Labor and Funding Reforms in Inter-Local Cooperation Law

In the sixteen months since Governor Snyder assumed office, the pages of this Local Government Law Bulletin have closely followed the major reforms out of Lansing directed at local government. Throughout the Governor’s tenure, the twin messages have remained the same. On the one hand, the reforms have sought to diminish the role, authority, and involvement of local government in favor of private industry. On the other, the reforms have sought to encourage local governments to cooperate, collaborate, and consolidate. As the 2011 session came to a close, further reforms out of Lansing were directed toward encouraging cooperation, collaboration, and consolidation through the removal of perceived labor law barriers in existing statutes, and the removal of funding barriers in a new intergovernmental cooperation statute.

The legislative changes to existing provisions in intergovernmental cooperation statutes are set forth in Act 261 of the Public Acts of Michigan of 2011 (Act 261), which amends the Emergency Services to Municipalities Act, Act 262 of the Public Acts of Michigan of 2011 (Act 262), which amends the Intergovernmental Transfer of Functions and Responsibilities Act, and Act 263 of the Public Acts of Michigan of 2011 (Act 263), which amends the Urban Cooperation Act. Our faithful readers are generally familiar with these newly amended statutes in their prior form, as the basic provisions of each have been addressed in these pages throughout the last year. The changes made by Acts 261, 262, and 263 with respect to the transfer of employees to joint endeavors between governments are significant.

The provisions of the Intergovernmental Transfer of Functions and Responsibilities Act, the Urban Cooperation Act, and the Emergency Services to Municipalities Act previously contained nearly identical protections for employees of public entities that desired to enter into agreements to provide services or to perform functions with another governmental entity. These sections generally provided an obligation to transfer those employees necessary for the operation to the entity that would now provide the joint service or function and required that the transferred employee would be placed in no worse position with the new employer than previously held with the former employer. For employees represented by unions, it was not absolutely clear whether the terms of a collective bargaining agreement transferred with the employees. And barriers to cooperation could arise in the context of disputes over continuation of the same union representation especially where different unions represented employees from the respective governmental entities.

Under the new provisions enacted by Acts 261, 262, and 263, negotiations on a new collective bargaining agreement are to begin at least 180 days before the date employees are to transfer. In addition, the parties to the contract or articles of incorporation creating an authority are required to specify in writing the employees that will be transferred to the new system, a matter which is within the parties discretion.

For those employees represented by unions, the actual collective bargaining agreements will not be required to be assumed by the new entity, but the terms of employment established under those collective bargaining agreements will continue to apply to those employees until modified through subsequent negotiations with a union representing those employees or for a period of six months after the transfer of employment occurs, whichever is earlier. The transferring entity will be required to utilize a merged seniority list for purposes of job assignment and other preferences, unless there is a mutual agreement to use a different format.

A union representing employees of a transferring entity will continue to represent those employees, but those employees have a right to seek an election to change that representative. If there are multiple unions representing some or all of the employees or one union and a number of non-union employees, an election will be held to determine the desires of the employees to union representation.

To ensure that Michigan’s collective bargaining law correctly reflects the changes to the intergovernmental cooperation statutes, the Legislature also adopted Act 259 of the Public Acts of 2011 and Act 260 of the Public Acts of 2011, which amended the Public Employment Relations Act consistent with the foregoing changes in the law. With respect to collective bargaining law, it is important to note that the decisions as to whether or not the public employer will consolidate, cooperate, or collaborate with another governmental entity, the identities of parties with whom to cooperate, collaborate, or consolidate, and the procedures for obtaining an agreement between governments are not subject to collective bargaining and are within the sole discretion of the employer. However, an employer is not relieved from any duty established by law to collectively bargain as to the effect of an intergovernmental agreement.

The Legislature also adopted Act 258 of the Public Acts of 2011, which created the new Municipal Partnership Act as an additional method of cooperation by allowing two or more local governments or a local government and a public agency to enter into a contract with each other to “form a joint endeavor to perform or exercise any function, service, power, or privilege that the local government or public agency could each exercise separately.” The Municipal Partnership Act provisions regarding the transfer of union and non-union employees are consistent with the new provisions of the Intergovernmental Transfer of Functions and Responsibilities Act, the Urban Cooperation Act, and the Emergency Services to Municipalities Act described above.

The Municipal Partnership Act can be utilized alone, or in conjunction with other cooperation statutes. Significantly, the Municipal Partnership Act also contains unique funding provisions. A party to a joint endeavor contract can use tax revenues that are dedicated to pay for the exercise or performance of any function, service, power, or privilege under the contract from any of the entities participating in the joint endeavor. Moreover, a joint endeavor may levy a tax of not more than five mills on all taxable property in the areas served by the joint endeavor for the purpose of providing revenue to the joint endeavor with the approval of the governing bodies and the approval of the electors. With respect to the levy of taxes, it is important to remember, however, that the total millage levied within a jurisdiction is subject to constitutional and statutory limits. Accordingly, a joint endeavor should carefully consider all its funding options before placing too great a reliance on the levy of taxes to fund functions or services. For governments and public agencies that choose to heed the directive out of Lansing to cooperate, collaborate, or consolidate, the statutory changes to the rights of transferring employees and the clarification of collective bargaining procedures should facilitate a smoother negotiation process with union and non-union employees alike, and the Municipal Partnership Act may provide an appropriate new mechanism for overcoming funding issues.