Waterloo Education Ass'n v. Iowa Public Employment Relations

In this case, we must decide whether an overload pay proposal submitted by the Waterloo Education Association (Association) to the Waterloo Community School District (District) is a mandatory or permissive subject of collective bargaining under section 20.9 of the Iowa Public Employment Relations Act (PERA). The Public Employment Relations Board (PERB) ruled that the proposal was a permissive subject of bargaining. The district court affirmed. We find the specific proposal in this case to be a mandatory subject of collective bargaining. We therefore reverse the district court and remand the matter for .further proceedings.

I. Prior Proceedings.

The Association filed a petition with PERB seeking an expedited determination on whether the overload pay proposal it presented to the District was a mandatory subject of bargaining under section 20.9 of PERA. The overload pay proposal provided that elementary teachers who teach more than three hundred minutes per day as part of regular work assignments “shall receive additional compensation.” “Secondary and middle school teachers who are assigned to teach six (6) classes per day” were also entitled to additional compensation. The overload pay proposal provided that additional teaching assignments would be compensated at “the employee’s hourly proportionate per diem rate.”

PERB issued a preliminary ruling finding that the proposal constituted a permissive subject of bargaining and followed the preliminary ruling with a lengthy final order containing the Board’s reasoning. In its final order, PERB stated that it believed that the precedents of this court required the result. PERB, however, stated that this court’s precedents suffer from an error that PERB itself may have precipitated through its own poorly reasoned decisions. The Board stated that if it did not feel constrained by our precedents, it would hold that the proposal was a mandatory subject of collective bargaining.

The Association appealed the decision to district court, which affirmed the PERB decision. The Association then filed a timely notice of appeal with this court.

II. Standard of Review.

As a threshold matter, we must determine whether the Board’s interpretation of section 20.9 is entitled to deference. Under Iowa Code section 17A.19(10)(c), (l) (2005), deference is warranted where interpretation of the statute is “clearly ... vested by a provision of law in the discretion of the agency.” “If the interpretation is so vested, then the court may reverse *420 only upon a finding the agency’s interpretation was ‘irrational, illogical, or wholly unjustifiable.’ ” Birchansky Real Estate, L.C. v. Iowa Dep’t of Pub. Health, State Health Facilities Council, 737 N.W.2d 134, 138 (Iowa 2007) (quoting Iowa Code § 17A.19(10)(c), (l)). Alternatively, if interpretation has not been explicitly vested in the agency, our review is for errors at law. Id. Whether a proposal is a mandatory subject of collective bargaining, as defined by Iowa Code § 20.9, has not been explicitly vested in PERB’s discretion. See Insituform Technologies, Inc. v. Employment Appeal Bd., 728 N.W.2d 781, 800 (Iowa 2007) (holding that interpretation of “willful” was not vested within the agency’s discretion). Therefore, our review is for correction of errors at law. Iowa Code § 17A.19(10)(c).

III. Discussion.

A. Introduction to Scope of Bargaining Issues. With the enactment at the height of the Great Depression of the National Labor Relations Act (NLRA), 29 U.S.C. sections 151-69 (2005), the prevailing view was that mandatory collective bargaining was an appropriate mechanism to adjust the conflicting relationship between economically powerful employers and comparatively weak employees. While the power of employees would obviously be strengthened by collective bargaining, it was generally believed that market forces would prevent employees from gaining too much at the expense of an employer. If wages became too high, the price of goods or services offered by the employer could become uncompetitive, thereby forcing moderation in employee demands.

In contrast, it was almost unanimously assumed that the collective bargaining model had no application to the public sector. Even President Franklin D. Roosevelt advised public employee leaders that “the process of collective bargaining, as usually understood, cannot be translated into the public service” because the employer was “the whole people” speaking through their public representatives. Letter from Franklin D. Roosevelt to Luther Steward (August 31, 1937), as reprinted in Christine G. Cooper & Sharon Bauer, Federal Sector Labor Relations Reform, 56 Chi.-Kent L.Rev. 509, 511-12 (1980). In short, it was feared that collective bargaining would intrude too deeply upon public policy matters that should be decided by responsible public officials.

