Court Opinion

ID: 2687600
Source: CourtListenerOpinion
Date Created: 2014-07-31 21:42:35.278918+00
Date Added: 2024-06-11T08:28:58.188684
License: Public Domain

IN THE SUPREME COURT OF IOWA
                             No. 13–1158

                           Filed May 9, 2014

AFSCME IOWA COUNCIL 61,
    Appellant,

and

STATE OF IOWA, DEPARTMENT OF ADMINISTRATIVE SERVICES,
    Appellee,

vs.

IOWA PUBLIC EMPLOYMENT RELATIONS BOARD,
    Appellee.

      Appeal from the Iowa District Court for Polk County, Michael D.

Huppert, Judge.

      Public employee organization appeals district court decision on

judicial review that reversed ruling of Public Employment Relations

Board on scope-of-bargaining issue. DISTRICT COURT JUDGMENT

AFFIRMED IN PART AND REVERSED IN PART; REMANDED WITH

INSTRUCTIONS.

      Mark T. Hedberg of Hedberg & Boulton, P.C., Des Moines, for

appellant.

      Thomas J. Miller, Attorney General, and Matthew T. Oetker,

Assistant Attorney General, for appellee State of Iowa, Department of

Administrative Services.
                                2

     Ann M. Smisek, Des Moines, for appellee Iowa Public Employment

Relations Board.
                                    3
WATERMAN, Justice.
      The fighting issue in this appeal is whether a collective bargaining

proposal addressing outsourcing of work performed by public employees

is a “procedure[] for staff reduction” and therefore a mandatory subject of

bargaining pursuant to Iowa Code section 20.9 of the Public Employment

Relations Act (PERA), Iowa Code chapter 20.        See Iowa Code § 20.9

(2013). The Iowa Public Employment Relations Board (PERB) determined

that the State of Iowa’s Proposal 8(B) is subject to mandatory bargaining.

The State and AFSCME Iowa Council 61 (AFSCME) filed cross-petitions

for judicial review.   The district court reversed PERB’s ruling on this

issue, and AFSCME appealed. We retained the appeal.

      In Waterloo Education Association v. Iowa Public Employment

Relations Board (Waterloo II), our court thoroughly reviewed the history of

public employee collective bargaining and the methods courts and

agencies use to resolve scope-of-bargaining issues.     740 N.W.2d 418,

420–28 (Iowa 2007), abrogated in part by statute, 2010 Iowa Acts ch.

1165, § 6 (codified at Iowa Code § 20.6(1) (2011)). We reaffirmed a two-

pronged test for ascertaining whether a proposal is a mandatory or

permissive subject of bargaining. Id. at 429. PERB used the Waterloo II

test. The parties disagree over the meaning and effect of Proposal 8(B)

and disagree over its predominant purpose under the Waterloo II test.

This case presents our first opportunity to review PERB’s application of

that test since the legislature amended PERA to expressly grant PERB

the authority to interpret and apply the chapter. See 2010 Iowa Acts ch.

1165, § 6 (codified at Iowa Code § 20.6(1) (2011)). Our review “do[es] not

pass in any way on the merits” of the proposal. Waterloo II, 740 N.W.2d

at 431.
                                        4

         For the reasons explained below, we hold that Proposal 8(B), as

interpreted by the State to require staff retention, is a permissive subject

of bargaining.      However, Proposal 8(B) is a mandatory subject under

AFSCME’s interpretation, which permits the employer to “bump” other

public employees after transfers resulting from outsourcing. The record

is inadequate to determine which interpretation is correct. Accordingly,

we affirm the district court’s judgment in part, reverse in part as to

Proposal 8(B), and remand for further proceedings consistent with this

opinion.

         I. Background Facts and Proceedings.

         AFSCME 1 is an employee organization certified by PERB to

represent certain State employees in collective bargaining. In November

2012, AFSCME began negotiating its 2013–2015 collective bargaining

agreement with the State. On November 30, the State provided its initial

bargaining position for the terms of the new contract.              The State

proposed deleting certain contract provisions from the existing contract.

