On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
On this appeal, the Court must determine the meaning of certain language in N.J.S.A. 40A:10-23 (section 23), a statute that authorizes the discretionary grant of health benefits to retirees.
In 2003, the Middletown Township policemen's Benevolent Association Local 124 (PBA) and the Middletown Police Superior Officers Association (SOA) filed grievances on behalf of Township Patrolmen Wayne Bradshaw and Anthony Gonzales, and Lieutenant Michael Mehler (the officers). The grievances concerned the entitlements of the officers to receive paid retiree health benefits under their respective bargaining agreements. The three officers qualified for "special retirement," which allows a police officer or firefighter who has accumulated twenty-five years of creditable service in the Police and Firemen's Retirement System (PFRS) to retire regardless of the amount of years of employment that the officer may have had with any specific department and without consideration of the officer's age.
Patrolman Gonzales, who retired on January 1, 2004, had been employed with the Township of Middletown (Township) for ten years, but had twenty-five years of credited service due to his prior employment as a police officer with other municipalities. Patrolman Bradshaw, who retired on September 1, 2003, had been employed by the Township for twenty-years, but had twenty-five years of pension service credit due to three years he served in the military and two years with the Department of Defense. Lieutenant Mehler had been employed with the Township for twenty-two years, but had over twenty-six years of credited service due to prior public employment.
After announcing their intention to retire, the officers were advised by the Township that they were ineligible for health benefits because Section 23 requires that an officer accrue twenty-five years of actual service with the municipality to be considered for discretionary retirement health benefits. The 2000-2003 PBA Agreement concerning retirement medical and health benefits contains slightly different language than the SOA Agreement for 2000-2004, but they both had similar import. The language is nearly identical to the language in prior Agreements and dates back to 1979. Each Agreement was approved by the Township in a separate resolution and the SOA Agreement was also approved by ordinance.
The grievances were consolidated and the matter was arbitrated in May and June 2004. At the arbitration hearing there was testimony in respect of the Township's past practice going back to the 1970s of agreeing to pay for retirement health benefits for all police officers who earned PRFS retirement, regardless of the years of actual service with the Township and without awareness that the statute, at the time, required twenty-five years with the Township. Based on the evidence presented, the arbitrator concluded that it was the Township's practice and it was bound under its collective bargaining agreements to provide benefits to all police retirees who had accrued twenty-five years of government service credits. In reaching his conclusion, the arbitrator compared the pre-1995 PBA and SOA Agreements with the Blue and White Collar bargaining unit Agreements, which specify that a retiree must have been employed with the Township for twenty-five years in order to receive benefits. The arbitrator concluded that the Township's failure to negotiate similar language with the PBA and SOA was problematic for the Township and that all parties understood that the officers were entitled to receive paid health benefits in retirement. The arbitrator also found that once the Township ratified the PBA and SOA Agreements, it could not then refuse to honor them by hiding behind the ordinance or resolution requirement.
In November 2004, the PBA and SOA filed verified complaints in the Chancery Division, seeking confirmation of the arbitrator's award. The Township filed an answer and counterclaim, arguing that Section 23 requires a resolution or an ordinance to be enacted before a governing body may grant lifetime health benefits coverage to retirees who have served less than twenty-five years with the municipality. Because no such authorizing ordinance or resolution was enacted, the Township contended that the arbitrator's award did not follow the law and should be vacated. The trial court disagreed and on February 7, 2005, entered an Order confirming the award in both cases.
The Appellate Division affirmed on appeal, concluding, among other things, that the arbitrator's award represented a reasonable interpretation of the contract language and satisfied the "reasonably debatable" standard.
The Supreme Court granted the Township's petition for certification.
HELD: N.J.S.A. 40A:10-23 grants municipalities discretion to assume the cost of retiree's health benefits so long as the retiree has accrued twenty-five years of any combination of government service credit. Only when the municipality chooses to require a particular period of service within its borders will a resolution or ordinance be required. Accordingly, the arbitrator's award did not violate any law and was subject only to the "reasonably debatable" standard. Measured against that standard, the award was properly confirmed.
