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Friday, March 11, 2011

The New Hampshire Approach to Breach of Contract Suits by State Employees

New_Hampshire All eyes have been on Wisconsin lately, as Republican Governor Scott Walker has succeeded in pushing through legislation that repeals collective bargaining rights for state employees and requires state workers to make financial contributions for their health care and retirement benefits. New York Times coverage of that saga is available here and here.  Little noticed has been New Hampshire’s push for reforming state employee benefits, as reported by the Union Ledger. The proposed plan would raise the retirement age for police and firefighters, reduce the amount of each worker’s salary included in the formula for pensions, and require workers to contribute more of their salary toward their retirement benefits.

What makes New Hampshire’s plan interesting is an amendment that was added to the bill that would effectively penalize workers who sue the state for breach of contract in court and win. These workers would pay “an additional 3% of their salary in pension contributions starting 10 days after a court victory.” Practically speaking, this provision makes a breach of contract suit by the state workers a lose-lose proposition: either pay the increased contributions, or hire a lawyer, win your lawsuit, and pay increased contributions anyway. Diana Lacey, the president of the State Employees Association, argues that punishing workers who seek to protect their rights in court is a “chilling attack on democracy.”  As reported in the Nashua Telegraph, supporters of the legislation argue that reforming state-employee retirement benefits is “essential to the long-term viability of the system.”

How likely is it that the bill will pass? Talking Points Memo points out that the New Hampshire GOP has veto-proof majorities in the State House and Senate. While it is possible that there may be some Republican defections, the State House just passed Right-to-Work legislation, which demonstrates GOP solidarity on labor issues. If Republicans don’t break ranks on the bill, Democratic Governor John Lynch will have little to no power to stop the bill’s passage.

One wonders, however if the penalty provision could survive court scrutiny.  Is it an unconstitutional state impairment of the obligation of contracts?  Is it a possible due process violation because it chills access to the courts as a remedy for contractual wrongs?

[Jon Kohlscheen & JT]

http://lawprofessors.typepad.com/contractsprof_blog/2011/03/the-new-hampshire-approach-to-breach-of-contract-suits-by-state-employees.html

Government Contracting, In the News, Labor Contracts | Permalink

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