Court Opinion

ID: 5452574
Source: CourtListenerOpinion
Date Created: 2022-01-08 19:20:50.279372+00
Date Added: 2024-06-11T08:32:31.785701
License: Public Domain

CORRIGAN, J., Dissenting.
I respectfully dissent. The majority does not honor the terms of the parties’ agreement and deprives the City of Los Angeles (the City) of its rightful authority to act in a fiscal emergency. I would affirm the Court of Appeal’s judgment, but not for the reasons given by the court below. I agree with the majority that the City could have contracted to arbitrate the validity of a furlough program, without unlawfully delegating its discretionary authority over salaries and budgets. (Maj. opn., ante, at pp. 1094-1096.) However, the City and the Engineers & Architects Association (the Union) made no such agreement. To the contrary, they agreed that the City would retain the authority to relieve employees from duty due to lack of funds, with arbitration limited to the practical consequences of that decision. Only a specific contract provision could restrict the City’s exercise of its prerogative. There is no such provision. Therefore, the decision to impose furloughs was a reserved management right, beyond the scope of arbitration.
*1106The majority recognizes that the memorandums of understanding (MOUs) here do not authorize an arbitrator to determine whether particular disputes are arbitrable, and thus the scope of the contractual duty to arbitrate is a matter for judicial resolution. (Maj. opn., ante, at pp. 1093, 1096.) However, the majority then applies standards of review governing arbitration agreements in a manner that abdicates the judicial duty to determine that question. I agree that doubts are resolved in favor of arbitration, and that labor disputes are presumptively arbitrable. (Maj. opn., ante, at pp. 1096-1097.) But as the majority acknowledges, “matters that the parties specifically exclude” from the scope of an arbitration agreement are not properly referred to an arbitrator. (Steelworkers v. Warrior & Gulf Co. (1960) 363 U.S. 574, 581 [4 L.Ed.2d 1409, 80 S.Ct. 1347] (Warrior & Gulf); see maj. opn., ante, at p. 1097.)
These MOUs specifically exclude the parties’ dispute from arbitration. The controlling language is found in article 1.9, titled “Management Rights” (boldface & some capitalization omitted): “As the responsibility for the management of the City and direction of its work force is vested exclusively in its City officials and department heads ...[,] except as specifically set forth herein no provisions in this MOU shall be deemed to limit or curtail the City officials and department heads in any way in the exercise of the rights, powers and authority which they had prior to the effective date of this MOU. . . . [Tjhese rights, powers, and authority include but are not limited to, the right to . . . relieve City employees from duty because of lack of work, lack of funds or other legitimate reasons, . . . [and to] take all necessary actions to maintain uninterrupted service to the community and carry out its mission in emergencies; provided, however, that the exercise of these rights does not preclude employees and their representatives from consulting or raising grievances about the practical consequences that decisions on these matters may have on wages, hours, and other terms and conditions of employment.” (Italics added.)
The import of this contract language is unmistakable. The MOUs reserve to the City certain fundamental management rights, “vested exclusively” in city officials. (Art. 1.9.) No MOU provision, including the arbitration clause, may “limit or curtail” the exercise of these rights, except as specifically provided in the agreement. (Ibid.) The enumerated management rights include the authority to relieve employees from duty due to lack of funds, and to “take all necessary actions” to preserve city services in emergencies. (Ibid.) Furloughs entail relieving employees from duty, reducing hours and wages to conserve funds in a fiscal emergency. Thus, they are squarely within the City’s reserved management authority, absent a specific limitation in the MOUs. Employees may invoke the grievance process set out in the MOUs only as to the practical effects of an exercise of management rights.
*1107The majority does not come to grips with the terms of article 1.9. It identifies no contract provision specifically limiting the City’s right to relieve employees from duty in a fiscal crisis. Instead, it summarily asserts that the contract language is “not free from ambiguities,” and reasons that applying the exclusion in the management rights provision would draw us into the merits of the dispute and swallow up the arbitration clause. (Maj. opn., ante, at p. 1100.) These concerns are misplaced. Before turning to the question of ambiguity, I address the ideas that we should avoid reaching the merits and that giving effect to the management rights provision would devour the arbitration clause.
