Alaska Public Employees Ass'n v. State , 1992 Alas. LEXIS 35 ( 1992 )

OPINION

BURKE, Justice.

This case requires that we decide whether the state’s classification plan for state jobs and its assignment of salary ranges to that plan are mandatory subjects of collective bargaining under Alaska’s Public Employment Relations Act (PERA). We conclude that these are not mandatory subjects of collective bargaining. Accordingly, we affirm the decisions of the administrative agency and the court below.

I

Pursuant to the State Personnel Act, AS 39.25, the state must establish a “position classification plan” for all state employees covered by the Act.¹ Under such a plan, each position, or job, is assigned to a class based on duties, responsibilities, and requirements of training or experience. The Personnel Act also requires the state to establish a pay plan for all classified positions.² Under the pay plan, the job classes are assigned to salary ranges, and then pay rates are assigned to the salary ranges.

During the 1980s, the Alaska Public Employees Association (APEA) was the collective bargaining representative for two bargaining units of state employees — the General Government Unit (GGU) and the Supervisory Unit. Together, these two units comprised more than 7,500 state employees in approximately 1,000 different job classifications. Prior to 1987, the APEA and the state had negotiated agreements for both units that permitted the state to classify jobs and to assign salary ranges to the classifications.³ The agreements also provided APEA with an appeal procedure by which the union could contest the state’s job classification decisions and salary range assignments up through the Department of Personnel to, ultimately, the Commissioner of Administration. When the APEA and the state entered into negotiations for new agreements to replace those that expired on June 30, 1987, APEA proposed to alter the provisions covering the union’s right to contest job classifications and salary range assignments. In particular, APEA wanted the new contracts to provide that all job classification and pay plan disputes would be resolved through a grievance procedure with binding arbitration as its final step.

The state, as employer, was no stranger to the sort of provision APEA attempted to bring to the bargaining table in 1987. Indeed, the state previously had negotiated collective bargaining agreements with two unions — Public Employees Local 71 (Local 71) and Public Safety Employees Association (PSEA) — that included provisions essentially identical to the one APEA proposed. Nonetheless, the state refused to consider APEA’s proposed provision.

In June 1987, APEA filed with the State of Alaska Labor Relations Agency (the Agency) an unfair labor practice complaint against the state. The complaint alleged, among other things, that classification plans and salary range assignments were mandatory subjects of bargaining under PERA, AS 23.40.070-.260, and that by refusing to bargain over those subjects the state had violated the duty to bargain in good faith.

After the filing of the unfair labor practice complaint, APEA and the state tentatively approved new collective bargaining agreements. The parties also agreed to dismiss without prejudice all charges in the unfair labor practice complaint other than those related to bargaining over job classification and salary assignment. Accordingly, APEA and the state fully briefed the remaining issues and, on August 26, 1987, the Agency issued an Order and Decision in the case. The Agency concluded that job classifications and salary range assignments were permissive, but not mandatory, subjects of bargaining under PERA. This was so, explained the Agency,

because AS 23.40.250(8) [of PERA] excludes from mandatory collective bargaining subjects, those “general policies describing the function and purposes of a public employer.” Those roles include the constitutional obligation of the employer to maintain a merit system, as amplified in AS 39.25.010 [of the Personnel Act], and the public policy duty to maintain a rational integrated system of classification.

Consequently, the Agency held that the state had not committed an unfair labor practice when it refused to bargain over APEA’s proposed contract provision.

APEA appealed the Agency’s decision to the superior court. Alaska State Employees Association (ASEA), as the current bargaining representative for the GGU, was permitted to intervene; PSEA was permitted to participate as amicus curiae. On August 18, 1989, the superior court, Judge John Bosshard III, issued a Memorandum Opinion and Judgment affirming the Agency decision in the case. APEA and ASEA have appealed the superior court decision; Local 71 has entered the case as amicus curiae.

II

We have applied two different standards when reviewing decisions by administrative agencies.⁴ “[W]here the questions of law presented do not involve agency expertise or where the agency’s specialized knowledge and experience would not be particularly probative as to the meaning of the statute,” we have applied the independent judgment standard. Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746 P.2d 896, 903 (Alaska 1987) (emphasis removed). However, “where the questions at issue implicate special agency expertise or the determination of fundamental policies within the scope of the agency’s statutory function,” we have applied the rational basis standard. Id.

