Supreme Court of California Justia
Citation 56 Cal.4th 1086.

City of LA v. Super. Ct.


Filed 6/20/13

IN THE SUPREME COURT OF CALIFORNIA

CITY OF LOS ANGELES,
Petitioner,
S192828
v.
Ct.App. 2/3 B228732
THE SUPERIOR COURT OF
LOS ANGELES COUNTY,
Los Angeles County
Respondent;
Super. Ct. No. BS126192
ENGINEERS & ARCHITECTS
ASSOCIATION,
Real Party in Interest.
____________________________________)

After declaring a fiscal emergency, a charter city adopted a mandatory
furlough program for its civilian employees. Many employees represented by a
union filed grievances against the city, arguing that the furloughs violated duly
ratified memorandums of understanding (MOUs) governing the terms and
conditions of their employment. When their grievances were denied, these
employees requested arbitration, and when the city refused to arbitrate, their union
petitioned the superior court for an order compelling the city to arbitrate the
furloughs dispute. The superior court granted the union‘s petition.
The city then petitioned the Court of Appeal for a writ of mandate, asking it
to overturn the superior court‘s decision. After issuing an order to show cause,
and setting the matter for a hearing, the Court of Appeal granted the city‘s petition.

1



Assuming, without deciding, that the employees‘ grievances are subject to
arbitration under the terms of the MOUs, the Court of Appeal concluded that the
city could not be compelled to arbitrate because arbitration would constitute an
unlawful delegation to the arbitrator of discretionary policymaking powers that the
city‘s charter vested in its city council.
To address the important issues raised by the Court of Appeal‘s decision,
this court granted the union‘s petition for review. The issue presented in that
petition is whether a charter city may arbitrate disputes over collectively bargained
wage and hour provisions without unlawfully delegating to the arbitrator its
discretionary budgeting and salary-setting authority. At this court‘s request, the
parties also briefed another issue, which is whether, under the MOUs at issue here,
the city has a contractual duty to arbitrate the employee furloughs dispute.
We conclude, first, that arbitration of the dispute at issue here does not
constitute an unlawful delegation of discretionary authority to the arbitrator and,
second, that the city is contractually obligated to arbitrate the employee furloughs
dispute. Thus, we reverse the Court of Appeal‘s judgment.
I. FACTS
Faced with a deficit exceeding $500 million, the Mayor of the City of Los
Angeles (the City) on May 12, 2009, sent a letter to the city council asking it to
declare a fiscal emergency and to adopt an urgency ordinance permitting full-time
city employees‘ workweeks to be reduced to less than 40 hours. In response to the
letter, the city council passed a resolution declaring an emergency and directing
the mayor to adopt a plan to furlough city employees for up to 26 days per fiscal
year. On May 22, the mayor approved the resolution, which thereby became an
ordinance.
The mayor adopted a plan requiring civilian city employees to take one
unpaid furlough day during each 80-hour pay period, effective July 5, 2009. In
2

response, approximately 400 employees represented by the Engineers &
Architects Association (the Union) filed grievances, arguing that the furloughs
violated the wage and workweek provisions of the MOUs governing their
employment. The City denied the grievances at each level of review. Under the
terms of the MOUs, the final step of the grievance process is submission of the
dispute to binding arbitration before the City‘s Employee Relations Board. The
Union and the employees timely requested arbitration, but the City refused to
arbitrate, asserting that its decision to impose mandatory furloughs was not subject
to arbitration.
On April 29, 2010, the Union filed in superior court a petition to compel
arbitration of the furloughs dispute. After considering the City‘s opposition
papers, and holding a hearing, the superior court granted the Union‘s petition. The
City petitioned the Court of Appeal for a writ of mandate.
After issuing an order requiring all parties to appear before it to show cause
―why the relief requested in the petition should or should not be granted,‖ the
Court of Appeal granted the City‘s petition. The Court of Appeal assumed,
without deciding, that under the terms of the governing MOUs the City‘s decision
to impose mandatory employee furloughs was subject to review by an arbitrator,
but the Court of Appeal concluded that any such agreement to arbitrate was
unenforceable because binding arbitration of the dispute would improperly
delegate to the arbitrator the City‘s discretionary salary-setting and budget-making
authority. The Court of Appeal directed the superior court to conduct further
proceedings consistent with its opinion. We granted the Union‘s petition for
review.
II. DELEGATION OF AUTHORITY
The Meyers-Milias-Brown Act (Gov. Code, § 3500 et seq.; the MMBA)
―governs collective bargaining and employer-employee relations for most
3

California local public entities, including cities, counties, and special districts.‖
(Coachella Valley Mosquito & Vector Control Dist. v. California Public
Employment Relations Bd. (2005) 35 Cal.4th 1072, 1077.) The MMBA‘s purpose
is to provide a reasonable method of resolving disputes between public employers
and public employee organizations regarding wages, hours, and other terms and
conditions of employment. (Gov. Code, § 3500, subd. (a).) ―The MMBA imposes
on local public entities a duty to meet and confer in good faith with representatives
of recognized employee organizations, in order to reach binding agreements
governing wages, hours, and working conditions of the agencies‘ employees.
(Gov. Code, § 3505.)‖ (Coachella Valley Mosquito & Vector Control Dist. v.
California Public Employment Relations Bd., supra, at p. 1083.)
If the parties reach an agreement, they jointly prepare a written MOU
stating the terms upon which they have agreed. (Gov. Code, § 3505.1.) Once a
local government approves an MOU, it becomes a binding and enforceable
contract that neither side may change unilaterally. (Glendale City Employees’
Assn., Inc. v. City of Glendale (1975) 15 Cal.3d 328, 334-338; accord, Retired
Employees Assn. of Orange County, Inc. v. County of Orange (2011) 52 Cal.4th
1171, 1182-1183; Voters for Responsible Retirement v. Board of Supervisors
(1994) 8 Cal.4th 765, 781.)
As noted earlier, after the City here adopted its furlough program, some 400
civilian city employees represented by the Union filed grievances alleging that the
furloughs violated the wage and workweek provisions of ratified MOUs governing
their employment. The City denied the grievances at each stage of the grievance
process. Under the terms of the MOUs that the City had ratified, the final step of
the grievance process is submission to binding arbitration before the Employee
Relations Board. But the City refused to arbitrate the question whether the
4

furloughs violated the ratified and binding collective bargaining agreements with
its employees.
The Court of Appeal concluded, first, that whether the furloughs dispute is
subject to arbitration is a matter to be decided by the courts rather than by the
arbitrator. The Union does not challenge that conclusion, which is well supported
by authority. Unless an arbitration agreement expressly provides otherwise, a
dispute regarding the scope of a contractual duty to arbitrate is subject to judicial
resolution. (AT&T Technologies v. Communications Workers (1986) 475 U.S.
643, 649; Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 479-
480; United Public Employees v. City and County of San Francisco (1997) 53
Cal.App.4th 1021, 1026.) Here, because the parties‘ MOUs did not expressly
authorize the arbitrator to determine whether particular disputes were subject to
arbitration, that determination was for the court to make.
Next, the Court of Appeal considered the nature of the furloughs dispute in
light of the arbitration provision in the MOUs. The furloughs dispute concerns
articles 1.9 and 3.1 of the MOUs. Article 3.1 broadly defines ―grievance‖ to
include ―any dispute concerning the interpretation or application of this written
MOU or departmental rules and regulations governing personnel practices or
working conditions applicable to employees covered by this MOU.‖ The Union
argues that furloughs, because they affect working conditions, are subject to the
grievance process, particularly when the City‘s right to unilaterally furlough
employees depends on interpretation and application of the MOUs. The Union
relies specifically on article 5.1 of the MOUs, which provides, as relevant here,
that ―[e]mployees shall be compensated for 40 hours per week at the regular
hourly rate for their class and pay grade.‖ The Union also relies on article 6.1‘s
references to salary schedules that are based on a work year consisting of 52
weeks of 40 hours each.
5