1. There is a strong preference for judicial confirmation of arbitration awards. In public sector arbitration, a court will confirm an arbitrator's award so long as the award is "reasonably debatable." Under that standard, a court reviewing an arbitration award may not substitute its own judgment for that of the arbitrator, regardless of the court's view of the correctness of the arbitrator's position. In interpreting the statutory language, the court's function is to enforce the statute in accordance with its clear language and terms. Should the statute be silent or ambiguous, the court may look to extrinsic evidence, including legislative history. (Pp. 11-14)
2. On its face, the statute that existed prior to its present amendment in 1995 expressed a clear legislative intention to require twenty-five years of service with the employer in order for the employer to grant discretionary health benefits to an employee who had not reached the age of sixty-two. When the 1995 amendment is compared to the earlier version of Section 23, it is evident that the Legislature eliminated the requirement of "a period of twenty-five years or more served with the employer" and replaced it with twenty-five years or more of service "credit" in a state or local retirement system, including some period with the employer at retirement. Thus, the amended statute empowers the Township to award health benefits to an expanded class of employees -- officers who have accredited twenty-five years of service and credits in one or more of the relevant governmental employers, including the Township. Indeed, the legislative history of the amendment removes any doubt. (Pp. 14-18)
3. Nothing in the statute suggests that the broadening of the class of qualified retirees is inoperative in the absence of an ordinance or resolution. Rather, the requirement of an ordinance or resolution is linked to the establishment of a threshold. In the absence of the township requiring a threshold, the statute provides that any combination of credits and service that totals twenty-five years will make an employee eligible for discretionary health benefits. The statute is thus fully operative without enactment of an ordinance or resolution. There is nothing in Section 23 that requires an ordinance or resolution in the circumstances of this case. (Pp. 18-21)
4. It was after the 1995 amendment, and with specific reference to it, that the PBA and SOA Agreements were renegotiated. Those new agreements specifically authorized retirement health benefits. The arbitrator properly observed that the Agreements must be interpreted in light of the new statute with which they fully conform. It was the obligation of the Township to negotiate different language if it intended to limit those benefits. Moreover, after reviewing the record in light of the parties' claims, the arbitrator's interpretation of the Agreements was "reasonably debatable." (Pp. 21-24)
Judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, WALLACE, RIVERA-SOTO and HOENS join in JUSTICE LONG'S opinion.
The opinion of the court was delivered by: Justice Long
Argued September 24, 2007
At issue in these consolidated appeals is the meaning of the following language in N.J.S.A. 40A:10-23, a statute authorizing the discretionary grant of health benefits to retirees:
[t]he employer may, in its discretion, assume the entire cost of such coverage and pay all of the premiums for employees a. who have retired on a disability pension, or 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 . . . . [N.J.S.A. 40A:10-23.]
Here, the Township of Middletown challenges an arbitrator's award that declared it bound under its collective bargaining agreements (CBAs) to provide health benefits to all police retirees who had accrued twenty-five years of government service credits. The Township's primary thrust is that N.J.S.A. 40A:10-23 requires a resolution or an ordinance to be enacted before a governing body may grant lifetime health coverage to retirees who have served less than twenty-five years with the municipality. Because no such authorizing ordinance or resolution was enacted, the Township argues that the arbitrator's award did not "follow the law" and should be vacated. The trial judge disagreed and confirmed the award and the Appellate Division affirmed.
N.J.S.A. 40A:10-23 grants municipalities discretion to assume the cost of a retiree's health benefits so long as the retiree has accrued the requisite twenty-five years of government service credit. Any combination of service and credit will pass muster; it is only where the municipality chooses to require a particular period of service within its borders that a resolution or ordinance is required. Accordingly, the arbitrator's award did not violate any law and was subject only to the "reasonably debatable" standard. Measured against that standard, the award was properly confirmed. We therefore affirm.
In 2003, the Middletown Township Policemen's Benevolent Association Local 124 (PBA) and the Middletown Police Superior Officers Association (SOA) filed grievances on behalf of Township Patrolmen Wayne Bradshaw and Anthony Gonzales, and Lieutenant Michael Mehler (the officers).*fn1 The grievances concerned the entitlements of the officers to receive paid retiree health benefits under their respective bargaining agreements.
All three qualified for "special retirement," which allows a police officer or firefighter who has accumulated twenty-five years of creditable service in the Police and Firemen's Retirement System (PFRS), to retire regardless of the number of years of employment that the officer may have had with any ...