Normally, a choice between these two standards of review carries particular importance as a ruling on the extent to which the courts properly should defer to an agency’s decision in a particular type of case. In the present case, however, close analysis of the standard of review question would produce nothing of practical significance. At the time APEA filed its unfair labor practice complaint, AS 23.40.250(3) provided that the labor relations agency responsible for administering PERA with regard to the state and state employees was the state personnel board. AS 23.40.-250(3), as enacted by ch. 113, § 2, SLA 1972. Subsequently, the governor, by executive order, created a new labor relations agency whose responsibilities combine “the labor relations functions of the Department of Administration personnel board, the Department of Labor, and the railroad labor relations agency into one state agency, the Alaska labor relations agency, in the Department of Labor.” Executive Order No. 77 (1990) (amending, inter alia, AS 23.40.-250(3)). We decline this opportunity to rule on the proper deference due either to the decision of a defunct agency or to the decisions of a new agency that had no involvement whatsoever with the case before us. Instead, we note that our holding today would be the same under either the independent judgment standard or the rational basis standard of review.

Ill

The stated purpose of PERA is to give public employees “the right to share in the decision-making process affecting wages and working conditions.” AS 23.40.-070.⁵ Accordingly, PERA specifically requires public employers to “negotiate with and enter into written agreements with employee organizations on matters of wages, hours, and other terms and conditions of employment.” AS 23.40.070(2). Such matters are “mandatory subjects of bargaining.” Alaska Community Colleges’ Fed’n of Teachers, Local 2404 v. University of Alaska, 669 P.2d 1299, 1305 (Alaska 1983) (Federation of Teachers). Another section of PERA provides that “ ‘terms and conditions of employment’ means the hours of employment, the compensation and fringe benefits, and the employer’s personnel policies affecting the working conditions of the employees; but does not mean the general policies describing the function and purposes of a public employer.” AS 23.40.-250(8).

As previously explained, the coordination of classification and pay plans for state employees consists of a three-step process: (1) each job is assigned to a class; (2) each job class is assigned to a pay range; and (3) salaries are assigned to each pay range. The question before us is whether steps one and two of the process properly fall within the “general policies” clause of AS 23.40.250(8).⁶ If they do, then the state did not commit an unfair labor practice by refusing to negotiate with APEA on those subjects. See AS 23.40.110(a)(5).

A

In this case, the Agency and the superior court both concluded that the merit principle was the most important employer policy implicated in the classification and pay plans. We agree.

The Alaska Constitution requires the legislature to “establish a system under which the merit principle will govern the employment of persons by the State.” Alaska Const, art. XII, § 6. Generally defined, the merit principle requires the recruitment, selection, and advancement of public employees “under conditions of political neutrality, equal opportunity, and competition on the basis of merit and competence.” R. Vaughn, Principles of Civil Service Law § 9.3[6], at 9-27 (1976) (quoting Stanley, What Are Unions Doing to the Merit Principle?, 31 Pub.Personnel Rev. 109 (1970)). In actual practice, however, “the merit principle is more complex and ambiguous than the above definition reveals.” Id. Our legislature adopted the Personnel Act for the express purpose of implementing the constitutionally mandated merit principle in state employment. AS 39.25.010(a). Clearly recognizing the complexity of its task, our legislature also provided a detailed definition for the merit principle.⁷ Thus, by statute, “[t]he merit principle of employment includes ... regular integrated salary programs based on the nature of the work performed.” AS 39.25.010(b). The elements of the merit principle’s “salary programs,” of course, are the classification plans and the salary plans adopted pursuant to AS 39.25.150.

With this understanding of the merit principle in mind, we turn now to the specific matters that the unions would have us categorize as mandatory subjects of bargaining.

B

The easier issue on appeal relates to the state’s statutory duty under AS 39.25.-150(1) to establish a job classification plan. The unions do not contend that job classification concerns wages or hours. The unions do contend, however, that the assignment of jobs to classes necessarily falls within the scope of the state’s “personnel policies affecting the working conditions of the employees.” AS 23.40.250(8). In response, the state argues that job classification falls within the scope of “the general policies describing the function and purposes of a public employer.” Id. We agree with the state.

