4th Court of Appeals holds City’s “evergreen clause” in collective bargaining agreement does not create unconstitutional debt

 

City of San Antonio v. San Antonio Firefighters’ Association, Local 624, 04-15-00819-CV (Tex. App. – San Antonio, August 23, 2017).

This is a permissive appeal, which was allowed by the court, where the City requested the Court of Appeals review the denial of its motion for summary judgment seeking to hold the “evergreen” clause of its collective bargaining contract, void as an unconstitutional debt. The court determined the clause was not an unconstitutional debt.

The City and firefighter union enter into multi-year collective bargaining agreement.  Because the contracts require council and union member approval, which takes time, the contracts have contained “evergreen” clauses which state the effective contract would continue in effect until a specified future date unless first replaced by a successor agreement or terminated by mutual agreement. At the time of suit, the Union and City had not adopted a successor agreement or terminated the current collective bargaining agreement (“CBA”). The City sought a declaration the clause was void as an unconstitutional debt or, in the alternative, as against public policy. The trial court denied the City’s summary judgment motion, which prompted this permissive appeal.

Article XI, Section 5 and Section 7 of the Texas Constitution prohibit debts by a city unless a sinking fund with revenue tax commitments are in place. The drafters intended to require local governments to operate on a cash basis and to limit their ability to pledge future revenues for current debts.  The court analyzed the term “debt” as referenced in the Texas Constitution. After analyzing case law, the court held a “debt” for constitutional purposes is a pecuniary obligation which cannot be satisfied out of current revenues for the year or savings. A contract can avoid constitutional infirmity if it is conditioned on a yearly appropriation of funds.  However, this CBA does not contain such a provision.  The City asserts “[w]hen the CBA was created in 2011, an absolute debt was created at once with only the time of payment being postponed.” The amount of the “debt” is presumably the total expense of complying with the contract, including the value of all the wages and benefits estimated to be due from 2011 through 2024.  According to the Union employee wages and benefits are not “debts” within the meaning of the Texas Constitution because no amount will be owed for a future year’s wages and benefits until work is performed by fire fighters and an obligation to pay them is incurred. The CBA sets a schedule of payments for when work is performed but is not a contract for employment. In order to succeed in its claims, the City must establish either that the entire CBA constitutes a debt or that non-severable obligations imposed by the CBA are unconstitutional debt, rendering the CBA void in its entirety. Conversely, if there are any severable provisions of the CBA that are not void for violating sections 5 and 7 of article XI of the Texas Constitution, the entire CBA is not void and the trial court properly denied the motion for summary judgment.  After a very long analysis of different provisions of the contract, the court held the contract does not create a debt. The actual amount the City will owe in a given year for operating expenses depends on the number and classification of employees. The contract does not expressly obligate the City to pay wages and benefits and does not contain any minimum staffing or funding requirements. As a result, the trial court properly denied the motion.

If you would like to read this opinion click here. Panel includes Chief Justice Marion, Justice Martinez and Justice Chapa. Opinion by Justice Chapa. The docket page with attorney information can be found here.