State of California (Department of Personnel Administration) (PERB 1978S)

STATE OF CALIFORNIA
DECISION OF THE	DECISION OF THE
PUBLIC EMPLOYMENT RELATIONS BOARD
STATE OF CALIFORNIA
AFSCME LOCAL 2620,
Charging Party,
V .
STATE OF CALIFORNIA (DEPARTMENT OF
PERSONNEL ADMINISTRATION),
Respondent.
Case No. SF-CE-230-S
PERB Decision No. 	1978-S
September 26, 2008
AFSCME LOCAL 2620,
Case No. SF-CE-230-S
PERB Decision No. 1978-S
September 26, 2008
Charging Party,
Appearances	Appearances: 	Beeson, Tayer & Bodine by Andrew H. Baker, Attorney, for AFSCME Local
2620; Jennifer M. Garten, Legal Counsel, for State of California (Department of Personnel
Administration).
Before McKeag, Wesley and Rystrom, Members.
Beeson, Tayer & Bodine by Andrew H. Baker, Attorney, for AFSCME Local
Before McKeag, Wesley and Rystrom, Members.
DECISION	DECISION
WESLEY, Member: 	This case is before the Public Employment Relations Board
(PERB or Board) on exceptions filed by both parties to an administrative law judge's (ALJ)
proposed decision. 	The charge filed by AFSCME Local 2620 (AFSCME) alleged that the
State of California (Department of Personnel Administration) (DP A or State) violated the
Ralph C. Dills Act (Dills Act) 1
WESLEY, Member: This case is before the Public Employment Relations Board
by unilaterally changing employee benefits under the California
Public Employees' Retirement System (CalPERS) as provided in the parties' memorandum of
understanding (MOU) when the State approved and implemented Senate Bill 1105 (SB 1105),
Public Employees' Retirement System (CalPERS) as provided in the parties' memorandum of
by unilaterally changing employee benefits under the California
2
1The Dills Act is codified at Government Code section 3512 et seq. Unless otherwise
indicated, all statutory references are to the Government Code.
2
indicated, all st
he Dills Act is codified at Government Code section 3512 et seq. Unless otherwise
SB 1105 (Stats. 2004, ch. 214), an urgency statute, took effect on August 11, 2004.	B 1105 (Stats. 2004, ch. 214), an urgency statute, took effect on August 11, 2004.
:
T
atutory references are to the Government Code.
S
PUBLIC EMPLOYMENT RELATIONS BOARD
V.
STATE OF CALIFORNIA (DEPARTMENT OF
PERSONNEL ADMINISTRATION),
Respondent
2620; Jennifer M. Garten, Legal Counsel, for State of California (Department of Personnel
Administration).
(PERB or Board) on exceptions filed by both parties to an administrative law judge's (ALJ)
proposed decision. The charge filed by AFSCME Local 2620 (AFSCME) alleged that the
State of California (Department of Personnel Administration) (DPA or State) violated the
Ralph C. Dills Act (Dills Act)'
understanding (MOU) when the State approved and implemented Senate Bill 1105 (SB 1 105),

the alternate retirement program (ARP) for new employees. 	AFSCME contends that
by
this
conduct the State violated section 3519(a), (b) and (c)
of
the Dills Act. The ALJ found the
charge timely filed but dismissed the charge finding
no
unilateral change in policy.
The Board has reviewed the entire record in this case, including the unfair practice
charge, complaint, DP
A's
position statement, post-hearing briefs, the proposed decision, and
the parties' exceptions and responses to exceptions. 	Based on our review, we affirm the
dismissal
of
the charge based on the discussion below.
the alternate retirement program (ARP) for new employees. AFSCME contends that by this
The Board has reviewed the entire record in this case, including the unfair practice
charge, complaint, DPA's position statement, post-hearing briefs, the proposed decision, and
the parties' exceptions and responses to exceptions. Based on our review, we affirm the
dismissal of the charge based on the discussion below.
PROCEDURAL BACKGROUND	PROCEDURAL BACKGROUND
On August 11, 2004, the Governor signed into law
SB
1105, which provided the ARP
for new, first time State miscellaneous employees hired on or after the effective date
of
the
law. Under the program, new employees do not accrue credit for service in the CalPERS
system, and do not make employee contributions to the system until the first day
of
the first
pay period commencing 24 months after becoming a member. Instead, new employees spend
their first two years
of
employment contributing to a defined contribution retirement plan.
After 46 months
of
employment, and until the end
of
the 49 th month
of
employment, these
employees can elect to receive credit in CalPERS for their first two years
of
employment by
transferring the accumulated contributions from the defined contribution retirement plan into
CalPERS.
AFSCME initiated this action on February 10, 2005, when it filed an unfair labor
practice charge alleging that the enactment
of
SB 1105 and the implementation
of
the ARP by
DP A unilaterally changed employee benefits regarding their CalPERS retirement options upon
employment as provided in the MOU.
