A nearly 3-year-old wage freeze will remain in effect for Nassau County workers after a federal appeals panel yesterday overturned a lower court decision that found the freeze illegal.
The Second Circuit Court of Appeals said in a unanimous decision that U.S. District Court Judge Leonard Wexler should have declined to rule on a section of a lawsuit filed by the county's police unions that questioned the authority of the Nassau Interim Finance Authority to impose a freeze.
NIFA, a fiscal oversight board created by state law in 2000, took control of Nassau's finances in 2011. At the request of Nassau County Executive Edward Mangano, NIFA declared a financial emergency and suspended all contractual pay hikes and step increases. Led by the Nassau Police Benevolent Association, all five county unions sued.
Wexler in February ruled that NIFA's power to freeze wages had expired, exposing the county to the possibility of having to pay $230 million in back pay. Wexler held up implementation of his decision to allow NIFA and the county to appeal.
The three-judge appellate panel wrote in a 14-page decision that state courts should interpret NIFA law, which it called "an important state legislative scheme to prevent the fiscal demise of Nassau County."
It directed Wexler to dismiss that portion of the lawsuit but retain jurisdiction over constitutional issues -- including whether the freeze violates contract law -- while the unions pursue a state challenge.
Union leaders vowed to continue their legal fight unless the county and NIFA approve new labor agreements they have been negotiating with Mangano.
"The liability remains," said Jerry Laricchiuta, president of Nassau's Civil Service Employees Association. "This just drags it out in state court."
James Carver, president of the Nassau PBA, said he has negotiated a new contract that he expects his members to ratify, the legislature to approve and NIFA to certify. Under the agreement, the PBA would drop its lawsuit.
"Regardless of what this decision is, when you look at the [contract] it provides the structural savings going forward as required by NIFA and brings closure to the litigation," Carver said. "Continuing the litigation is not good for morale. This, after 2 1/2 years, needs to be resolved."
Mangano, a Republican running for re-election, said the "decision ends one lawsuit and begins another. A settlement is in the best interest of the taxpayers."
Jon Kaiman, appointed Wednesday as NIFA's new chairman, said yesterday the decision "gives everyone the opportunity to come together and negotiate a better solution for the taxpayers of Nassau County."
He added, "There are consequences as a result of this decision. We need to sort through them and see where everyone stands and decide what to do next. My first step is to get everyone to the bargaining table."
Mangano announced recently that the PBA pact would save $320 million by restructuring pay and benefits for new police officers while lifting the wage freeze. NIFA issued an unusual public statement questioning the legality of some of the terms.
The appeals court wrote that "the district court abused its discretion" in deciding a state law question.
"Unlike a case involving a dispute between private parties, this case involves the construction of a significant provision of an extraordinarily consequential legislative scheme to rescue Nassau County from the brink of bankruptcy, to monitor its financial conditions and to take steps necessary to prevent a relapse," the panel said.