In its latest pronouncement on the California Agricultural Labor Relations Act (“ALRA”), the Supreme Court of California unanimously reversed the Fifth District Court of Appeal and upheld the constitutionality of an amendment to the statute establishing a Mandatory Mediation and Conciliation ("MMC") process for “first contract” negotiations extending beyond 90 days from either an initial or renewed request to bargain, finding that it neither violated the due process nor equal protection clauses of the federal and state constitutions, nor was an unconstitutional delegation of legislative power, nor did the union’s unexplained 18-year failure to revise its proposal or contact the employer regarding negotiations constitute an “abandonment” that was either a defense to the MMC process or a basis for decertifying the union as the employees’ collective bargaining representative under the ALRA.

The MMC History and Process

The ALRA was enacted in 1975 with one of its main objectives being to facilitate collective bargaining in what is now a $60-plus billion per annum industry in California. Although numerous collective bargaining agreements were signed during the first few years of the implementation of the statute, the paucity of agreements signed in the two decades thereafter caused the Legislature to amend the ALRA in 2002 and create the MMC process in order to, in its view, “ensure a more effective collective bargaining process” and likely result in the signing of additional agreements.

In particular, the MMC process may be invoked by either party: (i) 90 days after an “initial” demand for bargaining, if the certification occurred after January 1, 2003; or (ii) 90 days after a “renewed” demand for bargaining, if the certification occurred before January 1, 2003, the parties have negotiated for at least one year, the employer has committed an unfair labor practice, and the parties have not entered into a previous binding agreement, by filing a declaration with the Agricultural Labor Relations Board ("ALRB" or “Board”), the state agency exclusively created to implement the ALRA, stating that the parties have failed to reach a collective bargaining agreement and requesting that the Board issue an order directing the parties to mandatory mediation and conciliation of their issues before a neutral, agreed-upon mediator. Mediation then proceeds for a period of 30 days, which may be extended by the mediator for an additional 30 days. Within 21 days after expiration of the initial or extended period, the mediator is required to file a “report” with the ALRB that resolves all of the outstanding issues and sets forth the final terms of a complete collective bargaining agreement. In carrying out these responsibilities, the mediator “may consider those factors commonly considered in similar [interest arbitration] proceedings,” including: (i) the parties' demands; (ii) the employer's financial condition and ability to meet the costs of the contract; (iii) the wages, benefits and other terms and conditions of employment contained in other collective bargaining agreements covering similar agricultural operations with similar labor requirements; (iv) the wages, benefits and other terms and conditions of employment in comparable firms or industries in geographical areas with similar economic conditions; and (v) the average consumer prices for goods and services and the overall cost of living in the area where the work is performed.

Within 7 days of the filing of the mediator’s report, either party may petition the Board for review on the ground that a provision in the new collective bargaining agreement set forth in the mediator’s report is: (i) unrelated to wages, hours or other terms and conditions of employment; (ii) based on clearly erroneous findings of material fact; or (iii) arbitrary or capricious in light of the mediator’s findings of fact, which report, within 10 days of receipt, the Board may either deny, at which point the new collective bargaining agreement may take effect, or grant, in whole or in part, after which the Board will issue a decision requiring the mediator to modify the terms of the new collective bargaining agreement, meet with the parties for further mediation and, thereafter, submit a second report. Again, if no petition for review of the second report is filed by either party, the new collective bargaining agreement will take immediate effect as a “final order” of the Board; however, if a petition is filed, the Board will determine the issues and issue a “final order” containing all of the terms and conditions of the new collective bargaining agreement. Additionally, apart from the above-described “two-tier review,” either party may petition the Board to set aside the mediator’s report if: (i) it was procured by corruption, fraud or other undue means; (ii) there was corruption in the mediator; or (iii) the rights of the petitioning party were substantially prejudiced by the misconduct of the mediator.

Finally, within 30 days of the Board’s issuance of a “final order,” a party may petition either the Court of Appeal or the Supreme Court directly for review limited to whether, based upon the entire record: (i) the Board acted without, or in excess of, its jurisdiction; (ii) the Board did not proceed in the manner required by law; (iii) the Board’s order was procured by fraud or was an abuse of discretion; or (iv) the Board’s order violates either the Constitution of the United States or California.

