State v. U.S. the Dep't of Labor
State v. U.S. the Dep't of Labor
Opinion of the Court
The State of California ("State") has sought a federal grant for two state transit projects. The United States Department of Labor ("DOL") has refused to certify the State to receive the grant funds. The State argues this refusal of certification was arbitrary and capricious under the Administrative Procedure Act ("APA"). Although the court previously resolved the parties' cross motions for summary judgment, largely in the State's favor, one question remains: Whether DOL can properly base *1182its refusal to certify the State to receive grant funds based on an intervening state law's changes to pension benefit provisions affecting certain employees that work for Monterey-Salinas Transit ("MST"). As explained below, the court grants judgment for the State on this remaining issue.
I. BACKGROUND
The parties dispute the adequacy of the statutory interpretation in which the DOL engaged to deny the State's request for funding under § 13(c)(1) of the Urban Mass Transportation Act of 1964,
A. UMTA
Congress enacted UMTA in 1964 to revamp deteriorating transit systems throughout the nation.
During the legislative process, transit labor unions raised concerns about UMTA's potential impact on transit employees' rights. The unions feared local governments would use the newfound federal funding to assume operation of transit entities, and states would either restrict or outright prohibit public employers from bargaining collectively with their employees. Indeed, the National Labor Relations Act, intended to safeguard collective bargaining rights, applied (and continues to apply) only to private employees. Against this backdrop, labor unions warned UMTA could eradicate employees' hard-earned and bargained-for labor rights, conditions and benefits.
To address this concern, Congress drafted § 13(c), which frames the dispute here. See
The DOL may refuse to certify a state agency if existing state laws threaten any *1183of the five requirements. A denial of certification blocks the applicant from receiving funds. As relevant here, the DOL denied the State's request for funding for MST based on the first requirement, identified above, finding a particular state law changed, rather than preserved, certain employees' pension rights in violation of § 13(c)(1). See MST Decision, ECF No. 88-5, at 8.
B. MST's Collective Bargaining Agreement
MST is the consolidated transportation services agency for Monterey County, California. This order pertains only to MST's "classic employees": Employees hired after January 1, 2013. Since 1983, MST and the Amalgamated Transit Union ("ATU") have entered into collective bargaining agreements that protect MST employees' labor rights. See Administrative Record ("AR") 50, ECF No. 100. As relevant here, a particular ATU-MST agreement was in force when, in December 2012, the State applied for UMTA funding. AR 50-51 (listing effective dates of ATU's agreement with MST as October 1, 2010 through September 30, 2013). The existing ATU-MST agreement memorialized certain pension rights for MST's classic employees. As relevant here, the agreement defines how MST will calculate a pension using the employee's final salary and the years the employee worked; it also demarcates a 36-month period during which MST classic employees can purchase "airtime." AR 793-94, 829-31. Airtime is a time credit that adds fictitious years to the true years an employee has worked before retiring; airtime can be used to increase the calculation of an employee's pension. AR 794; see
C. California Law
The DOL refused to certify the State's receipt of funds to benefit MST in part because a state law passed in 2012, the California Public Employees Pension Reform Act ("PEPRA"), changed the airtime rights provision applicable to MST classic employees under the bargaining agreement in place at the time. PEPRA was touted as a "sweeping reform" that limited pension benefits for state employees, increased the retirement age for public employees, required state employees to pay for half of their pension costs, and stopped abusive pension practices. Press Release, Office of Gov. Edmund G. Brown, Jr. (Aug. 28, 2012).
The provisions of PEPRA that matter here shortened the time during which MST classic employees could exercise their bargained-for right to purchase airtime, by nine months. See
D. Procedural History
Soon after PEPRA's passage, the State applied for federal funding under UMTA to benefit MST and one other state transit agency, Sacramento Regional Transit District ("SacRT"). SJ Order at 2. The DOL refused to certify the State's request for funding to benefit either agency, citing as the basis both §§ 13(c)(1) (requiring "preservation" of employees' bargained for rights) and 13(c)(2) (requiring "continuation" of these rights). See MST Decision at 8. The State successfully challenged the DOL's decisions under the APA in this court in 2013, and the court remanded the matter to the DOL for reconsideration. See Remand Order at 1089; Enforcement Order at 30. In 2015, the DOL on remand again refused to certify either agency. Again the State sought relief in this court.
In early 2016, the DOL and the State cross-moved for summary judgment on the DOL's § 13(c)(1) and 13(c)(2) certification denials as to both transit agencies. ECF No. 99; ECF No. 104. The court resolved the parties' dispute in favor of the State except with respect to the issue now before the court: The DOL's § 13(c)(1) analysis as to MST classic employees. SJ Order at 51. This issue has now been joined by the State's supplementation of its complaint to clarify that it also challenges the DOL's § 13(c)(1) certification denial as to MST's classic employees. See First Am. Supp. Compl.
