MICHIGAN COALITION OF STATE EMPLOYEE UNIONS et al., Plaintiffs-Appellees,
STATE OF MICHIGAN et al., Defendants-Appellants
Argued January 13, 2015
The Michigan Coalition of State Employee Unions and others brought an action in the Court of Claims against the state of Michigan and various state agencies and officers, alleging that portions of 2011 PA 264, which amended the State Employees' Retirement Act (SERA), MCL 38.1 et seq., were unconstitutional because the resulting changes to retirement benefits altered rates of compensation or conditions of employment, which are within the exclusive authority of the Civil Service Commission to regulate. The Court of Claims, Joyce A. Draganchuk, J., granted plaintiffs' motion for summary disposition. The Court of Appeals, OWENS, P.J., and GLEICHER and STEPHENS, JJ., affirmed in part, reversed in part, and remanded, holding that SERA retirement benefits were properly classified as both " rates of compensation" and " conditions of employment," neither of which was subject to legislative alteration. 302 Mich.App. 187; 838 N.W.2d 708 (2013). The Supreme Court granted plaintiffs' application for leave to appeal. 495 Mich. 921, 844 N.W.2d 119 (2014) .
For MICHIGAN COALITION OF STATE EMPLOYEE UNIONS, ANTHONY MCNEILL, RAY HOLMAN, ANDREW POTTER, Plaintiffs-Appellees: WILLIAM A. WERTHEIMER, FRANKLIN, MI.
For INTERNATIONAL UNION UAW AND LOCAL 6000, Plaintiff-Appellee: AVA R. BARBOUR, DETROIT, MI.
For MICHIGAN CORRECTIONS ORGANIZATION/SEIU, MICHIGAN PUBLIC EMPLOYEES/SEIU LOCAL 517M, Plaintiffs-Appellees: MARY ELLEN GUREWITZ, DETROIT, MI.
For MICHIGAN STATE EMPLOYEES ASSOCIATION, AFSCME LOCAL 5, Plaintiffs-Appellees: BRANDON W. ZUK, LANSING, MI.
For MICHIGAN AFSCME COUNCIL 25, Plaintiff-Appellee: ROBERT D. FETTER, DETROIT, MI.
Chief Justice: Robert P. Young, Jr. Justices: Stephen J. Markman, Mary Beth Kelly, Brian K. Zahra, Bridget M. McCormack, David F. Viviano, Richard H. Bernstein. KELLY, J. (concurring in part and dissenting in part). MCCORMACK, J. (concurring in part and dissenting in part). BERNSTEIN, J. (dissenting).
[498 Mich. 315] BEFORE THE ENTIRE BENCH
Plaintiffs are several unions that represent employees in the state classified civil service. Their members are the beneficiaries of and participants in Michigan's retirement system established under the State Employees Retirement Act (SERA). SERA was enacted in 1943 and has been amended many times since. Plaintiffs challenge the most recent SERA [498 Mich. 316] amendment, 2011 PA 264. They contend that, because 2011 PA 264 increases the cost and reduces the accumulation of future pension benefits previously recognized, it unconstitutionally infringes the exclusive constitutional powers of the Civil Service Commission (commission) to manage and oversee the civil service system. The commission has never formally opposed or attempted to repudiate the application of SERA or any of its several amendments, including 2011 PA 264, to the employees of the state classified civil service.
While the commission has considerable constitutional powers to manage the civil service system and to preserve its sphere of constitutional authority, the commission has no legislative powers. It may neither enact legislation nor revise an enactment, nor may it dictate that the Legislature repeal or modify an enactment. Therefore, we hold that because the commission has acquiesced in the application of SERA to the employees of the civil service system, plaintiff's objections fail to establish a basis for relief.
We reverse the judgment of the Court of Appeals and remand to the Court of Claims for further proceedings consistent with this opinion.
In 1940, through an initiative petition, the people of Michigan ratified a constitutional amendment establishing a state civil
service system. Const 1908, art 6, § 22 became effective on January 1, 1941, and provided in part:
[498 Mich. 317] The commission shall classify all positions in the state civil service according to their respective duties and responsibilities, fix rates of compensation for all classes of positions, approve or disapprove disbursements for all personal services, determine by competitive performance exclusively on the basis of merit, efficiency and fitness the qualifications of all candidates for positions in the state civil service, make rules and regulations covering all personnel transactions, and regulate all conditions of employment in the state civil service. No person shall be appointed to or promoted in the state civil service who has not been certified as so qualified for such appointment or promotion by the commission. No removals from or demotions in the state civil service shall be made for partisan, racial, or religious considerations.
