YOUNG, C.J.
Plaintiffs are several unions that represent employees in the state classified civil service. Their members are the beneficiaries of and participants in Michigan's retirement system established under the State Employees Retirement Act (SERA).
While the commission has considerable constitutional powers to manage the civil service system and to preserve its sphere of constitutional authority, the commission has no legislative powers. It may neither enact legislation nor revise an enactment, nor may it dictate that the Legislature repeal or modify an enactment. Therefore, we hold that because the commission has acquiesced in the application of SERA to the employees of the civil service system, plaintiff's objections fail to establish a basis for relief.
We reverse the judgment of the Court of Appeals and remand to the Court of Claims for further proceedings consistent with this opinion.
In 1940, through an initiative petition, the people of Michigan ratified a constitutional amendment establishing a state civil
Shortly after its creation, the commission promulgated a rule requiring its state personnel director to recommend that the Legislature establish a retirement plan for classified employees:
Apparently, the commission thereafter designed a model retirement plan, which it submitted to the Governor for comment. However, before the Governor completed his review of the commission's plan,
Subsequently, the people ratified a new Constitution in 1963, which altered somewhat the way that the commission operates. Const. 1963, art. 11, § 5, ¶ 4, remains largely unchanged from Const. 1908, art. 6, § 22, and provides in relevant part:
In the same section, however, the ratifiers introduced a new legislative check on compensation increases for civil servants authorized by the commission:
Following the ratification of the 1963 Constitution, the commission replaced its initial retirement rule, Rule XXXVIII, but its replacement did not purport to fundamentally change the commission's advisory role in SERA's administration:
Section 31 — Retirement.
The commission's rules have remained substantively unchanged in this regard.
In 2011, the Legislature amended SERA.
Plaintiffs argue that SERA retirement benefits are "rates of compensation" or, alternatively, "conditions of employment," as these terms are used in Const. 1963, art. 11, § 5. Accordingly, plaintiffs claim, SERA retirement benefits are not subject to legislative change because the regulation of "rates of compensation" and "conditions of employment" of employees in the classified civil service is within the exclusive and plenary authority of the commission.
The Court of Claims held that 2011 PA 264 was unconstitutional. The Court of Appeals affirmed the ruling of the Court of Claims, concluding that SERA retirement
This Court reviews the grant or denial of summary disposition de novo.
As noted, plaintiffs make two alternative arguments that by enacting 2011 PA 264, the Legislature infringed the commission's constitutional authority. First, plaintiffs allege that the pension accrual characteristics altered by 2011 PA 264 affect classified employees' "rates of compensation" under Const. 1963, art. 11, § 5, and that the Legislature cannot act in that area. Second and in the alternative, plaintiffs allege that the pension accrual characteristics affected by 2011 PA 264 are "conditions of employment" under Const. 1963, art. 11, § 5. We address these two arguments in turn.
As used in article 11, § 5, we conclude that the term "rates of compensation" was not understood by the ratifiers of the 1963 constitution to include fringe benefits such as pensions; rather, the common understanding of the term at that time was that it included only salaries and wages.
Our primary goal in construing a constitutional provision is to give effect to the intent of the people of the state of Michigan who ratified the Constitution, by applying the rule of "common understanding."
Textual indicators in the Constitution uniformly indicate that the phrase "rates of compensation," as used in article 11, § 5, was commonly understood to include only salaries and wages, i.e., amounts paid out to employees in a paycheck.
This understanding is confirmed elsewhere. Highly significant to our assessment is the Address to the People. Apart from the text of the Constitution itself, the Address provides an authoritative contemporary construction of the constitutional provisions that the citizens of Michigan were asked to vote on.
Moreover, the portion of the Address explaining article 11, § 5 states: "Of special interest to civil service personnel is the provision in Sec. 24, Article IX, of the proposed constitution which specifies that pension plans and retirement systems of the state shall be contractual obligations `which shall not be diminished or impaired.'"
Finally, although of lesser import than the Address, the transcript of the constitutional convention debates further confirms that the common understanding of "rates of compensation" did not extend to pensions. The record is replete with references to "wages" and "salaries" during discussion of the Legislature's then-proposed veto power over commission increases to "rates of compensation,"
In conjunction with the text of article 11, § 5 discussed earlier, these historical sources confirm that the phrase "rates of compensation" referred to salaries and wages as opposed to fringe benefits such as the SERA pension program. Accordingly, we find no merit in plaintiffs' argument that 2011 PA 264 infringes the commission's authority to regulate "rates of compensation," because the SERA pension program does not affect "rates of compensation" as that term is used in Const. 1963, art. 11, § 5.
