risk management - daphne anneet
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Daphne M. AnneetBurke, Williams & Sorensen, LLP
Contracting Out Under Siege
Protecting and Preserving Cities’ Power To Contract OutCCCA 54th Annual Municipal Seminar
THE PERFECT STORM
• Falling revenues• Increasing wage, pension
and benefit costs• Structural deficits• Outsourcing a means to
deliver better service at a lower cost
CONTRACTING OUT UNDER SIEGE
• Legal• Political• Public relations • Traditional unfair labor
practice
CONTRACTING OUT UNDER SIEGE
Contract Cities• City of Lakewood model• Contract out many or most
of services
CONTRACTING OUT UNDER SIEGE
Special Services Statutes limit power (Gov’t Code § § 37103 & 53060)
Even though…
• Special services exempt from competitive bid
CONTRACTING OUT UNDER SIEGE
Special Services Statutes limit power (Gov’t Code § § 37103 & 53060)
Even though…
• Can’t waste public funds– No authority to purchase
services where public official has existing duty and ability to provide service
CONTRACTING OUT UNDER SIEGE
• Unions seize upon Costa Mesa as a new legal weapon
• Hemet - franchise of refuse• Redding – outsource of call
center services
• The Costa Mesa Decision• What it held• What it did not address• Overview of strategies to
protect and preserve contracting out power– Legal strategies to blunt Costa
Mesa– Labor relations considerations
PRESENTATION OVERVIEW
The Costa Mesa Decision
BACKGROUND
• Council approved comprehensive outsourcing plan
• 18 Departments or Divisions
• Variety of City services
City’s Outsourcing Plan3/1/2011
BACKGROUND
• CMCEA = union• MOU gives CMCEA
right to be part of outsourcing discussion
• Advance notice of any decision to contract out
• City did not comply
Meet and Confer Obligations - MOU
BACKGROUND• Notices to 100 EEs• No advance notice• Effective dates
(9/17/11 & 10/8/11)• 56% of membership• Contingent on
outsourcing of position• “Sincere regret”• Only 1 RFP issued
Layoff Notices
3/17 & 3/31 2011
THE LITIGATION
Suit Filed
5/16/2011
• Declaratory and injunctive relief
• Preliminary Injunction• Imminent threat of job
loss• Outsourcing Plan
violates:– MOU– Special services statutes
preclude outsourcing of “non-special services that City employees currently perform”
THE LITIGATION
City’s response • No duty to bargain decision,
only effects• Premature – no final
decision made• Statutory right to outsource
THE LITIGATION
Preliminary Injunction Granted
(7/15/2011)
• Interim relief– No contracting with a
nonlocal agency for services CMCEA members perform
– No layoffs as a result of any such contracting
THE LITIGATION
Narrow issue• Propriety of the
preliminary injunction
Appellate Court affirms preliminary injunction order
8/17/2010
COURT OF APPEAL DECISION
Irreparable Injury
• Job loss = injury• City admitted it was
“earnestly pursuing” outsourcing
• Broad scope of plan• Layoff notices real
threat of job loss
THE LITGATION
Balance of Hardships• CMCEA would incur
greater interim harm• EE’s in serious peril of job
loss, a serious matter• City can pursue
outsourcing plan, evaluate options, issue RFPs, just can’t contract out and/or layoff pending hearing on the merits
Contract Claim• No evidence City involved
CMCEA in any discussion re outsourcing as MOU requires
COURT OF APPEAL DECISION
Possibility of Success On the Merits
COURT OF APPEAL DECISION
Statutory Claim• Government Code
sections 53060 and 37103 limit a city’s right to contract with private entities for “nonspecial services”
• City presented no evidence that services qualify as “special services.”
Possibility of Success On the Merits
NARROW HOLDING
At this point in the controversy, however, we are convinced CMCEA's members would suffer irreparable harm in the absence of a preliminary injunction, there is “some possibility” they will prevail on both their contract and statutory claims (which are independent grounds for relief), and the relative harm to the parties favors preliminary relief.
COURT OF APPEAL DECISION
• Under Article XI § 7 of the Cal. Constitution, general law cities have powers a “broad as the legislature itself” (Costa Mesa, supra, 209 Cal.App.4th at p.310 n.3.)
• Implied authority to contract to carry out necessary functions (Id. at p.310)
• Powerless to take action in “conflict” with general laws (Id.)
•Article XI, § 7 “conflict”= preemption•Costa Mesa court did no analysis of conflict under the preemption doctrine
COURT OF APPEAL DID NOT CONSIDER
Preemption Doctrine
• Special services statutes do not preclude general law city from contracting for prosecuting services, even though it has a city attorney
• No implied preemption of the field
COURT OF APPEAL DID NOT CONSIDER
Preemption analysis in Montgomery v. Superior
Court (1975) 36 Cal.App.3d 657
•Cities created pursuant to charter have the ability to override general state laws on
– Any subject classified as a municipal affair
COURT OF APPEAL DID NOT CONSIDER
California Constitution, Article
11, section 5
COURT OF APPEAL DID NOT CONSIDER
Gov’t Code § 37112 • “In addition to other powers, a legislative body may perform all acts necessary or proper to carry out the provisions of this title.”
