PERB Decision No. 0676E•Magnolia Elementary School District (PERB 0676E)
Magnolia Elementary School District (PERB 0676E)
PERB Decision No. 0676ECalperb09.06.1988
Gesamter Gesetzestext
STATE OF CALIFORNIA DECISION OF THE PUBLIC EMPLOYMENT RELATIONS BOARD MAGNOLIA EDUCATORS ASSOCIATION, CTA/NEA, Charging Party, v. MAGNOLIA ELEMENTARY SCHOOL DISTRICT, Respondent. Case No. LA-CE-2517 PERB Decision No. 676 June 9, 1988 Appearance; Robert E. Lindquist, Attorney, California Teachers Association, for Magnolia Educators Association, CTA/NEA. Before Hesse, Chairperson; Porter and Shank, Members. DECISION SHANK, Member: Charging party, Magnolia Educators Association, CTA/NEA, appeals the Public Employment Relations Board (Board) agent's partial dismissal, attached hereto, of its charge alleging that respondent, Magnolia Elementary School District, by joining the Orange County Fringe Benefits Joint Powers Authority (JPA), made certain unilateral changes in health insurance benefits in violation of sections 3543.5(a), (b), and (c) of the Educational Employment Relations Act (EERA).1 1EERA is codified at Government Code section 3540 et seq. Unless otherwise indicated, all statutory references herein are to the Government Code. Section 3543.5 provides, in pertinent part, as follows: It shall be unlawful for a public school employer to: (a) Impose or threaten to impose reprisals on employees, to discriminate or threaten to ) ) ) ) ) ) ) ) ) ) ) )
Specifically, charging party appeals the dismissal of paragraphs 10, 11, 17, and 18 of its amended charge which, in essence, allege the following: Paragraph 10: As a consequence of joining the JPA, respondent "effected a material and significant change in the [total] amount of compensation received by the members of the bargaining unit in the form of health and welfare benefits" since: a. The total amount of compensation provided became subject to a "non-negotiable cost assessment unilaterally established by the Unilateral Insurer." b. The premium price and duration of insurance plans became subject to adjustment by the JPA. c. The penalties or disincentives for a change in insurer "substantially increase[d] the cost to the union for, or place[d] significant constraints on, bargaining any change in health or welfare benefits which entails a change in insurer." d. The basis for determining increases in premium prices changed. discriminate against employees, or otherwise to interfere with, restrain, or coerce employees because of their exercise of rights guaranteed by this chapter. (b) Deny to employee organizations rights guaranteed to them by this chapter. (c) Refuse or fail to meet and negotiate in good faith with an exclusive representative. 22
e. A foreseeable change in the amount of premium costs has occurred. Paragraph 11: As a consequence of joining the JPA, respondent "effected a material and significant change in the amount of the contribution individual bargaining unit members must make to ensure continued eligibility for health and welfare benefits." Paragraphs 17 and 18: Respondents attempted to "derogate and undermine [charging parties'] authority [as] exclusive bargaining representative^] by unilaterally implementing its bargaining position on health and welfare benefits." We have reviewed the partial dismissal and adopt that portion of the regional attorney's analysis which dismisses the allegations contained in paragraphs 10, 17, and 18 of the amended charge. As to paragraph 11 of said charge, we disagree with the regional attorney's conclusion. For the purposes of determining the existence of a prima facie case, the essential facts alleged by the charging party are deemed true. (San Juan Unified School District (1977) PERB Decision No. 12.) On its face, paragraph 11 of the charge alleges that respondent changed the amount individual bargaining unit members must contribute to ensure continued eligibility for health and welfare coverage. We view this as more than speculative or merely an "alternate theory" as construed by the regional attorney. Rather, charging party has depicted an actual change that has happened which is alleged to w 3
have a material and significant impact on bargaining unit employees. (Trinidad Union Elementary School District and Peninsula Union School District (1987) PERB Decision No. 629.) We find a prima facie case has been alleged, requiring this issue to be litigated. Therefore, we reverse the dismissal of paragraph 11 of the amended charge and order that the partial complaint already issued be amended to include this allegation. ORDER Based upon the foregoing, the Board hereby DISMISSES paragraphs 10, 17, and 18 of the amended charge, and ORDERS that the General Counsel incorporate paragraph 11 of the charge into the complaint already issued. Chairperson Hesse and Member Porter joined in this Decision. A 4
STATE Of CALIFORNIA GEORGE DEUKMEJIAN, Governor PUBLIC EMPLOYMENT RELATIONS BOARD LOS ANGELES REGIONAL OFFICE 3470 WILSHIRE BLVD., SUITE 1001 LOS ANGELES, CALIFORNIA 90010 (213) 736-3127 November 5, 1987 Robert Lindquist, Attorney California Teachers Association Post Office Box 9 2888 Los Angeles, CA 90009 Re: LA-CE-2517, Magnolia Educators Association, CTA/NEA v. Magnolia School District PARTIAL DISMISSAL OF UNFAIR PRACTICE CHARGE Dear Mr. Lindquist: In the above-referenced charge, as originally filed, the Magnolia Educators Association (Association) alleged that the Magnolia School District (District) made a unilateral change in health insurance benefits by joining the Orange County Fringe Benefits Joint Powers Authority (JPA or Authority). This action is alleged to be a violation of Educational Employment Relations Act (EERA) sections 3543.5 (a), (b) , and (c) . I indicated to you in my attached letter dated August 12, 1987 that the above-referenced charge did not state a prima facie case. You were advised that if there were any factual inaccuracies or additional facts which would correct the deficiencies explained in that letter, you should amend the charge accordingly. You were also invited to submit any legal argument. You were further advised that unless you amended the charge to state a prima facie case, or withdrew it prior to August 20, 1987, it would be dismissed. The time within which to file an amended charge was extended to September 8, 1987. On September 9, 1987 an amended charge was received, alleging violations of EERA sections 3543.5 (a) , (b) , (c), and (d). For the reasons which follow, the following allegations of the amended charge will be dismissed: Sub-Paragraphs 10 (a)-(e), 17, and 18.l The allegations in paragraphs 15 and 16 have been withdrawn. Under separate cover today a complaint has issued alleging that 1 The complaint which issued today includes allegations from the introductory portions of paragraph 10 and from paragraph 11. All other allegations of paragraph 10 and 11 are dismissed except those specifically included in the complaint.
