By verified complaint and order to show cause, New Jersey State Policemen's Benevolent Association, Local #16 (PBA) instituted this action under N.J.S.A. 2A:24-7 and N.J.S.A. 24:13A-19 for confirmation of the arbitrator's award granting pay increases to members of police department aggregating $228,650 for 1978 and $271,494 for 1979 against the City of East Orange, a municipal corporation existing under the laws of New Jersey, Thomas Cooke in his capacity as Mayor, and the members of the City Council of East Orange. The award was made pursuant to the provisions of the New Jersey Employer-Employee Relations Act added by L. 1977, c. 85, establishing that compulsory binding arbitration shall be used to resolve impasses in negotiations for contracts between fire and police departments and municipalities. N.J.S.A. 34:13A-14 et seq.
Complaint alleges that PBA and East Orange were parties to a collective bargaining agreement; that on or about November 15, 1977 negotiations commenced for a successor agreement, and that on December 15, 1977 it became apparent an impasse existed. PBA, pursuant to N.J.S.A. 34:13A-16, notified the Public Employment Relations Commission (PERC) of that impasse and requested the appointment of an arbitrator to resolve the impasse. By agreement, the arbitrator was to use conventional arbitration and the contract was to be for the years 1978 and 1979.
The complaint further alleges that the arbitrator was appointed on December 22, 1977 and that hearings were held on January 25, March 20 and 28, May 15 and 26, 1978, and that the award was made July 14, 1978. The complaint concluded in paragraph 10 that the award was not being
implemented by defendants. It sought confirmation of the award and counsel fees.
An answer was filed on behalf of all defendants admitting all allegations except those in paragraph 10. It asserted that the noneconomic award was implemented but asserted that the economic award cannot be implemented without violating the provisions of N.J.S.A. 40A:4-45.1 et seq., L. 1976, c. 68, as amended ("Cap Law") and N.J.S.A. 40A:4-57, a section of the Local Budget Law prohibiting expenditures in excess of appropriations included in the budget.
East Orange alternatively sought to have the award either vacated under N.J.S.A. 2A:24-8 and under N.J.S.A. 34:13A-16(f)(5) on the grounds that the award was procured by undue means in that the arbitrator ignored the legal inability of East Orange to meet the award or that the award be held not subject to the Cap Law under N.J.S.A. 40A:4-45.3(g) providing an exemption for "Expenditures mandated after the effective date of this act pursuant to State and Federal law."
East Orange submitted a copy of its budget and affidavits from its comptroller detailing the computation of the Cap limit for 1978 and projected for 1979, the status of negotiations with other employees and the generally poor state of its fiscal affairs in 1978 and projected for 1979. The conclusion to be inferred is that if the police absorbed the $236,201 in the budget for salary increases for 1978, then no other employees could receive any increases above normal increments because of the Cap Law.
On the return date both parties urged that the court determine that the exemption under N.J.S.A. 40A:4-45.3(g) applied so that the increase could be paid and no problem would be encountered with the Division of Local Government Services, which has indicated that the Cap Law applied. There did not appear to be an adverse position between the parties on this issue. The court adjourned the matter to permit the Attorney General to submit a brief amicus curiae on
the construction of the Cap Law. The Attorney General has appeared amicus curiae for John Laezza, Director, Division of Local Government Services, and has filed a brief stating that the Cap law does apply.
The basic question is whether the arbitrator's award should be confirmed. To answer this question in light of East Orange's position, it is first necessary to understand the interrelationship of N.J.S.A. 34:13A-1 et seq., L. 1968, c. 303, N.J.S.A. 34:13A-14 et seq., L. 1977, c. 85, the Local Budget Law, N.J.S.A. 40A:4-1 et seq. and the Cap law.