In response, the City relies primarily on article 1.9 of the MOUs, entitled
―Management Rights.‖ As relevant here, it provides: ―[E]xcept as specifically set
forth herein no provisions in this MOU shall be deemed to limit or curtail the City
officials and department heads in any way in the exercise of the rights, powers and
authority which they had prior to the effective date of this MOU. . . . [T]hese
rights, powers, and authority include but are not limited to, the right to . . . relieve
City employees from duty because of lack of work, lack of funds or other
legitimate reasons, . . . [and to] take all necessary actions to maintain
uninterrupted service to the community and carry out its mission in emergencies;
provided, however, that the exercise of these rights does not preclude employees
and their representatives from consulting or raising grievances about the practical
consequences that decision on these matters may have on wages, hours, and other
terms and conditions of employment.‖ (Italics added.)
The City argues that unilaterally imposing employee furloughs is
encompassed by article 1.9‘s provision preserving its authority to ―relieve City
employees from duty because of . . . lack of funds . . . [and to] take all necessary
actions to maintain uninterrupted service to the community and carry out its
mission in emergencies,‖ and that under article 1.9 an employee grievance cannot
be used to challenge a furlough decision; rather, a grievance can be brought only
in regard to the practical consequences of that decision. In response, the Union
argues that the quoted provision authorizes only layoffs, not furloughs, and does
not negate or override the MOUs‘ wage and workweek provisions.
The Court of Appeal here concluded that it was unnecessary to have either
the trial court or the arbitrator determine the merits of the parties‘ respective
arguments concerning the proper interpretation of the MOUs. The court reasoned
that, regardless of the provision in the MOUs requiring arbitrations of disputes
concerning the meaning of the MOUs‘ terms as the final step of the grievance
6

process, the City could not be compelled to arbitrate the validity of the furlough
program because such arbitration would constitute an unlawful delegation to the
arbitrator of two discretionary policymaking powers — salary setting and budget
making — that the City‘s charter vests in the city council.
The Court of Appeal was correct in stating that, unless a statute expressly
allows them to do so, public agencies and officers may not surrender or delegate to
subordinates any powers involving the exercise of judgment or discretion. (Bagley
v. City of Manhattan Beach (1976) 18 Cal.3d 22, 24; California Sch. Employees
Assn. v. Personnel Commission (1970) 3 Cal.3d 139, 144.) It was also correct in
characterizing the powers to set salaries and fix the budget as discretionary
powers. But the Court of Appeal was incorrect in its conclusion that arbitration of
the furloughs dispute here would involve a surrender or delegation by the City of
those discretionary powers.
By ratifying the MOUs, the City made discretionary choices in the exercise
of its salary-setting and budget-making authority. By deciding whether the
furlough program violates the terms of those MOUs, the arbitrator would not be
exercising any such discretionary authority. Rather, the arbitrator‘s role would be
limited to interpreting the MOUs for the purpose of determining whether the
furlough program violates the terms of those MOUs. Indeed, the arbitration
provision of the MOUs states that ―[t]he decision of an arbitrator resulting from
any arbitration of grievances hereunder shall not add to, subtract from, or
otherwise modify the terms and conditions of this MOU.‖
Some 34 years ago we observed: ―Grievance arbitration does not involve
the making of general public policy. Instead, the arbitrator‘s role is confined to
interpreting and applying terms which the employer itself has created or agreed to
and which it is capable of making more or less precise.‖ (Taylor v. Crane (1979)
24 Cal.3d 442, 453.) In determining the validity of the employees‘ grievances, the
7

arbitrator‘s role will be entirely adjudicative, not legislative. (See Glendale City
Employees’ Assn., Inc. v. City of Glendale, supra, 15 Cal.3d 328, 344-345
[computing and paying city employee salaries according to the terms of a ratified
MOU is a nonlegislative, ministerial act].) Accordingly, submission to the
arbitrator of the employees‘ claim here that the furlough program violates the
MOUs does not constitute an improper delegation to the arbitrator of any of the
City‘s discretionary authority.
The City argues that under its charter it ―may not agree to an MOU which
purports to impair the obligations of the City‘s elected officials . . . to take all
necessary actions to carry out the City‘s mission in an emergency.‖ It reasons that
because the mayor must submit a proposed budget annually and the city council
must enact a budget annually, and because the budget reflects the exercise of
discretion and judgment, an MOU may not restrict the choices available to the
mayor and city council in later years. But the same argument could be applied not
only to MOUs, but also to other multiyear financial commitments, including
contractual obligations to independent contractors, creditors, and vendors. Any
such multiyear commitment limits the budgetary options available in the years that
follow, and yet financial commitments of this sort have never been held to be
inherently impermissible or unenforceable. In this regard, the City‘s reliance on
White v. Davis (2003) 30 Cal.4th 528 is misplaced. This court there held that state
employees do not have the right to immediate or timely salary payments during a
budget impasse, but we also stressed that in such situations employees do have the
right ultimately to be paid the full salary they have earned. (Id., at pp. 570-571.)
The existence of an annual budget process does not prohibit a governmental entity
from entering into multiyear financial commitments, nor does it provide a
justification for avoiding or repudiating such commitments.
8

For these reasons, we conclude that arbitration of the employee grievances
challenging the furlough program as being in violation of the MOUs does not
involve an unlawful delegation of the city council‘s discretionary salary-setting
and budget-making authority.
III. ARBITRABILITY
As we have stated (see p. 5, ante), unless an arbitration agreement
expressly provides otherwise, a dispute regarding the arbitrability of a particular
dispute is subject to judicial resolution. In performing its duty to determine
whether a party has a contractual duty to arbitrate a particular dispute, a court is
required ―to examine and, to a limited extent, construe the underlying agreement.‖
(Freeman v. State Farm Mut. Auto Ins. Co., supra, 14 Cal.3d 473, 480.) When a
court interprets a collective bargaining agreement for the purpose of deciding
whether a particular grievance is arbitrable, however, its authority to interpret the
agreement is subject to certain well-established restrictions.
For disputes arising under collective bargaining agreements, there is a
―presumption of arbitrability,‖ under which a court should order arbitration of a
grievance ― ‗unless it may be said with positive assurance that the arbitration
clause is not susceptible of an interpretation that covers the asserted dispute.‘ ‖
(AT&T Technologies v. Communications Workers, supra, 475 U.S. at p. 650,
quoting Steelworkers v. Warrior & Gulf Co. (1960) 363 U.S. 574, 582-583
(Warrior & Gulf).) ―This presumption of arbitrability for labor disputes
recognizes the greater institutional competence of arbitrators in interpreting
collective-bargaining agreements, ‗furthers the national labor policy of peaceful
resolution of labor disputes and thus best accords with the parties‘ presumed
objectives in pursuing collective bargaining.‘ ‖ (AT&T Technologies v.
Communications Workers, at p. 650, quoting Schneider Moving & Storage Co. v.
Robbins (1984) 466 U.S. 364, 371-372.)
9

