Opinion
DOCKET NO. A-5044-12T1
01-06-2015
IN THE MATTER OF BOROUGH OF TENAFLY, Respondent-Respondent, v. PBA LOCAL 376, Appellant-Appellant.
Michael A. Bukosky argued the cause for appellant (Loccke, Correia, Limsky & Bukosky, attorneys; Leon B. Savetsky, of counsel and on the brief). Mark S. Ruderman argued the cause for respondent Borough of Tenafly (Ruderman & Glickman, P.C., attorneys; Mr. Ruderman, of counsel; Ellen M. Horn, on the brief). David N. Gambert, Deputy General Counsel, argued the cause for respondent New Jersey Public Employment Relations Commission (Martin R. Pachman, General Counsel, attorney; Mr. Gambert, on the brief). Paul L. Kleinbaum argued the cause for amicus curiae New Jersey State PBA (Zazzali, Fagella, Nowak, Kleinbaum & Friedman, attorneys; Mr. Kleinbaum, of counsel and on the brief; Marissa A. McAleer, on the brief).
JNOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Simonelli, Guadagno, and Leone. On appeal from the New Jersey Public Employment Relations Commission, IA-2013-018. Michael A. Bukosky argued the cause for appellant (Loccke, Correia, Limsky & Bukosky, attorneys; Leon B. Savetsky, of counsel and on the brief). Mark S. Ruderman argued the cause for respondent Borough of Tenafly (Ruderman & Glickman, P.C., attorneys; Mr. Ruderman, of counsel; Ellen M. Horn, on the brief). David N. Gambert, Deputy General Counsel, argued the cause for respondent New Jersey Public Employment Relations Commission (Martin R. Pachman, General Counsel, attorney; Mr. Gambert, on the brief). Paul L. Kleinbaum argued the cause for amicus curiae New Jersey State PBA (Zazzali, Fagella, Nowak, Kleinbaum & Friedman, attorneys; Mr. Kleinbaum, of counsel and on the brief; Marissa A. McAleer, on the brief). PER CURIAM
PBA Local 376 (PBA), appeals the June 2013 decision of the New Jersey Public Employee Relations Commission (PERC), affirming the May 2013 public interest arbitration award of Robert C. Gifford, which established the new term of the parties' collective bargaining agreement (CBA), salary increases, benefits for new hires, and general work schedule.
PBA asserts that PERC should have proceeded by rulemaking and not adjudication; PERC erred by failing to remand and direct the arbitrator to "cost-out" the modified provisions for each year of the CBA; and PERC was obligated to remand because the arbitrator did not adequately explain his decision on two of the nine statutory factors.
An industry term of art for conducting a cost analysis.
As PERC's findings on the sufficiency of Gifford's award are well-supported by record evidence, and PERC was firmly within its statutory authority to interpret N.J.S.A. 34:13A-16.7 via adjudication and not rulemaking, we affirm.
I.
PBA is comprised of approximately thirty-two police officers who work for respondent Borough of Tenafly (Borough). On February 25, 2013, PBA filed a Petition to Initiate Compulsory Interest Arbitration with PERC. After the Borough filed its answer, Robert C. Gifford was randomly appointed through PERC's Special Panel of Interest Arbitrators to serve as arbitrator.
Gifford conducted an interest arbitration hearing on April 5, 2013, during which both parties examined and cross-examined witnesses, submitted substantial documentary evidence, and argued orally. After the parties submitted post-hearing summations and briefs, Gifford issued his decision and award on May 6, 2013, forty-five business days after his appointment.
PBA immediately appealed the award to PERC. PERC affirmed Gifford's award and PBA appealed, raising the following points:
POINT I
PERC HAS FAILED TO FOLLOW ITS OWN REGULATION ESTABLISHED THROUGH ADJUDICATION.
POINT II
IN THE INSTANT CASE PERC'S REGULATION ESTABLISHED BY ADJUDICATION IS FLAWED AND SHOULD BE REVERSED.
