                   IN THE COURT OF APPEALS OF IOWA

                              No. 3-1179 / 13-0879
                              Filed June 25, 2014

FORT DODGE COMMUNITY
SCHOOL DISTRICT,
     Petitioner-Appellant,

vs.

IOWA PUBLIC EMPLOYMENT
RELATIONS BOARD,
     Respondent-Appellee,

and

FORT DODGE EDUCATION ASSOCIATION,
FORT DODGE MAINTENANCE EMPLOYEES
BARGAINING UNIT (BUS DRIVERS),
FORT DODGE EDUCATION ASSOCIATION
(ASSOCIATES), FORT DODGE SECRETARIAL/
CLERICAL EDUCATION ASSOCIATION,
FORT DODGE MAINTENANCE EMPLOYEES
BARGAINING UNIT (BLUE COLLAR),
     Intervenors-Appellees.
________________________________________________________________

      Appeal from the Iowa District Court for Polk County, Robert J. Blink,

Judge.



      A school district appeals from the district court ruling affirming the decision

of the Iowa Public Employment Relations Board. AFFIRMED.



      Andrew J. Bracken of Ahlers & Cooney, P.C., Des Moines, for appellant.

      Diana S. Machir of Iowa Public Employment Relations Board, Des Moines,

for respondent appellee.
                                     2



      Gerald L. Hammond of Iowa State Education Association, Des Moines, for

intervenors-appellees.



      Heard by Vogel, P.J., and Tabor and McDonald, JJ.
                                            3



MCDONALD, J.

       The Fort Dodge Community School District (“the District”) appeals the

district court’s ruling affirming the Iowa Public Employment Relations Board’s

(“PERB”) ruling in a negotiability dispute arising under the Iowa Public

Employment Relations Act (“PERA” or “the Act”), Iowa Code chapter 20 (2011).

The subject of the dispute is whether the District’s proposal to eliminate

severance pay provisions from several collective bargaining agreements

(“CBAs”) is a topic of mandatory or permissive bargaining under the Act.

                                            I.

       The District is a public employer within the meaning of PERA. See Iowa

Code § 20.3(10) (defining “public employer”). The district has five employee

units organized for the purposes of collective bargaining under the Act.1 See

Iowa Code § 20.3(4) (defining “employee organizations”). The labor negotiations

between the District and the employee organizations are thus subject to PERA.

The supreme court recently summarized the collective bargaining process under

PERA:

               PERA governs collective bargaining between public
       employers and public employee organizations. Iowa’s PERA
       contains both a provision establishing mandatory collective
       bargaining on specified matters and a contrapuntal management
       rights clause preserving exclusive, public management powers in
       traditional areas. The public management powers are found in


1
  The certified collective bargaining representatives for the five bargaining units are as
follows: Fort Dodge Education Association; Fort Dodge Maintenance Employees
Bargaining Unit (Bus Drivers); Fort Dodge Education Association (Associates); Fort
Dodge Secretarial/Clerical Education Association; and the Fort Dodge Maintenance
Employees Bargaining Unit (Blue Collar). The employee units and their certified
collective bargaining representatives shall hereinafter be referred to collectively as “the
employee organizations.”
                                        4



      Iowa Code section 20.7. . . . Iowa Code section 20.9 then
      enumerates seventeen topics that are subject to mandatory
      collective bargaining procedures:
                      The public employer and the employee
               organization shall meet at reasonable times . . . to
               negotiate in good faith with respect to wages, hours,
               vacations, insurance, holidays, leaves of absence,
               shift     differentials,   overtime     compensation,
               supplemental pay, seniority, transfer procedures, job
               classifications, health and safety matters, evaluation
               procedures, procedures for staff reduction, in-service
               training and other matters mutually agreed upon.
      Iowa Code § 20.9. This list is exclusive.
              The classification of a bargaining proposal as either
      mandatory or permissive is a critical issue.
                      If a subject is within the scope of mandatory
              bargaining, the parties are required to bargain over
              the issue, and if agreement is not reached, the
              statutory impasse procedures, which ultimately lead
              to binding arbitration, are available. If, on the other
              hand, the proposal is a permissive subject of
              bargaining under section 20.9, the public employer
              may reserve the right to decide the issue unilaterally
              by declining to participate in bargaining. When the
              employer declines to bargain over a permissive
              subject, the impasse procedures in PERA are not
              available and decisions related to the subject remain
              within the exclusive power of the public employer.

