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Middletown Township PBA Local 124 v. Township of Middletown

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


November 16, 2006

MIDDLETOWN TOWNSHIP PBA LOCAL 124, PLAINTIFF-RESPONDENT,
v.
TOWNSHIP OF MIDDLETOWN, DEFENDANT-APPELLANT.
MIDDLETOWN TOWNSHIP SOA, PLAINTIFF-RESPONDENT,
v.
TOWNSHIP OF MIDDLETOWN, DEFENDANT-APPELLANT.

On appeal from Superior Court of New Jersey, Chancery Division, Monmouth County, Docket Nos. C-343-04 and C-371-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued Telephonically October 5, 2006

Before Judges Lisa, Holston, Jr. and Grall.

In this public sector arbitration case, we are required to determine whether the "ordinance or resolution as appropriate" requirement of N.J.S.A. 40A:10-23 mandates that a specific ordinance be adopted by a municipality, which sets forth a specified period of necessary service within a municipality up to twenty-five years for a retiring employee to be entitled to paid lifetime health benefits from the municipality. We hold that an ordinance that adopts by reference a Collective Bargaining Agreement (CBA) between a municipality and an employee union satisfies the "ordinance or resolution as appropriate" requirement of N.J.S.A. 40A:10-23. Therefore, a specific ordinance is not required.

In these consolidated appeals, defendant, Township of Middletown (Township), appeals a portion of the Chancery Division's February 7, 2005 order. The order confirmed an October 25, 2004, arbitration award, which memorialized the arbitrator's forty-one page written opinion. The arbitrator determined that the Township was required to provide lifetime paid health benefits to retiring police officers with less than twenty-five years of actual service with the Township who qualified for a Police and Firemen's Retirement System (PFRS) pension as a result of twenty-five years of credited service. We affirm.

The Township entered into separate CBAs with the collective bargaining representative for patrol officers, plaintiff Middletown Township Policemen's Benevolent Association Local 124 (PBA), effective January 1, 2000 through December 31, 2003, and with the collective bargaining representative for superior officers, plaintiff Middletown Township Superior Officers Association (SOA), effective January 1, 2000 through December 31, 2004. In the spring of 2003, separate but related disputes between the Township and the PBA and the Township and the SOA arose concerning the right of Patrolman (Ptl.) Anthony Gonzalez and Ptl. Wayne Bradshaw, under the PBA's CBA, and Lieutenant (Lt.) Michael Mehler, under the SOA's CBA to receive paid lifetime health benefits upon retirement.

The PBA and SOA both contended that the applicable CBAs provide that, if a Township police officer (PO) qualifies for retirement on a PFRS pension, he/she is entitled to paid health benefits in retirement from the Township without regard to how many years of employment the officer had with the Township itself. Conversely, the Township claimed that both existing law and the CBAs require retirees to satisfy both twenty-five years of service in the PFRS and twenty-five years of actual service with the Middletown Township Police Department (MTPD) in order to receive paid retiree health benefits from the Township.

This litigation arose out of grievances filed against the Township by both the PBA and the SOA in the interests of the three officers. The officers had expressed an intention in 2003 to retire from the MTPD after twenty-five years of credited service in the PFRS, but without twenty-five years of actual service with the MTPD. They were also advised by the Township's administrator that twenty-five years actual service was required for a retired officer to receive paid retiree health benefits.

After internal dispute resolution procedures failed, the dispute was assigned by the Public Employment Relations Commission (PERC) to an arbitrator pursuant to the binding arbitration provisions contained in the CBAs. On April 8, 2004, the grievances were consolidated for purposes of hearing. The arbitrator held a hearing on May 6, 2004, May 10, 2004, and June 3, 2004. On October 25, 2004, Arbitrator Licata rendered his opinion and award granting the officers paid lifetime retirement health benefits and ordering the Township to reimburse each individual officer for all out-of-pocket expenses incurred in continuing his benefits.

On November 10, 2004, the PBA and SOA filed separate complaints in the Chancery Division seeking confirmation of the award. The Township filed a counterclaim seeking to vacate the portion of the award dealing with paid retiree health benefits.*fn1

On February 7, 2005, the judge entered an order confirming the arbitrator's award. This appeal followed. On May 6, 2005, we granted a stay of the Township's obligation to reimburse the officers.

