Opinion ID: 2599971
Heading Depth: 2
Heading Rank: 3

Heading: Post-Act 355 Procedural History

Text: In January 1998, the State announced that it would implement the after-the-fact payroll system according to the time schedule set forth in Act 355. On February 23, 1998, the Plaintiffs filed suit against the Defendants for injunctive and declaratory relief in the U.S. district court. The Plaintiffs sought a declaration that Act 355 unconstitutionally impaired the UHPA's collective bargaining agreement under Article I, Section 10 of the United States Constitution, see supra note 4. The Plaintiffs also moved to enjoin the State from converting to the after-the-fact payroll according to Act 355's time schedule. On June 16, 1999, the U.S. district court granted the Plaintiffs' motion for preliminary injunction against the Defendants, finding that: [M]any of the [3,175 UHPA] members may experience harm from a pay lag including incurring late fees for bills and credit cards and delays in mortgage payments. In some cases, a delay of even five days could [a]ffect a person's credit report. It is highly unlikely that any damages remedy would adequately compensate the injury of each and every member of UHPA. Univ. of Hawai`i Prof'l Assembly, 16 F.Supp.2d at 1247. The U.S. district court concluded that: [A] preliminary injunction is proper. [The] Plaintiffs have shown a likelihood of success on the merits because Act 355 substantially impairs the collective bargaining agreement. In addition, [the] Defendants have not shown that such an impairment is reasonable and necessary. Absent a preliminary injunction, irreparable harm is possible, and the balance of hardships weighs against [the] Defendants. Id. at 1248. On appeal to the Ninth Circuit, the preliminary injunction was affirmed on July 14, 1999. Univ. of Hawai`i Prof'l Assembly v. Cayetano, 183 F.3d 1096 (9th Cir. 1999). Specifically, the Ninth Circuit agreed with the U.S. district court that: [T]he pay dates were material to the terms of employment and, at the time the collective bargaining agreement was negotiated, the timing of the payroll was a negotiable matter.... ... The custom and practice of the State had been to pay its employees on the fifteenth and last days of each month. That was the status quo at the time the collective bargaining agreement was entered into. Id. at 1102. Moreover, the Ninth Circuit held that: [The] Plaintiffs are wage earners, not volunteers. They have bills, child support obligations, mortgage payments, insurance premiums, and other responsibilities. [The] Plaintiffs have the right to rely on the timely receipt of their paychecks. Even a brief delay in getting paid can cause financial embarrassment and displacement of varying degrees of magnitude. Id. at 1106. In light of the preliminary injunction, the State did not change the pay dates for UH faculty members, resulting in an approximately $6.2 million shortfall of the anticipated $51 million in savings for the 1997-98 fiscal year. Thereafter, the Defendants withheld $6.2 million from UH's budget. [10] As a result, UH was forced to delay payment on some expenses until the next fiscal year. [11] Therefore, as noted by the Plaintiffs, UH then had to confront in [fiscal year 19]99 the problem of [fiscal year 19]98 bills burdening the [fiscal year 19]99 budget, which could only be solved by the same method: pushing $6.2 million in [fiscal year 19]99 bills downstream to [fiscal year 20]00, in the manner of a game of musical chairs, and so on, indefinitely. After the collective bargaining agreement between the Plaintiffs and the Defendants expired on June 30, 1999, the Defendants moved to dismiss the U.S. district court case as moot and/or to dissolve the order for preliminary injunction. Univ. of Hawai`i Prof'l Assembly v. Cayetano, 125 F.Supp.2d 1237, 1240 (D.Haw.2000). The Defendants argued that the basis for the preliminary injunction was the effect of Act 355 upon the [collective bargaining agreement] in effect from 1995 until June 30, 1999.... [B]ecause [the agreement] has expired, there is no longer any contract that can be impaired by Act 355. Id. The U.S. district court agreed with the Defendants, holding that, [i]nsofar as the [collective bargaining agreement] includes a term that [the] Plaintiffs are to be paid on the fifteenth and the thirtieth of each month, this term (and all the other terms) of the [agreement] expired on June 30, 1999. Id. at 1241. The court, therefore, dissolved the injunction and dismissed the case by order filed on July 18, 2000, id. at 1242, which the Plaintiffs did not appeal. During the pendency of the proceedings in the federal courts, the Plaintiffs filed a complaint against the Defendants in the circuit court on June 2, 1999. Therein, the Plaintiffs sought a declaratory judgment that the Defendants: (1) failed to publicly announce their intention to implement a payroll lag, a violation of the reasonable notice requirement of HRS § 78-13 (Supp.2005) [12] (Count IFailure of Notice); (2) are without authority to impose any payroll lag except in conformity with the specific timetable set forth in HRS § 78-13 (Count IIBreach of Timetable); and (3) may not implement a payroll lag because the one-time-once-a-month payroll provision would violate the semimonthly payroll payment