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MERC & DOT Provide New Rulings on PA 152 Obligations

February 3, 2014

Two developments in late January help clarify public employer obligations under 2011 PA 152 and the Michigan Public Employment Relations Act (PERA). First, in Decatur Public Schools , MERC reversed former Administrative Law Judge O'Connor who had ruled that a public employer's discretionary choice between the hard cap or 80/20 was a mandatory subject of bargaining. Second, within a revised FAQ issued January 28, 2014, the Michigan Department of Treasury has updated its prior publication based on recent amendments to 2011 PA 152 embodied in 2013 Public Acts 269-273.

Decatur involved two companion situations, one involving Decatur's support staff union and the other involving the Van Buren County Education Association, the teachers' unit. The Decatur support staff alleged that the District unlawfully failed to bargain its decision to implement the hard cap and make deductions from paychecks consistent with the hard cap. MERC first ruled that because the support staff failed (after being notified) to demand bargaining over Decatur's decision to elect the hard cap method of complying with section 3 of PA 152, and make unilateral deductions, there could be no finding of an actual failure to bargain by the District.

In the companion case, the teachers' unit had requested bargaining about PA 152 compliance , the parties had in fact negotiated but were unable to reach agreement. When the District nonetheless unilaterally made deductions upon contract expiration to comply with PA 152, the teachers' union alleged an unlawful failure to bargain. In addressing their complaint, MERC analyzed the interplay between PERA and PA 152. Acknowledging that PERA is the dominant labor law governing public employer relationships with unionized employees, and that normally health care costs are a mandatory subject of bargaining, MERC reasoned that it must determine how PERA and PA 152 "work together" in order to give full effect to clear legislative intent.

Relying on rules of statutory construction, MERC noted that where two statutes conflict, the more specific statute must be honored. MERC disagreed with the ALJ's decision to read the two statutes in pari materia (i.e., together), because the purposes of the statutes differ. MERC found that PA 152's purpose was to limit the amount public employers pay for health insurance and that those limits must be satisfied or substantial penalties attach, and that it was not intended to address collective bargaining. MERC emphasized that because the public employer's election between hard cap and 80/20 is applicable to all of its employees, whether unionized or not, the public employer's choice on which method it will elect to comply with PA 152 "…is a policy decision to be made by the public employer," not a mandatory subject of bargaining, and not subject to a collective bargaining obligation. Flowing from this holding, MERC then ruled that a public employer, upon electing either section 3 (hard cap option) or section 4 (80/20 option), may take unilateral action to comply with PA 152 – including making unilateral payroll deductions to ensure its compliance – and is not required to delay compliance to negotiate with the union.

According to MERC, the public employer's election between hard cap and 80/20 is not a mandatory subject of bargaining, even though it affects wages, hours and terms and conditions of employment, because the employer's decision whether to accept the substantial risk of non-compliance with PA 152 "…is a policy choice within the Respondent's managerial prerogative." Because the election decision do es not relate to a mandatory subject of bargaining, the employer is under no obligation to bargain to impasse before making the payroll deductions needed to comply with the law. Thus, even though the Legislature did not designate these decisions as prohibited subjects of bargaining, since they are not mandatory subjects, the employer has the latitude to bargain or not bargain about the hard cap or 80/20 election, and may either take unilateral action to ensure timely compliance, or risk a finding of non-compliance and bargain with the union on how to allocate costs and make the deductions.

While this decision does not eliminate the need to negotiate a myriad of other issues related to health insurance, it is timely and important. Public employers may currently be adjusting their practices to ensure compliance with the recent amendments to PA 152, embodied in 2013 Public Acts 269-273. Among these, the most immediate issue to address by employers who have elected the hard cap method of compliance, is to ensure the proper categorization of employees with only one non-spouse dependent. Effective January 1, 2014 , such  individuals must be included within the "two person" category for calculating compliance with the hard cap dollar limitation, rather than the family category. In addition, employers should determine, after careful review of individual collective bargaining agreements, individual contracts, and Board policies, whether and when the hard cap limit on the Board's contribution for two persons will increase to the new statutory amount of $12,250. This determination depends in part upon each employer's medical benefit plan coverage year, which has also been defined within the recent amendments, and is discussed within the Treasury's revised FAQ.

Finally, MERC's ruling in Decatur may have broad implications for the increasing number of situations in which public employers  face statutory requirements on the one hand, and union demands to bargain, on the other.

Please consult with a Clark Hill attorney within our Education & Municipal Practice Group if you have any questions about compliance with the new amendments to PA 152 and/or the implications of the Decatur decision.

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