Thursday, March 7, 2013

Consideration, Senate Bill 1313 and Senate Bill 0001

Consideration: “the inducement to a contract, something of value given in return for a performance or a promise of performance by another, for the purpose of forming a contract…” (Law Dictionary).

According to National University of Singapore Professor Mindy Chen-Wishart, “The consideration doctrine is a moving target… Different [understandings] yield different [interpretations]… Each conception can be contradicted by another… Courts have considerable latitude in determining whether to find consideration (or not), and hence whether to enforce a promise (or not)… A contract supported by consideration can still be set aside for… misrepresentation, duress, or undue influence or its contents may be supplemented by implied terms or [be] partially invalidated because of unfairness. In these cases, the presence of serious inadequacy of consideration will usually be the major, although not the sole, factor… It would be highly undesirable to allow public officials to extract benefits in return for the performance of their existing legal duties” (Contract Law).

As stated by Professor of Law Claude D. Rohwer (Emeritus) and Professor of Law Anthony M. Skrocki (Emeritus), “Consider a promise by an employer to pay a retirement pension to an employee who has already worked for a company for 30 years… Under American law and the law of other common law systems, the question that must be answered is whether this promise to pay a pension [and COLA, health care…] was made as part of a bargain. A promise to pay a pension [and COLA, health care…] is supported by valid consideration if it is made as part of the employment contract. Thus, if the employee is required to work for a… period of time in exchange for the promised pension [COLA and health care], there is a bargain...” (Contracts in a Nutshell).  

Contracts supported by consideration are often one-sided, advantageous arrangements. In Illinois, we can imagine that any agreement with the General Assembly regarding a “guaranteed” funding to the pension systems, for example, would not be a “valid” consideration for public employees, especially since it would be in exchange for reductions of originally-vested benefits guaranteed by the Illinois and U.S. Constitutions.

What’s more, there is no question whether legislators will renege on any new promise made to public employees. The question is how soon it will happen. Legislators can rewrite or undo any bill they pass. The “funding” of the public employees’ pensions and offering of the health care option would have to be written into the Illinois Pension Code (40 ILCS 5/) to be considered “benefits” protected by the Illinois Constitution. In this way, consideration would create a contractual cause of action for the full enforcement of that expectation – an irrevocable binding contract between the state (legislators) and public employees. Both funding and health care assurances are quite doubtful.

Senate Bill 1313 (from the previous 97th Illinois General Assembly) changed the Health Insurance Plan for Public Employees (SB 1313 Full Text) on June 21, 2012. SB 1313 passed both Houses and the Governor approved… Public Act 97-0695  on July 1, 2012.

SB 1313 was recently examined in Sangamon County Circuit Court on February 21. The following news article became available on February 24, 2013:

“In a hearing in Sangamon County Circuit Court on Feb. 21, attorneys for the State argued that lawsuits seeking to overturn a new Illinois law eliminating the guarantee of affordable health care for retirees should be dismissed. Assistant Attorney General Richard Huszagh argued that the Circuit Court should dismiss four lawsuits that all challenge the legality of the new law (originally SB 1313) which reduce the State’s responsibility to provide health care benefits to state of Illinois and state university retirees.
“Previously Illinois law provided that retirees who had worked for the state or a state university for at least 20 years would not have to pay toward the cost of their own health care premiums, although they were still subject to all co-pays and deductibles that active employees had to pay. Employees who retired with less than 20 years paid toward their premiums under a sliding scale based on their years of service.
“The new law allows the Illinois Department of Central Management Services to set health care premium contributions for retirees. AFSCME has taken the position that any changes to the current payment structure (which is included in the AFSCME state employee contract) must first be negotiated with the Union. 
“In addition, AFSCME has joined with the Illinois Federation of Teachers, the Fraternal Order of Police and the Illinois Nurses Association to file a lawsuit challenging the legality of the new law because it violates the Illinois constitution’s prohibition against the diminishment of retirement benefits. Three other lawsuits were also filed on the same grounds and the court has consolidated them so that all will be heard jointly. AFSCME is also arguing that the change in the law represents a breach of contract since the retiree health care benefits were delineated in the Union’s contract with the State.
“At the hearing on February 21, Associate Judge Steven Nardulli heard arguments on the State’s motion to dismiss all four lawsuits. Assistant AG Huszagh argued that the constitutional prohibition against diminishing benefits was only meant to apply to pensions, not to health care benefits—and thus there was no basis for the case to proceed. He also argued that AFSCME retirees did not have the legal right to enforce their contract rights in the state circuit court. Attorneys for the plaintiffs, including AFSCME attorney, Steve Yokich, made arguments to the contrary.
“The judge gave the parties three weeks to submit statements setting forth the separate legal issues in the case in order to streamline possible appeals. He is expected to issue his decision shortly thereafter. If the judge grants the Motion to Dismiss, AFSCME and the other plaintiffs would have the right to appeal that decision to the Appellate Court” (American Federation of State, County and Municipal Employees).

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