Macomb Cnty. v. AFSCME Council 25 Locals 411 & 893, Docket No. 296416.

• Decision Date: 20 September 2011
• Docket Number: Docket No. 296416.
• Citation: 294 Mich.App. 149,818 N.W.2d 384
• Parties: MACOMB COUNTY v. AFSCME COUNCIL 25 LOCALS 411 AND 893.
• Court: Court of Appeal of Michigan — District of US

294 Mich.App. 149

818 N.W.2d 384

MACOMB COUNTY

v.AFSCME COUNCIL 25 LOCALS 411 AND 893.

Docket No. 296416.

Court of Appeals of Michigan.

Submitted May 10, 2011, at Lansing.

Decided Sept. 20, 2011, at 9:05 a.m.

McConaghy & Nyovich, P.L.L.C. (by Timothy K. McConaghy), for Macomb County, the Macomb County Road Commission, and the Macomb Circuit Court.

Miller Cohen, P.L.C., Detroit (by Bruce A. Miller and Richard G. Mack, Jr.), for AFSCME Council 25 Locals 411 and 893.

Georgi–Ann Bargamian, Detroit for International Union UAW Locals 412 and 889.

Anita Szczepanski, Okemos and Lisa Harrison for the Michigan Nurses Association.

Before: MARKEY, P.J., and FITZGERALD and SHAPIRO, JJ.

SHAPIRO, J.

Respondents-appellants employ members of the charging party-appellee labor unions. Pursuant to their respective collective-bargaining agreements (CBAs), respondents provide pension benefits to their employees. The CBAs provide the employees with various pension plan options, including one in which payments terminate at the death of the employee (straight-life pension) and another in which pension benefits continue until the death of both the employee and his or her spouse (joint-and-survivor pension or optional benefits plan). Since 1982, a particular mortality table was used to calculate the joint-and-survivor-pension monthly benefit. In 2006, respondents adopted a different mortality table for calculating those benefits, thereby reducing the monthly pension benefit paid under the joint-and-survivor plan. The charging parties filed a claim with the Michigan Employment Relations Commission (MERC), asserting that respondents committed an unfair labor practice (ULP) by lowering pension benefits without bargaining on the issue as required by the public employment relations act (PERA), MCL 423.201 et seq. The MERC agreed that respondents' unilateral actions constituted a ULP, ordered respondents to bargain on the issue, and held that until an agreement is reached, the joint-and-survivor pension benefits must be calculated under the mortality table adopted in 1982. We affirm.

I. UNDERLYING FACTS

The Macomb County Employees' Retirement System Ordinance (the retirement ordinance) provides pension benefits for employees who are members of the system.¹ Before 1982, calculation of optional joint-and-survivor pension benefits included consideration of the gender of the retiree because the average lifespans of women and men differed. In 1978, the United States Supreme Court held that the usage of separate tables constituted unlawful gender discrimination. Los Angeles Dept. of Water & Power v. Manhart, 435 U.S. 702, 98 S.Ct. 1370, 55 L.Ed.2d 657 (1978). The Michigan Attorney General then issued an opinion that public pension systems must adopt gender-neutral mortality tables. OAG, 1981–1982, No 5846, p. 29 (January 22, 1981) (“[A]doption of a sexually-neutral retirement table by the [county] would comport with federal and state law.”).²

In 1982, in response to this change in the law, the Macomb County Retirement Commission asked its actuary, Gabriel, Roeder and Smith (GRS), to study the effect on the retirement system if it adopted a single mortality table for all future retirees based on a blending of male and female mortality tables into one gender-neutral, or unisex, table. GRS's report explained that doing so would result in a range of outcomes. To the degree that the blend was weighted toward male mortality rates, the result would be “substantially lower benefits than at present for women electing a joint and survivor benefit[.]” ³ To the degree that the blend was weighted toward female rates, it would result in an increase in costs because it would increase benefits to male retirees greater than the reduction in benefits to female retirees. The report went on to note that the only way to “make sure that no participant will receive a lesser benefit than under present procedures” was to adopt a gender-neutral table with a 100% female/0% male blend of mortality rates. The report outlined the specific additional costs to the system using this and several other blends of the male and female mortality tables and offered them as options to the retirement commission. Though cognizant of the increase in overall costs to the retirement system, the retirement commission adopted the 100% female/0% male mortality blend as its gender-neutral mortality table.

