Risk Management - Daphne Anneet


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Risk Management - Daphne Anneet

  1. 1. Daphne M. AnneetBurke, Williams & Sorensen, LLPdanneet@bwslaw.comContracting Out Under SiegeProtecting and PreservingCities’ Power To Contract OutCCCA 54th Annual Municipal Seminar
  2. 2. THE PERFECT STORM• Falling revenues• Increasing wage, pensionand benefit costs• Structural deficits• Outsourcing a means todeliver better service at alower cost
  3. 3. CONTRACTING OUT UNDER SIEGE• Legal• Political• Public relations• Traditional unfair laborpractice
  4. 4. CONTRACTING OUT UNDER SIEGEContract Cities• City of Lakewood model• Contract out many or mostof services
  5. 5. CONTRACTING OUT UNDER SIEGESpecial Services Statutes limitpower (Gov’t Code § §37103 & 53060)Even though…• Special services exempt fromcompetitive bid
  6. 6. CONTRACTING OUT UNDER SIEGESpecial Services Statutes limitpower (Gov’t Code § §37103 & 53060)Even though…• Can’t waste public funds– No authority to purchaseservices where publicofficial has existing dutyand ability to provideservice
  7. 7. CONTRACTING OUT UNDER SIEGE• Unions seize upon CostaMesa as a new legal weapon• Hemet - franchise of refuse• Redding – outsource of callcenter services
  8. 8. • The Costa Mesa Decision• What it held• What it did not address• Overview of strategies toprotect and preservecontracting out power– Legal strategies to blunt CostaMesa– Labor relations considerationsPRESENTATION OVERVIEW
  9. 9. The Costa MesaDecision
  10. 10. BACKGROUND• Council approvedcomprehensiveoutsourcing plan• 18 Departments orDivisions• Variety of CityservicesCity’s Outsourcing Plan3/1/2011
  11. 11. BACKGROUND• CMCEA = union• MOU gives CMCEAright to be part ofoutsourcingdiscussion• Advance notice ofany decision tocontract out• City did not complyMeet and ConferObligations - MOU
  12. 12. BACKGROUND• Notices to 100 EEs• No advance notice• Effective dates(9/17/11 & 10/8/11)• 56% of membership• Contingent onoutsourcing ofposition• “Sincere regret”• Only 1 RFP issuedLayoff Notices3/17 & 3/31 2011
  13. 13. THE LITIGATIONSuit Filed5/16/2011• Declaratory andinjunctive relief• Preliminary Injunction• Imminent threat of jobloss• Outsourcing Planviolates:– MOU– Special services statutespreclude outsourcing of“non-special servicesthat City employeescurrently perform”
  14. 14. THE LITIGATIONCity’s response• No duty to bargaindecision, only effects• Premature – no finaldecision made• Statutory right to outsource
  15. 15. THE LITIGATIONPreliminary InjunctionGranted(7/15/2011)• Interim relief– No contracting with anonlocal agency forservices CMCEAmembers perform– No layoffs as a resultof any suchcontracting
  16. 16. THE LITIGATIONNarrow issue• Propriety of thepreliminaryinjunctionAppellate Court affirmspreliminary injunction order8/17/2010
  17. 17. COURT OF APPEAL DECISIONIrreparable Injury• Job loss = injury• City admitted it was“earnestly pursuing”outsourcing• Broad scope of plan• Layoff notices realthreat of job loss
  18. 18. THE LITGATIONBalance of Hardships• CMCEA would incurgreater interim harm• EE’s in serious peril of jobloss, a serious matter• City can pursueoutsourcing plan,evaluate options, issueRFPs, just can’t contractout and/or layoff pendinghearing on the merits
  19. 19. Contract Claim• No evidence Cityinvolved CMCEA in anydiscussion re outsourcingas MOU requiresCOURT OF APPEAL DECISIONPossibility of SuccessOn the Merits
  20. 20. COURT OF APPEAL DECISIONStatutory Claim• Government Codesections 53060 and 37103limit a city’s right tocontract with privateentities for “nonspecialservices”• City presented noevidence that servicesqualify as “specialservices.”Possibility of SuccessOn the Merits
  21. 21. NARROW HOLDINGAt this point in the controversy,however, we are convincedCMCEAs members would sufferirreparable harm in the absenceof a preliminary injunction, thereis “some possibility” they willprevail on both their contractand statutory claims (which areindependent grounds for relief),and the relative harm to theparties favors preliminary relief.
