Haub v. Montgomery County

⁴⁵⁰ ELDRIDGE, Judge. This case involves an effort by some Montgomery County merit system employees to obtain administrative and judicial review of provisions in the County’s operating budget for fiscal year 1996, as proposed by the County Executive and enacted by the County Council, which “privatized” certain county government functions. I. Montgomery County is a home rule county, having adopted a charter pursuant to Article XI-A of the Maryland Constitution. As we have pointed out, “[a] home rule county charter is a local constitution.” Bd. of Election Laws v. Talbot County, 316 Md. 332, 341 , 558 A.2d 724, 728 (1988).

Furthermore, under Article XI-A, § 1, of the Maryland Constitution, it is appropriate for a county home rule charter to contain a “system for budgeting and appropriating revenues,” Annapolis v. Anne Arundel County, 347 Md. 1, 15 , 698 A.2d 523, 530 (1997). Article 3 of the Montgomery County Charter sets forth the budgetary process for Montgomery County. The Montgomery County budget system differs somewhat from the type of executive budget systems in several other charter counties and at the state government. level. 1 Under § 302 of the Montgomery County Charter, the County Executive is required to “submit to the [County] Council, not later than March 15 of each year, comprehensive six-year programs for public services and fiscal policy.” The County Council, by a majority vote, is to approve, or modify and approve, these six year programs. Section 303 of the Charter provides, inter alia, that the County Executive by March 15th of each year must submit to the County Council a proposed operating budget for the ⁴⁵¹ ensuing fiscal year, “including recommended expenditures and revenues____” The proposed operating budget “shall be consistent with the six-year programs.” Section 305 of the Charter authorizes the County Council to “add to, delete from, increase or decrease any appropriation item in the operating ... budget.” The same section goes on to require that the “Council shall approve each budget, as amended, and appropriate the funds therefor not later than June 1 of the year in which it is submitted.” Section 305 also mandates that the County Council, by June 30th of each year, make tax levies necessary to finance the budget for each year.

Under § 306 of the Charter, the County Council, upon approval of the budget, must deliver it to the County Executive who, within ten days after delivery, “may disapprove or reduce any item contained in it.” If the Executive vetoes or reduces any item, the budget is returned to the County Council which has until June 30th of each year to override the Executive’s action. With certain exceptions, a two-thirds vote of the Council is required to override the Executive’s veto or reduction. Article 4 of the Montgomery County Charter concerns the merit system. Section 401 of the Charter provides that the County Council “shall prescribe by law a merit system for all officers and employees of the County government” with specified exceptions.

Section 401 goes on to state that any law which “designates a position as a non-merit position” must be enacted by a two-thirds vote of the Council. In addition, § 401 provides that “[officers and employees subject to a collective bargaining agreement may be excluded from provisions of law governing the merit system only to the extent that the applicability of those provisions is made subject to collective bargaining by legislation enacted under Section 510, Section 510A, or Section 511 of this Charter [relating to collective bargaining for county employees].” Section 401 also states that “[t]he merit system shall provide the means to recruit, select, develop, and maintain an effective, nonpartisan, and ⁴⁵² responsive work force with personnel actions based on demonstrated merit and fitness.” Section 402 of the Charter requires the County Executive to adopt personnel regulations for the administration and implementation of the merit system law. Section 403 creates a “Merit System Protection Board,” and § 404 provides that a merit system employee “who is removed, demoted, or suspended shall have, as a matter of right, an opportunity for a hearing before the Merit System Protection Board____” Section 404 further provides that the “decisions of the Board ... shall not be subject to review except by a court of competent jurisdiction.” The statutory provisions implementing Article 4 of the Charter more specifically provide that final decisions of the Merit System Protection Board are subject to judicial review in the Circuit Court for Montgomery County under the judicial review standards of the State Administrative Procedure Act, Maryland Code (1984, 1995 RepLVol.), § 10-222 of the State Government Article, and that decisions of the circuit court in such cases may be appealed to the Court of Special Appeals. See § 33-15 of the Montgomery County Code.

The Montgomery County Code provisions implementing Article 4 of the Charter provide that “[a]ny merit system employee ... who has been notified of impending removal, demotion or suspension shall be entitled to file an appeal to the” Merit System Protection Board and receive a hearing. See § 33-12(a) of the Montgomery County Code. Section 33-12(b) of the Montgomery County Code appears to grant rights in addition to those set forth in Article 4 of the Charter, stating in relevant part as follows: “(b) Grievances. A grievance is a formal complaint arising out of a misunderstanding or disagreement between a merit system employee and supervisor with reference to a term or condition of employment.