II. SUMMARY JUDGMENT: ADMINISTRATIVE REVIEW
When a plaintiff challenges a federal agency's actions under the APA, the district court does not identify and resolve factual disputes; the court instead determines whether the administrative record supported the agency's decision as a matter of law. Occidental Eng'g Co. v. Immigration and Naturalization Serv. ,
The court reviews both the path an agency took to arrive at a decision and the decision itself. Allentown Mack Sales & Serv., Inc. v. Nat'l Labor Relations Bd. ,
*1185III. DISCUSSION
The parties dispute what § 13(c)(1) requires. The DOL based its certification denial, in part, on its interpretation of § 13(c)(1) as prohibiting "any change" to MST classic employees' existing pension benefits. See ECF No. 128 at 3 (arguing PEPRA's airtime provision changed MST classic employees' benefits, warranting § 13(c)(1) certification denial). The State maintains that § 13(c)(1) prohibits certification only if the State "substantially reduces" MST employees' pension rights. ECF No. 124 at 3. The DOL contends the State's position contradicts § 13(c)(1)'s plain language.
When a court reviews an agency's legal interpretation, the first step involves assessing the statute's plain meaning, which binds both the court and the agency. United States v. Mead Corp. ,
This court previously deemed ambiguous § 13(c)(1)'s terms "preserve" and "existing." See SJ Order at 48-49. The court also previously explained why it did not extend Chevron deference to the DOL's interpretation of these ambiguous terms. Id. at 18,
A. Section 13(c)(1) Test
Section 13(c)(1) requires the agency applying for a federal grant to establish provisions necessary for the "preservation" of rights, privileges, and benefits under existing collective bargaining agreements.
The statute's words are always the starting point. Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S ,
(1) As a condition of financial assistance ... the interests of employees affected by the assistance shall be protected under arrangements the Secretary of Labor concludes are fair and equitable....
(2) Arrangements under this subsection shall include provisions that may be necessary for-*1186(A) the preservation of rights, privileges, and benefits (including continuation of pension rights and benefits) under existing collective bargaining agreements or otherwise;
(B) the continuation of collective bargaining rights;
(C) the protection of individual employees against a worsening of their positions related to employment;
(D) assurances of employment to employees of acquired public transportation systems;
(E) assurances of priority of reemployment of employees whose employment is ended or who are laid off; and
(F) paid training or retraining programs.
Unless Congress says otherwise, statutory terms carry their ordinary meanings. Roberts v. Sea-Land Servs., Inc. ,
The State and the DOL interpret this ambiguous term differently. The DOL subscribes to a rigid definition, explaining that "preservation of rights" means "an employer cannot change rights." MST Decision at 9; see also ECF No. 128 at 4-5 (standing by its position; rejecting the State's argument that certain changes are permissible). Interpreted as the DOL would have it, the provision would effectively bar improving those rights as well. The State argues instead that changing an employee's existing bargained-for rights violates § 13(c)(1) only if the change "substantially reduces" those rights. ECF No. 124 at 2.
Contextually, neither reading holds up. See Robinson v. Shell Oil Co. ,
The DOL's interpretation on the other hand is too rigid. To construe § 13(c)(1)'s obligation to "preserve" rights as completely prohibiting an employer's "changing" rights at all goes too far. As noted, Congress intended to financially support mass transportation, but worried that public ownership of transit agencies would threaten rights private employees had previously won. Jackson ,
Contextually then, the "preservation" language appears to prohibit only those changes that harm or diminish bargained-for rights. This reading, in turn, allows for changes that are either neutral or positive. See SJ Order at 50 (explaining why "Section 13(c)(1) cannot be interpreted to prohibit every "change" to a collective bargaining agreement, even changes without any meaningful effect."). One may argue if Congress meant to prohibit only negative changes, it would have said so. Congress did use "worsening" in a later provision.
Scrutinizing each word in isolation, however, can lead a reader astray. See, e.g., United States v. X-Citement Video, Inc. ,
In sum, the court interprets § 13(c)(1) to provide that the DOL may deny certification where a state entity seeks funding for a transit project, but has not protected the affected transit entity's employees against meaningful negative changes to rights and benefits conferred by their then-existing collective-bargaining agreements.