POINT III
PERC ERRED IN AFFIRMING THE AWARD WHICH VIOLATED N.J.S.A. 34:13A-16G (6) AND (8).
POINT IV
PERC'S DECISION SHOULD BE REVERSED AND THE MATTER SENT TO A NEW ARBITRATOR FOR DETERMINATION ON ALL ISSUES IN DISPUTE.
II.
The New Jersey Employer-Employee Relations Act (Act), N.J.S.A. 34:13A-1 to -43, includes a compulsory interest arbitration procedure for police departments and police officer representatives who reach an impasse in collective bargaining negotiations. N.J.S.A. 34:13A-16(b)(2). Once negotiations stall, either party may petition to initiate this process with PERC. Ibid. The arbitrator's award can be appealed to PERC and PERC decisions are appealed to this court. N.J.S.A. 34:13A-16(f)(5)(a).
The scope of our review of PERC decisions reviewing arbitration is "sensitive, circumspect, and circumscribed." Twp. of Teaneck v. Teaneck FMBA Local No. 42, 353 N.J. Super. 289, 300 (App. Div. 2002), aff'd o.b., 177 N.J. 560 (2003). We will only reverse a PERC decision if it is arbitrary, capricious, or unreasonable. P.F. v. N.J. Div. of Developmental Disabilities, 139 N.J. 522, 529-30 (1995). Unreasonable PERC decisions include those contrary to the language of the Act and/or "subversive of the Legislature's intent." In re Camden Cnty. Prosecutor, 394 N.J. Super. 15, 23 (App. Div. 2007).
Due weight should be accorded to an agency decision where "substantial element[s] of agency expertise [are] implicated," such as expertise in labor relations. State v. Prof'l Ass'n of N.J. Dep't of Educ., 64 N.J. 231, 259 (1974). That said, "[j]udicial scrutiny in public interest arbitration is more stringent than in general arbitration . . . [because it] is statutorily-mandated and public funds are at stake." Hillsdale PBA Local 207 v. Borough of Hillsdale, 137 N.J. 71, 82 (1994).
As to PERC's review, PERC defers to an arbitrator's judgment, exercise of discretion, and labor-relations expertise. City of Newark, P.E.R.C. No. 99-97, 26 NJPER 242 (¶30103 1999). As such, PERC will not vacate an interest award unless the appellant demonstrates that: (1) the arbitrator failed to give "due weight" to the factors in N.J.S.A. 34:13A-16(g) that he deemed relevant; (2) the arbitrator violated the professional standards in N.J.S.A. 2A:24-8 or -9; or (3) the award is not supported by substantial evidence in the record as a whole. See Hillsdale, supra, 137 N.J. at 82; accord In re City of Camden, 429 N.J. Super. 309, 325-26 (App. Div.), certif. denied, 215 N.J. 485 (2013).
An arbitrator must provide a reasoned explanation for the award, state which statutory factors are relevant, satisfactorily explain why the others are not relevant, and provide an analysis of the evidence on each relevant factor. Hillsdale, supra, 137 N.J. at 83-84 (citing N.J.S.A. 34:13A-16(g)). "Without such an explanation, the opinion and award may not be a 'reasonable determination of the issues.'" Ibid. (quoting N.J.A.C. 19:16-5.9). An arbitrator need not rely on all factors in fashioning the award, but must consider the evidence on each. Ibid.
In 2010, legislation was passed directed at terminating abuses of the pension systems and controlling the cost of providing public employee retirement, health care, and other benefits. See Paterson Police PBA Local 1 v. City of Paterson, 433 N.J. Super. 416, 419-21 (App. Div. 2013) (describing history of bills and provisions of Special Session Joint Legislative Committee on Public Employee Benefits Reform, Final Report (N.J. 2006)).
As a result, N.J.S.A. 34:13A-16 was amended to prohibit an interest arbitration award from increasing public employer "base salary" costs by more than two percent per contract year. See N.J.S.A. 34:13A-16.7(b) (codifying L . 2010, c. 105, § 2). Base salary is a statutory term of art, defined as "salary provided pursuant to a salary guide or table and any amount provided pursuant to a salary increment, including any amount provided for longevity[.]" N.J.S.A. 34:13A-16.7(a).