At the arbitration hearing, Bud Bradshaw, the Township's former administrator, testified that none of the CBAs between the Township and the police unions during his tenure as Township administrator ever set forth or established a minimum number of years of actual service in order to be eligible for paid retiree health benefits. Bradshaw served as Township administrator, first in the early 1970s for approximately two years and then again in the late 1970s. In 1981, he was appointed permanent Township administrator and continued in that capacity until his retirement in 1988. Bradshaw's testimony established that the parties to the CBAs, in the late 1970's, established a paid retirement health benefit for all police officers who earned a PFRS retirement, regardless of years of actual service with the Township, and without awareness of the contradicting requirements of the then-existing N.J.S.A. 40A:10-23.

After Bradshaw's retirement, paid retirement health insurance coverage continued to be included in the 1988-1990, 1991-1992, and 1993-1995 PBA's and SOA's CBAs. N.J.S.A. 40A:10-23 was amended in 1995 to permit a municipality to change the requirement for employer paid health benefits from "after 25 years' or more service with the employer" to "a period of service of up to 25 years with employer at the time of retirement." The 1995-1999 PBA's and SOA's CBAs continued to provide paid retirement health benefits regardless of the years of service with the Township.

The entitlement to paid retirement medical benefits is likewise set forth in Article XV(F)(1) of the 2000 - 2003 PBA's CBA. In pertinent part, this clause provides: "Pursuant to N.J.S.A. 40A:10-21 through -25, the employer agrees to pay for and provide such medical and health benefits as enumerated in Sections A, B AND D of this Article to all employees who have retired." Section A refers to health insurance coverage, Section B to a health insurance plan, and Schedule D to a prescription drug plan. The text of Article XV(F)(1) of the 2000 - 2004 SOA contract is slightly different. This clause provides, in pertinent part: "Pursuant to the authorities set forth in the appropriate laws of the State of New Jersey, the employer agrees to provide such benefits enumerated in Section A, B and D of this Article to all employees who have retired." Section A refers to health insurance, Section B to health insurance coverage, and Section D to a prescription plan.

The arbitrator, in applicable part, found:

The retiree health benefits were first established at some point in the 1970's between the Township and the PBA/SOA. At that time the climate of heightened concern over health benefit costs realized today were not part of the landscape that served as the backdrop to the parties' contract negotiations.

The Township argues that the parties who negotiated such language are presumed to have both understood and incorporated the existent state of law under N.J.S.A. 40A:10-23, which, at that time, permitted a municipality to provide paid retiree health care benefits for those employees who retired after twenty-five (25) years of creditable service in the PFRS and twenty-five (25) years or more of service with his or her employer, or on a disability retirement. Accordingly, the Township argues that the Arbitrator must presume that the parties both understood and incorporated the twenty-five (25) year service with the employer requirement under Article XII, § D.

While I agree with the Township that such a presumption should be accorded to the parties' intent because the relevant contract language is predicated on existing law, in this case, I am convinced that the presumption has been overcome. That is, the PBA and SOA have satisfactorily demonstrated that the parties who originally negotiated the provisions in question were ignorant of the scope or reach of then existing N.J.S.A. 40A:10-23, and in that cloud of ignorance, negotiated a guarantee that the Township would provide paid retiree health benefits to "all employees who have retired." My conclusion is explained in more detail below.

Bud Bradshaw served as the Township's Administrator from mid to late 1970's, and then again from 1981-1988. Bradshaw negotiated the early PBA/SOA Agreements. His testimony establishes that the parties did establish a paid retiree health benefit of all police officers who earned a service retirement, regardless of years of service with the Township, and without awareness of the contradicting requirements of then existing N.J.S.A. 40A:10-23. Bradshaw's testimony is the only historical evidence in the record pertaining to the original intent of the parties. On par with Bradshaw's testimony is the plain language chosen by the parties to express their mutual understanding regarding the payment of health benefits in retirement.

Indeed, in the case of Irwin Beaver's retirement benefits dispute, discussed in [Middletown Township PBA Local 124 v. Township of Middletown, 162 N.J. 361, 370-71 (2000)], the New Jersey Supreme Court had occasion to interpret the parties' successor language set forth at Article XV, §F of the 1988-1990 PBA Agreement which, in pertinent part, continued the original requirement that the Township provide paid health benefit to "all employees who have retired." The contract, therefore, did not comply with the terms of N.J.S.A. 40A:10-23, because it permitted (in fact required) benefits to be paid to employees who have not completed twenty-five (25) years of "service," and therefore was ultra vires . . . . Therefore, the New Jersey Supreme [Court], like this Arbitrator, found that the plain material language in question guaranteed paid health benefits to all police officers who effectively retired, i.e., collect a pension, while in the employ of the Middletown Township Police Department. Accord, Shelbrick v. Township of Middletown, [Docket A-1079-90T1], (Appellate Division distinguished Blue Collar Agreement provision for retiree health benefits requiring at least fifteen (15) years of actual service with the Township from the PBA Agreement, which according to the Appellate Division, "grants medical insurance benefit to all employees who have retired.")