The 1982 GRS report also noted that the retirement ordinance required that the optional joint-and-survivor benefit be “the actuarial equivalent” of the standard straight-life benefit. Accordingly, the report recommended adopting a specific rule to govern the meaning of actuarial equivalence in the context of optional benefits. The report recommended adoption of a rule stating that “for purposes of determining amounts of optional benefits, the actuarial equivalent will be based upon a stipulated interest rate and unisex mortality table.” Section 15 of the retirement ordinance was thereafter amended to read:

The Retirement Commission shall from time to time adopt such mortality and other tables of experience, and a rate or rates of regular interest, as are necessary in the Retirement System on an actuarial basis. For purposes of determining actuarial equivalent Retirement Allowances, the Retirement Commission is currently using a 7 1/2% interest rate and a blending of male and female rates based on the 1971 group annuity mortality table projected to 1984 with ages set back 2 years.... [Emphasis added.]

The retirement commission continued to use the same mortality table for 24 years. However, in 2006, in response to another study conducted by GRS, the retirement commission adopted a new gender-neutral mortality table, effective July 1, 2007, which, among other things, changed the assumed ratio of retirees selecting the joint-and-survivor plan from 100% female/0% male to 60% male/40% female. This had the result of lowering the monthly retirement benefit for those under the joint-and-survivor pension. The charging parties demanded bargaining over the change. Respondents rejected the demand, and the charging parties filed ULP charges with the MERC asserting a violation of respondents' duty under § 10(1)(e) of PERA, MCL 423.210(1)(e), to bargain over benefits.

Although the hearing referee and the MERC reached different rulings, they agreed on two preliminary questions. First, that under PERA, respondents have a duty to bargain over the method by which the joint-and-survivor pension benefits are determined. Second, they agreed that this duty to bargain was not eliminated by the fact that the pension plan is administered by an independent board.

The hearing referee and the MERC disagreed about whether the CBAs fully covered the issue of retirement-benefit calculations so as to satisfy the respondents' duty to bargain. The hearing referee found that this did because the CBAs incorporated § 26 of the ordinance, which describes the optional joint-and-survivor benefits as “actuarially equivalent” to the straight-life benefits. The hearing referee found that the term “actuarially equivalent” represented a bargained benefit and that, although the meaning of the term “actuarially equivalent” as used by the parties was ambiguous, respondents' unilateral change in the benefits paid under the optional joint-and-survivor plan did not give rise to a ULP.⁴

The MERC concluded that because the term “actuarially equivalent,” as used in the CBAs, was ambiguous, the CBAs did not “contain the entirety of the parties' agreements with respect to pension benefits.” It went on to conclude that the 24–year practice of using the 100 percent female mortality table constituted a “tacit agreement that the practice would continue.” ⁵ It found, therefore, that the unilateral change in the mortality tables used to calculate benefits constituted a ULP.

II. STANDARD OF REVIEW

The MERC's findings of fact are conclusive if supported by competent, material, and substantial evidence on the record considered as a whole. MCL 423.216(e); Const. 1963, art. 6, § 28; Amalgamated Transit Union, Local 1564, AFL–CIO v. Southeastern Mich. Transp. Auth., 437 Mich. 441, 450, 473 N.W.2d 249 (1991). Indeed, appellate review of those findings must be undertaken with sensitivity because of the administrative expertise of the MERC. Amalgamated Transit, 437 Mich. at 450, 473 N.W.2d 249;Gogebic Community College Mich. Ed. Support Personnel Ass'n v. Gogebic Community College, 246 Mich.App. 342, 348–349, 632 N.W.2d 517 (2001). The MERC's legal rulings, however, are not accorded the same deference as its factual findings. “Legal rulings of an administrative agency are set aside if they are in violation of the constitution or a statute, or affected by a substantial and material error of law.” Amalgamated Transit Union, 437 Mich. at 450, 473 N.W.2d 249. Of course, whether an error of law has occurred and, if so, whether it is substantial and material are legal questions subject to review de novo. Mich. Ed. Ass'n v. Christian Bros. Institute of Mich., 267 Mich.App. 660, 663, 706 N.W.2d 423 (2005). Also subject to review de novo are issues of statutory interpretation, Kent Co. Deputy Sheriff's Ass'n v. Kent Co. Sheriff, 463 Mich. 353, 357 n. 8, 616 N.W.2d 677 (2000), as well as whether contract language is ambiguous and the meaning of unambiguous contract language, Port Huron Ed. Ass'n v. Port Huron Area Sch. Dist., 452 Mich. 309, 323, 550 N.W.2d 228 (1996).

III. ANALYSIS

In this appeal, we must determine whether respondents violated their duty to bargain when they adopted new mortality tables to calculate joint-and-survivor benefits under the CBAs that had the result of reducing the monthly benefits paid under the joint-and-survivor plan. A public employer commits an unfair labor practice if it refuses to bargain in good faith regarding a mandatory subject of collective bargaining or takes unilateral action on the subject absent an impasse in the...