PER CURIAM.
Presently before the court are preliminary objections filed by the Executive Board of the Commonwealth of Pennsylvania and the Department of Labor and Industry (collectively referred to as the Executive Board)
The following summary is drawn from the allegations in the Association's first amended petition for review. Since 1996, Workers' Compensation Judges (WCJs) have been classified as management level employees and, hence, are not represented by a union and do not engage in collective bargaining. Every four years, the various unions that represent other Commonwealth employees engage in collective bargaining with the Governor's office with respect to a new collective bargaining agreement (CBA).
Each year, the Executive Board issues a resolution authorizing payment of any negotiated increase for union employees. At the same time, the Executive Board also issues a resolution to "pass on" the same increase to management and other non-union employees. On March 18, 2008, the Executive Board issued a resolution to "pass on" to management employees, including WCJs, a 3% general pay increase in July 2008 and a one-step longevity increment in January 2009, which equates to a pay increase of 2.25%, provided that they were employed continuously since January 31, 2008.
However, on December 19, 2008, the Executive Board adopted a new resolution rescinding the January 2009, one-step longevity increment or lump sum payment contained in the March resolution, stating that "fiscal challenges resulting from revenue falling significantly below budgetary projections during Fiscal Year 2008-09, have prompted the need for cost savings measures to address these fiscal challenges."
The Association sought further relief as follows: a permanent injunction barring implementation of the December resolution; certification of the proposed class (all individuals employed continuously as WCJs from January 31, 2008, until the first day of the first full pay period in January 2009); an order directing the Executive Board to make all class members whole; and an award of attorney fees and costs.
On January 24, 2011, the Executive Board filed preliminary objections in the nature of a demurrer alleging as follows:
The Executive Board seeks an order sustaining its preliminary objections and dismissing with prejudice the Association's § 1983 claims and its claims premised on the Contract and Taking Clauses of the United States and Pennsylvania Constitutions.
The Executive Board argues that the Association's § 1983 claims must be dismissed because § 1983 provides for a cause of action only against "persons" acting under color of state law, and individuals
This Court has repeatedly held that the Commonwealth, a department of the Commonwealth, and officials acting in their official capacities are not "persons" under 42 U.S.C. § 1983. Association of Settlement Companies v. Department of Banking, 977 A.2d 1257 (Pa.Cmwlth.2009) (citing Will v. Michigan Department of State Police, 491 U.S. 58, 109 S.Ct. 2304, 105 L.Ed.2d 45 (1989) in support of its holding that the Department of Banking is not a "person" to whom 42 U.S.C. § 1983 may apply); Faust v. Department of Revenue, 140 Pa.Cmwlth. 389, 592 A.2d 835 (1991), appeal denied, 530 Pa. 647, 607 A.2d 257 (1992) (neither the Commonwealth nor its officials acting in their official capacities are "persons" under 42 U.S.C. § 1983).
Moreover, to state a claim under § 1983, a plaintiff must (1) allege a violation of rights secured by the United States Constitution and the laws of the United States and (2) show that the alleged deprivation was committed by a person acting under the color of state law. Owens v. Shannon, 808 A.2d 607 (Pa.Cmwlth.2002). The Association claims a contract right with respect to the March resolution providing WCJs with a 3% general pay increase in July 2008 and a one-step longevity increment in January 2009. However, the Association has failed to sufficiently plead the presence of any such contractual right.
In order for a contract to be formed, there must be an offer, acceptance, and an exchange of consideration. Beaver Dam Outdoors Club v. Hazleton City Authority, 944 A.2d 97 (Pa.Cmwlth. 2008). Consideration is sufficient when it confers a benefit upon the promisor or a detriment upon the promisee, i.e., there is a bargained for exchange. Pyle v. Department of Public Welfare, 730 A.2d 1046 (Pa.Cmwlth.1999). In the present case, the March resolution was not bargained for because the Association incurred no detriment. In other words, the Association offered no consideration, and without consideration, there is no enforceable contract right.
The Contract Clause of the United States Constitution provides, in relevant part, that "[n]o state shall enter into any. . . Law impairing the Obligation of Contracts." U.S. Const. art. I, § 10. The Contract Clause of the Pennsylvania Constitution similarly provides that "[n]o . . . law impairing the obligation of contracts. . . shall be passed." Pa. Const. art. I, § 17. Our Pennsylvania Supreme Court has held that the Contract Clause of the Pennsylvania Constitution is generally to be applied in the same manner as its federal counterpart. First Nat'l Bank of Pennsylvania v. Flanagan, 515 Pa. 263, 528 A.2d 134 (1987).