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Page 2 the District's action of joining the JPA was an unlawful unilateral change because it resulted in a change in benefits and resulted in a significantly less reliable insurer. SUB-PARAGRAPHS 10 (a)- (e): Sub-Paragraph 10(a) - Compensation in the form of health and welfare benefits: The collective bargaining agreement provided for 1986-87 that the District would contribute up to a maximum amount toward employee health insurance. This allegation merely restates the allegation in paragraph 9 (1) and (5) of the original charge. The allegation, as made in the amended charge and the original charge, is that the JPA, rather than the District sets the cost assessment for health and welfare benefits and therefore, the District will no longer negotiate with the Association about the amount of compensation to be provided for members of the bargaining unit in the form of health and welfare benefits. The JPA does set the contribution rate for the District to receive health insurance coverage through the JPA. It does not necessarily follow, however, that the District must then pass on any increase or decrease assessed by the JPA to employees, or a fortiori, that it must do so without fulfilling its obligation to bargain with the Association. Faced with an increased contribution rate from the JPA for continued health insurance, the District can assume the increased costs; it can bargain to impasse with the Association about increasing the amount of employee contribution toward health; or it can withdraw from the JPA and seek other means of providing the bargained-for health insurance to employees. 2The discussion in this paragraph assumes that the status quo in health insurance in the District is that employees receive health insurance without making any contribution for those benefits. An argument could be made, of course, based on the contract language, that the status quo is that the District only contributes up to the ceiling amount in the agreement, and after that the employees pay the costs of health insurance. If that were the status quo, however, to change employee contributions for health insurance would not be an unlawful unilateral action because it would not alter the status quo.
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Page 3 If the result of bargaining is that no increased costs can be passed on to employees and if the District doesn't wish to assume those costs, again the District can leave the JPA. It is simply not an automatic consequence of an increase in the contribution rate by the JPA that the District will change the amount of compensation provided to employees in the form of health and welfare benefits. As the Board stated in Trinidad Union Elementary School District/Peninsula Union School District (1987) PERB Decision No. 629, there must be some cogent evidence that changes have happened or will happen, which have significantly changed or will significantly change employee benefits. The fact that the JPA sets the contribution rates for insurance is not such evidence. For these reasons and for the reasons stated in my August 12, letter relating to paragraph 9(1) and (5) of the original charge, the allegation in paragraph 10(a) of the amended charge is dismissed. Sub-paragraph 10(b) - Premium Price and Plan Duration3 This allegation is also similar to those contained in paragraph 9(1) and (5) of the original charge. It adds the element of the duration of the health insurance plan, but other than that addition, it merely applies the same logic and requires the same level of speculation about how the District will respond to a change in the contribution rate by the JPA, as noted above under Paragraph 10(a). Nor does the fact that JPA can change the premium cost at any time, or even adjust it retroactively, change the fact that the District is not required to remain in the JPA, nor is it required to unilaterally change employee contribution for health insurance even if the JPA does change the District's contribution rate to the JPA. You argue in your October 7, 1987 letter that joining the JPA has resulted in actual changes in insurance plan duration, and that other changes are reasonably foreseeable as a result of 3 Y O U allege that the premium amount the employer pays for health insurance is a matter within scope. The discussion of the Board's decision in Plumas Unified School District (1986) PERB Decision No. 578, at page 5 of this letter, infra, however, demonstrates that a change in premium amount (i.e. , employer costs for health insurance) without more, is not an unlawful unilateral change.