Notably, 2011 PA 264 does nothing to change the member's salary or wages.
As an alternative to their argument that SERA pensions are "rates of compensation," plaintiffs allege that SERA pensions are "conditions of employment." They further allege that, as a result, any legislative action in the field of pensions requires commission approval in order to be constitutional. Plaintiffs also appear to allege that SERA was itself an "exercise" of commission authority.
"The powers of government are divided into three branches: legislative, executive and judicial."
It scarcely bears repeating that the executive power cannot be used to enact actual statutes. That power is vested exclusively in the Legislature.
By the same logic, the commission has no explicit authority to require the Legislature to exercise its lawmaking power in the field of "conditions of employment." Under plaintiffs' interpretation of the constitutional provision at issue, the commission's power in this area would be so limitless as to include the authority for it to dictate the nuances of statutory schemes. Plaintiffs' argument that the commission has such authority must fail. Instead, when the commission wishes to regulate "conditions of employment," it must proceed within its own sphere, using its own constitutionally provided tools, which it typically does by promulgating and enforcing its rules.
Based on the foregoing, we hold that SERA could not have been, and thus is not, a product that the commission could have created by exercising its proper constitutional authority. These principles are equally relevant in considering whether the Legislature has overstepped its bounds and intruded into the sphere of the commission's constitutional responsibility. Unlike the federal Constitution, our Constitution is "not a grant of power to the Legislature, but is a limitation upon its powers."
The commission has plenary, exclusive authority to "regulate all conditions of employment in the classified service."
When confronted with a violation of the separation of powers, this Court has noted that it is permissible for one branch to acquiesce in the intrusion of another and thus avoid a constitutional conflict.
Furthermore, the dissent rightly states that "there is a meaningful difference between an assertion that the commission has the power to dictate what the Legislature enacts into law and an assertion that the commission is empowered to object to a legislative incursion into the commission's sphere of authority."
We merely hold that the commission may adopt rules that acquiesce in a statute that allegedly intrudes on its sphere of authority, as it has here. What plaintiffs seek in this appeal appears to be beyond the power of the commission. The commission cannot decline to acquiesce by directing the Legislature to "revive" an act that no longer exists. And what the commission cannot constitutionally do directly, it cannot, through surrogates or otherwise, accomplish indirectly by resort to the judiciary.
Const. 1963, art. 11, § 5 vests the Civil Service Commission with plenary authority to "fix rates of compensation" and "regulate all conditions of employment[.]" The Legislature, by 2011 PA 264, amended SERA, which provides pensions to state employees, including those in the classified civil service. 2011 PA 264 does not infringe the commission's authority to "fix rates of compensation" because the ratifiers did not understand that phrase to include pensions or other fringe benefits. Likewise, when the commission acquiesces in the application of SERA to employees in
We reverse the Court of Appeals and remand to the Court of Claims for further proceedings not inconsistent with this opinion.
MARKMAN, ZAHRA, and VIVIANO, JJ., concurred with YOUNG, C.J.
MARY BETH KELLY, J. (concurring in part and dissenting in part).
I concur in the majority's decision to reverse the judgment of the Court of Appeals and remand this case to the Court of Claims. I likewise agree with the majority's conclusion that, by amending the State Employees' Retirement Act (SERA)
In 1943, the Legislature enacted SERA, establishing retirement benefits for state employees and conferring on the commission various powers and duties in implementing the system of retirement benefits.
In granting leave to appeal, we specifically asked the parties whether 2011 PA 264 implicates the commission's authority under article 11, § 5, which, in part, expressly authorizes the commission to "regulate all conditions of employment in the classified service." It is beyond dispute that the challenged provisions of 2011 PA 264 concern amendments to the state employee pension system. The issue confronting this Court is whether these amendments alter a "condition of employment" within the meaning of article 11, § 5 and, therefore, invade the commission's constitutional authority. Rather than avoiding this constitutional issue, I would squarely address this question and, in doing so, would hold that these provisions do not implicate the commission's authority under article 11, § 5 because a pension, by definition, is not a condition of employment but rather an accrual of future financial benefits.
The text of article 11, § 5 suggests that the phrase "conditions of employment" is not without restriction. Indeed, the commission's general authority to "regulate all conditions of employment" is placed at the end of a list of specifically delineated powers: to "classify all positions in the classified service according to their respective duties and responsibilities," to "approve or disapprove disbursements for all personal services," to "determine by competitive examination and performance exclusively on the basis of merit, efficiency and fitness the qualifications of all candidates for positions in the classified service," and to "make rules and regulations covering all personnel transactions."
