MICHIGAN LOCAL GOVERNMENT MANAGEMENT ASSOCIATION. Public Sector Labor Law Update

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1 MICHIGAN LOCAL GOVERNMENT MANAGEMENT ASSOCIATION WINTER INSTITUTE 2013 Public Sector Labor Law Update Steven H. Schwartz Steven H. Schwartz & Associates, PLC W. 13 Mile, Suite 125 Farmington Hills, MI (248)

2 RIGHT TO WORK (M.C.L ,.209,.210,.214,.215) Effective March 28, 2013 Does Not Apply to Police Officers, Firefighters or Dispatchers if Eligible for Act 312 Arbitration Applies to All Other Municipal Employees 2

3 KEY PROVISIONS OF RIGHT TO WORK Prohibits Agency Shop Prohibits Fair Share Service Fee Allows Employees to Opt Out of Union Employees Can Not Be Forced to Pay Union Dues or Service Fee 3

4 PROHIBITIONS UNDER RIGHT TO WORK Union or Individual Can Not Force, Intimidate or Threaten Employees to Join a Union or Pay a Service Fee Employer May Not Fire an Employee For Not Paying Union Dues Payment of Union Dues or Service Fee Can Not Be Made to a Charity or Third Party 4

5 ENFORCEMENT Michigan Court of Appeals Has Exclusive Original Jurisdiction over the Act s Validity Cases for Violation of the Act may be Brought in Circuit Court Civil Fine of $500 for Violation Employee May Obtain - Injunction (Reinstatement) - Award of Damages (Back Pay) - Attorney Fees 5

6 POTENTIAL CONSEQUENCES OF RIGHT TO WORK Window Period to Settle Contract - Key Issue for Bargaining Strategy: Settle Before or After March 28, 2013? Possible Reduction In: - Grievance Arbitrations - Number of Bargaining Sessions - Unfair Labor Practice Charges - Fact-Finding 6

7 POTENTIAL CONSEQUENCES OF RIGHT TO WORK (Continued) New Approaches to Cutting Costs of Grievance Arbitrations: - Panel of Arbitrators, Not AAA - 2 Hearings/Day - Fixed Fee for Arbitrators Decline in Union Membership Will Vary: - Established Workforce vs. New Members - Tri-County Area vs. Outstate - Blue Collar vs. White Collar Community - Length of Representation By Union 7

8 POTENTIAL CONSEQUENCES OF RIGHT TO WORK (Continued) More Aggressive Bargaining/Less Concessions Possible Mergers of Locals or Unions Smaller Bargaining Units May Not Have Union Representation 8

9 BONDING FOR PENSION AND OPEB LIABILITY (P.A. 329; Amends M.C.L ,.2305,.2503 Amends the Revised Municipal ) Finance Act to allow a municipality closing a defined benefit (DB) retirement plan and implementing a defined contribution (DC) retirement plan, or a municipality that has already done so, to issue a debt security to pay all or part of the costs of the unfunded accrued liability (UAL) associated with the DB plan This action could be undertaken by ordinance or resolution of the municipality's governing body, without of a vote of its electors unless petition for referendum is filed. 9

10 BONDING FOR PENSION AND OPEB LIABILITY (Continued) Deadline: December 31, Bond for Unfunded Accrued Heath Care Liability - Bond for Costs of Partially or Completely Closed Defined Benefit Plan and Implementation of a Defined Contribution Plan - Bond for Costs of Unfunded Accrued Pension Liability of Closed Pension Plan 10

11 BONDING FOR PENSION Can Issue Bonds if: AND OPEB LIABILITY (Continued) 1. Have AA or higher Credit Rating 2. Publish Notice of Intent to Issue Bonds to Electors (with $ Amount, Purpose & Right of Referendum) 3. Issue Financial Analysis of All Post-Employment Benefit Programs 4. Obtain Approval From State Treasury Department 5. Bond Proceeds Go Into Trust Which is Audited Regularly 11

12 BONDING FOR PENSION AND OPEB LIABILITY (Continued) Municipality Must Covenant to Bondholders: 1) Won t rescind partial/complete cessation of accruals to defined benefit plan 2) Won t rescind closure of defined benefit plan to new or existing employees 3) Possible conflict with PERA/Act

13 CONSOLIDATION STATUTES Municipal Partnership Act, M.C.L : - authorizes two or more local governments, or one or more local governments and a public agency, to enter into a contract to form an entity to exercise their functions - nothing in the Act creates an employment relationship between the existing employees of a local government or public agency and a proposed entity. - Allows an entity to levy up to five mills with voter approval - Allows a party to the contract to use tax revenue dedicated to a function or service, to pay for the exercise or performance of that function or service under the contract. 13

