Opinion ID: 2745970
Heading Depth: 2
Heading Rank: 1

Heading: Payment of Step Increases

Text: The Union first argues that the PELRB incorrectly concluded that the payment of step increases during the status quo period violated a “strong and 3 dominant” public policy. The Union contends that the payment of step increases during the status quo period did not constitute a “cost item” and was not prohibited by law; therefore, the Town could and did “bind itself, through a past practice, to pay step increases during the status quo period.” We disagree. “Administrative agencies are granted only limited and special subject matter jurisdiction.” Appeal of Amalgamated Transit Union, 144 N.H. 325, 327 (1999) (quotation, brackets, and ellipsis omitted). “Because administrative agencies act in a quasi-judicial capacity, agencies inherently have limited jurisdiction to apply strong and dominant public policy as expressed in controlling statutes, regulations, common law, and other applicable authority, to address matters necessary to resolve questions arising within the scope of their jurisdiction.” Id. at 327-28 (citation omitted). “Just as this court will not enforce a contract or contract term that contravenes public policy, agencies may, within the confines outlined above, do the same” and may overrule an arbitrator’s award. Id. at 328 (quotation and citation omitted). We begin with an overview of the current state of the law. A CBA is a contract between a public employer and a union concerning the terms and conditions of employment. Appeal of Alton School Dist., 140 N.H. 303, 306 (1995). “[A]ny benefit acquired through collective bargaining whose implementation requires an appropriation by the legislative body of the public employer” is considered a “[c]ost item.” RSA 273-A:1, IV (2010). Thus, “cost items” are limited by statute to benefits acquired through collective bargaining; they do not include financial payments made by the employer in its discretion. See id. The parties to a CBA are not bound by its cost items unless the legislative body ratifies them, which occurs only if the legislative body approves them with “full knowledge of their terms.” Alton School Dist., 140 N.H. at 307 (quotation omitted); see also Appeal of Sanborn Regional School Bd., 133 N.H. 513, 520 (1990) (“[W]hether express or implied, ratification . . . requires full knowledge of the financial terms of the collective bargaining agreement.”). “Only cost items shall be submitted to the legislative body of the public employer for approval . . . .” RSA 273-A:3, II(b) (emphasis added); see Appeal of Laconia Patrolman Assoc., 164 N.H. 552, 557 (2013). When a CBA ends, so do the benefits, including cost items, that were acquired through collective bargaining. See Alton School Dist., 140 N.H. at 311. Here, when the 2006 CBA expired, the benefits that the parties had acquired through collective bargaining also expired. See id. In the absence of a current CBA, the parties’ “obligations to one another [we]re governed by the doctrine of maintaining the status quo.” Id. at 307. “The principle of maintaining the status quo demands that all terms and conditions of employment remain the same during collective bargaining after a CBA has expired.” Id. (quotation and brackets omitted). “This does not mean that the expired CBA continues in effect; rather, it means that the conditions under 4 which the [Union employees] worked endure throughout the collective bargaining process.” Id. (quotation omitted). We have consistently held that “[t]he status quo doctrine does not require payment of step increases after a CBA expires,” Laconia Patrolman Assoc., 164 N.H. at 557 (quotation and brackets omitted), because, during the status quo period, the employer must maintain salary levels at the expiration of the CBA but not schedules of projected salary increases contained within the CBA, see Milton School Dist., 137 N.H. 240, 245 (1993). See Alton School Dist., 140 N.H. at 307. Thus, “a public employer retains the discretion, but not the obligation, to grant step increases during the status quo period.” Laconia Patrolman Assoc., 164 N.H. at 557. Step increases granted at the employer’s discretion during the status quo period are discretionary payments, not cost items within the meaning of RSA 273-A:1, IV, because they are not the product of collective bargaining. See id. However, a public employer may be required to pay step increases following the expiration of a CBA if the increases are mandated in an evergreen clause and such cost items have been ratified by the legislative body. See Alton School Dist., 140 N.H. at 312 (concluding that evergreen clause was cost item that required ratification to be enforceable). The step increases at issue here were granted during the status quo period, in the absence of an approved evergreen clause; thus, because the increases were not acquired through