On August 11, 2004, the Governor signed into law SB 1105, which provided the ARP
AFSCME initiated this action on February 10, 2005, when it filed an unfair labor
practice charge alleging that the enactment of SB 1105 and the implementation of the ARP by
DPA unilaterally changed employee benefits regarding their CalPERS retirement options upon
employment as provided in the MOU.3 DPA filed a position statement on March 9, 2005,	PA filed a position statement on March 9, 2005,
3The charge alleged a violation of Article 11.3.C of the parties' MOU. The MOU was
effective July 3, 2003 through July 1, 2006.
2
he charge alleged a violation of Article 11.3.C of the parties' MOU. The MOU was
' D
'T
2
conduct the State violated section 3519(a), (b) and (c) of the Dills Act. The ALJ found the
charge timely filed but dismissed the charge finding no unilateral change in policy.
for new, first time State miscellaneous employees hired on or after the effective date of the
law. Under the program, new employees do not accrue credit for service in the CalPERS
system, and do not make employee contributions to the system until the first day of the first
pay period commencing 24 months after becoming a member. Instead, new employees spend
their first two years of employment contributing to a defined contribution retirement plan.
After 46 months of employment, and until the end of the 49" month of employment, these
employees can elect to receive credit in CalPERS for their first two years of employment by
transferring the accumulated contributions from the defined contribution retirement plan into
CalPERS.
effective July 3, 2003 through July 1, 2006.

stating that it was currently involved in four separate actions regarding the ARP, including
AFSCME's complaint. The letter also stated that DPA was awaiting a court decision regarding
the program. DP A requested that this action
be
held in abeyance pending the court decision.
AFSCME agreed to hold the charge in abeyance until the resolution
of
the case and abeyance
of
the charge was granted on April 19, 2005. 	On March 6, 2006, the California Court
of
Appeal issued its decision in California Assn.
of
Professional Scientists
v.
Schwarzenegger
(2006) 137 Cal.App.4
th
371
[40 Cal.Rptr.3d 354] (CAPS).4
stating that it was currently involved in four separate actions regarding the ARP, including
After the decision in CAPS, AFSCME requested that the charge be taken out
of
abeyance. 	On July 17, 2006, PERB notified the parties that the charge had been removed from
abeyance. A week later, DPA submitted a supplemental position letter. On July 25, 2006, the
General Counsel's office completed its investigation
of
the charge and issued a complaint. A
settlement conference was held on August 15, 2006, but the matter was not resolved. A formal
hearing was scheduled for January 11-12, 2007. 	In lieu
of
a hearing, the parties submitted a
stipulated statement
of
the facts and joint exhibits on January 23, 2007. Each party filed an
opening brief on February 27, 2007, and reply briefs were submitted on March 16, 2007. 	The
ALJ rendered a proposed decision on April 11, 2007, finding the charge timely filed and
4
After the decision in CAPS, AFSCME requested that the charge be taken out of
In CAPS, the Court interpreted language in the parties' MOU nearly identical to that in
the present case to determine whether enactment
of
SB 1105 impaired contractual rights. 	The
court stated:
There is nothing in the agreement, however, that restricts the
Legislature from making further changes to the Public
Employees' Retirement Law that apply only to prospective
employees, which is what the Legislature did when it enacted Bill
No. 1105 in 2004. The agreement's incorporation
of
section
21070.5 (section 8.8(C) of the agreement) did not commit the
Legislature to maintaining the same rights for all prospective
bargaining unit 10 employees throughout the effective period of
the agreement. Accordingly, Bill No. 1105 did not impair any
vested contractual rights, and the trial court properly denied
CAPS's mandamus petition. 	[CAPS, at pp. 385-386.]
n CAPS, the Court interpreted language in the parties' MOU nearly identical to that in
There is nothing in the agreement, however, that restricts the
Legislature from making further changes to the Public
Employees' Retirement Law that apply only to prospective
employees, which is what the Legislature did when it enacted Bill
No. 1 105 in 2004. The agreement's incorporation of section
21070.5 (section 8.8(C) of the agreement) did not commit the
Legislature to maintaining the same rights for all prospective
bargaining unit 10 employees throughout the effective period of
the agreement. Accordingly, Bill No. 1105 did not impair any
vested contractual rights, and the trial court properly denied
CAPS's mandamus petition. [CAPS, at pp. 385-386.]
3
*
I
3
AFSCME's complaint. The letter also stated that DPA was awaiting a court decision regarding
the program. DPA requested that this action be held in abeyance pending the court decision.