The United States Supreme Court has given this explanation of the
importance of arbitration in labor disputes: ―[T]he grievance machinery under a
collective bargaining agreement is at the very heart of the system of industrial self-
government. Arbitration is the means of solving the unforeseeable by molding a
system of private law for all the problems which may arise and to provide for their
solution in a way which will generally accord with the variant needs and desires of
the parties. The processing of disputes through the grievance machinery is
actually a vehicle by which meaning and content are given to the collective
bargaining agreement.‖ (Warrior & Gulf, supra, 363 U.S. 574, 581.)
Because of this central role played by arbitration in the interpretation and
enforcement of labor agreements, ―[a]part from matters that the parties specifically
exclude, all of the questions on which the parties disagree must . . . come within
the scope of the grievance and arbitration provisions of the collective agreement.‖
(Warrior & Gulf, supra, 363 U.S. 574, 581.) Moreover, in deciding whether a
particular labor dispute is covered by a collective bargaining agreement‘s
arbitration provision, ―[d]oubts should be resolved in favor of coverage.‖ (Id. at
p. 583; accord, AT&T Technologies v. Communications Workers, supra, 475 U.S.
at p. 649.)
A. The MOUs’ Arbitration Provision
To determine whether the furloughs dispute here is arbitrable, we begin by
examining the MOUs‘ arbitration provision. Article 3.1‘s section I(A) defines
―grievance‖ as ―any dispute concerning the interpretation or application of this
written MOU or departmental rules and regulations governing personnel practices
or working conditions applicable to employees covered by this MOU.‖ Article
3.1‘s section III specifies the grievance procedure for resolving such disputes. The
final step of that six-step procedure is submission of the grievance to arbitration,
10

which is ―to be conducted in accordance with applicable rules and procedures
adopted or specified by the Employee Relations Board, unless the parties agree to
other rules or procedures for the conduct of such arbitration.‖ The scope of the
arbitration is ―limited to the formal grievance originally filed by the employee to
the extent that said grievance has not been satisfactorily resolved.‖ With
exceptions not relevant here, the arbitrator‘s decision ―shall be binding on the
parties concerned,‖ but that decision may not ―add to, subtract from, or otherwise
modify the terms and conditions of [the] MOU.‖
Under the MOUs‘ arbitration provision, therefore, the City has assumed a
general contractual obligation to arbitrate disputes concerning the interpretation of
the MOUs. We next consider whether the employee furloughs dispute here is such
a dispute and, thereafter, whether any provision of the MOUs exempts this dispute
from arbitration.
B. The Furloughs Dispute
In deciding whether the dispute at issue is one concerning the interpretation
of the MOUs, we are mindful that ―where the collective bargaining agreement
provides for arbitration of all disputes pertaining to the meaning, interpretation and
application of the collective bargaining agreement and its provisions, any dispute
as to the meaning, interpretation and application of any specific matter covered by
the collective bargaining agreement is a matter for arbitration.‖ (Posner v.
Grunwald-Marx, Inc. (1961) 56 Cal.2d 169, 175; accord, United Teachers of Los
Angeles v. Los Angeles Unified School Dist. (2012) 54 Cal.4th 504, 518 (United
Teachers).) ―The function of the court is very limited when the parties have
agreed to submit all questions of contract interpretation to the arbitrator. It is
confined to ascertaining whether the party seeking arbitration is making a claim
which on its face is governed by the contract.‖ (Steelworkers v. American Mfg.
11

Co. (1960) 363 U.S. 564, 567-568; accord, United Teachers, at p. 519.)
Moreover, in deciding whether there is a contractual duty to arbitrate a labor
dispute, courts ―have no business weighing the merits of the grievance,
considering whether there is equity in a particular claim, or determining whether
there is particular language in the written instrument which will support the
claim.‖ (Steelworkers v. American Mfg. Co., supra, at p. 568, fn. omitted; accord,
AT&T Technologies v. Communications Workers, supra, 475 U.S. 643, 650; see
also Code Civ. Proc., § 1281.2 [stating that an order compelling arbitration ―may
not be refused on the ground that the petitioner‘s contentions lack substantive
merit‖].)
Here, as previously explained (see pp. 5-6, ante), the employee grievance is
that City‘s imposition of employee furloughs violated the wage and workweek
provisions of the MOUs. In support of that grievance, the Union relies
specifically on article 5.1 of the MOUs, which provides, as relevant here, that
―[e]mployees shall be compensated for 40 hours per week at the regular hourly
rate for their class and pay grade.‖ The Union also relies on article 6.1‘s
references to salary schedules that are based on a work year consisting of 52
weeks of 40 hours each.
In response, the City relies primarily on the MOUs‘ management rights
clause, article 1.9. In full, that clause states: ―As the responsibility for the
management of the City and direction of its work force is vested exclusively in its
City officials and department heads whose powers and duties are specified by law,
it is mutually understood that except as specifically set forth herein no provisions
in this MOU shall be deemed to limit or curtail the City officials and department
heads in any way in the exercise of the rights, powers and authority which they
had prior to the effective date of this MOU. The Association recognizes that these
rights, powers, and authority include but are not limited to, the right to determine
12

the mission of its constituent departments, offices and boards, set standards of
services to be offered to the public, exercise control and discretion over the City‘s
organization and operations, take disciplinary action for proper cause, relieve City
employees from duty because of lack of work, lack of funds or other legitimate
reasons, determine the methods, means and personnel by which the City‘s
operations are to be conducted, take all necessary actions to maintain
uninterrupted service to the community and carry out its mission in emergencies;
provided, however, that the exercise of these rights does not preclude employees
and their representatives from consulting or raising grievances about the practical
consequences that decisions on these matters may have on wages, hours, and other
terms and conditions of employment.‖
The City argues that article 1.9 reserves to it the right to impose employee
furloughs during a fiscal emergency under the language recognizing its rights to
―relieve City employees from duty because of . . . lack of funds‖ and to ―take all
necessary actions to maintain uninterrupted service to the community and carry
out its mission in emergencies.‖
The Union makes two arguments in response. Regarding the provision of
the management rights clause reserving a management right to ―relieve City
employees from duty,‖ the Union argues that this refers only to layoffs, not
furloughs. Regarding both of the management rights clause provisions on which
the City relies, the Union argues that even if those provisions may be construed as
recognizing the City‘s authority generally to impose employee furloughs during a
fiscal emergency, that authority is qualified by the phrase, ―except as provided
herein.‖ (See Professional Engineers in California Government v.
Schwarzenegger (2010) 50 Cal.4th 989, 1041-1042, fn. 35 [stating that a similar
proviso in an MOU‘s management rights clause ―suggests that the [management
rights] clause was not intended to override all of the other, more specific
13

provisions of the MOU governing wages, hours, and other terms and conditions of
employment.‖].) The Union argues that because the MOUs contain a specific
provision, article 5.1, requiring that covered employees ―be compensated for 40
hours per week at the regular hourly rate for their class and pay grade,‖ that
provision establishes a specific exception to the city council‘s otherwise broad
power to ―take all necessary actions to . . . carry out its mission in emergencies.‖
Without question, the employee grievances at issue present a ―dispute
concerning the interpretation‖ of the MOUs. Specifically, it is a dispute
concerning interpretation of the MOUs‘ provisions generally establishing a 40-
hour workweek, reserving to the City the right to ―relieve City employees from
duty,‖ reserving to the City the right to ―take all necessary actions to maintain
uninterrupted service to the community and carry out its mission in emergencies,‖
and allowing the City to exercise its reserved management rights ―except as
specifically set forth herein.‖ Because the dispute concerns the interpretation of
the MOUs, it is one that the City is contractually obligated to arbitrate unless the
dispute falls within an express exemption from arbitration.
C. Express Exemption From Arbitration
Arguing that the furloughs dispute is one that the MOUs expressly exclude
from arbitration, the City relies once again on the management rights provision,
article 1.9. The City‘s argument has two major components. First, the City again
argues that by reserving its rights to ―relieve City employees from duty because of
. . . lack of funds‖ and to ―take all necessary actions to maintain uninterrupted
service to the community and carry out its mission in emergencies,‖ article 1.9
recognizes and preserves its right to reduce labor costs during a fiscal emergency
by imposing employee furloughs. Second, the City argues that by expressly
allowing employee grievances ―about the practical consequences that decisions on
14

these matters may have on wages, hours, and other terms and conditions of
employment‖ (italics added), article 1.9, by necessarily implication, prohibits
employee grievances challenging the decisions themselves. In summary, the City
argues that because imposing employee furloughs during a fiscal emergency is a
reserved management right, and because as to such reserved rights arbitration is
limited to the consequences of the decision rather than the decision itself, the
employees cannot challenge the City‘s furlough decision through arbitration.
The City‘s argument fails because the contractual language on which it
relies as establishing an express exemption from its general obligation to arbitrate
contractual interpretation disputes is not free from ambiguities and because
resolving those ambiguities would draw us into the merits of the parties‘
underlying dispute. Pertinent here is the United States Supreme Court‘s
observation that ―if courts, in order to determine arbitrability, were allowed to
determine what is permitted [under a management rights clause] and what is not,
the arbitration clause would be swallowed up by the exception.‖ (Warrior & Gulf,
supra, 363 U.S. at p. 584.) Of course, the City could enter into MOUs expressly
excluding furlough disputes from arbitration, but the MOUs at issue here do not
unmistakably and beyond any doubt provide for such an exclusion. (See id. at
p. 583 [In deciding whether a labor dispute is covered by a collective bargaining
agreement‘s arbitration provision, ―[d]oubts should be resolved in favor of
coverage.‖].) We agree with the United States Supreme Court that a court ―should
view with suspicion an attempt to persuade it to become entangled in the
construction of the substantive provisions of a labor agreement, even through the
back door of interpreting the arbitration clause, when the alternative is to utilize
the services of an arbitrator.‖ (Id. at p. 585.)
To support its position that article 1.9 makes the furloughs dispute
inarbitrable, the City cites Engineers & Architects Assn. v. Community
15