"Base salary" also includes "any other item agreed by the parties" or "understood by the parties in the prior contract." Ibid. It expressly excludes "non-salary economic issues, pension and medical insurance costs," where non-salary economic issues are defined as "any economic issue that is not included in the definition of base salary." Ibid. This seemingly circular definition is clarified by the fact that if certain items were not included in base salary in kthe previous CBA, they may not be considered as base salary items for the new award. See N.J.S.A. 34:13A-16.7(b).
As a consequence of the legislation, PERC modified the interest arbitration award review standard to insure that the arbitration awards will not increase base salary by more than two percent per contract year or six percent in the aggregate for a three-year contract award. See Borough of New Milford, and PBA Local 83, P.E.R.C. No. 2012-53, 38 NJPER 340 (¶116 2012). Because the instant award was subject to the two-percent salary cap, PERC was required to determine whether arbitrator Gifford complied with and adequately explained his awards consistent with the requirements of both N.J.S.A. 34:13A-16(g) and N.J.S.A. 34:13A-16.7.
A.
As to PBA's first argument, PERC acted within its authority to interpret and apply N.J.S.A. 34:13A-16.7 through adjudication rather than rulemaking. It is well-settled that administrative agencies have broad discretion in fulfilling their statutory duties, including "the ability to select those procedures most appropriate to enable the agency to implement legislative policy." Texter v. Dep't of Human Servs., 88 N.J. 376, 385 (1982). To that end, an "agency has discretion to choose between rulemaking, adjudication, or an informal disposition in discharging its statutory duty[.]" Nw. Covenant Med. Ctr. v. Fishman, 167 N.J. 123, 137 (2001).
Courts generally defer to that choice "so long as the selection is responsive to the purpose and function of the agency." Texter, supra, 88 N.J. at 385-86. Indeed, agency interpretation of an existing statute by adjudication is often "inferable from the statute" itself. In re Application of Twp. of Jackson, 350 N.J. Super. 369, 378-79 (App. Div. 2002) (formal rulemaking was not required because statute and regulations implied agency adjudication of statute).
The arbitration is subject to a statutorily mandated procedure under N.J.S.A. 34:13A-16(g), which provides that "[t]he arbitrator shall decide the dispute based on a reasonable determination of the issues, giving due weight to those factors listed below that are judged relevant for the resolution of the specific dispute." This supports PERC's decision to affirm Gifford's award as to the statutory cap rather than promulgate rules.
Moreover, PERC has adjudicated N.J.S.A. 34:13A-16.7 in at least three prior decisions. See, e.g., New Milford, supra, 38 NJPER 340; Borough of Point Pleasant, P.E.R.C. No. 2013-28, 39 NJPER 203 (¶65 2013); Borough of Ramsey, P.E.R.C. No. 2012-60, 39 NJPER 17 (¶3 2012). The fact that the Legislature has not acted in response to PERC's adjudicative interpretations of N.J.S.A. 34:13A-16.7 is evidence of PERC's conformity with the Legislature's intent. Paterson, supra, 433 N.J. Super. at 429.
In Paterson, we interpreted the definition of "base salary" by relying on the language of subsection 16.7 and guidelines issued by two administrative agencies, the Division of Local Government Services (DLGS) and Division of Pension and Benefits (DPB). Ibid. Judge Espinosa, writing for our court, held that the "Legislature did not disavow the interpretation adopted by DLGS and DPB. Generally, the fact that the Legislature has not acted in response to an agency's interpretation is 'granted great weight as evidence of its conformity with the legislative intent.'" Ibid. (quoting Klumb v. Bd. of Educ. of Manalapan-Englishtown Reg'l High Sch. Dist., 199 N.J. 14, 24-25 (2009)).
