Supreme Court declares civil service wage cut constitutional

1. Background

In the September 2002 issue of Marval News we commented on the Supreme Court ruling in the case of “Tobar, Leónidas c/ Estado Nacional” (August 22, 2002) that declared the unconstitutionality of section 1 of Decree No 896/01 and section 10 of Law No 25,453, which had established a reduction of 13% in civil service wages as from August 30, 2001.

On April 10, 2003, in the case of “Müller, Miguel Ángel c/ Poder Ejecutivo Nacional – Contaduría General - Ejército Argentino,” the Supreme Court revoked the ruling handed down by Room V of the Federal Court of Appeals in Federal Contentious Administrative Matters and declared Decree No 430/00 to be constitutional. This Decree had established a reduction in public sector wages as from June 1, 2000 and was in force until July 2001, the date on which it was repealed by Decree No 896/01.

2. Justification for Appeals Court Ruling

As in the case of “Tobar, Leónidas c/ Estado Nacional”, the Appeals Court ruled that the reduction in remuneration altered the fundamental terms of the public sector employment contract and that in spite of the emergency invoked when issuing the decree, the reduction was arbitrary and irrational, as it directly or indirectly infringed constitutional rights, because, by proceeding in this manner, without modifying the consideration for which the employee was responsible, the State had upset the balance of the rendering of services, making the new remuneration unjust.

In addition, it ruled that the reduction was not temporary, because during the time it was enforced it implied a restriction on the right to property of a definitive nature, by suppressing a portion of remuneration in an unlimited manner.

It also considered that the circumstances of this case differed from those examined by the Court in the case of Guida (“Fallos” 323:1566).

3. Supreme Court Ruling

The Attorney General considered that the extraordinary appeal to the Supreme Court was formally admissible and that the ruling of the Appeals Court should be reversed.

On this matter, he stated that Decree No 430/00 was issued in the exercise of the exceptional powers conferred on the President of Argentina by section 99 sub-section 3 of the Argentine Constitution, as this is determined both by the preamble to the Decree (describing the emergency situation facing the public sector) and the procedure followed for its issue, and finally, from the terms of the decree itself, as well as from the nature of the measures adopted.

As regards the intervention by Congress in the process of ratification of the emergency decrees required by the Argentine Constitution, the Attorney General understood that this had taken place by means of the express repeal of Decree No 430/00 determined by Law No 25,453 (section 18), from which it is unequivocally determined that it had been considered valid until that moment.

On the matter of the power of the Government to reduce the salaries of its agents, the Attorney General stated that it was able to do so, but that for the measure to count on the support of the Argentine Constitution, the reduction should be adopted in emergency situations, have a general effect and be valid temporarily, as well as not being confiscatory, that is to say, without denaturalizing the right to compensation.

The Supreme Court revoked the ruling of the Appeals Court and, accepting the arguments and conclusions of the Attorney General, declared the constitutionality of Decree No 430/00.

In addition, it added that the wage restriction imposed in accordance with Decree No 430/00 lasted for a term of thirteen months (from June 2000 to July of the following year) during which time the wages of civil servants did not suffer from the loss of value following the devaluation of the currency that took place as from 2002, a situation which (among other reasons) meant that this case differed from that considered in the ruling by the Supreme Court in the case of “Tobar, Leónidas c/ Estado Nacional”.

Finally, the Court observed that for similar reasons the Court had rejected the claim for an adjustment of a pension benefit, which had been required in a context of economic stability and the harm to the plaintiff from the legal system in question had not been duly demonstrated.