Development Dept. (1994) 30 Cal.App.4th 644, in which the Court of Appeal
construed a similar (perhaps identical) management rights clause to exclude from
arbitration the City‘s decision to lay off a single employee ―due to lack of work
and/or lack of funds.‖ (Id. at p. 648.) The employee‘s grievance asserted ―that the
action was unnecessary and hence unfair, that sufficient work and funds existed to
provide for his position, and that no legitimate reason existed to warrant this
action.‖ (Ibid.) The union representing the employee conceded ―the City‘s right
to lay off employees because of a lack of work or funds.‖ (Id. at p. 650.) The
Court of Appeal held that the City was not required to arbitrate a dispute
concerning the adequacy of the justification for the exercise of a reserved
management right. (Id. at p. 655.)
The City asserts that the reasoning of that decision ―applies fully to the case
now before this Court.‖ To the contrary, however, the decision is readily
distinguishable. Here, the furloughs dispute is not about whether the City‘s
decision to impose employee furloughs was necessary or unnecessary, fair or
unfair, justified or unjustified. Rather, the dispute is about whether the City‘s
decision to impose furloughs during a fiscal emergency involved the exercise of a
reserved management right and whether it violated the wage and workweek
provisions of the MOUs. As we have explained, such a dispute falls within the
MOUs‘ arbitration provision.
The City presents some additional arguments in support of its contention
that the furloughs dispute is inarbitrable. As we explain, none has merit.
D. MOUs’ Grievance Procedure as “Department Oriented”
The City argues that the six-step grievance procedure, as set forth in the
MOUs, is aimed at resolving department-level disputes rather than citywide
disputes concerning actions, such as furloughs, that are taken by the city council.
16

Because the grievance procedure is ―department oriented,‖ and because arbitration
is part of this grievance procedure, the City argues, disputes regarding city council
actions are inarbitrable.
No doubt the City is at least partly correct, in that most employee
grievances involve department-level disputes concerning a single employee and
the grievance procedure has therefore been designed primarily to efficiently and
fairly resolve such disputes.1 As mentioned above (see pp. 5, 10, ante), the
MOUs, in article 3.1‘s section I(A), define ―grievance‖ as ―any dispute concerning
the interpretation or application of this written MOU or departmental rules and
regulations governing personnel practices or working conditions applicable to
employees covered by this MOU.‖ Under this definition, grievances can be
divided into two categories: (1) disputes concerning ―departmental rules and
regulations governing personnel practices or working conditions,‖ and (2) disputes
―concerning the interpretation or application of this written MOU.‖ Although
disputes in the former category may properly be characterized as department level
or department oriented, disputes in the latter category (especially those involving
interpretation rather than merely application of the MOU) necessarily implicate
the city council‘s authority because it is the council that has ratified the MOU,
thereby contractually obligating the City to abide by its terms.
As support for its argument that only department-level disputes are
arbitrable, the City cites Service Employees Internat. Union v. City of Los Angeles
(1994) 24 Cal.App.4th 136 (Service Employees). There, Kenneth Thompson, an

1
As the Union points out, however, the MOUs also expressly provide for
grievances to be filed by a union when they affect more than one employee. (Art.
3.1, § II(C).) In such situations, one or more of the designated steps in the
grievance process may be bypassed. (Ibid.)
17



employee within one city department (transportation), applied for a job in a
different city department (general services). When he did not get the job,
Thompson filed a grievance claiming that the proper personnel practices were not
followed. (Id. at p. 138.) Thompson‘s supervisors in the transportation
department rejected the grievance because they were not involved with the
challenged decision, while the management-level officials in the general services
department rejected the grievance because Thompson was not their employee.
The Court of Appeal held that in this situation the City was not required to
arbitrate the dispute because ―the MOU does not compel arbitration of employees‘
disputes with departments other than those employing them.‖ (Ibid.)
Service Employees, supra, 24 Cal.App.4th 136, has no application here.
Unlike Thompson, the employees who have filed the grievances at issue here do
not have disputes with departments other than the ones employing them. Rather,
their grievances present a dispute concerning wages and hours in their current
positions, a dispute that turns on the proper interpretation of the MOUs governing
their employment. Service Employees does not establish that such a dispute is
inarbitrable.
E. Absence of Express Waiver of Judicial Forum
The City argues that the dispute at issue is inarbitrable because the MOUs
do not contain an express waiver of the City‘s right to a judicial forum for
resolving disputes concerning the city council‘s statutory rights under the Charter
and state law to manage the City‘s finances in an emergency. In support of this
argument, the City relies on the United States Supreme Court‘s decision in Wright
v. Universal Maritime Service Corp. (1998) 525 U.S. 70 (Wright). The argument
fails, and Wright is distinguishable, because arbitration of the dispute here would
not involve the resolution of any statutory claim.
18

In Wright, a longshoreman sued under the Americans with Disabilities Act
of 1990 (42 U.S.C. § 12101 et seq.), claiming that six stevedore companies had
unlawfully discriminated against him by refusing to hire him after he settled a
claim for permanent disability benefits for job-related injuries. (Wright, supra,
525 U.S. at pp. 72-75.) The federal district court dismissed the action because the
longshoreman had failed to pursue arbitration of his claim under the terms of an
applicable collective bargaining agreement. (Id. at p. 75.) The Fourth Circuit
affirmed, but the United States Supreme Court reversed. (Id. at pp. 75-77.) In a
unanimous opinion, the court held that statutory claims are not subject to a
presumption of arbitrability (id. at p. 78) and that ―a union-negotiated waiver of
employees‘ statutory right to a judicial forum for claims of employment
discrimination‖ must be ― ‗clear and unmistakable‘ ‖ (id. at pp. 80-81).
The high court‘s decision in Wright does not assist the City here. The
presumption of arbitrability was found to be inapplicable in Wright because the
dispute at issue did not concern the application or interpretation of the collective
bargaining agreement, but instead ―the meaning of a federal statute.‖ (Wright,
supra, 525 U.S. at p. 79.) By contrast, the dispute at issue here entirely concerns
the meaning of the MOUs‘ provisions, not the meaning or application of any
statute or city charter provision. Because the dispute concerns the interpretation of
the MOUs, there is no need or justification for requiring a clear and unmistakable
waiver of the right to a judicial forum.
F. “The Ordinance”
The City argues that the MMBA allows a city to exempt certain subjects
from the grievance process, that the City has done so by enacting ―the Ordinance‖
(L.A. Admin. Code, § 4.800 et seq.), that the Ordinance‘s arbitration exemptions
are incorporated into the MOUs, and that the Ordinance exempts from arbitration
19

the furloughs dispute at issue here. This argument fails at the final step. The City
does not cite any provision of the Ordinance making the furloughs dispute here
inarbitrable.
In support of the proposition that not all labor disputes are subject to
resolution through a grievance process, the City cites the Ordinance‘s section
4.801 as limiting the grievance process to disputes ―concerning the interpretation
or application of a written [MOU] or of department rules and regulations
governing personnel practices or working conditions.‖ This provision closely
resembles the definition of ―grievance,‖ quoted above (see pp. 5, 10, 17, ante), in
the MOUs at issue here. As we have explained (see p. 14, ante), the dispute here
does concern interpretation of the applicable MOUs, and thus it is not rendered
inarbitrable by the Ordinance‘s section 4.801.
The City further argues that under the Ordinance grievances are limited to
―issues resolvable by individual departments‖ and do not include ―legislative acts
of the City Council.‖ But the City cites no provision of the Ordinance so stating.
The Ordinance‘s section 4.880 states that the city council‘s ―rights, powers and
authority . . . shall not be modified or restricted‖ by the Ordinance, but binding
MOUs necessarily restrict the city council‘s authority in the same way that any
binding contractual obligation does. Although the grievance procedure cannot be
used to impose restrictions on the city council‘s authority in addition to those
imposed by the MOUs themselves, it can be used to determine precisely what
restrictions the city council has imposed on its own authority by ratification of
those MOUs.
G. City Council Authority Under City Charter
The City contends that arbitration of the furloughs dispute ―would annul,
set aside or conflict with the city council‘s exclusive authority under the City
20

