Before Judges King, Muir, Jr. and Kestin.
The opinion of the court was delivered by: King, P.j.a.d.
 Submitted: March 25, 1998
On appeal from the Superior Court of New Jersey, Law Division, Essex County.
The appellant, State-Operated School District of the City of Newark (State District), challenges a decision of the Law Division Judge affirming an arbitration award in favor of the City Association of Supervisors and Administrators (CASA). The dispute concerns claimed vacation entitlements under a collective bargaining agreement predating the 1995 take-over of the Newark School District by the State Department of Education under N.J.S.A. 18A:7A-15 and -34. The State take-over occurred because of Newark's failure to provide a thorough and efficient education to its students. We conclude that the arbitrators exceeded their authority in entering this public-sector labor award. We reverse the Law Division order which confirmed the award.
Respondent CASA represents all administrative and supervisory personnel employed by the City of Newark School District which was "taken over" by the State in July 1995. The pertinent collective bargaining agreement contained an internal grievance procedure culminating in binding arbitration for unresolved labor disputes.
On July 19, 1996 the State District notified CASA members of the effects of the administrative reorganization on their employment status respecting termination, demotion or promotion, consequent upon the State take-over. In September 1996 the affected employees received full compensation for vacation days carried over from the July 1, 1995 to June 30, 1996 employment year but only a prorated portion of their vacation days for the July 1, 1996 to June 30, 1997 employment year. The proration recognized vacation-day compensation for those employees who actually worked only a portion of the 1996-97 year.
On October 10, 1996 CASA filed a class action grievance alleging that the State District had unilaterally changed the terms and conditions of members' employment concerning vacation days and reimbursement therefor. The three-member arbitration panel rendered a split decision on November 16, 1996 sustaining the grievance and directing the State District to pay for a full complement of vacation days for employment year 1996-97. CASA applied to the Superior Court for confirmation of the award, which the Law Division Judge granted on April 24, 1997.
Article III of the collective bargaining agreement provided that unresolved grievances proceed to final and binding arbitration before a panel of arbitrators. The panel included two members, one each appointed by the opposing parties. The partisan panel members then appointed a third member to serve as chair and neutral arbitrator. This mechanism was appropriate because the "takeover" statute requires that "collective bargaining agreements entered into by the school district shall remain in force," with certain exceptions not here relevant. N.J.S.A. 18A:7A-40. *fn1 Article III, Section C of the collective bargaining agreement also provided that [t]he arbitration panel shall be without power or authority to make any decision contrary to, inconsistent with, modify or vary in any way, the terms of this agreement or applicable law or the rules and regulations having the force and effect of statute.
Article XVI of the agreement, entitled "Directors, Assistant Directors, Central Office Supervisors, Curriculum Specialists: Status and Terms of Employment," set forth the disputed vacation entitlements of administrative personnel. Section H provided, [d]irectors shall be entitled to twenty (20) days of annual paid vacation to be elected as consecutive working days or other by the personnel involved. Vacations may be taken at any time between July 1 and June 30 of the following year, with the approval of the Executive Superintendent.
Curriculum specialists received the same vacation time as the agreement provided to directors. The agreement also gave central office supervisors "vacation days consistent with contract language which applies to all other 12 month CASA unit members." Twelve-month employees work from July 1 to June 30 of each year; ten-month employees work from September through June and do not receive the same vacation entitlement as twelve-month employees. (We have the impression that ten-month employees do not receive any vacation days because of their reduced work schedule and summer recess but can not verify this from the record.)
The July 19, 1996 notice advised these employees that they would receive compensation for their unused vacation days. In September 1996 the State District paid the impacted employees for all vacation days carried-over from the 1995-96 employment year. The State District then prorated and paid for their vacation days for the 1996-97 employment year, from July 1 to September 20, 1996.
A number of twelve-month employees filed individual grievances concerning the proration of their vacation days for the 1996-97 school year. When these disputes could not be resolved, CASA filed the class-action grievance on October 10, 1996, demanding arbitration pursuant to Article III of the agreement. CASA argued the State District owed its twelve-month employees the full vacation allotment for the 1996-97 employment year as of July 1, 1996, the beginning of the employment year. CASA claimed:
For the last 15-20 years, CASA members received their annual allotment of vacation days on the first day of the contract year [July 1] and had the right to use them immediately. On or about September 20, 1996 CASA members who were to receive compensation for accumulated vacation days were advised that days were earned during the year and were compensated on a pro-rata basis.
This constitutes a change in the terms and conditions of employment and represents a unilateral diminution in a contractual right, i.e., compensation for accumulated vacation days as set ...