14 CONSOLIDATION STATUTES (Continued) M.C.L a Amends PERA to allow for all intergovernmental agreements. The entry of those agreements are prohibited subjects of bargaining. 14

15 CONSOLIDATION STATUTES (Continued) The Urban Cooperation Act, Intergovernmental Transfers of Functions and Responsibilities Act and Municipal Services Act, M.C.L , , were amended to: Eliminate requirement that transferred employees retain seniority and benefits status Eliminate requirement of being bound to municipalities labor agreements Eliminate requirement that transferred employees retain pension status 15

16 PERSONAL PROPERTY TAX LEGISLATION 1) P.A. 397 (MCL a) Effective December 20, 2012 (industrial facilities exemption certificates) 2) P.A. 398 (MCL a) Effective December 20, 2012 (technology park districts) 3) P.A. 399 (MCL 211.9f) Effective March 28, 2013 (next Michigan business district) 4) P.A. 400 (MCL d) Effective March 28, 2013 (enterprise zones) 5) P.A. 401 (MCL 211.9m) Effective March 28, 2013 (new personal property) 6) P.A. 402 (MCL 211.9o) Effective March 28, 2013 (future exemption of industrial personal property and commercial personal property ) 7) P.A. 403 (MCL 211.9n) Effective March 28, 2013 (future exemption of qualified previously existing personal property ) 16

17 PERSONAL PROPERTY TAX LEGISLATION (continued) 8) P.A. 404 (MCL ) Effective upon voter approval in statewide election in August 2014 (telecommunications metropolitan areas metropolitan authority 9) P.A. 406 (MCL citation to be designated) Effective upon voter approval in statewide election in August 2014 (essential services special assessment) 10) P.A. 407 (MCL citation to be designated) Effective upon voter approval in statewide election in August 2014 (establishes metropolitan area metropolitan authority) 11) P.A. 408 (MCL , , ) Effective January 1, 2015 if voters approve use tax (use tax) 17

18 PERSONAL PROPERTY TAX LEGISLATION (continued) All of this legislation is repealed if use tax is not approved in August 2014 statewide election Existing exemptions from personal property tax are continued Annual filing of affidavits to Treasury Department are phased out 18

19 PERSONAL PROPERTY TAX LEGISLATION (continued) P.A. 401: 1) Beginning December 31, 2015, qualified new personal property exempt from personal property taxes 2) Must be eligible manufacturing personal property - used at least 50% of time in industrial processing or direct integrated support 3) Must be new personal property after December 31, 2012: a) not used in Michigan and either subject to or exempt from taxes (except exempted inventory under MCL 211.9c) before 1/1/13; b) not used outside of Michigan before 1/1/13; and c) purchased after 12/31/12. 19

20 PERSONAL PROPERTY TAX LEGISLATION (continued) P.A ) Beginning December 31, 2013, eligible personal property exempt from personal property taxes 2) Eligible personal property : industrial personal property or commercial personal property 3) Combined taxable value of all industrial personal property and commercial personal property in 1 tax collecting unit is below $40,

21 PERSONAL PROPERTY TAX LEGISLATION (continued) P.A. 403 Beginning 12/31/2015 Qualified previously existing personal property exempt from personal property taxes. - Eligible Manufacturing Personal Property - Either taxed/subject to tax exemption immediately preceding 10 years - Statute s language apparently indicates that it doesn t matter if inside or outside of Michigan last 10 years

22 P.A. 407 PERSONAL PROPERTY TAX LEGISLATION (continued) 1) Qualified municipality : reduction in taxable value of more than 2.3% of property tax as a result of the exemption of industrial personal property and commercial personal property 2) Statute establishes formula for calculating tax loss 3) Metropolitan authority levies use tax and distributes tax revenue to local units of government (beginning fiscal year ) 4) Metropolitan authority distributes funds to municipalities appropriated by Legislature to offset lost personal property tax revenue (fiscal year and fiscal year ) 22

23 LOCAL FINANCIAL STABILITY AND CHOICE ACT (M.C.L. not designated) P.A. 4 of 2011 Repealed by Referendum Uncertainty Whether Prior Law (P.A. 72 of 1990) Was In Effect New Law Becomes Effective March 28, Municipalities - School Districts 23

24 LIKELY LEGAL CHALLENGES TO EMERGENCY MANAGER LAW Is Emergency Manager s Power to Amend or Void Collective Bargaining Agreements Unconstitutional? (Impairment of Contracts Clause) Is New Law Substantially Different from P.A. 4 of 2011? 24

