LansingA state labor law judge has ruled city employee and retirees could be entitled to as much as $174.2 million in bonus payments from excess earnings Detroit’s General Retirement System made in 2011 and 2012.
But the employees and retirees aren’t likely to get paid anytime soon as the judge’s ruling is merely a recommendation to the Michigan Employee Relations Commission and the debt could get entangled in Detroit’s complicated bankruptcy case.
In a written opinion released late Friday, state Administrative Law Judge Doyle O’Connor cautioned that his ruling “may well offer little more solace than an assurance of a full ticket-price refund offered while still on the sharply tilting deck of the Titanic.”
O’Connor ruled Detroit’s City Council “unlawfully” breached a labor union contract in November 2011 when it ended the so-called 13th checks.
The judge also said the exact sum of retroactive payments would depend on a closer examination of the pension fund’s investment returns in 2011 and 2012.
U.S. Bankruptcy Judge Steve Rhodes on Wednesday allowed the American Federation of State, County and Municipal Employees Council 25 to get the ruling from O’Connor before his scheduled Friday retirement. O’Connor previously gave an oral ruling in AFSCME’s favor in February.
AFSCME’s unfair labor practice complaint against the city had been halted by the automatic stay that froze all litigation involving Detroit when the city filed for Chapter 9 bankruptcy protection in July.
O’Connor did conclude, however, that AFSCME’s complaint had merit.
“The ordinance maneuver by the city administration was a unilateral do-over in the midst of the 2008-2012 contract term which materially, and necessarily unlawfully and adversely altered existing conditions of employment,” O’Connor wrote in the opinion.
Detroit’s bankruptcy attorneys have argued the 13th checks depleted the city's pension fund of $1.9 billion in investment value over two decades and contributed to an estimated $3.5 billion unfunded liability at the center of the bankruptcy case.
O’Connor’s ruling only recommended retroactive relief for 2011 and 2012 because collective bargaining rights were suspended in March after Gov. Rick Snyder installed an emergency manager in Detroit.
The pension fund issued the bonus checks as a hedge against inflating annual pensions and are not uncommon, O’Connor said.
“The rationale for the 2011 ordinance change was premised on what has now become a convenient public relations gambit: that the 13th checks amounted to a gift, a gratuity, or a bonus. They were not,” O’Connor wrote. “In fact, the 13th check system is utilized by many employers as a method of giving some rough protection against inflation in deferred compensation systems.”
O’Connor also noted Detroit voters in 1996 rejected a ballot initiative would have ended the bonus checks for employees and retirees.
“Notwithstanding that express voicing of the will of the electorate, the 2011 ordinance amendment by the City Council, without so much as a nod of recognition, sought to mandate exactly what the voters had prohibited,” O’Connor wrote.