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Philadelphia Federation of Teachers, AFT, Local 3 v. School District of Philadelphia

Commonwealth Court of Pennsylvania

January 22, 2015

Philadelphia Federation of Teachers, AFT, Local 3, AFL-CIO and Jerry Jordan
School District of Philadelphia, the School Reform Commission, William J. Green, Feather Houstoun, Fara Jimenez, Marjorie Neff, and Sylvia Simms, in their official capacities as Members of the School Reform Commission, and Dr. William R. Hite, Jr., in his official capacity as the Superintendent of Schools, School District of Philadelphia, Appellants

Argued: December 10, 2014.

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Appealed from No. No. 01842. October Term 2014. State Agency Common Pleas Court of the County of Philadelphia. Judge Wright Padilla.

Mark A. Aronchick, Philadelphia, for appellants.

Ralph J. Teti, Philadelphia, for appellees.



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Appellants, the School District of Philadelphia (District); the School Reform Commission, William J. Green, Feather Houstoun, Fara Jimenez, Marjorie Neff, and Sylvia Simms, in their official capacities as members of the School Reform Commission (collectively, the SRC); and Dr. William R. Hite, Jr., in his official capacity as the District's Superintendent of Schools, appeal from the October 27, 2014 order of the Court of Common Pleas of Philadelphia County (trial court) permanently enjoining Appellants from taking any unilateral action to implement changes or modifications to the benefits of bargaining unit employees represented by the Philadelphia Federation of Teachers (PFT). For reasons different from those relied on by the trial court as stated below, we affirm.

Facts and Procedural History

On December 21, 2001, in light of a $200 million operating shortfall in the School District of Philadelphia's (District) $2 billion budget at the commencement of the 2001-02 school year, the Secretary of Education issued a declaration finding the District to be in financial distress. Consistent with section 696 of the Public School Code of 1949 (School Code), Act of March 10, P.L. 30, added by the Act of April 27, 1998, P.L. 270, as amended, 24 P.S. § 6-696, the SRC was established,[1] all powers and duties of the board of school directors were suspended, and the SRC assumed control of the operation, management, and educational program of the District.[2]

Following the appointment of the SRC, the District and PFT were parties to at least two collective bargaining agreements (CBAs) and two one-year extensions. The latest CBA was effective from September 1, 2009, through August 31, 2012, and was extended for one year through August 31, 2013. Prior to its expiration, in January of 2013, the District and PFT began negotiations with respect to a new CBA. However, the parties were unable to agree to terms that were satisfactory to each side.

On October 6, 2014, the SRC voted unanimously to adopt Resolution SRC-1, cancelling the District's expired CBA with PFT. This Resolution further authorized the District to impose new economic terms and conditions regarding certain fringe benefits and one wage term. Resolution SRC-1 stated, in pertinent part, that the SRC " pursuant to section 693(a)(1) of the School Code, incorporated in section 696(i) of the School Code, in order to effectuate needed economies in the operation of the School District's schools, hereby authorizes and directs the School District . . . to make specific limited changes and to implement . . .

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modified economic terms and conditions for employees in the bargaining unit represented by the PFT, consistent with economic terms proposed in negotiations. . . ." (Reproduced Record (R.R.) at 230a.) Further, Resolution SRC-1 stated that the SRC " hereby cancels the most recent [CBA] between the School District and the PFT to the extent it continues to govern the parties' relations. . . ." Id.

The District sought to impose changes to nine terms of employment, the majority of which focused on employee cost-sharing for health benefits and were estimated to save the District nearly $44 million for the 2014-2015 fiscal year and $198 million over a four-year period. Under prior CBAs, the District paid 100% of the monthly premiums for medical coverage of PFT members, including additional charges for employees' spouses who could have obtained health insurance paid for in whole or in part by their own employers. The medical plan was a customized personal choice plan from Independence Blue Cross known as the 20/30/70 plan. Additionally, the District contributed $4,353.00 per employee per year to PFT's Health and Welfare Plan, which administered and provided dental, optical, and prescription drug benefits to members of PFT's bargaining unit as well as retirees.

As part of the new terms, the District switched from the 20/30/70 plan to the Modified Personal Choice 320 plan (320 plan). Employees could opt to stay with the 20/30/70 plan, but they would be responsible for paying the difference in the plan premiums. The 320 plan, with a few exceptions, would provide the same medical coverage as the 20/30/70 plan but would increase the employees' share of the cost through co-pays, deductibles, and co-insurance. In addition, employees in PFT's bargaining unit would be required to contribute between 5% and 13% of the costs of the 320 plan, depending on the size of their salaries, and pay a surcharge of $70.00 per month for spouses who declined coverage offered by their own employers. Further, the new terms eliminated the previously paid opt-out credit for employees who chose not to enroll in the medical benefits plan, eliminated contributions to PFT's Health and Welfare Fund, and replaced the same with a District-administered plan for dental, optical, and prescription drug benefits.

