agreement before resorting to the federal courts. Specifically, defendants contend that the disputed matter is subject to an arbitration clause in the agreement and that this court may only determine whether the dispute falls under the arbitration agreement. Plaintiffs respond that the binding arbitration clause of the collective agreement only relates to matters specifically contained in the agreement and argue that the Resolution pertains to outside employment matters not addressed by the agreement. In addition, plaintiffs argue that the dispute rises above a mere breach of contract, as illustrated by the issuance of a complaint by PERC.
Article VI of the collective bargaining agreement delineates the grievance procedure for FOP members. Under this article, grievance is defined as "an appeal by an individual Police Officer or the Lodge on behalf of an individual Police Officer or group of Police Officers, from the interpretation, application or violation of terms and conditions of this Agreement." Collective Bargaining Agreement, Article VI (emphasis added). As earlier stated, the outside employment article of the collective bargaining agreement provided that upon approval, the Director of Public Safety would issue a work permit for outside employment. See supra n. 6. The challenged Resolution requires not only that all outside employment be channeled through the chief of police but also that all outside employers of officers in security positions follow the pay scale established by the Township and execute a Hold Harmless and Indemnification Agreement.
Under the Federal Arbitration Act, federal courts must enforce contractual agreements to arbitrate disputes. 9 U.S.C. § 1. Certain claims, however, are exempted from the Act. It is unclear whether the challenged Resolution requirements fall within the terms and conditions language of the grievance definition. Even if the language of the agreement provides for arbitration of the matters governed by the Resolution, arbitration in this case would not be mandated. Although there is a strong public policy which favors arbitration in general, see, e.g., United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 578, 4 L. Ed. 2d 1409, 80 S. Ct. 1347 (1960), the policy favoring arbitration is "inapplicable" where "the rights that plaintiffs seek to vindicate are not merely contractual, but arise from a federal statute." McLendon v. Continental Group, Inc., 602 F. Supp. 1492, 1501 (D.N.J. 1985). Underlying this exception to the arbitration requirement is "the basic premise that when Congress has provided a judicial remedy for the denial of certain statutory rights, that forum may not be denied through the arbitration provisions of a collective bargaining agreement. A trilogy of Supreme Court decisions has left no doubt on that score." Burke v. Latrobe Steel Co., 775 F.2d 88, 91 (3d Cir. 1985) (citing McDonald v. City of West Branch, Michigan, 466 U.S. 284, 80 L. Ed. 2d 302, 104 S. Ct. 1799 (1984); Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 67 L. Ed. 2d 641, 101 S. Ct. 1437 (1981); Alexander v. Gardner-Denver Co., 415 U.S. 36, 39 L. Ed. 2d 147, 94 S. Ct. 1011 (1974)). As the Supreme Court stated in McDonald v. City of West Branch, Michigan, "although arbitration is well suited to resolving contractual disputes, our decisions in Barrentine and Gardner-Denver compel the conclusion that it cannot provide an adequate substitute for a judicial proceeding in protecting the federal statutory and constitutional rights that § 1983 is designed to safeguard." 466 U.S. at 290 (holding that § 1983 action is not precluded by prior arbitration decision).
In this case, plaintiffs seek the enforcement of their substantive rights of equal protection and due process guaranteed under the Constitution. Under the reasoning of McDonald, plaintiffs could have chosen to challenge the adopted resolution in both the federal court and under the arbitration procedures. Id. Thus, "logically" plaintiffs could have "chosen one of these fora but not the other." McLendon v. Continental Group, Inc., 602 F. Supp. at 1502 (reasoning under Gardner-Denver that plaintiff need not exhaust arbitration procedure before bringing ERISA action). This court will not impose a rule that precludes plaintiffs from asserting their statutory and constitutional rights. Accordingly, the court holds that arbitration is not a prerequisite to filing the instant complaint.
IV. RIGHT TO CONTRACT
Plaintiffs assert that the resolution infringes on the fundamental right of the police officers to make a contract with a private employer. It is unclear, however, whether plaintiffs allege that the Resolution violates a right to contract or that it impairs existing contracts.
While it is true that article I, § 10 of the Constitution provides that "no state shall . . . pass any . . . Law impairing the Obligation of Contracts," this provision "is clearly designed to restrict states from passing laws which affect existing contractual obligations." Fort Wayne Patrolmen's Benevolent Ass'n v. City of Fort Wayne, 625 F. Supp. 722, 730 (N.D.Ind. 1986). As stated by the court in Fort Wayne, there is no constitutional right to the freedom to contract under article I, § 10. Id.
