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City of Los Angeles v. Superior Court (Engineers & Architects Association)

Supreme Court of California

June 20, 2013

CITY OF LOS ANGELES, Petitioner,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; ENGINEERS & ARCHITECTS ASSOCIATION, Real Party in Interest.

Superior Court Los Angeles County Ct.App. 2/3 B228732, Ct.App. 2/3 B228732, Judge: Gregory Wilson Alarcon

Carmen A. Trutanich, City Attorney, Zna Portlock Houston, Assistant City Attorney, Janis Levart Barquist and Jennifer Maria Handzlik, Deputy City Attorneys, for Petitioner.

Akins Gump Strauss Hauer & Feld, Rex S. Heinke and Jessica M. Weisel for Los Angeles Chamber of Commerce as Amicus Curiae on behalf of Petitioner.

Kronick, Moskovitz, Tiedemann & Girard, David W. Tyra and Meredith Packer Garey for League of California Cities and California State Association of Counties as Amici Curiae on behalf of Petitioner.

Kamine Phelps and Marcia Haber Kamine for Engineering Contractors’ Association as Amicus Curiae on behalf of Petitioner.

No appearance for Respondent.

Carroll, Burdick & McDonough, Gary M. Messing, Gregg McLean Adam, Jonathan Yank, Gonzalo C. Martinez; Levy, Stern, Ford & Wallach, Myers Law Group, Adam N. Stern and Lewis N. Levy for Real Party in Interest.

Leonard Carder and Arthur A. Krantz for International Federation of Professional and Technical Engineers, Local 21, Public Employees Union Local One, State Employees Trades Council-United, University Council-American Federation of Teachers, Academic Professionals of California, University Professional and Technical Employees, CWA Local 9119 and Marin Association of Public Employees as Amici Curiae on behalf Real Party in Interest.

Silver, Hadden, Silver, Wexler & Levine and Stephen H. Silver for Los Angeles Police Protective League, San Francisco Police Officers’ Association, CDF Firefighters, California Correctional Peace Officers’ Association, Ventura County Deputy Sheriffs’ Association, San Bernardino County Safety Employees’ Benefit Association, Deputy Sheriffs’ Association of Santa Clara County, Los Angeles County Professional Peace Officers’ Association (PPOA), Fresno Deputy Sheriffs’ Association, Santa Monica Police Officers’ Association, Manhattan Beach Police Officers’ Association, Anaheim Firefighters’ Association, Costa Mesa Firefighters’ Association, Inc., Huntington Beach Firefighters’ Association, Fullerton Firefighters’ Association, Orange City Fire Fighters, Inc., Orange County Employees’ Association and Peace Officers Research Association of California Legal Defense Fund Amici Curiae on behalf of Real Party in Interest.

Rothner, Segall & Greenstone, Anthony Segall, Ellen Greenstone, Jonathan Cohen and Anthony P. Resnick for American Federation of State, County and Municipal Employees, District Council 36, International Union of Operating Engineers Local 501, Laborers International Union of North America, Local 777, Los Angeles/Orange Counties Building and Constructions Trades Council and Service Employees International Union, Local 721 as Amici Curiae on behalf of Real Party in Interest.

KENNARD, J.

After declaring a fiscal emergency, a charter city adopted a mandatory furlough program for its civilian employees. Many employees represented by a union filed grievances against the city, arguing that the furloughs violated duly ratified memorandums of understanding (MOUs) governing the terms and conditions of their employment. When their grievances were denied, these employees requested arbitration, and when the city refused to arbitrate, their union petitioned the superior court for an order compelling the city to arbitrate the furloughs dispute. The superior court granted the union’s petition.

The city then petitioned the Court of Appeal for a writ of mandate, asking it to overturn the superior court’s decision. After issuing an order to show cause, and setting the matter for a hearing, the Court of Appeal granted the city’s petition. Assuming, without deciding, that the employees’ grievances are subject to arbitration under the terms of the MOUs, the Court of Appeal concluded that the city could not be compelled to arbitrate because arbitration would constitute an unlawful delegation to the arbitrator of discretionary policymaking powers that the city’s charter vested in its city council.