Additionally, the Township's negotiations with Blue and White Collar bargaining units demonstrates that when the Township intended to require an employee to have 25 years of actual service with the Township, as a prerequisite to the receipt of paid retiree health benefits, it expressed such an intent clearly by using the terminology "upon retirement by employee after twenty-five (25) years of Township employment and upon such employee collecting pension benefits . . . ." Conversely, with respect to the PBA and SOA agreements, the only requirement negotiated is that a police officer retire [and] collect a pension. Unlike the Blue and White Collar agreements, no actual years of service component was negotiated into the PBA/SOA Agreements. The failure of the Township to negotiate such language into the PBA/SOA Agreements only yields further support for the plain language argument advanced by the PBA/SOA, and accepted by the Arbitrator herein.

As a result of the foregoing findings and conclusions, it is apparent that up until July of 1995, the plain contract language negotiated by the parties did not conform with the then existing law. I further find . . . that the parties took no significant measure, at any time prior to July of 1995, to cure the legal defect in the relevant contractual provisions.

Then, in July of 1995, a significant amendment to N.J.S.A. 40A:10-23 changed the operative language of the statute to allow an employer to assume the entire cost of retiree health care benefits for employees who retired after twenty-five (25) years or more of service credit in a state or locally administered retirement system and a period of service of up to twenty-five (25) years with the employer as of the time of retirement, such period of service to be determined by the employer and set forth in an ordinance or resolution as appropriate . . . [emphasis supplied]. Consequently, the fixed 25 years of service with the employer requirement changed to a flexible "up to 25 years of service with the employer" standard (which I interpret to mean from 0-25 years) that could be established unilaterally, in the case where an employer employs non-union employees, or bilaterally, in a unionized setting.

Subsequent to the 1995 amendments to N.J.S.A. 40A:10-23, the parties continued the same operative language from the 1978-1979 Agreements and continued thereby to provide health benefits for all officers who retired, while making sure that language remained linking the contract language with existing legal requirements.

With the 1995 amendments intact, I find that the plain language of the current PBA and SOA Agreements fully supports the joint position of the PBA/SOA in this matter. Officers Bradshaw, Gonzalez and Mehler are, therefore, entitled to receive paid health benefits in retirement from the Township -because each officer effectively retired while in the employ of the Township.

[T]he Township failed to produce any evidence demonstrating a prior refusal on the part of the Township to provide paid retiree health benefits to any police officer who earned a recognized PFRS service retirement, but who had less than twenty-five (25) years of actual service with the Township. Thus, on balance, the totality of the past practice evidence adduced clearly favors the joint PBA/SOA position.

In summary, I find and conclude that both the plain language of the relevant contract provisions and the past practice or custom pertaining to retiree health benefits overwhelmingly supports the PBA's and SOA's claims that the Township violated the relevant contractual provisions by denying the Grievants fully paid retiree health benefits.

On appeal the Township presents the following arguments for our consideration.

POINT I

THIS COURT HAS THE AUTHORITY AND MANDATE TO REVIEW THE ARBITRATION AWARD AND CONFORM IT TO THE LAW.

POINT II

THE ARBITRATION AWARD, GRANTING RETIREE HEALTH BENEFITS TO AN EXPANDED CLASS PURSUANT TO THE AMENDMENT OF N.J.S.A. 40A:10-23, IS NOT LEGALLY FOUNDED ON A KNOWING LEGISLATIVE ENACTMENT AND MUST BE VACATED.

The Township asserts that this court should accord no special deference or weight to the decision of the arbitrator when reviewing the validity of the arbitration award. We disagree.

We are convinced that our review of the factual findings of the arbitrator's decision is governed by the Supreme Court's decision in New Jersey Transit Bus Operations, Inc. v. Amalgamated Transit Union, New Jersey State Council, 187 N.J. 546, 548 (2006) and is confined to determining whether the interpretation of the contractual language is reasonably debatable. The Court stated that "[a] deferential standard of review applies to an arbitrator's interpretation of a contract. So long as the arbitrator's interpretation of the contractual language is 'reasonably debatable,' a reviewing court is duty-bound to enforce it." Id. at 548 (quoting Kearny PBA Local #21 v. Town of Kearny, 81 N.J. 208 (1979)). The Court made clear that "[u]nder that standard, a reviewing court may not substitute its judgment for that of the arbitrator" and that "[t]he policy of strictly limiting judicial interference with arbitration is intended to promote arbitration as an end to litigation." Id. at 554.