  22. 22. COURT OF APPEAL DECISION• Under Article XI 7 of the Cal.Constitution, general law citieshave powers a “broad as thelegislature itself” (Costa Mesa,supra, 209 Cal.App.4th at p.310n.3.)• Implied authority to contract tocarry out necessary functions(Id. at p.310)• Powerless to take action in“conflict” with general laws (Id.)
  23. 23. •Article XI, § 7“conflict”=preemption•Costa Mesa courtdid no analysis ofconflict under thepreemption doctrineCOURT OF APPEAL DID NOT CONSIDERPreemption Doctrine
  24. 24. • Special services statutesdo not preclude generallaw city from contractingfor prosecuting services,even though it has a cityattorney• No implied preemption ofthe fieldCOURT OF APPEAL DID NOT CONSIDERPreemption analysis inMontgomery v. SuperiorCourt (1975) 36Cal.App.3d 657
  25. 25. •Cities created pursuantto charter have the abilityto override general statelaws on– Any subject classified asa municipal affairCOURT OF APPEAL DID NOT CONSIDERCaliforniaConstitution, Article11, section 5
  26. 26. COURT OF APPEAL DID NOT CONSIDERGov’t Code § 37112 • “In addition toother powers, alegislative body mayperform all actsnecessary or properto carry out theprovisions of thistitle.”
  27. 27. COURT OF APPEAL DID NOT CONSIDER74 Ops. Cal.Atty.Gen.109 (1991)• Attorney General opined§ 37112 authorizes theoutsourcing of a city jail toa private operator as a“necessary or proper”way for city to exercise itspower to establish a cityjail. 74 Ops. Cal.Atty.Gen.109 (1991)• No discussion of specialservices statutes as alimitation in that opinion
  28. 28. COURT OF APPEAL DID NOT CONSIDERSpecial ServicesStatutes Clarify ExistingCase Law• Special services statutes aclarification/codification ofexisting law which:– Authorized localgovernments to contractfor special services withoutcompetitive bid, unless– the contemplated serviceswere required to beperformed by an existingofficial who was willingand able to provide theservice.
  29. 29. •County board has noauthority to contract withprivate persons for theperformance of dutieswhich the law enjoins theofficial to performCOURT OF APPEAL DID NOT CONSIDER20 Ops. Cal.Atty.Gen.21 (1952)
  30. 30. • Purpose of specialservices: “remove allquestion of the necessityof advertising for bids for“special services” by aperson specially trainedand experienced andcompetent to performthe special servicesrequired.” (Id. at pp. 95-96.)COURT OF APPEAL DID NOT CONSIDERCobb v. Pasadena CityBd. of Ed. (1955) 134Cal.App.2d 93, 95
  31. 31. Legal StrategiesTo BluntThe Potential ImpactOf TheCosta Mesa Decision
  32. 32. • Identify specific,constitutional and/orstatutory independentgrounds for outsourcing• Costa Mesa: Jail (PenalCode); Payroll (Gov’t Code)• Hemet: Refuse (IntegratedWaste Management Act;Pub. Res. Code)• Redding: Call CenterServices (Cal. Const. Art. XI,§ 9)INDEPENDENT AUTHORITY TO CONTRACTStrategy #1
  33. 33. SERVICE MEETS “SPECIAL SERVICES” TESTStrategy #2Establish• Council acted wisely andthoughtfully• Consistent with allelements of specialservices statutes• No legal obligation toprovide contemplatedservice with in-houseresources• Decision supported bystrong legislative record
  34. 34. ELEMENTS OF § 530601951: Legislative body may contract for:*1+ “special services and advice in[2] financial, economic, accounting, engineering, legal,or administrative matters . . .” “The authority givenshall include the right of the legislative body of thecorporation or district to contract for the issuanceand preparation of payroll checks.*3+ The persons contracted with are to be “speciallytrained and experienced and competent to performthe special services required.”
