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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State v. Public Safety Employees Association (06/25/2004) sp-5823

State v. Public Safety Employees Association (06/25/2004) sp-5823

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA

STATE OF ALASKA,                        )
                              )    Supreme Court No. S-10698
             Appellant,                 )
                              )    Superior Court No.
     v.                       )    3AN-01-10051 CI
                              )    ALRA No. 00-1029-CBA
PUBLIC SAFETY EMPLOYEES       )
ASSOCIATION,                                 )    O P I N I O N
                              )
             Appellee.                  )    [No. 5823 - June 25,
                              2004]
________________________________)

          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, John E. Reese, Judge.

          Appearances:   Jan  Hart  DeYoung,  Assistant
          Attorney  General, Anchorage,  and  Bruce  M.
          Botelho,   Attorney  General,   Juneau,   for
          Appellant.   James A. Gasper,  Public  Safety
          Employees    Association,   Anchorage,    for
          Appellee.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.

          CARPENETI, Justice.


I.   INTRODUCTION

          I.   Alaska labor relations law provides that if a public

employer and a labor union successfully negotiate a contract,  it

shall  include  a  grievance procedure which shall  have  binding

arbitration as its final step.1  Does this statute permit parties

to  a  collective bargaining agreement to waive  their  right  to

grieve  a  subject governed by the agreement?  The  Alaska  Labor

Relations  Agency  answered this question  yes.   We  agree,  and

therefore affirm the decision of the agency.

II.  FACTS AND PROCEEDINGS

     A.   Facts

          The  Public  Safety  Employees  Association  (PSEA)  is

certified  by  the  Public  Employment  Relations  Act2  as   the

exclusive   bargaining  representative  for  state   correctional

officers.   The  terms and conditions of the officers  employment

are  governed  by a collective bargaining agreement between  PSEA

and  the  state.   The  agreement contains a provision  regarding

indemnification, under which the state agrees to provide a  legal

defense  to  officers sued in their individual capacities  unless

the  state determines that the officer acted beyond the scope  of

his  or  her authority or engaged in willful misconduct or  gross

negligence in performing the acts underlying the complaint.   The

agreement also explicitly exempts the states decision whether  to

provide  legal representation to a correctional officer from  the

grievance procedure3 which governs the rest of the contract.

          In  July  1999 Raymond Jones, an inmate at  the  Spring

Creek  Correctional Center in Seward, filed a complaint in  state

court  against corrections officer Vernon Gilliam,4 charging  him

with threatening and intimidating Jones and calling him a rat  in

front  of  two  other  inmates.  The  Department  of  Corrections

(Corrections) subsequently reprimanded Gilliam for  his  actions.

After  Jones sued Gilliam, an assistant attorney general notified

Gilliam  that  the  state  would  not  provide  him  with   legal

representation  because  it  deemed the  conduct  underlying  the

lawsuit  to  be willful misconduct or gross negligence.   Through

PSEA, Gilliam filed a grievance, which the state refused to  hear

because  its  contract with PSEA explicitly excluded  the  states

indemnification decisions from the grievance procedure.

          At  about the same time, Anthony Holland, an inmate  at

the  Palmer Correctional Center, filed complaints in federal  and

state  court  against corrections officer Beth Donovan,  alleging

that  she made racially derogatory remarks in a conversation with

him.  Corrections suspended Donovan for three days.  Donovan  was

          also informed that the state would not defend her against

Hollands lawsuits because it considered her conduct to be outside

the  scope  of  her  authority and to constitute  either  willful

misconduct or gross negligence.  Through PSEA, Donovan  attempted

to  grieve  the states decision but this grievance was denied  on

the same grounds that the state rejected Gilliams grievance.

     B.   Proceedings

          A.   After both grievances were rejected by the state, PSEA filed

a petition with the Alaska Labor Relations Agency (ALRA) to force

the  state  to  arbitrate  its indemnification  decisions.   PSEA

argued  that its collective bargaining agreement with  the  state

provided   that   any  controversy  or  dispute   involving   the

application  or  interpretation of the terms  of  the  collective

bargaining  agreement  was subject to the  grievance  procedure.5

While conceding that the collective bargaining agreement excluded

the   states   indemnification  decisions  from   the   grievance

procedure,  PSEA argued that this exclusion was contrary  to  law

and thus unenforceable.

          The  relevant  provisions of the collective  bargaining

agreement  are  sections  A  and F  of  Article  36.   Section  A

provides:

          If  the Employer determines that a bargaining
          unit  member did not engage in conduct beyond
          the  scope  of  the bargaining  unit  members
          authority   or   which  constituted   willful
          misconduct   or  gross  negligence   in   the
          performance  of the bargaining  unit  members
          duties,  upon request the Employer agrees  to
          provide   for  the  legal  defense   of   the
          bargaining  unit  member in any  civil  legal
          action  brought  against the bargaining  unit
          member as a result of the performance of  the
          bargaining unit members duties.
          