AFSCME Iowa Council 61 v. Iowa Pub. Emp’t Relations Bd., ___ N.W.2d ___,

___, 2014 WL 1884476, at *5 (Iowa May 9, 2014) (citations, internal quotations,

and internal emphasis omitted).

      The district and each of the employee organizations have entered into

collective bargaining agreements. Each agreement between the District and the

respective employee organization contains a provision relating to the payment of

severance upon termination of employment. By way of example, the collective

bargaining agreement with the Teachers provides, in part, as follows:
                                         5



       Article XII Wages
       I.      After ten (10) or more years of service, severance pay shall
               be promptly made to each employee in an amount
               equivalent to fifty (50%) of the per diem pay of the
               employee’s beginning base salary in the year of separation
               from the District and shall be equivalent to all unused sick
               leave days (not to exceed 120) which the individual had
               accumulated but did not use during employment with the
               District.

The severance pay provisions are not uniform across the five agreements,

containing differences regarding, among other things, an employee’s eligibility for

severance pay and the calculation of the amount of severance pay owed an

eligible employee. The differences between and among the agreements are not

material to this appeal.

       In 2012, the District and the employee organizations were negotiating

renewal of their respective CBAs.      During negotiations, the District proposed

eliminating the severance pay provision from each of the CBAs. The District took

the position that the proposal was not a subject of mandatory bargaining. The

employee organizations took the contrary position, contending severance pay fell

within the meaning of “supplemental pay” and was thus a mandatory topic of

bargaining under Iowa Code section 20.9.

       The District petitioned PERB for a ruling on negotiability. PERB held that

the proposals fell within the definition of “supplemental pay” within the meaning of

section 20.9 and were thus subjects of mandatory bargaining. In reaching that

conclusion, PERB first defined “supplemental pay” as “a payment of money or

other thing of value that is in addition to compensation received under another

section 20.9 topic and is related to the employment relationship.” Applying the

proposals to that definition, PERB reasoned that the severance pay proposals
                                           6



related to cash payment not otherwise covered under section 20.9 and that the

proposals were related to the employment relationship.             Specifically, PERB

reasoned the proposals were related to the employment relationship because

severance pay is paid on termination; is conditioned on length of service; is

calculated based on unused, accumulated sick leave; and was used to incent

employees to remain employed in the school district.

       In a thorough and well-reasoned ruling, the district court affirmed PERB’s

ruling. The court began its analysis by setting forth the correct legal standard:

              First, the burden is on the District to establish the invalidity of
       PERB’s interpretation. Second, the Court must give deference to
       PERB’s interpretation of section 20.9 and will only reverse if PERB
       acted irrationally, illogically, or wholly unjustifiably. These are
       heavy burdens for the District to overcome. On these principles
       alone, the Court concludes the agency’s decision should be
       affirmed.

The court then addressed each of the District’s arguments and found them

unavailing. This appeal timely followed.

                                          II.

              Judicial review of an agency ruling is governed by [the Iowa
       Administrative Procedure Act, Iowa Code chapter 17A]. The district
       court reviews the agency’s decision in an appellate capacity. In
       turn, we review the district court’s decision to determine whether it
       correctly applied the law. We must apply the standards set forth [in
       the IAPA] and determine whether our application of those
       standards produces the same result as reached by the district
       court.

AFSCME Iowa Council 61, 2014 WL 1884476, at *3 (citations and internal

quotation marks omitted). If so, we affirm the judgment of the district court.

