Financial Urgency: D.C.A. Cases & the Legal/Political Ramifications for Florida School Districts 34th Annual Spring Training Program May 15, 2014 Prepared by Leonard J. Dietzen, III © 2014 Rumberger, Kirk & Caldwell, P.A.

Financial Urgency Statute © 2014 Rumberger, Kirk & Caldwell, P.A. In the event of a financial urgency requiring modification of an agreement, the chief executive officer or his or her representative and the bargaining agent or its representative shall meet as soon as possible to negotiate the impact of the financial urgency. If after a reasonable period of negotiation which shall not exceed 14 days, a dispute exists between the public employer and the bargaining agent, an impasse shall be deemed to have occurred, and one of the parties shall so declare in writing to the other party and to the commission. The parties shall then proceed pursuant to the provisions of s An unfair labor practice charge shall not be filed during the 14 days during which negotiations are occurring pursuant to this section. § , Florida Statutes

PERC Interprets Financial Urgency © 2014 Rumberger, Kirk & Caldwell, P.A. In Walter E. Headley, Jr. Miami Lodge #20, FOP v. City of Miami (38 FPER ¶ 330) FOP filed a ULP alleging in pertinent part: 1)City acted improperly by invoking financial urgency where none existed. 2)City failed to follow procedures in statute by making unilateral changes in terms and conditions of employment before completing the impasse resolution process as set forth in , F.S. (2011).

General Rule and Exception © 2014 Rumberger, Kirk & Caldwell, P.A. Rule: If employees are represented by a bargaining agent, the employer is prohibited from unilaterally changing a wage, hour, term or condition of employment. Financial urgency statute is a legislatively enacted exception to this body of law. By applying it, an employer may change a wage, hour, term or condition of employment.

Definition of Financial Urgency © 2014 Rumberger, Kirk & Caldwell, P.A. In Manatee Education FEA, AFI v. School Board of Manatee County, 62 So. 3d 1176 the court charged PERC with defining the term “financial urgency.”

Definition of Financial Urgency © 2014 Rumberger, Kirk & Caldwell, P.A. In re: Walter E. Headley the hearing officer used the dictionary definition of urgent and urgency and defined financial urgency as “a financial condition calling for immediate attention, not necessarily the condition of financial emergency or bankruptcy. The hearing officer concluded that this is a financial condition that is less than financial emergency or a bankruptcy.

Further Clarification from PERC © 2014 Rumberger, Kirk & Caldwell, P.A. In re: Walter E. Headley PERC agreed with the hearing officer’s conclusion and added that a determination of financial urgency requires a close examination of the employer’s complete financial picture on a case- by-case basis.

Good Faith Standard © 2014 Rumberger, Kirk & Caldwell, P.A. When an employer invokes § , F.S., it is held to the standard of good faith as defined in (17), F.S. Good faith is a matter of intent; it is a state of mind which is usually determined by inference from a party’s conduct.

Avoiding an Unfair Labor Practice © 2014 Rumberger, Kirk & Caldwell, P.A. To prove a violation of (1)(a) and (c), F.S., in declaring a financial urgency the union must show evidence that: the employer’s financial assessment at the time financial urgency was declared was incorrect; or the employer was not acting in good faith when it declared financial urgency.

Test of Good Faith © 2014 Rumberger, Kirk & Caldwell, P.A. An employer has acted in good faith if, based on the totality of the relevant information relied on by the employer at the time it declared the financial urgency, a reasonable person acting in good faith could reach the conclusion that funding was not available to meet the employer’s financial obligations to its employees.

Union Rights Covered © 2014 Rumberger, Kirk & Caldwell, P.A. PERC also determined that the employer may unilaterally change an agreement after concluding the statutory 14 day bargaining period but before completing the impasse resolution procedures as set forth in , F.S. Union has a reasonable period to negotiate the impact of the financial urgency, access to impasse procedures and the right to challenge declaration of financial urgency by filing a ULP.

Headley, FOP v. City of Miami © 2014 Rumberger, Kirk & Caldwell, P.A. On Appeal at the 1 st DCA, Case No. 1D , from Appellant, FOP's Initial Brief - Issues on appeal: Whether the City was experiencing a financial urgency which required a modification of the CBA; and Whether PERC erred in concluding that the City could implement its changes in the CBA prior to the completion of the statutory impasse procedure.