Charter to manage the City‘s finances.‖ The City asserts that the issue here is
similar to issues this court decided in United Teachers, supra, 54 Cal.4th 504. The
City is wrong on both points.
In United Teachers, a school district approved conversion of an existing
public school into a charter school, after which a teachers‘ union filed grievances
claiming that the district had not complied with their collective bargaining
agreement‘s provisions relating to charter school conversions. (United Teachers,
supra, 54 Cal.4th at pp. 509-510.) When the grievances could not be otherwise
resolved, the teachers sought to compel arbitration under the terms of their
collective bargaining agreement. (Id. at p. 510.) This court held ―that a court
faced with a petition to compel arbitration to enforce collective bargaining
provisions between a union and a school district should deny the petition if the
collective bargaining provisions at issue directly conflict with the provisions of the
Education Code — that is, if they would annul, replace, or set aside Education
Code provisions.‖ (Ibid.)
The City argues that this case is similar to United Teachers, supra, 54
Cal.4th 504, because the MOUs at issue here, if construed to preclude the
imposition of employee furloughs during a fiscal emergency, would directly
conflict with provisions of the Los Angeles City Charter. But the City does not
show any such direct conflict. It does not identify any City Charter provision that
the MOUs, if construed to prohibit employee furloughs, would annul, replace, or
set aside. Indeed, the City cites only the City Charter provisions giving the city
council discretionary salary-setting and budget-making authority.
In essence, the City‘s argument here is that construing the MOUs as
prohibiting mandatory furloughs for employees covered by the MOUs, during the
time covered by the MOUs, would impermissibly conflict with the City Council‘s
21

discretionary salary-setting and budget-making authority. That argument fails for
the reasons previously explained. (See pp. 7-8, ante.)
H. Conclusion
Having found each of the City‘s arguments unpersuasive, we conclude that
the City is contractually obligated under the MOUs to arbitrate the employee
furloughs dispute at issue.
DISPOSITION
The Court of Appeal‘s judgment is reversed.
KENNARD, J.
WE CONCUR:
CANTIL-SAKAUYE, C. J.
WERDEGAR, J.
LIU, J.

22



DISSENTING OPINION BY CORRIGAN, J.
I respectfully dissent. The majority does not honor the terms of the
parties‘ agreement, and deprives the City of Los Angeles (the City) of its rightful
authority to act in a fiscal emergency. I would affirm the Court of Appeal‘s
judgment, but not for the reasons given by the court below. I agree with the
majority that the City could have contracted to arbitrate the validity of a furlough
program, without unlawfully delegating its discretionary authority over salaries
and budgets. (Maj. opn., ante, at pp. 7-9.) However, the City and the Engineers &
Architects Association (the Union) made no such agreement. To the contrary,
they agreed that the City would retain the authority to relieve employees from duty
due to lack of funds, with arbitration limited to the practical consequences of that
decision. Only a specific contract provision could restrict the City‘s exercise of its
prerogative. There is no such provision. Therefore, the decision to impose
furloughs was a reserved management right, beyond the scope of arbitration.
The majority recognizes that the MOUs here do not authorize an arbitrator
to determine whether particular disputes are arbitrable, and thus the scope of the
contractual duty to arbitrate is a matter for judicial resolution. (Maj. opn., ante, at
pp. 5, 9.) However, the majority then applies standards of review governing
arbitration agreements in a manner that abdicates the judicial duty to determine
that question. I agree that doubts are resolved in favor of arbitration, and that
labor disputes are presumptively arbitrable. (Maj. opn., ante, at pp. 9-10.) But as
1



the majority acknowledges, ―matters that the parties specifically exclude‖ from the
scope of an arbitration agreement are not properly referred to an arbitrator.
(Steelworkers v. Warrior & Gulf Co. (1960) 363 U.S. 574, 581 (Warrior & Gulf);
see maj. opn., ante, at p. 10.)
These MOUs specifically exclude the parties‘ dispute from arbitration. The
controlling language is found in article 1.9, titled ―Management Rights‖: ―As the
responsibility for the management of the City and direction of its work force is
vested exclusively in its City officials and department heads . . . , except as
specifically set forth herein no provisions in this MOU shall be deemed to limit or
curtail the City officials and department heads in any way in the exercise of the
rights, powers and authority which they had prior to the effective date of this
MOU. . . . [T]hese rights, powers, and authority include but are not limited to, the
right to . . . relieve City employees from duty because of lack of work, lack of
funds or other legitimate reasons, . . . [and to] take all necessary actions to
maintain uninterrupted service to the community and carry out its mission in
emergencies; provided, however, that the exercise of these rights does not
preclude employees and their representatives from consulting or raising grievances
about the practical consequences that decision on these matters may have on
wages, hours, and other terms and conditions of employment.‖ (Italics added.)
The import of this contract language is unmistakable. The MOUs reserve
to the City certain fundamental management rights, ―exclusively vested‖ in city
officials. (Art. 1.9.) No MOU provision, including the arbitration clause, may
―limit or curtail‖ the exercise of these rights, except as specifically provided in the
agreement. (Ibid.) The enumerated management rights include the authority to
relieve employees from duty due to lack of funds, and to ―take all necessary
actions‖ to preserve city services in emergencies. (Ibid.) Furloughs entail
relieving employees from duty, reducing hours and wages to conserve funds in a
2

fiscal emergency. Thus, they are squarely within the City‘s reserved management
authority, absent a specific limitation in the MOUs. Employees may invoke the
grievance process set out in the MOUs only as to the practical effects of an
exercise of management rights.
The majority does not come to grips with the terms of article 1.9. It
identifies no contract provision specifically limiting the City‘s right to relieve
employees from duty in a fiscal crisis. Instead, it summarily asserts that the
contract language is ―not free from ambiguities,‖ and reasons that applying the
exclusion in the management rights provision would draw us into the merits of the
dispute and swallow up the arbitration clause. (Maj. opn., ante, at p. 15.) These
concerns are misplaced. Before turning to the question of ambiguity, I address the
ideas that we should avoid reaching the merits, and that giving effect to the
management rights provision would devour the arbitration clause.
We are properly concerned with the merits when the parties‘ dispute is
about arbitrability. ―For arbitration is a matter of contract and a party cannot be
required to submit to arbitration any dispute which he has not agreed so to submit.
Yet, to be consistent with congressional policy in favor of settlement of disputes
by the parties through the machinery of arbitration, the judicial inquiry . . . must be
strictly confined to the question whether the reluctant party did agree to arbitrate
the grievance . . . .‖ (Warrior & Gulf, supra, 363 U.S. at p. 582.) Here our
inquiry is strictly confined to whether the City agreed to allow an arbitrator to
decide if it could impose furloughs in a fiscal emergency. While ―[d]oubts should
be resolved in favor of‖ arbitration (id. at p. 583), that does not mean we are
meddling in the merits by construing the exclusion in the management rights
clause. We have said that ―judicial enthusiasm for alternative methods of dispute
resolution must not in all contexts override the rules governing the interpretation
of contracts.‖ (Victoria v. Superior Court (1985) 40 Cal.3d 734, 739. ― ‗[T]he
3