Over time, the presumption that the collective bargaining model had no application to the public sector came under challenge. As noted by Professor Merton Bernstein, after the enactment of the NLRA and the growth in the number and power of private sector unions, a large number of semiskilled and skilled workers entered the middle class, while public employees such as teachers did not experience similar gains. This apparent disparity increasingly caused government employees to demand reforms designed to improve their economic standing. Merton C. Bernstein, Alternatives to the Strike in Public Labor Relations, 85 Harv. L.Rev. 459, 460 (1971). Across the country, various commissions and studies were conducted to determine if and how collective bargaining concepts could be applied to the public sector.

Beginning with Wisconsin in 1959, state legislatures began to enact legislation authorizing collective bargaining in the public sector. Joan Weitzman, The Scope of Bargaining in Public Employment 40-41 (1975). By 1974, forty states had adopted some kind of collective bargaining for public employees, while twenty-eight states enacted comprehensive statutes of general applicability. Id.

*421 Most of these state public collective bargaining statutes adopted language similar to the NLRA model, which expansively authorized mandatory collective bargaining over wages, hours, and “other terms and conditions of employment.” Many state public collective bargaining statutes, however, also included management rights provisions designed to reserve certain managerial and policy decisions. The goal seems to have been to allow public employees to collectively bargain to improve their economic well-being without unduly sacrificing the ability of politically responsible officials to manage public bodies and establish the broad contours of public policy.

Iowa lagged behind in the enactment of public employment collective bargaining legislation. At first, public employees pursued collective bargaining through exclusive employee representatives without express legislative authorization. In State Board of Regents v. United Packing House Food & Allied Workers, Local No. 1258, 175 N.W.2d 110 (Iowa 1970), this court held that public agencies did not have the power to agree to exclusive representation by an employee organization for collective bargaining without legislative authorization. 175 N.W.2d at 113-14. Four years later in 1974, the Iowa legislature enacted PERA. 1974 Iowa Acts ch. 1095, § 9.

In PERA, the legislature declined to adopt the NLRA model on the question of what subject matters are mandatory subjects of collective bargaining. Instead of incorporating the expansive NLRA language mandating collective bargaining over wages, hours and “other terms and conditions of employment,” the Iowa legislature instead specifically enumerated seventeen topics subject to collective bargaining. Iowa Code § 20.9.

These seventeen topics are sometimes referred to as the “laundry list” of mandatory subjects of collective bargaining. Specifically, section 20.9 provides that the public employer and the employee organization “shall” negotiate in good faith with respect to “wages, hours, vacations, insurance, holidays, leaves of absence, shift differentials, overtime compensation, supplemental pay, seniority, transfer , procedures, job: classifications, health and safety matters, evaluation procedures, procedures for staff reduction, in-service training, and other matters mutually agreed upon.” Id.

Like many other states, the Iowa legislature also included a management rights provision in the statute. Section 20.7 of PERA states that public employers shall have “the exclusive power, duty, and right to,” among other things, “[djirect the work of its public employees,” “[m]aintain the efficiency of governmental operations,” and “[d]etermine and implement methods, means, assignments and personnel by which the public employer’s operations are to be conducted.” Id. § 20.7. Thus, Iowa’s PERA contains both a provision establishing mandatory collective bargaining on specified matters and a contrapuntal management rights clause preserving exclusive, public management powers in traditional areas.

This court has recognized that section 20.9 establishes two classes of collective bargaining proposals: mandatory and permissive. City of Fort Dodge v. Iowa Pub. Employment Relations Bd., 275 N.W.2d 393, 395 (Iowa 1979). Mandatory subjects are those matters upon which the public employer is required to engage in bargaining. Id. Permissive subjects are those that the legislature did not specifically list in section 20.9, but are matters upon which both the public employer and the employee organization simply agree to bargain. Id.

Whether a proposal is a mandatory or permissive subject of bargaining under section 20.9 is a critical issue. If a subject *422 is within the scope of mandatory bargaining, the parties are required to bargain over the issue, and if agreement is not reached, the statutory impasse procedures, which ultimately lead to binding arbitration, are available. Decatur County v. Pub. Employment Relations Bd., 564 N.W.2d 394, 396 (Iowa 1997). If, on the other hand, the proposal is a permissive subject of bargaining under section 20.9, the public employer may reserve the right to decide the issue unilaterally by declining to participate in bargaining. When the employer declines to bargain over a permissive subject, the impasse procedures in PERA are not available and decisions related to the subject remain within the exclusive power of the public employer.