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Page 4 that action. Insofar as the alleged actual and reasonably foreseeable changes relate to the cost of insurance, or other costs to the employer (whether during or after membership in the JPA), they do not form an adequate basis for a prima facie unilateral change case for the reasons stated at p. 4 of this letter, supra. Insofar as the allegations in paragraph 10(b) are intended to state that the employees in the bargaining unit enjoyed the benefits of a "legally enforceable" contract of insurance prior to joining the JPA, and do not enjoy such benefits after the District joined the JPA, they do not state a prima facie case under the Board's rationale in Plumas and Trinidad, supra. In those cases the Board held that self-funding of employee insurance (whether directly or through a JPA) is not, without more, an unlawful unilateral change. Inherent in any self-funding of health insurance is the elimination of the contractual obligation of the prior insurance carrier, at least up to the stop loss amount. And those were the facts before the Board in both Trinidad and Plumas, based upon which there was found to be no unlawful unilateral change. For these reasons, and the ones stated in my August 12 letter, in response to paragraph 9(1) and (5) of the original charge, the allegation in paragraph 10(b) is dismissed. Sub-paragraph 10(c) - Penalty for Change in Insurer This allegation is similar to the one contained in paragraph 9(4) of the original charge. It alleges that as a result of joining the JPA various disincentives or penalties exist to bargaining a change in the insurer. You urge that these potential cost items are such as to "increase the cost to the Union for, or place significant constraints on, bargaining any change in health or welfare benefits which entails a change in insurer." (Amended Charge page 8, lines 4-6.) Even if one assumes the existence of each of the alleged disincentives or penalties, this allegation does not state a prima facie case. During the course of our discussions about these allegations, I pointed out that any penalties for or financial disincentives to withdrawing from the JPA prior to three years do not necessarily imply that faced with such penalties, the District will bargain in bad faith, or that the District will bargain in bad faith rather than accept such penalties. Joining the JPA is not an adequate predictor, much less a predeterminer, of the District's future bargaining behavior.
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Page 5 Sub-paragraph 10(d) - Basis for Determining Increases in Premium Price This allegation is essentially the same as that made in paragraph 9(6) of the original charge, with the addition of specifying the factors listed in the JPA Bylaws for determining contribution rates. For the reasons stated in my August 12, 1987 letter relating to paragraph 9(6) of the original charge, and for the reasons stated above relating to the other subparagraphs of paragraph 10 of the amended charge, this allegations is dismissed. Sub-paragraph 10(e) - Total Premium Amount This allegation is merely a restatement of the first allegation in paragraph 10(b). For the same reasons stated herein above under paragraph 10(b), it is dismissed. In sum the allegations in sub-paragraphs 10 (a)-(e) do not state a prima facie case because they assume that the District must act in an unlawful manner in response to an increase (or decrease) in contribution rate by the JPA. This is simply not so. In the event the District were to act in such a manner, a charge could then be filed, alleging an unlawful unilateral action by the District, or failure to bargain in good faith at the negotiating table.4 The Board's decision in Plumas, supra, supports the dismissal of the allegations in sub-paragraphs 10 (a)-(e). In that case, the Plumas district unilaterally moved from a health insurance plan administered by Equitable Benefit Plan (EBP) to a self-funded plan (up to a stop-loss amount) administered by EBP. The Board's decision states that the Plumas district saved $100,000 in health insurance costs by the shift to the self-funded plan. Yet the Board found no unlawful unilateral change in negotiable terms of employment - , based on that fact (and on others articulated in the decision). Thus, the Board has not found a mere insurance cost saving, without more, to be an unlawful unilateral change. The allegations in sub-paragraphs 10 (a)-(e) rest squarely on the proposition that such a cost saving (i.e., change in the employer's premium costs), even if it has no impact on the amount of employee contribution, is an unlawful unilateral change. During the course of our discussions about the amended charge, you cited various cases to support the issuance of a complaint based on the allegations in paragraph 10 . Then on
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Page 6 October 7, you submitted a memorandum detailing your arguments and citing legal authorities for your position.5 The gist of those arguments, insofar as they relate to the question of the cost of premiums, is as follows: Under Grant Joint Union High School District (1982) PERB Decision No. 196, two essential elements of a prima facie case of an unlawful unilateral change are first, that the change be "legally cognizable," and second, that the change be made in a matter within scope. In the health and welfare benefits area, there are two types of "legally cognizable" changes: "non-de minimis" changes in benefit coverage, or changes involving a "third party" to the negotiations which effect terms and conditions of employment. [In either kind of change, to state a prima facie case, the charging party has to state facts to show that the alleged unilateral change would 4 This is demonstrated by the fact that a complaint has issued today under separate cover today, alleging that the District did unilaterally change the amount of compensation received by employees in the form of benefits by joining the JPA. This is supported by the factual allegation that the District unilaterally passed on to the Blue Shield covered employees the savings it enjoyed as a result of joining the JPA. 5various ALJ decisions were cited in that memorandum. Such decisions are, of course, not precedential. PERB Regulation 32215. Additionally, none of the cited cases stand for the proposition that a change in the employer's costs of providing health insurance, without more, is an unlawful unilateral change. Even if any of the cited ALJ decisions could be so read, they have been overruled by the Board's decision in Plumas. Numerous NLRA decisions were also cited for the proposition that the cost to the employer of providing health insurance is negotiable, and that therefore to change those costs without negotiations is an unlawful unilateral change. None of the cited cases stand for that proposition, and even if they did, PERB has declined to follow such precedent, as demonstrated by Plumas.
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Page 7 either actually affect or have a "reasonably foreseeable effect" on negotiable subjects. The basis for this is found in Mt. Diablo Education Association (DeFrates) (1984) PERB Decision No. 422 and is reaffirmed by Trinidad Union Elementary School District/Peninsula Union School District (1987) PERB Decision No. 629, where the Board stated that there had to be cogent evidence that changes have occurred or will occur.] Examining each of the allegations in paragraphs 10 and 11 under these standards establishes that the changes enumerated there are both legally cognizable and within the scope of representation.6 The Board's decision in Trinidad "reaffirmed" that insurance premium costs are negotiable, "at least by implication." (October 7, 1987 letter, p. 15.) In addition, joining the JPA constituted an illegal parity agreement under the Court of Appeals analysis in Banning Teachers Association v. Public Employment Relations Board (1986) 186 Cal.App.3d 569, (Hg granted - Case No LA 32300). Finally, even under the totality of the circumstances rather than the per se test, joining the JPA is a violation of EERA section 3543.5 (c).7 None of these arguments, or the cited cases, are persuasive. First, whether on the basis that the claim is not legally cognizable, or because the subject itself is not within the scope of representation, the Board in Plumas Unified School District (1986) PERB Decision No. 578, found no unlawful unilateral change in a case where the employer saved $100,000 in premium costs by self-funding insurance. That case is dispositive of the issue that a mere savings in premium costs, 6The scope analysis is, first that premium costs are "wages," an enumerated subject; or even if they are not directly wages, under the Anaheim analysis, they are closely related to wages, and therefore within scope. 7These latter two arguments were not raised previously.
