Nearly 11 years after John G. Rowland’s resignation, Connecticut is being asked to accept a multi-million-dollar settlement of damages arising from the former Republican governor’s layoffs of more than 2,000 unionized state employees, an act deemed illegal by a federal appeals court.
A proposed settlement negotiated by the office of Attorney General George Jepsen and lawyers for a coalition of state employee unions was presented Tuesday to legislative leaders. The terms are subject to review by the General Assembly and the U.S. District Court.
The value of the complex settlement was estimated at between $100 million and $125 million, but it is structured to minimize the fiscal impact on the state by compensating a majority of the plaintiffs with extra vacation and personal days, not cash.
A relatively small number of employees who were laid off and never rehired — as few as 105 and as many as 250 — could claim back pay, less what they earned at subsequent jobs. Their claims would be paid over four years.
About 2,000 others who were reinstated and remain on the state payroll would be compensated with 10 vacation days and five personal days for emotional distress, plus additional time off for economic damages that would be calculated by a formula in the settlement.
Those who were reinstated and then left state service would be paid $1,500 in two payments of $750 over 12 months.
Terms were described to The Mirror by sources familiar with negotiations.
In a statement, Jepsen said that, despite its costs, the proposed settlement was the best option for the state.
“Make no mistake — there are costs associated with this settlement, and while they will not be fully known or realized for some time, they are not insignificant. I am deeply mindful of the fiscal difficulties confronting the state,” Jepsen said. “However, the financial risks of not settling are simply too significant to ignore. The settlement we have negotiated will substantially reduce the impact on the state budget not only by decreasing the state’s overall financial exposure but also by spreading the financial liabilities over a number of years.”
The union coalition issued a statement celebrating the proposed settlement as closing “a dark chapter in our state’s history.”
“By standing together, public service employees and their unions proudly opposed John Rowland’s unlawful and unconstitutional actions for over a decade,” the coalition said. “They fought for a principle dear to all Americans — that no public official can use his power to punish people just because of the group to which they belong — whether it be a union, a religion, or a political party.”
Rowland and Marc S. Ryan, who oversaw budgeting and labor relations as the secretary of policy and management, were sued in their official capacities and personally, but the state indemnified them for any damages.
Once the U.S. Court of Appeals for the 2nd Circuit deemed the layoffs to be illegal in May 2013, the state had been facing a worst-case exposure of $340 million in damages, plus a dozen years’ worth of legal fees and accumulating interest on the damages.
Even with the discounted damages and legal fees under the settlement, it is an expensive end to protracted litigation that Rowland initially dismissed as “a meaningless lawsuit without merit.”
Instead, it turned into a 12-year legal odyssey.
The bitter fight with labor erupted soon after Rowland’s re-election in 2002 to a third term that quickly soured with a fiscal crisis, the labor fight and, ultimately, the beginnings of a corruption investigation that would drive him from office.
On his orders, 2,800 layoff notices went out in February 2003, although the attorney general’s office says hundreds were rescinded, leaving about 2,500 workers without jobs. The vast majority were reinstated within a year.
Rowland, whose job approval rating was 58 percent shortly before his re-election, never recovered politically. A Quinnipiac University poll in March, the month after the layoffs, showed his job rating had dropped to 33 percent.
The unions immediately hired David S. Golub, one of the state’s best-known plaintiffs’ attorneys, to take an unusual contingency case: A federal civil rights suit accusing Rowland and Ryan of illegally targeting union members.
The suit claimed that the Rowland administration structured the layoffs to punish unions who supported his Democratic opponent and then defied his demand for concessions. As a civil rights case, Rowland faced the potential of stiff punitive damages if the state lost.
Ryan, who said the layoffs were a legitimate response to a budget crisis, called the civil rights claims “fanciful.”
But the state’s defense was weakened by Rowland’s sparing members of the only union that supported his re-election, the Connecticut State Police Union, while other peace officers were laid off.
Also, some of the union members laid off held jobs that were funded by federal grants, and their layoffs did nothing to address the state’s budget problems.
The appeals court unanimously ordered the U.S. District Court to find for the plaintiffs and begin the complex task of calculating damages.
Jepsen initially appealed to the U.S. Supreme Court, saying that the decision was a threat to the rights of state and local governments to manage their finances. But he set aside the appeal and opened negotiations in December 2013.
His public rationale at the time was that getting the Supreme Court to hear the case was a long shot: Only about 12 percent of appeals filed by state attorneys general are accepted for review, with an overall acceptance rate of just 1 percent.
The court refused a motion by a lawyer for Rowland and Ryan to hear the case after Jepsen opened negotiations.
Jepsen, who still had the right to renew his appeal to the Supreme Court, said he opened negotiations at the “moment of maximum leverage.”
As part of the proposed settlement, Golub would be paid a fee equal to 17.5 percent of the damages, slightly more than half his original contingency fee of 33.3 percent. The plaintiffs also agreed to accept 5 percent interest, instead of the maximum 10 percent allowed by law.
A precise value of the proposed settlement is unknown, because plaintiffs must make individual claims for economic damages. The deal sets a formula for paying claims: Gross economic loss, minus offsetting wages and unemployment benefits, minus a 30-percent settlement discount.
Added to individual damage calculations would be 5 percent simple interest on economic damages from the date of the loss through the date of payment.
The economic damages would then be converted to days off.
Those compensated in vacation time could eventually covert the time off to cash when they retire. The state also has the option to buy back the time in future years.
The suit was a class action on behalf of all unionized employees. Those not laid off would be compensated for the “chilling effect” of Rowland’s targeting unions. They would get one and one-quarter days off in personal time, which cannot be converted to cash.
The Rowland case was an awkward one for Jepsen and Gov. Dannel P. Malloy.
In their 2010 elections, the two Democrats were supported by the unions who sued, and both are acquainted with Golub. Jepsen also was the nominee for lieutenant governor in 2002, when Rowland won.
Golub is now representing the Connecticut Democratic Party before the State Elections Enforcement Commission, which is investigating a potential violation of state campaign finance laws during the 2014 campaign for governor.
Rowland resigned July 1, 2004 and pleaded guilty to federal corruption charges and served 10 months in prison.
He was convicted last year on charges arising what the U.S. attorney’s office described as a scheme to solicit two congressional campaigns in 2010 and 2012 to secretly pay him as a political consultant in violation of U.S. campaign finance laws.
Rowland was sentenced last month to 30 months in prison. He is free pending appeal.