Contractual No Layoff Provisions



We are writing to inform you about a recent New York Court of Appeals decision which has important implications for public employers whose union contracts contain a no layoff provision or who are considering whether to agree to one. At a time when many public employers are considering reductions in force, the decision appears to signal a judicial shift away from deferring to arbitrators to decide questions involving the scope of a CBA’s no layoff provision, and towards a requirement that a job security clause be explicit in order to be enforceable through the arbitration process.

In Matter of the Arbitration Between Johnson City Professional Firefighters and Village of Johnson City, the Court of Appeals granted a stay of arbitration precluding a union from arbitrating a CBA‟s no layoff clause that stated, “[t]he Village shall not lay-off any member of the bargaining unit during the term of this contract.” The union sought to enforce this provision through a grievance arbitration following the layoff of several of its members due to budgetary constraints.

In considering the Village’s objection to arbitration, the Court explained that it “has long held that a purported job security provision does not violate public policy, and therefore is valid and enforceable, only if the provision is ‘explicit,’ the CBA extends for a ‘reasonable period of time,’ and the CBA ‘was not negotiated in a period of a legislatively declared financial emergency between parties of unequal bargaining power’ … A purported ‘job security’ clause that is not explicit in its terms is violative of public policy, rendering it invalid and unenforceable.”

The Court held that the contract did not define the term “layoff,” did not expressly prohibit the abolition of positions due to budgetary necessity, was not “explicit, unambiguous and comprehensive” in its restriction on the Village’s right to eliminate positions for “budgetary, economic or other reasons” and did not “explicitly protect the firefighters from the abolition of their positions due to economic and budgetary stringencies.” In finding the provision to be unclear, the Court noted that, “[t]he term ‘layoff’ is undefined in the CBA, and is open to different and reasonable interpretations. Indeed, the parties’ disagreement over whether the term ‘layoff’ constitutes a permanent or non-permanent job loss, and whether the Village’s abolition of the firefighter positions constituted a layoff, underscores its ambiguity.” The Court concluded, therefore, that “[s]imply put, because the clause is not explicit, unambiguous and comprehensive, there is nothing for the Union to grieve or for an arbitrator to decide.”

The Court further explained that, “[f]rom a public policy standpoint, our requirement that ‘job security’ clauses meet this stringent test derives from the notion that before a municipality bargains away its right to eliminate positions or terminate or lay off workers for budgetary, economic or other reasons, the parties must explicitly agree that the municipality is doing so and the scope of the provision must evidence that intent. Absent compliance with these requirements, a municipality’s budgetary decisions will be routinely challenged by employees, and its ability to abolish positions or terminate workers will be subject to the whim of arbitrators.”

The Court provided examples of the wording for no layoff clauses that would meet its “stringent test” for arbitrability. One was a clause providing that, “[d]uring the life of this contract no person in this bargaining unit shall be terminated due to budgetary reasons or abolition of programs but only for unsatisfactory job performance and provided for under Tenure Law.” This, the Court explained, explicitly restricted the public employer’s right to eliminate positions and terminate workers for economic reasons.

Now that the Court has provided updated guidance with regard to this issue, we recommend that any no layoff provision in your CBAs, or one to which you may be considering agreeing in negotiations, be reexamined to determine whether it meets the test for being enforceable through arbitration; i.e., that it is sufficiently comprehensive, unambiguous and explicit in limiting your right to eliminate positions for economic or budgetary reasons. We further recommend that your review include whether the provision was negotiated at a time when the parties had equal power at the bargaining table and/or restricts layoffs for only a reasonable period of time. Depending upon the wording of your contract’s no layoff provision, you may be able to implement a reduction in force without having to have an arbitrator interpret and perhaps enforce the provision against you. You must also consider whether the potential “benefits” of “walking away” from a previously agreed-upon no layoff provision will outweigh the potential legal, contractual, financial, political and other downsides to doing so. Finally, you should also keep these considerations in mind when, as is likely, your unions demand increased clarity in any existing no layoff clauses.

Please do not hesitate to contact us if you have any questions regarding this decision or the interpretation of your CBA’s no layoff provision.


© Lamb & Barnosky, LLP, 2011