The determination of the board as to what constitutes a term or condition of employment shall be final. Grievances do not include the following: ⁴⁵³ Classification allocations, except due process violations; failure to reemploy a probationary employee; or other employment matters for which another forum is available to provide relief or the board determines are not suitable matters for the grievance resolution process. * * * ” The Montgomery County personnel regulations adopted by the County Executive, in § 29-2, also provide for appeals to the Merit System Protection Board when a merit system employee has a “grievance” concerning “a term or condition of employment.” 2 II. In March 1995, the County Executive of Montgomery County, in submitting to the County Council the proposed operating “Budget and Public Services Program” for fiscal year 1996, recommended contracting out and privatizing certain ⁴⁵⁴ county government functions and services previously performed by county employees. 3 In April 1995, 156 county merit system employees received notices that positions in their various job classifications or occupational classes were targeted for abolition based upon the proposed budget for the next fiscal year. These programs and services would not be terminated if the proposed budget was passed; rather, the functions would no longer be provided by county merit system employees.

Receipt of a “notice of intent letter,” however, did not necessarily mean that a particular employee’s position would be abolished. The county administrative procedure regulations require that notices be provided to all employees in the targeted occupational class even if only one position in that class may be affected. On May 2, 1995, the merit system employees who received the “notice of intent letters” filed complaints with the Montgomery County Office of Human Resources. The relief requested by the employees was that “the privatization or contracting out of these programs, functions and services be withdrawn and rescinded; that these programs, functions and services continue to be performed—if at all—by County merit system employees; and that all merit system employees adversely affected by any of the privatization or contracting be restored and made ⁴⁵⁵ whole for any losses in pay or other remuneration, benefits, or adverse effects on any terms or conditions of employment.” The budget and public services programs, including the privatizing/contracting out provisions, were approved by the County Council and went into effect on July 1, 1995, prior to a decision on the employees’ complaints by the Office of Human Resources.

In a decision rendered on July 7, 1995, by the Labor/Employee Relations Manager of the Office of Human Resources, and reiterated in August 1995 by the Director of the Office of Human Resources, the Office decided that the complaints were not grievable under the Charter, the merit system ordinances and the personnel regulations. The Office pointed out that the employees “seek to contest the right of the County to contract out/privatize certain government functions. More specifically, [they seek] that the contracting out/privatization of certain services and programs recommended by the County Executive in the FY1996 General County Government Budget and adopted by the County Council be ‘withdrawn and rescinded.’ ” (Emphasis added). The Office went on to state that the employees involved are covered by collective bargaining agreements, that if the complaints were grievable the exclusive forum would be the collective bargaining contract grievance procedure, but that, as the employees acknowledged, “contracting out/privatization of government work is not negotiable under the County Collective Bargaining Law.” The Office took the position that employees covered by a collective bargaining agreement cannot use the merit system grievance procedure to complain about matters which are covered by the collective bargaining law and deemed management functions and thus not grievable under the collective bargaining law.

The Office also rejected the employees’ reliance on § 401 of the Montgomery County Charter, saying: “The [employees] argue that by operation of Charter Section 401 the subject matter of their complaint is properly ⁴⁵⁶ grieved, as the ‘involuntary removal of government work and service from Merit System employees presents perhaps the most fundamental controversy over terms and conditions of Merit System employment ... ’ Moreover, [the employees] have construed the language of Section 401 to mean that to ‘recruit, select, develop and maintain an effective, non-partisan, and responsive work force with personnel actions based on demonstrated merit and fitness,’ permits employees to grieve management decisions which determine the budget, mission and services to be rendered by the government.... “Contrary to the [employees’] position, maintaining an effective, non-partisan and responsive work force is achieved by those merit system actions which result in the evaluation, training, compensation, promotion, demotion, transfer, separation, etc. of employees. It is certain aspects of these actions that are the conditions of employment to which employees may grieve and obtain relief, and not the decision as to what and how the services will be performed. “The [employees] are incorrect in maintaining that removal of government work and service is a condition of employment to which there is some employee right. The authority for the allocation of resources funded by tax revenues are established by Charter and determined as recommended by the County Executive and approved by the County Council. “The opportunity to grieve and obtain relief through the [employees’] complaints would result in the undoing of appropriation decisions made by the County Executive and approved by the County Council contrary to their Charter authority. These decisions are fundamental to the operation and administration of the County Government.” The employees appealed to the Merit System Protection Board which on January 23,1996, sustained the decision of the Office of Human Resources.

The Board agreed with the Office that the complaints were not grievable under the procedure set forth in the merit system ordinances and regulations ⁴⁵⁷ because the subject was covered by the collective bargaining law and was a non-grievable management function under that law. The Board also held that the matter was not a grievable employment condition under the merit system law and regulations but was the prerogative of the County Executive and County Council under the budget provisions of the County Charter, and particularly under §§ 302 and 305 of the Charter. Thereafter, the employees filed in the Circuit Court for Montgomery County the present action for judicial review of the Merit System Protection Board’s decision. At the conclusion of the hearing before the circuit court, the court rendered an oral opinion upholding the decision of the Board.