AFSCME agreed to hold the charge in abeyance until the resolution of the case and abeyance
of the charge was granted on April 19, 2005. On March 6, 2006, the California Court of
Appeal issued its decision in California Assn. of Professional Scientists v. Schwarzenegger
(2006) 137 Cal.App.4 371 [40 Cal.Rptr.3d 354] (CAPS).
abeyance. On July 17, 2006, PERB notified the parties that the charge had been removed from
abeyance. A week later, DPA submitted a supplemental position letter. On July 25, 2006, the
General Counsel's office completed its investigation of the charge and issued a complaint. A
settlement conference was held on August 15, 2006, but the matter was not resolved. A formal
hearing was scheduled for January 11-12, 2007. In lieu of a hearing, the parties submitted a
stipulated statement of the facts and joint exhibits on January 23, 2007. Each party filed an
opening brief on February 27, 2007, and reply briefs were submitted on March 16, 2007. The
ALJ rendered a proposed decision on April 11, 2007, finding the charge timely filed and
the present case to determine whether enactment of SB 1105 impaired contractual rights. The
court stated:

concluding that AFSCME did not make a prima facie showing
of
an unlawful unilateral
change. 	AFSCME filed a statement
of
exceptions to the proposed decision on May 15, 2007.
DPA filed a response to the exceptions and its own cross-exceptions on June 4, 2007.
AFSCME's
response to
DPA's
exceptions was filed
on
June 8, 2007.
STIPULATION OF FACTS	STIPULATION OF FACTS
concluding that AFSCME did not make a prima facie showing of an unlawful unilateral
AFSCME and DPA submitted two joint exhibits and a stipulation
of
facts to the ALJ. The
parties' stipulation
of
facts states
as
follows:
AFSCME and DPA submitted two joint exhibits and a stipulation of facts to the ALJ. The
parties' stipulation of facts states as follows:
1.
2.
AFSCME is an employee organization within the meaning
of
Government
Code section 3513(a).
2.
AFSCME is an employee organization within the meaning of Government
Charging Party is a recognized employee organization within the meaning
of
Government Code section 3513(b), recognized as the exclusive representative
of
the
employees in an appropriate unit, namely State Bargaining Unit 19.
3.
employees in an appropriate unit, namely State Bargaining Unit 19.
Charging Party is a recognized employee organization within the meaning of
The Governor is the State employer pursuant to Government Code sections 35130,
(sic) and 19815 .4(g). The Governor has designated DP A as his designated representative for
the purposes
of
meeting and conferring with AFSCME on matters within the scope
of
representation pursuant to Government Code section 3513Q).
Code section 3513(a).
Government Code section 3513(b), recognized as the exclusive representative of the
The Governor is the State employer pursuant to Government Code sections 35130,
(sic) and 19815.4(g). The Governor has designated DPA as his designated representative for
the purposes of meeting and conferring with AFSCME on matters within the scope of
representation pursuant to Government Code section 3513(j).
4. Article 11.3.C.
of
the July 3, 2003-July
1,
2006, and the July
1,
2006-June 30,
2008, Unit
19
Memorandum
of
Understanding (MOU) between Charging Party and
Respondent provides:
New employees who meet the criteria for CalPERS
membership would be emolled in the First Tier plan and have
the right to be covered under the Second Tier plan within 180
days
of
the date
of
their appointment.
If
a new employee
does not make an election for Second Tier coverage during
this period, he or she would remain in the First Tier plan.
rticle 1 1.3.C. of the July 3, 2003-July 1, 2006, and the July 1, 2006-June 30,
New employees who meet the criteria for CalPERS
membership would be enrolled in the First Tier plan and have
the right to be covered under the Second Tier plan within 180
days of the date of their appointment. If a new employee
does not make an election for Second Tier coverage during
this period, he or she would remain in the First Tier plan.
5. Roughly half of the employees in Bargaining Unit 19 are classified as
state miscellaneous and roughly half as state safety employees.
4
oughly half of the employees in Bargaining Unit 19 are classified as
state miscellaneous and roughly half as state safety employees.
1.
3.
4. A
5. R
change. AFSCME filed a statement of exceptions to the proposed decision on May 15, 2007.
DPA filed a response to the exceptions and its own cross-exceptions on June 4, 2007.
AFSCME's response to DPA's exceptions was filed on June 8, 2007.
2008, Unit 19 Memorandum of Understanding (MOU) between Charging Party and
Respondent provides:

6.
State miscellaneous employees emolled in Tier I are covered by a two percent at 55
retirement formula. Employees emolled in the Tier I retirement plan contribute roughly five
percent
of
their earnings above $513.00 to their retirement account. State miscellaneous
employees electing Tier II are covered by a 1.25% at 65 retirement formula. Employees
electing to participate in Tier II are not required to contribute to the retirement plan.
Employees emolled in Tier I cannot receive any retirement benefits unless they accrue five
years
of
service credit. Employees emolled in Tier II cannot receive any retirement benefits
unless they accrue ten years
of
service credit.
7.
State miscellaneous employees enrolled in Tier I are covered by a two percent at 55
There are approximately 5,000 Bargaining Unit 19 employees
of
which 237 are
currently emolled in Tier
II
retirement.
Of
these 237 Bargaining Unit 19 employees, five
employees elected Tier II retirement between January
1,
2000, and the present.