(Emphasis added.)  Section F provides:

          For  purposes of this Article, Employer means
          the    State    of   Alaska   or   designated
          representative of the State or an  agency  of
          the  State.   Consistent with past  practice,
          decisions  of the Employer pursuant  to  this
          Article shall not be subject to the grievance-
          arbitration procedures.
          
(Emphasis added.)

          In  its  petition to force the state to  arbitrate  its

indemnification  decisions,  PSEA  argued  that  AS  23.40.210(a)

requires  that  any  mandatory subject expressly  included  in  a

collective  bargaining agreement must be subject to  a  grievance

procedure, otherwise the provision waiving that right is illegal.

PSEA  relied on Hemmen v. State, Department of Public Safety6  in

making    this   argument.    Because   PSEA   maintained    that

indemnification is a mandatory bargaining subject, it argued that

a  collective  bargaining agreement that exempted indemnification

from  the  grievance  procedure violated AS  23.40.210(a)  as  we

interpreted it in Hemmen.

          Alaska Statute 23.40.210(a) provides in relevant part:

          Upon  the completion of negotiations  between
          an  organization and a public employer, if  a
          settlement  is  reached, the  employer  shall
          reduce  it  to  writing in  the  form  of  an
          agreement. . . . The agreement shall  include
          a   grievance  procedure  which  shall   have
          binding arbitration as its final step.
          
(Emphasis  added.)   Hemmen  is  the  only  case  in  which  this

provision  has been interpreted.  The controversy  in  that  case

involved the involuntary transfer of a sergeant in the Department

of  Public  Safety  from  a  position  in  Fairbanks  to  one  in

Anchorage.7  To avoid being transferred, Hemmen resigned and then

filed  suit alleging that he had been constructively discharged.8

At  that time, PSEAs collective bargaining agreement provided for

binding  arbitration as the final step in all grievances,  except

for  those  grievances involving involuntary transfers.9   Hemmen

maintained that the contractual exception for binding arbitration

of involuntary transfers violated AS 23.40.210(a).10  We agreed:

          We   conclude  that  the  objective   of   AS
          23.40.210  is  to ensure that  all  contracts
          subject  to  the  statute  contain   such   a
          procedure,  and  that binding arbitration  be
          included  as the final step of all  grievance
          procedures.  Consequently, we hold  that  the
          agreements exclusion of grievances  involving
          involuntary     transfers    from     binding
          arbitration violates AS 23.40.210.[11]
          
          A  panel of the ALRA board heard the present dispute on

August  1, 2000.  The panel considered two issues: first, whether

legal  indemnification is a mandatory subject of bargaining  and,

second,  whether Alaska law requires that all mandatory  subjects

of  bargaining be subject to a grievance procedure, even  if  the

parties   have  explicitly  waived  that  right  during  contract

negotiations.

          Relying  on  our  decisions in Kenai Peninsula  Borough

School District v. Kenai Peninsula Education Assn (Kenai I)12 and

Alaska  Public  Employees Assn v. State,13 the  board  determined

that,  because indemnification is more closely related to  public

employees economic interests than to the states general policies,

it  is  a  mandatory subject of bargaining.  However,  the  board

rejected PSEAs interpretation of Hemmen, concluding instead that,

while binding arbitration must be the final step of any grievance

procedure, Hemmen does not require that all mandatory subjects of

bargaining be subject to the grievance procedure.  It thus  found

that  PSEA  and  the  state had explicitly  exempted  the  states

indemnification  decisions  from the  grievance  process  and  it

denied PSEAs petition.  PSEA appealed.

          On  June  29, 2002 Superior Court Judge John  E.  Reese

rejected the agencys interpretation of AS 23.40.210(a) and Hemmen

and  held  that  Article  36F  of the agreement,  which  exempted

indemnification  decisions  from  the  grievance  procedure,  was

illegal  and unenforceable.  While acknowledging that Hemmen  did

not explicitly address a situation in which the contract entirely

excluded  an  area of bargaining from the grievance process,  the

court interpreted Hemmen to apply AS 23.40.210(a) to all subjects

of  negotiation, such that all contracts subject to  the  statute

[must] contain a grievance procedure that culminates with binding

arbitration.   The  court thus concluded that the  parties  to  a

collective bargaining agreement may not waive the right to grieve

to  binding arbitration any issue which has been negotiated  into

the contract.

          Judge  Reese  stayed his decision pending  our  review.

The  state  appealed,  asking us to reverse the  superior  courts

interpretation  of AS 23.40.210(a) and Hemmen, to reconsider  our

decision  in  Hemmen  should we agree with  the  superior  courts

interpretation  of  that  decision, and to  reverse  the  agencys

determination  that  indemnification is a  mandatory  subject  of

bargaining  should  we  find  that  all  mandatory  subjects   of

bargaining   must   be   governed  by  the  grievance-arbitration

procedure.