The court initially addressed a question raised by the court during the hearing, namely whether the grievances were premature because there had been no showing that any employees had yet been adversely affected by the enacted budget. After pointing out that this question was neither decided nor raised at the administrative level, and that, therefore, the issue might not properly be before the court, the circuit court nevertheless held that the grievances were not premature. The court went on to disagree with the County’s position and the Board’s holding that the matter was not grievable under the merit system law because it was dealt with and deemed a management function under the collective bargaining law. The court, however, agreed with the alternative ground for the administrative decision that the contracting out and privatizing decisions were not grievable under the merit system law and the Charter but constituted “legal” actions by “the elected officials.” The circuit court continued: “The Court does not believe, therefore, that it is a grievable issue.

In the scheme of things, and the way the Court interprets they were intended, the ultimate decider on the overall policy within the county is not with any appointed board, but it is with the elected officials of the county. “And within the county charter, there are provisions for the adoption and implementation of budgets and programs for the county, and the Court believes that they are within ⁴⁵⁸ the prerogative of the comity elected officials to consider and enact and implement without oversight by any board including the Merit Systems Protection Board.” The court entered a written order on August 28, 1996, affirming the decision of the Merit System Protection Board. The employees appealed to the Court of Special Appeals. Prior to oral argument in the intermediate appellate court, this Court issued a writ of certiorari. Haub v. Montgomery County, 844 Md. 568 , 688 A.2d 447 (1997).

III

The employees argue that contracting out and privatization are grievable under the merit system grievance procedures primarily because they concern terms or conditions of employment and therefore fall within the definition of grievance contained in § 33-12(b) of the Montgomery County Code. The employees advocate a • broad interpretation of the phrase “terms and conditions,” contending that it is comprehensive enough to include decisions to contract out or privatize public employees’ work. They rely on several cases dealing with federal labor law. In addition, the employees urge that the Charter’s language “that ‘[t]he merit.system shall provide the. means to •... maintain an effective, nonpartisan and responsive work force ...’” is a “fundamental mandate from the citizens of Montgomery County [which] requires that the county work force be ‘preserved from failure or decline’ within the [scope] of the Merit System.” (Appellants’ reply brief at 10-11).

The employees maintain that “[t]he Merit System’s integrity is put squarely at issue in this controversy” because the Merit System Protection Board exists “ ‘to assure that employees are treated fairly, are treated in a manner that is .consistent with laws, rules, regulations ..., [and] that we not have the spoils system____’ ” (Appellants’ opening brief at 10, quoting the circuit court). The employees argue that the merit system is designed to prevent public policy formation and implementation by outsiders. They claim that if the employees are not allowed to grieve contracting out and privatizing decisions, it would in essence allow “the ‘democrati ⁴⁵⁹ cally instituted’ Merit System to be effectively disowned by the very government administration which is bound by the Charter and Code to protect and nurture it.” (Appellants’ reply brief at 10). ' Montgomery County argues that significant policy considerations require that contracting out/privatizing decisions be exempt from the merit system grievance procedure. Both the employees and the County agree that the grievances are not cognizable under the collective bargaining agreement or collective bargaining laws because Montgomery County’s collective bargaining law has expressly excluded collective negotiation on contracting out and privatizing. 4 The County argues that “[w]here the matter may not be grieved because it is expressly committed to the management’s discretion under the collective bargaining statute, it is not a ‘term or condition of employment’ grievable under the merit system.” (Appellee’s brief at 11).

The County maintains that “only those merit system actions which result in the evaluation, training, compensation, promotion, demotion, transfer, separation, (and similar actions) of employees may be challenged. It is certain aspects of these actions that comprise the terms and conditions of employment which remain subject to the grievance process and not the decision as to what and how the services will be performed.” (Appellee’s brief at 24-25). According to the County, the decision as to whether to contract out or privatize a function is “an important policy decision which is committed to [a governmental employer’s] discretion” and is only “reviewable in the political arena, not in the confines of collective bargaining or grievance resolution. ⁴⁶⁰ This is especially the case where the governing public sector collective bargaining statute expressly makes the decision to contract out work a non-bargainable matter.” (Appellee’s brief at 21). The County insists that, to allow these decisions to be either arbitrable in the collective bargaining context or grievable under the merit system laws, would corrupt the democratic process. “Management rights in the public sector are designed to ensure that the government’s responsibility to make and implement public policy is properly decided by the political process____” (Appellee’s brief at 18).

Furthermore, the County asserts that the request by the employees that the privatization be withdrawn and rescinded “is beyond the scope of relief the [Merit System Protection] Board may order as envisioned by the merit system law.” (Appellee’s brief at 27). The County argues that the employees could challenge an adverse personnel action such as suspension, demotion, or dismissal but that they are not able to. seek relief by “undoing [the] appropriation decisions made by the County Executive and approved by the County Council. These decisions are fundamental to the operation and administration of the County Government.”