Attorney General's Opinion

Attorney General, Richard Blumenthal

April 18, 2000

The Honorable Eric D. Coleman
Co-Chair, Planning and Development
Senator, 2nd District
Legislative Office Building Room 2100
Hartford, CT 06106-159

The Honorable Jefferson B. Davis
Co-Chair, Planning and Development
Representative, 50th District
Legislative Office Building Room 2100
Hartford, CT 06106-159

Dear Senator Coleman and Representative Davis:

By letter dated March 28, 2000 you requested an opinion as to whether Substitute Senate Bill 311, "An Act Concerning The Observance of Martin Luther King Day," if enacted, would unconstitutionally impair a municipality's contracts with its employee collective bargaining units." We conclude that this legislation will be upheld if challenged in a court of law.

The proposed legislation requires (1) that any municipality that did not observe Martin Luther King (MLK) Day by closing nonessential offices shall close such nonessential offices on the designated holiday; (2) that notwithstanding the general statutes, each municipal employer and union not observing MLK Day as a legal holiday as of the effective date of this act shall reopen their collective bargaining agreement for the sole purpose of negotiating compensation or exchange of benefits, if any, for the observance of MLK Day; (3) that if any such municipal employer and union are unable to resolve the compensation or exchange of benefits issue by July 1, 2000, the parties shall submit to mediation through the State Board of Mediation and Arbitration (SBMA); and (4) that if the parties are unable to resolve the compensation or exchange of benefits issue by September 1, 2000, the parties shall submit the issue to the SBMA for binding arbitration not later than October 1, 2000 and the SBMA shall resolve it not later than November 30, 2000.

Article I, Section 10 of the Constitution of the United States provides that: "No state shall...pass impairing the Obligation of Contracts." Although the prohibition of the Contract Clause appears to proscribe "any" impairment, "'the prohibition is not an absolute one and is not to be read with literal exactness like a mathematical formula.' [Home Building and Loan Assn. V. Blaisdell], 290 U.S. at 428, 54 S.Ct. at 236 [1934]. Thus, a finding that there has been a technical impairment is merely a preliminary step in resolving the more difficult question whether that impairment is permitted under the Constitution." U.S. Trust Co. of New York v. New Jersey, 431 U.S. 1, 21 (1977), rehearing denied 431 U.S. 975 (1977).

The first inquiry is "whether the state law has, in fact, operated as a substantial impairment of a contractual relationship." Energy Reserves Group, Inc., v. Kansas Power and Light Co., 459 U.S. 400, 411 (1983) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244 (1978). With regard to the possible effect on the municipality of having to pay for an additional holiday day off, the municipality cannot invoke the protection of the impairment clause. Cranford Co. v. City of New York, 38 F.2d 52, 54 (2d Cir. 1930) ("municipal corporation is merely a department or arm of the state, and as such it cannot raise, as against legislative enactment...that it...impairs the obligation of the contract.") citing In City of Trenton v. State of New Jersey, 262 U.S. 182 (1923). Therefore, the question focuses on whether the state law has substantially impaired the contractual rights of the employees.

The more severe the impairment the greater scrutiny is given to the legislation. Energy Reserves Group, 459 U.S. at 411 quoting Allied Structural Steel Co., 438 U.S. at 245. The law requires each municipality that does not currently close on MLK Day to close on MLK Day in the future and to negotiate "compensation or exchange of benefits, if any, for the bargaining unit members covered by such agreement for observance of Martin Luther King Day." If no exchange of benefits results from arbitration and the municipality continues to pay the employees for the holiday, the employees would not incur a loss; they would gain a day's pay. Thus, that scenario would result in a benefit to the employees rather than an impairment of the employees' contractual rights. If an exchange of benefits is awarded then it is likely that there would be no substantial impairment because the value of the parties' bargain would be provided. Maryland State Teachers Association, Inc. v. Hughes, 594 F.Supp. 1353, 1363 (D.Md. 1984). See also El Paso v. Simmons, 379 U.S. 497, 506-08 (1965) ("it is not every modification of a contractual promise that impairs the obligation of contract"). Therefore, a mere technical change in the terms of the contract on one item may not be considered a substantial impairment. "Laws which restrict a party to those gains reasonably to be expected from the contract are not subject to attack under the contract Clause, notwithstanding that they technically alter an obligation of a contract." El Paso, 379 U.S. at 515. However, if arbitration resulted in no pay for the day off, then arguably this might constitute a substantial impairment because monies expected for that day1 may be necessary for the employees to meet their monthly expenses. See Condell v. Bress, et al, 983 F.2d 415, 418 (2d Cir. 1993) (withholding10 % of an employee's pay over 10 weeks could prevent employee from meeting short-term financial obligations).