We are properly concerned with the merits when the parties’ dispute is about arbitrability. “For arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit. Yet, to be consistent with congressional policy in favor of settlement of disputes by the parties through the machinery of arbitration, the judicial inquiry . . . must be strictly confined to the question whether the reluctant party did agree to arbitrate the grievance . . . .” (Warrior & Gulf, supra, 363 U.S. at p. 582.) Here our inquiry is strictly confined to whether the City agreed to allow an arbitrator to decide if it could impose furloughs in a fiscal emergency. While “[d]oubts should be resolved in favor of’ arbitration (id. at p. 583), that does not mean we are meddling in the merits by construing the exclusion in the management rights clause. We have said that “judicial enthusiasm for alternative methods of dispute resolution must not in all contexts override the rules governing the interpretation of contracts.” (Victoria v. Superior Court (1985) 40 Cal.3d 734, 739 [222 Cal.Rptr. 1, 710 P.2d 833]. “ ‘[T]he policy favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate.’ [Citations.]” (Ibid.; see, e.g., Coopers & Lybrand v. Superior Court (1989) 212 Cal.App.3d 524, 537 [260 Cal.Rptr. 713].
Nor is this a case where a management rights clause threatens to swallow an arbitration clause. These MOUs do not, as in the Warrior & Gulf case, generally declare that “ ‘matters which are strictly a function of management shall not be subject to arbitration.’ ” (Warrior & Gulf, supra, 363 U.S. at p. 583.) The City is bound by all restrictions “specifically set forth” in the MOUs, which provide ample grounds for arbitrable disputes. (Art. 1.9.) The danger here is that a broad reading of the arbitration clause will override the exclusions stated in the management rights clause. The provision limiting grievances over the exercise of a management right to the practical effects on working conditions has no meaning if every dispute over management rights is arbitrable.
That said, the majority properly recognizes that an express exemption from arbitration relieves the City from the obligation to arbitrate. (Maj. opn., ante, *1108at p. 1100.) However, the majority does not apply or even examine the express exemption in the management rights clause. It deems the clause “not free from ambiguities,” but points to no ambiguous term. (Ibid.) It would be difficult to do so, because the contract language is not ambiguous. The parties agreed that the City would have broad authority to act in fiscal emergencies, subject only to specific contract limitations. There are none that preclude furloughs.
The Union attempts to find a limitation against furloughs in article 5.1, which governs work schedules. However, the language noted by the Union is restricted to the special situation of employees working long days in exchange for extra days off. The fourth paragraph of article 5.1 states: “Employees on a four/ten work schedule shall work ten hours per day for a four day work week (or twelve hours per day for a three day work week in the Information Technology Agency only) exclusive of lunch periods. Employees shall be limited to rest periods in accordance with the provisions of Article 4.4. Employees shall be compensated for 40 hours per week at the regular hourly rate for their class and pay grade.” (Italics added.)
This provision cannot reasonably be transformed into a restriction against furloughs. It clarifies the rate of compensation for employees working the unorthodox schedules mentioned earlier in the paragraph. In the first paragraph of article 5.1, which addresses more generally the subject of wages and hours, the parties agreed that the City could “assign employees to work a four/ten, five/forty, nine/eighty or other work schedule.” (Italics added.) They also agreed that “[mjanagement may require employees to change their work schedules (working hours or change days off, except the split day) . . . providing that the change is not arbitrary, capricious or discriminatory.” (Art. 5.1, italics added.) This paragraph goes on to contemplate arbitration over whether a schedule change is arbitrary, capricious, or discriminatory. The Union makes no such claim; it argues only that furloughs are unauthorized. However, nothing in article 5.1 limits the City’s authority to implement furloughs. Indeed, the first paragraph of the article contemplates considerable flexibility in the exercise of management’s power to set schedules.
