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May 26, 2020

Imposing a wage freeze on certain employees of a political subdivision of the State

In March, 2011, the Nassau County Interim Finance Authority [NIFA] imposed a year-long wage freeze on Nassau County employees. 

Fifteen unions representing these employees sued NIFA, its directors, and other County officials, contending that the wage freeze, because it was a legislative act that was not reasonable and necessary to achieve NIFA’s purported goal of fiscal soundness, violated the Contracts Clause of the United States Constitution* to the extent the freeze obviated the relevant compensation provisions set out in various collective bargaining agreements between Nassau County and the several employee organizations then in place.

Federal district court granted NIFA's motion for summary judgment. The court held that NIFA’s implementation of the wage freeze was administrative, in contrast to being legislative, and, therefore, "did not implicate the Contracts Clause."

The United States Circuit Court of Appeals, Second Circuit, assuming, without deciding, that NIFA’s imposition of the wage freeze was legislative in nature, concluded that the wage freeze was a reasonable and necessary means to achieve NIFA’s asserted end of "ensuring the continued fiscal health of the County."

For that reason, said the court, NIFA's action "did not violate the Contracts Clause," and affirmed the judgment of the district court.

Article I, Section 10, Clause 1, of the Constitution of the United States provides, in pertinent part, that "No State shall ... pass any ... Law impairing the Obligation of Contracts...."

The decision is posted on the Internet at:
https://www.ca2.uscourts.gov/decisions/isysquery/1e649443-151b-448e-a6b8-0d08ae00804d/1/doc/18-1587_complete_opn.pdf#xml=https://www.ca2.uscourts.gov/decisions/isysquery/1e649443-151b-448e-a6b8-0d08ae00804d/1/hilite/


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NYPPL Blogger Harvey Randall served as Principal Attorney, New York State Department of Civil Service; Director of Personnel, SUNY Central Administration; Director of Research, Governor’s Office of Employee Relations; and Staff Judge Advocate General, New York Guard. Consistent with the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations, the material posted to this blog is presented with the understanding that neither the publisher nor NYPPL and, or, its staff and contributors are providing legal advice to the reader and in the event legal or other expert assistance is needed, the reader is urged to seek such advice from a knowledgeable professional.
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