The central issue presented in this case is whether the Association’s overload wage proposal is a mandatory or permissive subject of collective bargaining.

B. Methods of Resolving Scope of Bargaining Disputes.

1. Scope of bargaining in the state and federal courts. From the beginning of collective bargaining, the question of what subject matters are mandatory subjects of collective bargaining sparked considerable litigation as employers and employee organizations jockeyed for position. In general, the United States Supreme Court has construed the NLRA to provide a relatively broad scope of mandatory bargaining under the phrase “wages, hours, and other terms and conditions of employment.”

The United States Supreme Court has, however, held that even the expansive NLRA scope-of-bargaining provision has limits. For example, in Fibreboard Paper Products Corporation v. National Labor Relations Board, 379 U.S. 203, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964), the high court observed that the phrase “other terms and conditions of employment” was a flexible term which would expand to conform with prevailing industry practices. Id. at 210, 85 S.Ct. at 402-03, 13 L.Ed.2d at 238.

In an important concurring opinion in Fibreboard, Justice Potter Stewart advanced the concept that there were certain core entrepreneurial activities that were not subject to collective bargaining. Id. at 223, 85 S.Ct. at 409-10, 13 L.Ed.2d at 245-46 (Stewart, J., concurring). This line drawing, however, between bargainable “terms and conditions” and core entrepreneurial activities was to be done on a ease-by-case basis. Id. Ultimately, the Supreme Court articulated a balancing test for scope-of-bargaining issues in which the benefits for labor-management relations must be greater than the burdens placed on an employer subject to bargaining. First Nat’l Maintenance Corp. v. Nat’l Labor Relations Bd., 452 U.S. 666, 679, 101 S.Ct. 2573, 2581, 69 L.Ed.2d 318, 331 (1981).

In the context of state public bargaining statutes that use the expansive NLRA phrase “other terms and conditions of employment” to describe mandatory bargaining subjects, the analysis becomes even more complicated with the inclusion of a management rights provision. Employment terms and conditions are often intertwined or entangled with public policy issues that have traditionally been within the purview of public employers. In order to accommodate the special needs of public employers, state courts with NLRA-type scope-of-bargaining provisions have developed a wide variety of “balancing tests” to be applied at the threshold stage of the scope-of-bargaining analysis. See, e.g., Central City Educ. Ass’n, IEA/NEA v. Illinois Educ. Labor Relations Bd., 149 Ill.2d 496, 174 Ill.Dec. 808, 599 N.E.2d 892, 904-05 (1992) (holding that test includes whether benefits of bargaining for employee outweighs burden on employer); City of *423 Biddeford by Board of Educ. v. Biddeford Teachers Ass’n, 304 A.2d 387, 420 (Me.1973) (Wernick, J., concurring in part, dissenting in part) (noting quantitative and qualitative importance of invasion of managerial functions may override prima facie eligibility for collective bargaining as working condition); Local 195, IFPTE, AFL-CIO v. State, 88 N.J. 393, 443 A.2d 187, 192-93 (1982), superseded by statute, N.J. Stat. Ann. § 34.13A-23 (1990), as recognized in Jackson Twp. Bd. of Educ. v. Jackson Educ. Ass’n ex rel. Scelba, 334 N.J.Super. 162, 757 A.2d 311, 314 (App.Div.2000) (stating proper approach is to balance degree to which a proposal intimately and directly affects the work and welfare of employees against the degree to which the proposal significantly interferes with management prerogatives related to government policy); Pennsylvania Labor Relations Bd. v. State College Area Sch. Dist., 461 Pa. 494, 337 A.2d 262, 268 (1975) (discussing whether impact of issue on interest of employee in wages, hours, and other terms and conditions of employment outweighs its probable effect on basic policy of school system).

