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MERC Issues New Ruling on a Public Employer's Bargaining Obligations under PA 152

By Steven K. Girard, Eric C. Griggs / Sep 04, 2014

In Shelby Township and Command Officers Association of Michigan, Case No. C12 D-067, the Michigan Employment Relations Commission (MERC) further analyzed a public employer's bargaining obligations under the Publicly Funded Health Insurance Contribution Act, 2011 Public Act 152 (PA 152). MERC began by reaffirming its Decatur Public Schools decision that the choice of cost sharing options under PA 152 is a permissive subject of bargaining. This means that a public employer may, but is not required to, bargain over whether it will apply the hard caps under section 3, the 80% employer share under section 4, or exempt itself under section 8 (note: school districts and some other public employers may not exempt themselves under PA 152).

In Shelby Township, MERC opined on what was the next logical issue of dispute: the duty to bargain over the allocation among employee groups of the 20% premium sharing (in this case, the Township had selected the 80%/20% option). Unfortunately for public employers, MERC ruled that the allocation among employee groups of medical insurance cost sharing is a mandatory subject of bargaining.               

In this case, beginning the first medical benefit plan year after the parties' contract expired, the Township unilaterally implemented an employee premium share of 20% of the plan's illustrated rate, which was a bundled rate that included active employees and retirees. Had the illustrated rate not included the retirees, it would have been much lower. Thus, MERC found that on the facts, the Township implemented a premium share that was greater than 20% because retiree costs are not required to be included in the PA 152 calculation. MERC reviewed the language of PA 152 and determined that the law does not determine the amount to be allocated to a particular unit or particular employee. In fact, Section 4(2) of PA 152 states: "The public employer may allocate the employees' share of the total annual costs of the medical benefit plans among the employees of the public employer as it sees fit."

MERC interpreted this section as the public employer sees fit and as agreed to by its labor unions. Since PA 152 does not determine how the employee costs are allocated, MERC found that the allocation of the 20% costs to each group of employees is a mandatory subject of bargaining. MERC then found that since the Township unilaterally required the Command Officer group to pay more than 20% (remember the retiree bundling issue) it violated its duty to bargain in good faith (the union had made a previous request to bargain over the issue).

The problem with this ruling is that if one employee group can negotiate to pay less than 20% of the share of its medical benefit plan then another group will have to pay more than 20% for the total employee cost not to exceed 20% and the total employer cost not to exceed 80%. MERC had no problem with this issue. It found this fact alone "does not preclude good faith bargaining." If it did, MERC stated, "there would be no duty to bargain over any benefit that had a financial impact on an employer, since public employers generally must bargain over allocation of their limited resources."

So what is an employer to do in the face of one bargaining unit that demands to pay less than 20% and does not care who else has to pay more? If no agreement is reached by the implementation deadline set in PA 152, MERC stated, "the employer may implement the premium share by allocating precisely twenty percent of the health care costs to employees without breaching its duty to bargain." However, the duty to continue to bargain with the union over the issue remains; the only thing that is changed is the status quo.

For public employers who bargain with Act 312 employee units and who may be subject to binding arbitration awards, this raises some disturbing scenarios. For example, if an Act 312 arbitrator orders a 10% premium share for one unit, then that would require other employee groups, union and non-union, to pay more. If the employer already has contracts in place with other union groups that require a 20% contribution, then that may mean that only the non-union employees will have to absorb all the required additional costs to meet the 20% threshold of PA 152. And lest one think the issue can be avoided by staying with the hard caps, think again. Section 3 of PA 152 also states, "A public employer may allocate its payments for medical benefit plan costs among its employees and elected public officials as it sees fit."  

The troubling consequences of MERC's ruling make it likely that the Township will appeal this decision to the Michigan Court of Appeals. In the meantime, if you have questions about complying with PA 152 or the implications of the Shelby Township decision, please contact Steve Girard at sgirard@clarkhill.com or (616) 608-1148; Eric Griggs at egriggs@clarkhill.com or (616) 608-1147; or your Clark Hill Municipal or Education Law attorney.