This Court has explained that the commission has the authority "to regulate employment-related activity involving internal matters such as job specifications, compensation, grievance procedures, discipline, collective bargaining and job performance," but not activity that is not related to employment.
The history behind the grant of authority in article 11, § 5 is also instructive. Clearly, the voters intended to provide the commission with the authority to "regulate all conditions of employment for employees in the classified service" when they approved the amendment of Const. 1908, art. 6, § 22 in 1940. By retaining this very same language in the 1963 Constitution, the ratifiers of article 11, § 5 expressed their intent that the commission continue to have such authority.
In examining 2011 PA 264, it is important to note that MCL 38.35a, MCL 38.50a, and MCL 38.1e do nothing to implicate article 9, § 24 because they do not impair or diminish pension members' already accrued pension benefits; rather, they only affect the accrual of future pension benefits. Moreover, because pension proceeds are payable to the member upon his or her completion of service, calculation of those benefits does not impose conditions of employment, but creates benefits following employment.
As the majority recognizes, the commission's regulatory authority under article 11, § 5 does not empower the commission to enact, amend, or revise the laws of this state because it is not a legislative body.
Consistent with this analysis, I concur in the majority's decision to reverse the decision of the Court of Appeals and remand this case to the Court of Claims. Nevertheless, I respectfully dissent from the majority's assumption that a pension is a condition of employment and instead would reach the question this Court posed — and the parties briefed — and uphold 2011 PA 264 because it does not regulate a "condition of employment" within the meaning of article 11, § 5.
McCORMACK, J. (concurring in part and dissenting in part).
I concur in the majority's decision to reverse the judgment of the Court of Appeals and to remand this case to the Court of Claims. I also agree with Justice BERNSTEIN
I am less confident about what the Civil Service Commission's constitutional authority means in this particular context, given that the commission cannot legislate or make appropriations, as both the majority and Justice BERNSTEIN acknowledge, and therefore cannot accomplish many goals with respect to retirement benefits without legislative action. See Const. 1963, art. 4, § 1 ("The legislative power of the State of Michigan is vested in a senate and a house of representatives."); 46th Circuit Trial Court v. Crawford Co., 476 Mich. 131, 141, 719 N.W.2d 553 (2006) (opinion by MARKMAN, J.) (stating that "the power to tax and to appropriate for specific purposes" is a "fundamental aspect" of legislative power); Const. 1963, art. 3, § 2 ("No person exercising powers of one branch shall exercise powers properly belonging to another branch except as expressly provided in [the] constitution."). Stated differently, I believe the question of how the commission's power to regulate pensions as a "condition of employment" within the civil service can be reconciled with the Legislature's exclusive authority to make appropriations to be a difficult one. I write separately because while the majority's explanation of the commission's historic acquiescence in the legislature's encroachment might be correct, given that it is not essential to the majority's holding and was not explored by the parties, I would refrain from commenting on it. Although the majority may not believe that its discussion of this point drives any of its analysis, I do not believe its opinion makes that sufficiently clear.
Despite the significance of this separation of powers question, I ultimately agree with the majority that it is not a question we should reach just yet. Because the commission, as the affected constitutional actor, is not a party to this lawsuit, has not otherwise officially objected to the legislature's action, and appears by its own official pronouncement, Civil Service Rule 5-13, to have acceded to the legislation, I believe we should refrain from deciding the separation of powers question that the plaintiffs have asserted on the commission's behalf for today. But since Rule 5-13 is all we need to decide this case, I would not consider what import, if any, to assign the commission's historical "acquiescence" in the broader context.
If, in the future, the commission changes its position and objects to the Legislature's enactment of 2011 PA 264, we will need to confront the question of the commission's constitutional authority and the effect of its historical accommodation of the legislative enactments embodied in the State Employees Retirement Act, MCL 38.1 et seq. In my view, those questions should be evaluated once there is a genuine dispute between the commission and the Legislature, once the affected parties have had sufficient opportunity to answer them, and after this Court has taken time to carefully evaluate them with the benefit of that input. For now, I believe the majority is ultimately correct to postpone that difficult constitutional question for another day.
BERNSTEIN, J. (dissenting).
Our Constitution provides that the Civil Service Commission has plenary authority to "regulate all conditions of employment." Const. 1963, art. 11, § 5. The majority concludes that the 2011 amendments to the State Employees' Retirement Act (SERA), MCL 38.1 et seq., do not infringe the commission's constitutional grant of authority where the commission has previously acquiesced to SERA. Put simply, the majority holds that to reject only those amendments
As an initial matter, I agree with the majority that a pension is a "condition[] of employment" as that phrase is used in Const. 1963, art. 11, § 5, and that the commission's authority under that provision includes the authority to establish, maintain, and amend a pension plan.