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Paqe 8 without more, is not an unlawful unilateral change. To issue a complaint on the allegations in sub-paragraphs 10 (a)-(e) would be contrary to that decision. Second, even using the "reasonably foreseeable" standard for determining whether joining the JPA is an unlawful unilateral change, facts have not been alleged that show a reasonably foreseeable change in negotiable subjects by a mere change in the cost to the District for providing the insurance. [This of course assumes that a mere change in costs is not negotiable, following Plumas. It is not disputed- that there were premium cost savings.] Additionally, as stated herein above, the District's future bargaining behavior is not predetermined by its joining of the JPA. Third, the Board's decision in Trinidad follows the earlier Plumas rationale that premium cost changes, standing alone, are not unlawful unilateral changes. This is confirmed by the following statement in Trinidad; In sum, the evidence in the record supports the conclusion that the Districts have improved the ability to supply benefits at a reduced cost to themselves. It is not enough to theorize whether the JPA arrangement could potentially cause problems for its members, or whether the JPA resulted in a less well-established or less reliable carrier. Nor is that statement, "dicta." It is an integral part of the Board's discussion of the reasons it disagreed with the ALJ's determination that there had been an unlawful relinquishment of control over insurance costs to the JPA. Fourth, entering into a joint powers agreement is not the same as an illegal parity agreement. The JPA itself acknowledges the bargaining obligations of the districts by permitting them to leave the JPA prior to the usual three-year term, if that is required as a result of collective bargaining. There is no provision in the JPA which, like the one found to be illegal by the Court of Appeals in Banning, requires the districts to negotiate the same insurance benefits for their employees as other districts in the JPA. Fifth, whether one adjudges the allegations in sub-paragraphs 10 (a)-(e) on the per se or the totality of the conduct test, they do not state a prima facie case. There was no showing that this is an unlawful unilateral change, nor were facts
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Page 9 alleged to support a finding that the conduct is one indication of bad faith bargaining. You also argue that an inevitable effect of joining a JPA for health insurance is what you call homogenization of the benefit programs. By this term you apparently mean that there will be a tendency of this District to negotiate for the benefits that are available through the JPA and to be unwilling to agree to other changes in benefits that the Association may seek at the negotiating table. The tendency toward homogenization, assuming for the sake of argument that it will occur, is not in and of itself indicative of bad faith bargaining. Again it is speculation that such bad faith bargaining will occur. If during the future course of negotiations about health insurance, the District fails to negotiate in good faith, that is the time to file a charge about that behavior. For all the foregoing reasons, the allegations in sub-paragraphs 10 (a)-(e) of the amended charge are dismissed.8 PARAGRAPHS 17-18 - Undermining These allegations were not made in the original charge. Assuming for the sake of this analysis that the allegations would be considered timely by the application of the relation back doctrine, they do not state a prima facie case of unlawful undermining for the following reasons. In some instances, direct communication by the employer with the employees unlawfully undermines the exclusive representative and the collective bargaining relationship. In Muroc Unified School District (12/15/78) PERB Decision No. 80, the Board addressed the issue of communications or memoranda directed at employees as follows: 8Paragraph 9(b) of the amended charge could be read to make the same or similar allegations as those in sub-paragraphs 10 (a)-(e). I, however, read paragraphs 1-9 to be preliminary to the allegations of the manner in which the alleged unilateral change altered negotiable terms and conditions of employment, and have not therefore formally dismissed any of those allegations. Insofar as any allegations in paragraphs (l)-(9), including but not limited to paragraph 9(b), are intended to or actually restate in substance the allegations in sub-paragraphs 10 (a)-(e), they are also dismissed.