The administration of the commission's powers shall be vested in a state personnel director who shall be a member of the state civil service and who shall be responsible to and selected by the commission after open competitive examination.
Shortly after its creation, the commission promulgated a rule requiring its state personnel director to recommend that the Legislature establish a retirement plan for classified employees:
RETIREMENT. The director, in conjunction with appointing authorities, other supervising officials, the state budget director and members of the legislature, shall prepare and submit to the commission for approval and subsequent recommendation to the governor and the legislature for adoption by law, a comprehensive and workable contributory retirement system for employees in the state civil service.
Apparently, the commission thereafter designed a model retirement plan, which it submitted to the Governor for comment. However, before the Governor [498 Mich. 318] completed his review of the commission's plan, the precursor to SERA was introduced in the House of Representatives as House Bill No. 177. SERA was signed into law as 1943 PA 240, and was codified as MCL 38.1 et seq.
Subsequently, the people ratified a new Constitution in 1963, which altered somewhat the way that the commission operates. Const 1963, art 11, § 5, ¶ 4, remains largely unchanged from Const 1908, art 6, § 22, and provides in relevant part:
The commission shall classify all positions in the classified service according to their respective duties and responsibilities, fix rates of compensation for all classes of positions, approve or disapprove disbursements for
all personal services, determine by competitive examination and performance exclusively on the basis of merit, efficiency and fitness the qualifications of all candidates for positions in the classified service, make rules and regulations covering all personnel transactions, and regulate all conditions of employment in the classified service.
In the same section, however, the ratifiers introduced a new legislative check on compensation increases for civil servants authorized by the commission:
Increases in rates of compensation authorized by the commission may be effective only at the start of a fiscal year [498 Mich. 319] and shall require prior notice to the governor, who shall transmit such increases to the legislature as part of his budget. The legislature may, by a majority vote of the members elected to and serving in each house, waive the notice and permit increases in rates of compensation to be effective at a time other than the start of a fiscal year. Within 60 calendar days following such transmission, the legislature may, by a two-thirds vote of the members elected to and serving in each house, reject or reduce increases in rates of compensation authorized by the commission. Any reduction ordered by the legislature shall apply uniformly to all classes of employees affected by the increases and shall not adjust pay differentials already established by the civil service commission. The legislature may not reduce rates of compensation below those in effect at the time of the transmission of increases authorized by the commission.
Following the ratification of the 1963 Constitution, the commission replaced its initial retirement rule, Rule XXXVIII, but its replacement did not purport to fundamentally change the commission's advisory role in SERA's administration:
Section 31 -- Retirement.
31.1 Cooperation With State Retirement Board. --
The state personnel director shall cooperate with the State Employees' Retirement Board in maintaining a comprehensive contributory retirement system for state civil service employees.
The commission's rules have remained substantively unchanged in this regard.
[498 Mich. 320] B. 2011 PA 264
In 2011, the Legislature amended SERA. Relevant to the instant case are the amendments of MCL 38.1e, MCL 38.35a, and MCL 38.50a. Broadly speaking, the amendments (1) potentially reduce the value of overtime compensation as it factors into a member's pension formula for future benefits, and (2) require members
to make an election between paying to remain in a defined benefit plan (that was previously free), or instead joining a " Tier 2," 401(k)-style defined contribution plan.
[498 Mich. 321] II. PROCEDURAL HISTORY
Plaintiffs argue that SERA retirement benefits are " rates of compensation" or, alternatively, " conditions of employment," as these terms are used in Const 1963, art 11, § 5. [498 Mich. 322] Accordingly, plaintiffs claim, SERA retirement benefits are not subject to legislative change because the regulation of " rates of compensation" and " conditions of employment" of employees in the classified civil service is within the exclusive and plenary authority of the commission.
The Court of Claims held that 2011 PA 264 was unconstitutional. The Court of Appeals affirmed the ruling of the Court of Claims, concluding that SERA retirement
benefits are properly classified as both " rates of compensation" and " conditions of employment," neither of which is subject to legislative alteration. The state appealed and we granted leave, directing the parties to brief " whether 2011 PA 264 is unconstitutional, in whole or in part, in ...