Detroit Judge Lets Union Seek 13th Pension Check Ruling

A Detroit municipal-workers’ union can ask a Michigan employment judge to put in writing his opinion that the city broke labor laws when it barred retirees from getting an extra pension check, a bankruptcy judge said.

U.S. Bankruptcy Judge Steven Rhodes today agreed with the union that an administrative law judge should be free to issue an opinion about the so-called 13th-check policy, which the city said cost it $1.92 billion from 1985 to 2008.

Doyle O’Connor, the administrative law judge for the state employment commission, is retiring at the end of the week and the union wants him to put on paper an oral finding he made earlier this year.

Rhodes made it clear that he wasn’t allowing the union, the Michigan Employment Relations Commission or O’Connor to consider renewing the 13th-check policy.

Limiting what O’Connor and the union can do related to the policy will prevent “any prejudice to the city,” Rhodes said today during a hearing in Detroit.

“We want him to have the freedom to rule, including, if he thinks it appropriate, on any dollar amount of damages,” Sharon Levine, an attorney for the American Federation of State County and Municipal Employees, said in an interview after the hearing.

NAACP Request

Also at the hearing, the NAACP, the civil rights group, asked Rhodes for permission to pursue a voting rights lawsuit that challenges the Michigan law that allowed Detroit Emergency Manager Kevyn Orr to put the city into bankruptcy in July.

Before the bankruptcy, state NAACP officials filed a lawsuit that claims the emergency manager law violates the voting rights of black people in Detroit and several other local governments by stripping their elected officials of power.

Just over half of all black people in Michigan live in a community controlled by an emergency manager, Melvin Hollowell, an NAACP attorney, said in court. Allowing the lawsuit to proceed wouldn’t interfere with Detroit’s bankruptcy because the group would agree that any ruling that invalidates the emergency manager law wouldn’t undo any actions Orr has taken up to now, Hollowell told Rhodes.

City and state lawyers opposed the motion, claiming it may be impossible for the bankruptcy to continue should a court decide the law is unconstitutional. Rhodes said he would issue a written ruling on the request.

City Pensions

On the 13th check dispute, both sides said that any issue related to the pensions of about 20,000 retired city workers will be a key focus of the bankruptcy.

For decades the city’s pension board for general employees gave retirees an extra check and current workers a bonus to their optional annuity fund whenever the pension fund earned more from investments than expected.

From July 1985 to June 2008, a pension board that is independent from the city council paid out what it considered excess money 18 times, or about $951 million in total. That included $121.1 million handed out in the 2008 fiscal year, the last for which information was available. The board made the payments if it earned more on investments than expected.

The practice went on so long that it became an expected benefit that couldn’t be canceled without negotiating with the union first, O’Connor said at a February hearing on the issue.

Extra Earnings

Every year the pension fund earned more than 7.9 percent on its investments, it split the extra earnings three ways, giving money to current employees who had annuity accounts, to the city to reduce its annual pension contribution and to retirees in the form of a 13th check.

Since 1985, employees collected at least $756.2 million, the city $445.3 million and retirees $195 million, according to court records.

Since the city canceled the policy in 2011, the pension fund for general employees made 18 percent in one year and 20 percent in another, union attorney Richard G. Mack said in court. O’Connor may use those numbers to determine how much the city may owe in damages for canceling the policy without first negotiating with the union, Levine said in court.

The bankruptcy case is City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).

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