Finally, the new terms instituted a uniform per diem rate for substitute teachers, eliminated contributions to PFT's Legal Fund, which provided certain legal services free of charge to members, reduced paid sick leave and short-term disability leave, and reduced the amount of termination pay benefits.

On October 16, 2014, PFT and its president, Jerry Jordan, filed a complaint and petition for a temporary restraining order and preliminary injunctive relief with the trial court. The complaint alleged that the SRC's cessation and/or modification of benefits for bargaining unit employees was a direct violation of the expired CBA and that there is no language in the CBA or any statute which grants the SRC the unilateral authority to cancel and/or modify existing benefits for bargaining unit members. The complaint also alleged that an injunction was necessary to preserve the status quo while the parties proceed to arbitration and/or proceed with an unfair labor practice charge filed with the Pennsylvania Labor Relations Board (PLRB).[3]

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The sole relief sought by PFT in the complaint was the issuance of an injunction halting implementation of the changes announced by the SRC. Following an evidentiary hearing on October 20, 2014, which included testimony from Jordan, president of PFT; Cheryl Logan, assistant superintendent for forty-four schools in the District; Naomi Wyate, chief talent officer for the District; and Sophie Bryan, an employee of the superintendent's office and a member of the District's bargaining team, the trial court issued an order granting the preliminary injunction. The SRC promptly filed a notice of appeal.

Shortly thereafter, the parties submitted a stipulation to the trial court to convert the preliminary injunction to a permanent injunction but maintain the SRC's rights of appeal. The stipulation further provided that PFT would hold the unfair labor practice charges that they had filed with the PLRB in abeyance and would not proceed with an arbitration demand pending the outcome of the appeal. Consistent with the stipulation, on October 27, 2014, the trial court issued an order permanently enjoining the SRC from taking any unilateral action to implement modifications to the benefits and terms and conditions of employment of bargaining unit members as sought by the passage of SRC-1. The SRC immediately filed a second notice of appeal. On October 29, 2014, this Court issued an order expediting the briefing schedule and directing that the matter be listed for oral argument before the Court en banc on December 10, 2014.

In a statement of matters complained of on appeal, the SRC argued that the trial court erred by granting injunctive relief where PFT failed to show a clear right to relief on the merits. More specifically, the SRC alleged that it " had the power to effect needed economies in the operation of the . . . District's schools, pursuant to 24 P.S. § 6-696 and 24 P.S. § 6-693(a)(1) . . . by cancelling the [CBA] between the [District] and the PFT . . . and unilaterally imposing on the PFT and the employees in the PFT bargaining units the nine new economic terms and conditions described in SRC-1...." [4] The SRC also alleged that PERA does not bar or limit its right to cancel the CBA and unilaterally impose new economic terms and conditions because section 28(a) of Act 46 of 1998, which added section 696 to the School Code, repealed PERA to the extent it was inconsistent with Act 46. Around the same time, the SRC filed a praecipe to withdraw its earlier notice of appeal.

On November 3, 2014, the trial court issued an opinion in support of its order, noting that section 696 of the School Code states that the SRC is given the powers stated therein as well as those enumerated in section 693, but provides that the section 693 powers must be exercised within 60 days of its creation. The trial court noted that since the District was declared in distress in December 2001, the 60-day

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period had long since passed.[5] Acknowledging that the language of section 693(a)(1) includes the power to " cancel or renegotiate any contract other than teachers' contracts," 24 P.S. § 6-693(a)(1), the trial court, citing " a long line of case law," (Trial court op. at 10), to form the basis of its interpretation that the phrase " teachers' contracts" in section 693(a)(1) includes CBAs, rejected the SRC's contrary assertion that the phrase only referred to the individual contracts of tenured teachers. Noting that section 696 of the School Code empowers the SRC to negotiate a new CBA, the trial court found nothing in that section authorizing the SRC to cancel a CBA. Finally, the trial court concluded that PERA was not inconsistent with section 696.


On appeal,[6] the SRC reiterates its argument that the trial court erred in concluding that PFT had a clear right to relief on the merits because the SRC was statutorily authorized to cancel the CBA and impose new terms in order to effect needed economies in the District. We must disagree, for reasons other than those advocated by the trial court.