The State asserted the proposed deletions “concern[] permissive subjects

which the State need not negotiate in accordance with Iowa Code section

20.9.”
         Proposal 8(B) of the State’s bargaining position deleted a provision

of the then-current collective bargaining agreement, which stated:

                If, as a result of outsourcing or privatization following
         an Employer initiated competitive activities process,
         positions are eliminated, the Employer shall offer affected
         employees other employment within Iowa State government.
         Other employment shall first be sought within the affected
         employee’s department and county of employment. Affected
         employees accepting other employment shall not be subject

      1AFSCME is an acronym for the American Federation of State, County and

Municipal Employees.
                                         5
         to loss of pay nor layoff pending placement in other
         employment under this Section.         Neither shall such
         employees be subject to a decrease in pay in their new
         position. However, affected employees will not be eligible for
         any pay increase until such time as their pay is within their
         new pay grade range. In the alternative, employees may
         elect to be laid off.
                Employees placed in other employment under this
         Section, as well as those electing to be laid off, will be eligible
         for recall to the classification held at the time of outsourcing
         or privatization, in accordance with Article VI of this
         Agreement.

AFSCME disputed the State’s classification of this provision as a

permissive bargaining subject, arguing that the provision was instead a

“procedure[] for staff reduction,” which is a mandatory bargaining

subject under Iowa Code section 20.9 (2013).

         Because the parties could not agree whether this provision, and

others, were mandatory bargaining subjects, the State filed a “Petition for

Expedited Resolution of Negotiability Dispute” with PERB. PERB ruled

on the State’s petition on February 8, 2013.             It rejected the State’s

argument that the predominant purpose of Proposal 8(B) is to retain

staff.    PERB found the predominate purpose of Proposal 8(B) “is to

designate a process for implementing a staff reduction that occurs due to

outsourcing.”      PERB was not persuaded by the State’s argument that

Proposal 8(B) “makes outsourcing economically infeasible because [the

State] must maintain employment for displaced employees under the

proposal.” It ruled “[t]his argument relates to the merit of the proposal

rather than the test of negotiability.” PERB further found Proposal 8(B)

did not infringe on the State’s authority to decide to reduce staff, but

instead “focuses on what happens once a decision to reduce staff has

been made.” It therefore concluded “[b]ecause the predominant purpose

of [Proposal 8(B)] is to set out a process for implementing procedures for
                                      6

a staff reduction, it is mandatory.”      PERB concluded the State’s other

proposals were permissive.

      Both the State and AFSCME filed petitions for judicial review. On

July 12, the district court affirmed PERB’s decision on all proposals

except for Proposal 8(B). The district court determined Proposal 8(B) did

not fit within the meaning of “procedures for staff reduction,” explaining:

      [T]he statutory phrase “procedures for staff reduction”
      relates to the manner in which the contemplated reduction
      will take place, not how to manage the consequences
      associated with a reduction that has already taken place. In
      the court’s mind, this hinges upon the word “for,” which is
      defined in this context as a function word used to indicate
      purpose or an intended goal. Merriam-Webster’s Collegiate
      Dictionary 454 (10th ed. 2001); see also Wiseman v.
      Armstrong, 269 Conn. 802, 811, 850 A.2d 114, 119 (2004).
      In other words, for the procedures in question to be
      considered mandatory under § 20.9, they must have as their
      purpose, goal or object a reduction in staff. As measured by
      this standard, proposal 8(B) falls short; its predominant
      purpose relates to the aftermath of a reduction that has
      already resulted from outsourcing or privatization.

The district court thus reversed PERB’s ruling that Proposal 8(B) was a

mandatory bargaining subject, without reaching the State’s argument

that the predominant purpose of Proposal 8(B) is staff retention.

      AFSCME appealed the district court’s ruling regarding Proposal
8(B). PERB and AFSCME argue we should uphold PERB’s ruling, while

the State urges us to affirm the district court’s ruling.

      II. Scope of Review.

      Judicial review of an agency ruling is governed by Iowa Code

chapter 17A. See Iowa Med. Soc’y v. Iowa Bd. of Nursing, 831 N.W.2d
826, 838 (Iowa 2013). The district court reviews the agency’s decision in

an appellate capacity.    Id.   In turn, “ ‘[w]e review the district court’s

decision to determine whether it correctly applied the law.’ ” Id. (quoting

City of Sioux City v. GME, Ltd., 584 N.W.2d 322, 324 (Iowa 1998)). “We
                                     7

must apply the standards set forth in section 17A.19(10) and determine

whether our application of those standards produce[s] the same result as

reached by the district court.”    Auen v. Alcoholic Beverages Div., 679
N.W.2d 586, 589 (Iowa 2004).