collective bargaining, they were not cost items under the statute. See Laconia Patrolman Assoc., 164 N.H. at 557. Consequently, because the step increases were discretionary payments, the Town was not obligated to continue paying them. See id. The Union “does not contest the fact that the Town had the right not to pay [the] step increases.” It argues, instead, that, under the facts of this case, the Town’s past practice of paying step increases “created an obligation that was . . . tantamount to a waiver of that right.” We are not convinced by the Union’s argument; rather, we agree with the Town that the payment of step increases, even if a “past practice,” remains a discretionary matter and does not subject the Town to a binding obligation. See Appeal of N.H. Dep’t of Corrections, 164 N.H. 307, 309 (2012) (defining past practice). Given our well-established rule that the status quo doctrine does not require payment of step increases after a CBA expires, Laconia Patrolman Assoc., 164 N.H. at 557, we hold that a “past practice” of granting step increases during the status quo period cannot, as a matter of law, render such increases a binding term and condition of public employees’ employment, cf. N.H. Dep’t of Corrections, 164 N.H. at 309. Here, “[b]ecause the decision to grant the step increases was discretionary, the [Town] remained free to rescind them.” Laconia Patrolman Assoc., 164 N.H. at 557. To conclude otherwise would allow the parties to a CBA to create — by their actions — a binding obligation to an expenditure of funds that otherwise 5 would require approval by the Town’s legislative body. Cf. Appeal of City of Franklin, 137 N.H. 723, 727 (1993) (concluding that monetary provisions in CBA were “cost items because, in the literal sense, implementation of the provisions ‘require[d] an appropriation’” (quotation omitted)). The Union acknowledges as much, recognizing that “a finding of a past practice would require [funding of the step increases] as a matter of law.” The law does not support this result. We conclude that, in accordance with the “strong and dominant public policy” expressed in RSA chapter 273-A and our case law, the status quo doctrine did not require the Town to continue paying step increases after the 2006 CBA expired, even though it had previously provided such increases during the status quo period. Accordingly, because the arbitrator’s award violates this policy, the PELRB correctly concluded that the award is not enforceable. We disagree with the Union to the extent that it argues that the Town was obligated to pay the increases in this case because the voters funded them. It is undisputed that the Town published an approved operating budget for 2012 — after it had ceased paying the step increases — that included monies sufficient to fund the step increases for bargaining unit members. The Town asserts that the Board correctly concluded that there was insufficient evidence to conclude that the Town properly warned the voters about the cost of the status quo step increases. Regardless of the voters’ knowledge of the costs, however, their funding of the step increases is not dispositive. As we have previously held, Town votes approving funding for step increases during a status quo period do not obligate a public employer to pay the increases. See Alton School Dist., 140 N.H. at 311. This is so because it is the public employer, not the legislative body, that has the authority to negotiate and enter into collective bargaining agreements, and “[t]he vote of the legislative body is binding only with respect to cost items.” Id. Allowing the voters to determine in the first instance — outside the collective bargaining process — which benefits the public employees will enjoy, “would frustrate the entire collective bargaining process set forth in RSA chapter 273-A.” Id. Here, as discussed above, the step increases that the voters arguably funded were not benefits acquired through collective bargaining and, thus, were not cost items. See id. We, therefore, conclude that, even assuming that the voters funded the step increases with full knowledge of their financial terms, such action did not mandate that the Town make the payments during the status quo period. We are also unconvinced by the Union’s argument that the Town’s “failure to pay [the] agreed upon and funded increases destroys the level playing field necessary for full and fair negotiations between a public employer and a public employee.” 6 Finally, given our holding, we reject the Union’s argument that the PELRB erred in allowing the “discontinuance of step increase[s] retroactive to August of 2011, although [its] decision was not rendered until July 11, 2013.” Requiring the Town to retroactively pay step increases for the period before the PELRB’s decision would contravene our determination that the Town was not obligated to pay the increases at all.