I agree with the majority that the separation of powers doctrine generally dictates that an executive body like the commission does not have the authority to either enact statutes or appropriate funds.
The majority thus reasons that the commission lacks the authority to require the Legislature to enact statutes as the commission sees fit. I agree with the majority that the commission's constitutional grant of authority does not go so far as to allow the commission to "dictate [to the Legislature] the nuances of statutory schemes," even when those statutory schemes touch upon the commission's sphere of authority ("conditions of employment"). Ante at 285. However, there is a meaningful difference between an assertion that the commission has the power to dictate what the Legislature enacts into law and an assertion that the commission is empowered to object to a legislative incursion into the commission's sphere of authority. The former is a usurpation of legislative powers, which the separation of powers doctrine forbids; the latter is merely a recognition that because the commission's "grant of power is from the Constitution, any executive, legislative or judicial attempt at incursion into that `sphere' would be unavailing." Council No. 11, AFSCME v. Civil Serv. Comm., 408 Mich. 385, 408, 292 N.W.2d 442 (1980).
The majority assumes without deciding that the commission has a constitutional grant of authority to establish, maintain, and amend a pension plan. When the Legislature interferes with this plenary grant of authority, the commission may object to this improper interference. In so doing, the commission does not seek to exercise the legislative power to enact, amend, or veto laws. Instead, the commission's rejection of the challenged provisions in 2011 PA 264 is better characterized
The majority also considers whether the Legislature intruded into the sphere of the commission's authority in enacting the challenged provisions of 2011 PA 264. Again, in assuming without deciding that pensions are conditions of employment over which the commission has plenary authority, the majority concludes that SERA itself is an intrusion into the commission's authority and that the challenged provisions are more of the same. Faced with the Legislature's violation of the separation of powers, the majority turns to the idea of executive acquiescence, concluding that the commission acquiesced to "the Legislature's presumed violation of the separation of powers when it made SERA applicable to civil servants[.]" Ante at 287. In support of this claim, the majority cites Civil Service Rule 5-13, which provides that "[a] classified employee is eligible for retirement benefits as provided by law." Because the law regarding retirement benefits now encompasses the challenged provisions enacted in 2011 PA 264, the majority concludes that the commission cannot now revoke its acquiescence without itself violating the separation of powers doctrine by directing the Legislature to strike these provisions.
In support of the idea of executive acquiescence, the majority relies on a series of cases that considered the concept of judicial acquiescence. This line of cases dealt with judicial acquiescence to legislative action. In Perin v. Peuler, 373 Mich. 531, 541, 130 N.W.2d 4 (1964), this Court first defined the scope of judicial rulemaking by stating that
However, this Court recognized a limit to this general grant of constitutional authority: "[A]s is evident from the plain language of [Const. 1963] art. 6, § 5, this Court's constitutional rule-making authority extends only to matters of practice and procedure." McDougall v. Schanz, 461 Mich. 15, 27, 597 N.W.2d 148 (1999). In distinguishing between substantive rules and rules of practice and procedure, the McDougall Court found that the Perin Court had "overstated the reach of our rule-making authority," explaining that the distinction between rules of substance and procedure "is one that was not only advocated by recognized scholars contemporaneously with the development and passage of our 1963 Constitution, but one that ...
The McDougall majority thus stands for the proposition that this Court's constitutional grant of authority to promulgate rules is not a grant of plenary authority. Although this Court has "exclusive rule-making authority in matters of practice and procedure," id. at 26, 597 N.W.2d 148, the McDougall majority was primarily concerned with making clear that this Court does not have such authority with regard to substantive rules. In contrast, there is no such limitation on the commission's authority over conditions of employment in either the plain language of the Constitution or in the minds of the ratifiers, whose clear intent was to remove the classified civil service from legislative interference.
In contrast to the situation presented in McDougall, the commission's authority over conditions of employment is plenary; any legislative incursion into this sphere is itself a violation of the separation of powers doctrine. The commission's involvement, however minimal, in the enactment of SERA and amendments thereafter speaks nothing to this underlying constitutional principle.
The majority finally relies on Judicial Attorneys Ass'n v. Michigan, 459 Mich. 291, 586 N.W.2d 894 (1998). In that case, this Court held that statutory provisions that designated counties as the employers of judicial employees violated the separation of powers doctrine. Id. at 302-303, 586 N.W.2d 894. In so holding, this Court acknowledged that practical necessity (in particular, the lack of the ability to appropriate funds) drove the judiciary to reach certain accommodations with the Legislature. Id. However, this Court specifically found that this prior acquiescence could not "be used as an excuse to diminish the judiciary's essential authority over its own personnel." Id. at 303, 586 N.W.2d 894.
