Washington Federation of State Employees, AFL-CIO, Council 28 AFSCME v. State

• Decision Date: 17 May 1984
• Docket Number: COUNCIL,AFL-CI,No. 48914-9,48914-9
• Citation: 682 P.2d 869,101 Wn.2d 536
• Parties: WASHINGTON FEDERATION OF STATE EMPLOYEES,28, AFSCME, et al., Appellants, v. The STATE of Washington, et al., Respondents.
• Court: Washington Supreme Court

Page 536

101 Wn.2d 536

682 P.2d 869

WASHINGTON FEDERATION OF STATE EMPLOYEES, AFL-CIO, COUNCIL

28, AFSCME, et al., Appellants, v. The STATE of Washington, et al., Respondents.

No. 48914-9.

Supreme Court of Washington,

En Banc.

May 17, 1984.

Cordes, Younglove & Wyckoff, Douglas P. Wyckoff, Mark S. Lyon, Olympia, Hafer, Cassidy & Price, Richard H. Robblee, Richard D. Eadie, Seattle, for appellants.

Ken Eikenberry, Atty. Gen., Richard A. Heath, Donald F. Cofer, Asst. Attys. Gen., Olympia, for respondents.

DOLLIVER, Justice.

In 1982 the Washington Legislature amended the state civil service laws to permit performance as well as seniority to be considered in matters of compensation, reduction in force, and reemployment. Substitute House Bill 1226, 47th Legislature, 1st Ex. Sess. (1982). The Governor approved Substitute House Bill 1226, except for section 30 and all references thereto. His veto message stated:

Section 30 calls for legislative review and approval of the proposed administrative rules for implementing the act. Failure of the legislature to approve the rules would void several sections of the act. In addition to presenting some constitutional issues relating to the functions of the legislative and executive branches, implementation of this section creates too much uncertainty as to when or whether the law will become effective.

Laws of 1982, 1st Ex. Sess., ch. 53, at 1511. Thereafter, plaintiff Washington Federation of State Employees, AFL-CIO, filed a complaint for declaratory judgment and injunction against defendants State of Washington; Governor Spellman; Higher Education Personnel Board, Douglas Sayan, Director; and State Personnel Board, Leonard Nord, Secretary.

The union alleged enactment of Laws of 1982, 1st Ex. Sess., ch. 53 would change the terms, rights, and benefits historically accorded to public employees under the state civil service law.

The challenged provisions of chapter 53 include:

1. Certification. The number of names referred to hiring authorities for vacancies, promotions, and reemployment from layoff is increased from two to four more names than there are vacancies to be filled. Sections 4(2) and 16(2).

2. Increment Salary Increases. Length of service (seniority) as the sole basis for awarding increment salary step increases is eliminated. Sections 4(18) and 16(18). Instead, employee performance evaluation standards will additionally be utilized to award salary increases. Sections 6, 8, and 21.

3. Layoffs. Reduction in force is no longer based solely upon seniority. The decision is now also founded upon an employee's performance. Sections 7 and 20.

4. Reemployment from Layoff. Rather than base reemployment on seniority, hiring authorities are also subject to the expanded certification law. Sections 10 and 23.

The union maintained public employees covered by the state civil service and higher education personnel laws relied on established practices and regulations under existing laws which amounted to contract expectancies under Const. art. 1, § 23. The amendments were alleged to have impaired substantially their contract with the State and hence to be violative of the contract clause of Const. art. 1, § 23. Additionally, plaintiffs challenged the validity of Governor Spellman's veto of section 30. See Laws of 1982, 1st Ex. Sess., ch. 53, at 1510.

Motions for intervention were granted to the following plaintiff unions: Washington Public Employees Association; United Food and Commercial Workers, Local 1001; and International Federation of Professional and Technical Engineers, Local 17.

Plaintiffs moved for summary judgment and defendants cross-motioned. The Superior Court granted (1) defendants' motion for summary judgment upholding the constitutional validity of Laws of 1982, 1st Ex. Sess., ch. 53, and (2) plaintiffs' motion for summary judgment invalidating the Governor's affirmative veto of section 30. Both parties appealed. Pursuant to RAP 4.2, direct review was accepted.

I. Contract Clause

"No ... law impairing the obligations of contracts shall ever be passed." Const. art. 1, § 23. This provision is substantially the same as U.S. Const. art. 1, § 10 and is to be given the same effect. Ruano v. Spellman, 81 Wash.2d 820, 825, 505 P.2d 447 (1973).

Generally, a statute is treated as a contract when the language and circumstances demonstrate a legislative intent to create rights of a contractual nature enforceable against the State. United States Trust Co. v. New Jersey, 431 U.S. 1, 17 n. 14, 97 S.Ct. 1505, 1515 n. 14, 52 L.Ed.2d 92 (1977).

The difficulty ... has always been to distinguish what is intended by the legislature to be an exercise of its ordinary legislative function in making laws, which, like other laws, are subject to its full control by future amendments and repeals, from what is intended to become a contract between the State and other parties when the terms of the statute have been accepted and acted upon by those parties.

Hale, The Supreme Court and the Contract Clause: II, 57 Harv.L.Rev. 621, 663-64 (1944) (quoting New Jersey v. Yard, 95 U.S. 104, 114, 24 L.Ed. 352 (1877)). See Aetna Life Ins. Co. v. Washington Life & Disability Ins. Guar. Ass'n, 83 Wash.2d 523, 539, 520 P.2d 162 (1974). Compare Indiana ex rel. Anderson v. Brand, 303 U.S. 95, 104-05, 58 S.Ct. 443, 447-48, 82 L.Ed. 685 (1938) (contract between teacher and school corporation evinced by the numerous uses of the word "contract" in the state act) with Dodge v. Board of Educ., 302 U.S. 74, 78-79, 58 S.Ct. 98, 100, 82 L.Ed. 57 (1937) (teacher compulsory retirement law did not create a contractual obligation as neither the language of the law nor the circumstances of its adoption evinced such a legislative intent).

Plaintiff unions contend the state civil service laws form the basis of a contractual relationship between the State and its public employees. These laws are alleged to form a "statutory contract" which is binding under Const. art. 1, § 23, through the promise of "deferred benefits" in return for the acceptance and continued employment of public employees. Moreover, the public employees' reliance on the State's statutory promises is claimed to invoke the doctrine of promissory estoppel. Restatement (Second) of Contracts § 90 (1981). Additionally, plaintiffs maintain the public employee pension cases, beginning with Bakenhus v. Seattle, 48 Wash.2d 695, 296 P.2d 536 (1956), are analytically similar.

Bakenhus involved the modification of a pension statute, during the tenure of the plaintiff policeman, which would have deprived the officer of approximately one-third of his anticipated pension. Bakenhus v. Seattle, supra at 703, 296 P.2d 536. Affirming an increase in pension funds, we determined the State's obligation to pay a pension was contractual in nature and vested at the time the employee entered public service. Bakenhus v. Seattle, supra at 698-70, 296 P.2d 536.

Subsequent cases have affirmed the Bakenhus holding. See Washington Fed'n of State Employees v. State, 98 Wash.2d 677, 658 P.2d 634 (1983) (pension rights of public employees unconstitutionally impaired by statute preventing the inclusion of the value of accrued vacation time in computing pension benefits); Horowitz v. Department of Retirement Sys., 96 Wash.2d 468, 635 P.2d 1078 (1981) (denial of refund of contributions to judicial retirement system due to contractual bar of pertinent statute); Eagan v. Spellman, 90 Wash.2d 248, 581 P.2d 1038 (1978) (a lowering of the mandatory retirement age after an employee commenced public service was invalidated as her potential pension was decreased from 28 percent to 18 percent of her average final compensation); Washington Ass'n of Cy. Officials v. Washington Pub. Employees' Retirement Sys. Bd., 89 Wash.2d 729, 575 P.2d 230 (1978) (the practice of Public Employees' Retirement System to include lump sum termination payments in the computation of "average final compensation", which determines pension payments, held to be a contractual obligation).

Defendants argue the state civil service laws do not create a contract between the State and its employees. Relying principally upon Association of Capitol Powerhouse Eng'rs v. State, 89 Wash.2d 177, 570 P.2d 1042 (1977), defendants maintain:

[T]he terms and conditions of public employment ... are basically controlled by statute, not by contract ... [as i]t is clearly within the province of the legislature to enact statutes regulating the "mode and appointment and tenure in public employment."

89 Wash.2d at 184, 570 P.2d 1042 (quoting Gogerty v. Department of Insts., 71 Wash.2d 1, 5, 426 P.2d 476 (1967)). See Greig v. Metzler, 33 Wash.App. 223, 230, 653 P.2d 1346 (1982).

Additionally, defendants limit the Bakenhus rule to "pension" cases and distinguish "tenure" cases. This distinction was clearly defined in Eagan v. Spellman, 90 Wash.2d 248, 581 P.2d 1038 (1978). The majority in Eagan found the lowering of the mandatory retirement age affected a pension right and therefore did not need to "question the ability of public employers to terminate their employees nor the tenure rights of such employees." 90 Wash.2d at 255, 581 P.2d 1038. The dissent found the law to be a "regulation of a term of public employment (tenure) which is the unchallenged right of the county to exercise unilaterally ... unrelated to the contract rights involved in a pension scheme." 90 Wash.2d at 263, 581 P.2d 1038 (Horowitz, J., dissenting).

We adopt the defendants' position as the correct statement of the law. The rights challenged here are neither deferred benefits nor do they give rise to contractual expectancies. Rather, the affected provisions (certification, increment salary increases, layoffs, and reemployment from layoffs) are best categorized as terms of public employment (tenure) and part of a system of personnel administration. Cf. RCW 41.06.010; RCW 28B.16.010. Tenure is regulated by legislative policy. We affirm the...