On certification to the Superior Court, Appellate Division, whose opinion is reported at 159 N.J. Super. 402 (1978).
For modification: -- Chief Justice Hughes and Justices Mountain, Jacobs, Pashman, Clifford, Schreiber and Handler. Opposed -- None. The opinion of the court was delivered by Schreiber, J. Pashman, J., concurring. Justice Handler joins in this concurring opinion. Pashman and Handler, JJ., concurring in the result.
[81 NJ Page 211] The general subject matter of this appeal concerns an arbitrator's award involving a dispute between public employees and a municipality arising out of the interpretation of their collective bargaining agreement. Its judicial voyage commenced when Kearny P.B.A. Local # 21 (PBA) filed a complaint to confirm
an arbitration award granting overtime pay for standby time to members of the Town of Kearny Police Department. Shortly thereafter, the Town filed a complaint seeking to set aside the award. The matters were heard together and the trial court affirmed the award. Upon appeal the Appellate Division held that the arbitrator "imperfectly executed" his powers and modified the award by granting overtime only to those police who were not residents of Kearny. 159 N.J. Super. 402 (1978). We granted PBA's petition for certification in which it requested overtime pay for all police, resident and nonresident, and the Town's cross-petition which sought to disallow pay for all irrespective of residence. 78 N.J. 406 (1978).
The essential underlying facts in this proceeding are virtually undisputed. On October 11, 1976, certain employees of the Town of Kearny went on strike. Almost immediately thereafter the chief of police issued the following directive to the police:
Due to the fact that all Town employees other than the Police Department, will take part in a "job action" effective 7:00 p.m. Monday, October 11, 1976, the members of this Department are hereby directed to remain on a standby basis until further notice, and are not to leave the Town of Kearny.
The chief's order was effective until lifted at noon on October 15, 1976. Violation of the directive would have subjected a police officer to disciplinary action.
PBA claimed that the police officers who had remained on standby were entitled to compensation for overtime pursuant to the contract which PBA, as the sole and exclusive representative of the members of the Kearny Police Department (except the police chief and deputy chiefs) had entered into with the Town. The agreement governed various terms and conditions of employment including, among others, hours of work and overtime. It also contained a two-step grievance procedure, grievances consisting of any complaint with respect to wages, hours of work, or other conditions of employment. If at the conclusion of the grievance procedure the matter had not been satisfactorily resolved, either party could demand arbitration, the New Jersey Public Employment Relations Commission being designated
to select an arbitrator. The arbitrator's decision had to be in writing and was to include the reasons for his findings and conclusion. The agreement also provided the decision was to be final and binding on both parties.
When the Town refused to make any payment for the standby service, PBA unsuccessfully processed the dispute through the grievance procedure and then demanded arbitration. The arbitration was heard at the Kearny Town Hall on March 25, 1977. Both sides were afforded an opportunity to have witnesses testify and present other evidence. No stenographer was present and the proceedings were not transcribed. However, the arbitrator's decision reflects that the parties stipulated to the facts previously recited. In addition, the parties agreed that payment for the standby at overtime rates would cost the Town between $80,000 and $120,000. The arbitrator's decision also indicates that the arbitrator had the contract before him.
The Town contended that the police were never required to report during the standby period and further argued that the contract contained no provision for standby compensation. It claimed that the parties understood that there was to be no payment for standby service inasmuch as PBA had unsuccessfully sought an express standby provision during contract negotiations. Therefore, it contended that PBA could not obtain through arbitration what it had not achieved in negotiations.
PBA argued that the contract covered all the police officers' working terms and conditions. The agreement provided for a workday not to exceed eight consecutive hours in a 24-hour period, and for overtime pay for hours worked beyond eight. PBA rationalized that standby represented working time in excess of the regular workday and therefore the police were entitled to overtime.
The arbitrator reasoned that an employee is entitled to compensation for hours worked beyond agreed upon periods. He found that once the employer mandates that the employee
cannot enjoy freedom of movement during nonworking hours, the employee is on duty. The arbitrator also recognized that public employees may be required to work beyond their normal work hours, particularly when emergencies arise. When that occurs, the employee is entitled to compensation.
