State Budget Impasse: The Political Question Doctrine, Statutory Interpretation and Federal Pre-Emption
March 9, 2010
Every so often, our state courts are presented with an opportunity to clarify or reaffirm one of the basic principles underlying our American form of democracy. Rarely are numerous opportunities presented in a single case, but in its recent ruling in Council 13 AFSCME v. Commonwealth, the Pennsylvania Supreme Court addressed at length the proper role of the judiciary in our tripartite form of government; statutory construction principles under federal law; and the appropriate means of reconciling the conflicting demands of state and federal law.
These issues arose in the context of what has become a yearly political battle in many states, including here in Pennsylvania, between the executive and legislative branches of government over the budget for most of the state's operations. The Pennsylvania Constitution directs the governor to submit an annual budget for the General Assembly's consideration (Article III, Section 12). In turn, the General Assembly is to adopt the budget and enact an appropriations bill (Article VII, Section13).
Article III, Section 24 of the Pennsylvania Constitution requires, with very few exceptions, that appropriations legislation must be enacted before the funds may be expended from the state treasury. Yet in each of the last six years, the governor and the General Assembly have been unable to agree upon an appropriations bill before the July 1 start of the fiscal year, holding up funding for vital government services. In 2009, the budget stalemate lasted for months.
Among those caught in the crossfire during these annual budget battles have been state workers subject to furlough due to partial government shut downs. Since 2005, the Rendell administration either threatened or actually implemented furloughs of about 25,000 employees, asserting that it was legally required to shut down non-critical government operations in order to avoid unnecessary violations of Article III, Section 24 of the state constitution.
Specifically, the administration acknowledged that if it continued to employ so-called "non-critical" state workers, it would be obligated to pay them their wages, under the federal Fair Labor Standards Act (FLSA). However, in the administration's view, if it paid those wages before a budget was enacted, it would be in violation of the constitutional prohibition against expenditure without a legislative appropriation.
As for the approximately 50,000 employees deemed "critical" to the public health, safety and welfare, the administration inexplicably planned to continue to employ and pay those workers throughout the budget impasse, despite the requirements of Article III, Section 24.
Of course, there were those who viewed the administration's furlough threats as merely a tactic to pressure the Legislature to give some ground in the budget dispute. However, the administration maintained that the furloughs were legally required by the conflicting demands of the FLSA and the state constitution.
When furloughs were threatened in 2008, three state worker unions representing most of the workers in question filed a declaratory judgment action, asking the Commonwealth Court to declare whether or not the administration's view of the law was correct. The unions argued that under the Supremacy Clause of the U.S. Constitution, the FLSA pre-empts the state constitution, at least when it comes to payment of employee wages and, therefore, the administration was not legally compelled to shut down the government and furlough employees.
In response, the administration argued that the case should be dismissed because it involved a non-justiciable political question. Alternatively, the administration sought a declaration that the governor's scheme of furloughing 25,000 "non-critical" employees but continuing to employ and pay 50,000 "critical" employees during a budget impasse was lawful.
The trial court — which in this case was the Commonwealth Court — found the case justiciable. It avoided addressing whether the FLSA pre-empts the Pennsylvania Constitution by determining that the FLSA does not require timely payment of wages. The court also ruled that Article III, Section 24 prevents the administration from paying any employee in the absence of an appropriations act. The unions and the administration filed cross-appeals to the Pennsylvania Supreme Court.
While the case was pending on appeal, the 2009 budget impasse occurred. As a result of the Commonwealth Court's ruling, during the first several weeks of that stalemate, state workers were expected to work without pay. They finally were paid when a partial budget was enacted in mid-August, but for many, the damage had been done. The average unionized state employee earns approximately $35,000 yearly.
Without their paychecks, they were unable to make timely payments on their mortgages and other credit obligations, incurring late fees, increased interest rates and other penalties. Thousands of state employees struggling to find ways to feed their families and put gas in the car to get to work, went to food banks and took out additional loans to try to make ends meet.
Although the Supreme Court's Dec. 28, 2009, ruling did not actually mention the "payless paydays" to which state workers had been subjected in 2009, it implicitly outlawed such tactics in the future. The court, in a six-to-one decision authored by Chief Justice Ronald D. Castille, found the case justiciable, held that the FLSA does indeed require timely payment of at least minimum wage for hours worked, and determined that this timely payment requirement pre-empts Article III, Section 24 of the Pennsylvania Constitution so that it does not prohibit payment of employee wages during an impasse.
On the question of justiciability, the Rendell administration argued that for the court to rule on the declaratory judgment action would be an improper judicial intrusion into the constitutional power of the executive branch to decide which employees may work and be paid during a budget impasse. The Supreme Court disagreed, holding that the unions were merely seeking a declaration as to whether or not the administration was correct in believing that the FLSA and the state constitution mandated the furloughs.
