Ehrlich v. Maryland State Employees Union

WILNER, J. On January 14, 2003 — one day before the end of Governor Parris N. Glendening’s term of office as Governor and four days before the Constitutional deadline for his successor, Governor Robert L. Ehrlich, Jr., to submit a balanced budget for FY 2004 to the General Assembly — a staff person in the Governor’s Office, upon direction by the Governor, “approved” two memoranda of understanding (MOU) with the American Federation of State, County, and Municipal Employees (AFSCME) that carried a fiscal impact to the State of approximately $100 million. The principal issue before us in these cross-appeals is whether those MOUs are effective and enforceable. We shall hold that they are not effective and therefore are unenforceable. BACKGROUND A general program of collective bargaining for Maryland State employees was inaugurated in 1996, when Governor Glendening signed Executive Order 01.01.1996.13.

That Executive Order recognized the right of Executive Branch employees to form or join employee organizations, bargain collective ⁶⁰⁰ ly, and engage in other concerted activities and, in furtherance of those rights, provided for the creation of appropriate bargaining units and the election and certification of exclusive bargaining representatives. The only substantive provision regarding actual collective bargaining was in the section that defined the term “collective bargaining.” That provision required the “employer” and the employee exclusive bargaining organization to negotiate in good faith with respect to wages, hours, and other terms and conditions of employment. It stated further that, upon completion of negotiations, the parties “shall execute a written memorandum of understanding incorporating the terms of any agreement reached, and, to the extent they require legislative approval or the appropriation of funds, such terms shall be recommended to the Legislature for approval or the appropriation of funds, as may be necessary.” The term “employer” was not defined in the Executive Order. The order stated that the exclusive bargaining representatives were entitled to meet and negotiate with the Governor or the Governor’s designee in an effort to reach an agreement subject to the Governor’s approval, and it enjoined “managerial and supervisory employees” from refusing to bargain collectively with the exclusive bargaining representatives.

It did not, however, specify who, in particular, was to sign any MOU on behalf of the State or any State agency. The validity of that Executive Order was challenged, largely on the basis that there was no legislative authorization for it. We sustained the order, principally on the ground that “[n]one of the provisions of the Executive Order, not one, makes or purports to make any agreement reached through the collective bargaining process conducted by subordinate administrative officials legally binding or to divest the Governor, the General Assembly or other public officer of discretion given them by law.” McCulloch v. Glendening, 347 Md. 272, 292 , 701 A.2d 99, 108-09 (1997). The order, we said, was not inconsistent with existing “meet and confer” provisions already in the State Code, id. at 287-89 , 701 A.2d at 106-07 , and was within the general authority of the Governor as the ⁶⁰¹ Constitutional head of the Executive Branch of the State Government. • In an effort to provide a more solid base for a collective bargaining regime and not have it rest solely on an Executive Order that could be modified or revoked by subsequent Governors, Governor Glendening proposed legislation to the 1999 Session of the General Assembly.

The bill, which was enacted as 1999 Md. Laws, ch. 298, and took effect July 1, 1999, incorporated some features and provisions of the Executive Order but was far more extensive. In a thoroughly rewritten title 3 to the State Personnel and Pensions Article (SPP), it provided collective bargaining rights for Executive Branch employees, reserved certain rights to the State, prohibited employees from engaging in strikes and the State from engaging in lockouts, set forth procedures for the election and certification of exclusive bargaining representatives and for the collective bargaining process, and created a State Labor Relations Board (SLRB) as a unit within the Department of Budget and Management (DBM) to administer and enforce the law. The bill was extensively amended during the legislative process. The provisions particularly relevant to the instant case are (1) SPP §§ 3-501 and 3-601, dealing with the collective bargaining process and MOUs, and (2) §§ 3-206 and 3-207, authorizing the Secretary of Budget and Management, by regulation, to define unfair labor practices and authorizing SLRB to investigate and take appropriate action in response to complaints of unfair labor practices.

As enacted in 1999, the law did not apply to any institution of higher education but only to the principal departments in the Executive Branch and certain other designated Executive agencies. In 2001, the Legislature extended the collective bargaining provisions to the State universities and colleges and, in doing so, drew a number of distinctions between them and the other Executive agencies, mostly in terms of who is authorized to negotiate, sign, and ratify agreements. See 2001 Md. Laws, ch. 341. As we are dealing here with MOUs involving non-collegiate agen ⁶⁰² des, we shall limit our consideration to the provisions relating to them.