Further, and as the Borough correctly notes, those cases cited by PBA which hold that rulemaking is preferable to adjudication are distinguishable here. PBA principally relies on Crema v. New Jersey Department of Environmental Protection, which held that "[w]hen the agency is concerned with 'broad policy issues' that affect the public-at-large or an entire field of endeavor or important areas of social concern, or the contemplated action is intended to have wide application and prospective effect, rulemaking becomes the suitable mode of proceeding." 94 N.J. 286, 299 (1983).
PBA also improperly relies on Mortgage Bankers Association of New Jersey v. New Jersey Real Estate Commission, 200 N.J. Super. 584 (App. Div 1985), which was reversed by our Supreme Court. 102 N.J. 176 (1986).
PBA failed to note, however, that the broad policy issues in Crema were pervasive environmental matters affecting the general populace, as opposed to the narrow question of interpreting base salary in a statute affecting only those public employees whose contracts are subject to compulsory interest arbitration. Id. at 302 (stating that "health and quality of life" and the "widespread effects upon the public at large for the indefinite future" command "special importance" in the law). Further, the agency in Crema was not merely interpreting an existing statute, but acting outside of any statutory or regulatory authority. Ibid.
Similarly, PBA relies on Vi-Concrete Co. v. New Jersey Department of Environmental Protection, which is distinguishable because it dealt with the far-reaching issue of environmental damage, and the agency there did not interpret an existing statute but offered relief (a landfill permit) outside of its statutory authority. 115 N.J. 1, 12-13 (1989). Likewise, DelRossi v. Department of Human Services is distinguishable because the agency there was specifically directed by the Legislature to discharge its duties through rulemaking and not adjudication. 256 N.J. Super. 286, 292 (App. Div. 1992).
In sum, there is no evidence or authority to suggest, let alone mandate, that PERC should have promulgated rules interpreting N.J.S.A. 34:13A-16.7 before adjudicating this matter.
B.
PBA next argues that PERC erred by failing to remand the award to a different arbitrator because Gifford did not adequately analyze the criteria of N.J.S.A. 34:13A-16(g)(6) or (8). The Act expressly requires an arbitrator to analyze evidence on factor (6), and a failure to do so should thus be grounds for remand. N.J.S.A. 34:13A-16(f)(3) and (g). Otherwise, an arbitrator "need rely not on all factors, but only on those that the arbitrator deems relevant." Hillsdale, supra, 137 N.J. at 83.
PBA's entire argument on this point consists of the single, unsupported assertion that "[the] arbitrator basically skimmed through the criteria" in subsections (6) and (8). PBA raised this argument below and PERC dismissed it, finding:
[T]he arbitrator addressed all nine factors on pages 143 through 154 of his decision. . . . The arbitrator gave greater weight to the interests and welfare of the public, the statutory restrictions imposed on the employer (the 2% cap) and the internal comparison with the Borough's four other employee units. The arbitrator weighed the other factors and satisfactorily explained why they were not relevant.
. . . .
Based on the totality of the arbitrator's decision and award, taking into account the constraints placed on him based on the 2% cap, we find that the arbitrator gave due weight to the subsection 16g factors judged relevant to the resolution of this matter and explained the weight he afforded to each of the factors in an appropriate manner.
This reference is to the arbitrator's conclusions. The arbitrator's analysis is found on pp. 78-142 of his award.
Upon our review of the record, we agree with PERC's assessment of Gifford's award. Gifford began with a thorough analysis of the nine statutory factors and interpretive case law. He discussed the evidence presented on all nine factors, and explained that he assigned greater weight to three factors: the interests and welfare of the public; the statutory cap; and internal comparisons with other Borough units.
Gifford noted factor (4) was inapplicable because there were no party stipulations in this case.
Gifford addressed factor six, the financial impact of the award on the governing unit, on pages 133-35 of his decision. He noted that L. 2010, c. 105 (now codified at N.J.S.A. 34:13A-16.7) amended factor six to require consideration of "the limitations imposed upon the local unit's property tax levy pursuant to section 10 of P.L. 2007, c. 62 (C40A:4-45.45)[.]"