The court noted that the political question doctrine shields from judicial intrusion the executive's policy decisions. It does not, however, divest the judicial branch of its authority to interpret the law, when the actions of the executive purport to be based upon the requirements of the law. It is the role of the judiciary to interpret the constitution and laws, and to determine whether those sources require or prohibit given conduct. As Castille explained, "The political question doctrine is a shield, not a sword. … [I]t does not exist to remove a question of law from the Judiciary's consideration merely because the Executive branch has forwarded its own opinion of the legal issue in a political context." The breadth of the court's approach to justiciability undoubtedly will have significant influence for years to come.
On the question of whether or not the FLSA requires timely payment of wages, the court acknowledged that the FLSA does not explicitly state that wages must be paid on the regular payday, or at any other specific time. However, its inquiry did not end there. Applying principles of statutory construction, the court noted that where, as here, the express language of the statute does not address a particular issue, the court must look to the design and purpose of the statute as a whole and "give the statutory language the meaning that advances the policies underlying the legislation."
Applying this rule to the question at hand, the court adopted the reasoning of the 9th U.S. Circuit Court of Appeals in a case involving non-payment of wages to California state workers during a budget impasse. The 9th Circuit noted the FLSA requires that the employer "shall pay" at least minimum wage for hours worked, and that failure to do so results in liability for unpaid wages and liquidated damages. The imposition of liability would be meaningless unless there was a point in time at which wages were due to be paid, and after which they were unpaid, in violation of the statute. Similarly, there must be a point at which the statute of limitations for an unpaid wage claim begins to run — again, the point at which the employer has failed in its statutory obligation to pay at least minimum wage for all hours worked.
The 9th Circuit concluded that these provisions have meaning only if the FLSA also requires timely payment of wages. Noting that the same conclusion had been reached by the two other federal circuits that had considered the issue (the 2nd and 7th), the Supreme Court concurred in 9th Circuit's analysis.
The impact of this particular portion of the court's ruling extends well beyond the state workers at issue in the case. It will also benefit FLSA-covered local government workers across the commonwealth. Private sector employees in Pennsylvania have long enjoyed the right to be paid on their regular payday under the Wage Payment and Collection Law. But that law does not apply to state or local government employees.
Furthermore, no state or federal court in Pennsylvania previously addressed the question of the FLSA's timely payment requirement in a precedential decision.
Finally, on the question of pre-emption, the Supreme Court concluded that because it is impossible during a budget impasse to comply with both the FLSA requirement of timely payment of wages and the constitutional prohibition against spending unappropriated funds, the state law prohibition must yield to the supremacy of federal law.
The court noted that there are three possible means by which a state law may be pre-empted by federal law. The first is "express pre-emption," where the language of the federal law itself expresses the intent to pre-empt state law. An example is Section 514 of the Employee Retirement Income Security Act, which explicitly provides that the statute "shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan," with certain enumerated exceptions. The FLSA contains no such provision.
The second type of pre-emption, "field pre-emption," applies where Congress evidences its implicit intent to occupy the entire field or area. An example is the National Labor Relations Act, which courts have held pre-empts state laws directed at conduct arguably prohibited or permitted by the statute, including conduct that Congress, in enacting the statute, intended to leave unregulated. Because the FLSA's savings clause expressly permits states to enact more protective legislation, the court found field pre-emption was not applicable in this case.
Third, and finally, "conflict pre-emption" applies where compliance with both state and federal law is impossible, or where the state law presents an obstacle to the accomplishment of the full purpose and objectives of Congress embodied in the federal law. It was this third type of pre-emption that the court found present in this case, finding the conflict between the two laws obvious. As the administration acknowledged at the outset of the litigation, it is simply not possible to shut down every government operation during an impasse, and therefore some workers must remain employed.
Because the FLSA pre-empts the state constitutional provision, the Supreme Court further explained, the state law has no legal effect. Therefore, contrary to the administration's view, the constitutional provision has no application to payment of employee wages as required by the FLSA, and so does not require furlough of any workers. Payment of federally mandated wages is not a violation of the Pennsylvania Constitution for the simple reason that the federal law supersedes Article III, Section 24. Consequently, the Supreme Court declared that the governor may continue to employ and pay all FLSA-covered employees when a budget is not enacted by the July 1 start of the fiscal year.
With this decision, the Pennsylvania Supreme Court resolved the crucial legal rules for the recurring, politically driven budget battles in the middle of which moderately paid state employees have been caught for years. After this authoritative declaration, the affected parties will now approach the annual budget negotiations with a clear understanding of the applicable legal rules.
The ruling also takes on national importance, as it will undoubtedly be looked to for guidance by the many other states and political subdivisions facing increasingly frequent and protracted budget impasses during these tough economic times.
Alaine S. Williams is a founding partner of Willig Williams & Davidson, where she has represented labor unions and workers in both the public and private sector for 30 years. She can be contacted at email@example.com.
Amy L. Rosenberger is a partner in the firm, also practicing union-side labor and employment law. The firm represented the unions that filed suit in Council 13 AFSCME v. Commonwealth. She can be contacted at firstname.lastname@example.org