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Page 10 The EERA imposes on the public school employer an obligation to meet and negotiate with the exclusive representative, and embodies the principle enunciated in federal decisions that the employer is subject to the concomitant obligation to meet and negotiate with no others, including the employees themselves. (See Medo Photo Supply Corp. v. NLRB (1944) 321 U.S. 678 [14 LRRM 581].) Consequently, . . . actions of a public school employer which are in derogation of the authority of the exclusive representative are evidence of a refusal to negotiate in good faith. (NLRB v. Goodyear Aerospace Corp. (6th Cir. 1974) Evidence of bad faith includes undermining the ability of the exclusive representative to act on behalf of the unit. Muroc Unified School District (12/15/78) PERB Decision No. 80; Modesto City Schools (3/8/83) PERB Decision No. 291. The charge, as presently written, fails to allege actions of the public school employer which are in derogation of the authority of the exclusive representative. The allegations in paragraphs 17 and 18 are, therefore, dismissed. In some instances, direct communication by the employer with the employees unlawfully undermines the exclusive representative and the collective bargaining relationship. In Muroc Unified School District (12/15/78) PERB Decision No. 80, the Board addressed the issue of communications or memoranda directed at employees as follows: The EERA imposes on the public school employer an obligation to meet and negotiate with the exclusive representative, and embodies the principle enunciated in federal decisions that the employer is subject to the concomitant obligation to meet and negotiate with no others, including the employees themselves. (See Medo Photo Supply Corp. v. NLRB (1944) 321 U.S. 678 [14 LRRM 581] .) Consequently, . . . actions of a public school employer which are in derogation of the authority of the exclusive representative are evidence of a refusal to negotiate in good faith. (NLRB v. Goodyear Aerospace Corp. (6th Cir. 1974)
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Page 11 Evidence of bad faith includes undermining the ability of the exclusive representative to act on behalf of the unit. Muroc Unified School District (12/15/78) PERB Decision No. 80; Modesto City Schools (3/8/83) PERB Decision No. 291. The charge, as presently written, fails to allege actions of the public school employer which are in derogation of the authority of the exclusive representative. The allegations in paragraphs 17 and 18 are, therefore, dismissed. Right to Appeal Pursuant to Public Employment Relations Board regulations, you may obtain a review of this dismissal of the charge by filing an appeal to the Board itself within twenty (20) calendar days after service of this dismissal (California Administrative Code, title 8, section 32635(a)). To be timely filed, the original and five copies of such appeal must be actually received by the Board itself before the close of business (5:00 p . m . ) , or sent by telegraph, certified or Express United States mail postmarked no later than the last date set for filing. Code of Civil Procedure section 1013 shall apply. (See section 32135.) The Board's address is: Public Employment Relations Board 1031 18th Street Sacramento, CA 95814 If you file a timely appeal of the refusal to issue a complaint, any other party may file with the Board an original and five copies of a statement in opposition within twenty calendar days following the date of service of the appeal (section 32635(b)). Service All documents authorized to be filed herein must also be "served" upon all parties to the proceeding, and a "proof of service" must accompany each copy of a document served upon a party or filed with the Board itself. (See section 32140 for the required contents and a sample form.) The document will be considered properly "served" when personally delivered or deposited in the first-class mail postage paid and properly addressed. Extension of Time A request for an extension of time in which to file a document with the Board itself must be in writing and filed with the
November 5, 1987 PARTIAL DISMISSAL OF UPC LA-CE-2517 Page 12 Board at the previously noted address. A request for an extension must be filed at least three calendar days before the expiration of the time required for filing the document. The request must indicate good cause for and, if known, the position of each other party regarding the extension, and shall be accompanied by proof of service of the request upon each party (section 32132). Final Date If no appeal is filed within the specified time limits, the dismissal will become final when the time limits have expired. Sincerely, JOHN SPITTLER Acting General Counsel By By,_____ _ Sandra Owens Dennison Regional Attorney Attachment cc: Dr. John Renley Spencer Covert
STATE OF CALIFORNIA GEORGE DEUKMEJIAN, Governor PUBLIC EMPLOYMENT RELATIONS BOARD LOS ANGELES REGIONAL OFFICE 3470 WILSHIRE BLVD.. SUITE 1001 LOS ANGELES, CALIFORNIA 90010 (213) 736-3127 August 12, 1987 Robert Lindquist, Attorney California Teachers Association Post Office Box 9 2888 Los Angeles, CA 90009 Re: IA-CE-2517, Magnolia Educators Association, CTA/NEA v. Magnolia School D i s t r i c t Dear Mr. Lindquist: In the above-referenced charge the Magnolia Educators Association (Association) a l l e g e s that the Magnolia School D i s t r i c t (District) made a unilateral change in health insurance benefits by joining the Orange County Fringe Benefits Joint Powers Authority (JPA or Authority). This action is alleged to be a violation of Educational Employment Relations Act (EERA) sections 3543.5 ( a ) , (b) , and ( c ) . My investigation of the charge revealed the following information. The JPA was formed on January 1, 1987, by the D i s t r i c t and eight other public educational agencies. The D i s t r i c t ' s membership was e f f e c t i v e on that date. The D i s t r i c t Board of Education acted to join the JPA on December 15, 1986. The Agreement establishing the JPA provides that it was formed pursuant to Government Code sections 6500 et seq., to "jointly provide for a seIf-insurance program for employee health and welfare benefits." The JPA is a separate legal e n t i t y , and in accord with Article 4 of the JPA Agreement, it has only those powers which are common to the member d i s t r i c t s and which are "in furtherance of the functions and objectives" of the Agreement. (JPA Agreement, Article 4. Section ( a ) . ) The Bylaws of the JPA give it the authority to set the annual premiums for the insurance for the member d i s t r i c t s . (Bylaws, Article V.) The contribution for premiums is determined by at l e a s t the following factors: "cost price index (inflation f a c t o r ) ; experience factor; cost of reinsurance; desired l e v e l of self-insured retention; desired l e v e l of reserves; and plan design." (By-Laws, Article V. Section B.1.) Premiums are to be paid monthly or tenthly by the member d i s t r i c t s . There was no change in the coverage for employees of the D i s t r i c t , or in the administration of the plan by the action of joining the JPA.