PBA and East Orange urge that the legislative history of the Compulsory Interest Arbitration Act, L. 1977, c. 85, enacted after the Cap Law, shows that the Legislature did not intend that awards under it should be subject to the limits imposed upon local budgets by the Cap Law. They point out that the version of the bill as passed by the Senate contained, in what is now found in N.J.S.A. 34:13A-16(g) (criteria to be employed by arbitrator), the following additional language:
(i) The arbitrator shall not issue any finding, opinion, or order which shall impose any fiscal obligation on any municipality, county, fire prevention district, or the State, or any agency thereof, which shall cause by itself or in conjunction with decisions of other arbitrators, any such governmental unit to exceed the limit of any law which imposes spending or budgetary restrictions on such governmental unit.
However, they show that the Assembly deleted the language. Thereafter, the Senate passed the bill in the form previously passed by the Assembly. The Governor subsequently signed the bill.
The inquiry into the legislative history of the Compulsory Interest Arbitration Law must be broader. The Public Employer-Employee Relations Study Commission Report to the Governor and the Legislature, dated February 2, 1976 (Report), is the beginning point.
The Report starts with a review of L. 1968, c. 303, N.J.S.A. 34:13A-1 to 13. In 1968 the Legislature authorized collective bargaining between public employers and public employees, and established certain unfair labor practices. It also authorized an agency to assist the collective bargaining process by providing mediation and factfinding services to the parties in the event of an impasse. It gave the agency rulemaking power. N.J.S.A. 34:13A-5.4(e) states:
The commission shall adopt such rules as may be required to regulate * * * the time of commencement of negotiations and of institution of impasse procedures so that there will be full opportunity for negotiations and the resolution of impasses prior to required budget submission dates.
There was no provision for compulsory arbitration to resolve an impasse to meet a budget submission date. Cf. N.J.S.A. 34:13A-6(b). The Commission did promulgate a rule that required negotiations for a new or successor contract to commence at least 120 days in advance of the public employer's required submission date. N.J.A.C. 19:12-2.1. The Commission in N.J.A.C. 19:12-1.1, after referring to the statute quoted above, stated:
The reference to "alternate time periods" covers the situation where the parties agree to a different period of negotiation, as permitted under N.J.A.C. 19:12-2.1(a). Since the statute mandates completion of negotiations and resolution of impasses "prior to the required budget submission dates," N.J.S.A. 34:13A-5.4(e), the alternative time period provision in the rule cannot be construed as permitting
the parties to agree on a time frame that will continue beyond the required budget submission date.
The Local Budget Law sets the date for the introduction and adoption of the budgets for municipalities. N.J.S.A. 40A:4-5 and 10. The budget must be introduced by the governing body not later than February 10 of the fiscal year. Subject to exceptions not germane to the issues herein, the governing body must adopt the budget by March 25 of the fiscal year.
The Faulkner Act, in N.J.S.A. 40:69A-46, provides that under certain of the forms of municipal government provided for therein the mayor must submit a proposed budget to the governing body by January 15 of the fiscal year.
The New Jersey Public Employment Relations Commission (PERC) now administers the law for public employment, N.J.S.A. 34:13A-3(b), 5.2, and has rulemaking power for public employment, N.J.S.A. 34:13A-11. It has instituted procedures under which it establishes the required budget submission date for each municipality. This avoids disputes as to what dates to use.
The Study Commission recognized in its Report (at 24) that budget laws were a factor to be considered. In the draft of the legislation it proposed in the Report, the Study Commission (at 96) adhered to the concept of requiring resolution of the impasse prior to the required budget submission date. The Study Commission recommended compulsory arbitration for the final resolution of impasses in collective bargaining for all public employees.
The Legislature chose to make compulsory arbitration applicable only to fire and police personnel, N.J.S.A. 34:13A-15, 16. The court notes that our Supreme Court has held compulsory arbitration constitutional as a means of resolving impasses when applied to the public sector. Div. 504 Amalgamated Transit Union v. Mercer Cty. Improvement Auth. , 76 N.J. 245 (1978). A number of other states have adopted compulsory ...