      In Waterloo II, decided in 2007, we recognized that “[w]hether a

proposal is a mandatory subject of collective bargaining, as defined by

Iowa Code § 20.9, has not been explicitly vested in PERB’s discretion.”
740 N.W.2d at 420.     In 2010, the legislature responded by amending

Iowa Code section 20.6 to expressly grant PERB authority to “[i]nterpret,

apply, and administer” the provisions of Iowa Code chapter 20.           2010

Iowa Acts ch. 1165, § 6 (codified at Iowa Code § 20.6(1) (2011)) (replacing

language that authorized PERB only to “[a]dminister” the provisions of

chapter 20). The same year, in Renda v. Iowa Civil Rights Commission,

we noted, “The question of whether interpretive discretion has clearly

been vested in an agency is easily resolved when the agency’s enabling

statute explicitly addresses the issue.” 784 N.W.2d 8, 11 (Iowa 2010).

Because the legislature has now expressly vested PERB with discretion to

interpret and apply chapter 20, we will review PERB’s interpretation and

application of section 20.9 to determine if it is “irrational, illogical, or

wholly unjustifiable.” Iowa Code § 17A.19(10)(l), (m) (2013).

             A decision is “irrational” when it is “not governed by or
      according to reason.” Webster’s Third New International
      Dictionary 1195. A decision is “illogical” when it is “contrary
      to or devoid of logic.”        Id. at 1127.       A decision is
      “unjustifiable” when it has no foundation in fact or reason.
      See id. at 2502 (defining “unjustifiable” as “lacking in . . .
      justice”); id. at 1228 (defining “justice” as “the quality or
      characteristic of being just, impartial or fair”); id. (defining
      “just” as “conforming to fact and reason”).

Sherwin-Williams Co. v. Iowa Dep’t of Revenue, 789 N.W.2d 417, 432

(Iowa 2010).
                                      8

      “The burden of demonstrating. . . the invalidity of agency action is

on the party asserting invalidity.”   Iowa Code § 17A.19(8)(a).   We may

affirm the district court on an alternative ground that is supported by the

record and urged by the prevailing party.           Hawkeye Foodservice

Distribution, Inc. v. Iowa Educators Corp., 812 N.W.2d 600, 609 (Iowa

2012).

      III. Analysis.

      PERA governs collective bargaining between public employers and

public employee organizations. Waterloo II, 740 N.W.2d at 421. “Iowa’s

PERA contains both a provision establishing mandatory collective

bargaining on specified matters and a contrapuntal management rights

clause preserving exclusive, public management powers in traditional

areas.”   Id.   The public management powers are found in Iowa Code

section 20.7.    That section expressly retains for public employers “the

exclusive power, duty, and the right to,” among other things, “[h]ire,

promote, demote, transfer, assign and retain public employees in

positions within the public agency”; “[r]elieve public employees from

duties because of lack of work or for other legitimate reasons”; and

“[d]etermine    and    implement   methods,   means,    assignments     and

personnel by which the public employer’s operations are to be

conducted.” Iowa Code § 20.7(2), (5), (6). Iowa Code section 20.9 then

enumerates seventeen topics that are subject to mandatory collective

bargaining procedures:

             The public employer and the employee organization
      shall meet at reasonable times . . . to negotiate in good faith
      with respect to wages, hours, vacations, insurance, holidays,
      leaves of absence, shift differentials, overtime compensation,
      supplemental pay, seniority, transfer procedures, job
      classifications, health and safety matters, evaluation
      procedures, procedures for staff reduction, in-service training
      and other matters mutually agreed upon.
                                          9

Iowa Code § 20.9 (emphasis added). This list is exclusive. Waterloo II,
740 N.W.2d at 425.

      The classification of a bargaining proposal as either mandatory or

permissive “is a critical issue.” Id. at 421.