If plaintiffs are alleging that the resolution impairs existing contracts, this claim must similarly fail. In determining whether a violation of the contract clause exists, the "threshold inquiry is whether the state law has, in fact, operated as a substantial impairment of a contractual relationship." Id. (citing Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 74 L. Ed. 2d 569, 103 S. Ct. 697 (1983) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 57 L. Ed. 2d 727, 98 S. Ct. 2716 (1978))). Plaintiffs have not offered any evidence that any FOP members are employed under specific contracts. In addition, New Jersey law provides for at-will employment, except that termination cannot be contrary to public policy. See Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58, 72, 417 A.2d 505, 512 (1980). The Fort Wayne court, analyzing a similar resolution, stated that the proposed resolution
does not change those at will contracts at all. It does, however, act to change the conditions surrounding the outside jobs that police officers work. An outside employer may consider those changes to be worth enduring because he likes the advantages gained by employing police officers, in which case the at will contracts will continue. Or the employer may decide that the changes make employing off-duty officers too expensive or risky, in which case he would fire the officer, which is clearly within his power as an at will employer. In either case, the contract remains the same - an at will employment contract. Thus, Policy III does not substantially impair the obligations of the outside employment contracts.
Id. at 730.
Although the Resolution provides for the Township to establish and broker the salary of off-duty police officers, plaintiffs have failed to demonstrate whether this clause substantially impairs existing contracts. Thus, the court holds that the Resolution does not impair outside employment contracts.
V. EQUAL PROTECTION
Plaintiffs argue that the Resolution violates the FOP members' equal protection rights afforded under the fourteenth amendment.
The Equal Protection Clause of the fourteenth amendment provides that no state shall "deny any person within its jurisdiction the equal protection of the laws." U.S. CONST. amend. XIV, § 1. Plaintiffs assert that the Resolution and the accompanying Hold Harmless and Indemnification Agreement treats police officers differently and that this disparate treatment is not rationally related to a legitimate state interest. Specifically, plaintiffs contend that the Resolution creates impermissible classes of moonlighting officers: those officers who provide security work and those officers who provide non-security services. Only those officers working in security positions are required to follow the procedure outlined in the Resolution, including acquiring a Hold Harmless and Indemnification Agreement from the outside employer and adhering to the wage scale set by the Township. Officers working in off-duty non-security positions are not subject to the Resolution and are free to set their own wage scale. Thus, it is clear that the Resolution applies only to police officers engaged in "off-duty" security work and classifies off-duty officers into two groups: officers performing off-duty security work and those performing off-duty non-security work.
In determining the validity of this classification scheme, the court must first decide the proper standard of review. Generally, "legislation is presumed to be valid and will be sustained if the classification drawn by the statute is rationally related to a legitimate state interest." City of Cleburne v. Cleburne Living Center, Inc., 473 U.S. 432, 440, 87 L. Ed. 2d 313, 105 S. Ct. 3249 (1985). A higher standard of review applies only when the statute classifies by race, alienage, or national origin, or when the statute implicates a fundamental right. Id. The Resolution's classification of officers based on the type of off-duty work performed does not implicate any of the factors which require heightened scrutiny under equal protection. Accordingly, this court will apply the rational relationship test to the FOP members' equal protection challenge to the Resolution. In making this determination, the court is aware that "when social or economic legislation is at issue, the Equal Protection Clause allows the States wide latitude." Cleburne, 473 U.S. at 440. In addition, the party challenging the Resolution bears the "heavy burden" of demonstrating that "the varying treatment of different groups or persons is so unrelated to the achievement of any combination of legitimate purposes that [a court] can only conclude that the legislature's actions were irrational." Hodel v. Indiana, 452 U.S. 314, 69 L. Ed. 2d 40, 101 S. Ct. 2376 (1981) (quoting Vance v. Bradley, 440 U.S. 93, 97, 59 L. Ed. 2d 171, 99 S. Ct. 939 (1979)).
A. Legitimate Interests
While it may be true that economic factors have forced police officers into the practice of moonlighting, a township has a legitimate interest in regulating its police department, including the off-duty activities of its officers. It is clear that such goals as reducing mental and physical fatigue, limiting litigation and lessening liability insurance expenses serve as legitimate government interests supporting regulation. See, e.g., Ammon v. City of Coatesville, 1987 U.S. Dist. LEXIS 6719, No. 87-1577 (E.D. Pa. July 24, 1987), aff'd, 838 F.2d 1205 (3d Cir. 1988). Because of these legitimate goals, it is also clear that a municipality can regulate and even prohibit off-duty work. See Isola v. Borough of Belmar, 34 N.J. Super. 544, 112 A.2d 738 (App. Div. 1955); see also Rhodes v. Smith, 273 S.C. 13, 254 S.E.2d 49, 50 (1979) ("Regulations prohibiting all outside employment have been upheld."); Annotation, Validity, Construction, and Application of Regulation Regarding Outside Employment of Governmental Employees or Officers, 94 A.L.R.3d 1230 (1979). Finally, the court recognizes that a "majority of courts considering the validity of regulations which in some way restrict the outside employment of government employees have upheld the regulations." Ammon v. City of Coatesville, 1987 U.S. Dist. LEXIS 6719, No. 87-1577 (E.D. Pa. 1987).