The rationale of state courts adopting the threshold balancing approach is that the “terms and conditions of employment” that constitute mandatory subjects of collective bargaining are also invariably connected with some functions arguably within the purview of management, either through a management rights provision or through traditional analysis. City of Biddeford, 304 A.2d at 419 (Wernick, J., concurring in part, dissenting in part) (noting as a practical matter, working conditions are invariably connected with some managerial function). Conversely, almost every management decision traditionally thought to be within the purview of a public employer has some impact on an employee’s terms and conditions of employment. Rapid City Educ. Ass’n v. Rapid City Area Sch. Dist. No. 51-4, 376 N.W.2d 562, 566 (S.D.1985) (Henderson, J., concurring) (stating that almost every decision of public employer affects “terms and conditions of employment”); see also Los Angeles County Employees Ass’n, Local 660 v. County of Los Angeles, 33 Cal.App.3d 1, 108 Cal.Rptr. 625, 628 (1973) (same).

Thus, in cases involving statutes with expansive NLRA-type seope-of-bargaining provisions, there is a conflict between the expansive concepts of employee rights and traditional public employer prerogatives. These are two highly territorial pikes at large in the legal pond of collective bargaining, each with the capacity of devouring the other. In order to avoid the predominance of either management or employee rights, state courts have concluded that they have no other choice but to engage in balancing of some kind. Joint Bargaining Comm. of Pennsylvania Soc. Serv. Union v. Pennsylvania Labor Relations Bd., 503 Pa. 236, 469 A.2d 150, 153 (1983) (noting “[without a proper balance the two sections [scope of bargaining including “terms and conditions” and management rights provision] might negate each other”); Rapid City, 376 N.W.2d at 566 (Henderson, J., concurring) (stating that the court is required to walk “legal tightwire” between employer and employee rights).

The judgment of these courts that they must somehow accommodate employee and management rights through a balancing process is certainly understandable. Without clear legislative standards as to the scope of bargaining, the courts in these states have been left to their own devices to fill in the statutory gap. Kenai Peninsula Borough Sch. Dist. v. Kenai Peninsula Educ. Ass’n, 572 P.2d 416, 423 (Alaska 1977) (stating that more specific guidance from legislature would be “helpful”); Dunellen Bd. of Educ. v. Dunellen Educ. *424 Ass’n, 64 N.J. 17, 311 A.2d 737, 741 (1973) (noting that legislative reference to “terms and conditions” of employment establishes shadowy line and hardly furnishes disposi-tive guidance).

While a judicially created balancing test has the potential of preserving the rough contours of the grand legislative compromise between management and employee rights over time, any balancing test is extraordinarily difficult to apply in individual cases. This difficulty is not surprising in light of the fact that it is impossible to objectively measure or quantify the weight of employer and employee interests. Further, even if there was some kind of objective measurement of each interest, the balancing test requires courts to balance the apples of employee rights against the oranges of employer rights. No court has been able to successfully advance a convincing formula for determining how many employee rights apples it takes to equal an employer rights orange. Finally, the ill-defined nature of balancing tests in general gives rise to the possibility that invisible, unconscious, but perhaps inevitable judicial bias could creep into the decision-making process. See Developments in the Law —Public Employment, 87 Harv. L.Rev. 1676, 1689 (1984) (noting that with no clear standards in balancing tests, judges invariably fall back on their own political visions of the ideal power relationship between government and its employees). As noted by Harry H. Wellington and Ralph K. Winter in their classic essay, courts are badly suited to make judgments about which issues should be bargainable. Harry H. Wellington & Ralph K. Winter, The Limits of Collective Bargaining, 78 Yale L.J. 1107, 1126 (1968). .