8.
here are approximately 5,000 Bargaining Unit 19 employees of which 237 are
On August 11, 2004, the Legislature enacted Senate Bill 1105 (SB 1105) adding to
and amending various provisions within the Government Code. Senate Bill 1105 added
Government Code section 20281.5, which created ARP. SB 1105 is incorporated herein by
reference.
9.
n August 11, 2004, the Legislature enacted Senate Bill 1105 (SB 1105) adding to
Senate Bill 1105 and Government Code section 20281.5 mandates that state
miscellaneous employees, including those in Bargaining Unit 19, hired after August 11, 2004,
be emolled in the ARP.
10.
Senate Bill 1105 and Government Code section 20281.5 mandates that state
Government Code section 19999.31 provides in part: "[t]he Department
of
Personnel Administration shall administer the retirement program established by this
chapter."
11.
19999.31
DPA began administering the retirement program established by SB 1105
effective August 11, 2004.
Government Code section 	provides in part: "[the Department of
Personnel Administration shall administer the retirement program established by this
chapter."
PA began administering the retirement program established by SB 1105
effective August 11, 2004.
12.
5
6.
7. T
8. O
9.
ARP.
10.
11. D
12. Under the ARP, employees hired after August 11, 2004, become members
of	Under the ARP, employees hired after August 11, 2004, become members of
5
retirement formula. Employees enrolled in the Tier I retirement plan contribute roughly five
percent of their earnings above $513.00 to their retirement account. State miscellaneous
employees electing Tier II are covered by a 1.25% at 65 retirement formula. Employees
electing to participate in Tier II are not required to contribute to the retirement plan.
Employees enrolled in Tier I cannot receive any retirement benefits unless they accrue five
years of service credit. Employees enrolled in Tier II cannot receive any retirement benefits
unless they accrue ten years of service credit.
currently enrolled in Tier II retirement. Of these 237 Bargaining Unit 19 employees, five
employees elected Tier II retirement between January 1, 2000, and the present.
and amending various provisions within the Government Code. Senate Bill 1105 added
Government Code section 20281.5, which created ARP. SB 1105 is incorporated herein by
reference.
miscellaneous employees, including those in Bargaining Unit 19, hired after August 11, 2004,
be enrolled in the

CalPERS, but are not initially eligible for Tier I or Tier II and will not initially accrue credit
for service within the CalPERS system until the first day
of
the pay period starting
24
months
after the employee becomes a member
of
CalPERS. Employees emolled in the ARP
contribute roughly five percent
of
their earnings above $513.00 to an alternate retirement
account. Employee contributions are placed in an alternative retirement account, rather than
deposited with CalPERS. During an election period, the ARP allows an employee
to
determine where his ARP contributions shall go. The election period begins on the first day
of
the 4 7th month and ends on the last day
of
the 49th month after the date the employee
became a member
of
the system. Employees have three options during the election period.
The employee may elect: (1) to move his contributions to a 401(k) plan; (2) to obtain a
refund
of
the ARP contributions; or (3) to transfer the proceeds to CalPERS to receive credit
in Tier I for the period the employee was participating in the ARP (i.e. the first 24 months).
If
the employee elects to transfer the ARP proceeds to CalPERS to receive Tier I credit (i.e.,
option 3), the State employer becomes responsible to fund the additional liability that was not
paid for by the ARP member's contribution so that the employee receives the full credit
service in Tier
I.
The ARP also allows for an employee to elect to transfer to Tier II.
13.
CalPERS, but are not initially eligible for Tier I or Tier II and will not initially accrue credit
A copy
of
the August 18, 2004, Personnel Management Liaison Memorandum
issued by Respondent describing the ARP is incorporated herein by reference.
14.
copy of the August 18, 2004, Personnel Management Liaison Memorandum
Like employees emolled in Tier
I,
employees under the ARP cannot receive
any retirement benefits unless they accrue five years
of
service credit.	any retirement benefits unless they accrue five years of service credit.
ike employees enrolled in Tier I, employees under the ARP cannot receive
15. Senate Bill 1105 applies prospectively to employees hired after its effective
date
of
August 11, 2004.
enate Bill 1105 applies prospectively to employees hired after its effective
date of August 11, 2004.
16. Charging Party was on notice
of
the passage
of
SB 1105 by virtue
of
its
enactment.
Charging Party was on notice of the passage of SB 1105 by virtue of its
enactment.
6
13. A
14. L
15. S
16.
6
for service within the CalPERS system until the first day of the pay period starting 24 months
after the employee becomes a member of CalPERS. Employees enrolled in the ARP
contribute roughly five percent of their earnings above $513.00 to an alternate retirement
account. Employee contributions are placed in an alternative retirement account, rather than
deposited with CalPERS. During an election period, the ARP allows an employee to
determine where his ARP contributions shall go. The election period begins on the first day
of the 47th month and ends on the last day of the 49th month after the date the employee
became a member of the system. Employees have three options during the election period.