August 12, 1987 LA-CE-2517 Page 2 Insurance companies assign insureds to experience rating pools which are used as a partial basis for determining their insurance rates for the upcoming insurance year. Larger employers may have an experience rating pool of their own, and smaller districts may be placed in a pool with other smaller employers. This district claims that it is 100% credible, that is, it is assigned to its own experience rating pool. The Association claims that the District's experience rating pool is now that of the JPA, not the District. No facts have been provided to support that allegation. The District denies that its experience rating pool was changed when it joined the JPA. The self-insurance aspect of the JPA funding of the health insurance benefits is limited by an aggregate stop-loss provision of 120% of the District's anticipated claims. There is also an individual stop-loss provision of $50,000 per employee. (This is not recited in the JPA Agreement or bylaws, but it is undisputed by the Association that these are the stop-loss amounts.) This stop-loss aspect of the JPA self-funding arrangement provides that the District is fully insured by Blue Shield, in the aggregate for amounts beyond 120% of its anticipated claims in a year. The JPA's reserves (from member district contributions) are established so as to cover the exposure up to 120% of the initial anticipated claims. The Agreement which establishes the JPA provides that its members are jointly and severally liable "upon any liability which is otherwise imposed on any one of the members or upon the Authority for injury caused by a negligent or wrongful act or omission occurring in the performance of the Agreement." The Agreement requires the district to remain in the JPA for 3 years unless earlier termination is "required as a condition of collective bargaining." If a member district terminates before three years, however, there will be no refund or repayment of its contributions to the JPA. The JPA is governed by a Board of Directors, with most decisions requiring only a majority vote. Each member district has one vote on the Board of Directors, regardless of the number of employees of the district. The collective bargaining agreement in effect at the time the District acted to join the JPA provided in Article XV that the District would pay up to the specified annual dollar amounts toward the employee benefit program for eligible unit members. Section 15.2.4 of the Agreement provides: The District may change carriers providing insurance benefits as set forth in this Article. In such event the District will consult with the Association.
August 12, 1987 LA-CE-2517 Page 3 The carrier for health insurance at that time was Blue Shield. The Charge alleges that during reopener negotiations on salary and fringe benefits for the 1986-87 school year in particular in August 27, September 30, October 10 and October 16, 1986, the District spokesperson, John Renley, stated that "District entry into a Joint Powers Agreement was a bargainable subject and that the District would not join the Orange County Fringe Benefits JPA unless and until its bargaining obligation was complete." (Paragraph 5 of the Statement of Charge.) The charge alleges that the District's decision to join the JPA reduced or eliminated benefits in the following ways: (1) The determination of premium and benefits levels now has been placed within the exclusive control of the JPA and, as a consequence, Charging Party is denied the opportunity to bargain the cost of insurance coverage for its members; (2) The JPA is a "self-funded" program, and thus, is a less reliable insurer and less able to perform than the previous carrier, Blue Shield, and as a consequence, Charging Party receives a materially lower quality of medical benefits; (3) The JPA, rather than respondent, maintains all control over reserves, interests, premium overpayments, or rebates from insurers, thus reducing the amount of money available for negotiation with Charging Party; (4) JPA Rules prohibit withdrawal from membership prior to a three-year period of time with full pro-rata refund rights, thus reducing the amount of money available for negotiating with Charging Party, if such negotiations occur with in (sic) the three-year membership period; (5) Control over retention, administrative costs, marketing costs, have been transferred from Respondent to the JPA, thus eliminating Charging Party's opportunity to bargain with Respondent over such fees and their relationships to claims payments;
August 12, 1987 LA-CE-2517 Page 4 (6) Respondent has transferred its claims experience pool from the District as its own claims pool to the JPA pooled claims experience, thus affecting the benefits base available for the premium rates agreed upon between Charging Party and Respondent. For the following reasons the charge does not state a prima facie violation of the EERA. In determining whether a party has violated section 3543.5(c) of EERA, the PERB utilizes either the "per se" or "totality of the conduct" test, depending on the specific conduct involved and the effect of such conduct on the negotiating process. Stockton Unified School District (1980) PERB Decision No. 143. Unilateral changes are considered "per se" violations if certain criteria are met. Those criteria are: (1) the employer implemented a change in policy concerning a matter within the scope of representation, and (2) the change was implemented prior to the employer notifying the exclusive representative and giving it an opportunity to request negotiations. Walnut Valley Unified School District (1981) PERB Decision No. 160; Grant Joint Unified High School District (1982) PERB Decision No. 196. The nub of the issue presented here is whether the change to self-funding of health insurance through the JPA is a matter within the scope of representation. At the time the charge was filed, the latest PERB decision dealing with self-funding of health insurance as a potential unlawful unilateral change was Plumas Unified School District (1986) PERB Decision No. 578, in which the Board found the district's decision to self-fund medical insurance not to be an unlawful unilateral change. In Plumas, there was a 120% stop-loss provision in the self-funding arrangement. Since the charge was filed, the Board has decided Trinidad Union Elementary School District and Peninsula Union School District (1987) PERB Decision No. 629. In that case, the Board stated unequivocally that a "change to a self-funded plan does not, without more, result in a per se violation of EERA." The Board also found that joining a JPA to self fund benefits is essentially the same as individually self-funding those benefits, and therefore not negotiable under the Plumas rationale. The Board articulated its reasons for finding the
August 12, 1987 LA-CE-2517 Page 5 JPA self-funding to be the same as individual self-funding, as follows: first, the districts did not relinquish control over insurance to the JPA;' second, the JPA did not result in less reliability or greater risk; third, the lack of State regulation of the JPA is not of consequence to the reliability of the JPA; and fourth, the alleged lack of experience of the JPA Board of Directors did not have any impact on the capacity of the JPA to provide insurance coverage. Further, in Trinidad, the Board reaffirmed that there must be some "impact on services or benefits" in order to find a (c) violation in a change in insurance carrier. Trinidad, supra, at p. 12. The facts alleged in this charge appear to require dismissal for the same reasons which the Board stated in Trinidad. Each of the Association's alleged areas of change in insurance benefits will be analyzed in light of the Board's holding in Trinidad. Relinquishment of control In Trinidad, the Board stated: In sum, the evidence in the record supports the conclusion that the Districts have improved the ability to supply benefits at a reduced cost to themselves. It is not enough to theorize whether the JPA arrangement could potentially cause problems for its members, or whether the JPA resulted in a less well-established or less reliable carrier.5 [1] No facts have been alleged here that provide any cogent evidence that changes in control have happened or will happen, which changes would cause a significant change in employee benefits. It is merely speculation that, in the future, some changes in those benefits might occur by an action of the JPA. 1 In the footnote of this quote the Board states, "There must be some cogent evidence that changes have happened or will happen, which have significantly changed or will significantly change employee benefits."