policy favoring arbitration cannot displace the necessity for a voluntary agreement
to arbitrate.‘ [Citations.]‖ (Ibid.; see also, e.g., Coopers & Lybrand v. Superior
Court (1989) 212 Cal.App.3d 524, 537. )
Nor is this a case where a management rights clause threatens to swallow
an arbitration clause. These MOUs do not, as in the Warrior & Gulf case,
generally declare that ― ‗matters which are strictly a function of management shall
not be subject to arbitration.‘ ‖ (Warrior & Gulf, supra, 363 U.S. at p. 583.) The
City is bound by all restrictions ―specifically set forth‖ in the MOUs, which
provide ample grounds for arbitrable disputes. (Art. 1.9.) The danger here is that
a broad reading of the arbitration clause will override the exclusions stated in the
management rights clause. The provision limiting grievances over the exercise of
a management right to the practical effects on working conditions has no meaning
if every dispute over management rights is arbitrable.
That said, the majority properly recognizes that an express exemption from
arbitration relieves the City from the obligation to arbitrate. (Maj. opn., ante, at
p. 14.) However, the majority does not apply or even examine the express
exemption in the management rights clause. It deems the clause ―not free from
ambiguities,‖ but points to no ambiguous term. (Id. at p. 15.) It would be difficult
to do so, because the contract language is not ambiguous. The parties agreed that
the City would have broad authority to act in fiscal emergencies, subject only to
specific contract limitations. There are none that preclude furloughs.
The Union attempts to find a limitation against furloughs in article 5.1,
which governs work schedules. However, the language noted by the Union is
restricted to the special situation of employees working long days in exchange for
extra days off. The fourth paragraph of article 5.1 states: ―Employees on a
four/ten work schedule shall work ten hours per day for a four day work week (or
twelve hours per day for a three day work week in the Information Technology
4

Agency only) exclusive of lunch periods. Employees shall be limited to rest
periods in accordance with the provisions of Article 4.4. Employees shall be
compensated for 40 hours per week at the regular hourly rate for their class and
pay grade.‖ (Italics added.)
This provision cannot reasonably be transformed into a restriction against
furloughs. It clarifies the rate of compensation for employees working the
unorthodox schedules mentioned earlier in the paragraph. In the first paragraph of
article 5.1, which addresses more generally the subject of wages and hours, the
parties agreed that the City could ―assign employees to work a four/ten, five/forty,
nine/eighty or other work schedule.‖ (Italics added.) They also agreed that
―[m]anagement may require employees to change their work schedules (working
hours or change days off, except the split day) . . . providing that the change is not
arbitrary, capricious or discriminatory.‖ (Art. 5.1, italics added.) This paragraph
goes on to contemplate arbitration over whether a schedule change is arbitrary,
capricious, or discriminatory. The Union makes no such claim; it argues only that
furloughs are unauthorized. However, nothing in article 5.1 limits the City‘s
authority to implement furloughs. Indeed, the first paragraph of the article
contemplates considerable flexibility in the exercise of management‘s power to set
schedules.
The Union also refers to article 6.1 of the MOUs, which provides salary
schedules consisting of 40-hour weeks. Here again, no guarantee of a 40-hour
week is implied. The salary schedules establish norms, which are used not only
for ordinary work schedules but also to calculate pay for employees working
overtime or reduced hours. They are not a specific limitation on the City‘s
authority to relieve employees from duty in a fiscal emergency.
The Union claims the management rights provision itself is ambiguous,
citing a footnote in Professional Engineers in California Government v.
5

Schwarzenegger (2010) 50 Cal.4th 989, 1041-1042, fn. 35 (Professional
Engineers). The footnote consists entirely of dicta, and its discussion is inapposite
here. Professional Engineers addressed ―State‘s Rights‖ MOU clauses that the
trial court had found persuasive with respect to the Governor‘s power to furlough
state employees. We decided that even if the court had erroneously interpreted
these clauses to permit furloughs, it would not affect our ultimate determination
that the Legislature effectively ratified and validated the Governor‘s furlough
program. (Professional Engineers, at pp. 1041-1042.) Nevertheless, we
commented as follows:
―One of the ‗State‘s Rights‘ clauses upon which the trial court relied was
section 3.1.B of the MOU between the state and plaintiff CASE. That section of
the CASE MOU provides in full: ‗To the extent consistent with law and this
MOU, the rights of the State include, but are not limited to, the exclusive right to
determine the mission of its constituent departments, commissions, and boards; set
standards of service; train, direct, schedule, assign, promote, and transfer its
employees; initiate disciplinary action; relieve its employees from duty because of
lack of work, lack of funds, or for other legitimate reasons; maintain the efficiency
of State operations; determine the methods, means and personnel by which State
operations are to be conducted; take all necessary actions to carry out its mission
in emergencies; and exercise complete control and discretion over its organization
and the technology of performing its work. The State has the right to make
reasonable rules and regulations pertaining to employees consistent with this
MOU provided that any such rule shall be uniformly applied to all affected
employees who are similarly situated.‘
―The trial court pointed to the language in this section permitting the state
to ‗relieve its employees from duty because of lack of work, lack of funds, or for
other legitimate reasons,‘ but failed to take note of the introductory clause of
6

section 3.1.B —‗[t]o the extent consistent with law and this MOU‘ (italics added)
— which suggests that the ‗State‘s Rights‘ clause was not intended to override all
of the other, more specific provisions of the MOU governing wages, hours, and
other terms and conditions of employment. Moreover, the clause recognizing the
state‘s right to relieve its employees from duty because of ‗lack of funds‘ — the
clause relied upon by the trial court — reasonably can be interpreted to refer only
to the state‘s authority, under [Government Code] section 19997, to lay off
employees for lack of funds. As will be recalled, section 19997 is one of the few
statutes dealing with the terms and conditions of employment that is not subject to
supersession under the Dills Act. (See, ante, at pp. 1034–1035, fn. 29.)
―Two separate provisions of the MOU in question (§§ 10.2, 10.3) explicitly
address the question of furloughs. Section 10.2 provides in relevant part that
‗[w]henever the State determines it is necessary to lay off employees, the State and
the Union shall meet in good faith to explore alternatives to laying off employees
such as . . . voluntary reduced work time . . . .‘ (Italics added.) Section 10.3
provides that ‗[t]he State may propose to reduce the number of hours an employee
works as an alternative to layoff. Prior to the implementation of this alternative to
a layoff, the State will notify and meet and confer with the Union to seek
concurrence of the usage of this alternative.‘
―The trial court‘s ruling does not appear to give adequate consideration to
these specific provisions of the MOU, or to assess how these provisions
reasonably should be interpreted in light of the common understanding (at the time
the parties entered into the MOU) of the Governor‘s authority or lack of authority
to impose such furloughs. (See, e.g., Los Angeles City Employees Union v. City of
El Monte (1985) 177 Cal.App.3d 615, 623 [ordinary ‗custom and usage‘ must be
considered in interpreting the terms of an MOU].) In light of all of these
circumstances, the trial court‘s reliance upon the ‗State‘s Rights‘ clauses in the
7

