HR REPORT: Sanbornize It!
Despite the ongoing pandemic, as the days grow shorter, and the nights longer, labor contract negotiations for public employers are in full swing. Although the physical format of those negotiations may look different in these unique times, our obligations to follow certain processes and procedures pursuant to New Hampshire’s Public Employee Labor Relations Act, RSA 273-A (the “Act”) remain.
In the coming months, many of New Hampshire’s towns and cities will likely reach tentative agreements with labor unions that will include future “cost items,” such as wages and benefits. The Act defines “cost item” to mean “any benefit acquired through collective bargaining whose implementation requires an appropriation by the legislative body of the public employer with which negotiations are being conducted.” RSA 273-A:1, IV. As towns and cities begin to plan for upcoming annual budget meetings, in whatever format is appropriate, they must still ensure that all “cost items” are properly submitted for approval at the annual meeting in order for any negotiated agreement to become final and binding on the parties. RSA 273-A:3:II.
Pursuant to the Act, submission of cost items to the appropriate legislative body is a mandatory step in the contract negotiation process. In Appeal of Prof’l Firefighters of Hudson, the Supreme Court held that “[t]he parties to a CBA are not bound by its cost items unless the legislative body ratifies them, which occurs only if the legislative body approves them with ‘full knowledge of their terms.’” 167 N.H. 46, 52 (2014). What this means is that, for multi-year collective bargaining agreement to be fully enforceable, the employer must either present the relevant cost items to the legislative body on an annual basis or in the alternative, present the anticipated costs of each year covered by the agreement to the legislative body first considering the tentative agreement. While the former method is permissible, municipalities that seek to approve the cost items in a multi-year agreement in each year of the contract risks having the contract disrupted mid-term if the legislative body unexpectedly votes down the cost items. Therefore, the latter method, in which the anticipated costs for all years of the agreement are presented all at once is widely preferred by both employers and labor unions.
Under this method, so long as the legislative body is properly warned of the anticipated cost of the subsequent contract years and nonetheless agrees to appropriate money to fund the cost items in the first year of the contract, the subsequent years’ cost items need not be separately submitted to the legislative body each year. Instead, while the contract remains in effect, the cost of the subsequent years can be included in the employer’s general warrant. This notification/warning is commonly referred to as “Sanbornizing” the contract, after the seminal Supreme Court case addressing the matter. See Appeal of the Sanborn Reg’l Sch. Bd., 133 N.H. 513, 522 (1990). In that case, the Court established that:
In order to submit a cost item for review by a school district meeting, the warrant for that meeting must describe the item with enough clarity to apprise the voters of what will be the subject of the meeting. Submission to a school district meeting, therefore, of a proposal to provide salary increases must be warned by a warrant article sufficient to indicate plainly that action may be taken on such matters at the place and time stated. [Applying this reasoning, h]ad the articles of the warrant detailed the financial terms of the first, second, and third years of the collective bargaining agreement, even though the voters appropriated only the funds for the first year, such a vote could bind the district to fund all three years of the agreement.
Lastly, keep in mind that an automatic renewal (or “evergreen”) clause in a CBA that purports to continue the terms of the contract indefinitely until the parties negotiate, and the legislative body ratifies, a successor contract, is considered a cost item. Appeal of Milton Sch. Dist., 137 N.H. 240, 243 (1993). Accordingly, in order to ensure the legislative body has “full knowledge” of the terms of the negotiated CBA that includes such a clause, the employer should also explicitly notify the legislative body that the contract includes the automatic renewal clause and the anticipated costs that would result from exercise of that provision. Id. at 243-44. If an evergreen clause is not Sanbornized, it will be unenforceable at the expiration of the negotiated agreement. See, e.g., Appeal of Alton Sch. Dist., 140 N.H. 303, 307 (1995) (“An automatic renewal clause is a cost item and it, therefore, does not bind the parties unless it has been ratified by the legislative body.” (internal citations omitted)); Milton Sch. Dist., 137 at 244 (refusing to enforce automatic renewal clause where it was not submitted to the legislative body with other cost items).
As we all continue to work together to navigate the uncertain waters of this pandemic, it is even more important to make sure all cost items contained in negotiated agreements are properly presented. Or to invoke the late great Peter Tosh, “Sanbornize it!” This will ensure proper ratification of all negotiated agreements, provide effective notice to legislative bodies of their upcoming financial obligations, and promote productive labor relations by ensuring that public employers can follow through on their contractual obligations.