August 12, 1987 LA-CE-2517 Page 6 Risk and Reliability No facts are alleged here that indicate that the JPA is less reliable or puts employees at greater risk than they were under the prior arrangement for funding health insurance. As in Plumas and Trinidad, there is a stop-loss provision which limits the exposure of the District, in this case, to 120% of the anticipated claims for the insurance year. Beyond that amount the District is fully insured by Blue Shield.2 The argument is made that the joint and several liability of the Districts in the JPA for each others acts exposes this district to liability for another district that might fail to make its contributions. This argument fails to take into account the fact that the JPA Bylaws provide that a member district that fails to make the required contributions to the Authority may be involuntarily terminated from the JPA, thereby eliminating or cutting short the time within which the other JPA members would arguably be incurring liability for the contributions of the defaulting member. To speculate that such exposure might continue for a long enough period of time to make the JPA funding a less reliable method than the current method, is just that, speculation. Under Trinidad, more than just speculation is required to establish a change to a less reliable insurer. Moreover, the Board in Trinidad implicitly overruled the ALJ's determination that the joint and several liability of the member districts for each other was a factor creating increased risk and lack of reliability. In his decision the ALJ stated: The terms of the NCSMIG agreement and bylaws, in particular, imposed joint and several liability on the members, in accord with the statute governing joint power relationships. Small employers in the NCSMIG, including Trinidad, are now exposed to potential financial disaster by sharing in liability up to the stop-loss amount. This differs dramatically from Plumas, in which the employer's exposure was no greater after the switch to self-funding. (Trinidad Proposed Decision (11/7/86) at p. 38.) 2 Here, as in Plumas, if the stop-loss aspect of the District's health insurance coverage were cancelled, then a charge could be filed, in which some cogent evidence of a loss in reliability and increased risk could be presented.
August 12, 1987 LA-CE-2517 Page 7 The Board, in deciding that the JPA in Trinidad did not result in less reliability or greater risk to employees, stated, "There was no evidence produced by the Charging Parties that the JPA was not reliable . . . . The risk here was limited by the stop-loss plan as it was in Plumas." By these statements, the Board implicitly rejected the ALJ's finding regarding the exposure from joint and several liability. In this case, as in Trinidad, Government Code section 6508.1 permits the joint and several liability of the member districts. Here, as in Trinidad, the implication that such joint and several liability creates additional risk and lack of reliability is rejected. Control Over Reserves The Association claims that the JPA now has control over reserves, interests, premium overpayments, or rebates from insurers, thereby "reducing the amount of money available for negotiations with Charging Party." The District claims that these are matters within the control of the insurers, not the District, and that the Association has never had the right under the EERA to negotiate with the District over these moneys. Even if one assumes that the District did shift control over these matters to the JPA, however, there are no facts alleged here to show how this alleged change in control impacts on services or benefits. Without such facts, a prima facie case cannot be stated. Claims experience pool The Association has not provided any evidence that would demonstrate that the District has had a change in its experience rating pool as a result of joining the JPA for self-funding of health insurance. The District states that both prior to and after joining the JPA the District has been considered by its insurers to be 100% credible, that is its rates are set based on its own experience, not that of the other districts in the JPA. Even if there had been a change in experience rating pool by the joining of the JPA, that fact alone would not constitute a unilateral action by the District. The setting of experience rating pools is an action of insurers, not of the insured. Under the Board's holding in Trinidad, arguably, if a district action caused the insurer to evaluate its placement of the District in one or another experience rating pool, and that had
* .. August 12, 1987 LA-CE-2517 Page 8 an impact on the level or quality of employee benefits, there could be a basis for finding a prima facie (c) violation. This case does not present such a scenario, however. There are simply no facts alleged to show how a change in experience rating pool would have any impact on the level or quality of employee benefits. Prohibition against withdrawal prior to three years The JPA agreement does provide that member districts can withdraw from membership prior to the initial three-year period if that is required as a condition of collective bargaining. (JPA Agreement, section 8 ) . In the event of a voluntary withdrawal prior to the three-year period, however, the Bylaws provide that there will be no refund or repayment to the withdrawing member (Bylaws Article VII, Section B.) From these provisions the Association deduces that the amount of money available for negotiating with Charging Party will be reduced if the negotiations occur within the three-year period. This is alleged to be one of the ways in which the District has changed the benefits of employees. Even assuming the Association's deduction to be valid, there are no facts alleged that show that the three-year membership without full pro-rata refund would materially change employee benefits. Under the Board's decision in Trinidad, facts Must be stated to show such a material change in benefits by the JPA provision regarding three-year membership without refund. Control over retention, administrative costs and marketing costs. The Association also alleges that employee benefits have been reduced or eliminated by the transfer of control over retention, administrative costs and marketing costs from the District to the JPA. It is not clear from the facts alleged that the District ever had control over retention, administrative costs, or marketing costs in order to transfer such control to the JPA. The District denies that it ever had such control. Assuming, however, that the District did transfer control over these items to the JPA, the issue at this level of inquiry is whether that fact would arguably demonstrate an impact on employee benefits. At most, this transfer of control could result in higher or lower costs to the District for employee benefits. A change in costs to the employer, does not, however, necessarily imply a change in employee benefits. As in so many of the other areas of this charge, the Association theorizes about what might happen as a result of this alleged change in control. What might happen, without facts to demonstrate how it might happen and how the events would affect employee benefits, is not enough to state a prima facie case in this area.