MOU‘s is at the least open to serious question.‖ (Professional Engineers, supra,
50 Cal.4th at pp. 1041-1042, fn. 35.)
The distinctions between the MOU provisions quoted in Professional
Engineers and those before us here are substantial and determinative. Rather than
granting the City the power to relieve employees from duty due to lack of funds
― ‗[t]o the extent consistent with . . . this MOU‘ ‖ (Professional Engineers, supra,
50 Cal.4th at p. 1042, fn. 35), here the parties agreed that ―except as specifically
set forth herein no provisions in this MOU shall be deemed to limit or curtail the
City . . . in any way‖ in the exercise of its right to relieve employees from duty in a
fiscal emergency (art. 1.9, italics added). Instead of restricting management to
actions consistent with MOU terms, these MOUs provide the City with reserved
powers limited only by specific contract terms. That is a significant difference.
An action not specifically barred is permitted, even if it is arguably inconsistent
with general MOU terms.
Furthermore, no provision in these MOUs contemplates furloughs as an
alternative to layoffs, or imposes a meet-and-confer requirement before hours are
reduced, as was the case in Professional Engineers. The parties anticipated
voluntary furloughs upon the agreement of individual employees and
management, without mentioning layoffs. Article 5.3 of the MOUs provides:
―[W]henever a full-time employee voluntarily reduces the number of his/her
biweekly regular hours from eighty (80) to a number not less than seventy-two
(72) at the request of, or with the permission of, his/her appointing authority, such
employee shall be credited with all rights and benefits as though he/she worked
eighty (80) hours in the payroll period. The employee shall not be credited for
overtime worked until more than forty (40) hours have been worked in the
workweek. Compensation received under this Article shall be considered full
8

compensation for all employees participating in the voluntary work hour
reduction.‖
Nothing in this voluntary furlough provision limits the City‘s authority to
impose mandatory furloughs, or raises a doubt as to whether the contract term
―relieve City employees from duty because of . . . lack of funds‖ refers to
furloughs or layoffs. (Art. 1.9.) Here the term includes both alternatives, unless
there is a specific limitation elsewhere in the MOUs. But Article 5.3 governs only
voluntary reductions in hours by employees. It does not implicate the City‘s
reserved unilateral authority to act in a fiscal emergency.
For all these reasons, what we said in Professional Engineers does not
control the interpretation of the MOUs in this case. These parties agreed that the
City‘s power to relieve employees from duty due to lack of funds, and to take all
necessary actions in emergencies, was limited only as specifically set forth in the
MOUs. (Art. 1.9.) They agreed that the City could impose ―other work
schedule[s]‖ than the alternatives set out in the MOUs, and could change
employees‘ work hours in ways not arbitrary, capricious, or discriminatory. (Art.
5.1.) While the parties contemplated 40-hour workweeks at regular rates of pay as
the norm, they did not require 40-hour workweeks. (Arts. 5.1, 6.1.) Nor did they
specify that if furloughs were to be imposed in lieu of layoffs, it would be on a
voluntary basis.
The Union was free to bargain for a narrower management rights clause.
Or, accepting the terms of article 1.9, it could have negotiated for specific
protections against furloughs. It did neither of those things. Like any party to a
contract, it ought to be bound by the terms to which it agreed. The majority‘s
failure to enforce this agreement is unfortunate. An important question of public
policy and a matter of considerable budgetary significance is committed to the
discretion of an unelected arbitrator, whose decision is unreviewable. (Moncharsh
9

v. Heily & Blase (1992) 3 Cal.4th 1, 11.) The City does not seek to insulate its
decision from oversight. It is willing to submit to judicial review, under a
deferential standard appropriate to actions taken by local government in response
to a fiscal emergency. (See San Francisco Fire Fighters Local 798 v. City and
County of San Francisco (2006) 38 Cal.4th 653, 667-670.) We should give the
Union its day in court, and not subject the decisions of elected leaders in difficult
times to second-guessing by an arbitrator who is not answerable to the voters.
CORRIGAN, J.
WE CONCUR:

BAXTER, J.

CHIN, J.


10

See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion City of Los Angeles v Superior Court
__________________________________________________________________________________

Unpublished Opinion


Original Appeal
Original Proceeding
Review Granted
XXX 193 Cal.App.4th 1159
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S192828
Date Filed: June 20, 2013
__________________________________________________________________________________

Court:

Superior
County: Los Angeles
Judge: Gregory Wilson Alarcon

__________________________________________________________________________________

Counsel:

Carmen A. Trutanich, City Attorney, Zna Portlock Houston, Assistant City Attorney, Janis Levart Barquist
and Jennifer Maria Handzlik, Deputy City Attorneys, for Petitioner.

Akins Gump Strauss Hauer & Feld, Rex S. Heinke and Jessica M. Weisel for Los Angeles Chamber of
Commerce as Amicus Curiae on behalf of Petitioner.

Kronick, Moskovitz, Tiedemann & Girard, David W. Tyra and Meredith Packer Garey for League of
California Cities and California State Association of Counties as Amici Curiae on behalf of Petitioner.

Kamine Phelps and Marcia Haber Kamine for Engineering Contractors‘ Association as Amicus Curiae on
behalf of Petitioner.

No appearance for Respondent.

Carroll, Burdick & McDonough, Gary M. Messing, Gregg McLean Adam, Jonathan Yank, Gonzalo C.
Martinez; Levy, Stern, Ford & Wallach, Myers Law Group, Adam N. Stern and Lewis N. Levy for Real
Party in Interest.

Leonard Carder and Arthur A. Krantz for International Federation of Professional and Technical Engineers,
Local 21, Public Employees Union Local One, State Employees Trades Council-United, University
Council-American Federation of Teachers, Academic Professionals of California, University Professional
and Technical Employees, CWA Local 9119 and Marin Association of Public Employees as Amici Curiae
on behalf Real Party in Interest.


Page 2 – counsel continued – S192828

Counsel:

Silver, Hadden, Silver, Wexler & Levine and Stephen H. Silver for Los Angeles Police Protective League,
San Francisco Police Officers‘ Association, CDF Firefighters, California Correctional Peace Officers‘
Association, Ventura County Deputy Sheriffs‘ Association, San Bernardino County Safety Employees‘
Benefit Association, Deputy Sheriffs‘ Association of Santa Clara County, Los Angeles County Professional
Peace Officers‘ Association (PPOA), Fresno Deputy Sheriffs‘ Association, Santa Monica Police Officers‘
Association, Manhattan Beach Police Officers‘ Association, Anaheim Firefighters‘ Association, Costa
Mesa Firefighters‘ Association, Inc., Huntington Beach Firefighters‘ Association, Fullerton Firefighters‘
Association, Orange City Fire Fighters, Inc., Orange County Employees‘ Association and Peace Officers
Research Association of California Legal Defense Fund Amici Curiae on behalf of Real Party in Interest.

Rothner, Segall & Greenstone, Anthony Segall, Ellen Greenstone, Jonathan Cohen and Anthony P. Resnick
for American Federation of State, County and Municipal Employees, District Council 36, International
Union of Operating Engineers Local 501, Laborers International Union of North America, Local 777, Los
Angeles/Orange Counties Building and Constructions Trades Council and Service Employees International
Union, Local 721 as Amici Curiae on behalf of Real Party in Interest.



Counsel who argued in Supreme Court (not intended for publication with opinion):

Janis Levart Barquist
Deputy City Attorney
200 North Main Street, 800 City Hall East
Los Angeles, CA 90012
(213) 978-7151

Jennifer Maria Handzlik
Deputy City Attorney
200 North Main Street, 800 City Hall East
Los Angeles, CA 90012
(213) 978-7151

Gregg McLean Adam
Carroll, Burdick & McDonough
44 Montgomery Street, Suite 400
San Francisco, CA 94104
(415) 989-5900


Supreme Court Case: S192828
Court of Appeal Case(s): Second Appellate District, Div. 3
B228732
Case Caption: LOS ANGELES, CITY OF v. S.C. (ENGINEERS & ARCHITECTS ASSOCIATION)
Case Category: Review - Civil Original Proceeding
Start Date: 05/04/2011
Case Status: closed; remittitur issued
Issues: none
Disposition Date: 06/20/2013
Case Citation: 56 Cal.4th 1086.

