Police union members, the smallest of the six groups that had to approve the proposal, rejected it, said Ray Sullivan, a spokesman for the plaintiffs. Sixty-one per cent of police union members voted against the settlement.
Crafted during more than a year of closed-door, court-ordered talks, the proposal overwhelmingly won approval from all of the other groups, including teachers, retirees and firefighters.
But according to the agreement, if more than half of any one of the groups rejected the proposal, the settlement process would end and the original lawsuits would proceed. A trial is scheduled for September.
Because it was rejected by the smallest group — police union members made up less than 2 per cent of those eligible to vote in the first round — Superior Court Judge Sarah Taft-Carter "ordered both sides back into mediation to explore whether a settlement can still be reached," according to a statement from the plaintiffs.
Talks resumed Monday, and the parties were due to report back to the court in one week.
Even if the parties reach an agreement that is acceptable to the police unions, the proposed settlement still would have to clear a second vote by a much wider pool of people covered under it. The General Assembly would also have to sign off on it.
The proposal, announced in February, was an attempt to resolve lawsuits filed by public-sector unions and retirees over the state's 2011 pension overhaul. The deal offers retirees a modest pension increase of $500 with the promise of additional increases sooner than the current law calls for. But most of the other sweeping changes approved by lawmakers are preserved.
The overhaul was designed to save Rhode Island $4 billion over the next 20 years.
The outcome marks a defeat for Gov. Lincoln Chafee and Treasurer Gina Raimondo, who argued it was a good deal for all parties and preferable to continued costly litigation.
Spokeswomen for Chafee and Raimondo said in a joint statement that the governor and treasurer participated in good faith in the mediation that led to the settlement agreement and will continue to do so.
Richard Licht, the director of administration, had no immediate comment Monday after the parties had an in-chambers conference with the judge in Kent Superior Court in Warwick.
According to the plaintiffs, there were 417 police union members eligible to vote in the first round; 254 ballots were received, and 61 per cent voted to reject.
The vote to reject was 34 per cent for state workers; 31 per cent for teachers; 27 per cent for firefighters; 26 per cent for retirees; and 15 per cent for municipal workers.
The total number of ballots mailed out was 23,624. Those that were not returned were counted as votes in favour of the proposed settlement.
A group of 50 retired state workers and teachers covered under the proposed deal filed a new suit last week challenging the pension law and objecting to their inclusion in any class-action settlement. They want to proceed with their own legal challenges.