To address the important issues raised by the Court of Appeal’s decision, this court granted the union’s petition for review. The issue presented in that petition is whether a charter city may arbitrate disputes over collectively bargained wage and hour provisions without unlawfully delegating to the arbitrator its discretionary budgeting and salary-setting authority. At this court’s request, the parties also briefed another issue, which is whether, under the MOUs at issue here, the city has a contractual duty to arbitrate the employee furloughs dispute.

We conclude, first, that arbitration of the dispute at issue here does not constitute an unlawful delegation of discretionary authority to the arbitrator and, second, that the city is contractually obligated to arbitrate the employee furloughs dispute. Thus, we reverse the Court of Appeal’s judgment.

I. Facts

Faced with a deficit exceeding $500 million, the Mayor of the City of Los Angeles (the City) on May 12, 2009, sent a letter to the city council asking it to declare a fiscal emergency and to adopt an urgency ordinance permitting full-time city employees’ workweeks to be reduced to less than 40 hours. In response to the letter, the city council passed a resolution declaring an emergency and directing the mayor to adopt a plan to furlough city employees for up to 26 days per fiscal year. On May 22, the mayor approved the resolution, which thereby became an ordinance.

The mayor adopted a plan requiring civilian city employees to take one unpaid furlough day during each 80-hour pay period, effective July 5, 2009. In response, approximately 400 employees represented by the Engineers & Architects Association (the Union) filed grievances, arguing that the furloughs violated the wage and workweek provisions of the MOUs governing their employment. The City denied the grievances at each level of review. Under the terms of the MOUs, the final step of the grievance process is submission of the dispute to binding arbitration before the City’s Employee Relations Board. The Union and the employees timely requested arbitration, but the City refused to arbitrate, asserting that its decision to impose mandatory furloughs was not subject to arbitration.

On April 29, 2010, the Union filed in superior court a petition to compel arbitration of the furloughs dispute. After considering the City’s opposition papers, and holding a hearing, the superior court granted the Union’s petition. The City petitioned the Court of Appeal for a writ of mandate.

After issuing an order requiring all parties to appear before it to show cause “why the relief requested in the petition should or should not be granted, ” the Court of Appeal granted the City’s petition. The Court of Appeal assumed, without deciding, that under the terms of the governing MOUs the City’s decision to impose mandatory employee furloughs was subject to review by an arbitrator, but the Court of Appeal concluded that any such agreement to arbitrate was unenforceable because binding arbitration of the dispute would improperly delegate to the arbitrator the City’s discretionary salary-setting and budget-making authority. The Court of Appeal directed the superior court to conduct further proceedings consistent with its opinion. We granted the Union’s petition for review.

II. Delegation of Authority

The Meyers-Milias-Brown Act (Gov. Code, § 3500 et seq.; the MMBA) “governs collective bargaining and employer-employee relations for most California local public entities, including cities, counties, and special districts.” (Coachella Valley Mosquito & Vector Control Dist. v. California Public Employment Relations Bd. (2005) 35 Cal.4th 1072, 1077.) The MMBA’s purpose is to provide a reasonable method of resolving disputes between public employers and public employee organizations regarding wages, hours, and other terms and conditions of employment. (Gov. Code, § 3500, subd. (a).) “The MMBA imposes on local public entities a duty to meet and confer in good faith with representatives of recognized employee organizations, in order to reach binding agreements governing wages, hours, and working conditions of the agencies’ employees. (Gov. Code, § 3505.)” (Coachella Valley Mosquito & Vector Control Dist. v. California Public Employment Relations Bd., supra, at p. 1083.)

If the parties reach an agreement, they jointly prepare a written MOU stating the terms upon which they have agreed. (Gov. Code, § 3505.1.) Once a local government approves an MOU, it becomes a binding and enforceable contract that neither side may change unilaterally. (Glendale City Employees’ Assn., Inc. v. City of Glendale (1975) 15 Cal.3d 328, 334-338; accord, Retired Employees Assn. of Orange County, Inc. v. County of Orange (2011) 52 Cal.4th 1171, 1182-1183; Voters for Responsible Retirement v. Board of Supervisors (1994) 8 Cal.4th 765, 781.)

