State v. Am. Fed'n of State, Cnty. & Mun. Emps., Council 31

• Decision Date: 24 March 2016
• Docket Number: No. 118422.,118422.
• Citation: 51 N.E.3d 738,401 Ill.Dec. 907
• Parties: The STATE of Illinois (The DEPARTMENT OF CENTRAL MANAGEMENT SERVICES), Appellant, v. AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, COUNCIL 31, Appellee.
• Court: Illinois Supreme Court

51 N.E.3d 738

401 Ill.Dec. 907

The STATE of Illinois (The DEPARTMENT OF CENTRAL MANAGEMENT SERVICES), Appellant

v.AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, COUNCIL 31, Appellee.

No. 118422.

Supreme Court of Illinois.

March 24, 2016.

Rehearing Denied May 23, 2016.

Lisa Madigan, Attorney General, of Springfield (Carolyn E. Shapiro, Solicitor General, and Richard S. Huszagh, Assistant Attorney General, of Chicago, of counsel), for appellant.

Stephen A. Yokich, of Dowd, Block, Bennett, Cerrone, Auerbach & Yokich, of Chicago, for appellee.

Joel Abbott D'Alba, of Asher, Gittler & D'Alba, Ltd., of Chicago, for amicus curiae Illinois AFL–CIO.

OPINION

Justice THEIS delivered the judgment of the court, with opinion.

¶ 1 This case arises out of the entry of an arbitration award directing the State of Illinois to pay a 2% wage increase to state employees covered by a multiyear collective bargaining agreement between the State of Illinois, Department of Central Management Services (the State), and the American Federation of State, County and Municipal Employees, Council 31 (AFSCME).

¶ 2 For the reasons discussed below, we hold that the arbitration award violates Illinois public policy, as reflected in the appropriations clause of the Illinois Constitution (Ill. Const.1970, art. VIII, § 2 (b)), and section 21 of the Illinois Public Labor Relations Act (Act) (5 ILCS 315/21 (West 2014) ). Accordingly, we reverse the judgments of the appellate court (2014 IL App (1st) 130262, 385 Ill.Dec. 931, 19 N.E.3d 1127 ) and the circuit court of Cook County, and vacate the arbitration award.

¶ 3 BACKGROUND

¶ 4 AFSCME is the exclusive bargaining representative for approximately 40,000 state employees working in more than 50 departments, authorities, boards, and commissions under the authority of the Governor (collectively, executive agencies). In 2008, AFSCME and the State negotiated a multiyear collective bargaining agreement governing those employees' wages, hours, and conditions of employment. The agreement was effective September 5, 2008, through June 30, 2012, spanning almost four fiscal years.¹ Article XXXII of the agreement provided for a general wage increase on January 1, 2009, and thereafter on every July 1 and January 1, with the final increase on January 1, 2012. The individual wage increases varied in amount, but over the life of the agreement the wage increases totaled 15.25%. The underlying dispute in the present case involves the 4% wage increase that was scheduled to go into effect on July 1, 2011.

¶ 5 In addition to the wage increases, the parties agreed, pursuant to article V of the collective bargaining agreement, to resolve certain disputes, including contract interpretation disputes, through binding arbitration. The parties also agreed, as set forth in article XXXIV, that the provisions of the collective bargaining agreement “cannot supersede law.”

¶ 6 In January 2010, in the face of declining state revenues owing to the Great Recession, and the potential layoff of 2,500 state employees, AFSCME and the State agreed to $300 million in cost savings measures. The parties' written agreement limited the number of employees subject to layoff, limited facility closures during fiscal year 2011, deferred a portion of the wage increases scheduled to go into effect during fiscal year 2011, and set a target date for agreement on a voluntary furlough program.

¶ 7 In the fall of 2010, in recognition of the yet ongoing fiscal crisis facing the State, the parties entered into two cost savings agreements that established a $100 million savings goal for fiscal year 2012. Among other things, AFSCME agreed to a partial deferral of the wage increase scheduled to go into effect on July 1, 2011. Rather than the 4% increase reflected in the collective bargaining agreement, a 2% increase would be implemented on July 1, 2011, with the remaining 2% increase to be implemented on February 1, 2012. The State, in turn, agreed that no layoffs or facility closures would occur through the end of fiscal year 2012. The cost savings agreements expressly provided that arbitrator Edwin Benn would be retained to decide any disputes relative to the agreements.²

