Employers Have No Past Practice Obligation to Pay Step Increases Following the Expiration of a Collective Bargaining Agreement

The information contained in this article is not intended as legal advice and may no longer be accurate due to changes in the law. Consult NHMA's legal services or your municipal attorney.

In Appeal Of Professional Fire Fighters of Hudson, IAFF Local 3154, which was decided on October 28, 2014, the New Hampshire Supreme Court held that an employer has no obligation to pay step increases following the expiration of a collective bargaining agreement (CBA) even if it has done so in the past. This is an important decision for New Hampshire public employers, and this article discusses the factual background of the case as well as its significant impact.

Since the New Hampshire Supreme Court’s decisions in the Milton (1993) and Alton (1995) cases, it has been well settled that following the expiration of a CBA, a public employer is required to maintain the status quo until a successor agreement is reached. In those and subsequent cases, the Court made clear that, in the absence of an “evergreen” clause (which would continue all aspects of an expired CBA in effect until a successor agreement is reached), the status quo obligation does not include the payment of step increases after CBA expiration. Nevertheless, many public employers, despite having no obligation to do so, have continued to pay post-expiration steps.

Background Facts

Since 1991, the Town of Hudson and the Union representing members of the Town’s Fire Department were parties to a series of five collective bargaining agreements. Each of the CBAs expired without a successor agreement in place. None of the expired agreements contained evergreen language.  Despite having no obligation to do so, the Town continued to pay step increases following the expiration of the first four CBAs. However, when the most recent CBA expired, the Town informed the Union that it would not pay step increases (“post-expiration steps”) unless and until a successor CBA was reached. The Union objected and filed a grievance alleging that because the Town had granted post-expiration step increases in the past, it had created a binding past practice and that the payment of post-expiration steps must continue.

The Town denied the grievance and the matter was submitted to binding arbitration. Following a hearing, a labor arbitrator ruled that the fact that the Town had paid post-expiration steps in the past, together with the fact that it had appropriated funds in the current budget to cover the cost of those steps, resulted in the creation of a binding past practice. The arbitrator ordered the Town to pay step increases retroactive to the date that the CBA expired.

The Town took the unusual step of refusing to implement the arbitration award, which resulted in the Union filing an unfair labor practice charge with the Public Employees Labor Relations Board (PELRB). Before the PELRB, the Town did not deny that it had refused to implement the arbitration award. Instead, it argued that the PELRB should not enforce the award, on grounds that it was contrary to both law and public policy. Following a hearing, the PELRB ruled that the Town had not committed an unfair labor practice because the arbitrator’s award violated “a strong and dominant policy, namely the need for approval by the local legislative body of the expenditure of public monies to fund benefits like step increases for bargaining unit employees both during a contract’s express term and during any interval between collective bargaining agreements.” The Union appealed the PELRB’s decision to the New Hampshire Supreme Court.

The Supreme Court’s Decision

Following the submission of briefs and oral argument, the Court upheld the PELRB decision. The Court first reaffirmed its prior decisions in Milton, Alton and Laconia Patrolman Assoc. (2013), in which it held that the status quo doctrine does not require payment of post-expiration step increases. The Court then rejected the Union’s argument that the Town’s history of paying step increases changed this analysis because a “past practice” of paying the increases created a binding, enforceable obligation. The Court disagreed, stating:

“[g]iven our well-established rule that the status quo doctrine does not require payment of step increases after a CBA expires . . . we hold that a ‘past practice’ of granting step increases during the status quo period cannot, as a matter of law, render such increases a binding term and condition of public employees’ employment. . . .”

In reaching this decision, the Court noted the important role that legislative bodies play in approving the cost items in proposed CBAs:

“[b]ecause the decision to grant the step increases was discretionary, the [Town] remained free to rescind them. To conclude otherwise would allow the parties to a CBA to create — by their actions — a binding obligation to an expenditure of funds that otherwise would require approval by the Town’s legislative body.”

As the Court found that the arbitrator’s award violated the “‘strong and dominant public policy’ expressed in RSA chapter 273-A and our case law . . .”, it found that the award was not enforceable.

Conclusion

This case is a significant victory for New Hampshire public employers who may have paid, or are currently paying, post-expiration steps increases in the absence of evergreen language. Those employers are now free to discontinue the practice and require employees to achieve wage adjustments at the bargaining table.

Mark Broth and Laurel McClead are members of the DrummondWoodsum’s Labor and Employment Group and their practice focuses on the representation of private and public employers in all aspects of the employer-employee relationship. This is not a legal document nor is it intended to serve as legal advice or a legal opinion.  Drummond Woodsum & MacMahon, P.A. makes no representations that this is a complete or final description or procedure that would ensure legal compliance and does not intend that the reader should rely on it as such. “Copyright 2015 Drummond Woodsum.  These materials may not be reproduced without prior written permission.”