requirement of HRS § 78-13 (Count IIIBreach of Semimonthly Pay Requirement). After the federal court dissolved the injunction and dismissed the federal action in July 2000, the Defendants notified the Plaintiffs, via letter dated August 3, 2000, that the payroll lag would be implemented by delaying the November 15, 2000 pay date to November 20, 2000 and, thereafter, the faculty would be paid each month on the fifth and the twentieth. The resulting effect would be that the UH faculty members would be paid only once in November 2000. On September 6, 2000, the Plaintiffs amended their complaint, asserting an additional claim that the implementation of the payroll lag is contrary to the public employees' right to organize for the purpose of collective bargaining, in violation of article XIII, section 2 of the Hawai`i Constitution, quoted infra (Count IV). On September 11, 2000, the Plaintiffs sought to enjoin the Defendants from implementing the one-time-once-a-month payroll provision, pursuant to HRS § 78-13, in the circuit court. Specifically, the Plaintiffs argued that the implementation of the after-the-fact payroll system would violate: (1) the statutory time schedule set forth in HRS § 78-13; (2) the semimonthly payment requirement of HRS § 78-13; and (3) the faculty's constitutional right to organize for collective bargaining purposes. The Plaintiffs also argued that, because the Defendants had previously provided a full six-months notice of their intention to implement the payroll lag in June 1998 by announcing its intention in January 1998, a similar notice should be given to them prior to the implementation in order for the faculty to order their financial affairs. On October 20, 2000, the circuit court granted the Plaintiffs' motion for preliminary injunction, finding that: [1.] There is a substantial likelihood that [the] Plaintiffs will prevail on the merits. The Defendants have failed to provide reasonable notice to the Plaintiffs as required by HRS § 78-13(a) (1993), as amended[; and] [2.] [The] Plaintiffs will be irreparably harmed if the Defendants fail to tender the Unit 7 [UHPA members] paychecks on November 15, 2000, since they will only be paid half-a-month's wages for a full month's work. A delay in payroll to 3,100 individual Unit 7 faculty may have a very real effect on their ability to meet their financial obligations in a timely manner. A damages remedy is not likely to redress each employee's injury. On March 9, 2001, the circuit court issued a notice of proposed dismissal inasmuch as no trial setting status conference had been scheduled as required by Rules of the Circuit Court of the State of Hawai`i (RCCH) Rule 12(c) (2004). [13] On March 20, 2001, the Plaintiffs filed their objection to the proposed dismissal, essentially arguing that they were attempting to resolve the payroll lag matter through the bargaining of a successor contract to the 1995-1999 agreement, which was still pending. The Plaintiffs maintained that: Both sides are content to leave the status quo alone, pending the possible resolution of the underlying issues through collective bargaining. If collective bargaining fails to resolve the issues, then it makes sense to have a status conference to evaluate other options. The Defendants, however, supported the dismissal, asserting that the Plaintiffs intended to keep the case alive to enhance their bargaining position during negotiations over a collective bargaining agreement. Subsequently, the circuit court issued an order withdrawing the notice of proposed dismissal. On March 30, 2001, the Defendants filed a motion to dismiss, arguing that, because the anticipated date of implementation of the payroll lag had passed, the case was moot. The circuit court denied the motion. On May 17, 2001, the Defendants filed a motion for judgment on the pleadings, arguing that the complaint had no merit as a matter of law. The Plaintiffs filed an opposition, citing to matters outside the pleadings. The motion was heard on July 10, 2001, at which time the circuit court indicated an inclination to deny Defendants' motion based upon the Plaintiffs' opposition; however, inasmuch as the opposition referred to matters outside of the pleadings, the circuit court concluded that it would treat the motion as one for summary judgment. [14] The circuit court then reset the matter for hearing on August 21, 2001 and allowed the parties to brief the matter of summary judgment. On August 3, 2001, the Defendants filed their motion for summary judgment, arguing that the implementation of an after-the-fact payroll for faculty members does not violate HRS § 78-13. The Defendants maintained, inter alia, that the time schedule set forth in the Act 355 amendment is directory and not mandatory. Relying on Perry v. Planning Commission of the County of Hawai`i, 62 Haw. 666, 619 P.2d 95 (1980), the Defendants argued that: (1) there is nothing in Act 355 that negates the Governor's authority to apply the payroll lag after the scheduled implementation; (2) time is clearly not of the essence, as the implementation schedule was merely to make the after-the-fact payroll less burdensome to State employees; and (3) no public interests or private rights are jeopardized by the delayed implementation as to faculty members. They further maintained that