In light of these challenges, it is not surprising that the state court application of threshold balancing tests in the scope-of-bargaining context has yielded a riot of fact-specific results that defy orderly characterization. For instance, a lengthy annotation presents in excruciating detail the, conflicting results on a myriad of issues. See generally James D. Lawlor, Validity and Construction of Statutes or Ordinances Providing for Arbitration of Labor Disputes Involving Public Employees, 68 A.L.R.3d 885 (2007), comparing, for example, West Hartford Educ. Ass’n v. DeCourcy, 162 Conn. 566, 295 A.2d 526 (1972) (class size subject to mandatory bargaining), with West Irondequoit Teachers Ass’n v. Helsby, 35 N.Y.2d 46, 358 N.Y.S.2d 720, 315 N.E.2d 775 (1974) (class size not bargainable), Clark County Sch. Dist. v. Local Gov’t Employee Management Relations Bd., 90 Nev. 442, 530 P.2d 114 (1974) (school calendar issues negotiable), with Burlington County College Faculty Ass’n v. Bd. of Trustees, Burlington County College, 64 N.J. 10, 311 A.2d 733 (1973) (college calendar not negotiable), and Local 195, 443 A.2d at 187 (subcontracting of work not subject to mandatory negotiation), with Unified Sch. Dist. No. 1 of Racine County v. Wisconsin Employment Relations Comm’n, 81 Wis.2d 89, 259 N.W.2d 724 (1977) (issue of subcontracting subject to mandatory bargaining). While a balancing test for determining scope-of-bargaining issues may be necessary when legislatures have delegated open-ended authority to the courts, it is an imperfect approach for courts that favor principled decision-making over ill-defined discretionary exercises. Balancing tests are a product of raw legal necessity, not judicial preference.

Where a legislature elects not to use the expansive NLRA phrase “other terms and conditions of employment” and chooses instead to list a finite number of enumerated topics, the case for a balancing test becomes even less compelling. For example, in Kansas, the legislature originally adopted an NLRA-type mandatory bar *425 gaining provision in a' statute regarding public teacher collective bargaining. In response, the Kansas Supreme Court developed an impact test that involved bal-' ancing the impact of an issue on the well-being of the individual against the overall effect on the operation of the school system. Na t'l Educ. Ass’n of Shawnee Mission, Inc. v. Bd. of Educ. of Shawnee Mission Unified Sch. No. 512, 212 Kan. 741, 512 P.2d 426, 435 (1973), superseded by statute, Kan. Stat. Ann. § 75-4322(t) (1977), as recognized in Kansas Bd. of Regents v. Pittsburgh State Univ. Chapter of Kansas-Nat’l Educ. Ass’n, 233 Kan. 801, 667 P.2d 306, 318 (1983).

While the Kansas legislature at first embraced the approach of Shawnee Mission, it later amended its statute to delete the NLRA-type scope-of-bargaining language. Unified Sch. Dist. No. 501 v. Sec’y of Kansas Dep’t of Human Resources, 235 Kan. 968, 685 P.2d 874, 876-77 (1984). Instead the legislature provided a closed, finite list of topics that would be mandatory subjects of collective bargaining for teaching professionals. Id. In light of the legislative action, the Kansas Supreme Court, following the lead of the responsible administrative agency, ■ sanctioned the adoption of a topics test to replace its prior impact balancing test to determine scope-of-bargaining issues. Id.

Under the topics test, the scope of bargaining is determined by whether the topic of a proposal is within the scope of one of the specifically enumerated subjects of collective bargaining. If a proposal was defi-nitionally within the scope of one of the enumerated topics, it is a mandatory subject of collective bargaining. If it fell outside the definition of any mandatory topic, the proposal was not negotiable. Id. at 877. A threshold balancing determination is not required under the topic test because the legislature has already performed the balancing by .including each specific topic as a subject of mandatory bargaining.

Thus, instead of dealing with two pikes in a pond, legislatures that have adopted a “laundry list” have gone to dry land and established a legal shooting range with a series of legislatively established targets of mandatory bargaining. Proponents of mandatory bargaining must hit one of the targets, or come close enough to one, in order to avoid characterization of the proposal as permissive. The role of the courts in this setting is not to balance the pikes, but to. judge the accuracy of the proponent’s legal shot.

2. Iowa approach to scope of bargaining issues. In determining whether a proposal is within the scope of section 20.9; this court noted early on that the Iowa House of Representatives approved an amendment to the original bill deleting the expansive NLRA phrase “or other terms and conditions of employment” from the list of mandatory subjects. Charles City Cmty. Sch. Dist. v. Pub. Employment Relations Bd., 275 N.W.2d 766, 771 (Iowa 1979) [hereinafter Charles City I]; Fort Dodge, 275 N.W.2d at 398. The final version of the bill did not contain the expansive NLRA language. Instead, the final version of the Iowa PERA contained a finite, or laundry list, of mandatory subjects of collective bargaining. 1974. Iowa Acts ch. 1095, § 9. Because the Iowa PERA does not include the phrase “other terms and conditions of employment,” this court has held that if a proposal does not fall within one of the laundry list of terms contained in section 20.9, it is not a subject of mandatory bargaining. Charles City I, 275 N.W.2d at 771-73; Fort Dodge, 275 N.W.2d at 397-98. In other words, this court has held that the legislature’s laundry list in section 20.9 is exclusive and not merely descriptive or suggestive. See *426 Lawrence E. Pope, Analysis of Iowa Public Employment Relations Act, 24 Drake L.Rev. 1, 33-34 (1974).

