AFT Michigan v. State
297 Mich. App. 597
| Mich. Ct. App. | 2012Background
- Three cases consolidated on appeal challenge MCL 38.1343e, enacted 2010 to fund retiree health benefits through 3% wage withholdings by school districts.
- Plaintiffs include public school employees and labor organizations representing them; they sought injunctions, declaratory relief, and return of withholdings.
- The trial court granted summary disposition for plaintiffs; it held the statute violates Contracts, Takings, and Due Process.
- Studier v Mich Pub Sch Emps’ Ret Bd (2005) held retiree health care benefits are not accrued financial benefits, shaping the contract analysis.
- Legislative funding mechanism uses employer contributions to a state health care fund; retirees’ health benefits are not guaranteed contractual rights under Studier; the majority affirms invalidity, remanding for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does MCL 38.1343e impair contracts? | Plaintiffs allege 3% wage reduction is a substantial impairment of contracts. | State contends no contract is impaired since retiree benefits are not accrued and CBAs are unaffected. | Yes, substantial impairment of contract found. |
| Does MCL 38.1343e constitute a taking? | Withholding funds creates a per se taking of a definable property interest in wages. | Monetary obligations do not automatically constitute takings. | Yes, statute constitutes a taking without just compensation. |
| Does MCL 38.1343e violate substantive due process? | Direct transfer of wages to fund others’ benefits is arbitrary and irrational. | Policy choice to fund retiree health care via employee contributions is permissible. | Yes, violates substantive due process. |
| Do plaintiffs have standing to challenge? | Labor organizations represent members affected by the statute. | Lack of membership proof undermines standing. | Standing established for organizational plaintiffs. |
| Are the claims ripe for decision? | Wage confiscation is current and ongoing, not hypothetical. | Ripe only if future health benefits are challenged. | Ripe; current wage confiscation supports adjudication. |
Key Cases Cited
- Baltimore Teachers Union v Baltimore Mayor & City Council, 6 F.3d 1012 (4th Cir. 1993) (contractual wage impairment analysis in public sector)
- Buffalo Teachers Federation v Tobe, 464 F.3d 362 (2d Cir. 2006) (temporary, limited contract impairment may be permissible)
- Allied Structural Steel Co v Spannaus, 438 US 234 (U.S. 1978) (contract impairment scrutiny framework)
- Webb’s Fabulous Pharmacies, Inc v Beckwith, 449 US 155 (U.S. 1981) (takings implications of property-like funds and interest)
- Eastern Enterprises v Apfel, 524 US 498 (U.S. 1998) (takings/dissent considerations on monetary obligations)
- Studier v Mich Pub Sch Emps’ Ret Bd, 472 Mich 642 (Mich. 2005) (retiree health benefits not accrued financial benefits)
- Adams v United States, 391 F.3d 1212 (Fed. Cir. 2004) (overtime pay not a protected property interest)
- McCarthy v City of Cleveland, 626 F.3d 280 (6th Cir. 2010) (takings/monetary obligation limitations)