In a major legal test of a landmark 2019 law that allowed state workers to unionize, a Carson City judge ruled against Nevada’s largest state worker union Thursday, preserving a veto from Gov. Joe Lombardo that scuttled a $25 million appropriation funding a now-2-year-old state worker arbitration agreement.

The American Federation of State, County and Municipal Employees (AFSCME) Local 4041 sued the Lombardo administrationin September, pushing for a legal maneuver that, if approved, would have compelled the state to pay the $25 million arbitration award to boost salaries among workers in the employee groups represented by the unions. AFSCME represents several thousand state employees across three categories.

Though a third-party arbitrator awarded the state employee unions the money in 2022, the funding never materialized amid a quirk in the state’s two-year budget cycle and a deep partisan divide over authorizing the retroactive money.

Legislative Democrats initially sought to fund that award earlier this year through SB440, arguing that not awarding the funding was tantamount to voiding the state’s collective bargaining law. But Lombardo, a Republican, ultimately vetoed the measure and wrote in his veto message that the state “not be well-served” by funding a retroactive and “non-binding” arbitration award.

In ruling against AFSCME on Thursday, Judge James Russell said the governor has the absolute right to veto legislation, and that though the Legislature had approved the bill, a court could not force the government to make the legislative appropriation. The union can still appeal the decision to the state Supreme Court.

A spokesperson for Lombardo’s office declined to comment on the ruling.

In a statement provided Friday morning, AFSCME member Brian Miller said the union disagreed with Thursday’s decision and that the union is weighing next steps while waiting for the judge’s full written opinion. 

“Nevada law is clear that arbitration decisions are final and binding, and we stand by our demand for immediate payment to state workers of the wages they have already earned,” Miller said.

Attorney Nate Ring, representing AFSCME, argued during the hearing that though SB440 was vetoed, it doesn't exempt the state from fulfilling its side of an arbitration agreement made with the union last year.

Ring, who is married to Senate Majority Leader Nicole Cannizzaro (D-Las Vegas), cited a previous case in Iowa that involved a governor vetoing an agreement that would have increased pay for union workers in 1992.

Deputy Attorney General Nathan Holland, who was defending the state, said that under AFSCME’s argument, the governor would be obligated to somehow approve the funding even if lawmakers had hypothetically rejected SB440.

How we got here 

Thursday’s hearing comes as part of a long-running partisan battle over an arbitration agreement that has spanned two years and two governors, and one that reaches into the heart of a 2019 law that first authorized collective bargaining for state employees.

The first bargaining units for Nevada state workers were organized and recognized by the state in 2021, with collective bargaining agreements largely agreed to before the end of the state’s 120-day legislative session. But an impasse in contract negotiations with some of the bargaining units sent the process skidding beyond that year’s session and toward a third-party arbitrator that summer.

That arbitrator ultimately awarded the unions a 2 percent pay increase, a bump later approved by a state board including then-Gov. Steve Sisolak in 2022. However, because state lawmakers would not meet to consider a new budget for another year, the award did not have a clear funding mechanism.

In 2023, legislative Democrats sought to make good on the promise with SB440, which included roughly $25 million in funding directed toward bargaining units that received the arbitration award.

During floor debates, Cannizzaro argued that lawmakers had an obligation under the 2019 collective bargaining law to fund the arbitration agreement, even if they did not agree with it politically. But Republicans, including Minority Leader Heidi Seevers Gansert (R-Reno), argued the money would create an unfair disparity between union and non-union state employees.

SB440 was passed along party lines in both chambers, with Democrats in favor and Republicans opposed. Lombardo vetoed the bill June 16. In his veto message, he echoed the arguments made by legislative Republicans, writing, in part, that the retroactive award would “create perverse incentives regarding employee pay.”

Updated at 8:26 a.m. on 12/1/2023 to reflect the correct case Ring referred to during the hearing.

Updated at 11:24 a.m. on 12/1/2023 to include comment from AFSCME on Thursday's decision.