       Where, as here, the question presented is whether the agency correctly

interpreted statutory text, the level of scrutiny applied during review of the
                                           7



agency’s action depends on whether the legislature has vested the agency with

interpretive authority.    In Waterloo Education Association v. Iowa Public

Employment Relations Board, 740 N.W.2d 418, 420 (Iowa 2007) (“Waterloo II”),

the supreme court held that such authority had not been vested in PERB. In

apparent response to that decision, the General Assembly amended the Act and

explicitly granted PERB the authority to “interpret, apply, and administer” the

provisions of chapter 20. See Iowa Code § 20.6(1). “Because the legislature

has now expressly vested PERB with discretion to interpret and apply chapter

20, we will review PERB’s interpretation and application of section 20.9 to

determine if it is “irrational, illogical, or wholly unjustifiable.”   AFSCME Iowa

Council 61, 2014 WL 1884476, at *3 (quoting Iowa Code § 17A.19(10)(l), (m)).

                A decision is “irrational” when it is “not governed by or
       according to reason.” Webster’s Third New International Dictionary
       1195. A decision is “illogical” when it is “contrary to or devoid of
       logic.” Id. at 1127. A decision is “unjustifiable” when it has no
       foundation in fact or reason.             See id. at 2502 (defining
       “unjustifiable” as “lacking in . . . justice”); id. at 1228 (defining
       “justice” as “the quality or characteristic of being just, impartial or
       fair”); id. (defining “just” as “conforming to fact and reason”).

Id. “The burden of demonstrating . . . the invalidity of agency action is on the

party asserting invalidity.” Id. (quoting Iowa Code § 17A.19(8)(a)).

                                          III.

       Prior to directly addressing the parties’ arguments, it is necessary to

provide some context. The District correctly notes that prior decisions of the

supreme court and this court restrictively interpreted the terms in section 20.9. In

City of Fort Dodge v. Iowa Public Emp’t Relations Bd., 275 N.W.2d 393, 396

(Iowa 1979), the court explained that it was not bound by PERB’s interpretation
                                        8



of PERA, reasoned that PERA should be interpreted strictly, and held a clothing

allowance did not fall within the meaning of “wages” or “supplemental pay.”

Justice McCormick dissented, stating:

             I agree the legislature did not adopt the broad scope of
      mandatory bargaining provided in the NLRA. However, this does
      not automatically require that the terms in § 20.9 be given a narrow
      and restricted meaning. Instead I believe [section] 4.1(2) requires
      that these terms be given their ordinary meaning.

City of Fort Dodge, 275 N.W.2d at 399. Similarly, in Charles City Community

School District v. Iowa Public Emp’t Relations Bd., 275 N.W.2d 766, 769 (Iowa

1979), the supreme court stated “we are not bound by Board interpretations of

law and must make an independent determination of the meaning of the statute.”

The supreme court further concluded “from the legislative history of [section] 20.9

and the cogent policy arguments for distinguishing public and private sector

bargaining that the Iowa legislative intent was to adopt a restrictive approach to

interpreting the subjects listed in [section] 20.9.” Charles City, 275 N.W.2d at

773. Justice McCormick, joined by Justices Uhlenhopp and Harris, dissented,

contending there was nothing in the statute or legislative history compelling the

conclusion that “the terms identifying mandatory subjects of bargaining should be

given a narrow as opposed to ordinary meaning.” Id. at 775.

