from income taxes would continue to decline for the foreseeable future. This downward trend in revenues was before the City at the time of CBA negotiations.

“That the City was aware of the impending deficit is demonstrated in its letter sent to Association on April 9, 2009, in which the City recognized “a continuing downturn in the City’s financial condition.” Additionally, the City attempted to declare exigent circumstances on two separate occasions based on budget issues prior to agreeing to the Association. The situation was so grim, in fact, that the mayor was contemplating bankruptcy.

“Historically, SERB has remedied unlawful midterm modifications to a contract by ordering the employer to rescind the unilateral implementation of the midterm changes, thereby returning the parties to the status quo ante. That is precisely the remedy imposed in this case. We see no reason to conclude that the trial court abused its discretion in adopting SERB’s remedy.”

Toledo Police Command Officers’ Association v. SERB, 2014 WL 4824268 (Ohio App. 2014).