It is long settled law within this Commonwealth that the constitutional prohibition against the impairment of contracts protects the permanence of a salary and, to the contrary, the clause does not prohibit the abrogation of the salary of a public officer during the term of his office. Barker v. City of Pittsburgh, 4 Pa. 49 (1846) (holding that there is no contract, express or implied, for the permanence of a salary and that the city of Pittsburgh can abrogate the salary of an elected official before the expiration of his term); see also Wagoner v. Philadelphia, 215 Pa. 379, 64 A. 557 (1906) (holding that ordinance that fixed the salaries of bricklayers was not within the nature of a contract between the city of Philadelphia and the bricklayers).
A court makes three threshold inquiries in evaluating a Contract Clause claim: (1) whether there is a contractual relationship; (2) whether a change in a law has impaired that contractual relationship; and (3) whether the impairment is substantial. Transport Workers Union of America, Local 290 v. Southeastern Pennsylvania Transportation Authority, 145 F.3d 619 (3d Cir.1998). Significantly, the Contract Clause "prohibition is aimed at the legislative power of the State, and not at the decisions of its courts, or the acts of administrative or executive boards or officers, or the doings of corporations or individuals." New Orleans Waterworks Company v. Louisiana Sugar Refining Company, 125 U.S. 18, 30, 8 S.Ct. 741, 31 L.Ed. 607 (1888). Thus, a court must first consider whether there is shown on the record any act of state legislation. St. Paul Gaslight Co. v. St. Paul, 181 U.S. 142, 21 S.Ct. 575, 45 L.Ed. 788 (1901).
Simply stated, an act of state legislation requires an act of legislative power. Legislative power has been defined as the lawmaking power of a legislative body that relates to subjects of a permanent or general character. Price v. Pennsylvania Prop. & Cas. Ins. Guaranty Ass'n., 158 F.Supp.2d 547 (E.D.Pa.2001). While such lawmaking power may, for purposes of the Contract Clause, be expressed in a form other than a statute such as an ordinance of a municipal corporation or political subdivision, mere administrative actions do not fall within the ambit of the constitutional prohibition. See New Orleans Waterworks Company (ordinance of New Orleans City Council granting the Louisiana Sugar Refining Company permission to ship Mississippi River water directly to its plant notwithstanding state charter grant of exclusive water supply rights to the New Orleans Waterworks Company held by United States Supreme Court to be a local administrative act and hence not state action in violation of the Contract Clause);
In other cases analyzing the Contract Clause issue, federal courts have held that a resolution of the Grand River Dam Authority increasing rates for water and steam was not a legislative action, Grand River Dam Authority v. Nat'l Gypsum Co., 352 F.2d 130 (10th Cir.1965), cert. denied, 383 U.S. 907, 86 S.Ct. 888, 15 L.Ed.2d 663 (1966); a resolution passed by the Port Authority of New York authorizing the construction and lease of a cold storage facility in New Jersey was not a legislative action, Nat'l Cold Storage Co. v. Port of New York Authority, 286 F.Supp. 1016 (S.D.N.Y.1968); a resolution of the Board of Commissioners of the Chicago Park District cancelling all permit agreements for rock music concerts for the year 1970 was not a legislative action, Contemporary Music Group, Inc. v. Chicago Park District, 343 F.Supp. 505 (N.D.Ill.1972); a resolution of the Southeastern Pennsylvania Transportation Authority modifying an employee benefit plan to require enrolled employees to contribute a percentage of their salary was not a legislative action, Transport Workers Union of America, Local 290; and a resolution of the Port Authority of Allegheny County amending the terms of a pension plan was not a legislative action, Skoutelas v. Port Authority of Allegheny County, No. 2:07CV1077, 2008 WL 1773876, 2008 U.S. Dist. LEXIS 31704 (W.D.Pa.2008).