We have thoroughly reviewed the record, in light of the arbitrator's factual interpretation of the CBAs in issue here. We are convinced that the arbitrator's interpretation represented a reasonable interpretation of the contract language and satisfies the "reasonably debatable" standard. The arbitrator's decision was based on the plain language of the provisions of the CBAs and the past practice of the Township in providing benefits to police officers as compared to other blue and white collar Township employees.

The Township contends that the arbitrator's interpretation of this public sector contract is contrary to N.J.S.A. 40A:10-23. Thus, we must consider whether the arbitrator's reasonably debatable interpretation violates the law. Office of Employee Relations v. Communications Workers of Am., 154 N.J. 98, 112 (1998).

Prior to its amendment in 1995, N.J.S.A. 40A:10-23 permitted a municipal employer to "assume the entire cost of retiree health benefits and pay all of the premiums for employees who have retired . . . after 25 years or more service with the employer." In 1995, the statute was amended to allow a municipality to broaden the categories of employees eligible for paid retiree health benefits to include employees who have less than twenty-five years actual service with that employer. N.J.S.A. 40A:10-23, as amended in 1995, reads in applicable part:

The employer may, in its discretion, assume the entire cost of [health insurance] coverage and pay all of the premiums for employees . . . b. who have retired after 25 years or more of service credit in a State or locally administered retirement system and a period of service of up to 25 years with the employer at the time of retirement, such period of service to be determined by the employer and set forth in an ordinance or resolution as appropriate. (emphasis added).

The Township's April 16, 2001 Minute Book reflects that at the regular meeting, after a second reading and a public hearing, Ordinance #2001-2627, "Authorizing Positions and Providing Salaries, Increments, and Fringe Benefits for Patrol Officers in the Township of Middletown For the Years 2000, 2001, 2002 and 2003" was adopted by the Township committee. The ordinance in its preamble states that the ordinance being adopted was the result of extensive negotiations for terms of employment for patrol officers between the Township and PBA to succeed the CBA for the years 1996-1999, and that the parties had negotiated an overall settlement and CBA for the years 2000, 2001, 2002, and 2003. At the same meeting Resolution #2001-125 was approved "Authorizing Execution of PBA Collective Bargaining Agreement For the Years 2000, 2001, 2002 and 2003." The resolution specifically refers to specific changes from the prior CBA and that the specifically enumerated changes and changes to other terms were "as set forth in detail in the 2000-2003 [PBA CBA] annexed [to the Resolution] and on file for inspection with the Township Clerk." The resolution authorized the mayor and Township clerk to execute a CBA for the years 2000, 2001, 2002, and 2003 in the form essentially as annexed thereto, subject to approval by the Township attorney and subsequent to the adoption of the salary ordinance.

Similarly, the Township's Minute Book for June 3, 2002, reflects that at the regular meeting after a second reading and a public hearing Ordinance # 2002-2680, "Authorizing Salaries, Increments, and Fringe Benefits For Police Superior Officers (Sergeants, Lieutenants, Captain) For the Years 2000, 2001, 2002, 2003 and 2004 and Amending Management Salary Ordinances to Add Position" was adopted by the Township committee. The ordinance, in its preamble, refers to the new CBA as resulting from negotiations over an extended period, including meetings with a State mediator, the Township and the SOA resolving terms and conditions of employment for the period January 1, 2000 through December 31, 2004. The ordinance specifically incorporates therein the SOA's CBA by reference and indicates the execution of the CBA shall be approved by separate resolution and that both the SOA's Agreement and Resolution are available in the Municipal Clerk's Office. At the same meeting Resolution #2002-183, "Authorizing The Execution of the Superior Officers Association Collective Bargaining Agreement For the Years 2000, 2001, 2002, 2003 and 2004" was adopted. The Resolution references the negotiations that resulted in a proposed settlement and new SOA contract for the years 2000 through 2004. It also states that the CBA is available for inspection with the Township clerk and authorizes the mayor and the Township clerk to execute a Superior Officers CBA for the years 2000, 2001, 2002, 2003, and 2004, approved by the Township attorney.