A salary program must begin with a carefully designed framework of job descriptions and classifications — the “position classification plan” mandated by AS 39.25.-150(1).⁸ A job classification plan, then, is an integral part of the very foundation of the merit principle in state employment. Any collective bargaining provision that would affect directly the state’s job classification plan also would affect directly the preeminent general policy governing state employment administration. We are convinced that AS 23.40.250(8) excludes that sort of basic policy decision from the mandatory subjects of bargaining listed in AS 23.40.070(2).⁹

C

We come then to the more troublesome aspect of this case. The primary problem emerges from the statutory language in the Personnel Act that charges the director of personnel with responsibility for creating personnel rules that “shall provide for”

(2) the preparation, maintenance, revision and administration by the director of personnel of a pay plan for all positions in the classified and partially exempt services; the pay plan (A) shall be based upon the position classification plan; (B) shall provide for fair and reasonable compensation for services rendered, and reflect the principle of like pay for like work; (C) may be amended, approved, or disapproved by the legislature in regular or special session; after the pay plan is in effect, a salary or wage payment may not be made to a state employee covered by the plan unless the payment is in accordance with this chapter and the rules adopted under this chapter or unless the payment is in accordance with a valid [collective bargaining] agreement entered into in accordance with AS 23.40 [PERA]....

AS 39.25.150(2). The pay plan described in this subdivision of the statute, of course, encompasses steps two and three of the general classification and wage establishment process: after job classification is done, the pay plan assigns salary ranges to the individual classes and then assigns actual dollar figures to each salary range. All parties here agree that the assignment of actual dollar figures to the salary ranges is a matter of “wages” and thus a mandatory subject of bargaining. See AS 23.40.070(2). The only question is whether step two also is a mandatory subject of bargaining under AS 23.40.250(8).

To begin with, we find the final clause of subdivision (2) ambiguous. The clause alludes to the controlling effect a collective bargaining agreement might have on the actual salary or wage payment a covered state employee may receive. Certainly that language reinforces the conviction that the legislature intended the state to bargain collectively with public employee unions over the actual determination of salary amounts certain classified employees will receive. However, the statute does not answer the question whether the legislature also intended to give public employee unions the right to demand bargaining over salary or wage range assignments to job classes.

Other provisions of the Personnel Act bring the problem closer to focus. For example, as we have noted, the legislature’s own definition of the merit principle includes “regular integrated salary programs.” AS 39.25.010(b)(2) (emphasis added). A salary program is the schedule produced by integrating the applicable job classification plan with the applicable pay plan. See AS 39.25.150(1) & (2). Thus, arguably, the first aspect of the pay plan— the assignment of salary ranges to job classes — actually embodies, in practical form, the state’s preeminent policy of establishing a system of personnel administration according to the merit principle. Accordingly, we agree with the state that collective bargaining over assignment of salary ranges to job classes necessarily impinges upon the merit principle, which generally is not a mandatory subject of bargaining.

On the other hand, we also agree with the unions that the assignment of salary ranges to job classes undeniably impinges upon the issue of “compensation ... and the employer’s personnel policies affecting the working conditions of employees,” AS 23.40.250(8), which usually are mandatory subjects of bargaining. Thus, on the issue of salary range assignments, employee and governmental interests substantially overlap. It is precisely this overlapping of interests that we recognized when we recently called the problem of categorizing the issue “a close and difficult question.” State v. Public Safety Employees Ass’n, 798 P.2d 1281, 1287 (Alaska 1990) (Public Safety Employees Ass’n).¹⁰

Of course, in some respects, the overlap of employer and employee interests on this issue actually may benefit public employment administration. As we explained in PSEA:

State employees are as familiar with their qualifications and positions as their administrators are. They may be able to make a valuable ' contribution to the process of assigning positions to salary ranges. In this respect, giving public employees a voice in matters like salary range classification seems consistent with the purposes of the [Personnel] Act.