As noted earlier, after the City here adopted its furlough program, some 400 civilian city employees represented by the Union filed grievances alleging that the furloughs violated the wage and workweek provisions of ratified MOUs governing their employment. The City denied the grievances at each stage of the grievance process. Under the terms of the MOUs that the City had ratified, the final step of the grievance process is submission to binding arbitration before the Employee Relations Board. But the City refused to arbitrate the question whether the furloughs violated the ratified and binding collective bargaining agreements with its employees.

The Court of Appeal concluded, first, that whether the furloughs dispute is subject to arbitration is a matter to be decided by the courts rather than by the arbitrator. The Union does not challenge that conclusion, which is well supported by authority. Unless an arbitration agreement expressly provides otherwise, a dispute regarding the scope of a contractual duty to arbitrate is subject to judicial resolution. (AT&T Technologies v. Communications Workers (1986) 475 U.S. 643, 649; Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 479-480; United Public Employees v. City and County of San Francisco (1997) 53 Cal.App.4th 1021, 1026.) Here, because the parties’ MOUs did not expressly authorize the arbitrator to determine whether particular disputes were subject to arbitration, that determination was for the court to make.

Next, the Court of Appeal considered the nature of the furloughs dispute in light of the arbitration provision in the MOUs. The furloughs dispute concerns articles 1.9 and 3.1 of the MOUs. Article 3.1 broadly defines “grievance” to include “any dispute concerning the interpretation or application of this written MOU or departmental rules and regulations governing personnel practices or working conditions applicable to employees covered by this MOU.” The Union argues that furloughs, because they affect working conditions, are subject to the grievance process, particularly when the City’s right to unilaterally furlough employees depends on interpretation and application of the MOUs. The Union relies specifically on article 5.1 of the MOUs, which provides, as relevant here, that “[e]mployees shall be compensated for 40 hours per week at the regular hourly rate for their class and pay grade.” The Union also relies on article 6.1’s references to salary schedules that are based on a work year consisting of 52 weeks of 40 hours each.

In response, the City relies primarily on article 1.9 of the MOUs, entitled “Management Rights.” As relevant here, it provides: “[E]xcept as specifically set forth herein no provisions in this MOU shall be deemed to limit or curtail the City officials and department heads in any way in the exercise of the rights, powers and authority which they had prior to the effective date of this MOU.... [T]hese rights, powers, and authority include but are not limited to, the right to... relieve City employees from duty because of lack of work, lack of funds or other legitimate reasons, ... [and to] take all necessary actions to maintain uninterrupted service to the community and carry out its mission in emergencies; provided, however, that the exercise of these rights does not preclude employees and their representatives from consulting or raising grievances about the practical consequences that decision on these matters may have on wages, hours, and other terms and conditions of employment.” (Italics added.)

The City argues that unilaterally imposing employee furloughs is encompassed by article 1.9’s provision preserving its authority to “relieve City employees from duty because of... lack of funds... [and to] take all necessary actions to maintain uninterrupted service to the community and carry out its mission in emergencies, ” and that under article 1.9 an employee grievance cannot be used to challenge a furlough decision; rather, a grievance can be brought only in regard to the practical consequences of that decision. In response, the Union argues that the quoted provision authorizes only layoffs, not furloughs, and does not negate or override the MOUs’ wage and workweek provisions.

The Court of Appeal here concluded that it was unnecessary to have either the trial court or the arbitrator determine the merits of the parties’ respective arguments concerning the proper interpretation of the MOUs. The court reasoned that, regardless of the provision in the MOUs requiring arbitrations of disputes concerning the meaning of the MOUs’ terms as the final step of the grievance process, the City could not be compelled to arbitrate the validity of the furlough program because such arbitration would constitute an unlawful delegation to the arbitrator of two discretionary policymaking powers — salary setting and budget making — that the City’s charter vests in the city council.

The Court of Appeal was correct in stating that, unless a statute expressly allows them to do so, public agencies and officers may not surrender or delegate to subordinates any powers involving the exercise of judgment or discretion. (Bagley v. City of Manhattan Beach (1976) 18 Cal.3d 22, 24; California Sch. Employees Assn. v. Personnel Commission (1970) 3 Cal.3d 139, 144.) It was also correct in characterizing the powers to set salaries and fix the budget as discretionary powers. But the Court of Appeal was incorrect in its ...


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