On certification to the Superior Court, Appellate Division, whose opinion is reported at 177 N.J. Super. 239 (1981).
For affirmance -- Chief Justice Wilentz and Justices Pashman, Handler, Pollock and O'Hern. For reversal -- Justices Clifford and Schreiber. The opinion of the Court was delivered by Pashman, J. Schreiber, J., dissenting. Justice Clifford joins in this opinion.
This appeal concerns the conduct of binding arbitration under the fire and police arbitration act, L. 1977, c. 85, N.J.S.A. 34:13A-14 to -21. The City of Newark (City) attacks a Public Employment Relations Commission (PERC) rule on final offer arbitration, a type of binding arbitration in which, after formal hearings, the arbitrator must choose between the last offers of each party to the labor contract dispute. Formal hearings are held when the parties are unable to resolve their differences through negotiation and mediation. The challenged rule, N.J.A.C. 19:16-5.7, allows the arbitrator to accept revisions of the parties' "final offers" throughout the formal arbitration proceedings.
The City argues that N.J.A.C. 19:16-5.7(f) contravenes the statutory requirement that "final offers" be submitted to the arbitrator "[p]rior to the arbitration proceedings," N.J.S.A. 34:13A-16(f)(1). The City also contends that allowing such revisions frustrates the purpose of final offer arbitration as contemplated in the Employer-Employee Relations Act, N.J.S.A. 34:13A-1 to -21.
We find that PERC's rule does not contravene the Employer-Employee Relations Act and that it furthers the statute's public policy of "promot[ing] permanent, public . . . employer-employee peace and the health, welfare, comfort and safety of the people of the State." N.J.S.A. 34:13A-2. We therefore uphold the regulation and affirm the judgment of the court, 177 N.J. Super. 239, below.
The fire and police arbitration act, L. 1977, c. 85, N.J.S.A. 34:13A-14 to -21, established procedures to be followed whenever negotiations between a municipality and its fire or police employees reach an impasse. The statute permits the parties to select any of various methods for the resolution of their contract disputes. However, the parties must notify PERC if they
cannot agree upon a procedure for resolving their disputes 60 days prior to the budget submission date of the year in which the fire or police contract will take effect. N.J.S.A. 34:13A-16(b), [§ 16(b)]. If the parties cannot agree upon a dispute resolution procedure within 50 days of the budget submission date, they are required to follow the particular form of final offer arbitration codified at N.J.S.A. 34:13A-16(d)(2), [§ 16(d)(2)].
The budget submission date for Newark's 1979 city budget was January 15, 1979. About November 5, 1978, some 70 days before that time, plaintiff Newark Firemen's Benevolent Association (Association) notified PERC that it had not reached agreement with the City on the terms of its contract for 1979 and was therefore requesting that PERC appoint an arbitrator. Since the parties had not agreed upon a particular method for resolving their disputes, final offer arbitration was mandated by § 16(d).
The record does not reveal what transpired between the parties from November 1978 until the parties first met with Dr. Bernard J. Manney, the PERC-appointed arbitrator, on May 14, 1979.*fn1 Between May 14 and July 30, 1979, arbitrator Manney met with the parties five times to mediate the dispute without formal arbitration hearings. During this time, the arbitrator gained agreement on some issues and persuaded the parties to abandon certain proposals. By July 30, 1979 the City had raised its wage offer from no increase to a 5 percent increase. The Association's proposed wage hike had dropped to 9 percent from a substantially higher figure.
The arbitrator convened formal hearings on July 30, 1979. As required by N.J.S.A. 34:13A-16(f)(1), prior to these formal proceedings
the parties submitted their "final offers" in two separate parts. Pursuant to § 16(d)(2), each party submitted (a) a package offer including all the economic issues in dispute, and (b) separate offers on every other issue in dispute.*fn2 At the close of this first formal hearing, the Association submitted a revised offer on the economic issues, lowering its wage increase proposal from 9 percent to 8 percent, adjusting its request for nighttime differential pay, and dropping its demand for a dental plan. Such revisions in final offers are contemplated by the contested PERC rule, N.J.A.C. 19:16-5.7, which permits the arbitrator to accept revised offers until the formal hearing is deemed closed, provided that the other party has an opportunity to respond. Rather than revising its own economic offer, however, the City informed the arbitrator of its position that § 16(f)(1) of the fire and police arbitration act forbids revisions of the original offers submitted prior to the formal hearings in final offer arbitration.
