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Appellate Court Holds
Arbitration Cost-Sharing Provisions Are Unconstitutional
BY MICHAEL A. MCGILL
Lackie & Dammeier, LLP
A California appellate court
has upheld, in a published opinion, the unconstitutionality of arbitration
cost-sharing provisions. See April Florio v. City of Ontario,
2005 WL 1533135, __ Cal.App.4th ___. This new case law will have a
significant financial impact on public labor unions. The challenged
provision, found in a Memorandum of Understanding (MOU) between the City
of Ontario and its employee union, required that Ontario and the
disciplined employee share equally the cost of a hearing officer in an
employee’s appeal of serious discipline. The California Supreme Court, in
California Teachers Association v. The State of California, (1999) 20
Cal.4th 327, 84 Cal.Rptr. 425 (CTA), found that cost sharing
provisions serve no legitimate government interest and simply impose a
burden upon, and therefore a disincentive to, the exercise of an
employee’s due process right to an administrative appeal. Despite the
Supreme Court’s pronouncement that a “cost requirement presents a total
and fatal conflict with controlling constitutional principles and is
invalid on its face,” many cities and counties include cost-sharing
provisions such as the one disputed here.
On appeal, the City of Ontario
dug its own hole when it brazenly conceded that the cost-sharing provision
was “an attempt to reduce costs in the more egregious cases by encouraging
employees who suspect they are likely to lose their challenges to accept
the City’s decision to seek a settlement, rather than delay termination
through administrative and subsequent judicial appeals.” In other words,
the city conceded that the cost-sharing provision was expressly designed
to dissuade hearing requests. This admission was fatal as the Supreme
Court in CTA had previously concluded that a cost-sharing provision
containing a standard for imposing costs that deters appellants from
exercising their right to a due process hearing was not rationally related
to the goal of discouraging only patently meritless challenges.
Finally, the city pointed to
the contractual nature of the MOU in which the cost-sharing provision was
located, arguing that the employee union had “waived” employee rights by
agreeing to the provision. The argument was quickly dismissed by the
appeals court, noting that “collective bargaining agreements may not
contain provisions abrogating employees’ fundamental constitutional
rights.” Of course, this too, was not a novel concept. The appellate court
issued its opinion affirming the lower court’s decision, and upon the
request of this author, the opinion was certified for publication.
There can be little doubt that
this decision will have a broad, sweeping effect. Many public agencies
have similar, if not identical, cost-sharing provisions to the one that
was struck down in Florio. Further, it goes without saying that public
agencies will always remain steadfast in their desire to avoid costs,
particularly when that cost is associated with an employee’s appeal of the
very discipline they imposed. However, there should, from this point
forward, be no doubt that an employee’s “due process rights include the
right to have a meaningful hearing without having to pay for it.” More
importantly, the right now precludes employee unions from bargaining this
due process right away by agreeing to pre-dispute arbitration agreements
in their MOU. As those who have participated in disciplinary appeal
hearings can certainly attest to, the costs of arbitration expenses can
run in the thousands of dollars. Up until this point, the barrier created
by the inability to pay up front such staggering costs presented in many
cases, virtually closed the door on an administrative appeal, before it
even began. With the publication of Florio, employees everywhere are now
able to at least step in, block the door from closing, and obtain the due
process hearing they are entitled to. Perhaps the only remaining question
not answered, is what effect this decision will have on those employees
who had previously been required to pay arbitration costs, and whether an
employee has any recourse to seek reimbursement from their employer. With
the proliferation of cost-sharing provisions, it is only a matter of time
before that question is answered.
ABOUT THE AUTHOR:
Michael A. McGill is an associate attorney with the law firm of Lackie &
Dammeier, LLP, and represents police associations and officers throughout
California in all labor and employment related litigation.
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