GARDENDALE, Ala., Nov. 16, 2016 /PRNewswire-USNewswire/ -- Reversing the U.S. District Court for the Virgin Islands, a three-judge panel of the Third Circuit Court of Appeals unanimously ruled that the government of the Virgin Islands acted illegally in passing the Virgin Islands Economic Stability Act of 2011 ("VIESA") to respond to a budget crisis during the last recession.
Among other measures, VIESA cut the wages of most government employees by eight percent despite the fact that many employees' wages were set in union contracts. The United Steelworkers (USW), which represents approximately 2,000 employees in the Virgin Islands, filed a lawsuit contending that VIESA violated the U.S. Constitution's contracts clause by cutting wages below those specified in the unions' contracts with the government. The contracts clause protects against government actions impairing contracts, particularly contracts to which the government is a party. "This is a victory for all government workers of the Virgin Islands," said USW District 9 Director Daniel Flippo. "The USW stands totally committed in fighting for the rights of our members." The district court tried the case on December 5, 2011, and ruled on March 29, 2012, that VIESA did not violate the contracts clause because the fiscal crisis excused the impairment of the USW's contracts. The union appealed. Yesterday, the Court of Appeals overturned the judgment of the District Court. In rejecting the government's "fiscal crisis" defense, it found that the government acted unreasonably when it passed VIESA and cut the pay of employees covered by USW contracts. The Court of Appeals said VIESA violated the contracts clause with respect to union contracts because the government was aware of its financial difficulties at the time it entered into these contracts.