News Story

Court Upholds Law Banning Automatic Wage Increases For Public Employees

Prior to law, unions could lock in compensation increases with little incentive to negotiate

The Michigan Court of Appeals has upheld a law banning automatic wage increases after the expiration of union contracts.

A 2011 law banned the practice of salary increases after collective bargaining agreements expired. Before the law, in practice, what was happening was a union contract would lock in raises. After a contract expired, the law required districts make pay increases as if the contract was still in effect, which meant step increases and wages were guaranteed until a new contract was agreed to by both parties. The new law froze salaries until a new contract was reached.

Former State Rep. Marty Knollenberg, R-Troy, was the sponsor of the bill, now Public Act 54 of 2011. He applauded the court and discussed the reasoning for the law.

"What was going on is that a lot of the public employers were having difficulty resolving their negotiations with the public unions," said Knollenberg , who is now running for the 13th Michigan State Senate district. "You had a number of public employers who for months or years could not renew their contracts. Public employees were getting automatic pay increases even though they weren't being negotiated by either party. The bill was to put more fairness so the negotiations were not as tilted toward the public unions."

During the debate over the bill, former Royal Oak Superintendent Thomas Moline testified that the district had to pay an extra $1.7 million in additional salary and benefits while the union had little incentive to bargain.

"The 2009-2010 school year commenced within the School District of the City of Royal Oak with the absence of a new negotiated teacher contract. Nonetheless, the school system was required to pay $430,000 in additional insurance increase, and $357,000 in step increases based on the expired contract," Moline said. "Bargaining continued in Royal Oak in a second year in summer of 2010. At that point, the school system was presented with a second round of automatic step increases ranging from 4 percent to 12 percent additional compensation for step eligible instructors and amounting to $420,000 in additional costs. The school system also braced for a 17 percent increase in insurance for our teacher group amounting to $525,000."

The 2011 law limited automatic pay and benefit increases for all public employees. But a new proposed law would change that.

Senate Bill 850, introduced by Sen. Patrick Colbeck, R-Canton, would exempt public safety employees from the law. It passed the Senate on Tuesday by a 27-10 vote and heads to the state House.

Sen. Colbeck said he introduced the bill because the original law was not supposed to impact law enforcement officers and was tied up with reforming Public Act 312, which relates to binding arbitration.

"The key provision of the binding arbitration law is the 'ability to pay' provision we now have. If the municipality does not have the money, it cannot be a part of the binding arbitration agreement." Sen. Colbeck said. "This bill is just making well with what was originally agreed to when the Legislature reformed PA 312."

A similar bill, HB 5097,  has already been introduced in the House with significant support.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.