There were 11 days of formal hearings. The Association made a second substantial revision of its economic package on October 2, 1979, reducing its wage proposal to 6 1/2 percent. At the final hearing on October 4, 1979, the Association also made a minor revision of its economic offer regarding the computation of overtime pay. The City never revised its initial 5 percent wage hike offer. Both parties, however, revised their non-economic offers on August 9, 1979 after mediation by the arbitrator the preceding week apparently clarified the parties' positions on several issues.
On November 5, 1979, arbitrator Manney submitted his opinion and award. The arbitrator noted that after negotiation and arbitration the total difference in the dollar amounts of the
parties' proposals was only $341,508, as compared to a city budget of almost $300 million. The arbitrator selected the Association's last offer on the economic package, calling for a 6 1/2 percent wage increase, a prescription drug plan, an increase in the fire fighters' clothing allowance and higher longevity pay. The arbitrator chose some of the City's and some of the Association's last offers on the noneconomic issues still in dispute.
On November 9, 1979 the Association filed suit in the Superior Court, Chancery Division, seeking to confirm the award and have the City ordered to implement its terms. The City filed an answer and counterclaim seeking to vacate the award. In addition to challenging PERC's rule on revisions of final offers, N.J.A.C. 19:16-5.7, the City attacked the constitutionality of the fire and police arbitration statute and argued that the arbitrator's award was unsupported by substantial evidence.*fn3
On December 20, 1979, after argument from the parties and intervenor PERC, Superior Court Judge Geoffrey Gaulkin entered an order confirming the arbitrator's award, ordering its prompt payment, and dismissing the City's counterclaims. Judge Gaulkin denied motions by the City for a stay of judgment on December 20, 1979 and January 3, 1980. The court also denied without prejudice the Association's request for interest on the amount of judgment and other supplemental relief. Emergent relief pending appeal was denied by the Appellate Division on January 23, 1980.
On January 31, 1980 Judge Gaulkin ordered that the award be paid by February 11, 1980 or he would begin taking testimony for possible contempt sanctions. Judge Gaulkin further ordered interest of 8 per cent retroactive to November 5, 1979 on the unpaid amount of the judgment. The City subsequently paid the award.
The Appellate Division affirmed Judge Gaulkin's judgment confirming the 1979 contract award on January 29, 1981. This Court granted the City's petition for certification. 87 N.J. 348 (1981).
The challenged PERC rule, N.J.A.C. 19:16-5.7, carries a "rebuttable presumption of validity" and the City has "the burden of proving [its] invalidity." New Jersey Guild of Hearing Aid Dispensers v. Long, 75 N.J. 544, 561 (1978); In re Regulation F-22, Office of Milk Industry, 32 N.J. 258, 261-62 (1960). "An administrative regulation . . . will not be set aside on the ground that it transgresses the statute unless the transgression is plain," Lane v. Holderman, 40 N.J. Super. 329, 335 (App.Div.1956), aff'd. 23 N.J. 304 (1956), quoted in New Jersey Guild, 75 N.J. at 561. The City must therefore show more than the rule's inconsistency with one of several plausible interpretations of the fire and police arbitration act, N.J.S.A. 34:13A-14 to -21. The City must prove that allowing the parties in final offer arbitration hearings to modify their original offers would "alter the terms of [the] legislative enactment or frustrate the policy embodied in the statute." N.J. Chamber of Commerce v. N.J. Elec. Law Enforce. Comm'n., 82 N.J. 57, 82 (1980).
To meet its burden, the City argues that N.J.A.C. 19:16-5.7 contravenes the statutory requirement that "final offers" be submitted to the PERC-appointed arbitrator prior to the arbitration ...