Univ. of Hawaii Prof'l Assembly v. Cayetano
| Decision Date | 15 January 1999 |
| Docket Number | No. 98-16148,98-16148 |
| Parties | (9th Cir. 1999) UNIVERSITY OF HAWAII PROFESSIONAL ASSEMBLY; ALEXANDER MALAHOFF; LINDA CURRIVAN ; DIANE FERREIRA; HUGH FOLK; VINCENT LINARES; and DAVID MILLER, Plaintiffs-Appellees, v. BENJAMIN J. CAYETANO, in his capacity as Governor of the State of Hawaii, and SAM CALLEJO, in his capacity as Comptroller of the State of Hawaii, Defendants-Appellants |
| Court | U.S. Court of Appeals — Ninth Circuit |
Gary Hynds, Deputy Attorney General, Honolulu, Hawaii, for the defendants-appellants.
T. Anthony Gill, Gill & Zukeran, Honolulu, Hawaii, for the plaintiffs-appellees.
Appeal from the United States District Court for the District of Hawaii;Alan C. Kay, District Judge, Presiding. D.C. No. CB-98-00165-ACK.
Before: Charles Wiggins, A. Wallace Tashima, and Barry G. Silverman, Circuit Judges.
This case involves a challenge by employees of the State of Hawaii to Act 355, the State's "pay lag" law. Act 355 would allow the State to postpone by a few days, at six different times, the dates on which state employees are to be paid. It also declares those postponements to be "not subject to negotiation." The district court granted a preliminary injunction against the operation of this statute on the ground that it impaired the obligations of the employees' collective bargaining agreement in violation of the Contract Clause of the United States Constitution. We agree with the district court's reasoning and affirm.
The predecessor to Act 355 was Act 80 (Session Laws of Hawaii 1996). Enacted in 1996, Act 80 gave Hawaii's governor the power to convert from a "predicted payroll" to an "after-the-fact payroll." A predicted payroll requires state agencies to assume or predict their employees' rate of absenteeism during an entire pay cycle. An after-the-fact payroll system pays employees only for time already worked, eliminating the overpayment problem. The problem with a predicted payroll is that if employees failed to report to work and had insufficient leave to draw against, overpayment results. The changeover from a predicted to an after-the-fact payroll system was to have been accomplished, according to the statute, by implementing "a one-time once a month payroll payment . . . to effect [the] conversion . . . ."
Before Act 80's enactment, Hawaii Revised Statutes ("HRS") S 78-13 provided that state employees were to be paid "at least semi-monthly." It is undisputed that for over twenty-five years it had been the custom and practice of the State to pay its employees on the fifteenth day and the last day of each month.
In response to Act 80, two unions, the Hawaii State Teachers Association ("HSTA") and the University of Hawaii Professional Assembly ("UHPA") filed a prohibited practice complaint with the Hawaii Labor Relations Board. The Unions complained that unilateral implementation of Act 80's pay lag program without first bargaining in good faith constituted a prohibited labor practice under state law. See HRS SS 89-13(a)(5), (6), (7), (8), and 89-9. 1
The Hawaii Labor Board issued Order 1402 on January 17, 1997 finding that the long-standing fifteenth and last-day-ofthe-month pay dates were material to the existing collective bargaining agreement. Order 1402 directed the State to cease and desist from implementing any pay lag without first negotiating with the unions. The State appealed Order 1402 to the state court, which reversed the order of the Labor Board. The state court reasoned that Order 1402 was not supported by the evidence and remanded the matter to the Labor Board for further proceedings. In any event, the State never implemented Act 80.
Meanwhile, the previous collective bargaining agreement between UHPA and the State expired. Negotiations over a new collective bargaining agreement were not proceeding well and by the end of 1996, the faculty members voted to strike if an agreement were not reached. UHPA wanted to bargain over the issue of any change in pay dates, but the State declined. Nevertheless, UHPA and the State entered into a new collective bargaining agreement on January 27, 1997. It was retroactive to July 1, 1995 and effective until June 30, 1999. Although the new collective bargaining agreement contained no provision regarding specific pay dates, it is undisputed that at that time, state employees were still being paid on the fifteenth and last days of the month.