¶ 8 The Governor's proposed budget for fiscal year 2012, submitted to the General Assembly in February 2011, sought appropriations that would have fully funded the wage increases reflected in the CBA. The General Assembly's subsequent appropriation bills were, in fact, sufficient for that purpose with respect to the vast majority of executive agencies. As to 14 agencies, however, the Governor's Office of Management and Budget (GOMB) determined that the legislative appropriations were insufficient to pay the 2% wage increase.³

¶ 9 On July 1, 2011, immediately after adoption of the fiscal year 2012 budget, the acting director of the Department of Central Management Services (CMS) issued a memorandum advising agency directors, personnel and payroll managers, and labor relations administrators that, due to insufficient appropriations, the wage increase could not be implemented in those 14 agencies. The memorandum explained:

“Pursuant to the Illinois Constitution, the General Assembly possesses the sole authority to make appropriations for all expenditures of public funds by the State. Additionally, [section 21 of] the Illinois Public Labor Relations Act * * * states, ‘[s]ubject to the appropriation power of the employer, employers and exclusive representatives may negotiate multi-year collective bargaining agreements pursuant to the provisions of this Act.’

The Governor's proposed budget to the General Assembly sought to fully fund all collective bargaining contracts. However, the budget that was passed by the General Assembly and sent to the Governor DOES NOT contain appropriation authority to implement * * * increases for employees [in 14 agencies] covered by [the CBA].” (Emphasis in original.)

¶ 10 AFSCME thereafter initiated a labor arbitration before the parties' designated arbitrator. The arbitrator directed the parties to brief the effect of section 21 of the Act on their dispute.

¶ 11 The State argued that section 21 mandates that expenditures by the executive branch pursuant to a collective bargaining agreement are contingent on the existence of corresponding appropriations by the General Assembly, and that this provision simply restates the mandate contained in the appropriations clause of the Illinois Constitution. The State further argued that section 21 of the Act was incorporated into the CBA by virtue of the parties' express agreement, set forth in article XXXIV of the CBA, that “ the provisions of this contract cannot supersede law.”

¶ 12 AFSCME argued that the very purpose of the Act was to expand the collective bargaining rights of public employees. Thus, section 21 should not be read to “cut back” on such rights by making collective bargaining agreements subject to the approval of the General Assembly.

¶ 13 On July 19, 2011, the arbitrator issued an award in favor of AFSCME. Based strictly on the four corners of the CBA, the arbitrator found that the State violated the CBA when it failed to pay the 2% wage increase on July 1, 2011. The arbitrator directed the State to begin paying the wage increase immediately and, within 30 days from the date of the award, “to make whole” those employees who did not receive the wage increase on July 1, 2011.⁴ As to section 21 of the Act, the arbitrator determined that he was without authority to interpret this statutory provision, that being a matter for the courts. The arbitrator also declined to consider the State's constitutional and public policy arguments, again citing his lack of authority.

¶ 14 The State filed a complaint in the circuit court of Cook County to vacate the arbitration award. AFSCME, in turn, filed a counterclaim to confirm the award. The parties stipulated that during the pendency of the case, the GOMB had determined that, “as a result of attrition, lower than anticipated overtime, and the shifting of some staff payroll from the General Revenue Fund to other funding sources,” 4 of the 14 agencies now had sufficient appropriations to pay the wage increases for fiscal year 2012 retroactive to July 1, 2011. Thus, the parties' dispute focused on the remaining 10 agencies.

¶ 15 On July 9, 2012, the circuit court entered its order vacating the arbitration award in part. Although the circuit court agreed with the arbitrator that the State was under a contractual obligation to pay the wage increase, the circuit court determined that section 21 of the Act, when considered in conjunction with the appropriations clause, is indicative of a well-defined and dominant public policy that prohibits the expenditure of public funds where authority to do so, i.e., a sufficient appropriation, is lacking. The circuit court also determined that the applicability of this public policy was fact-dependent. That is, in order to excuse the State's obligation under the CBA to pay the wage increase, the State must establish that the appropriations to the remaining 10 executive agencies were, in fact, insufficient. The circuit court remanded the matter to the arbitrator for such fact-finding. The arbitrator, however, declined to consider the matter further, and the parties agreed to proceed before the circuit court. Thereafter, four more agencies determined that they were able to pay the wage increase with their remaining appropriations. Accordingly, the parties proceeded to trial on the issue of whether the appropriations to the six remaining agencies were sufficient to pay the 2% wage increase.⁵

¶ 16 The State offered testimony from Robert Brock, budget director for the Department of Human Services; Rob Craddock, deputy director over the labor relations function for CMS; Marc Staley, associate director of the GOMB; and Bryan Geckler, chief financial officer for the Department of Corrections. Additionally, the parties filed 326 joint stipulations, and...