The Union also refers to article 6.1 of the MOUs, which provides salary schedules consisting of 40-hour weeks. Here again, no guarantee of a 40-hour week is implied. The salary schedules establish norms, which are used not only for ordinary work schedules but also to calculate pay for employees working overtime or reduced hours. They are not a specific limitation on the City’s authority to relieve employees from duty in a fiscal emergency.
*1109The Union claims the management rights provision itself is ambiguous, citing a footnote in Professional Engineers in California Government v. Schwarzenegger (2010) 50 Cal.4th 989, 1041-1042, fn. 35 [116 Cal.Rptr.3d 480, 239 P.3d 1186] (Professional Engineers). The footnote consists entirely of dicta, and its discussion is inapposite here. Professional Engineers addressed “State’s Rights” MOU clauses that the trial court had found persuasive with respect to the Governor’s power to furlough state employees. We decided that even if the court had erroneously interpreted these clauses to permit furloughs, it would not affect our ultimate determination that the Legislature effectively ratified and validated the Governor’s furlough program. (Professional Engineers, at pp. 1041-1042.) Nevertheless, we commented as follows:
“One of the ‘State’s Rights’ clauses upon which the trial court relied was section 3.1.B of the MOU between the state and plaintiff CASE. That section of the CASE MOU provides in full: ‘To the extent consistent with law and this MOU, the rights of the State include, but are not limited to, the exclusive right to determine the mission of its constituent departments, commissions, and boards; set standards of service; train, direct, schedule, assign, promote, and transfer its employees; initiate disciplinary action; relieve its employees from duty because of lack of work, lack of funds, or for other legitimate reasons; maintain the efficiency of State operations; determine the methods, means and personnel by which State operations are to be conducted; take all necessary actions to carry out its mission in emergencies; and exercise complete control and discretion over its organization and the technology of performing its work. The State has the right to make reasonable rules and regulations pertaining to employees consistent with this MOU provided that any such rule shall be uniformly applied to all affected employees who are similarly situated.’
“The trial court pointed to the language in this section permitting the state to ‘relieve its employees from duty because of lack of work, lack of funds, or for other legitimate reasons,’ but failed to take note of the introductory clause of section 3.1.B—‘[t]o the extent consistent with law and this MOU’ (italics added)—which suggests that the ‘State’s Rights’ clause was not intended to override all of the other, more specific provisions of the MOU governing wages, hours, and other terms and conditions of employment. Moreover, the clause recognizing the state’s right to relieve its employees from duty because of ‘lack of funds’—the clause relied upon by the trial court— reasonably can be interpreted to refer only to the state’s authority, under [Government Code] section 19997, to lay off employees for lack of ftmds. As will be recalled, section 19997 is one of the few statutes dealing with the terms and conditions of employment that is not subject to supersession under the Dills Act. (See, ante, at pp. 1034-1035, fn. 29.)
*1110“Two separate provisions of the MOU in question (§§ 10.2, 10.3) explicitly address the question of furloughs. Section 10.2 provides in relevant part that ‘[w]henever the State determines it is necessary to lay off employees, the State and the Union shall meet in good faith to explore alternatives to laying off employees such as . . . voluntary reduced work time . . . .’ (Italics added.) Section 10.3 provides that ‘[t]he State may propose to reduce the number of hours an employee works as an alternative to layoff. Prior to the implementation of this alternative to a layoff, the State will notify and meet and confer with the Union to seek concurrence of the usage of this alternative.’
“The trial court’s ruling does not appear to give adequate consideration to these specific provisions of the MOU, or to assess how these provisions reasonably should be interpreted in light of the common understanding (at the time the parties entered into the MOU) of the Governor’s authority or lack of authority to impose such furloughs. (See, e.g., Los Angeles City Employees Union v. City of El Monte (1985) 177 Cal.App.3d 615, 623 [220 Cal.Rptr. 411] [ordinary ‘custom and usage’ must be considered in interpreting the terms of an MOU].) In light of all of these circumstances, the trial court’s reliance upon the ‘State’s Rights’ clauses in the MOU’s is at the least open to serious question.” (Professional Engineers, supra, 50 Cal.4th at pp. 1041-1042, fn. 35.)