III. STANDARD OF REVIEW

          In  an  appeal  from  an agency decision,  we  directly

review the agency action in question rather than the decision  of

the superior court.14  In considering administrative appeals,  we

have recognized four principal standards of review:

          The  substantial evidence test  is  used  for

          questions of fact.  The reasonable basis test

          is used for questions of law involving agency

          expertise.  The substitution of judgment test

          is   used  for  questions  of  law  where  no

          expertise  is  involved.  The reasonable  and

          not  arbitrary  test is used  for  review  of

          administrative regulations.[15]

          In   interpreting  the  language  of  AS   23.40.210(a)

generally, we apply our independent judgment.16  In attempting to

ascertain  the  intent  of  the  legislature,  we  construe  this

statutory  language so as to adopt a rule of  law  that  is  most

persuasive in light of precedent, reason, and policy. 17

          We have not previously decided the appropriate standard

of   review   applicable  to  the  ALRAs  determination  of  what

constitutes  a mandatory subject of bargaining.18   We  now  hold

that, because this is a legal question19 to which the ALRA brings

  specialized  knowledge and experience  20  we  will  apply  the

reasonable  basis standard of review to the ALRAs  categorization

of a subject as mandatory or permissive.  Under this standard, we

          will defer to the judgment of the ALRA so long as it is supported

by the facts and a reasonable basis in law.21

IV.  DISCUSSION

     A.   Indemnification Is a Mandatory Subject of Bargaining.
          
          We first address whether indemnification is a mandatory

subject  of  bargaining.  The ALRA concluded that indemnification

is  a  mandatory  subject of bargaining because public  employees

would have strong economic interests in legal representation from

their  public employer as a result of getting sued  for  a  work-

related  function.   Because  the  agency  employed  its  special

expertise in labor relations in reaching this conclusion, we will

affirm  its  judgment so long as it is reasonable.22  We  believe

that it is.

          The   duty  to  bargain  over  what  are  often  called

mandatory  subjects of bargaining23 arises from  the  requirement

that  the state and the union negotiate collectively over  wages,

hours, and other terms and conditions of employment.24  The terms

and conditions of employment include the hours of employment, the

compensation  and  fringe benefits, and the  employers  personnel

policies  affecting  the working conditions of  the  employees.25

Mandatory subjects of bargaining have traditionally been  defined

as  those subjects most closely related to the economic interests

of employees.26

          While  the state concedes that its decision whether  to

provide  a  legal  defense will have a financial  impact  on  its

employees,  it  contends  that  not  all  subjects  that   affect

employees   economic   interests  are   mandatory   subjects   of

bargaining.   Indeed, the state argues that it  has  historically

considered  legal indemnification to be a permissive  subject  of

bargaining due to the states prerogative to set public policy and

to control its litigation strategy.  In support of this argument,

the  state cites Public Defender Agency v. Superior Court,  Third

Judicial  District,27 a case in which we recognized the power  of

the  attorney  general  to  bring  any  action  which  he  thinks

          necessary to protect the public interest, . . . [including the

corollary power] to make any disposition of the states litigation

which  he  thinks  best, . . . [which] includes  the  initiation,

prosecution and disposition of cases.28  The state contends that,

because  indemnification is more closely  related  to  government

policies  than to the economic interests of employees,  it  is  a

permissive rather than mandatory subject of bargaining.

          In  holding that indemnification is a mandatory subject

of  bargaining, the ALRA relied upon administrative decisions  in

New  York29  and  New Jersey30 as well as the balancing  test  we

articulated in Kenai I.31  In that case, we explained:

          a  matter  is more susceptible to  bargaining
          the more it deals with the economic interests
          of   employees  and  the  less  it   concerns
          professional  goals and methods.   Bargaining
          over  the  latter topics presents  particular
          problems because there is less likely  to  be
          any   politically  organized  interest  group
          other  than  the union concerned  with  these
          issues.  .  . . Furthermore, it  is  such  an
          abstract  and  abstruse subject  that  it  is
          unlikely that any appreciable portion of  the
          public  will  either understand  it  or  care
          greatly about it.  In such circumstances, the
          risk   that   effective   power   over    the
          governmental decision will come to rest  with
          the    union   is   significantly    greater.
          Moreover,  it  is more likely there  will  be
          disagreements   among   union   members    on
          questions  of this nature than on  bread  and
          butter   issues;  the  risk   that   minority
          viewpoints  within  the  union  will  not  be
          meaningfully represented in the bargaining is
          a real one.[32]
          
We therefore held that matters such as salaries, fringe benefits,

the  number  of hours worked, and the amount of leave  time  were

mandatory   subjects  of  bargaining,  while   issues   such   as

preparation time and class size were within the realm  of  school

management  and function, despite their obvious relation  to  the

teachers working conditions.33

          It  is  often  difficult to characterize  an  issue  as

either mandatory or permissive.  The practical challenges of this

          process were elucidated in Alaska Public Employees Assn v. State,34

a  case  in  which we considered whether job classifications  and

salary range assignments were mandatory subjects of bargaining.35

Because  of the close relationship between the job classification

plan   and   the  state  merit  principle,  we  held   that   job

classification should be exempt from bargaining.36  With  respect

to  the  assignment of positions to salary ranges, we  determined

the  issue to be a permissive subject of bargaining  one on which

state employees could be heard at the states discretion  but  not

a  mandatory  subject of bargaining under existing  state  salary

programs.37  In reaching this conclusion, we adapted the test for

negotiability  set  out in Kenai I, creating instead  a  division

between mandatory and permissive subjects of bargaining in cases,

such  as this one, where the government employers constitutional,

statutory,  or  public policy prerogatives significantly  overlap

the public employees collective bargaining prerogatives.38  Under

this   modified   test,   a  matter  is   more   susceptible   to

categorization as a mandatory subject of bargaining the  more  it

deals  with the economic interests of employees and the  less  it

concerns the employers general policies.39

          ALRA  found that public employees . . . strong economic

interests in legal representation from their public employer as a

result  of getting sued for a work-related function is sufficient

to ensure that they have the right to bargain over such an issue.

While   we   are   sympathetic  to  the  states   argument   that

indemnification  is closely tied to a governmental  function  and

implicates more than just a public employees financial interests,

we  nonetheless conclude that the ALRA had a reasonable legal and

factual basis to find otherwise.  But because we also agree  with

the  ALRA that the parties to a CBA can waive the right to grieve

a mandatory subject of bargaining, we conclude that requiring the

parties to negotiate over the subject of indemnification will not

infringe   upon  the  states  right  to  direct  its   litigation

strategies  and legal resources where, as here, it  exempts  such

          decisions from the grievance process.

     B.   Alaska Statute 23.40.210(a) Requires that All Mandatory
          Subjects of Bargaining Culminate in a Grievance-Arbitration
          Procedure Unless that Right Is Clearly and Unmistakably Waived.
          
          Resolution  of  this  case  depends  primarily  on  our

interpretation  of  the Public Employment Relations  Act  (PERA):

Under  the  Act,  may  the  parties to  a  collective  bargaining

agreement  waive  the right to arbitrate a mandatory  subject  of

negotiation?  We recently set out the principles for interpreting

statutory   language  in  Tesoro  Petroleum  Corp.  v.   State,40

explaining  that,  where  the text of  the  statute  is  arguably

ambiguous,  we will apply the following precepts to give  meaning

to the statute:

          The  purpose of statutory construction is  to
          give effect to the intent of the legislature,
          with  due  regard  for the meaning  that  the
          statutory   language   conveys   to   others.
          Statutory   construction  begins   with   the
          language of the statute construed in light of
          the  purpose of its enactment. If the statute
          is unambiguous and expresses the legislatures
          intent,  statutes  will not  be  modified  or
          extended  by  judicial construction.   If  we
          find  a statute ambiguous, we apply a sliding
          scale  of  interpretation, where the  plainer
          the  language,  the more convincing  contrary
          legislative history must be.[41]
          
          1.   The plain language of the statute is ambiguous.

          Alaska  Statute  23.40.210(a) generally  addresses  the

legislatures   requirements   for  labor   relations   agreements

involving public employers.42  In addition to mandating that every

such  agreement  be in writing, that its term  not  exceed  three

years, and that it include a cost-of-living differential for  in-

and out-of-state employees, subsection .210(a) commands that each

collective  bargaining  agreement include a  grievance  procedure

which shall have binding arbitration as its final step.

          The  state  claims that this requirement  is  satisfied

because   the  agreement  in  this  case  includes  a  grievance-

arbitration  procedure,  albeit  one  that  exempts  the   states

indemnification decisions.  According to the state,  the  statute

          requires only that the agreement include a grievance-arbitration

procedure, but it does not require that all mandatory subjects of

bargaining  be  governed by the grievance procedure.   The  state

claims  that it would deter collective bargaining and defeat  the

purposes of PERA if we interpret AS 23.40.210(a) to require  that

arbitration be available for all subjects of bargaining.  In  the

states  view, AS 23.40.210(a) does not prohibit bargaining  about

the availability of arbitration.

          The states analysis notwithstanding, the plain language

of  subsection  .210(a) does not answer the question  before  us.

While  the  statute on its face requires only that  an  agreement

include   a  grievance  procedure  which  culminates  in  binding

arbitration, the states interpretation would permit  the  parties

to  waive the right to grieve each negotiated provision.  Because

that interpretation could potentially read all meaning out of the

statute,  we  cannot rely on the plain language  of  the  statute

alone in ascertaining the legislatures intent.  We therefore look

to  other  sources  to  determine  what  result  the  legislature

intended to achieve.

          2.   The legislative history of AS 23.40.210 is not instructive.

          In  a prior case involving a different provision of the

statute  in  question  here, we noted  the  lack  of  legislative

history available for AS 23.40.210:

          The  legislative history of AS  23.40.210  is
          not particularly enlightening.[fn]  Given the
          ambiguous  language of the  statute  and  the
          absence  of relevant legislative history,  we
          construe  this statutory language  so  as  to
          adopt  a  rule of law that is most persuasive
          in light of precedent, reason, and policy.[43]
          __________
               [fn]  House  Bill 683 was  passed  as  a
          rider  to  a  minor amendment to the  penalty
          provision of the Wage and Hour Act.  See 1972
          H.J. 1312 (May 22, 1972).  Then Governor Egan
          sponsored   the  bill,  but  the   historical
          materials give no indication as to the source
          of the text.  Id. at 1321.
          
          3.   The National Labor Relations Act is inapplicable.
               
          1.   When interpreting the provisions of the Act in the past, we

          have sought guidance from decisions interpreting the National

Labor Relations Act (NLRA),44 on which the Act was based.45  But in

contrast  to  the  Act,  the NLRA does  not  require  that  labor

contracts  include  a  grievance  procedure  that  culminates  in

binding arbitration.46  While we recognize the instructive  value

of the NLRA and the many cases interpreting it, we cannot rely on

federal  precedent to resolve whether grievance-arbitration  must

be  available for all mandatory subjects given that the NLRA does

not  require that a grievance procedure be included  in  a  labor

contract.47  The legislature clearly intended to diverge from the

NLRA  on  this  point.  We therefore conclude that  it  would  be

inappropriate  to  rely on NLRA precedent  to  determine  whether

grievance-arbitration  must  be  available  for   all   mandatory

subjects of bargaining pursuant to AS 23.40.210(a).

          4.   The  Public Employment Relations Act, taken  as  a
               whole,   requires  that  mandatory   subjects   of
               bargaining be subject to grievance-arbitration.
               
          We  next examine the PERA, the legislation of which  AS

23.40.210(a)  is  a  part, in recognition of the  principle  that

[t]he  meaning  of  a statutory provision is  determined  by  the

language  of the particular provision construed in light  of  the

purpose of the whole instrument.48

          Alaska Statute 23.40.070(2) requir[es] public employers

to negotiate with and enter into written agreements with employee

organizations  on matters of wages, hours, and  other  terms  and

conditions of employment.49  These are the mandatory subjects  of

bargaining  on  which  the parties must bargain  in  good  faith,

although  they  need  not  reach  agreement.50   Alaska   Statute

23.40.210(a) in turn requires that written agreements  include  a

grievance  procedure with binding arbitration as its final  step.

These sections are best read together to require the parties to a

collective  bargaining agreement to negotiate  on  all  mandatory

subjects  of bargaining and, if agreement is reached, that  those

negotiations be memorialized in a written agreement that includes

a  binding grievance-arbitration procedure.  Accordingly, we hold

          that the legislature intended all mandatory subjects of

bargaining   on   which  agreement  has  been   reached   to   be

presumptively  subject  to  the agreements  grievance-arbitration

procedure.   This conclusion is consistent with our  prior  cases

addressing the scope of public employees right to arbitration.

               a.   Our prior cases imply that mandatory subjects
                    of bargaining must be arbitrable.
                    
          Much  of  the controversy in this case arises from  the

competing  interpretations  of Hemmen  v.  State,  Department  of

Public  Safety51 and its bearing on the present  situation.   Our

decision  in  Hemmen  was brief, and can  be  summarized  in  the

following two sentences:

          We   conclude  that  the  objective   of   AS
          23.40.210  is  to ensure that  all  contracts
          subject  to  the  statute  contain   such   a
          procedure,  and  that binding arbitration  be
          included  as the final step of all  grievance
          procedures.  Consequently, we hold  that  the
          agreements exclusion of grievances  involving
          involuntary     transfers    from     binding
          arbitration violates AS 23.40.210.[52]
          
          The   ALRA   interpreted  Hemmen  to  require   binding

arbitration as the final step of the grievance process,  but  not

to  require  that  all  areas of bargaining  be  subject  to  the

grievance  process  in  the  first  place.   The  superior  court

rejected  this  reasoning and held that  [t]he  more  appropriate

interpretation of Hemmen is that AS 23.40.210(a) applies  to  all

subjects  of negotiation.  According to the superior  court,  the

objective of AS 23.40.210 is to insure that all contracts subject

to the statute contain a grievance procedure that culminates with

binding arbitration.

          We conclude that the ALRA correctly interpreted Hemmen:

binding  arbitration must be the final step of a contract dispute

subject  to the grievance process.  This means that the grievance

process  must conclude with binding arbitration, but it does  not

require  that all contract provisions be subject to the grievance

process.   This interpretation of Hemmen is consistent  with  our

prior   cases  construing  the  scope  of  bargaining  by  public

          employees, which have implied that arbitration is required only

for mandatory subjects of bargaining, and not for all subjects of

bargaining.

           In Kenai I53 we first considered what types of subjects

can  be  bargained by public employers.  We endeavored to balance

the requirement to bargain in good faith on matters pertaining to

public  school employees employment and the fulfillment of  their

professional duties54 with the legislative directive  prohibiting

the  delegation of the legal responsibilities, powers, and duties

of  the  school board including its right to make final decisions

on  policies.55   Recognizing the risk that  permitting  teachers

unions  to bargain on matters of educational policy might  result

in  the erosion of school board control over those issues, we set

out  a  test  to determine which subjects could be negotiated  by

school  boards and which could not.56  The test primarily focused

on  the  nexus between the issue sought to be bargained over  and

the economic interests of the employees.57  Under our holding  in

Kenai  I, certain issues tangentially related to teachers working

conditions,  but  more  closely tied to  professional  goals  and

methods   an area over which the school board must retain control

were  exempted  from  the  bargaining  process.58   However,   we

nonetheless encouraged school boards to discuss these issues with

their  teaching  staffs, to consider teacher  proposals  on  such

issues, and to draw from the expertise and experience of teachers

in establishing educational policy.59

          Our  subsequent  decision in Kenai Peninsula  Education

Assn v. Kenai Peninsula Borough School District (Kenai II)60 drew

extensively  on  our  discussion in Kenai  I.   In  Kenai  II  we

considered  whether  a grievance involving a negotiated  contract

provision regarding a teachers non-professional duties  could  be

submitted  to arbitration.61  The collective bargaining agreement

negotiated  by  the teachers and the school board  contained  two

types  of  grievance  procedures,  one  for  violations  of   the

agreement,  which  would be subject to binding  arbitration,  and

          another for violations of school board policy, which could be

aired  before  the  school board but could not  be  arbitrated.62

Based on our earlier holding, we concluded in Kenai II that items

which  could  not  be  negotiated because they  are  too  closely

related to school board policy likewise could not be arbitrated.63

As we explained:

          To  allow  such bargaining raised the  danger
          that control over educational policy could be
          effectively transferred from the school board
          to  the union over a series of contracts  and
          thus   undermine  the  ability  of   elective
          officials  to  perform their  duties  in  the
          public   interest.   This  danger  would   be
          equally  present  if matters  of  educational
          policy  were  allowed to go  to  arbitration.
          Thus,  the  realm  of what is  arbitrable  is
          bounded   by   the   limits   of   what    is
          negotiable.[64]
          
          Most recently, in Alaska Public Employees Assn v. State

(APEA),65  we  again addressed what types of  subjects  could  be

considered  mandatory and therefore arbitrable.66  In  APEA,  the

union  contested the agencys categorization of job classification

and   salary  range  assignments  as  nonmandatory  subjects   of

bargaining and argued that, even if these subjects did  not  have

to be bargained over, the state should nonetheless be required to

submit  disputes over those issues to binding arbitration.67   We

disagreed,  holding that [b]inding arbitration is not  absolutely

available  when the matter in dispute is not a mandatory  subject

of  bargaining.68  We did not have occasion in the context of the

APEA  decision  to  consider whether, conversely,  all  mandatory

areas  of  bargaining  are  subject to the  grievance-arbitration

process.  We explicitly hold today that they are.

          5.   The   right   to  grieve  mandatory  subjects   of
               bargaining can be waived by PSEA.
               
          But  this  case  also presents the question  whether  a

union  can  waive  the  right to grieve a  mandatory  subject  of

bargaining.   The  ALRA held that PSEA can  waive  the  right  to

arbitrate  mandatory  subjects  if  such  waiver  is  clear   and

unmistakable.   In  reaching this conclusion, the  agency  relied

          upon decisions by the Tenth Circuit69 and the National Labor

Relations  Board70 that permitted unions to waive  the  right  to

bargain over wages or other mandatory subjects of negotiations so

long   as  the  waiver  was  clear  and  unmistakable.   We  have

previously stated that unions must have broad discretion to serve

the  employees  they represent,71 and we see no reason  why  this

discretion  should not extend to a unions ability  to  waive  the

right  to grievance-arbitration, even for a mandatory subject  of

bargaining.

          This   approach  finds  support  in  federal  decisions

allowing   unions  to  waive  employees  statutory  rights,   but

requiring  that  such  waiver  be  clear  and  unmistakable.   In

Metropolitan Edison Co. v. NLRB,72 the United States Supreme Court

held that a union could waive its officers statutory rights under

the NLRA, but required that the waiver be clear and unmistakable.73

Likewise,  in  Wright v. Universal Maritime Service Corp.,74  the

Court   stated  that  a  union-negotiated  collective  bargaining

agreement could waive an employees statutory right to a  judicial

forum  for a discrimination claim in favor of binding arbitration

so  long  as  the waiver of the statutory remedy  was  clear  and

unmistakable.75   The Court has reached a similar  conclusion  in

numerous additional cases.76

          The  statutory  right to grieve mandatory  subjects  of

bargaining  is an important one, but certainly no more  important

than  an  employees statutory right to a judicial  remedy  for  a

discrimination claim.  Just as an employee can waive a  statutory

right  to  a  judicial  remedy  for a  discrimination  claim,  an

employees   union  can  waive  a  statutory  right  to  arbitrate

mandatory  subjects of bargaining.  Accordingly,  we  hold  today

that  PSEA  can waive the right to grieve mandatory  subjects  of

bargaining.  But, consistent with the federal courts and with our

own  precedent,77 such waiver will be effective only when  it  is

clear and unambiguous.

          The  collective bargaining agreement negotiated by PSEA

          and the state clearly and unmistakably waived the employees right

to  grieve  the  states decision not to provide them  with  legal

representation if they acted beyond the scope of their  authority

or  engaged  in  willful  misconduct or gross  negligence.   PSEA

agreed  that  the  states decision not to indemnify  an  employee

shall  not  be  subject to the grievance-arbitration  procedures.

The  collective bargaining agreement does not, however, waive  an

employees right to grieve the states determination that he or she

acted outside the scope of his authority or committed misconduct.

Nor does it bar an employee from grieving the disciplinary action

imposed  as  a  result of such misconduct.78  Just as  important,

since  a collective bargaining agreement can cover only a  three-

year period,79 PSEA is free to negotiate new terms in a subsequent

agreement.

          Allowing PSEA to waive an employees statutory right  to

grieve  certain decisions made by the state will allay the states

concern  about losing control over such issues as its  litigation

strategies  without  sacrificing  public  employees  right  to  a

grievance procedure for mandatory subjects of bargaining.   Legal

indemnification  is  a  mandatory subject  of  bargaining  which,

absent an express agreement to the contrary, must be subject to a

grievance  procedure with binding arbitration as the final  step.

But  PSEA, in its capacity as the public safety employees  union,

has  the  discretion to waive this right in  the  course  of  its

contract negotiations with the state.  In all circumstances, such

waiver must be clear and unmistakable.

V.   CONCLUSION

          Because legal indemnification is a mandatory subject of
bargaining,  it  must  be  subject to  the  grievance-arbitration
procedure  of  the  public  employees contract  with  the  state.
However, because unions have broad discretion to negotiate in the
interest  of  their members, PSEA can waive the right  to  grieve
even a mandatory subject of bargaining.  We therefore REVERSE the
decision  of  the superior court and AFFIRM the decision  of  the
Alaska Labor Relations Agency.
_______________________________
     1    AS 23.40.210(a).

     2    AS 23.40.070-.260.

     3     This  procedure governs any dispute arising  from  the
interpretation  or  application  of  the  collective   bargaining
agreement.  Efforts at dispute resolution follow four steps which
culminate in arbitration.

     4     This  complaint also named corrections  officer  Floyd
Ainsworth, Jr. and the Alaska Department of Corrections.

     5     Article 16.01A of the CBA defines a grievance  as  any
controversy    or   dispute   involving   the   application    or
interpretation of the terms of this Agreement arising between the
Union or an employee or employees and the Employer.

     6    710 P.2d 1001 (Alaska 1985).

     7    Id. at 1001.

     8    Id. at 1002.

     9    Id. at 1003 (emphasis in original).

     10    Id.

     11    Id.

     12    572 P.2d 416 (Alaska 1977).

     13    831 P.2d 1245 (Alaska 1992).

     14    N. Alaska Envtl. Ctr. v. State, Dept of Natural Res., 2
P.3d 629, 633 (Alaska 2000).

     15    Handley v. State, Dept of Revenue, 838 P.2d 1231, 1233
(Alaska 1992).

     16     State v. Alaska State Employees Assn/AFSCME Local 52,
923 P.2d 18, 22 (Alaska 1996).

     17    Pub. Safety Employees Assn v. State, 799 P.2d 315, 319
(Alaska  1990)  (quoting  Guin v. Ha, 591  P.2d  1281,  1284  n.6
(Alaska 1979)).

     18    We specifically declined to reach that issue in Alaska
Public  Employees Assn v. State, 831 P.2d 1245,  1247-48  (Alaska
1992).   In  that case, the agencies had been reorganized  before
our  decision,  and we declined the opportunity to  rule  on  the
proper  deference due either to the decision of a defunct  agency
or  to  the  decisions of a new agency that  had  no  involvement
whatsoever with the case before us. Id. at 1248.

     19     The  definition of mandatory subjects  of  bargaining
comes  from  the Public Employee Relations Act, and includes  the
hours  of  employment, the compensation and fringe benefits,  and
the employers personnel policies affecting the working conditions
of  the  employees.  AS 23.40.250(9).  See also  AS  23.40.070(2)
(requiring  public  employers to bargain  on  matters  of  wages,
hours, and other terms and conditions of employment).

     20     Alaska Pub. Employees Assn, 831 P.2d at 1247 (quoting
Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746 P.2d 896,
903 (Alaska 1987) (emphasis removed)).

     21     Alaska State Employees Assn/AFSCME Local 52, 923 P.2d
at 24-25.

     22    Id.

     23    Alaska Pub. Employees Assn, 831 P.2d at 1246.

     24    AS 23.40.070(2).

     25    AS 23.40.250(9).

     26    Alaska Pub. Employees Assn, 831 P.2d at 1251.

     27    534 P.2d 947 (Alaska 1975).

     28    Id. at 950.

     29     In  the  Matter  of  Patrolmens  Benevolent  Assn  of
Newburgh, NY, Inc. & the City of Newburgh, 18 Off. Dec.  of  N.Y.
Pub.  Employ.  Rel. Bd., 18 NYPER  3065 (1985)  (explaining  that
unions demand to negotiate over legal insurance was deemed demand
to   negotiate  over  form  of  compensation  and  was  therefore
mandatory).

     30    In the Matter of Union County & Union County PBA Locals
199  &  199A,  25 N.J. Pub. Employee Rep.  30141 (1999)  (stating
that agreement to compensate employees for cost of representation
and to indemnify them against judgments is mandatorily negotiable
term and condition of employment).

     31    572 P.2d 416 (Alaska 1977).

     32    Id. at 422.

     33    Id. at 423.

     34    831 P.2d 1245 (Alaska 1992).

     35    Id. at 1249.

     36    Id.

     37    Id. at 1251.

     38    Id.

     39    Id.

     40    42 P.3d 531 (Alaska 2002).

     41    Id. at 537 (citations omitted).

     42    The statute provides, in relevant part:

          Upon  the completion of negotiations  between
          an  organization and a public employer, if  a
          settlement  is  reached, the  employer  shall
          reduce  it  to  writing in  the  form  of  an
          agreement.  The agreement may include a  term
          for  which it will remain in effect,  not  to
          exceed  three  years.   The  agreement  shall
          include a pay plan designed to provide for  a
          cost-of-living   differential   between   the
          salaries paid employees residing in the state
          and employees residing outside the state. . .
          .  The  agreement shall include  a  grievance
          procedure    which   shall    have    binding
          arbitration as its final step.  Either  party
          to  the  agreement has a right of  action  to
          enforce  the  agreement by  petition  to  the
          labor relations agency.
          
     43    Pub. Safety Employees Assn v. State, 799 P.2d 315, 319
(Alaska  1990)  (quoting  Guin v. Ha, 591  P.2d  1281,  1284  n.6
(Alaska 1979)).

     44    29 U.S.C.  151 et seq.

     45    See, e.g., Pub. Safety Employees Assn, 799 P.2d at 318-
24  (explaining  that this court has looked to decisions  of  the
National  Labor  Relations Board . . .  in  interpreting  Alaskas
labor laws).

     46    Compare AS 23.40.210(a) with 29 U.S.C.  158(d).

     47    NLRB v. Am. Natl Ins. Co., 343 U.S. 395 (1952) (duty to
bargain limited to wages, hours and other terms and conditions of
employment;   all   other  subjects  are  permissive   areas   of
bargaining).

     48    Forest v. Safeway Stores, Inc., 830 P.2d 778, 782 n.11
(Alaska  1992) (quoting Wien Air Alaska v. Arant, 592  P.2d  352,
356 (Alaska 1979)).

     49     AS  23.40.250(9)  defines  terms  and  conditions  of
employment  as  the  hours of employment,  the  compensation  and
fringe  benefits, and the employers personnel policies  affecting
the  working conditions of the employees; but does not  mean  the
general policies describing the function and purposes of a public
employer.

     50     See  AS 23.40.110(a)(5) (prohibiting public  employer
from  refusing  to  bargain  collectively  in  good  faith);   AS
23.40.110(c)(2) (prohibiting labor or employee organization  from
refusing to bargain collectively in good faith).

     51    710 P.2d 1001 (Alaska 1985).

     52    Id. at 1003.

     53    572 P.2d 416 (Alaska 1977).

     54    Id. at 417 (quoting AS 14.20.550).

     55    Id. (quoting AS 14.20.610).

     56    Id. at 419, 422.

     57    Id. at 422.

     58    Id.

     59    Id. at 423.

     60    628 P.2d 568 (Alaska 1981).

     61    Id. at 569.

     62    Id.

     63    Id.

     64    Id. at n.1.

     65    831 P.2d 1245 (Alaska 1992).

     66    Id. at 1252.

     67    Id.

     68    Id.

     69    Capitol Steel & Iron Co. v. N.L.R.B., 89 F.3d 692 (10th
Cir. 1996).

     70     Allison Corp. & Furniture Workers Div., I.U.E.  Local
282, 330 NLRB 1363 (2000).

     71     See,  e.g., Thomas v. Anchorage Tel. Util., 741  P.2d
618,  630  (Alaska  1987)  (union must  have  valid  reasons  for
differentiating in its treatment of groups of employees  but  has
wide range of reasonableness to serve the unit it represents).

     72    460 U.S. 693 (1983).

     73     Id. at 708 (stating that Court will not infer from  a
general  contract provision that the parties intended to waive  a
statutorily protected right unless the undertaking is  explicitly
stated.    More  succinctly,  the  waiver  must  be   clear   and
unmistakable.).

     74    525 U.S. 70 (1998).

     75    Id. at 80.

     76    See id. (listing cases holding that waiver of statutory
rights must be clear and unmistakable).

     77    Univ. of Alaska v. Univ. of Alaska Classified Employees
Assn,  952  P.2d 1182, 1185 (Alaska 1998) (waiver  of  bargaining
subject  by  express agreement must be in clear and  unmistakable
language).

     78     Additionally,  because no party  to  this  litigation
asserts the existence of any statutory right to a judicial remedy
for a claim of wrongful denial of defense or indemnification,  we
do not decide whether the collective bargaining agreements waiver
of  the  right to grieve might affect any employees  right  to  a
judicial remedy.

     79    AS 23.40.210(a).