25 LOCAL FINANCIAL STABILITY AND CHOICE ACT Act Incorporates by Reference Amendment to PERA (M.C.L ) Applies to all new collective bargaining agreements Emergency Manager has power to reject, modify or terminate the CBA Prohibited Subject of Bargaining 25

26 LOCAL FINANCIAL STABILITY AND CHOICE ACT Options for Local Elected Officials: 1. Consent Agreement 2. Mediation 3. Emergency Manager 4. Chapter 9 Bankruptcy 26

27 LOCAL FINANCIAL STABILITY AND CHOICE ACT Consent Agreement 30 Days to Negotiate a Consent Agreement. Requires Approval of the State Treasurer, Chief Administrative Officer and the Governing Body If the Agreement Can t be Negotiated, the State Can Require One of the Other 3 Options Treasurer May Require that a Consent Agreement Include a Continuing Operations Plan or a Recovery Plan. If Adopted, the Recovery Plan Supersedes the Adopted Budget If the Consent Agreement is Breached, the Governor Can Appoint An Emergency Manager or Require the Neutral Evaluation The Local Government s Duty to Bargain is Suspended 27 During the Length of the Consent Agreement

28 LOCAL FINANCIAL STABILITY AND CHOICE ACT An Emergency Manager: Replaces the Governing Body and Chief Administrative Officer. Chief Administrative Officer and the Governing Body May Not Act Unless Authorized by the EM to do so. After 18 Months, the Governing Body May Vote by a 2/3 Vote to Remove the EM (Subject to approval From the Mayor). The Local Government May Vote by 2/3 Vote to Request to be Removed From Receivership of an EM (Subject to Mayoral Approval). Can Reject Any Charter or Contractual Minimum Staffing Level Requirements. Shall Act as the Sole Agent of the Government in CBA Negotiations. May Remove All Government Administrators Including Heads of Departments Who are Not Elected Officials. Approves or Disapproves of Issuing Any Debt. Powers Shall be Superior to and Supersede Any Powers of the Officers or Entities of the Local Government, whether Elected or Appointed. Can Remove, Replace, Appoint, or Confirm Any Appointment to a Board of the Local Government. During the Pendency of the Receivership, the Authority of the Chief Administrative Officer and Governing Body Shall be Suspended and Vested in the EM. Upon Appointment of an EM, All Salary, Wages and Benefits for a Chief Administrative Officer and Members of the Governing Body are eliminated. The EM May Restore Their Salaries if Consistent with the Financial Plan. Unless Included Within the EM s Financial and Operating Plan, the EM May Not Sell a Government Asset of more than $50,000 Without State Treasurer Approval. Before Leaving Office, the EM Shall Adopt a 2 Year Budget for the Local Government. 28

29 EVIP The Carrot Approach (Replaced State-Revenue Sharing) A push to the average? Qualification: Accountability & Transparency; Consolidation of Services; and Employee Compensation Plan or Compliance with P.A. 152 For FY 2013 $210 million available under EVIP, $125.6 million for a new incentive-based program for counties (Governor s proposed budget) 29

30 INTERNET PRIVACY PROTECTION ACT (P.A. 478; M.C.L. not designated) Personal internet accounts are internet-based accounts or services that require user input or store user access information via electronic device to profile, display, communicate or store data Prohibits employers from requesting prospective or current employees for observation or access to personal internet accounts Prohibits employers from taking adverse employment action against employees who deny access to personal internet accounts 30

31 INTERNET PRIVACY PROTECTION ACT (Continued) Exceptions Employer may require access to electronic devices paid for in whole or in part by employer Employer may require access to electronic accounts or services obtained by virtue of employment relationship with the employer or used for employer s business purposes Employer not prohibited from adverse employment actions against employees who transfer employer s data to employee personal accounts or devices without authorization 31

32 INTERNET PRIVACY PROTECTION ACT (Continued) Employer may conduct investigation or require cooperation where there is specific information that employee s personal internet account contains information in violation of law, regulation or prohibited practices of work-related misconduct Employer may conduct investigation or require cooperation where there is specific information that employee engaged in unauthorized transfer of employer data Employer may restrict or prohibit access to websites on employer provided devices, networks and resources Employer may monitor, review or access all information on devices owned or partially paid for by employer The Act does not prohibit any action that is otherwise allowed by federal law or self regulatory agency Employer may access publicly available information or information that is available without password 32

33 INTERNET PRIVACY PROTECTION ACT (Continued) Violations punishable by: Misdemeanor fine of $1,000 Civil action wherein employee may demand injunction, damages no greater than $1,000 and attorney s fees and court costs 33

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