the application of an after-the-fact payroll system would not violate the faculty's constitutional right to organize for collective bargaining purposes inasmuch as, traditionally[,] pay days for public employees were determined by statute, not by collective bargaining. See HRS § 78-13 (1993). Consequently, a statute that changes pay days does not violate any specific term of the expired collective bargaining agreement, and since the parties have not negotiated pay days, the fact that the pay days are changed by statute does not interfere with whatever constitutional right the faculty has to organize for the purpose of collective bargaining. On August 14, 2001, the Plaintiffs filed their cross-motion for summary judgment, reiterating that the implementation of the payroll lag would violate HRS § 78-13. The Plaintiffs specifically argued that: The new and improved Act 355 (1997) ... provided that if the Governor chose to proceed with the lag, a specific schedule for implementation would be mandatory. Act 355 did not make the lag mandatory, but if the Governor chose to implement, it restricted implementation to the period June through September, 1998. (Emphasis in original.) The Plaintiffs also argued that the implementation of the payroll lag would be an unconstitutional restriction on public sector bargaining of wages, noting that, under the plan, employees would face an actual four percent loss of income in a year, and fifty percent lost of income in a month, and: Faculty, like most everyone else, and presumably like the State itself, pay bills, like home rental, car loans, and tuition, on a monthly cycle. Bills come due regularly. Some, like child support payments, are due on a certain day and are enforced by law. If payments are not made within the monthly cycle, they are late. Whether a day late or a week late, a late payment has consequences, and it's illegal to write a check for which funds are not on deposit. On September 10, 2001, the circuit court conducted a hearing on the parties' motions and, thereafter, issued its written orders (1) denying the Defendants' motion for judgment on the pleadings [15] and (2) granting the Plaintiffs' cross-motion for summary judgment. In both orders, the circuit court found, inter alia, that: [1.] Imposition of a payroll lag on [UH] faculty, by means of a one-time, once a month paycheck, would deprive [the] faculty [members] of one paycheck in the month and year of implementation, or 50% of their salary in the month of implementation and 1/24 of their salary in the year of implementation. [2.] This loss of income would have a material and significant effect on the faculty, especially the lower-paid faculty. Such a pay loss would be of a magnitude comparable to other issues that triggered the UHPA strike of 2001. A payroll lag would likely impose a substantial hardship on employees, who might not be able to meet their financial obligations, such as mortgage payments or court-ordered child support payments, in a timely manner. Employee contributions to benefit funds that depend on receipt of a paycheck could be delayed, in some cases requiring the employees to dip into savingsif anyto maintain timely payments. Faculty may also incur late fees and other penalties due to the pay lag. A damage remedy would likely not address each employee's injury, as previously recognized by this [c]ourt and the U.S. [d]istrict [c]ourt[.] [3.] The public interest favors the Plaintiffs. [The] Defendants have not shown that the payroll lag is both reasonable and necessary to fulfill an important public purpose. Accordingly, the circuit court concluded that: 1. Section 78-13, HRS, requires twice-monthly pay for all [UH] faculty, subject only to one possible exception. 2. The exception from the twice-monthly requirement, found in § 78-13(a), HRS, pertains to a payroll lag imposed in 1998, and is not available to Defendants. 3. Defendants' imposition of a payroll lag on Plaintiff faculty would violate § 78-13(a), and would therefore be illegal. Moreover, with respect to the order granting the Plaintiffs' motion for summary judgment, the circuit court added that [a]n injunction against illegal imposition of a lag is justified, and is consistent with Plaintiff's prayer for relief. The circuit court, thus, entered a permanent injunction against the Defendants from implementing the Act 355 payroll lag plan upon the UH faculty members. Final judgment was entered on December 12, 2001. On December 27, 2001, the Defendants appealed the December 12, 2001 judgment. This court, however, dismissed the appeal on April 30, 2002 for lack of appellate jurisdiction because the final judgment d[id] not identify the claims for which it [was] entered or that judgment [was] entered on all ... of the [Plaintiffs'] causes of action. A first amended judgment was then entered on June 7, 2002. Therein, the circuit court: (1) entered judgment in favor of the Plaintiffs with respect to the Defendants' violation of HRS § 78-13's breach of semimonthly payment requirement (Count III); (2) dismissed all other claims of the Plaintiffs; and (3) permanently restrained and enjoined the Defendants from imposing the after-the-fact payroll system upon UH faculty members. On June 24, 2002, the Defendants timely filed their notice of appeal in the instant case.