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MERC Decision: Multi-Year Contracts Can Lock in Health Cost-Sharing Choice

Kacie Kefgen

By Kacie Kefgen, MASB Assistant Director of Labor Relations and Legal Services

DashBoard, March 11, 2015

In February, the Michigan Employment Relations Commission ruled in favor of the Garden City Education Association in a dispute over whether it was permissible for the Garden City Public Schools to institute a mid-contract change to their health care cost-sharing system from an 80-20 to a hard cap cost-sharing system. Read this case here.

The dispute arose out of differing opinions about the impact of PA 152 of 2011, which requires public employers to limit the amount they may contribute to employee health care benefit plans of their employees. School districts, as public employers, must choose between contributing a maximum of 80 percent of the costs of the plans or a hard cap amount set by the Department of Treasury each year.

Just before the legislation became effective, GCPS and its teachers union agreed to a three-year collective bargaining agreement that covered the period between Sept. 1, 2011 through Aug. 31, 2014. In that CBA, the school district agreed to provide group insurance coverage for its teachers, and the teachers agreed to contribute 20 percent toward the health insurance premiums. A few months later, in December 2011, the school board voted to adopt the 80-20 option for the 2012 calendar year to comply with PA 152. In December 2012, the board again voted to adopt the 80-20 option for the 2013 calendar year. In December 2013, however, while the relevant CBA was still in force, the board voted to adopt the hard cap option. The union challenged this action by the board.

The ultimate question for MERC was whether by bargaining the 80-20 provision into their CBA the district obligated itself to choose the 80-20 option for itself during each of the three years covered by the CBA or whether it retained the freedom to choose between 80-20 and hard cap regardless of what the CBA stipulated.

MERC explained that the choice of health care cost sharing is a permissive subject of bargaining. Furthermore, the Commission explained that public employers must comply with both PA 152 and the Public Employment Relations Act, and they may not repudiate provisions in the CBA and must bargain in good faith. When the district agreed to the CBA 80-20 provision on health care cost sharing, it obligated itself to choose the 80-20 option during the period of the contract. By choosing the hard cap option for the third year of the contract, the district repudiated the contract and breached its duty to bargain in good faith.

If you have any questions about MERC decisions or other labor relations inquiries, please feel free to contact me at kkefgen@masb.org or 517.327.5914.

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