Id. at 1286. Consequently, the assignment of salary ranges clearly should be a permissive subject of bargaining. The state definitely should give its employees a voice in salary range assignments, by bargaining over the assignments, when the state considers such interaction beneficial to the larger mission of public employment. Nevertheless, the final question is whether unionized employees should have the power to constrain the state to bargain collectively over matters related to the merit principle. We believe that a satisfactory answer to this question emerges when we interpret the controlling statutes in light of our own prior cases on the proper scope of collective bargaining under PERA.

In Kenai Peninsula Borough School Dist. v. Kenai Peninsula Educ. Ass’n, 572 P.2d 416 (Alaska 1977) (Kenai I), we enunciated a general balancing test for determining whether an issue of public education was negotiable in collective bargaining between a teachers’ union and the local government under AS 14.20.550-.610 (mediation and negotiation in public education employment). In general, we wrote, “a matter is more susceptible to bargaining the more it deals with the economic interests of employees and the less it concerns professional goals and methods.” Id. at 422. Subsequently, of course, we held that PERA establishes the distinction between mandatory and permissive subjects of bargaining and makes refusal to bargain over mandatory subjects an unfair labor practice. Federation of Teachers, 669 P.2d at 1305. We now adapt the Kenai I balancing test for “negotiability” to the Federation of Teachers division between mandatory and permissive subjects of bargaining in cases, such as this one, where the government employer’s constitutional, statutory, or public policy prerogatives significantly overlap the public employees’ collective bargaining prerogatives. We conclude that a matter is more susceptible to categorization as a mandatory subject of bargaining the more it deals with the economic interests of employees and the less it concerns the employer’s general policies.

When we apply this test in the present case, we conclude that salary range assignment cannot be a mandatory subject of bargaining under the state’s present system of implementing its “regular, integrated salary programs.” Admittedly, state employees have strong economic interests in the assignment of salary ranges to classifications. However, the countervailing policy concern at work here is, by specific provision of the Personnel Act, the weightiest one in the state employer’s trust. See Alaska Const, art. XII, § 6; AS 39.25.010. No similarly specific prerogative exists on the unions’ side of the balance. Indeed, in PERA the legislature expressly reinforces the importance of the merit principle and rather pointedly refrains from stating that implementation of the merit principle may ever be mandatorily contingent upon the approval of its employees or of outside arbitrators. See AS 23.40.070.¹¹ This contrast between the state’s strong, specific, express mandate to act and the employees’ more diffuse, general, limited entitlement to bargain is important in our balance of the competing interests here.

Also important to our decision here, however, is the fact that the collective bargaining representatives of state employees may demand that the state bargain over the actual pay scales assigned to the state-designed salary ranges. Thus, the employees do have some mandatory influence, at the most concrete level, in the final shape of their pay plans. If this were not so, then the employees’ interest in the assignment of salary ranges would increase markedly and might outweigh the state’s interest in the merit principle, insofar as the principle inheres in assignment of salary ranges to job classes. Accord AS 23.-40.070 (purpose of PERA is to grant public employees “the right to share in the decision-making process affecting wages and working conditions” through collective bargaining); AS 39.25.150(2) (Personnel Act approves determination of wage payments according to collective bargaining agreements entered into under PERA). On its face, however, the mandatory right to bargain over the final step by which the state integrates its job classification and pay plans currently provides unionized employees adequate exercise of the mandatory bargaining prerogative granted them in AS 23.40.070(2). Accordingly, we hold that the assignment of salary ranges to job classes is not a mandatory subject of collective bargaining between the state and its employees’ collective bargaining representatives.

IV

APEA also argued before the Agency, and now argues on appeal, that even if job classification and salary range assignment are not mandatory subjects of collective bargaining, the state still must submit disputes over those issues to binding arbitration. We disagree. Binding arbitration is not absolutely available when the matter in dispute is not a mandatory subject of bargaining. See Kenai Peninsula Educ. Ass’n v. Kenai Peninsula Borough School Dist., 628 P.2d 568, 569 & n. 1 (Alaska 1981).

APEA's agreements with the State contained no provision for mandatory arbitration of classification plan and pay range assignment disputes, and no basis exists for the implication of such a remedy. See supra note 3 and accompanying text (describing APEA’s bargained-for appeals procedure for the state’s job classification and salary range assignment decisions). Under the facts of this case, the state’s actions related to job classification and salary range assignments are not subject to binding arbitration.