Case Background

Gerawan Farming ("Gerawan" or “Company”) is a farming business that owns approximately 12,000 acres in the Central Valley of California. In 1990, a majority of Gerawan's employees voted to be represented by the United Farm Workers of America ("UFW” or “Union”) and, following an appeal of the election results, on July 8,1992, the Union was certified by the ALRB as the employees’ exclusive bargaining representative. Shortly thereafter, the Union sent a letter to Gerawan requesting that it begin contract negotiations to which the Company agreed. However, the Company heard nothing further from the Union for more than two years until November of 1994, when it renewed its request to bargain. Shortly thereafter, the parties held one negotiation session that ended with the Union expressly representing to the Company that it would revise its proposal and contact the Company about future negotiations.

However, it was not until nearly 18 years later, on October 12, 2012, that the Union finally followed through on its promise to contact Gerawan to set up the next negotiations session and, despite the Company’s request, refused to explain why it had taken so long to do so. In early 2013, the parties held the first of more than 10 bargaining sessions but again failed to reach a complete agreement. On March 29, 2013, the Union filed its formal declaration with the ALRB requesting MMC, however, Gerawan vigorously opposed the request, claiming that the statutory prerequisites for invoking MMC had not been met and that the UFW had abandoned its status as the employees’ bargaining representative. Nevertheless, the Board denied Gerawan’s opposition to the Union’s MMC request, including the Company’s “abandonment defense,” concerning which it took no evidence and made no findings, and formally referred the parties to MMC for which they mutually agreed to use the well-known and experienced Mediator/Arbitrator, Matthew Goldberg. Mediator Goldberg conducted several “voluntary” mediation sessions with the parties in the summer of 2013, which failed to produce a final and complete agreement. Thereafter, as required by the MMC process, Mediator Goldberg held several “on-the-record” bargaining sessions which resolved some, but not all, of the parties’ issues and, as a result, on September 28, 2013, he submitted his required report to the Board resolving all of the terms still in dispute. Gerawan formally objected to Mediator Goldberg’s report and, following review of same, the Board remanded six disputed provisions to him for further proceedings. The parties ultimately resolved all of the disputed provisions voluntarily with Mediator Goldberg who then issued his second report to the Board to which neither party objected and, on November 19, 2013, it took effect as the Board’s final order.

Shortly thereafter, Gerawan filed a petition for review of the Board's final order with the Fifth District Court of Appeal, challenging the constitutionality of the MMC statute as being violative of equal protection and due process, an invalid delegation of legislative authority, and an unconstitutional taking of private property, as well as asserting that that the Board’s order was invalid because the Union had legally “abandoned” its status as the employees’ certified bargaining representative under the ALRA, due to its “nearly two-decade absence” from the bargaining table. The Fifth District Court of Appeal formally stayed the Board’s final order and, thereafter, issued a Decision and Order agreeing with Gerawan, and finding the MMC statute to be both facially unconstitutional and violative of the equal protection clause because “similarly-situated employers are treated dissimilarly” as well as an improper delegation of legislative authority to the mediator "to establish employment terms that will be imposed by the force of law…without any defined policy direction, goal or standard." Finally, despite finding the MMC statute “constitutionally invalid,” the Court of Appeal also decided the “statutory issue” and held that Gerawan was entitled to raise the “abandonment defense” because "the MMC process differs materially from bargaining and is largely a post-bargaining process" and, therefore, the Board abused its discretion by ordering the parties to MMC without considering the Company’s claim of union abandonment.

Both the ALRB and the UFW filed petitions for review of the Fifth District’s Decision and Order in the Supreme Court of California (“Supreme Court” or “Court”), which were granted, and, as discussed in greater detail below, the Court recently decided to unanimously reverse the Fifth District and hold that the statutory MMC process neither violates substantive due process nor equal protection, nor is an unconstitutional delegation of legislative power to the mediator; and also rejected the Fifth District’s finding that an employer could raise “union abandonment” as a separate defense to MMC because the Legislature “intended to reserve the power to decertify [bargaining] representatives to employees and labor organizations alone...” and not to employers.

Opinion Highlights

First, after noting that the Court of Appeal had not addressed the issue, the Supreme Court rejected Gerawan's argument that the statutory MMC process is violative of substantive due process because it essentially forces private sector employers into “compulsory” interest arbitration without their consent. In support of its holding, the Court distinguished the decisions of the United States Supreme Court finding compulsory arbitration to be violative of the National Labor Relations Act ("NLRA") as based on “statutory’ and not “constitutional“ grounds and because “agricultural employees” are not covered by the NLRA. According to the Court, absent any indication by the “high court…that compulsory arbitration in areas not covered by the NLRA would be unconstitutional” (emphasis in original), it could not find “compulsory interest arbitration categorically unconstitutional here.”

