LANSING – In a decision state workers hailed as a major victory, the Michigan Court of Appeals on Wednesday held that a 2012 law requiring workers to pay 4 percent of their pay into their pension system violated the constitutional provisions on classified employee compensation.
The decision, in Michigan Coalition of State Employee Unions v. Michigan, upheld a decision made by the Court of Claims. But where the earlier decision held the entire law, PA 264 of 2011, was void, in a per curiam decision the Appeals panel ordered the case remanded to see if any provisions in the act were severable from the rest.
The law was hailed as a major reform to help ensure that state worker retirement funds, especially for those workers still on the defined benefit plan, were paid for.
The Michigan Corrections Organization, one of the unions that challenged the law, called the decision a “complete win for MCO members and all state workers in the defined benefit pension system.”
A spokesperson for the Department of Technology, Management and Budget said the administration was reviewing the decision and had not yet decided itself if it would appeal the ruling to the Supreme Court. The state has 42 days in which to make that decision, said Kurt Weiss.
However, Weiss also said that the 4 percent was continuing to be deducted to be paid into the pension system and would continue to be deducted. Since April 2012, when the deduction took effect, $59.1 million had been collected.
The law was aimed at getting state workers that are still on the defined benefit pension system to contribute to their retirement, which Weiss said was not occurring before the law was passed.
Since 1997, all new state workers have to participate in a defined contribution retirement system. Weiss said there are 17,800 workers still on the defined benefit plan with more than 33,000 workers now on the defined contribution plan.
The law gave the defined benefit workers the option to remain in the pension system, and contribute 4 percent, or join the defined contribution system. Weiss said all but 600 workers elected to stay in the defined benefit plan.
But the employee unions charged the law, by making major changes to how compensation was defined, redefining over-time and changing the term of years to determine average compensation for a worker (which would have resulted in lower average pension payments), violated Article 11, Section 5 of the Constitution which establishes the Civil Service Commission and gives it the power to establish compensation. The Legislature can only reverse the commission by a two-thirds majority.
And in the decision, Judge Donald Owens, Judge Elizabeth Gleicher and Judge Cynthia Stephens, concurred with that argument.
The state argued that when the Civil Service Commission was first established in 1940 to replace what was viewed as a largely corrupt state employee appointment system, pensions were rare and fringe benefits were not viewed as part of compensation.
But the Appeals panel said when the Constitution was adopted in 1963, the voters had a much different view of compensation and that context had to be considered in reviewing the legislation.
“We conclude the ratifiers in 1963 would have considered ‘rates of compensation’ to include fringe benefits provided civil service employees, and that would include the pension plan offered as part of the compensation package. Changing the nature of the plan changes the nature of the benefit, and thus it amounts to a change in the rate of compensation or in the conditions of employment. This is within the authority of the commission, not the Legislature, and therefore (the law is) unconstitutional,” the court said.
And, because the statute made changes to benefits such as over-time, the court said it “improperly invades the authority of the commission and therefore is unconstitutional.”
In a statement issued by the coalition of unions, the group hailed the decision as a victory for the workers and a “lesson for the Michigan Legislature.” Lawmakers should stop focusing on attacking state workers, the union coalition said, and focus of helping build families.
This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com