  35. 35. ELEMENTS OF GOV’T CODE § 371031949: 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 suchcompensation to these experts as it deemsproper.”
  36. 36. AUTHORIZED AS A “SPECIAL SERVICE”Strong LegislativeRecord• Satisfy each element• Rationale for outsourcing• Full evaluation to meetservice objectives(quantity, quality, cost)• Historical overview ofexperience with serviceand related issues• Fiscal analysis• Analysis of options• Expert review required?• Meet and confer process• Oral Reports – oral/written• Resolutions
  37. 37. CITIES’ BROAD CONSTITUTIONAL POWERStrategy #4 • Article XI, §7 broad powers• Limited only by state law in“conflict” with locallegislation• Implied power to contract tocarry out purpose• Wide latitude to decidewhich municipal powers toprovide• (Costa Mesa, supra, 209Cal.App.4th at p. 310)
  38. 38. CITIES’ BROAD CONSTITUTIONAL POWERStrategy #4 • Article XI, §5 broadpowers• Cities createdpursuant to charterhave power tooverride generalstate laws• On any subject thatcan be classified asa municipal affair
  39. 39. CITIES’ BROAD CONSTITUTIONAL POWERStrategy #4 • Charter cities haveplenary power overmunicipal affairs underArticle XI, §5• State prevailing wagelaws do not apply to acharter city– State Bldg. and Const.Trades Council of Cal.,AFL-CIO v. City of Vista(2012) 54 Cal.4th 547)
  40. 40. PREEMPTION ANALYSISStrategy #5• Special ServicesStatutes arepermissive, notpreemptive• Codify existing caselaw– ContemporaneousAttorney Generalopinions/cases
  41. 41. Labor RelationsStrategies
  42. 42. • Notice andopportunity tobargain• Point of agreementor impasse• Before firmdecision is madeMEET AND CONFER OBLIGATIONSMeet and Confer BeforeMaking A Firm Decision
  43. 43. MEET AND CONFER OBLIGATIONS• A decision on amandatory subjectbefore reachingagreement orimpasse is a violationof the duty to bargainin good faith– Ex. RFPProvide AdvanceNotice of ProposedAction Re:Contracting Out
  44. 44. MEET AND CONFER OBLIGATIONSAvoid Direct Dealing• Interference withunion’s right toexclusiverepresentation• Notice to unionbefore affectedemployee• Management shouldnot discuss withemployees
  45. 45. COMMUNICATIONS STRATEGIESDevelop CoherentCommunicationsStrategy• Be prepared forcommon approachand themes• Advise managementand electeds oncommunicationsstrategy
  46. 46. COMMUNICATIONS STRATEGIESCommunications -Free Speech• Factually accurate• No promises ofbenefits• No threats• No disparaging remarksabout union leadership• No suggestion of acourse of action
  47. 47. “How many times are you gonnatell me to pick up my things beforeI really hafta do it?”
  48. 48. • Position oncontracting out– Support theevaluation process– No decision untilreview completeand meet & conferconcluded• Service Levels– Ok to discuss, butno decision untilprocess completeComments Before aFirm Decision is MadeCOMMUNICATIONS STRATEGIES
  49. 49. COMMUNICATION STRATEGIES• Closed sessiondiscussion• Unequivocal support• Favored proposal• Rewards/threats• Employee concessions• Current personnelComments To StayAway From Before AFirm Decision is Made
  50. 50. “Security is lax on this side.”
  51. 51. THE BATTLE IS FAR FROM OVER• Identify independentcontracting authority• Establish compliance withspecial services statutes• Re-assert broad powers• Comprehensive laborrelations strategy
  52. 52. Daphne M. AnneetBurke, Williams & Sorensen, LLPdanneet@bwslaw.comTHANK YOU