Unilateral Alteration of Public Sector Collective Bargaining Agreements and the Contract Clause

As public sector budgets have waxed and waned in response to changes in the economic cycle over the past 30 years, public sector employers increasingly have sought to control personnel costs by resorting to measures such as wage freezes and furloughs. Not infrequently, those measures have pitted the viability of collective bargaining agreements against the ability of government to protect its coffers. This article examines those court decisions that have considered the reach of the contract clause in this setting over the past thirty years. Most of these courts properly have applied the principles established by the Supreme Court in the United States Trust Co. decision so as to restrict the permissible scope of self-serving legislative modifications. A significant minority of decisions, however, have afforded substantial deference to such modifications even though they occur in a context in which the legislative body is hardly a disinterested observer. While the legislative impairment of governmental contract rights is a necessary safety valve in some circumstances, an underlying theme of many of the minority decisions is that public sector collective bargaining agreements are not as worthy of protection as other types of governmental contracts. This article takes issue with that theme as an undesirable vestige of the discredited notion that public employees owe a duty of “extra loyalty” to the state. The article proposes an analytical framework that treats public sector collective bargaining agreements the same as other governmental contracts, rather than as a second-class type of contract. It urges that a governmental body should be sustained in impairing its contract obligations to its employees on the same basis as other self-serving impairments; that is, only when such impairment is reasonable and necessary to serve an important governmental purpose