      If a subject is within the scope of mandatory bargaining, the
      parties are required to bargain over the issue, and if
      agreement is not reached, the statutory impasse procedures,
      which ultimately lead to binding arbitration, are available.
      If, on the other hand, the proposal is a permissive subject of
      bargaining under section 20.9, the public employer may
      reserve the right to decide the issue unilaterally by declining
      to participate in bargaining. When the employer declines to
      bargain over a permissive subject, the impasse procedures in
      PERA are not available and decisions related to the subject
      remain within the exclusive power of the public employer.

Id. at 421–22 (citation omitted).

      When PERB resolves a negotiability dispute, it decides only

whether a subject is a mandatory topic of bargaining—not whether a

specific proposal is substantively meritorious. See Iowa Admin. Code r.

621—6.3(1) (defining “negotiability dispute” as “a dispute arising in good

faith during the course of collective bargaining as to whether . . . a

proposal which is subject to collective bargaining under Iowa Code

section 20.9 is a mandatory topic of bargaining”). In the same way, on

appeal, “we do not pass in any way on the merits” of a negotiability

dispute. Waterloo II, 740 N.W.2d at 431. We review only “the question of

whether [the disputed topic] . . . must be determined, if possible, by the

parties themselves through good faith negotiations and in the event of

impasse, through binding arbitration as provided in PERA.” Id.

      Under our deferential standard of review, our task today is to

decide if PERB’s interpretation of “procedures for staff reduction” in Iowa

Code section 20.9 and its application of that statute to Proposal 8(B) are

“irrational,   illogical,   or   wholly   unjustifiable.”   See   Iowa   Code
                                    10

§ 17A.19(10)(l), (m). The topics listed in Iowa Code section 20.9 cannot

be defined “in a fashion so expansive that the other specifically identified

subjects of mandatory bargaining become redundant,” nor are the topics

“subject to the narrowest possible interpretation.”       Waterloo II, 740
N.W.2d at 429–30.     Consistent with legislative intent, PERB must give

each topic in section 20.9 “its common and ordinary meaning within the

structural parameters imposed by section 20.9.” Id. at 430.

      In determining whether Proposal 8(B) presents a mandatory

bargaining topic, PERB employed the analytical framework our court

cemented in Waterloo II. See id. at 428–29. In Waterloo II, we recounted

how our court adopted a straightforward definitional “topics” test in

Charles City Community School District v. Public Employment Relations

Board, 275 N.W.2d 766, 772–73 (Iowa 1979), but also struggled with the

relationship between the exclusive rights of management in section 20.7

and the mandatory bargaining provisions in section 20.9. Waterloo II,
740 N.W.2d at 426. Over the years, our court vacillated between a strict

topics test and a balancing test that sought to harmonize the mandatory

bargaining provisions with management rights.          Id. at 426–28.    In

Waterloo Community School District v. Public Employment Relations Board

(Waterloo I), 650 N.W.2d 627 (Iowa 2002), the PERB case that

immediately preceded Waterloo II, the court cited the topics test “but did

not directly apply it.” Waterloo II, 740 N.W.2d at 428.

      In Waterloo II, we sought to identify, once and for all, “the proper

test for determining whether a proposal is subject to mandatory

bargaining under section 20.9.” Id. at 428. We first considered caselaw

from other state courts and federal courts regarding how they resolve

scope-of-bargaining issues. Id. at 422–25. We then thoroughly reviewed

the evolution of our court’s approach to resolving scope-of-bargaining
                                     11

disputes. Id. at 425–28. Waterloo II ultimately clarified the proper test,

see id. at 428–29, and it is this test PERB uses to adjudicate such

disputes. 2

      Under the Waterloo II framework, PERB attempts to identify the

proposal’s “predominant purpose.” Id. at 427, 429. This inquiry serves

to guard against “the possibility that artful negotiators may attempt to

craft proposals that incidentally involve [mandatory bargaining topics],

but which are really designed to influence . . . policy or limit

management discretion.” Id. at 431. Proposals that only “incidentally

involve” a mandatory bargaining topic cannot be said to have that topic

as the proposal’s predominant subject. Id. “When framing the scope of a

disputed proposal topic, we are concerned with determining what the

employer would be bound to do if a proposal were taken to arbitration

and incorporated into a collective bargaining agreement.” State v. Pub.

