American Federation of State v. Phoenix

• Citation: 142 P.3d 234,213 Ariz. 358
• Decision Date: 15 August 2006
• Docket Number: No. 1 CA-CV 04-0766.,1 CA-CV 04-0766.
• Parties: AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, AFL-CIO, LOCAL 2384, Plaintiff/Appellant/Cross-Appellee, v. CITY OF PHOENIX, Defendant/Appellee/Cross-Appellant, The City of Phoenix Employment Relations Board, Defendant/Appellee.
• Court: Arizona Court of Appeals

Page 234

142 P.3d 234

213 Ariz. 358

AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, AFL-CIO, LOCAL 2384, Plaintiff/Appellant/Cross-Appellee, v. CITY OF PHOENIX, Defendant/Appellee/Cross-Appellant, The City of Phoenix Employment Relations Board, Defendant/Appellee.

No. 1 CA-CV 04-0766.

Court of Appeals of Arizona, Division 1.

August 15, 2006.

Martin & Bonnett, P.L.L.C. by Daniel L. Bonnett, Susan Martin, Jennifer L. Kroll, Phoenix, Attorneys for Plaintiff/Appellant/Cross-Appellee.

Office of the City Attorney, Gary Verburg, Acting City Attorney by L. Michael Hamblin, Assistant City Attorney, Phoenix, Attorneys for Defendant/Appellee/Cross-Appellant City of Phoenix.

William R. Brown, Phoenix, Attorney for Defendant/Appellee the City of Phoenix Employment Relations Board.

National Right to Work Legal Defense Foundation, Inc. by John R. Martin, Springfield, VA, and Perkins Coie Brown & Bain P.A. by Kandace B. Majoros, Michael T. Liburdi, Clinten N. Garrett, Phoenix, Attorneys

for National Right to Work Legal Defense Foundation, Inc., Amicus Curiae.

WINTHROP, Judge.

¶ 1 The American Federation of State, County, and Municipal Employees, AFL-CIO, Local 2384 ("the Union") appeals from the superior court's judgment in favor of the City of Phoenix ("the City"). The Union argues that the superior court erred in finding that the Union's proposed mandatory deductions from non-union workers' wages, or "fair share" proposals, are illegal under Arizona state law; violate the City's "meet and confer" ordinance; and, even if legal, are a permissive rather than mandatory subject of collective bargaining. The City cross-appeals, arguing that the superior court erred in determining that Arizona's wage withholding statute, Arizona Revised Statutes ("A.R.S.") section 23-352 (1995), would not necessarily preclude an agreement involving "fair share." After considering the arguments presented, we hold that the "fair share" proposals are impermissible under Arizona's constitution and "right to work" statutes, and therefor affirm the trial court's judgment.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 The Union is an employee labor organization recognized by the City as the exclusive bargaining representative for all City employees within a designated bargaining unit (Field Unit II or Local 2384) under the "meet and confer" ordinance, Article XVII, Division 1, of the Phoenix City Code ("P.C.C."). See generally P.C.C. §§ 2-216, -217. As such, the Union is required by law to represent all Unit II employees without regard to union membership in negotiating, administering, and enforcing collective bargaining agreements. See P.C.C. § 2-217(E). The Union's principal source of income is membership dues collected from Unit II employees who are Union members. However, the City also provides financial assistance to the Union to aid the Union in acting as exclusive bargaining representative for all Unit II employees, including paying the full salary and benefits of three full-time Union officials and providing the Union with another 3610 paid hours annually.

¶ 3 On November 30, 2001, during the compulsory "meet and confer"¹ process, the Union and two other unions proposed a mandatory union contribution, or "fair share,"² provision (in which all workers, including non-union workers, would be required to contribute to the unions for services performed for the workers' benefit) in the unions' original labor proposals submitted to the City. The City responded that it was "not in agreement," but indicated it would discuss the issue during negotiations. From January through April 2002, the parties negotiated, and the unions made several proposals for achieving "fair share."³

¶ 4 The unions maintained that non-union employees should be required to pay a pro rata share of the unions' actual costs of negotiating and administering collective bargaining agreements. Although conceding that traditional "agency shop" agreements⁴ were prohibited in Arizona, the unions argued that, unlike "right to work" provisions found in some other states' constitutions and statutes, nothing in Arizona's constitution or statutes specifically prohibited requiring the payment of a pro rata share of a union's expenses, or similar fees, as a term or condition of employment. Thus, "fair share" contributions as proposed by the unions would be something less than the full equivalent of union dues.