Gifford noted that the amendment "emphasizes the importance of the restriction on raising revenue through taxes by the local government tax levy cap in rendering an award." Quoting Hillsdale, supra, 137 N.J. at 85-86, Gifford observed that our Supreme Court has held that the "considerations under this factor do not equate with a municipality's ability to pay," but instead regard the municipality's ability to raise taxes in light of the levy cap.
After this analysis, Gifford found that "[t]he state of the economy directly impacts the Borough's ability to raise revenue through taxes to pay for police salary increases and benefits." He discussed New Jersey's high unemployment rate, compared layoff and unemployment statistics among different municipalities in Bergen County (where the Borough is located), and explained that "[c]ontinuing layoffs in the private and public sector in New Jersey dramatically impact the Borough's ability to pay for the salary increases and benefits sought in this interest arbitration."
Gifford then compared employment statistics of several New Jersey police forces, noting the "surge" of retirements, "struggl[es] with lean staffing," and an overall decline of four percent in police staffing levels statewide. Gifford concluded that "the continuing after effects of the deepest recession since the Great Depression of 1929 continue to impact the Borough's ability to support continuing increases in PBA salary and benefits."
In arriving at his award, Gifford found that
the Borough's tax levy cap calculation sheet for 2012 indicates that the amount to be raised by taxation was $461,209 below the maximum allowable amount ($20,325,959 compared to $20,787,168). In addition, the Borough had an available levy cap bank from 2011 of $806,193. As to the appropriations cap, the total 2012 budget of $19,014,432
was $2,479,111 below the total general appropriations for municipal purposes cap of $21,493,543. With respect to surplus, the Borough indicates that its surplus balance was $3,333,959 as of January 1, 2010, $2,687,167 as of January 1, 2011, $2,967,390 as of January 1, 2012, and $2,580,670 as of January 1, 2013.
I have calculated the awarded base salary increases including salary, holiday pay, education pay, and longevity to be $106,222 in 2013, $107,242 in 2014 and $0 in 2015. The total cost of the awarded base salary increases that include salary, holiday pay, education pay, and longevity over the three (3) year term of the contract is $213,464.
Having considered the entire record, I conclude that the financial impact of this Award as outlined above will not adversely affect the governing unit, its residents and its taxpayers[.]
As to factor eight, Gifford noted that it "requires an Interest Arbitrator to consider the 'continuity and stability of employment' in determining a reasonable economic package." He found that the Borough's proposal "will best allow the Borough to maintain and continue a stable work force and avoid additional layoffs in the Police Department and throughout the municipality," as well as "more reasonably protect the police officers' stability and continuity of employment than the PBA's demands."
Upon reviewing the evidence, he concluded that his awarded modifications "are reasonable under the circumstances presented and will maintain the continuity and stability of employment given the legal constraints on the amount that can be awarded herein [i.e., the statutory cap]." Gifford did not give great weight to this factor.
The above record fully supports PERC's conclusion that Gifford gave "due weight" to the statutory factors and explained the weight he afforded to each of the factors in "an appropriate manner." There is no support in the record for PBA's assertion that Gifford "skimmed" through factors six and eight. Because PERC's decision was based on substantial record evidence, it was neither arbitrary, capricious, nor unreasonable.
C.
Finally, PBA argues that PERC should have remanded this matter because arbitrator Gifford failed to cost-out every modified provision for each year of the CBA. Specifically, PBA argues that the arbitrator had to cost-out his elimination of longevity pay and terminal leave and limitation of vacation and personal days for those hired after May 7, 2013. PBA makes this argument despite acknowledging that a full cost-out of these changes for new hires was impossible. Its argument that remand is required to complete an admittedly, impossible task is illogical and inapposite to controlling precedent.