Next, the Court rejected the Company’s argument that the MMC process was violative of the equal protection clause by finding that the Legislature had a rational basis for its enactment, namely “to facilitate collective bargaining agreements between agricultural employers and employees” and promote collective bargaining. In support of its holding, the Court rejected Gerawan’s argument that the MMC process imposes a “distinct, unequal and individualized set of rules” on each affected employer thereby creating a “class of one,” by distinguishing the decisions relied upon as inapplicable to MMC which “does not facially violate equal protection.” Although agreeing with Gerawan that the difference in treatment of each employer under the MMC statute by definition is “intentional,” the Court held that the Company’s equal protection claim based upon a “class of one” analysis failed because it could not establish that it “was treated differently from other similarly situated persons,” or that there was “no rational basis for the difference in treatment,” and, therefore, did not meet the applicable test. The Court then went on to reject the Company’s claim that the MMC process was “facially violat[ive]” of equal protection as “unconstitutionally arbitrary,” by reviewing the statutory instructions to be considered by the mediator in each case that would necessarily “constrain [her/his] discretion” and finding that Gerawan had not shown that, at a minimum, hypothetical applications of the statute violated equal protection “in the generality or great majority of cases.” With specific regard to the equal protection challenges, the Supreme Court rejected the “hypothesizing” in which it found the Fifth District had engaged on this issue, finding that the mere fact that differential treatment among similarly situated agricultural employers “is possible” under the MMC statute was not enough to declare the statute “facially unconstitutional.”

The Court then went on to reject the Fifth District’s finding that the MMC process was an unconstitutional delegation by the Legislature of legislative authority to the mediator. In support of its holding, the Court analyzed the statutory language and held that the Legislature neither (i) left the “resolution of fundamental policy issues to others” in tasking the mediator ultimately to resolve “only disputed terms” of the final agreement; nor (ii) failed to “provide adequate direction [to the mediator] for implementation of that policy” in resolving only disputed issues by providing a “nonexclusive list of factors for the mediator to consider” when developing the final agreement.

The Court also observed that, in addition to squarely meeting these two criteria necessary for a constitutional delegation of power to the mediator, the statutory MMC process also contained “safeguards adequate to prevent its abuse,” including those regarding mediator selection, review by the Board of the mediator’s report(s) and, ultimately, petitions for review in the California courts with the power to reverse the Board’s final order based upon well-recognized criteria applicable to arbitrators’ awards, all of which combined in the Gerawan case to demonstrate, in the Court’s view, that the “review process [was] not a “mere ‘rubberstamp” and protected the Company from “any abuses of that process.”

Finally, the Court rejected the Fifth District’s finding that, although not applicable as a basis for refusing to bargain with a certified union, Gerawan and other California agricultural employers may raise an “abandonment defense” to a union’s request for MMC because it “differs materially from bargaining and is largely a postbargaining process.” Citing the “deference” to which the ALRB is entitled “when interpreting policy in its field of expertise,” the Court found that the Legislature was aware of the Board’s “certified until decertified” rule before enacting the MMC statute that contained no language addressing either “certification” or “abandonment” and, therefore, the Board’s specific rejection of abandonment as a defense to a request for MMC after the statute was enacted was, in the Court’s view, appropriate, and cautioned that any decision to reverse the Board’s refusal to recognize abandonment as a defense to MMC should be reserved for “the Legislature, not the courts.” Finally, after finding that abandonment was not a defense to MMC, the Court went on to hold that abandonment could not be applied in the “ordinary bargaining process” to strip a certified union of its representative status, observing that the Legislature reserved the “power to decertify [a union] to employees and [unions] alone.”

Practice Pointers

Although Gerawan has announced that it will seek review of the Court’s unanimous Decision in the United States Supreme Court, California agricultural employers faced with a request for MMC should continue to follow the above-described statutory process through issuance of a final order by the Board, at which point they may want to petition for writ of review in either the Court of Appeal or directly to the Supreme Court challenging the constitutionality of the MMC statute regarding whether (i) the reference in the statute to the word "may" in the factors that mediators may consider in crafting collective bargaining agreements means "must;" and/or (ii) the statute may still be vulnerable to an “as-applied class of one” equal protection challenge, both of which arguments the Court specifically declined to address in Gerawan.