Another factor that has been considered in determining the extent of the impairment is whether the industry the complaining party has entered has been regulated in the past such that the party enters the field subject to further legislation on the same topic. Energy Reserves Group, 459 U.S. at 411 citing Allied Structural Steel Co., 438 U.S. at 242 n.13 citing Viex v. Sixth Ward Bldg. & Loan Assn., 310 U.S. 32, 38 (1940). State legislation has designated state holidays for many years and has included MLK Day as a holiday since 1973. Thus, municipalities and their employees have been well aware of the legislative intent to demonstrate observance of MLK Day. Furthermore, collective bargaining rights of municipalities have been heavily regulated by legislation as set forth in MERA. Thus, the parties have entered their collective bargaining agreement subject to further legislation upon the same topic. Accordingly, the mandate of the proposed bill to reopen negotiations will be found to be appropriate.

Next, "if the state regulation constitutes a substantial impairment, the State, in justification, must have a significant and legitimate public purpose behind the regulation...." Id. at 411-12 citing United States Trust Co., 431 U.S. at 22. The remedying of a broad and general social problem has been accepted as a significant and legitimate public purpose. Id. at 412 citing Allied Structural Steel Co., 438 U.S. at 247, 249. It would appear that the state is exercising its legitimate police power by recognizing and honoring a great civil rights leader who pursued civil rights causes.

Finally, the "legislation adjusting the contracting parties' rights and responsibilities must be upon reasonable conditions and of a character appropriate to the public purpose justifying its adoption." United States Trust Co., 431 U.S. at 22. It is customary and proper when reviewing social regulation for courts to defer to legislative judgment as to the necessity and reasonableness of a particular measure. Id. citing East New York Savings Bank v. Hahn, 326 U.S. 230 (1945). In the proposed legislation, the adjusting of the parties' rights and responsibilities based on their collective bargaining agreement is "upon reasonable conditions" because the legislation provides for the parties to renegotiate. If the parties are unable mutually to resolve an exchange of benefits through the renegotiation process, then the law provides for mediation and, ultimately, arbitration by the SBMA to resolve the issue. Such an adjustment as is mandated by the proposed bill is of a character appropriate to the bill's purpose of observing MLK by closure.

We strongly recommend that the arbitration provision set forth in section 4 refer specifically to that which is set forth in MERA, Conn. Gen. Stat. § 7-473c so that there is no confusion as to who the arbitrators are or what process should be followed. The reference to SBMA is inappropriate since the municipalities are governed by MERA and the SBMA does not provide interest arbitration. Statutory interest arbitration panels are selected in accordance with Conn. Gen. Stat. § 7-473c. Interest arbitration provided by Conn. Gen. Stat. § 7-473c requires that the arbitrators be guided by certain statutorily specified factors when deciding to accept one or the other last best offers. Such statutory guidelines would support the reasonableness of the process.

In summary, we conclude that the legislation will be upheld if challenged in a court of law.

Very truly yours,

Richard Blumenthal
Attorney General

Beth Z. Margulies
Assistant Attorney General


1 We assume that the parties' collective bargaining agreement is a three year contract and at least the first year has already gone by. Thus, one day's pay for one or two years at most is at issue.

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