© 2014 Rumberger, Kirk & Caldwell, P.A. On appeal at the 1 st DCA, Case No. 1D , from Appellee, City of Miami’s Answer Brief - Issues on Appeal Whether the budgetary shortfall in excess of $115-million faced by the City of Miami constituted a “financial urgency” requiring modification of the subject collective bargaining agreement pursuant to section , Florida Statutes. Whether the language and intent of section authorized the City of Miami to immediately modify the subject collective bargaining agreement when faced with a financial urgency before completion of the impasse process. Headley, FOP v. City of Miami

© 2014 Rumberger, Kirk & Caldwell, P.A. On appeal at the 1 st DCA, Case No. 1D , Court affirmed PERC’s determination that City properly invoked the procedures in section and thus, did not commit an unfair labor practice when it unilaterally modified the bargaining agreement. Headley, FOP v. City of Miami

© 2014 Rumberger, Kirk & Caldwell, P.A. On appeal at the 1 st DCA, Case No. 1D , Court held: “Financial urgency is a dire condition requiring immediate attention and demanding prompt and decisive action, but not necessarily a financial emergency or bankruptcy.” “Local government is not required to demonstrate that funds are not available from any other possible source to preserve the agreement” Headley, FOP v. City of Miami

© 2014 Rumberger, Kirk & Caldwell, P.A. On appeal at the 1 st DCA, Case No. 1D , Court held: “Instead the local government must only show that other potential cost-saving measures and alternative funding sources are unreasonable or inadequate to address the dire financial condition facing the local government.” “Impact bargaining only requires notice and an opportunity to negotiate before the proposed changes are implemented.” Headley, FOP v. City of Miami

© 2014 Rumberger, Kirk & Caldwell, P.A. On appeal at the 1 st DCA, Case No. 1D , Court held: “The Legislature intended the phrase ‘negotiate the impact’ in section to be a reference to ‘impact bargaining.’ The declaration of the financial urgency and the 14-day negotiating period in the statue are the notice and reasonable opportunity to negotiate that is required in the context of ‘impact bargaining.’” Headley, FOP v. City of Miami

© 2014 Rumberger, Kirk & Caldwell, P.A. On appeal at the 1 st DCA, Case No. 1D , Court held: “If dispute still exists the local government may immediately impose the modifications to the bargaining agreement.” Headley, FOP v. City of Miami

© 2014 Rumberger, Kirk & Caldwell, P.A. The Constitutional right of public employees to collectively bargain with their employer and the interrelated constitutional right of a bargaining unit to be free from government impairment of contracts with its employees are at the heart of this appeal. Hollywood Fire Fighters, Local 1375, IAFF, Inc. v. City of Hollywood, 133 So. 3d 1042 (4 th DCA 2014) Hollywood Fire Fighters v. City of Hollywood

© 2014 Rumberger, Kirk & Caldwell, P.A. Fourth District Court of Appeals disagreed with First District’s application of Florida Supreme Court case Chiles v. United Faculty of Florida, 615 So. 2d 671 (Fla. 1993). In Chiles the court held the right to contract protected by the Florida Constitution severely limits the legislature’s power to alter a contract. Hollywood Fire Fighters v. City of Hollywood

© 2014 Rumberger, Kirk & Caldwell, P.A. Florida Supreme Court’s test in Chiles The legislature has authority to reduce benefits in a CBA only where it can demonstrate a compelling state interest. The legislature must demonstrate no other reasonable alternative means of preserving its contract with public workers, in whole or in part. The legislature must demonstrate that the funds are available from no other possible reasonable source. Hollywood Fire Fighters v. City of Hollywood

© 2014 Rumberger, Kirk & Caldwell, P.A. Fourth DCA opinion Relying on Chiles to establish financial urgency, the City was required to demonstrate that funds were available from no other possible source. Court certified conflict with Headley to Florida Supreme Court. Headley is still pending. Hollywood Fire Fighters v. City of Hollywood

Guidelines for General Funds © 2014 Rumberger, Kirk & Caldwell, P.A. The district school board shall maintain a general fund ending fund balance that is sufficient to address normal contingencies. 1)If at any time the portion of the general fund’s ending fund balance not classified as restricted, committed, or non- spendable in the district’s approved operating budget is projected to fall below 3 percent of projected general fund revenues during the current fiscal year, the superintendent shall provide written notification to the district school board and the Commissioner of Education. § , Florida Statutes

Guidelines for General Funds © 2014 Rumberger, Kirk & Caldwell, P.A. 2) If at any time the portion of the general fund’s ending fund balance not classified as restricted, committed, or non- spendable in the district’s approved operating budget is projected to fall below 2 percent of the projected general fund revenues during the current fiscal year, the superintendent shall provide written notification to the district school board and the Commissioner of Education. Within 14 days after receiving such notification, if the commissioner determines that the district does not have a plan that is reasonably anticipated to avoid a financial emergency as determined pursuant to § , the commissioner shall appoint a financial emergency board that shall operate under the requirements, powers, and duties specified in § (3)(g) § , Florida Statutes

Possible triggers of financial urgency © 2014 Rumberger, Kirk & Caldwell, P.A. Automatic step Increases in cost of health care Teacher Allocation Funds Performance pay plan Declining FTE

Disclaimer The information provided during this presentation is not intended for legal advice. The presentation, and any handouts which may accompany it, provide general information on this topic and answers to common questions about this issue. Please consult an attorney to assure that this information, and your interpretation of it, is appropriate to your particular situation. © 2014 Rumberger, Kirk & Caldwell, P.A.

Thank you! Leonard J. Diezten, III, Esquire Rumberger, Kirk & Caldwell, P.A. P.O. Box Tallahassee, FL (850) © 2014 Rumberger, Kirk & Caldwell, P.A.