A Los Angeles City Hall panel on Monday delivered a significant victory to municipal labor unions, breathing new life into a legal challenge to pension benefit reductions being counted on to save billions of dollars over the next 30 years.
On a 3-2 vote, the Employee Relations Board sided with the Coalition of L.A. City Unions on a key procedural question: whether the group met a deadline to challenge a hike in the retirement age and a reduction in benefits approved in 2012 for new employees.
The board's decision sets the stage for a full hearing on union claims that the pension changes were improperly imposed without required bargaining.
City officials are relying on the pension savings to help eliminate a chronic budget deficit by 2018. If the pension plan is invalidated, "the city's ability to eliminate the deficit and continue to provide services to Angelenos — and benefits to its employees — would be seriously hampered," said City Administrative Officer Miguel Santana, a top budget official.
Public employee pension costs have been a major issue in recent years, consuming a growing portion of the budget. In departments overseen by the City Council, contributions for civilian employee retirement costs have climbed from $260 million in 2005 to $410 million in the fiscal year that starts July 1, according to Santana.
Mayor Eric Garcetti voted for the pension cuts in October 2012, as a councilman, and defended them on the mayoral campaign trail last year. The coalition, which represents roughly 20,000 civilian city workers, says Garcetti and his colleagues lacked the legal authority to impose the pension reductions unilaterally.
A city hearing officer concluded six months ago that the coalition had missed the deadline for objecting to the pension changes. The board rejected those findings on Monday, with one Garcetti appointee providing a key vote in support of the employees' coalition. After the meeting, labor attorney Ellen Greenstone predicted the board will favor the coalition's arguments on the underlying dispute.
"We're completely right on the law," she said.
The battle before the five-member labor relations board could have major repercussions as Garcetti and council members attempt to hold the line on employee costs. When the pension changes were first approved, budget officials said the measure would save up to $70 million over five years and up to $309 million over a decade.
For every dollar of compensation paid to coalition workers hired before July 1, 2013 — the date the pension benefits were reduced — the city must set aside an additional 28 cents for retirement benefits, Santana said. For coalition employees hired after the reductions went into effect, the city must set aside 18 cents.
Lawyers for the city contend negotiations were not required to alter benefits provided to future employees. Garcetti spokesman Yusef Robb declined to comment on how the mayor would deal with a decision striking down the pension reductions.
"The previous mayor and the City Council acted in accordance with legal advice provided by the city attorney," Robb said. "And we would expect the board to follow that advice as well."
The debate over the pension reductions had become secondary to technical questions over the procedures for pursuing a legal challenge.
Employee Relations Board rules state that a union must file an unfair labor practice claim no more than 90 days after it "becomes aware" of the alleged misconduct.
Hearing Officer Luella Nelson concluded in December the clock began ticking for a union challenge on Aug. 27, 2012. That was the day Santana sent the employees' coalition a letter noting the council was proceeding with plans to raise the retirement age and cut the size of benefits for newly hired workers.
Nelson found that the city gave a second notice on Sept. 6, 2012.
Greenstone, the labor union lawyer, argued that the period to file a challenge began no earlier than Oct. 26, 2012, the day the council cast its final vote on the pension package. One month after Santana sent his letter, lawmakers began to waver over their commitment to the pension reduction plan, she said.
The City Council gave preliminary approval to the pension rollback on Sept. 25, 2012. But they also instructed Santana to meet with labor representatives to "find common ground and to avoid litigation" on the pension plan. Garcetti, as a councilman, was one of three lawmakers who signed the motion.
Labor leaders said they assumed the issue had not been resolved — and that there was not yet a need for a formal challenge. "We shouldn't be penalized for assuming that those discussions might bear fruit," Greenstone told the employee relations panel.
On Monday, Rhonda Hilyer, Garcetti's newest appointee to the board, provided the critical third vote to reject the hearing officer's recommendation to dismiss the union challenge. She said the City Council left labor leaders with the impression there was still room for movement on the pension issue.
"When the council said, 'Find common ground and avoid litigation,' there's an implication there," she said. "They aren't just hollow words."