This court must now consider the validity of the Resolution with its accompanying Hold Harmless and Indemnification Agreement insofar as it applies only to officers engaged in off-duty security work. The Township offers one justification for the Resolution: to prevent the Township from litigation and liability exposure in the event an off-duty officer is deemed an employee of the Township. This justification fails to withstand even the minimum scrutiny under the rational relationship test.
B. Asserted Interest
Defendants contend that the Resolution serves a legitimate state interest in protecting taxpayers against litigation and liability exposure in the event that an off-duty moonlighting officer is deemed to be an employee of the Township in a wrongful tortious action.
In support, the Township outlines a series of incidents that occurred while off-duty officers were employed in security positions and argues that such incidents presented the Township with potential liability exposure.
While it is true that a municipality's attempt to limit its exposure to liability and to protect the public treasury when an off-duty officer commits a tort outside the scope of police employment is a legitimate government end, see Fort Wayne, 625 F. Supp. at 731,
the Township's Resolution is not so limited. The Resolution through the indemnification agreement also attempts to shift the burden of liability on an outside employer regardless of whether the officer committed the alleged tort in his role as a municipal officer or in his role as a security guard for a private employer.
Specifically, section 4 of the Hold Harmless and Indemnification Agreement provides that the employer's insurance company shall pay all Township costs of litigation whether the off-duty officer "is determined to be either an employee of the employer or an employee of the Township." In addition, section 5 of the agreement requires that the employer agree to hold the Township harmless and indemnify the Township for
any acts committed by the 'moonlighting' off-duty Pennsauken police officer in the course of his activities as a 'moonlighting' Pennsauken police officer, whether or not it is judicially determined or agreed between any parties that the 'moonlighting' Pennsauken police officer was an employee of the Township or an employee of the employer in this Agreement. (Emphasis added.)
The court finds that shifting the entire burden of litigation and liability onto third-party employers is not a legitimate government interest. See Benelli v. City of New Orleans, 478 So. 2d 1370, 1373 (La. Ct. App. 1985) ("it is not a proper governmental end for the City to shift the entire legal responsibility for its police officers onto paid detail employers who might coincidentally benefit from duties which benefit the public at large and which a police officer is legally obligated to perform twenty-four hours a day."). Under New Jersey law, a municipality must provide an officer with the necessary means for defense "whenever a member or officer of a municipal police department or force is a defendant in any action or legal proceeding arising out of and directly related to the lawful exercise of police powers in the furtherance of his official duties," N.J.STAT.ANN. 40A:14-155 (West Supp. 1988).
Thus, the Township has a statutory obligation to provide an officer with necessary means for defense in an action which arises out of the officer's performance of his duties. See, e.g., Township of Edison v. Mezzacca, 147 N.J. Super. 9, 370 A.2d 511 (App. Div. 1977); see also Critchley & Roche v. City of Newark, 206 N.J. Super. 32, 39, 501 A.2d 1002, 1006 (App.Div. 1985) (municipality's statutory requirement is to offer "its police officers the services of reasonably competent attorneys who are admitted to practice law in this State"). Although the scope of this statutory obligation has been limited by the legislature, it is clear that the statute applies when a police officer is exercising official duties. A municipality would be responsible for the legal fees of an off-duty officer who responded to an incident in his official capacity and then is sued for actions arising out of that response.
In addition, under the New Jersey Tort Claims Act, public entities are liable for the torts of their employees committed within the scope of public employment under the theory of respondeat superior except when the municipal employee's actions are intentional. See N.J.STAT.ANN. 59:2-2,-10 (West 1982); see also McDonough v. Jorda, 214 N.J. Super. 338, 350, 519 A.2d 874, 880 (App. Div. 1986) cert. denied, 489 U.S. 1065, 1989 U.S. LEXIS 1218, 103 L. Ed. 2d 809, 109 S. Ct. 1338 (1989). Specifically, the state Tort Claims Act provides in pertinent part:
59:2-2. Liability of public entity