We begin by addressing the relevant statutory provisions. Generally, the collective bargaining process between all public employers and public employees is governed by PERA. PERA, passed in 1970, gave rank-and-file public employees, including professional employees such as teachers, the right to be represented by unions, to negotiate contracts, and to strike in the event of an impasse. Curley v. Board of School Directors, 163 Pa.Cmwlth. 648, 641 A.2d 719, 724-25 (Pa. Cmwlth. 1994). Indeed, PERA defined the framework for collective bargaining by the vast majority of public employees in the Commonwealth. [7] As the SRC states in its brief, " [t]he right of public employees to bargain collectively with their employers is statutorily granted and the contours of that right, the matters made subject to bargaining, and other rights and duties of the parties are up to the General Assembly to decide," which it did with PERA. (SRC Brief at 28.)

Section 701 of PERA addresses mandatory subjects of bargaining, providing as follows:

Collective bargaining is the performance of the mutual obligation of the public employer and the representative of the public employes to meet at reasonable times and confer in good faith with respect

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to wages, hours and other terms and conditions of employment, or the negotiation of an agreement or any question arising thereunder and the execution of a written contract incorporating any agreement reached but such obligation does not compel either party to agree to a proposal or require the making of a concession.

43 P.S. § 1101.701.

Section 702 of PERA sets forth matters not subject to bargaining, stating that:

Public employers shall not be required to bargain over matters of inherent managerial policy, which shall include but shall not be limited to such areas of discretion or policy as the functions and programs of the public employer, standards of services, its overall budget, utilization of technology, the organizational structure and selection and direction of personnel. Public employers, however, shall be required to meet and discuss on policy matters affecting wages, hours and terms and conditions of employment as well as the impact thereon upon request by public employe representatives.

43 P.S. § 1101.702. It is relevant to our analysis to note that section 28(a) of Act 46 of 1998, the purpose and scope of which is discussed below, repealed PERA only to the extent that it was inconsistent with the revised provisions of the School Code, it did not repeal PERA in its entirety.[8]

Section 801 of PERA addresses a collective bargaining impasse, stating as follows:

If after a reasonable period of negotiation, a dispute or impasse exists between the representatives of the public employer and the public employes, the parties may voluntarily submit to mediation but if no agreement is reached between the parties within twenty-one days after negotiations have commenced, but in no event later than one hundred fifty days prior to the 'budget submission date,' and mediation has not been utilized by the parties, both parties shall immediately, in writing, call in the service of the Pennsylvania Bureau of Mediation.

43 P.S. § 1101.801 (emphasis added).

Section 803 of PERA states that " if the representatives of either or both the public employes and the public employer refuse to submit to the procedures" set forth in section 801, " such refusal shall be deemed a refusal to bargain in good faith" and could lead to the filing of unfair labor practice charges by a party or by the PLRB on its own.[9] 43 P.S. § 1101.803. There is no dispute that the SRC and PFT have continued to bargain in good faith over the past 21 months towards a new CBA and that neither party has declared that the negotiations have reached a point of impasse. Rather, the parties simply continued working towards a new CBA, at least until the SRC passed Resolution SRC-1.

Further, Section 804 of PERA states that " [n]othing in this article shall prevent the parties from submitting impasses to voluntary binding arbitration with the proviso the decisions of the arbitrator which

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would require legislative enactment to be effective shall be considered advisory only." 43 P.S. § 1101.804. At no time prior to the passage of Resolution SRC-1 did the SRC, PFT, or the Board, on its own motion, file an unfair labor practice charge or submit the matter to voluntary binding arbitration.[10]

Section 693 of the School Code -- Special Board of Control

However, even before PERA was enacted, special rules applied to financially distressed school districts. In 1959, the General Assembly passed what is commonly referred to as the Distressed School Law,[11] which amended the School Code to provide for special boards of control to govern school districts found to be financially distressed by the predecessor to the Secretary of Education. Section 693 was added to the School Code at this time and granted a special board of control the following powers:

(a) Except as otherwise provided in subsection (b), when the special board of control assumes control of a distressed school district, it shall have power and is hereby authorized to exercise all the rights, powers, privileges, prerogatives and duties imposed or conferred by law on the board of school directors of the distressed district, and the board of school directors shall have no power to act without the approval of the special board of control. In addition thereto, the special board of control shall have power to require the board of directors within sixty (60) days to revise the district's budget for the purpose of effecting such economies as it deems necessary to improve the district's financial condition. To this end the special board of control may require the board:
(1) To cancel or to renegotiate any contract other than teachers' contracts to which the board or the school district is a party, if such cancellation or renegotiation of contract will effect needed ...

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