SPP § 3-501(a) requires the Governor to designate one or more representatives to participate in the collective bargaining process on behalf of the State agencies. Section 3-501 (c) directs the parties to make every reasonable effort to conclude negotiations in a timely manner “for inclusion by the principal unit in its budget request to the Governor” and provides expressly that they “shall conclude negotiations before January 1 for any item requiring an appropriation of funds in the fiscal year that begins on the following July 1.” Section 3-501(c)(2)(ii) directs the Governor to include in the budget bill submitted to the General Assembly any amounts in the budgets of the principal units “required to accommodate any additional cost resulting from the negotiations.... ” Both § 3 — 501(d)(1) and § 3-601 contain provisions dealing with the execution of MOUs, some of which appear to be duplicative. Section 3 — 501(d)(1) provides that an MOU that incorporates all matters of agreement reached by the parties shall be “executed” by the exclusive representative, on behalf of the employees, and, for the State, by the Governor or the Governor’s designee. Section 3 — 601(a)(1) requires that an MOU contain all matters of agreement reached in the collective bargaining process.

Section 3-601(a)(2) requires that the MOU be in writing, that it be signed by the exclusive bargaining representative involved in the collective bargaining negotiations, and by “the Governor or the Governor’s designee.” Section 3-601 (c) requires, in addition, that the MOU be ratified; it states that “a memorandum of understanding is not effective until it is ratified by the Governor and a majority of the votes cast by the employees in the bargaining unit.” (Emphasis added). The first MOUs between AFSCME and the State were negotiated and signed under the 1996 Executive Order. AFSCME was certified as the exclusive bargaining representative for bargaining units A, B, C, D, F, and H, and, in 1997, entered into two-year MOUs with respect to those units ⁶⁰³ covering fiscal years 1999 and 2000. In 1999, still under the Executive Order, the State and AFSCME entered into new MOUs for fiscal years 2001 and 2002.

The MOUs covering those four years are not in the record before us, and we do not know who signed them for the State. Governor Glendening believed that he may have signed the first ones, although he was not certain. Negotiations for an FY 2003 MOU began in late 2001/early 2002, but, in the absence of an agreement on wage increases, the MOU for FY 2001-2002 was extended to cover FY 2003. According to Gerald McEntee, International President of AFSCME, he and Governor Glendening agreed to bifurcate negotiations with respect to a 2004 MOU — to deal first with non-economic issues and postpone negotiations on economic issues until after the general election in November, 2002.

By July, 2002, a tentative agreement, in principle if not in language, had been reached on the non-economic issues, but no meetings took place with respect to economic issues until November 14, 2002, at which time the Governor, whose term of office would end in two months, apparently agreed to a 2% increase in wages for all State employees and certain other terms. Negotiations as to language bogged down, however, and a tentative agreement on an actual draft was not reached until December 13, 2002, when two MOUs — one for bargaining units A, B, C, D, and F, and one for unit H — were approved, but not signed, by the collective bargaining committees. The two MOUs were submitted for employee ratification on December 18, 2002 and were declared ratified on or about January 13, 2003. On January 14, 2003, the MOUs were signed by the members of the collective bargaining committee.

Signing “For the State of Maryland” were Charles M. Rhodes, Jr., chief negotiator, and Andrea M. Fulton, Executive Director of the Office of Personnel Services and Benefits, Department of Budget and Management. The MOUs had no signature line for the Governor to ratify the agreements. They did, however, contain a signature line designated “Approved By,” and that was signed by Gene Lynch who, until noon the next day, served as Governor Glendening’s chief of ⁶⁰⁴ staff. It is undisputed that neither Governor Glendening nor his successor, Governor Ehrlich, signed the MOUs or made any other public pronouncement of ratification.

The General Assembly commences its annual session on the second Wednesday of January, which, in 2008, was January 8. See Md. Constitution, Art. Ill, § 14. In the year following a Gubernatorial election, the newly elected Governor is required to submit a budget for the ensuing fiscal year within 10 days after the convening of the General Assembly. See Md. Constitution, Art. Ill, § 52(3).