The Township contends that the reduced period must be knowingly arrived at by the municipal governing body by its enactment of an ordinance. It argues that because no separate ordinance has been adopted approving paid health benefits for retired police officers, with no minimum requirement of years of service within the Township, the pre-existing requirement set forth in N.J.S.A. 40A:10-23 of twenty-five years actual service with the municipality must remain in effect. We disagree.

The statutory phrase "ordinance or resolution, as appropriate," at issue here, has been subject to judicial interpretation in Township of North Bergen v. City of Jersey City 232 N.J. Super. 219 (App. Div.), certif. denied, 117 N.J. 632 (1989). In Township of North Bergen, supra, the appellants challenged the legality of the municipal council's resolution granting a tax abatement to a developer of the Jersey City waterfront. The appellants claimed that the phrase "ordinance or resolution, as appropriate" contained in N.J.S.A. 55:14K-37b, the tax abatement statute, required Jersey City to adopt an ordinance when granting the tax abatement because of the character of the municipal action that was contemplated. Id. at 223. While recognizing the greater solemnity and formality of an ordinance as compared to a resolution, we noted that, "[i]t is well-settled that where a statute does not expressly require action by ordinance or resolution the power may be exercised by either means." Id. at 224 (citations omitted). We pointed out that had the Legislature intended abatements be granted by ordinance under certain circumstances and by resolution under other circumstances, it could simply have set forth specific standards. Ibid. We cited N.J.S.A. 39:4-197, where the Legislature specifically determined which motor vehicle and traffic regulations could be adopted by an ordinance, which by an ordinance or resolution, and which by an ordinance, resolution or regulation.

Here, the Township made use of both ordinances and resolutions in the process it employed in adopting the PBA's and SOA's CBAs. We are convinced, therefore, that the Township's adoption of the 2000-2003 PBA's and SOA's CBAs, in issue here, by both an ordinance and a resolution that incorporated by reference the CBAs negotiated between the Township and the police unions, complied with the amendment to N.J.S.A. 40A:10-23. We are equally convinced that the amendment does not require the adoption of a separate ordinance containing a specified period of necessary service up to twenty-five years before a category of employees is entitled to be paid retirement health benefits.

We need not decide, in this appeal, whether a resolution alone would have satisfied the statutory criteria. See Bonzella v. Monroe Twp. 367 N.J. Super. 581, 583 (App. Div. 2004) (although the validity of the adoption of the resolution was not at issue, this court upheld the trial court's interpretation of a resolution, adopted pursuant to N.J.S.A. 40A:10-23, which granted retirement health benefits to both a husband and wife who were employed for twenty-five years with the municipality); see also Twp. of North Bergen, supra, 232 N.J. Super. 219 (where this court affirmed the trial court's affirmance of Jersey City's granting of a tax abatement by resolution to a developer of a previously blighted area, pursuant to the "ordinance or resolution, as appropriate" requirement of N.J.S.A. 55:14K-37b).

The Township asserts that from a public policy standpoint, the fiscal impact on the community by lowering the years of actual service requirement would be great. Therefore, it contends a separate ordinance must be passed specifically stating that no fixed number of years of outside service is required before a time period less than twenty-five years can be considered valid. In support of this position the Township cites Middletown, supra, in which the Supreme Court stated in dicta:

Plaintiffs contend that when the Township Council formally ratified the collective bargaining agreement, it adopted the type of resolution required by the 1995 amendment.

N.J.S.A. 40A:10-23 states that the period of service required under the statute be "set forth in an ordinance or resolution." In our view, the 1995 amendment to the statute reflects the legislative intention to require an ordinance or resolution that specifically adopts N.J.S.A. 40A:10-23. [Middletown, 162 N.J. at 374.]

The Supreme Court dicta states that N.J.S.A. 40A:10-23 must be specifically adopted, not that N.J.S.A. 40A:10-23 must be adopted by an ordinance or a resolution separate from the one adopting a CBA. Nor does the Court state that N.J.S.A. 40A:10-23 must be adopted by an ordinance or a resolution for a specific purpose. In this case, both CBAs refer to the municipality's statutory authority to assume the cost of benefits. The PBA's CBA refers to N.J.S.A. 40A:10-21 through -25 specifically and the SOA's CBA refers to the authorities set forth in the appropriate laws of the State of New Jersey. We are satisfied, therefore, that the ordinances are consistent with the Supreme Court's dicta in Middletown.

We affirm the Chancery Division's order of February 7, 2005, confirming the October 25, 2004 arbitration award. We also vacate our stay of the Chancery Division's order requiring the Township to reimburse each individual officer the out-of-pocket expenses incurred in continuing their benefits.

Affirmed.


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