Emp’t Relations Bd., 508 N.W.2d 668, 675 (Iowa 1993).           A proposal’s

predominant purpose should not be decided “merely [by] looking for the

topical word as listed in section 20.9” because this “virtually . . .

mechanical exercise” is not the same as identifying the predominant

characteristic of a proposal. See id.

      In a typical case in which PERB is able to identify the predominant

subject of a proposal, it next asks if that subject is “definitionally within

the scope” of a topic listed in Iowa Code section 20.9. Waterloo II, 740
N.W.2d at 425. If the answer to that question is “yes,” the proposal is a

mandatory subject of collective bargaining—subject only to the limitation

that proposals are not subject to collective bargaining if they are

       2Both the State’s and AFSCME’s briefs accept the use of this analytical

structure.
                                       12

“preempted or inconsistent with any provision of law.”               Id. at 429

(describing the question of whether a proposal is illegal as the second

prong of the analysis). The list of seventeen mandatory bargaining topics

thus presents a “legal shooting range” and an employee organization

“must hit one of the targets, or come close enough to one, in order to

avoid characterization of the proposal as permissive.” Id. at 425.

      In holding that the first, and typically determinative, inquiry is

whether a proposal presents a mandatory bargaining topic, Waterloo II

necessarily “reject[ed] the notion that the issue of negotiability should

ordinarily be resolved at the outset by balancing the employer’s interest

in management rights against the interest of employees in mandatory

bargaining.” Id. at 429. We held: “By creating the section 20.9 laundry

list of exceptions to management prerogatives, the legislature has already

done the balancing.       There is no occasion for this court to judicially

rebalance what the legislature has already balanced.”              Id.   Yet, we

recognized the need for a “balancing-type analysis” “in unusual cases

where the predominant topic of a proposal cannot be determined”

because      “mandatory    and    permissive    elements    are     inextricably

intertwined in a proposal.” Id. at 429, 431. In these rare cases in which

a   balancing   analysis    is   appropriate,   the   employer’s    interest   in

management rights is weighed against the interest of employees in

mandatory bargaining. See id. at 429.

      A. What is the Definition of “Procedures for Staff Reduction”?

PERB, the district court, and the parties all agree that an employer’s

decision to reduce staff does not fall within “procedures for staff

reduction”; the State is free to decide to eliminate staff positions as a

result of outsourcing or privatization and need not negotiate such

decisions.     PERB defines “procedures for staff reduction” to mean
                                        13

“matters involving the order and manner of how a staff reduction will be

carried out.” The district court found PERB’s definition of “procedures

for staff reduction” too broad, concluding the word “for” in “procedures

for staff reduction” is “a function word used to indicate purpose or an

intended goal.” The district court, therefore, defined “procedures for staff

reduction” more narrowly, as procedures that “have as their purpose,

goal or object a reduction in staff.”

      Because PERB has been granted interpretive authority under

chapter 20, it is within its discretion to choose one appropriate definition

of the word “for” over another.              The Merriam–Webster Collegiate

Dictionary defines “for” not only as “a function word to indicate purpose”

or “an intended goal,” but also as “with respect to.” Merriam–Webster's

Collegiate Dictionary 488 (11th ed. 2009). If a procedure is “with respect

to” staff reduction, it is a procedure “for” staff reduction. PERB defined

“procedures for staff reduction” as procedures that describe the “order

and manner of how a staff reduction will be carried out.” The phrase

“order and manner of how” is simply another way of saying “with respect

to” or “for.”   PERB’s definition of the phrase “procedures for staff

reduction” thus is consistent with a common meaning of the word “for.”

      PERB’s definition does not otherwise contradict the plain meaning

of “procedure,” “staff,” or “reduction.”      Black’s Law Dictionary defines

“procedure” as a “specific method or course of action.”         Black’s Law

Dictionary 1323 (9th ed. 2009).         We have previously given the term

“procedures” in Iowa Code section 20.9 a broad application, holding it is

not limited to “a particular way of accomplishing something” or “a series

of steps,” but may also include substantive matters. See Saydel Educ.