      Applying this restrictive interpretive overlay, our court has previously

addressed the issues of whether reimbursement of accumulated, unused sick

leave and severance pay are mandatory or permissive topics of bargaining. We

held both topics fell outside the scope of section 20.9 and were thus not

mandatory topics of bargaining:
                                  9



        The Association argues that reimbursement for unused sick
leave falls within the terms “wages,” “supplemental pay” and
“leaves of absence” which are mandatory bargaining items under
section 20.9. Several prior PERB decisions are cited as support
that this payment is compensation.             Decisions from other
jurisdictions are also relied on. These are not persuasive. The
PERB decisions were made before the supreme court determined
that the specific listing in section 20.9 was to be restrictively
applied. Other jurisdictions have statutes similar or identical to the
NLRA, which we have already discussed contains broader
language and is more inclusive.
        In Fort Dodge Community School District v. P.E.R.B., 319
N.W.2d 181, 183-84 (Iowa 1982), wages are defined as a specific
sum or price paid by an employer in return for the employee’s
services, and supplemental pay is pay for extra services relative to
the time, skill and nature of the services. The Fort Dodge case held
cash incentives for early retirement pay are not wages or
supplemental pay, and the rationale is controlling here. The
proposal here calls for reimbursement of unused sick leave in a
lump sum cash payment upon termination of employment. It is not
directly related to services rendered or to the time, skill, and nature
of additional services, but rather is a form of severance pay to be
paid to any employee leaving his or her employment, whether due
to retirement, lay-off, or any other reason. Under the proposal, the
payment is triggered by the termination of the employment
relationship, and not by the rendering of primary or additional
services. While it may be argued employees perform a service by
not taking sick leave, we believe this stretches the meaning of
service and is not what the legislature intended.
        ....
        . . . The proposal is a permissive subject of bargaining.
        ....
        The Association argues this proposal [severance pay] is also
mandatory under the categories, “wages” or “supplemental pay.”
Terms of this proposal would grant a payment to any employee
severed from employment for any reason after five years of service.
It is not a payment made for any actual services rendered. The
circumstance which triggers the payment is the termination of
employment, and not the performance of any primary or extra
services. As with the sick leave reimbursement proposal, no extra
service not already compensated is provided by the employee in
order to obtain this benefit. The severance pay proposal is likewise
a permissive subject of bargaining.
        The Association makes several persuasive arguments
regarding the public benefit, including discouraging absenteeism,
rewarding those who do not use their sick leave and encouraging
                                         10



       continuity in the workforce, contending these desirable results
       should elevate the matters to the mandatory-bargaining category.
       Our courts have previously explained why more restrictive
       bargaining is necessary in the public employment sector. We are,
       therefore, unpersuaded by the public benefit argument because
       other public benefits are also to be considered.

Prof’l Staff Ass’n of Area Educ. Agency 12 v. Pub. Emp’t Relations Bd., 373

N.W.2d 516, 518-19 (Iowa Ct. App. 1985) (citations omitted).

       There are two developments subsequent to these cases that are relevant

here. First, in Waterloo II, the supreme court clearly articulated the analysis to be

applied in determining whether a topic is a mandatory or permissive subject of

bargaining:

               The first prong for determining whether a proposal is subject
       to collective bargaining, the threshold topics test, is ordinarily a
       definitional exercise, namely, a determination of whether a proposal
       fits within the scope of a specific term or terms listed by the
       legislature in section 20.9. Once that threshold test has been met,
       the next inquiry is whether the proposal is preempted or
       inconsistent with any provision of law. Ordinarily, this two-step
       process is the end of the matter. Only in unusual cases where the
       predominant topic of a proposal cannot be determined should a
       balancing-type analysis be employed to resolve the negotiability
       issue. See Clinton Police Dep’t Bargaining Unit v. Iowa Pub.
       Employment Relations Bd., 397 N.W.2d 764 (Iowa 1986) (hybrid
       proposal involving both safety and staffing subjects held to primarily
       relate to staffing and thus not subject to mandatory collective
       bargaining).

Waterloo II, 740 N.W.2d at 429. Significantly, the court also adopted Justice

McCormick’s position by rejecting the conclusion the terms in section 20.9 should

be given a restrictive reading as opposed to their ordinary and common reading:

               The topics listed in Iowa Code section 20.9 cannot be
       defined in a fashion so expansive that the other specifically
       identified subjects of mandatory bargaining become redundant, nor
       are the topics subject to the narrowest possible interpretation.
       Consistent with legislative intent, PERB must give each topic in
                                        11



        section 20.9 its common and ordinary meaning within the structural
        parameters imposed by section 20.9.

AFSCME Iowa Council 61, 2014 WL 1884476, at *5 (citing Waterloo II).

        The District contends the holdings of City of Fort Dodge, Charles City, and

Professional Staff Association were unaffected by the supreme court’s decision

in Waterloo II.   The district argues those cases “are still valid decisions and

binding precedent on PERB.” The District solely “relies on these precedents in

maintaining that severance pay is not a mandatory topic of negotiation.” The

District’s reliance is misplaced. Whatever precedential value those decisions had

was largely undermined by Waterloo II’s rejection of the restrictive interpretive

approach and adoption of the common and ordinary meaning approach. For

example, in City of Fort Dodge, the majority applied the restrictive approach and

concluded non-monetary compensation could not fall within the meaning of

wages. The court did not consider the common and ordinary meaning of the

term.   Justice McCormick on the other hand had no difficulty concluding the

common and ordinary meaning of “wages” included non-monetary compensation.