The employee may elect: (1) to move his contributions to a 401(k) plan; (2) to obtain a
refund of the ARP contributions; or (3) to transfer the proceeds to CalPERS to receive credit
in Tier I for the period the employee was participating in the ARP (i.e. the first 24 months). If
the employee elects to transfer the ARP proceeds to CalPERS to receive Tier I credit (i.e.,
option 3), the State employer becomes responsible to fund the additional liability that was not
paid for by the ARP member's contribution so that the employee receives the full credit
service in Tier I. The ARP also allows for an employee to elect to transfer to Tier II.
issued by Respondent describing the ARP is incorporated herein by reference.

17.
On July 23, 2004, representatives
of
AFSCME attended an informal meeting
held between representatives
of
the Union
of
American Physicians and Dentists and
representatives
of
DPA concerning the ARP and other issues. No agreement was finalized
as
a result
of
this meeting.
representatives of DPA concerning the ARP and other issues. No agreement was finalized as
a result of this meeting.
held between representatives of the Union of American Physicians and Dentists and
n July 23, 2004, representatives of AFSCME attended an informal meeting
ALI'S DECISION	ALJ'S DECISION
In the proposed decision, the ALJ rejected DP A's claim that the charge was untimely
filed because AFSCME was aware
of
the pending legislation. The ALJ held that "notice
of
the
Legislature's consideration
of
a proposed bill
is
not actual or constructive notice
of
the clear
intent to implement change." Rather, the ALJ found that the charge was timely as it was filed
within six months
of
the date
of
SB
1105's enactment on August 11, 2004.
filed because AFSCME was aware of the pending legislation. The ALJ held that "notice of the
In the proposed decision, the ALJ rejected DPA's claim that the charge was untimely
Legislature's consideration of a proposed bill is not actual or constructive notice of the clear
intent to implement change." Rather, the ALJ found that the charge was timely as it was filed
within six months of the date of SB 1 105's enactment on August 11, 2004.
The ALJ then considered whether DP A breached its duty to bargain under the Dills Act
when it implemented changes in retirement benefits for new employees contained in the ARP.
The ALJ applied the "per se" test in Stockton Unified School District (1980) PERB Decision
No. 143 (Stockton) and concluded that AFSCME failed to prove the first prong
of
the test.
The ALJ held that "when it enacted and implemented
...
changes as part
of
the ARP, the State
did not depart from the terms
of
the MOU; it made no change in the contractual status quo."
The ALJ relied on the court's ruling in interpreting a similar contract provision in CAPS to find
no change in policy under the MOU between AFSCME and the State.
7
The ALJ then considered whether DPA breached its duty to bargain under the Dills Act
17. O
no change in policy under the MOU between AFSCME and the State.
DISCUSSION	DISCUSSION
First, we agree with the ALJ' s determination that the charge was timely filed. 	Under
Dills Act section 3514.5, PERB may not issue a complaint based on alleged conduct which
occurred more than six months prior to the filing of the unfair practice charge. 	In a unilateral
change case, the statute of limitations begins to run when the charging party has actual or
constructive notice of the respondent's clear intent to implement the alleged change. 	(State of
7
First, we agree with the ALJ's determination that the charge was timely filed. Under
when it implemented changes in retirement benefits for new employees contained in the ARP.
The ALJ applied the "per se" test in Stockton Unified School District (1980) PERB Decision
No. 143 (Stockton) and concluded that AFSCME failed to prove the first prong of the test.
The ALJ held that "when it enacted and implemented . . . changes as part of the ARP, the State
did not depart from the terms of the MOU; it made no change in the contractual status quo."
The ALJ relied on the court's ruling in interpreting a similar contract provision in CAPS to find
Dills Act section 3514.5, PERB may not issue a complaint based on alleged conduct which
occurred more than six months prior to the filing of the unfair practice charge. In a unilateral
change case, the statute of limitations begins to run when the charging party has actual or
constructive notice of the respondent's clear intent to implement the alleged change. (State of

California (Department
of
Forestry and Fire Protection) (1998) PERB Decision No. 1260-S.)
Actual or constructive notice occurs when the exclusive representative has knowledge
of
the
proposed change. 	(Marin Community College District (1995) PERB Decision No. 1092.) In
this case, the ALJ properly found that knowledge
of
the pending legislation is not sufficient to
demonstrate actual or constructive notice
of
the clear intent to implement a change in policy.
Thus, AFSCME's filing
of
the charge within six months
of
the enactment
of
SB 1105 was
timely.
We now consider whether the State unilaterally changed the policy on employee
benefits under CalPERS without providing notice and an opportunity to bargain. In
determining whether a party has violated Dills Act section 3 519( c), PERB utilizes either the
"per se" or "totality
of
the conduct" test, depending on the specific conduct involved and the
effect
of
such conduct on the negotiating process. 	(Stockton.) Unilateral changes are
considered "per se" violations
if
certain criteria are met. Those criteria are: (1) the employer
implemented a change in policy concerning a matter within the scope
of
representation; and
(2) the change was implemented before the employer notified the exclusive representative and
gave it an opportunity to request negotiations. 	(Walnut Valley Unified School District (1981)
PERB Decision No. 160; Grant Joint Union High School District (1982) PERB Decision
No. 196.)