Ass’n v. Pub. Emp’t Relations Bd., 333 N.W.2d 486, 488–89 (Iowa 1983)

(internal quotation marks omitted); accord Pub. Emp’t Relations Bd., 508
14
N.W.2d at 677 (“We have defined the term ‘procedure’ broadly in our

prior cases interpreting section 20.9.”). Based on these definitions, we

conclude PERB’s interpretation of “procedures for staff reduction” is

consistent with the plain and ordinary meaning of the phrase and is

therefore not irrational, illogical, or wholly unjustifiable.   If a proposal

“involv[es] the order and manner of how a staff reduction will be carried

out,” that proposal is a “method” “with respect to” staff reduction.

         Accordingly, we disagree with the district court’s reason for

reversal.    However, the State in the PERB proceedings and in district

court urged an alternative ground for holding Proposal 8(B) is

permissive—that its predominant purpose is staff retention. The district

court did not rely on that ground. We may affirm the district court on

this alternative ground urged by the State below and supported by the

record.     See Hawkeye, 812 N.W.2d at 609.      We therefore turn to that

issue.

         B. What is the Predominant Purpose of Proposal 8(B)? PERB

found that Proposal 8(B)’s predominant purpose “is to designate a

process for implementing a staff reduction that occurs due to

outsourcing.” The State argues that Proposal 8(B) is instead a procedure

for staff retention.

         The State argues that, because Proposal 8(B) requires the State to

offer affected employees another position within the government, the

State’s workforce and payroll is not reduced.      The State points to the

language in Proposal 8(B) that requires the State to retain affected

employees at their current pay grade:

         [T]he Employer shall offer affected employees other
         employment within Iowa State government.          Other
         employment shall first be sought within the affected
         employee’s department and county of employment. Affected
                                      15
      employees accepting other employment shall not be subject
      to loss of pay nor layoff pending placement in other
      employment under this Section.      Neither shall such
      employees be subject to a decrease in pay in their new
      position.

(Emphasis added.) The State asserts:

      It is entirely unclear how Proposal 8(B) could have been
      construed to constitute a procedure for staff reduction when,
      by the very terms of the provision, no staff can be reduced
      and . . . the State is precluded from implementing a lay-off of
      affected employees.

      AFSCME       defends   PERB’s    identification   of   Proposal   8(B)’s

predominant purpose.         AFSCME asserts Proposal 8(B) “deals with

measures to be taken as a result of staff reduction due to outsourcing or

privatization of jobs.” PERB on appeal argues, “[w]hile the proposal may

require the employer to retain bargaining unit employees by offering

them employment elsewhere, overall the proposal describes a procedure

that occurs when positions are eliminated” and categorizes the State’s

argument as “akin to the expression of a glass being half-empty or half-

full.” PERB points out that the proposal does not require employers to

retain staff generally or to refrain from reducing employees not in the

bargaining unit.

      We conclude a staff reduction occurs only when an employee

leaves the State payroll, not merely when a particular job position is

eliminated. As the Kentucky Supreme Court recently observed, “no one

could reasonably argue that a job classification must last forever.” Webb

v. Meyer, 406 S.W.3d 444, 447 (Ky. 2013). The Kentucky Supreme Court

further recognized “[t]here is a significant distinction between being

transferred within one’s employment and not having employment at all.”

Id. (holding “[i]f there has been no termination of employment, there has

been no layoff or reduction in force”).       We agree and hold a “staff
                                    16

reduction” under section 20.9 requires “that there has, in fact, been a

reduction in the total work force and not simply the substitution of one

position for another.” Valdez v. Cantor, 994 P.2d 483, 486 (Colo. App.

1999) (“We have failed to discover a single instance in which the term

has been held to apply when the total number of employees has

remained the same.”).      Accordingly, if the predominant purpose of

Proposal 8(B) is staff retention, the proposal is a permissive bargaining

topic. It would be illogical for PERB to conclude otherwise.

      Yet, the record is inadequate for us to discern what, exactly,

Proposal 8(B) will bind the State to do. It is unclear if Proposal 8(B) will

result primarily in a position reduction rather than a staff reduction. At

oral argument, counsel for AFSCME and the State discussed the actions

the State could take—pursuant to Proposal 8(B) and other provisions of

the collective bargaining agreement—in response to outsourcing that

eliminates job positions. No clear consensus emerged as to what would

occur. The parties debated whether the State must create new positions

to accommodate displaced employees, whether the State could move

affected employees only into open positions, or whether the State could

“bump” other employees in order to create position vacancies.