¶ 5 The City's ultimate position was that "fair share" was illegal and, even if legal, a permissive rather than mandatory subject of bargaining. Consequently, the City eventually requested that the unions drop their request for the inclusion of "fair share" as a condition for reaching an agreement. The City claimed that not only is "fair share" not a subject of mandatory collective bargaining under the City's "meet and confer" ordinance, but involuntary collection of a "fair share" of the unions' expenses of negotiating, administering, and enforcing collective bargaining agreements from non-union members would be in violation of Article 25 of the Arizona Constitution⁵ and Arizona's "right to work" laws, A.R.S. §§ 23-1301 to -1307 (1995).⁶ The City also argued that including any language in a current or future Memorandum of Understanding ("MOU")⁷ requiring non-union employees to pay their "fair share" of the unions' expenses would violate A.R.S. § 23-352⁸ and subject the City to liability for the allegedly wrongful withholding of the payment of employees' wages, including treble damages and attorneys' fees under A.R.S. § 23-355 (1995).

¶ 6 The unions and the City eventually entered an MOU without a "fair share" provision for contract years 2002-2004, but included contract "re-opener" language on the subject of "fair share" in the event the unions eventually prevailed on that issue. Additionally, on April 24, 2002, the unions jointly filed an Unfair Labor Practice ("ULP") charge, Case No. CA-180, with the City of Phoenix Employment Relations Board ("PERB"),⁹ arguing that the negotiations leading to the MOU constituted a violation of P.C.C. § 2-220(A)(5) (refusing to meet and confer). The unions sought a determination that "fair share" is a mandatory subject of bargaining under P.C.C. § 2-215(A)¹⁰ of the City's "meet and confer" ordinance, and further sought an order from the PERB directing the City to "meet and confer" and bargain in good faith with the unions on that issue. On May 22, 2002, the PERB issued its Decision and Order, finding that "fair share" is a permissive rather than mandatory subject of bargaining under P.C.C. § 2-215(A), and ordering the dismissal of the ULP charge.

¶ 7 On June 21, 2002, the unions filed a "Complaint for Special Action Review and for Declaratory Relief," challenging the PERB's determination that the unions' "fair share" proposals are a subject of permissive rather than mandatory bargaining under the P.C.C. The Union eventually filed an amended complaint, and the other two unions withdrew as plaintiffs, leaving the Union as the only plaintiff. On April 23, 2003, pursuant to stipulation of the parties, the Union filed a "Second Amended Complaint for Special Action Review and for Declaratory Relief" seeking, inter alia, (1) a declaration that the Union's "fair share" proposals are the subject of mandatory bargaining under P.C.C. § 2-215(A) of the City's "meet and confer" ordinance; (2) an order directing the PERB to vacate its May 22 order finding that the subject of "fair share" is a permissible rather than mandatory subject of bargaining; (3) a declaration that "fair share" as requested by the Union is not contrary to the Arizona Constitution or Arizona statutes; and (4) an order directing the City to negotiate in good faith with the Union on the subject of "fair share."

¶ 8 In June 2003, the PERB moved to dismiss Count II of the Second Amended Complaint, in which the Union sought declaratory relief. The PERB argued that such a request was procedurally inappropriate because it could not be made on a special action review of an administrative decision, and, because the superior court's review should be limited solely to the review of the administrative order and the Union had failed to exhaust its administrative remedies, jurisdiction was lacking. The City joined the motion, and the Union opposed the motion.

¶ 9 Following hearings on August 11 and September 4, 2003, and before ruling on the merits of the special action, the superior court determined that the PERB had the authority to decide the issue of the legality of "fair share." Further, because the legality issue had not been decided at the administrative level, the court remanded the matter to the PERB to determine that issue. The court also ruled that the issue whether the Union could bring a declaratory judgment action in a special action review of an administrative decision (the issue posed by Count II) was moot.

¶ 10 On October 21, 2003, the PERB, by a 3-2 vote, issued another "Decision and Order," concluding "that the concept of fair share, or mandatory assessment of fees for services provided by an employee organization, does not violate the Arizona Constitution, Right to Work laws, or Section 2-214(A) of the Phoenix City Code."¹¹ Thereafter, the City filed an amended separate answer and cross-claim, alleging that the PERB had erred in concluding that "fair share" does not violate Article 25 of the Arizona Constitution, A.R.S. §§ 23-1303 to -1305, and P.C.C. § 2-214, and in failing to conclude that non-voluntary wage deductions and transfers to a union for services provided violates A.R.S. § 23-352 (the wage withholding statute).

¶ 11 After extensive briefing, the superior court ordered that oral argument be held on August 23, 2004, and directed the sides to file with the court a two-page summary of argument addressing all issues raised. In its summary and at oral argument, the Union argued that "fair share" fees are legal and a mandatory subject of collective...