Emergency Manager Can Unilaterally Amend Pension Formula

Michigan is one of several states with “emergency financial manager” laws. Under the Michigan statute, an emergency manager has broad powers, essentially replaces a mayor and city council, and even has the authority to invalidate collective bargaining agreements (CBAs).

AFSCME Local 3317 represent sergeants, lieutenants, and captains in the Wayne County Sheriff’s Department. AFSCME was party to a collective bargaining agreement with Wayne County that was set to expire on September 30, 2014. In 2015, with the contract still unresolved and the County facing serious fiscal problems, the County Executive reached an agreement with the State Treasurer to appoint the county executive as the emergency manager.

Almost immediately, the Emergency Manager changed the pension multiplier for Local 3317 members from 2.5% to 1.25%. Local 3317 sued, alleging it had a protected property right to the pension multiplier, and pointed to a clause in the expired collective bargaining agreement as support for its contention that the pension multiplier was protected until at least 2020. The contract clause provided that “upon the termination of this collective bargaining agreement, the parties may agree to bargain over retirement-related issues during the next round of contract negotiations. However, all issues concerning retirement, including but not limited to, any and all provisions outlined in Article 38 of this Agreement, covering the period of October 1, 2008 through September 30, 2011, shall not be subject to arbitration until October 1, 2020.”

The federal Sixth Circuit Court of Appeals dismissed the lawsuit. The Court concluded that “this part of the CBA does not provide for a specific pension benefit multiplier, nor state that the retirement provisions in Article 38 remain in effect until 2020. The provision relates to how the parties may bargain over retirement-related issues, and whether such issues will be subject to arbitration.

“Without stating how the provision extends retirement-related portions of the CBA beyond the expiration of the entire agreement, AFSCME merely points to case law establishing that a CBA may include different expiration dates for different provisions of the contract. That is undisputed. But AFSCME’S allegation that this particular CBA provided for a distinct expiration date for the provisions in Article 38 is not supported by the plain language of the agreement. Indeed, AFSCME fails to specify how language pushing off any arbitration until 2020 supports an inference that the benefits multiplier itself must stay in place until 2020. Thus, AFSCME cannot show a protected property interest, arising from a contract with Wayne County, in maintaining certain pension benefit levels.

“Similarly, AFSCME’s argument that Emergency Manager Evans lacked the power to change the pension benefit multiplier hinges on the expiration of the CBA. The State’s emergency financial manager law permits emergency managers to reject or modify the terms and conditions of an existing collective bargaining agreement under certain circumstances. Because the CBA – including Article 38 – had expired before Evans changed the pension benefit multiplier, the exhibits to the Complaint reveal that AFSCME cannot prove that Evans acted beyond his power as chief administrative officer of Wayne County. Thus, we find that AFSCME has failed to allege that it had a protected property interest in the 2.5% benefits multiplier until 2020.”

AFSCME, Council 25 and Charter County of Wayne, 2017 WL 2992223 (6th Cir. 2017).