      AFSCME’s counsel described what would happen as “a game of

musical chairs,” with some employees being terminated to accommodate

those that had been displaced due to outsourcing. AFSCME’s counsel

asserted that, at the end of the day, some employees would be left

without jobs. Under this scenario, there would be a reduction in staff.

AFSCME’s counsel expressed concern that a displaced employee could be

moved into a new position and then terminated a short time later.

AFSCME’s counsel also expressed concern that a displaced employee

could be reassigned to an impractical position—for example, a position in
                                     17

in a faraway location—and such a reassignment would amount to a

constructive discharge.

       The State’s counsel acknowledged “[t]he proposal is silent” as to

whether the State could bump employees and stated, “I don’t read in

here that the employees have the right to bump someone else.”            The

State’s counsel asserted that displaced employees could only be moved to

open positions, and no other employees could be bumped. The State’s

counsel suggested that other contract provisions provide procedures to

govern when bumping can occur. The State’s counsel stated, “I believe

. . . this proposal . . . does not affect the rights of a separate agency,

separate department. Those employees have their separate rights under

[the   bargaining   agreement].”     The   existing   collective   bargaining

agreement, however, is not included in the record.        We are unable to

determine from the record whether the State may bump or terminate

other public employees holding positions to be filled by transferred

employees who lost positions due to outsourcing.

       All parties agree the decision to outsource is a permissive

bargaining subject—it is a fundamental management power to decide to

outsource.    When asked at oral argument if “the ultimate decision

whether to subcontract or outsource or privatize a particular set of jobs

in state government is a permissive subject,” AFSCME’s counsel

acknowledged:

              The ultimate decision whether or not we are going to
       privatize, whether or not we are going to close an institution,
       whether or not we are going to do something else that results
       in a reduction of force is, in fact, [the] prerogative of the
       employer.

Yet, the prohibition on reducing staff found in Proposal 8(B) is at odds

with the State's authority to outsource.
                                    18

Proposal 8(B) by its terms prohibits the State from involuntarily laying off

any affected employee or reducing the pay of any affected employee. The

employee can choose to resign, but can also choose not to resign. The

State must find another position in state government for any employee

who declines to resign.   This effectively gives the employee veto power

over the employer’s ability to reduce staff.           Under the State’s

interpretation, Proposal 8(B) is a procedure for staff retention, not

reduction. Under this meaning of Proposal 8(B), it is illogical for PERB to

find it to be a mandatory subject of bargaining.

      The bumping issue, however, was not briefed by the parties or

addressed by the rulings of PERB or the district court. On this record,

we are unable to determine if the State would have the ability to lay off

other state employees whenever required by Proposal 8(B) to offer

positions to bargaining unit employees whose jobs are outsourced, as

AFSCME contends.      The factual record is inadequate to determine the

realities of what Proposal 8(B) requires the State to do and how the other

provisions of the collective bargaining agreement are implicated.

Accordingly, we reverse the district court’s ruling as to Proposal 8(B) and

remand for further proceedings on that issue.

      IV. Disposition.

      For the foregoing reasons, we hold, to the extent the primary

purpose of Proposal 8(B) is to preclude the State from reducing staff in

response to outsourcing, it is a permissive rather than mandatory

subject of bargaining. Nevertheless, if PERB determines on remand that

the State is permitted to reduce employment by bumping employees after

transfers resulting from outsourcing, then Proposal 8(B) can be found to

be a mandatory subject of bargaining.        We affirm the district court

judgment on the issues not raised in the appeal. We reverse the district
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court’s ruling as to Proposal 8(B) and remand this case to the district

court to remand to PERB for further proceedings consistent with this

opinion.

      Costs are assessed equally to AFSCME and the State.

      DISTRICT    COURT     JUDGMENT       AFFIRMED      IN      PART   AND

REVERSED IN PART; REMANDED WITH INSTRUCTIONS.

      All justices concur except Appel, J., who takes no part.