Despite the fate of Act 80, on July 3, 1997, the Hawaii legislature enacted Act 355 (Session Laws of Hawaii 1997).2 Act 355 does two main things. First, it authorizes a total of six pay lags, of between one and three days duration, aimed at implementing a conversion from a predicted to an after-the-fact payroll system. Second, it specifically excludes the subject of the pay lag from collective bargaining. It states:"The implementation of the after-the-fact payroll shall not be subject to negotiation under chapter 89."
Defendants touted that the pay lags would create a savings of approximately $51 million for the State by rolling over salaries to the next fiscal year and by reducing inadvertent salary overpayments.
Plaintiffs are individually named University of Hawaii faculty members and their union, the University of Hawaii Professional Assembly. On February 23, 1998, Plaintiffs filed the underlying complaint against Defendants for declaratory and prospective injunctive relief seeking to enjoin the implementation of Act 355. Plaintiffs alleged that Act 355 constituted an impairment of their collective bargaining agreement in violation of the Contract Clause, Art. I, S 10 of the United States Constitution.
On June 16, 1998, the district court granted UHPA's motion for preliminary injunction. The court found that Plaintiffs had shown a likelihood of success on the merits, that the possibility of irreparable harm existed, and that the balance of hardships tipped in their favor.
Defendants appealed, moving for a stay of the preliminary injunction pending appeal under Rule 62, Fed. R. Civ. P., which the district court denied. Defendants then moved this court to stay the preliminary injunction, which we denied, also. This appeal ensued.
"The grant of a preliminary injunction will be reversed only where the district court abused its discretion and based its decision on an erroneous legal standard or on clearly erroneous findings of fact." FDIC v. Garner, 125 F.3d 1271, 1276 (9th Cir.), cert. denied, 118 S.Ct. 1299 (1998). A finding of fact is clearly erroneous when after weighing the entire evidence, the reviewing court is left with "the definite and firm conviction that a mistake has been committed." Zepeda v. INS, 753 F.2d 719, 724 (9th Cir. 1985) (internal citations and quotation marks omitted).
A district court will grant a motion for a preliminary injunction if a party demonstrates either "1) a combination of probable success on the merits and the possibility of irreparable injury, or 2) the existence of serious questions going to the merits and that the balance of hardships tips sharply in its favor." Garner, 125 F.3d at 1276. "These are not two tests, but rather the opposite ends of a single continuum in which the required showing of harm varies inversely with the required showing of meritoriousness." Republic of the Philippines v. Marcos, 862 F.2d 1355, 1362 (9th Cir. 1988) (internal citation and quotation marks omitted).
Article I, S 10, of the Constitution provides:"No State shall . . . pass any . . . Law impairing the Obligation of Contracts."
"A federal cause of action is stated under the contract clause when one alleges that he or she has a contract with the state, which the state, through its legislative authority, has attempted to impair." E & E Hauling, Inc. v. Forest Preserve District of Du Page County, 613 F.2d 675, 678 (7th Cir. 1980). Plaintiffs claim that Act 355 substantially impairs the obligation of the collective bargaining agreement with the State because it not only changes the employees' pay dates, but removes the whole subject from the bargaining table in violation of Hawaii's labor law. The State, however, argues that although Act 355 arguably might have impaired the performance of the collective bargaining agreement under a breach of contract theory, any obligation under the contract was not impaired.
Our analysis begins with a determination of whether Act 355 "operated as a substantial impairment of a contractual relationship." General Motors Corp. v. Romein , 503 U.S. 181, 186 (1992), (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244 (1978)); Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411 (1983). In other words, we must address whether the State, through its legislative authority, enacted Act 355 to impair its contract with Plaintiffs. The Supreme Court has stated that"[t]his inquiry has three components: whether there is a contractual relationship, whether a change in law impairs that contractual relationship, and whether the impairment is substantial." Seltzer v. Cochrane, 104 F.3d 234, 236 (9th Cir. 1996) (quoting General Motors Corp., 503 U.S. at 181).
The first component to be addressed is whether a contractual relationship existed between Plaintiffs and the State. It is undisputed that the collective bargaining agreement is the contractual relationship between Plaintiffs and the State, and that the collective bargaining agreement makes no specific mention of the dates on which Plaintiffs are to be paid. Plaintiffs contend that Act 355 unconstitutionally impairs implicit terms of the collective bargaining agreement. Defendants argue that a promise to pay on the fifteenth and last days of the month was not part of...
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