B. PEPRA's Airtime Changes
The State, on MST's behalf, applied for grant funding in December 2012. ECF No. 9-2 at 105-07, AR 157-59. So, the existing agreement at the time was the ATU-MST collective bargaining agreement in effect from October 1, 2010 through September 30, 2013. See AR 50-51. The parties agree the existing bargaining agreement allowed MST classic employees to purchase airtime through September 2013. ECF No. 124 at 2 nn.5-6. The parties also agree PEPRA's reduction of that period by nine months is the only change relevant to the court's current narrow inquiry. H'rg Tr., ECF No. 134, at 16:19-25 (DOL's counsel's effective concession that only provision directly relevant here is PEPRA's airtime provision); see also
1. Deference to the DOL
The DOL contends PEPRA's elimination of MST classic employees' airtime purchasing power for a nine month period warranted a § 13(c)(1) certification denial. Because the DOL's decision reflects a discretionary application of law, the court reviews the decision under Skidmore "with anything from great respect to indifference" depending on how well-reasoned it is. Skidmore ,
First, the DOL's inaccurate interpretation of § 13(c)(1) colors its analysis. Instead of examining the nature and meaningfulness of PEPRA's effect on MST employees' pension rights, the DOL broadly relied on the basic fact that PEPRA "changed" government employee pension rights as proof that the State has not "preserved" existing rights. AR 69. As discussed above, however, a § 13(c)(1) analysis properly focuses on the nature and degree of change. The DOL's decision recites various PEPRA provisions, including those reviewed below; the DOL labels these as barriers to § 13(c)(1) compliance, but does not explain how the changes in state law negatively and meaningfully impact MST classic employees' rights.
Second, the DOL partially bases its decision on PEPRA provisions that DOL now effectively concedes do not apply to MST classic employees, as explained below. H'rg Tr. at 16:19-25 (DOL's counsel's argument only that PEPRA's airtime provision changed MST classic employees' benefits); see also ECF No. 128 (briefing focused only on the airtime provision). For example, the DOL cites PEPRA's change to the definition of pensionable compensation. AR 69. But this change does not apply to MST. See
Finally, the DOL offers new reasons for its decision on remand. For instance, the DOL cites the flood of government employees' December 2012 applications to purchase airtime credits as evidence of PEPRA's impact. ECF No. 128 at 5. But this finding does not appear anywhere in the DOL's initial denial decision. See AR 68-69. The court cannot affirm the DOL's decision based on post hoc rationalizations: The DOL must support its decision based on reasons articulated at the time of the first denial order. SJ Order at 51 (noting this concern); see also Citizens to Pres. Overton Park, Inc. v. Volpe ,
In sum, the court does not defer to the DOL's decision because it is not well reasoned.
2. Independent Review
Independently analyzing PEPRA's airtime change leads to the conclusion it does not meaningfully and negatively impact MST classic employees' existing pension rights. Airtime, and the ability to purchase it, is a significant pension benefit. The court thus rejects the State's argument that § 13(c)(1) does not apply because PEPRA's airtime provision effected only a de minimis change. ECF No. 124 at 2. Section 13(c)(1) protects a classic employee's "rights, privileges, and benefits." Even if airtime is considered a "benefit enhancement option," it is still a benefit: The option to enhance a benefit is a benefit in and of itself.
Completely eliminating one's ability to purchase airtime would have a meaningful and negative impact on one's pension benefits. See SJ Order at 3 n.2 (describing how airtime in general has a "significant" effect on retirement benefit calculations); Remand Order ,
In sum, PEPRA did not meaningfully and negatively impact rights the MST classic employees enjoyed under their existing collective bargaining agreements so as to warrant a § 13(c)(1) denial. The DOL misconstrued its statutory mandate to determine that the State had not "preserved" existing bargained-for rights. The court finds the DOL's § 13(c)(1) denial was improper under the APA.
*1190C. Conclusion
The court GRANTS the State's motion for partial summary judgment on the DOL's § 13(c)(1) denial as to MST classic employees. Given this order, the State has prevailed on all issues.
IV. REMEDIES
The State requests "a final declaratory judgment and permanent injunction preventing [the DOL] from using PEPRA to deny [§] 13(c) certification to any California transit agency grantee." ECF No. 129 at 6. The "Supreme Court has cautioned that 'injunctive relief should be no more burdensome to the defendant than necessary to provide complete relief to the plaintiffs' before the court." L.A. Haven Hospice, Inc. v. Sebelius ,
Here, the State challenges the DOL's denials of certification as to only two transit agencies: MST and SacRT. This is not a class action. The parties have made arguments particularized to the two agencies about the relevant collective bargaining agreements, on which the court has relied to reach its decision. The court finds no basis for awarding remedies extending beyond the two state transit agencies here.
The court enjoins the DOL from relying on PEPRA, as currently enacted, to deny the State's application for funding under either § 13(c)(1) or § 13(c)(2) to the extent the State intends those funds to benefit MST or SacRT.
IT IS SO ORDERED.
This resolves ECF No. 99.
At the time this order was filed, this press release was available at the following link: https://www.gov.ca.gov/news.php?id=17694.
Reference
- Full Case Name
- STATE of California v. UNITED STATES the DEPARTMENT OF LABOR
- Cited By
- 3 cases
- Status
- Published