New Milford speaks to an arbitrator's ability to cost-out potentially speculative costs:
Since an arbitrator, under the new law, is required to project costs for the entirety of the duration of the award, calculation of purported savings resulting from anticipated retirements, and for that matter added costs due to replacement by hiring new staff or promoting existing staff are all too speculative to be calculated at the time of the award. The Commission [PERC] believes that the better model to achieve compliance with P.L. 2010 c. 105 [now codified at N.J.S.A. 34:13A-16.7] is to utilize the scattergram demonstrating the placement on the [salary] guide of all of the employees in the bargaining unit as of the end of the year preceding the initiation of the new contract, and to simply move those employees forward through the newly awarded salary scales and longevity entitlements. Thus, both reductions in costs resulting from retirements or otherwise, as well as any increases in costs stemming from promotions or additional new hires would not affect the costing out of the award[.]
[New Milford, supra, 38 NJPER 340 (emphasis added).]
PERC next addressed the statutory cap in Borough of Ramsey, which held that speculative costs relating to new hires "should not affect the costing out of the award [because] N.J.S.A. 34:13A-16.7(b) speaks only to establishing a baseline for the aggregate amount expended by the public employer on base salary items for the twelve months immediately preceding the expiration of the [CBA]." Borough of Ramsey, supra, 39 NJPER 17.
Here, Gifford relied heavily on both New Milford and Ramsey in fashioning his award. As to costing-out, Gifford wrote:
In accordance with PERC's standards [i.e., New Milford and Ramsey], by utilizing the same complement of officers employed by the Borough as of December 31, 2012 over a term of three (3) years, and assuming for the purposes of [projection] there are no resignations, retirements, promotions or additional hires, the increases to base salary awarded herein increase the total base salary including salary, holiday pay, education pay and longevity pay as follows:
Base Year
Total Base Salary
Increase fromPrior Year
2012
$3,763,060
2013
$3,922,636
$106,222
2014
$4,029,877
$107,242
2015
$4,029,877
$0
Total Increase: $213,464
Gifford therefore followed the directive in New Milford, to use existing personnel numbers for the twelve months preceding the new CBA to project costs over its full duration, rather than use actual (if nonexistent) figures to cost-out future expenses as PBA suggests. He awarded a three-year contract effective January 1, 2013 through December 31, 2015. He used the undisputed figure of $3,763,060 from the last twelve months of the preceding contract to calculate that he could not award more than $225,784 (i.e., six percent of $3,763,060) in base salary increases over the three-year term. He ultimately awarded $213,464 in base salary increases over the full three years of the contract.
PBA mistakenly argues that Gifford "did not and could not project costs resulting from its elimination and modification of longevity, terminal leave benefits, vacation and personal days for new hires." The award expressly includes those items within the base salary calculus.
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PERC found that (1) Gifford complied with PERC's guidance in Ramsey and New Milford, (2) PBA did not dispute the financial information provided by the Borough to calculate base salary in the new CBA, (3) Gifford properly calculated that he "could not award base salary increases of more than $225,784 over the three year term of the new contract," and (4) Gifford's awarded base salary increase "complied with the statutory 2% cap."
PERC further found that
[n]either the arbitrator nor the parties had the ability to cost out the award with respect to additional new hires because it was not known at the time of the arbitration proceeding how many new employees would be hired during the term of the new contract.
PERC concluded by distinguishing this case from Point Pleasant. According to PERC, the Point Pleasant award was vacated because
unlike in this case, "[t]here was no detailed analysis of the costs of the base year, . . . no analysis as to how these costs would be calculated in [future years of the contract,] . . . nor was there a calculation demonstrating how the award met
the 2% salary cap requirements of N.J.S.A. 34:13A-16.7."
PERC thus implied that it found Gifford's analysis to be sufficiently detailed and his "cost-out" to comply with the requirements of N.J.S.A. 34:13A-16.7. PERC based its decision on controlling law, including its own prior guidance, and a review of arbitrator Gifford's careful calculations. PERC's decision as to costing-out was thus neither arbitrary, capricious, nor unreasonable.
We find no support for PBA's argument that a remand is required, let alone a remand to a new arbitrator.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION