The selling of a $100 million labor settlement
He’s struck a multi-million-dollar deal to settle a protracted civil rights case by state employee unions against former Gov. John G. Rowland. Now, all Attorney General George Jepsen has to do is sell it to a cash-strapped legislature.
In a press conference Wednesday, Jepsen said that the settlement offer he shared Tuesday with legislative leaders was structured to minimize the immediate impact of a deal worth between $100 million and $125 million.
Without a settlement, the state faced the prospect of a federal trial judge awarding damages of between $250 million and $340 million, payable within 30 days of judgment, as compensation for the illegal layoffs of more than 2,000 employees in early 2003.
Once the settlement is formally presented to the General Assembly, most likely by week’s end, legislators will have 30 days to review the offer. If no action is taken, the settlement will be deemed to have been accepted by the state.
Legislative leaders, who have been consumed with revisions to the budget this week, have said little about the offer.
Senate Minority Leader Len Fasano, R-North Haven, said Wednesday he was reviewing the settlement offer, but he believes that Jepsen and his staff had a sound rationale for attempting a settlement.
“Where no one’s exactly sure what’s going to happen, you take advantage of it,” said Fasano, who is a trial lawyer. “I think it’s a smart time to explore it, take a look at it, understand it and maybe move on it. It’s a lot to digest in a short period of time.”
No payments would be due in this fiscal year, and a majority of the compensation would be paid in time off, not money. The cash value of the award would be about $44 million, payable over four years.
That includes about $14 million in legal fees for David S. Golub. He took the case on in February 2003 on behalf of the State Employees Bargaining Agent Coalition, representing about 37,000 unionized employees.
Instead of asking a judge to award a standard contingency fee equal to one-third of damages, Golub would be paid a fee equal to 17.5 percent of damages. In a civil rights case where the plaintiffs prevail, it is common for the court to order the defendant to pay fees of more than 30 percent.
“People are going to say well, jeezus, Dave Golub gets a $14 million or $15 million payday,” Jepsen said. “That’s the way our laws work. We reward risk in Connecticut, and he is entitled. There is no reason to believe that a judge would reduce his award.”
The art of selling a major settlement to the General Assembly requires walking a fine line: Jepsen must convince lawmakers that the state’s legal position was weak, but not weak enough to provoke unions members to press for a trial on damages.
The scales tipped in favor of the unions in May 2003, when a three-judge panel of the U.S. Court of Appeals for the 2nd Circuit unanimously concluded that the Rowland administration’s layoffs of more than 2,000 employees was motivated by anti-union animus, not a need to balance the budget.
The appeals court directed the U.S. District Court in Hartford to begin calculating damages. As a civil rights case, the plaintiffs were entitled to economic damages for their losses, plus punitive damages, interest and legal fees.
Jepsen appealed to the U.S. Supreme Court, then set aside the appeal when SEBAC, the State Employees Bargaining Agent Coalition, proposed settlement talks.
The odds strongly favored SEBAC to win a bigger award in a trial for damages than what the state would offer in a settlement, but the unions risked losing everything if Jepsen went ahead with an appeal to the Supreme Court.
“It was a time of maximum risk for both parties,” Jepsen said. “We entered good faith negotiations. We made it clear going in that the state’s finances were a real issue, and we needed to be creative to craft an agreement.”
The politics of the settlement are complicated.
As Democrats supported by labor, a settlement potentially exposes Jepsen and Gov. Dannel P. Malloy to accusations of rewarding allies. In fact, both are friendly with Golub, who is now representing the Connecticut Democratic Party before the State Elections Enforcement Commission.
It is the flip side of the politics underlying the lawsuit.
The plaintiffs accused Rowland, a Republican who described unions as his “natural enemies,” of structuring layoffs in 2003 to maximize pain to union members, reflecting an anti-union animus more than a need to cut costs.
Rowland and Marc S. Ryan, who oversaw budgeting and labor relations as the secretary of policy and management, were sued in their personal and official capacities.
Based on facts stipulated by Rowland and Ryan as a way to avoid submitting to depositions, the appeals court ruled for the unions. Jepsen said the stipulations, which were made when Rowland and Ryan were represented by a private attorney, reflected a belief that Rowland’s attitude toward the unions was irrelevant under the law.
“They thought the law permitted them to seek to exact concessions through union members through threat of layoffs without having to include management employees in that threat,” said Perry Zinn-Rowthorn, the deputy attorney general. “The 2nd Circuit disagreed.”
Noting that the trial judge had agreed with Rowland, Jepsen said Rowland’s position on the stipulations was not unreasonable.
Rowland declined comment. Ryan offered no assessment of the settlement, but he defended the administration’s layoffs of a dozen years ago as motivated by fiscal necessity. At the time, the administration proposed cutting spending and increasing taxes to close a gaping budget gap.
The spending cuts included wage, benefit and early-retirement savings demanded of labor.
“It was a fair request and we asked all workers to take a wage freeze to balance the budget,” Ryan said in a text message. “Managers’ wages were frozen in return for no layoffs. We simply asked the same of the unions.”
Ryan said no one was discriminated against.
The settlement covers the federal civil rights case and two related cases filed in Superior Court.
While Rowland and Ryan were sued personally, they will be indemnified under state law for damages. Their legal bills also were paid by the state.
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