California (Department of Forestry and Fire Protection) (1998) PERB Decision No. 1260-S.)
The ALJ held that implementation
of
the ARP did not amount to a change in policy
under the parties' MOU, relying on the court's holding in CAPS. 	The proposed decision
stated, "that the employer did not implement a change in policy concerning a matter within the
scope
of
representation when it enacted and implemented the pension changes in the ARP has
been determined [by the court] and has the force of precedent."
8
The ALJ held that implementation of the ARP did not amount to a change in policy
8
Actual or constructive notice occurs when the exclusive representative has knowledge of the
proposed change. (Marin Community College District (1995) PERB Decision No. 1092.) In
this case, the ALJ properly found that knowledge of the pending legislation is not sufficient to
demonstrate actual or constructive notice of the clear intent to implement a change in policy.
timely.
Thus, AFSCME's filing of the charge within six months of the enactment of SB 1105 was
We now consider whether the State unilaterally changed the policy on employee
benefits under CalPERS without providing notice and an opportunity to bargain. In
determining whether a party has violated Dills Act section 3519(c), PERB utilizes either the
'per se" or "totality of the conduct" test, depending on the specific conduct involved and the
effect of such conduct on the negotiating process. (Stockton.) Unilateral changes are
considered "per se" violations if certain criteria are met. Those criteria are: (1) the employer
implemented a change in policy concerning a matter within the scope of representation; and
(2) the change was implemented before the employer notified the exclusive representative and
gave it an opportunity to request negotiations. (Walnut Valley Unified School District (1981)
PERB Decision No. 160; Grant Joint Union High School District (1982) PERB Decision
No. 196.)
under the parties' MOU, relying on the court's holding in CAPS. The proposed decision
stated, "that the employer did not implement a change in policy concerning a matter within the
scope of representation when it enacted and implemented the pension changes in the ARP has
been determined [by the court] and has the force of precedent."

In its exceptions, AFSCME argues against the ALJ's reasoning, asserting that the
CAPS Court did not decide the question
of
whether the State's change in pension policy
constituted a violation
of
the Dills Act. AFSCME points to the court's statement, "The
constitutional issue CAPS seeks to litigate here
is
separate and distinct from any issue
of
whether the state violated its collective bargaining obligations under the Dills Act." (Id., at
pp. 381-382.) Nevertheless, we find that because the CAPS Court made findings about the
ARP under the same facts and interpreting substantially identical MOU language, those
findings are determinative
of
the Dills Act question before the Board as we discuss below.
Court
of
Appeal decisions are binding precedent on administrative agencies. 	(Auto
Equity Sales, Inc.
v.
Superior Court
of
Santa Clara County (1962) 57 Cal.2d 450 [20 Cal.Rptr.
321].) Therefore, even though the CAPS Court did not decide whether the State committed an
unfair practice under the Dills Act, the court's legal and factual determinations as to the ARP
are binding to the extend they impact this Board's analysis
of
the ARP under the Dills Act.
In its exceptions, AFSCME argues against the ALJ's reasoning, asserting that the
9
AFSCME argues that even though the State was not contractually precluded from
changing the pension benefits available to prospective employees, the State was obligated to
provide it with notice and an opportunity to bargain the decision to implement the ARP.
AFSCME argues that,	AFSCME argues that,
provide it with notice and an opportunity to bargain the decision to implement the ARP.
AFSCME argues that even though the State was not contractually precluded from
changing the pension benefits available to prospective employees, the State was obligated to
An entirely separate issue, and the one raised in the present case,
is whether the State, even though it was not contractually
precluded from changing the pension benefits available to
prospective employees, was nonetheless obligated to provide the
Union notice and an opportunity to meet and confer over the
decision to implement and/or the effects
of
the ARP.
9
An entirely separate issue, and the one raised in the present case,
We find that no such duty exists under the facts before us. The California Constitution
provides that the Legislature "may exercise any and all legislative powers which are not
expressly, or by necessary implication denied to it by the Constitution." (Pacific Legal
Foundation v. Brown (1981) 29 Cal.3d 168, 180 [172 Cal.Rptr. 487] citing Methodist Hosp. of
We find that no such duty exists under the facts before us. The California Constitution
CAPS Court did not decide the question of whether the State's change in pension policy
constituted a violation of the Dills Act. AFSCME points to the court's statement, "The
constitutional issue CAPS seeks to litigate here is separate and distinct from any issue of
whether the state violated its collective bargaining obligations under the Dills Act." (Id., at
pp. 381-382.) Nevertheless, we find that because the CAPS Court made findings about the
ARP under the same facts and interpreting substantially identical MOU language, those
findings are determinative of the Dills Act question before the Board as we discuss below.
