Freedom Foundation

Inslee Agrees To Illegal Union Contract Provisions

The Freedom Foundation has recently learned that Gov. Jay Inslee apparently violated the state constitution by agreeing to “memoranda of understanding” modifying certain state employee collective bargaining agreements in effect for the 2015-17 biennium.

The MOUs awarded retroactive pay raises to certain Department of Corrections (DOC) employees represented by Teamsters 117.

State collective bargaining laws specify that the Office of Financial Management (OFM), under the authority of the governor, negotiates collective bargaining agreements (CBAs) with unions representing state employees setting their wages, benefits and working conditions. 

The negotiated contracts are then submitted to the state legislature for approval and funding, coinciding with the state’s biennial budget. The CBA’s currently in effect are set to expire on June 30, 2017.

On October 26, 2016, however, Inslee signed three MOUs modifying the Teamsters 117 CBA. The first MOU gave Licensed Practical Nurse 2 positions at the Monroe Correctional Complex a five percent raise, retroactive to July 1, 2015. The second MOU granted all DOC Sex Offender Treatment Specialists a five percent raise retroactive to July 1, 2016. And the third MOU provided all Sex Offender Treatment Specialist Supervisors a five percent raise retroactive to July 1, 2016.

While increased pay may be justified for the affected DOC staff, the method by which they were awarded the retroactive compensation raises serious legal questions.

First, RCW 41.80.010(3) provides:

“(3) The governor shall submit a request for funds necessary to implement the compensation and fringe benefit provisions in the master collective bargaining agreement or for legislation necessary to implement the agreement. Requests for funds necessary to implement the provisions of bargaining agreements shall not be submitted to the legislature by the governor unless such requests:
(a) Have been submitted to the director of the office of financial management by October 1 prior to the legislative session at which the requests are to be considered; and
(b) Have been certified by the director of the office of financial management as being feasible financially for the state.
The legislature shall approve or reject the submission of the request for funds as a whole. The legislature shall not consider a request for funds to implement a collective bargaining agreement unless the request is transmitted to the legislature as part of the governor’s budget document submitted under RCW 43.88.030 and 43.88.060. If the legislature rejects or fails to act on the submission, either party may reopen all or part of the agreement or the exclusive bargaining representative may seek to implement the procedures provided for in RCW 41.80.090.”

While the governor has periodically agreed to various MOUs in the past without legislative approval, this may be the first time the governor has awarded pay increases to state employees via an MOU without following the appropriate process and first seeking legislative approval for the use of funds.

Secondly, Article II, Section 25 of the Washington State Constitution provides:

“The legislature shall never grant any extra compensation to any public officer, agent, employee, servant, or contractor, after the services shall have been rendered, or the contract entered into, nor shall the compensation of any public officer be increased or diminished during his term of office. Nothing in this section shall be deemed to prevent increases in pensions after such pensions shall have been granted.”

While the state constitution prohibits the legislature from awarding retroactive pay raises, it does not specifically apply to the governor. Of course, the constitution never gives the governor authority to expend funds in the first place, instead reserving that authority to the people’s elected legislators, and its drafters likely did not foresee the collective bargaining arrangement of questionable constitutionality currently in use. Regardless, the legal principle is quite clear.

Further, Article VIII, Section 5 provides:

“The credit of the state shall not, in any manner be given or loaned to, or in aid of, any individual, association, company or corporation.”

By granting certain DOC staff additional compensation for services already rendered, Inslee appears to have violated both state law and these constitutional provisions.

The governor’s actions have apparently raised eyebrows in the legislature on both sides of the aisle.

In a letter to Gov. Inslee dated Dec. 12, 2016, House minority leader Rep. Dan Kristiansen (R-Snohomish) and Rep. Bruce Chandler (R-Granger), ranking Republican on the appropriations committee, expressed alarm that “the executive branch would enter into agreements that clearly violate the express terms of our state Constitution.” The letter continued:

“Frankly, the decision to provide unlawful compensation calls into question the expertise of OFM’s Labor Relations Office. We assume your office was not made aware of the illegality of this award prior to execution. We are not aware of, and have not been provided with, any legally defensible explanation for this retroactive compensation… To the extent your office cannot establish legal authority justifying these contracts, we ask that you take the appropriate steps to remedy this situation and recoup any compensation that would be considered an unconstitutional gift of public funds.”

Rep. Timm Ormsby (D-Spokane) sent a similar letter, dated Dec. 16, 2016, to David Schumacher, director of OFM, stating:

“…I remain concerned about the precedent set by several of the changes to the master collective bargaining agreement with Teamsters Local 117… As you are aware, the Washington State Constitution Article 2, Section 25 prohibits retroactive compensation. While I understand the Courts have found one exception to this prohibition, given that the Teamsters 117-represented employees have been beneficiaries of a legislatively-approved labor contract for the 2015-17 fiscal biennium, from July 1, 2015 until today, that exception does not appear to apply in these cases… In the future, I expect that the Office of Financial Management will exercise more caution in executing changes to master collective bargaining agreements to assure that the process and results comply with the prohibition on retroactive compensation in Article 2, Section 25 of the state’s constitution. In addition, I request that you review the negotiation and legal review process being used today to assure this compliance takes place.”

The cases Rep. Ormsby is likely referring to are State ex rel. Eshelman v. Cheetham, 21 Wash. 437 (1899) and Christie v. The Port of Olympia, 27 Wn.2d 534 (1947).

In Cheetham, the Washington State Supreme Court found that, although the legislature has the authority to increase the pay of state employees at any time, it may not constitutionally add to an employee’s compensation “after the services had been performed.” The court noted,

“It seems to us that the language of [Article 2, Section 25 of] the constitution is so plain and comprehensive that there is little room for construction, and, if the language employed would not serve to prohibit the payment of more wages after services were rendered than was originally contracted for, it would be difficult to use language that would bring about that result.”

In Port of Olympia, however, the State Supreme Court drew a distinction between “retroactive compensation” and “deferred compensation.” It held that payment may be provided for work previously performed as long as “the payments represent compensation which accrued in strict pursuance to a contract made before the work was done.”

As Rep. Ormsby indicates in his letter, however, the DOC employees were being paid at particular rates in accordance with a legally approved collective bargaining agreement. For the governor and OFM to go back and award additional retroactive pay for work already performed and compensated in accordance with a legal contract appears to directly violate the state constitution.

Schumacher responded to the two letters from House leadership in a letter dated Jan. 31, 2017. While he claimed to “understand the gravity” of their concerns and “take them seriously,” he noted the “unique set of circumstances related to the execution of the MOUs… This is not a situation that OFM has previously encountered…” While Schumacher noted that OFM “[does] not believe that the agreements represented extra compensation for services already rendered,” he provided no legal defense for or explanation of the agency’s actions.

Even if all laws and regulations governing Washington’s collective bargaining process for state employees are followed to the letter, the system leaves much to be desired. Among other concerns, the opaque process gives the executive branch too much control over the negotiations over the CBAs and the legislature too little. The fact that Inslee has seen fit to ignore, repeatedly, state laws and the constitution for the sake of one of the most powerful special interest groups supporting his administration is deeply disturbing.

Update 5/17/2017:

The Senate Commerce, Labor and Sports Committee held a work session on collective bargaining which included a discussion of the retroactive pay raises for Teamsters 117-represented DOC employees.

Update 6/15/2017:

Emails obtained by the Freedom Foundation through a public records request from DOC and OFM staff confirm that the additional pay awarded to the three job classifications in question was retroactive for services already provided.

In an Oct. 13, 2016 email to OFM and DOC staff, Jeffrey Landon, Senior Administrator of Programs at DOC, noted, “our intent is to apply [the added assignment pay for sex offender treatment specialists and sex offender treatment specialist supervisors] retroactive to July 1.”

On Oct. 18, 2016, Ann Mitchell at OFM emailed Michelle Woodrow of Teamsters 117 copies of the two MOUs for sex offender treatment specialists and their supervisors and noted that she “backdated the increases to 7/1/2016.”

In an email sent on Oct. 26, 2016, Woodrow asked Mitchell when the licensed practical nurses “can expect to see their retro checks.”