In Charles City I, the court announced a two-pronged test to determine negotiability questions. Charles City I, 275 N.W.2d at 772-73. The first prong was a topics test — whether a particular proposal fell within the scope of any of the specifically delineated terms in section 20.9. Id. If a proposal was not within the scope of one of the specifically delineated terms, it was not subject to mandatory bargaining. Id. If, however, the proposal was within the scope of one of the delineated terms, the court moved on to the second prong, specifically, whether collective bargaining over the proposal would be illegal. Id. If the proposal was not illegal then the proposal would be subject to collective bargaining. Id. This two-step approach was reiterated the following year in Charles City Education As sociation v. Public Employment Relations Board, 291 N.W.2d 663, 666 (Iowa 1980) [hereinafter Charles City II]..

Even though the early PERA cases articulated this straightforward two-pronged seope-of-bargaining test, the court nonetheless struggled with the relationship between section 20.7, which contains the exclusive rights of management, and section 20.9, which contains the mandatory bargaining provisions. For example, in Charles City I, the court expressly noted the need to “harmonize” the sections. Charles City I, 275 N.W.2d at 775. Similarly, in Charles City II, the majority approved the harmonizing approach in Charles City I, noting the need to construe statutory provisions in the context of the entire enactment. Charles City II, 291 N.W.2d at 666. Although the majority in these cases did not expressly embrace a balancing test, the implication in Charles City I and II seems to have been that employee rights in section 20.9 had to be balanced or harmonized with management rights in section 20.7.

■ Early dissenting opinions rejected the harmonizing approach. According to the dissents, the list of topics in section 20.9 should be regarded as exceptions to or carve-o.uts of the management rights in section 20.7. As a result, the dissenters argued that there is no need to harmonize or balance the sections in determining whether a proposal is subject to mandatory bargaining. According to the dissenters, the only requirement is simply to properly define the scope of the terms in section 20.9. See Charles City I, 275 N.W.2d at 776 (McCormick, J., dissenting in part) (noting that employer’s right to direct work under section 20.7 does not affect scope of bargaining under section 20.9); Fort Dodge, 275 N.W.2d at 399 (McCormick, J., dissenting) (rejecting “balancing” of employee bargaining rights against reserved employer prerogative).

In ■ 1987, the court returned to better moorings in Northeast Community School District v. Public Employment Relations Board, 408 N.W.2d 46 (Iowa 1987) [hereinafter Northeast ]. In this case, the court reiterated the two'-pronged test of negotiability presented in Charles City I and II. Id. at 50. Unlike in Charles City I and II, however, the court further noted that if a proposal falls within an. exception established by section 20.9, “then the proposal is subject to negotiation regardless of the broa,d grant of authority given to public employers under section 20.7.” Id. This principle is the essence of a topics test, where the question of the scope of bargaining is primarily a definitional exercise and does not involve balancing of employee interests against management interests. In effect, the court in Northeast adopted the analytical approach of the dissenters in Charles City I and Fort Dodge.

*427 The court returned to the issue of the relationship between sections 20.7 and 20.9 in State v. Public Employment Relations Board, 508 N.W.2d 668 (Iowa 1998) [hereinafter State]. In State, the court noted that “[v]irtually all of the mandatory subjects of collective bargaining impact in some way on the reserved rights of public employers.” State, 508 N.W.2d at 675. Instead of engaging in a threshold balancing of employer and employee interests, however, the State court reemphasized the two-pronged approach adopted in the early Iowa PERA cases. According to State, the first prong inquiry is a topics test— whether the proposal, on its face, logically falls within the definition of any term contained in section 20.9. Id. at 672. In determining whether a proposal fell within the definition of a section 20.9 term, the State court observed that consideration must be given to the predominant purpose of the proposal and to what the emplo