Court of Appeal decisions are binding precedent on administrative agencies. (Auto
Equity Sales. Inc. v. Superior Court of Santa Clara County (1962) 57 Cal.2d 450 [20 Cal.Rptr.
321].) Therefore, even though the CAPS Court did not decide whether the State committed an
unfair practice under the Dills Act, the court's legal and factual determinations as to the ARP
are binding to the extend they impact this Board's analysis of the ARP under the Dills Act.
is whether the State, even though it was not contractually
precluded from changing the pension benefits available to
prospective employees, was nonetheless obligated to provide the
Union notice and an opportunity to meet and confer over the
decision to implement and/or the effects of the ARP.
provides that the Legislature "may exercise any and all legislative powers which are not
expressly, or by necessary implication denied to it by the Constitution." (Pacific Legal
Foundation v. Brown (1981) 29 Cal.3d 168, 180 [172 Cal.Rptr. 487] citing Methodist Hosp. of

Sacramento v. Saylor (1971) 5 Cal.3d 685,691 [97 Cal.Rptr. 1].) The Dills Act
is
a limited
delegation
of
authority by the Legislature to the Governor, allowing DP A, as the State
employer's representative, the authority to bargain with the State's unions to determine terms
and conditions
of
employment. (Department
of
Personnel Administration v. Superior Court
(1992) 5 Cal.App.4
th
155,177
[6
Cal.Rptr.2d 714].) The Dills Act, however, does not preclude
the Legislature itself from unilaterally adopting, enacting or implementing terms and
conditions
of
employment which,
if
implemented by DP A without legislative direction, would
have been an unfair practice
if
not negotiated. Notwithstanding AFSCME' s arguments to the
contrary, DPA's implementation
of
the ARP amounted to the State's compliance with law as
prescribed by the legislative process and not unilateral implementation
of
a change in policy on
the part
of
the State as an employer.
AFSCME also argues that the ALJ's reading
of
CAPS was overbroad. AFSCME
asserts the CAPS Court decided only that the State's change in pension benefits policy for
"prospective employees" was not precluded by the contractual language in the MOU at issue in
the case, and not that the State made no change in the pension benefits policy for bargaining
unit employees overall. 	This argument is not persuasive, as we agree with the State that "the
ARP, by its terms, became the new retirement plan for all state miscellaneous employees hired
after August 11, 2004, without any qualifications." As the California Court
of
Appeal noted in
Department
of
Personnel Administration v. Superior Court, supra, 5 Cal.App.4th 155, 181,
fn. 17, the Legislature retains ultimate authority over state employees' wages, hours and
working conditions. In that case, the court highlighted the fact that, "in its initial version,
section 3532 of the act permitted the state and unions to reach 'binding agreements,' but this
language was transferred to and amended in section 3
51 7. 5 to require submission of
memoranda of understanding to the Legislature for approval."
Sacramento v. Saylor (1971) 5 Cal.3d 685, 691 [97 Cal.Rptr. 1].) The Dills Act is a limited
10
delegation of authority by the Legislature to the Governor, allowing DPA, as the State
employer's representative, the authority to bargain with the State's unions to determine terms
and conditions of employment. (Department of Personnel Administration v. Superior Court
(1992) 5 Cal.App.4" 155, 177 [6 Cal.Rptr.2d 714].) The Dills Act, however, does not preclude
the Legislature itself from unilaterally adopting, enacting or implementing terms and
conditions of employment which, if implemented by DPA without legislative direction, would
have been an unfair practice if not negotiated. Notwithstanding AFSCME's arguments to the
contrary, DPA's implementation of the ARP amounted to the State's compliance with law as
prescribed by the legislative process and not unilateral implementation of a change in policy on
the part of the State as an employer.
AFSCME also argues that the ALJ's reading of CAPS was overbroad. AFSCME
asserts the CAPS Court decided only that the State's change in pension benefits policy for
'prospective employees" was not precluded by the contractual language in the MOU at issue in
the case, and not that the State made no change in the pension benefits policy for bargaining
unit employees overall. This argument is not persuasive, as we agree with the State that "the
ARP, by its terms, became the new retirement plan for all state miscellaneous employees hired
after August 11, 2004, without any qualifications." As the California Court of Appeal noted in
Department of Personnel Administration v. Superior Court, supra, 5 Cal.App.4th 155, 181,
fn. 17, the Legislature retains ultimate authority over state employees' wages, hours and
working conditions. In that case, the court highlighted the fact that, "in its initial version,
section 3532 of the act permitted the state and unions to reach 'binding agreements,' but this
language was transferred to and amended in section 3517.5 to require submission of
memoranda of understanding to the Legislature for approval."

The Court stated, in CAPS, that "Nothing in this provision [in the parties' MOU]
abdicates the legislative power to make changes in the pension system for prospective
employees." (Id., at
p.