The distinctions between the MOU provisions quoted in Professional Engineers and those before us here are substantial and determinative. Rather than granting the City the power to relieve employees from duty due to lack of funds “ ‘[t]o the extent consistent with . . . this MOU’ ” (Professional Engineers, supra, 50 Cal.4th at p. 1042, fn. 35), here the parties agreed that “except as specifically set forth herein no provisions in this MOU shall be deemed to limit or curtail the City ... in any way ...” in the exercise of its right to relieve employees from duty in a fiscal emergency (art. 1.9, italics added). Instead of restricting management to actions consistent with MOU terms, these MOUs provide the City with reserved powers limited only by specific contract terms. That is a significant difference. An action not specifically barred is permitted, even if it is arguably inconsistent with general MOU terms.
Furthermore, no provision in these MOUs contemplates furloughs as an alternative to layoffs, or imposes a meet-and-confer requirement before hours are reduced, as was the case in Professional Engineers. The parties anticipated voluntary furloughs upon the agreement of individual employees and management, without mentioning layoffs. Article 5.3 of the MOUs provides; “[W]henever a full-time employee voluntarily reduces the number of his/her *1111biweekly regular work hours from eighty (80) to a number not less than seventy-two (72) at the request of, or with the permission of, his/her appointing authority, such employee shall be credited with all rights and benefits as though he/she worked eighty (80) hours in the payroll period. The employee shall not be credited for overtime worked until more than forty (40) hours have been worked in the workweek. Compensation received under this Article shall be considered full compensation for all employees participating in the voluntary work hour reduction.”
Nothing in this voluntary furlough provision limits the City’s authority to impose mandatory furloughs, or raises a doubt as to whether the contract term “relieve City employees from duty because of . . . lack of funds” refers to furloughs or layoffs. (Art. 1.9.) Here the term includes both alternatives, unless there is a specific limitation elsewhere in the MOUs. But Article 5.3 governs only voluntary reductions in hours by employees. It does not implicate the City’s reserved unilateral authority to act in a fiscal emergency.
For all these reasons, what we said in Professional Engineers does not control the interpretation of the MOUs in this case. These parties agreed that the City’s power to relieve employees from duty due to lack of funds, and to take all necessary actions in emergencies, was limited only as specifically set forth in the MOUs. (Art. 1.9.) They agreed that the City could impose “other work schedule[s]” than the alternatives set out in the MOUs, and could change employees’ work hours in ways not arbitrary, capricious, or discriminatory. (Art. 5.1.) While the parties contemplated 40-hour workweeks at regular rates of pay as the norm, they did not require 40-hour workweeks. (Arts. 5.1, 6.1.) Nor did they specify that if furloughs were to be imposed in lieu of layoffs, it would be on a voluntary basis.
The Union was free to bargain for a narrower management rights clause. Or, accepting the terms of article 1.9, it could have negotiated for specific protections against furloughs. It did neither of those things. Like any party to a contract, it ought to be bound by the terms to which it agreed. The majority’s failure to enforce this agreement is unfortunate. An important question of public policy and a matter of considerable budgetary significance is committed to the discretion of an unelected arbitrator, whose decision is unreviewable. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11 [10 Cal.Rptr.2d 183, 832 P.2d 899].) The City does not seek to insulate its decision from oversight. It is willing to submit to judicial review, under a deferential standard appropriate to actions taken by local government in response to a fiscal emergency. (See San Francisco Fire Fighters Local 798 v. City and County of San Francisco (2006) 38 Cal.4th 653, 667-670 [42 *1112Cal.Rptr.3d 868, 133 P.3d 1028].) We should give the Union its day in court and not subject the decisions of elected leaders in difficult times to second-guessing by an arbitrator who is not answerable to the voters.
Baxter, J., and Chin, J., concurred.
Petitioner’s petition for a rehearing was denied August 28, 2013. Baxter, J., and Corrigan, J., were of the opinion that the petition should be granted.