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State v. American Federation of State

Court of Appeals of Illinois, First District, Second Division

September 30, 2014

THE STATE OF ILLINOIS (The Department of Central Management Services), Plaintiff-Appellant and Cross-Appellee,
v.
AMERICAN FEDERATION OF STATE, COUNTY, AND MUNCIPAL EMPLOYEES, COUNCIL 31, Defendant-Appellee and Cross-Appellant

Page 1128

Appeal from the Circuit Court of Cook County. Nos. 11 CH 25352, 11 CH 31951 . The Honorable Richard Billik, Jr. and Rodolfo Garcia, Judges presiding.

SYLLABUS

On appeal from the State's complaint to vacate an arbitrator's award in favor of a union representing state employees requiring the State to pay the employees' wages that had not yet been appropriated, the trial court's order vacating and modifying in part the arbitrator's award by permitting the State to present evidence that several agencies did not have sufficient funds to comply with the arbitrator's order and allowing the State to delay payment beyond the time frame permitted by the award was reversed and the cause was remanded with directions to confirm the arbitrator's award, since the award arose from the parties' arbitration agreement and was in accord with the Illinois public policy favoring the enforceability of contracts and the negotiation of binding, multiyear contracts between public employees' unions and the State.

Laner Muchin, Ltd., of Chicago (Joseph M. Gagliardo, Thomas S. Bradley, Lawrence J. Weiner, Special Assistant Attorneys General, of counsel), for Appellant.

Cornfield & Feldman LLP, of Chicago (Stephen A. Yokich, of counsel), for Appellee.

Mitchell Roth, General Counsel, of Chicago, Amicus Curiae Illinois Education Association.

Sean Smoot, Director and Chief Legal Counsel, of Chicago, Amicus Curiae Policemen's Benevolent and Protective Association.

Carmel, Charone, Widmer, Moss & Barr Ltd., of Chicago (Susan Matta, William Widmer, of counsel), for Amicus Curiae.

JUSTICE NEVILLE delivered the judgment of the court, with opinion. Presiding Justice Simon and Justice Pierce concurred in the judgment and opinion.

OPINION

NEVILLE, JUSTICE.

Page 1129

[¶1] The State of Illinois filed a complaint to vacate an arbitrator's award entered in favor of a union of state employees. The trial court vacated the arbitrator's award in part and permitted the State to present evidence in support of its claim that several of its agencies lacked sufficient funds to comply with the arbitrator's award. The court ordered the State to pay its employees amounts due under the State's agreements with the union, but the court permitted the State to delay payment beyond the time frame permitted by the arbitrator's award. The State appeals from the judgment, arguing that the document signed by an agent for the State and an agent for the union imposed no obligation on the State, because in the document the State's agent purported to commit the State to paying amounts the General Assembly had not yet appropriated. The union cross-appeals from the judgment, arguing that the trial court should have confirmed the arbitrator's award.

[¶2] We find that the arbitrator's award drew its essence from the arbitration agreement, and the award accords with Illinois public policy favoring the enforceability

Page 1130

of contracts and the negotiation of binding, multiyear contracts between the State and unions of public employees. We reverse the trial court's order and remand for entry of an order confirming the arbitrator's award.

[¶3] BACKGROUND

[¶4] In 2008, the State of Illinois, through its Department of Central Management Services (CMS), agreed to a four-year collective bargaining agreement (CBA) with the American Federation of State, County and Municipal Employees (AFSCME). The CBA required the State to increase the wages of AFSCME members by 1.5% on January 1, 2009, 2.5% on July 1, 2009, 2% on January 1, 2010, 2% on July 1, 2010, 2% on January 1, 2011, 4% on July 1, 2011, and a further 1.25% on January 1, 2012. The CBA provided:

" Should any part of this Agreement *** be Judicially determined to be contrary to law, such invalidation of such part or provision shall not invalidate the remaining portions hereof ***. The parties shall attempt to renegotiate the invalidated part or provisions. The parties recognize that the provisions of this contract cannot supersede law."

[¶5] In the CBA, the parties also agreed to use a grievance process to resolve disputes. For grievances that reached arbitration, the CBA established arbitration procedures, and it specified that " [t]he arbitrator shall neither amend, modify, nullify, ignore, add or subtract from the provisions of this Agreement."

[¶6] In the summer of 2009, Governor Pat Quinn directed 10 state agencies to lay off a total of 2,500 employees, with the layoffs to take effect early in fiscal 2010. AFSCME filed a grievance to contest the layoffs. AFSCME and the State, through CMS, agreed to present the matter to arbitrator Ed Benn for resolution. With Benn's assistance, the parties reached a mediated resolution on January 26, 2010, signed by agents for the union and the State. Under the mediated resolution, the State agreed to lay off only 1,200 employees, while closing 4 state-run facilities and deferring the wage increases set in the CBA. The measures to which AFSCME agreed saved the State about $300 million, far exceeding the $115 million the State expected to save from the proposed 2,500 layoffs.

[¶7] Later in 2010, Governor Quinn sought further concessions from the union. The parties signed several cost savings agreements (CSAs) in the fall of 2010. The first such agreement set a goal of finding budgetary savings of $100 million, and named Benn as the agreed arbitrator for any disputes arising under the CBA and the CSAs. By early November 2010, the parties identified sufficient savings, and in a second CSA the State's agent agreed that " there shall be no temporary or indeterminate layoffs through the end of [fiscal year] 2012 (June 30, 2012), nor shall the State close any facilities prior to July 1, 2012." AFSCME agreed to yet more deferrals of the wage increases set in the CBA, unpaid furloughs, reduction of overtime, and other cost reductions. AFSCME's members ratified the CSAs, and the State began to realize the savings under the CSAs.

[¶8] On February 16, 2011, Governor Quinn introduced to the General Assembly a proposed budget for fiscal year 2012. The proposed budget included sufficient appropriations to fund the State's promises under the CBA, as modified by the CSAs. The General Assembly rejected parts of the proposed budget. In May 2011, the General Assembly adopted its budget appropriating funds for fiscal year 2012 to all the state agencies, with specific amounts for specific categories of expenses.

Page 1131

CMS reviewed the budget and determined that the appropriations for paying employees at 14 agencies would not suffice to meet the State's commitments under the CBA and the CSAs. CMS froze the pay for its employees for those 14 agencies at the amounts paid during fiscal year 2011. ...


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