August 12, 1987 LA-CE-2517 Page 9 In sum, as in Plumas and Trinidad, the facts alleged here show merely a change by the District in the method of financing its health insurance benefits for employees. Without further facts to show how this change in the funding mechanism materially changes the benefits for employees, no prima facie case is stated. Nor do the statements Spokesperson Renley is alleged to have made at the negotiating table about the negotiability of the decision to join the JPA compel a different result. As noted above, Spokesperson Renley is alleged to have stated that the District would not join the Orange County Fringe Benefits JPA unless and until its bargaining obligation was complete. Given the interpretation most favorable to the Association's case, the District's action in joining the JPA without negotiating, after the alleged statements of its agent at the bargaining table is most like reneging on a tentative agreement.3 In Stockton, PERB Decision No. 143, the Board found a (c) violation in a district's action of reneging, but based its finding on the "totality of the conduct" test, not the per se test. PERB stated in Stockton; The repudiation of an agreement on a single issue has been held, by itself, not to manifest a lack of good faith. Therefore, the Board will look at the "totality of the circumstances" to determine whether the District's conduct indicated good faith negotiating. (Footnote omitted.) 3 The statement as alleged is ambiguous, and is susceptible to two interpretations. The first is that the District would not unilaterally join the JPA unless and until it had bargained to agreement with the Association even if the District had no legal obligation under EERA to negotiate about the decision to join the JPA. The second interpretation is that the District would complete any bargaining obligation which it had under the law prior to joining the JPA. In that event, since there was no obligation to bargain, the District acted in accord with its stated intention. However, at this level of inquiry, it is appropriate to give the Association's allegation the interpretation most favorable to its case, and to assume that the District did agree to bargain over the decision prior to joining the JPA.
August 12, 1987 LA-CE-2517 Page 10 If the "totality of the conduct" test is applied to the allegations here, they do not state a prima facie case of a (c) violation. Nor have any facts been revealed during the course of my investigation to show any other bad faith conduct that would support a finding of a (c) violation by the application of the totality of the conduct test. Even assuming, for the sake of argument, that the district's decision to join the JPA were shown in some way to affect employee health insurance benefits or services, there is also the issue here whether the Association waived its right to negotiate over the decision by the inclusion of section 15.2.4 in the Collective Bargaining Agreement. As noted above, that section gives the District the right to change insurance carriers, provided it consults with the Association. During the course of my investigation of the charge, I asked the Association's representative, Bill Harju, for his response to the waiver defense, and specifically inquired whether the Association was alleging a failure to consult, as required by section 15.2.4. His response was that the Association wasn't really alleging a change in carrier in this case, so section 15.2.4 did not apply. The charge, however, in paragraph 9 and 10, specifically states that there has been a change in insurer/carrier. (See subsection (2) of paragraph 9 and paragraph 10.) It appears, therefore, that, unless the Association is alleging that the District failed to consult about the alleged change in carrier, that the District was acting within its authority, as agreed to by the Association, to change to another insurance carrier.4 For these reasons, even if some facts were alleged to show some change in employee benefits or services by joining the JPA, it appears that this charge would have to be dismissed because the Association waived its right to negotiate over changes in insurance carriers. • For these reasons, the charge as presently written does not state a prima facie case. If you feel that there are any factual inaccuracies in this letter or any additional facts which would correct the deficiencies explained above, please amend the charge accordingly. In addition, if there is legal argument which you wish to submit, I will also consider it. 4 No facts have been alleged to show a lack of consultation.
August 12, 1987 LA-CE-2517 Page 11 The amended charge should be prepared on a standard PERB unfair practice charge form clearly labeled First Amended Charge, contain all the facts and allegations you wish to make, and be signed under penalty of perjury by the charging party. The amended charge must be served on the respondent and the original proof of service must be filed with PERB. If I do not receive an amended charge or withdrawal from you by close of business on August 20, 1987, I shall dismiss your charge. If you have any questions on how to proceed, please call me at (213) 736-3127. Sincerely, Sandra Owens Dennison Regional Attorney cc: Bill Harju
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