COURT OF APPEAL DID NOT CONSIDER
74 Ops. Cal.Atty.Gen. 109 (1991)
• Attorney General opined § 37112 authorizes the outsourcing of a city jail to a private operator as a “necessary or proper” way for city to exercise its power to establish a city jail. 74 Ops. Cal.Atty.Gen. 109 (1991)
• No discussion of special services statutes as a limitation in that opinion
COURT OF APPEAL DID NOT CONSIDER Special Services
Statutes Clarify Existing Case Law
• Special services statutes a clarification/codification of existing law which:– Authorized local
governments to contract for special services without competitive bid, unless
– the contemplated services were required to be performed by an existing official who was willing and able to provide the service.
•County board has no authority to contract with private persons for the performance of duties which the law enjoins the official to perform
COURT OF APPEAL DID NOT CONSIDER
20 Ops. Cal.Atty.Gen. 21 (1952)
• Purpose of special services: “remove all question of the necessity of advertising for bids for “special services” by a person specially trained and experienced and competent to perform the special services required.” (Id. at pp. 95-96.)
COURT OF APPEAL DID NOT CONSIDER
Cobb v. Pasadena City Bd. of Ed. (1955) 134
Cal.App.2d 93, 95
Legal Strategies To Blunt
The Potential Impact Of The
Costa Mesa Decision
• Identify specific, constitutional and/or statutory independent grounds for outsourcing
• Costa Mesa: Jail (Penal Code); Payroll (Gov’t Code)
• Hemet: Refuse (Integrated Waste Management Act; Pub. Res. Code)
• Redding: Call Center Services (Cal. Const. Art. XI, § 9)
INDEPENDENT AUTHORITY TO CONTRACT
Strategy #1
SERVICE MEETS “SPECIAL SERVICES” TEST
Strategy #2 Establish • Council acted wisely and
thoughtfully• Consistent with all
elements of special services statutes
• No legal obligation to provide contemplated service with in-house resources
• Decision supported by strong legislative record
ELEMENTS OF § 53060
1951: Legislative body may contract for: [1] “special services and advice in [2] financial, economic, accounting, engineering, legal,
or administrative matters . . .” “The authority given shall include the right of the legislative body of the corporation or district to contract for the issuance and preparation of payroll checks.
[3] The persons contracted with are to be “specially trained and experienced and competent to perform the special services required.”
ELEMENTS OF GOV’T CODE § 37103
1949: Legislative body may contract with: [1] “any specially trained and experienced person,
firm or corporation for [2] special services and advice in[3] financial, economic, accounting, engineering,
legal or administrative matters. It may pay such compensation to these experts as it deems proper.”
AUTHORIZED AS A “SPECIAL SERVICE”
Strong Legislative Record
• Satisfy each element• Rationale for outsourcing• Full evaluation to meet
service objectives (quantity, quality, cost)
• Historical overview of experience with service and related issues
• Fiscal analysis• Analysis of options• Expert review required?• Meet and confer process• Oral Reports – oral/written• Resolutions
CITIES’ BROAD CONSTITUTIONAL POWER
Strategy #4 • Article XI, §7 broad powers
• Limited only by state law in “conflict” with local legislation
• Implied power to contract to carry out purpose
• Wide latitude to decide which municipal powers to provide
• (Costa Mesa, supra, 209 Cal.App.4th at p. 310)
CITIES’ BROAD CONSTITUTIONAL POWER
Strategy #4 • Article XI, §5 broad powers
• Cities created pursuant to charter have power to override general state laws
• On any subject that can be classified as a municipal affair
CITIES’ BROAD CONSTITUTIONAL POWER
Strategy #4 • Charter cities have plenary power over municipal affairs under Article XI, §5
• State prevailing wage laws do not apply to a charter city– State Bldg. and Const.
Trades Council of Cal., AFL-CIO v. City of Vista (2012) 54 Cal.4th 547)
PREEMPTION ANALYSIS
Strategy #5 • Special Services
Statutes are permissive, not preemptive
• Codify existing case law– Contemporaneous
Attorney General opinions/cases
Labor Relations Strategies
• Notice and opportunity to bargain
• Point of agreement or impasse
• Before firm decision is made
MEET AND CONFER OBLIGATIONS
Meet and Confer Before Making A Firm Decision
MEET AND CONFER OBLIGATIONS
• A decision on a mandatory subject before reaching agreement or impasse is a violation of the duty to bargain in good faith– Ex. RFP
Provide Advance Notice of Proposed
Action Re: Contracting Out
MEET AND CONFER OBLIGATIONS
Avoid Direct Dealing• Interference with
union’s right to exclusive representation
• Notice to union before affected employee
• Management should not discuss with employees
COMMUNICATIONS STRATEGIES
Develop Coherent Communications
Strategy
• Be prepared for common approach and themes
• Advise management and electeds on communications strategy
COMMUNICATIONS STRATEGIES
Communications - Free Speech
• Factually accurate• No promises of
benefits• No threats• No disparaging remarks
about union leadership• No suggestion of a
course of action
“How many times are you gonna tell me to pick up my things before
I really hafta do it?”
• Position on contracting out– Support the
evaluation process– No decision until
review complete and meet & confer concluded
• Service Levels– Ok to discuss, but
no decision until process complete
Comments Before a Firm Decision is Made
COMMUNICATIONS STRATEGIES
COMMUNICATION STRATEGIES• Closed session
discussion• Unequivocal support• Favored proposal• Rewards/threats• Employee concessions• Current personnel
Comments To Stay Away From Before A
Firm Decision is Made
“Security is lax on this side.”
THE BATTLE IS FAR FROM OVER
• Identify independent contracting authority
• Establish compliance with special services statutes
• Re-assert broad powers• Comprehensive labor
relations strategy