See City of Fort Dodge, 275 N.W.2d at 398 (McCormick, J., dissenting) (“Even

the most restrictive definition of wages does not limit compensation to cash. It is

one thing to say wages are usually a payment of money but quite another to say

they are always a payment of money. . . . [P]ayment of wages may be made in

kind rather than cash even under the ordinary definition.”).          Likewise, in

Professional Staff Association, our court concluded that severance pay was not

supplemental pay, in part, because “the specific listing in section 20.9 was to be

restrictively applied.” Prof’l Staff Ass’n, 373 N.W.2d at 518. As in City of Fort
                                        12



Dodge, our court never considered the common and ordinary meaning of

“supplemental pay.” Judge Oxberger dissented, concluding that severance pay

fell within even a restrictive interpretation of supplemental pay. See Prof’l Staff

Ass’n, 373 N.W.2d at 519. While parts of our earlier decisions still have force,

the definitional analysis—the first prong of the Waterloo II test—contained in

those cases is of little value.

       A greater obstacle to the District’s position on appeal relates to the second

legal development material to this case. The cases upon which the District relies

were decided prior to the time the legislature vested interpretive authority with

PERB. In those cases, we thus owed no deference to the agency’s interpretation

of the terms in section 20.9. See, e.g., Waterloo II, 740 N.W.2d at 420 (“Whether

a proposal is a mandatory subject of collective bargaining, as defined by Iowa

Code § 20.9, has not been explicitly vested in PERB’s discretion. Therefore, our

review is for correction of errors at law.”); Charles City, 275 N.W.2d at 769

(stating “we are not bound by Board interpretations of law and must make an

independent determination of the meaning of the statute”); City of Fort Dodge,

275 N.W.2d at 396 (same); Prof’l Staff Ass’n, 373 N.W.2d at 517 (same). As

previously noted, in 2010 the legislature gave PERB express authority to

interpret and apply the provisions of Iowa Code chapter 20. Instead of dealing

with this development directly, the District merely argues PERB’s definition is

overbroad and ignores forty years of precedent. Whether PERB’s definition is

overbroad, whether the prior cases set forth the more logical definition of

“supplemental pay,” and whether the prior definitions appear more consistent
                                            13



with the legislature’s intent in balancing management and labor rights are no

longer the controlling questions. The only controlling question presented in this

appeal is whether PERB’s definition of “supplemental pay” is irrational, illogical,

or wholly unjustifiable.”     See Iowa Code § 17A.19(10)(l), (m).2             This is a

deferential standard.

       In conducting our analysis, we are guided by the supreme court’s most

recent discussion of the issue. “The topics listed in Iowa Code section 20.9

cannot be defined in a fashion so expansive that the other specifically identified

subjects of mandatory bargaining become redundant, nor are the topics subject

to the narrowest possible interpretation.” AFSCME Iowa Council 61, 2014 WL

1884476, at *5. “Consistent with legislative intent, PERB must give each topic in

section 20.9 its common and ordinary meaning within the structural parameters

imposed by section 20.9.”         Id.   PERB’s decision contains seven pages of

historical analysis to derive the proper principles to apply to the question whether

the contract provisions fall within the definition of “supplemental pay” in Iowa

Code section 20.9.        The decision then contains fifteen pages of analysis

regarding the common and ordinary meaning of “supplemental pay.”                    PERB

considered its own prior interpretations, relevant case law, dictionary definitions



