Opinion ID: 2792311
Heading Depth: 2
Heading Rank: 2

Heading: aft mich i

Text: Current public school employees, through their representative labor organizations, sued the state of Michigan and other state defendants in 2011, contending that MCL 38.1343e violated the aforementioned provisions of the Michigan and United States Constitutions. The Court of Claims held this provision unconstitutional as violative of the Takings Clauses of the Michigan and United States Constitutions, Const 1963, art 10, § 2 and US Const, Ams V and XIV, and the guarantees of due process in the Michigan and United States Constitutions, Const 1963, art 1, § 17 and US Const, Am XIV, § 1. The Court of Claims did not find any violation of the Contracts Clauses of the Michigan and United States Constitutions, Const 1963, art 1, § 10 and US Const, art I, § 10, cl 1. The state appealed the Court of Claims’ ruling, and in a split decision, the Court of Appeals affirmed in part. AFT Mich v Michigan, 297 Mich App 597, 616, 621, 627; 825 NW2d 595 (2012) (AFT Mich I). AFT Mich I held that MCL 38.1343e effected a taking without just compensation because the state was forcibly taking possession of a portion of the school employees’ salaries without affording them just compensation in return. The Court of Appeals focused on what it viewed as the confiscatory nature of the statute-- requiring that current public school employees fund the healthcare benefits of current public school retirees 3 absent any guarantee that the former would ever be eligible to receive healthcare benefits upon their own retirement. It concluded as a result that MCL 38.1343e violated the takings clauses of the Michigan and United States Constitutions. Id. at 621. The Court of Appeals also held that MCL 38.1343e unconstitutionally impaired employment contracts between public school employees and employer school districts, notwithstanding the Court of Claims’ conclusion to the contrary, because MCL 38.1343e effectively required the school districts to pay the employees less than their agreed-upon salaries. Although asserting that a contractual impairment does not always rise to the level of a constitutional violation, the Court concluded nonetheless that the state here had failed to demonstrate that the impairment was necessary to further its purpose in enacting the statute, which was to ensure the fiscal stability of the MPSERS retiree healthcare program. The Court reasoned that the state could have pursued alternative means to correct the funding problem that would not have involved a diminution, or “impairment,” of the salaries of current employees. Because the state had not attempted to achieve its goals through those alternatives, the Court ruled that 2010 PA 75 also violated the Contracts Clauses of the Michigan and United States Constitutions. Id. at 616. Finally, the Court of Appeals held that MCL 38.1343e violated the employees’ right to “substantive” due process. It concluded that the law arbitrarily forced one discrete group of individuals-- current public school employees-- to fund the retiree healthcare of a separate discrete group-- current public school retirees. The Court recognized that, although the accrued pension benefits of public employees are expressly protected by Const 1963, art 9, § 24 as contractual obligations that can be neither diminished nor impaired, future healthcare benefits are not. Nonetheless, because the 4 state did not prefund retiree healthcare benefits, current employees were contributing 3% of their salaries absent any guarantee that they themselves would ever receive healthcare benefits upon retirement. The Legislature could simply alter the law again and modify or even eliminate the retiree healthcare program before current employees retired. The state was thus requiring current employees to cover the state’s own financial obligations, while merely undertaking an essentially empty promise that current employees would receive similar benefits when they retired. The Court believed that this scheme was unreasonable, arbitrary, and capricious, and that it violated the “substantive” due process guaranteed by the Michigan and United States Constitutions. Id. at 627. Judge SAAD, who authored an opinion concurring in part and dissenting in part, would have reversed the judgment of the Court of Claims and held 2010 PA 75 constitutional. He began by noting that “legislative enactments are presumed to be constitutional absent a clear showing to the contrary,” and then argued that an obligation merely to pay money cannot constitute a taking requiring just compensation, that 2010 PA 75 created an obligation between public school employees and the state that did not affect the employment contracts between the employees and their school district employers, and that the Court of Claims should not have granted relief on plaintiffs’ “substantive” due process claim because it was a mislabeled claim essentially alleging an uncompensated taking, an argument that plaintiffs had separately raised. AFT Mich I, 297 Mich App at 630-640 (SAAD , J., concurring in part and dissenting in part). The state sought leave to appeal the Court of Appeals’ ruling in AFT Mich I. That application is currently pending before this Court and has been held in abeyance for the resolution of the instant case. AFT Mich v Michigan, 846 NW2d 57, 58 (Mich, 2014). 5