Labor Relations: The Meet and Confer Process

California Court of Appeal also concluded that the City’s retiree health benefit was not a benefit under the City’s retirement system, consistent with the Ninth Circuit’s 2009 decision. Because the retiree health benefit was renegotiated every few years between the City and its labor organizations and there was no express language or evidence that it was intended to be a permanent benefit, the retiree health benefit was not a vested right and could be modified by the City. Generally, where retiree medical benefits are set forth in an MOU, it is presumed that the benefit expires at the expiration of the MOU except where the benefit was already vested prior to inclusion in the MOU or where there is an express or implied term which indicates the parties intended the benefit to extend beyond the life of the MOU. For example, where an MOU promised to provide 50% paid retiree medical premiums for each retiree presently enrolled “and for each retiree in the future,” a court held that this potentially could indicate that the benefit would extend beyond the life of the MOU. In the REAOC case cited above, the California Supreme Court determined that retiree health benefits may become vested contractual rights in certain circumstances; essentially noting that vesting is simply a matter of the parties’ intent. The court did not announce that the benefit in question was vested, but rather stated that such a circumstance could exist and sent the case back to the Ninth Circuit for a decision based on the specific facts. The Ninth Circuit eventually affirmed a decision finding that the benefit in question was not vested. In a case related to REAOC , the Ninth Circuit upheld a dismissal where each MOU had durational language in which the agreements therein, including an agreement to provide monthly grants toward retiree health insurance, expired upon the MOU’s expiration unless otherwise specified. Standards issued by the Governmental Accounting Standards Board in Statement 45 (GASB 45) require that all public sector agencies report the cost of providing retiree health care benefits, as well as “other post-employment benefits” (OPEBs) as the liability incurs, rather than as a cost when paid. Due to this accounting standard, failure to fund liability from retiree health benefits results in the appearance of unfunded liabilities on the agency’s financial statements. Agencies are therefore keen to reduce liability from OPEB’s where possible. Agencies covered by the Public Employees’ Medical and Hospital Care Act (“PEMHCA”) face additional restrictions which impede the ability to modify retiree health care benefits; employers covered by the County Employees Retirement Law of 1937 (CERL) may have more flexibility to reduce or eliminate retiree health care benefits. However, once it is established that an employee or retiree has a vested right to a post- employment benefit, the employer may only reduce that vested right in very narrow circumstances. In some cases, employers are prohibited from altering retiree health benefits via an MOU altogether. For this reason, employers should examine their retiree health benefits on a case-by-case basis before attempting to reduce or modify them through negotiations.

Labor Relations: The Meet and Confer Process ©2019 (s) Liebert Cassidy Whitmore 35