The resolutions only applied to a specific subject and a specific group of employees for a distinct period of time, i.e., a 3% general pay increase in July 2008 and a one-step longevity increment or lump sum payment in January 2009 for management and other non-union employees, including WCJs. Additionally, the resolutions were simply the method by which the Executive Board performed its statutory duty. Moreover, the actions of the Executive Board are consistent with the typical actions of management personnel, i.e., the setting of salaries for those under their supervision. See, e.g., Jefferson County Court Appointed Employees Association v. Pennsylvania Labor Relations Board, 603 Pa. 482, 985 A.2d 697 (2009) (holding that a county salary board acts in an administrative capacity in fixing the salaries and compensation of county employees); Franklin County Prison Board v. Pennsylvania Labor Relations Board, 491 Pa. 50, 417 A.2d 1138 (1980) (holding that the fixing of salaries by a county salary board was not a legislative enactment). Thus, in concordance with the decisions noted above, we must conclude that the March and December resolutions did not constitute legislative actions so as to implicate the provisions of the Contract Clause of the United States or Pennsylvania Constitutions.
Finally, we conclude that the Association's claims under the Takings Clause of the United States and Pennsylvania Constitutions also must fail.
The Takings Clause emanates from the last clause of the Fifth Amendment to the United States Constitution providing that private property shall not "be taken for public use, without just compensation." U.S. Const. amend. V. The Takings Clause of the Pennsylvania Constitution similarly provides that private property shall not "be taken or applied to public use, without authority of law and without just compensation being first made or secured." Pa. Const. art. I, § 10. Both constitutional provisions are interpreted using the same standards and framework. Smith v. Cortes, 879 A.2d 382 (Pa.Cmwlth. 2005), aff'd, 587 Pa. 506, 901 A.2d 980 (2006) (recognizing that our Pennsylvania Supreme Court has consistently relied upon the decisions of the United States Supreme Court in resolving claims under the Takings Clause).
In order to succeed on its claim under the Takings Clause, the Association first would be required to establish a property right in future salaries. The Association cannot meet this burden. Under Pennsylvania law, employees are at will and, absent a contract, may be terminated at any time for any reason or for no reason. Stumpp v. Stroudsburg Municipal Authority, 540 Pa. 391, 658 A.2d 333 (1995). This general rule is not abrogated just because the employee is a governmental worker since an individual does not have a per se right in governmental employment.
In the present case, it is undisputed that since 1996, WCJs have been classified as management level employees and are not subject to any CBA.
Accordingly, the preliminary objections of the Executive Board addressed above are sustained. Having so concluded, we need not address the Executive Board's remaining preliminary objections, and we dismiss the Association's First Amended Petition for Review.
AND NOW, this 19th day of January, 2012, the preliminary objections filed on behalf of Respondents are hereby sustained and the First Amended Petition for Review filed by Petitioners is dismissed.
A copy of the complete resolution can be found at Exhibit 5 of the Association's First Amended Petition for Review.
A copy of this resolution can be found at Exhibit 6 of the Association's First Amended Petition for Review.
A jury trial was held before the trial court and the jury ultimately ruled in favor of the Refinery. The trial court thereafter entered judgment in the Refinery's favor and dismissed Waterworks' petition. Waterworks appealed to the Supreme Court of Louisiana, which affirmed the judgment, concluding that the ordinance was not in violation of the contract contained in the charter. Waterworks appealed to our United States Supreme Court. The Court dismissed the appeal concluding that it lacked jurisdiction because no legislative act of the state had been upheld. The Court held that the ordinance at issue involved no exercise of legislative power and the decision of the Supreme Court of Louisiana was not based to any degree upon the United States Constitution or any state law enacted subsequent to the charter.
The Court explained that in order to present a valid Contract Clause claim, not only must the obligation of a contract have been impaired, but it must have been impaired by a law of the state. The Court noted, however, that a law of the state, in order to come within the constitutional prohibition, need not be in the form of a statute enacted by the state legislature or in the form of a state constitution. Rather, the Court indicated that any enactment to which the state gives the force of law, such as a by-law or ordinance of a municipal corporation, may be considered a law for purposes of the prohibition. However, the Court characterized the city's permission in this case, albeit in the form of an ordinance, as merely a license. In so doing, the Court referenced a portion of the city's charter granting city council the authority to permit any person contiguous to the river the privilege of laying pipes. In other words, the charter enacted by the legislature established the rule/law, but committed its execution to city council, i.e., city council would decide whether a person met the definition under the rule. The Court described the City's authority in this regard as administrative, not legislative.