The arbitrator did not find that PBA's failure to gain an express standby provision in the agreement led to a different result. He believed that because the PBA proposal advanced during collective negotiations sought standby compensation when the employee was required "to be on standby at home" and, since the chief of police's directive ordered them "not to leave the Town of Kearny," the Town's argument was wanting, for the two standby conditions were not the same. He stated that, if the police chief's order had omitted that limitation, the Town would prevail. That not being so, he concluded the Town had breached the agreement and that the police should be compensated at overtime rates for hours in excess of the eight-hour workday in each 24-hour period between 8:40 p.m. on October 11, 1976 (when the directive was issued) and 12:00 noon on October 15, 1976.
The trial court agreed with the reasoning of the arbitrator and confirmed the award. It also rejected the Town's claim that the award granted recovery to police who may have been on vacation or on sick leave, noting that the arbitrator justly assumed that each member of the police department was on regular duty during that four-day period in October. The Town had offered no evidence to refute that assumption.
The Appellate Division reexamined the arbitrator's reasoning. Emphasizing that the arbitrator had agreed that PBA could not obtain in arbitration what it was denied at the negotiating table, the Appellate Division seized on what it considered an inconsistency in the arbitrator's reasoning. The arbitrator assumed that the police would not have been entitled to pay if they had been ordered to stand by at home, and, yet, he ordered that police who were residents of the Town were entitled to overtime pay
when forced to stand by under the less restrictive requirement that they remain within the municipal limits. The Appellate Division found that the inconsistency of awarding compensation for time involving lesser restrictions with respect to resident policemen conflicted with the arbitrator's apparent intent, as reflected in his decision, to compensate for standby time spent under a greater restraint than that contained in the contract proposal. On the other hand, nonresidents were required by the police chief's directive to remain within the Town. This was a more severe limitation than being confined to one's home beyond the municipality's borders, and thus granting them overtime pay accorded with the arbitrator's intent. Accordingly, it affirmed the award as to nonresident policemen but set it aside as to residents.
We have heretofore recognized that what may be submitted to binding arbitration in the public sector is circumscribed. Unlike the private sector, prerogatives of management, particularly those involving governmental policy making, cannot be bargained away to be determined by an arbitrator. Tp. of W. Windsor v. Public Employment Rel. Comm., 78 N.J. 98, 115 (1978). The underlying reason for this position is founded on the concern of delegating such power to a private person. Justice Pashman acknowledged as much in Ridgefield Park Ed. Ass'n v. Ridgefield Park Bd. of Ed., 78 N.J. 144 (1978), when he wrote:
To be constitutionally sustainable, a delegation must be narrowly limited, reasonable, and surrounded with stringent safeguards to protect against the possibility of arbitrary or self-serving action detrimental to third parties or the public good generally. [ Id. at 164]
See also Bernards Tp. Bd. of Ed. v. Bernards Tp. Ed. Ass'n, 79 N.J. 311, 321-322 (1979).
Furthermore, the arbitrator in resolving disputes in the public sector must comply with certain standards and criteria. Some of these have previously been referred to in our case law. In Division 540, Amalgamated Transit Union, AFL-CIO v. Mercer County Improvement Auth., 76 N.J. 245 (1978), Justice Sullivan
noted that an arbitrator "must consider the public interest and the impact of his decision on the public welfare. He must act fairly and reasonably to the end that labor peace between the public employer and its employees will be stabilized and promoted. He must make findings which are adequate, and sufficient to support the award." Id. at 252. He held that these inherent standards and criteria would be deemed to be incorporated in the compulsory arbitration provisions of a statute governing a county improvement authority and its employees, N.J.S.A. 40:37A-96.
In New Jersey State Policemen's Benevolent Ass'n Local 29 v. Town of Irvington, 80 N.J. 271 (1979), in discussing the significance of a statutory limitation on a municipality's expenditures, N.J.S.A. 40A:4-45.1 et seq., with respect to an arbitrator's resolution of a dispute between the municipality and its police force (the arbitration being compulsory, N.J.S.A. 34:13A-16), Justice Pashman pointed out that even in the absence of an express statutory provision an "arbitrator's consideration of a town's Cap situation is mandated by the constitutional proscription against undue delegations of legislative authority to private individuals." Id. at 293.
In the companion case of City of Atlantic City v. Laezza, 80 N.J. 255 (1979), decided the same day, voluntary but binding arbitration of disputes between public employees ...