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Unilateral Modification of CBA During "Fiscal Emergency" Disfavored By Supreme Court of Florida


Headley, Jr. v. City of Miami, Florida - Supreme Court of Florida


Facts:  On July 28, 2010, the City of Miami ("City") declared a "financial urgency" and notified Miami Lodge No. 20, Fraternal Order of Police ("Union") that the City intended to implement changes regarding wages, pension benefits, and other economic terms of employment.  After negotiations concerning the financial urgency, the City informed the Public Employee Relations Commission ("PERC") that a dispute remained between all parties.  On August 31, 2010, the City's legislative body voted to unilaterally alter the terms of the collective bargaining agreement ("CBA") in order to address the financial urgency and as a result impose a tiered wage reduction, eliminate education pay supplements, free other pay, and modify benefit calculations.  

All parties went before the PERC and the City presented evidence that it faced a budget deficit of $140 million and it had taken all available steps, short of unilaterally modifying the CBA, to address the deficit.  The Union countered and suggested the city raise the mileage tax rate and install red light cameras (among other fixes) to cover the $140 million gap.  However the City argued these proposed measures would not generate sufficient revenue.  The PERC interpreted the relevant statute, Section 447.4095, Florida Statutes and held that the City could make unilateral changes to the CBA after having provided notice and an opportunity to bargain to the Union.  The First District Court of Appeal affirmed the decision.  The Union subsequently appealed.

Holding:  When the Supreme Court began its analysis of the case, it noted that the relevant statute did not define the "financial urgency" needed for a municipality to unilaterally alter terms and conditions of employment, such as what was done in this case.  As a result, the Court adopted the PERC's definition of "financial urgency" and held it to be a condition requiring immediate attention and decisive action.

The Supreme Court noted a 1993 decision from the Court, Chiles v. United Faculty of Florida, which addressed the standard that must be followed when a government entity attempts to change a CBA to address a revenue shortfall.  In Chiles, the Court had held that legislatures have authority to reduce wages previously agreed upon in a CBA but only where it can demonstrate a compelling state interest for doing so.  However, "the mere fact that it is politically more expedient to eliminate all or part of the contracted funds [of a CBA] is not in itself a compelling reason."  As a result, municipalities must show that the only way to address a dire financial situation, such as a "financial urgency", is to modify the CBA.  To do so, it must be shown that funds are available from no other reasonable source.

However, a split existed among Court of Appeals in the state in regard to interpretation of Chiles:  The First District held that a municipality only need to show that alternative funding sources would be inadequate to address the financial situation, while the Fourth District held that a municipality must prove that funds are available from no other source before altering the terms and conditions of employment.  In this instance, the Supreme Court agreed with the reasoning from the Fourth District Court of Appeal and held that unilateral contract modification of a CBA by a municipality is not allowed if a legislature has merely demonstrated that alternative funding sources are inadequate.  Instead, it must be shown that funds are not available from any other possible reasonable source (which the Union had done in this case). 

Judgment:  The Supreme Court of Florida reversed the lower court and held that the City of Miami could not unilaterally amend its CBA with the Union because the City had failed to show there were no other reasonable sources from which funds could be obtained to cover a $140 million deficit.

The Takeaway:  I have not come across a collective bargaining case in a while that I wanted to highlight...however, the statutory interpretation (and the Supreme Court's decision to resolve a split among Districts) was a big reason for me writing about this opinion.  Note how the Supreme Court of Florida had handed down its decision in the Chiles case, which had subsequently been interpreted by two different Districts.  While I do not necessarily agree with the Court's ruling in this instance (as the Court did not agree with the First District interpretation that unilateral modification could occur if alternative funding sources are found to be inadequate), I understand the Court's rationale.  

Note that at the end of its opinion, the Court stressed the long recognized principal of collective bargaining and the right to contract free of impairment.  Simply put, given the Court's nod to a public policy in the state of allowing collective bargaining (and disfavoring unilateral modification), the City of Miami simply had little ground to stand on.

Majority Opinion Judge:  Judge Quince

Date:  March 2, 2017

Opinion:  hr.cch.com/ELD/HeadleyMiami030217.pdf

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