The superior court decision affirming the State Labor Relations Agency Order and Decision No. 110 is AFFIRMED.

1 . AS 39.25.150(1). The director of the state personnel division of the executive branch of government, the state personnel board, and the commissioner of administration all share responsibility for establishing the classification plan. Id.

2 . AS 39.25.150(2). The director of personnel alone has responsibility for preparing, maintaining, revising, and administering the pay plan. Id.

3 .Article 19 of the General Government Unit agreement covered job classification; Article 18 of the Supervisory Unit agreement was an identical provision.

4 . We scrutinize the merits of the Agency’s decision directly, without deference to the superior court’s intermediate appellate decision. Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746 P.2d 896, 903 (Alaska 1987).

6 . All parties in this case agree that step three— assignment of actual salaries to the pay plan — is a matter of wages within the meaning of AS 23.40.070(2), and thus a mandatory subject of collective bargaining.

7 .AS 39.25.010 provides in full:

(a) It is the purpose of this chapter to establish a system of personnel administration based upon the merit principle and adapted to the requirements of the state to the end that persons best qualified to perform the functions of the state will be employed, and that an effective career service will be encouraged, developed and maintained.

(b) The merit principle of employment includes the following:

(1) recruiting, selecting, and advancing employees on the basis of their relative ability, knowledge, and skills, including open consideration of qualified applicants for initial openings;

(2) regular integrated salary programs based on the nature of the work performed;

(3) retention of employees with permanent status on the basis of the adequacy of their performance, reasonable efforts of temporary duration for correction in inadequate performance, and separation for cause;

(4) equal treatment of applicants and employees with regard only to consideration within the merit principles of employment; and

(5) selection and retention of an employee’s position secure from political influences.

8 . A job, or “position,” classification plan first requires "a grouping together of all positions on the basis of duties and responsibilities.” AS 39.25.150(1)(A).

9 . As the state notes, other jurisdictions generally agree with our conclusion here. See, e.g., In re State Employees' Ass'n of New Hampshire, Inc., 120 N.H. 690, 422 A.2d 1301, 1303 (1980). The unions, by contrast, have not brought a single authority to our attention in support of their argument that job classification is a mandatory subject of bargaining.

10 . In Public Safety Employees Ass’n we also noted that “[d]ecisions in other jurisdictions are not very helpful because many states have more-detailed provisions addressing this question.” 798 P.2d at 1286. Indeed, even when other courts address the question of mandatory public sector bargaining in general terms, the results are idiosyncratic. Compare Central Michigan Univ. Faculty Ass’n v. Central Michigan Univ., 404 Mich. 268, 273 N.W.2d 21, 26 (1978) (even if aspect of employment relationship may be said to be only minimally a condition of employment, it is a mandatory subject of bargaining) with University Educ. Ass’n v. Regents of the Univ. of Minnesota, 353 N.W.2d 534, 539 (Minn.1984) (if term or condition of employment and employer’s managerial policies "are so ‘inextricably interwoven’ that negotiation of the issue involves negotiation of the policy,” then the issue is not a mandatory subject of bargaining). Commentators likewise present sharply diverging views on the proper scope of public sector collective bargaining. Compare Summers, Public Employee Bargaining: A Political Perspective, 83 Yale L.J. 1156, 1192-94 (1974) with Developments in the Law — Public Employment, 97 Harv. L.Rev. 1611, 1684-99 (1984).

11 . The declaration of policy in PERA expressly includes a mandate to coordinate four distinct, and in some sense competing, interests:

The legislature ... finds that the enactment of positive legislation establishing guidelines for public employment relations is the best way to harness and direct the energies of public employees eager to have a voice in determining their conditions of work, to provide a rational method for dealing with disputes and work stoppages, to strengthen the merit principle where civil service is in effect, and to maintain a favorable political and social environment.

AS 23.40.070 (quoted in full supra note 5). Moreover, the final subsection of AS 23.40.070 reiterates the importance of the merit principle in public employment. Id. at (3). Thus, nowhere does AS 23.40.070 state or imply that collective bargaining and employee organizing shall be integral parts of a merit system of employment. On the contrary, PERA’s declaration of policy always refers to the merit principle as an important, independent policy that may limit employee rights if those rights conflict with the merit principle.