2
  Waterloo II set forth a two-step inquiry. The first inquiry is whether the proposal falls
within the definition of a mandatory topic of bargaining. Waterloo II, 740 N.W.2d at 429.
“Once that threshold test has been met, the next inquiry is whether the proposal is
preempted or inconsistent with any provision of law.” Id. The District limited its
argument to whether the proposal falls within definition of a topic of mandatory
bargaining. Although a strong argument could be made PERB’s interpretation so
changes the nature of public employee bargaining as to be inconsistent with PERA and
in violation of the second stop of Waterloo II, the argument was not made here and will
not be considered.
                                             14



of the term, definitions from other jurisdictions, and treasury regulations.        In

reviewing these authorities, PERB recognized that “supplemental pay” could be

limited to that involving monetary compensation or could also include non-

monetary compensation. PERB adopted the definition that supplemental pay

included non-monetary compensation related to the employment relationship. To

avoid an overly-expansive definition that rendered the other specifically identified

subjects of mandatory bargaining redundant, PERB specifically excluded from its

interpretation any proposal that could be subject to mandatory bargaining under

any other term in section 20.9.           PERB then concluded that the proposals

regarding severance pay fell within this definition.

       We cannot say the definition or its application to the proposals at issue is

irrational, illogical, or wholly unjustifiable.     PERB cites sufficient authority in

support of its interpretation. In addition to the authorities cited by PERB we note

Justice McCormick, in City of Fort Dodge, reached a similar conclusion regarding

the meaning of wages—concluding that wages was commonly understood to

include non-monetary forms of compensation.              See City of Fort Dodge, 275

N.W.2d at 398. Judge Oxberger, in Professional Staff Association, concluded

the severance pay proposal at issue in that case fell within a restrictive

interpretation of “supplemental pay.” Prof’l Staff Ass’n, 373 N.W.2d at 519. A

fortiori, he would also conclude that severance pay fell within a less restrictive

interpretation of the same. Given the authority cited by PERB in support of its

interpretation and our own case law on the same issue, we cannot say PERB’s

interpretation is irrational, illogical, or wholly unjustifiable.
                                  15



                                  IV.

For the foregoing reasons, the judgment of the district court is affirmed.

AFFIRMED.

Vogel, P.J., concurs specially.
                                        16



VOGEL, P.J. (concurring specially)

       While I agree with the majority’s reasoning, I concur specially to illustrate

the consequences of our court’s conclusion.

       The history of mandatory subjects of collective bargaining in Iowa is

illustrative. As Waterloo II noted:

       In PERA, the legislature declined to adopt the NLRA model on the
       question of what subject matters are mandatory subjects of
       collective bargaining. Instead of incorporating the expansive NLRA
       language mandating collective bargaining over wages, hours and
       “other terms and conditions of employment,” the Iowa legislature
       instead specifically enumerated seventeen topics subject to
       collective bargaining.

740 N.W.2d at 421.

       The supreme court approached the issue of whether a subject was a

mandatory subject of bargaining by using a two-pronged test—first, whether a

particular proposal fell within the scope of the specific terms in section 20.9, and

second, whether collective bargaining over the proposal would be illegal. See

Charles City, 275 N.W.2d at 772.          However, Charles City struggled with

balancing the terms delineated in section 20.9 with section 20.7, which set forth

the exclusive rights of management. As such, the court returned to the strict two-

pronged approach, that is, a topics test. State v. Pub. Emp’t Relations Bd., 508

N.W.2d 668, 672–75 (Iowa 1993).

       Waterloo II, though, departed from the previous precedent’s narrow

interpretation of the laundry list of terms, see City of Fort Dodge, 275 N.W.2d at

397, and instead adopted “the common or ordinary meaning of words” approach.

Waterloo II, 740 N.W.2d at 430. Thus, it appears Waterloo II overruled prior
                                          17



precedent sub silentio, as well as wandered away from Iowa’s more restrictive

approach to mandatory subjects of collective bargaining (that is, as opposed to

the NLRA’s more expansive style).

       The problem now, of course, is that the legislature vested authority with

PERB to interpret chapter 20 in 2010.          Combined with Waterloo II’s liberal

approach to defining terms in section 20.9, PERB, as it has done in this case, is

allowed to interpret terms regardless of our courts’ precedent. Then, given our

narrow standard of review, we are restricted from any meaningful judicial review

of PERB’s definition. Consequently, PERB may now determine an issue is a

mandatory subject of bargaining, despite years of precedent to the contrary.

Regardless of these practical issues, I agree with the majority that, given

Waterloo II and the amended section 20.6, PERB’s interpretation should be

upheld and the district court affirmed.