Put simply — one branch's acquiescence, however affirmative, cannot render an unconstitutional act constitutional.
Because the challenged provisions of 2011 PA 264 constitute violations of the separation of powers doctrine, I would hold that they are not properly part of SERA.
While the majority assumes without deciding that pensions are a condition of employment as that phrase is understood in Const. 1963, art. 11, § 5, Justice KELLY would uphold 2011 PA 264 on the basis that it does not regulate conditions of employment. I respectfully disagree with Justice KELLY'S conclusion. I believe that pensions are a condition of employment.
Justice KELLY argues that the plain language of the Constitution indicates that the phrase "conditions of employment" was not intended as a broad catchall, and is instead limited to internal matters. However, I believe this reading fails to account for this Court's prior pronouncement that the commission has the authority "to regulate employment-related activity involving internal matters such as job specifications, compensation, grievance procedures, discipline, collective bargaining and job performance, including the power to prohibit activity during working hours which is found to interfere with satisfactory job performance." Council No. 11, 408 Mich. at 406-407, 292 N.W.2d 442 (emphasis added).
Justice KELLY also notes that, by the time the 1963 Constitution was ratified, SERA had been in effect for 20 years; by keeping the same grant of authority found in the 1908 Constitution, the ratifiers thus did not intend to eliminate the Legislature's authority to enact and amend SERA. In support of this proposition, Justice KELLY cites a comment that suggests the ratifiers intended that pension plans not be diminished or impaired. But as stated earlier, this supposed intention shines no light on whether the commission can properly challenge legislative incursion into its sphere of authority. I agree that the ratifiers did not intend to proscribe the Legislature's ability to enact or amend SERA, but this did not change the underlying presumption that the commission maintained the constitutional authority to regulate pensions; that the commission did not challenge the enactment or amendment of SERA prior to the ratification of the 1963 Constitution only indicates that it did not believe that the Legislature had yet overstepped its bounds.
Justice KELLY finally notes that the challenged provisions of 2011 PA 264 only affect the accrual of future pension benefits; because such benefits are only payable to individuals upon leaving the classified civil service, pension benefits follow employment, and are not conditions of employment. The constitutional difference wrought by this change in preposition appears
As to the first, there is nothing in the plain language of the Constitution that suggests that a "condition of employment" is limited in scope to those internal matters that are present during a particular time period. This Court has previously stated that grievance procedures are unquestionably within the commission's grant of authority, Council No. 11, 408 Mich. at 406, 292 N.W.2d 442, and one hopes that grievance procedures are not part of everyday reality for most employees in the classified civil service. Indeed, the ability to plan ahead for expected future outcomes is part and parcel of the internal, employment-related activity that constitutes conditions of employment. See Wescott v. Civil Serv. Comm., 298 Mich.App. 158, 164, 825 N.W.2d 674 (2012) (holding that the commission does not need to consider disability decisions rendered by other state agencies in making a determination on a request for long-term disability benefits); Mich. State Employees Ass'n v. Dep't of Mental Health, 421 Mich. 152, 163-164, 365 N.W.2d 93 (1984) (holding that it is the constitutional duty of the commission to establish discharge procedures in accordance with due process). The very motivation for the creation of the classified civil service points to the same conclusion: a merit-based system was memorialized in our Constitution out of a fear of a patronage system, which could result in the future termination of otherwise qualified employees upon a change in political fortune. See Mich. State Employees Ass'n, 421 Mich. at 159-160, 365 N.W.2d 93. As to the second, a condition of employment is not defined by whether a classified civil service employee is required to behave a certain way in order to maintain employment. This definition is not broad enough to encompass "job specifications, compensation, grievance procedures, discipline, collective bargaining and job performance," Council No. 11, 408 Mich. at 406, 292 N.W.2d 442, which are all unquestionably part of the commission's grant of plenary authority.
Because I conclude that pensions are a condition of employment under Const. 1963, art. 11, § 5, I would hold that the challenged provisions of 2011 PA 264 improperly intrude on the commission's constitutional grant of plenary authority.
I would hold that pensions fall under the commission's plenary authority over conditions of employment under Const. 1963, art. 11, § 5. Because the commission has not acquiesced to the Legislature's intrusion into its constitutional sphere of authority, I would hold that the challenged provisions of 2011 PA 264 constitute a violation of the separation of powers doctrine. Accordingly, I would affirm the decision of the Court of Appeals.
As amended, MCL 38.50a provides in part: