Appeals Court Denies Interest in 3% Case

The Michigan Court of Appeals has ruled that school employees who had 3 percent of their salary illegally withheld by the state from 2010-12 are not entitled to be paid additional interest on the money.

The decision is the latest twist in a long-running legal saga that grew out of the 3 percent case, which public education employees won in December 2017 after a seven-year court battle. More than $550 million was returned to 275,000 school employees in that victory.

The unions who brought the lawsuit – MEA, AFT Michigan, and AFSCME – had argued that school employees were owed more interest on money illegally seized from their paychecks than the meager amount given to them.

The Court of Appeals ruling, issued Thursday and released on Friday, found that a lower court’s decision to grant additional interest was incorrect. The state had not waived its right to governmental immunity so plaintiffs were therefore not entitled to damages for the violation of the Michigan and U.S. constitutions, the ruling said.

The next step will be to decide whether to file an appeal to the Michigan Supreme Court, a decision that falls under the guidelines of the Legal Representation Policy as adopted by the MEA Board and Representative Assembly, said MEA General Counsel Lisa Harrison.

In 2010, the Michigan Legislature enacted Public Act 75, requiring school districts to withhold 3 percent of school employees’ wages to fund retiree health care for current retirees – a benefit those employees were not even guaranteed to someday receive.

In 2017 the Supreme Court ruled in favor of school employees, and the money was returned which had been held in an interest-bearing account during years of litigation and multiple appeals by the state.

In reversing a decision by the Court of Claims, the Court of Appeals ruled 3-0 that the Supreme Court’s order that the funds originally taken from the plaintiffs be refunded with interest was satisfied through the interest accrued in the interest-bearing account.


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