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AMERICAN FEDERATION STATE v. COMMONWEALTH PENNSYLVANIA (02/06/89)

decided: February 6, 1989.

AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, COUNCIL 13, AFL-CIO, ET AL., AND JOINT BARGAINING COMMITTEE OF THE PENNSYLVANIA SOCIAL SERVICES UNION AND THE PENNSYLVANIA EMPLOYMENT SECURITY EMPLOYEES' ASSOCIATION LOCALS 668 AND 675, SEIU, AFL-CIO, ET AL., AND DENNIS J. SOLECKI AND LEA F. BARBUSH, ET AL., APPELLANTS,
v.
COMMONWEALTH OF PENNSYLVANIA, ET AL., APPELLEES



Appeal from the ORder of the Commonwealth Court Entered on November 12, 1987, at Nos. 2064 C.D. 1983, 2133 C.D. 1983 and 2160 C.D. 1983. 111 Pa. Commonwealth Ct. 81, Nix, C.j., and Larsen, Flaherty, McDermott, Zappala, Papadakos and Stout, JJ. Larsen, J., files a concurring and dissenting opinion.

Author: Papadakos

[ 520 Pa. Page 364]

OPINION OF THE COURT

This appeal involves the American Federation of State, County and Municipal Employees, Council 13, AFL-CIO, the Joint Bargaining Committee of the Pennsylvania Social Services Union, and the Pennsylvania Employment Security Employees' Association, Locals 668 and 675 (Appellants) against the State Employees' Retirement Board (Board) challenging the propriety of an order issued by the Commonwealth Court which directed that various members of

[ 520 Pa. Page 365]

    the State Employees' Retirement System's (System) pension contributions remain at 5% of their salary.

Appellants are the major unions who represent most Commonwealth and school employees who are entitled to retirement benefits on account of their services to the Commonwealth and its instrumentalities. Until July 21, 1983, all members of the system were required to contribute 5% of their salary to the System. Thereafter, Section 7 of Act 31 of 1983 became effective, 71 Pa.C.S. ยง 5505.1 (Act 31), requiring all members of the system to contribute an additional 1 1/4% of their salary to the System as member retirement contributions.

The Legislature's attempt to extract an additional 1 1/4% from active members' salaries who were members of the system on July 21, 1983, generated a declaratory judgment action before the Commonwealth Court. That Court ruled that Section 7 of Act 31 of 1983 was an unconstitutional impairment of the right to contract for both vested and non-vested members, and enjoined the Commonwealth from collecting pension contributions from employees who were active members of the System prior to July 22, 1983 in excess of the 5% basic contribution rate. AFSCME v. Commonwealth, 80 Pa. Commonwealth Ct. 611, 472 A.2d 746 (1984).

A direct appeal followed to this Court and, following arguments, we affirmed the order of the Commonwealth Court agreeing that the retirement benefits were a matter of contract rights which could not be changed once fixed and that these rights applied to vested and non-vested members alike as a matter of constitutional law. Association of Pennsylvania State College and University Faculties v. State System of Higher Education, 505 Pa. 369, 479 A.2d 962 (1984).

The Board, in its attempt to implement the Commonwealth Court's order, has ceased to collect the additional 1 1/4% contribution from all employees who were active members of the System and who were making membership contributions to the System on July 21, 1983. The Board

[ 520 Pa. Page 366]

    contemporaneously issued a management directive ordering that the 6 1/4% rate be collected from all other employees who were members of the System before July 22, 1983, but who were separated from their employment for any reason for more than 14 days and who were later reinstated or reemployed.

Dissatisfied with this practice, Appellants filed an enforcement motion with the Commonwealth Court in its original jurisdiction, arguing that the Board was improperly applying the higher contribution rate to the following System members:

1. Employees who have been suspended, terminated or discharged from employment and have subsequently been returned to employment because of an arbitration award, civil service order, court order, law suit, or settlement of a claim for reinstatement;

2. Employees who have been separated from their employment (i.e., furloughed) and subsequently returned to work pursuant to statutory or contractual provisions such as recall rights;

3. Employees who have been on extended authorized leaves of absence with or without pay;

4. Employees who have been separated from employment either voluntarily or involuntarily and who subsequently returned in a manner or method reinstating their accrued seniority rights including credit for prior service; and

5. Employees who have been separated either voluntarily or involuntarily from their employment and who have subsequently returned to active pay status but who maintained their member's status throughout the separation period.

The Board defended its management directive as a logical interpretation of the Commonwealth Court's order which it read as protecting only those members of the System who were actively employed on July 21, 1983. The Commonwealth Court disagreed with the Board's ...


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