Standing; Public School Employee’s Retirement System

Pennsylvania State Education Ass’n v. Public Sch. Employees’ Retirement Bd., Order sustaining preliminary objection and dismissing declaratory judgment action, No. 199 M.D. 2021 (Pa. Cmwlth. July 21, 2022) (unreported), direct appeal, appeal docket 90 MAP 2022

In this direct appeal, the Pennsylvania Supreme Court will consider whether a teachers’ union has standing to seek a declaration that the Public School Employees’ Retirement System must calculate a school district’s pension fund withdrawal liability when it outsources work to private entities or converts a public school to a charter school

The Public School Employees’ Retirement Code was amended in 2019 to provide that when a school district withdraws all or part of its workforce from the Public School Employees’ Retirement System, it must pay the System the amount of unfunded liability attributable to the employees being withdrawn; before the amendment, the unfunded liability was paid by the districts that remained in the System. Interpreting the 2019 amendment, the Public School Employees’ Retirement Board decided that it would not apply withdrawal liability to school districts that engaged in outsourcing “until further policy is approved by [PSERB] and by legislation.” Slip op. at 4, quoting PSERB’s resolution.

The Pennsylvania State Education Association (PSEA) sued, arguing that school district outsourcing, i.e., subcontracting the work of a bargaining unit, is a mandatory subject of bargaining. PSEA sought a declaratory judgment that the 2019 amendment requires PSERB to calculate withdrawal liability when school employee work is subcontracted to private entities or when district schools are converted to charter schools. PSEA explained that that a school district commits an unfair labor practice if it does not clearly advise the union of the projected savings associated with a contemplated subcontract and provide the union with an opportunity to prevent the subcontracting by matching those savings, and that the 2019 amendment requiring the school district to make a withdrawal payment directly affects the negotiations because it offsets and thus diminishes or eliminates the savings produced by the outsourcing plan. PSEA identified three of its local union affiliates that were aggrieved by PSERB’s lack of action on the 2019 amendment because subcontracting decisions were made, or are being contemplated, without consideration of the withdrawal liability related to those decisions.

PSERB, and the intervening Pennsylvania School Boards Association, filed preliminary objections, arguing inter alia that PSEA lacks standing to seek the requested declaration.  The Commonwealth Court agreed, concluding that PSEA’s interest is insufficiently direct and immediate because the harm alleged – loss of union jobs – could occur even if PSERB imposes withdrawal liability on the school district:

[D]eclaratory judgment is not to resolve remote questions or to aid a party in a different transaction… . The harm PSEA asserts, the subcontracting of bargaining unit work and charter school conversions, is not the immediate or direct result of the challenged action of PSERB, but of the school district employers’ decisions. As PSEA admits in its response to PSBA’s PO, school districts could still choose to subcontract bargaining unit work even if PSERB was to impose withdrawal liability on those school districts. (PSBA’s POs ¶ 23; PSEA’s Answer to PSBA’s POs ¶ 23.) Because PSERB’s decision may not affect the ultimate decision of a school district to subcontract bargaining unit work resulting from negotiations, PSEA’s interests in PSERB’s decision is not direct or immediate. Accordingly, there is a lack of causal connection between the harm and the challenged action.

Slip op. at 15.

Moreover, the court reasoned, PSERB’s refusal to apply the new amendment to outsourcing situations “does not prevent PSEA from bargaining over subcontracting and/or charter school conversions. PSEA acknowledges that a school district’s potential withdrawal liability … can be calculated using” the statutory formula to calculate a ”close approximation of the amount due” that could be used “by the school district and the union as part of the negotiations related to subcontracting.” Id.

In this direct appeal, the Supreme Court will hear argument limited to the question:

Do the well-pled material facts of the Amended Petition establish that [the Pennsylvania State Education Association] has a substantial, direct, and immediate interest, and therefore standing, to challenge the [Public School Employees’ Retirement] Board’s refusal to apply the withdrawal provisions of Section 8327.1 of the Public School Employees’ Retirement Code, 24 Pa. C.S. § 8327.1, to subcontracting?

For more information, contact Kevin McKeon or Dennis Whitaker.