Governor Glendening had not submitted a budget to the 2003 General Assembly prior to leaving office and, indeed, at least as a practical matter, could not have done so. Governor Ehrlich, in the belief that the State could not afford the salary increases and other benefits provided for in the MOUs, not only never ratified the MOUs but declined to fund them in the budget that he submitted on January 17, 2003. When negotiations between AFSCME and the Ehrlich Administration regarding the MOUs failed to produce a satisfactory agreement, AFSCME filed suit in the Circuit Court for Anne Arundel County against the Governor, the State, the Secretary of Budget and Management, and the SLRB for declaratory and mandatory injunctive relief. The union asked that the court declare (1) that the two MOUs “are in full force and effect,” (2) that Governor Ehrlich breached his Constitutional and statutory obligations by failing to request appropriations to fund the increases provided for in those MOUs, (3) that DBM breached statutory duties by failing to adopt regulations defining unfair labor practices and to provide administrative support to SLRB, and (4) that SLRB breached its obligation under the Administrative Procedure Act to adopt procedural regulations to permit declaratory ruling proceedings, and to investigate and remedy alleged unfair labor practices.

It asked, as well-that the court direct the Governor to request the necessary appropriations and direct DBM and SLRB to adopt appropriate regulations. ⁶⁰⁵ After hearing argument on cross motions for summary-judgment, the court, on October 17, 2003, entered a memorandum opinion and order in which it concluded, in relevant part, that: (1) By directing Mr. Lynch to sign the MOUs, Governor Glendening effectively ratified them, and that they therefore constituted “binding contracts” between the State and AFSCME; (2) In light of Maryland Code, § 3-205 of the State Government Article, which is part of the Gubernatorial Transition Act, Governor Ehrlich, in submitting his budget to the General Assembly, was not bound by the economic terms of the MOUs and was not required to submit an appropriation for pay raises agreed to by the Glendening Administration; (3) The MOUs were not signed and did not become final agreements until January 14, 2003, and therefore did not comply with the requirement of SPP § 3 — 501 (c)(2)(i) that the parties conclude negotiations before January 1 for an item requiring an appropriation of funds; (4) The Secretary of Budget and Management had adopted procedural regulations governing petitions and proceedings for declaratory rulings; and (5) Although the Secretary was not required to adopt regulations governing unfair labor practices, AFSCME was not barred from proceeding, in the instant litigation, to demand that they do so. Implicit in the first two findings is that, although Governor Ehrlich was not required to fund the economic provisions of the MOUs, the non-economic terms of those agreements were binding on the defendants. That point was made explicit in a subsequent order denying the defendants’ request for a stay. In that order, entered December 31, 2003, the court stated that it had relied on SPP §§ 3 — 501(d)(l)(i) and 3 — 601(c) “in determining that the non-economic terms of the MOUs were binding.” ⁶⁰⁶ The defendants noted a timely appeal from the order, complaining that the court erred in finding that Governor Glendening had ratified the MOUs.

Their position is that no ratification occurred and that, in the absence of ratification, the MOUs were entirely ineffective. AFSCME filed a cross-appeal, complaining about the declaration that the Secretary was not required to adopt regulations governing unfair labor practices. By not pursuing the issue, AFSCME has abandoned its argument that Governor Ehrlich was required to include in his budget appropriations sufficient to fund the economic terms of the MOUs — essentially the 2% wage increase. We granted certiorari on our own initiative prior to proceedings in the Court of Special Appeals. 1 DISCUSSION Effectiveness of the MOUs The major issue at the Circuit Court level was whether Governor Ehrlich was obliged to fund the wage increases agreed to by Governor Glendening.

The defendants argued that he was not so obliged for three reasons: (1) the MOUs were never ratified by Governor Glendening and therefore never became effective at all; (2) they were not, in any event, signed by January 1, 2003, which was a prerequisite with respect to any term requiring an appropriation; and (3) even if the MOUs were properly signed and ratified, in light of provisions in Article III, § 52 of the Maryland Constitution and § 3-205 of the State Government Article, Governor Ehrlich was entitled to present his own budget to the General