384.) Although the court's analysis relates to the changes themselves
and not the question
of
whether the State was obligated to negotiate prior to implementing
those changes, the court's reasoning is significant for our analysis. 	The court stated, "There
is
nothing in the agreement, however, that restricts the Legislature from making further changes
to the Public Employees' Retirement Law that apply only to prospective employees, which is
what the Legislature did when it enacted Bill No. 1105 in 2004." (Id., at p. 385.) Also,
significant to the court's analysis and ours is the fact that the Legislature had expressly required
the parties to negotiate over previous changes to pension benefits but declined to do so
regarding the changes mandated by
SB
1105. (Id., at p. 385.)
AFSCME also argues that the Governor was charged with negotiating the decision to
implement SB 1105 before signing it into law. We find that the State did not commit an
unlawful unilateral change in policy by virtue
of
the Governor's signing SB 1105 into law,
because in signing new legislation, the Governor was carrying out a function directed by the
California Constitution. PERB has acknowledged that when the Governor is acting as a
participant in the legislative process and is fulfilling his/her constitutional responsibilities
thereby, those acts are to be viewed separate and apart from his/her responsibilities as chief
executive and employer
of
State employees. (State
of
California, Department
of
Personnel
Administration (1988) PERB Decision No. 706-S (State
of
California (DPA)).)
The Court stated, in CAPS, that "Nothing in this provision [in the parties' MOU]
In State of California (DPA), the Board held that the Governor's compliance with the
constitutional mandate of Article IV, section 12
of the California Constitution in submitting a
budget without first meeting and negotiating with a union, was not a unilateral implementation
of a negotiable subject. Similarly, in considering and signing new legislation, the Governor is
In State of California (DPA), the Board held that the Governor's compliance with the
11	1 1
abdicates the legislative power to make changes in the pension system for prospective
employees." (Id., at p. 384.) Although the court's analysis relates to the changes themselves
and not the question of whether the State was obligated to negotiate prior to implementing
those changes, the court's reasoning is significant for our analysis. The court stated, "There is
nothing in the agreement, however, that restricts the Legislature from making further changes
to the Public Employees' Retirement Law that apply only to prospective employees, which is
what the Legislature did when it enacted Bill No. 1105 in 2004." (Id., at p. 385.) Also,
significant to the court's analysis and ours is the fact that the Legislature had expressly required
the parties to negotiate over previous changes to pension benefits but declined to do so
regarding the changes mandated by SB 1105. (Id., at p. 385.)
AFSCME also argues that the Governor was charged with negotiating the decision to
implement SB 1105 before signing it into law. We find that the State did not commit an
unlawful unilateral change in policy by virtue of the Governor's signing SB 1105 into law,
because in signing new legislation, the Governor was carrying out a function directed by the
California Constitution. PERB has acknowledged that when the Governor is acting as a
participant in the legislative process and is fulfilling his/her constitutional responsibilities
thereby, those acts are to be viewed separate and apart from his/her responsibilities as chief
executive and employer of State employees. (State of California, Department of Personnel
Administration (1988) PERB Decision No. 706-S (State of California (DPA)).)
constitutional mandate of Article IV, section 12 of the California Constitution in submitting a
budget without first meeting and negotiating with a union, was not a unilateral implementation
of a negotiable subject. Similarly, in considering and signing new legislation, the Governor is

12
fulfilling a legislative role identified in the California Constitution. 	Article IV, section 10(a)
states that "each bill passed by the Legislature shall be presented to the Governor. It becomes
a statute
if
it
is
signed by the Governor." Thus, the Governor's role in considering and signing
legislation, as prescribed in the California Constitution, does not amount to a unilateral change
in policy by the State.
Therefore, we find that the State did not violate its obligation under section 3519(c)
of
the Dills Act to meet and confer in good faith. Accordingly, the State also did not interfere
with the rights
of
bargaining unit employees to be represented, nor did it deny AFSCME its
rights to represent bargaining unit employees in violation
of
section 3519(a) and (b)
of
the
Dills Act.
fulfilling a legislative role identified in the California Constitution. Article IV, section 10(a)
Dills Act.
Therefore, we find that the State did not violate its obligation under section 3519(c) of
the Dills Act to meet and confer in good faith. Accordingly, the State also did not interfere
with the rights of bargaining unit employees to be represented, nor did it deny AFSCME its
rights to represent bargaining unit employees in violation of section 3519(a) and (b) of the
ORDER
The unfair practice charge and complaint in Case No. SF-CE-230-S are hereby
DISMISSED WITOUT LEAVE TO AMEND.
The unfair practice charge and complaint in Case No. SF-CE-230-S are hereby
DISMISSED WITOUT LEA VE TO AMEND.
ORDER
12
Members McKeag and Rystrom joined
in
this Decision.	Members McKeag and Rystrom joined in this Decision.
states that "each bill passed by the Legislature shall be presented to the Governor. It becomes
a statute if it is signed by the Governor." Thus, the Governor's role in considering and signing
legislation, as prescribed in the California Constitution, does not amount to a unilateral change
in policy by the State.