Cross Referenced Cases:
No Cross Referenced Cases Found

Opinion Information
Date:Citation:Docket Number:
Thu, 06/20/201356 Cal.4th 1086.S192828

Opinion Authors
OpinionJustice Joyce L. Kennard
ConcurJustice Goodwin Liu
DissentJustice Carol A. Corrigan

Brief Downloads
application/pdf icon
Real Party in Interest, Engineers & Architects Association, Petition for Review Filed on May 4, 2011.pdf (5632066 bytes)
application/pdf icon
Petitioner’s Answer to Petition for Review Filed on May 25, 2011.pdf (3961130 bytes)
application/pdf icon
Real Party in Interest, Engineers & Architects Association, Reply to Answer to Petition for Review Filed on June 6, 2011.pdf (2261609 bytes)
application/pdf icon
Real Party in Interest, Engineers & Architects Association, Opening Brief on the Merits Filed on September 26, 2011.pdf (5707309 bytes)
application/pdf icon
Real Party in Interest, Engineers & Architects Association, Request for Judicial Notice Filed on September 26, 2011.pdf (4021495 bytes)
application/pdf icon
Petitioner’s Answer Brief on the Merits Filed on December 13, 2011.pdf (6895582 bytes)
application/pdf icon
Petitioner’s Request for Judicial Notice Filed on December 13, 2011.pdf (4369904 bytes)
application/pdf icon
Real Party in Interest, Engineers & Architects Association, Reply Brief on the Merits Filed on February 2, 2012.pdf (2773232 bytes)
application/pdf icon
Petitioner’s Supplemental Brief Filed on November 30, 2012.pdf (3044234 bytes)
application/pdf icon
Real Party in Interest, Engineers & Architects Association, Supplemental Brief Filed on November 30, 2012.pdf (2347406 bytes)
application/pdf icon
Real Party in Interest, Engineers & Architects Association, Reply to Supplemental Brief Filed on December 14, 2012.pdf (2425241 bytes)
application/pdf icon
Petitioner’s Reply to Supplemental Brief Filed on December 17, 2012.pdf (2379720 bytes)
application/pdf icon
Real Party in Interest, Engineers & Architects Association, Supplemental Brief Filed on January 2, 2013.pdf (3546271 bytes)
application/pdf icon
Petitioner’s Reply to Supplemental Brief Filed on January 10, 2013.pdf (671430 bytes)
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website
Jun 6, 2014
Annotated by Cesar De La Vega

Facts

On May 12, 2009, faced with a deficit exceeding $500 million, the Mayor of the City of Los Angeles sent a letter to the city council requesting that it declare a fiscal emergency and adopt an urgency ordinance that would permit full-time city employees’ workweeks to be reduced to less than 40 hours. The city council complied with the request and passed a resolution declaring an emergency and directed the mayor to adopt a plan to furlough city employees for up to 26 days per fiscal year. The resolution, with the mayor’s approval, became an ordinance on May 22.

Effective July 5, 2009, the mayor adopted a plan that required civilian city employees to take one unpaid furlough day during each 80-hour pay period. Arguing that the furloughs violated wage and workweek provisions in the MOUs (Memos of Understanding) governing their employment, approximately 400 employees represented by the Engineers & Architects Association (the Union) responded by filing grievances (complaints due to injury, injustice, or wrong). The City denied the grievances at each level of review and refused to arbitrate (that is, allow for the settling of a controversy between contending parties through an investigation by unofficial persons chosen by the parties). The MOUs stated that the last step of the grievance process was arbitration, but the City defended its decision by asserting that the imposition of mandatory furloughs was not subject to arbitration. The Union then filed a petition to compel arbitration of the grievances filed.

Procedural History

The Union filed a petition to compel arbitration in Superior Court. The Superior Court granted the Union’s petition, to which the city appealed. The Court of Appeals reversed the Superior Court’s decision, holding that the city was under no duty to submit its furlough decision to arbitration. The Union responded by petitioning the California Supreme Court for review. The Supreme Court granted review, and in a 4-3 opinion, the Court reversed the Court of Appeal’s judgment.

Issues

I. May a charter city arbitrate disputes over collectively bargained wage and hour provisions without unlawfully delegating to the arbitrator its discretionary budgeting and salary-setting authority?
II. Under the MOUs at issue here, does the City have a contractual duty to arbitrate the employee furloughs dispute?

Holding

I. The arbitration of the dispute at issue does not constitute an unlawful delegation of discretionary authority to the arbitrator.
II. The City is contractually obligated to arbitrate the employees’ furloughs dispute.

Analysis

First, the Court concluded that the arbitration of employee grievances challenging the furlough program as being in violation of the MOUs did not involve an unlawful delegation of the city council’s discretionary salary-setting and budget-making authority. The Court of Appeal correctly stated that unless a statute expressly allows them to do so, public agencies and officers may not surrender or delegate to subordinates any powers involving the exercise of judgment or discretion. (Bagley
v. City of Manhattan Beach (1976) 18 Cal.3d 22, 24; California Sch. Employees Assn. v. Personnel Commission (1970) 3 Cal.3d 139, 144.) It also correctly characterized the powers to set salaries and fix the budget as discretionary powers.

But the Court of Appeal incorrectly concluded that arbitration of the furloughs disputed would involve a surrender or delegation by the City of those discretionary powers. In ratifying the MOUs, the City made discretionary choices in the exercise of its salary-setting and budget-making authority. The arbitrator, in deciding whether the furlough program violates the terms of the MOUs, would not be exercising any such discretionary authority. The arbitrator’s role would be limited to interpreting the MOUs for the purpose of determining whether the furlough program violates the terms of the MOUs. Grievance arbitration does not involve the making of general public policy. The arbitrator’s role is confined to interpreting and applying terms which the employer itself has created or agreed to and which it is capable of making more or less precise. (Taylor v. Crane (1979) 24 Cal.3d 442,453.) The arbitrator’s role in determining the validity of the employees’ grievances is entirely adjudicative, not legislative, and therefore submission of the employees’ claim to the arbitrator did not constitute an improper delegation to the arbitrator of any of the City’s discretionary authority.

Second, the Court concluded that the city is contractually obligated to arbitrate the employees’ furloughs dispute. Unless an arbitration agreement expressly provides otherwise, a dispute regarding the arbitrability of a particular dispute is subject to judicial discretion. In performing its duty to determine whether a party has a contractual duty to arbitrate a particular dispute, a court is required to examine and, to a limited extent, construe the underlying agreement. (Freeman v State Farm Mut. Auto Ins. Co., supra, 14 Cal.3d 473, 480.) There is a presumption of arbitrability for disputes arising under collective bargaining agreements, and in deciding whether a particular labor dispute is covered by a collective bargaining agreement’s arbitration provision, doubts should be resolved in favor of coverage. (Steelworkers v. Warrior & Gulf Co. (1960) 363 U.S. 574, 582-583.)

In looking at the MOUs arbitration provision in this case, the Court found that the City assumed a general contractual obligation to arbitrate disputes concerning the interpretation of the MOUs. The Court then determined that the employees’ furlough dispute is without question a dispute that concerned the interpretation of the MOUs. Specifically it was a dispute that concerned the interpretation of the MOUs’ provisions generally establishing a 40-hour workweek, reserving the City the right to relieve City employees from duty, take all necessary actions to maintain uninterrupted service to the community and carry out its mission in emergencies, and allowing the City to exercise its reserved management rights, except as specifically set forth therein. Unless the dispute falls within an express exemption from arbitration, the City is contractually obligated to arbitrate it because the dispute concerns the interpretation of the MOUs.

The City presented several arguments in support of the contention that the furlough dispute was inarbitrable, but the Court found that none of them had merit. The Court rejected the City’s argument that the management rights clause in the MOUs allowed for the furloughs because the clause was subject to ambiguities. The Court also rejected the City’s argument that the furlough dispute was not arbitrable since the MOUs did not contain an express waiver of the City's right to a judicial forum for resolving disputes concerning the city council’s rights under state law to manage the city’s finances in an emergency. The Court explained its reason for rejecting this second argument, stating that “the dispute at issue here entirely concerns the meaning of the MOUs' provisions, not the meaning or application of any statute or city charter provision. Because the dispute concerns the interpretation of the MOUs, there is no need or justification for requiring a clear and unmistakable waiver of the right to a judicial forum.”

Tags
public law; compelled arbitration; mandatory furloughs; Los Angeles; city council resolution; wage and workweek violations; Employee Relations Board; unlawful delegation of discretionary authority; Meyers-Milias-Brown Act (Gov. Code Section 3500 et seq.); California local public entities; employer-employee relations; collective bargaining; Taylor v Crane (1979) 24 Cal.3d 442, 453.

By Cesar De La Vega