On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Supreme 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 Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
In 1997, the Port Authority of New York and New Jersey (Port Authority) subleasedoperational control and management of the international terminal at John F. Kennedy International Airport (JFK Airport) to a private entity, JFK International Air Terminal LLC (JFKIAT). The issue in this case is whether that lease -- and the resulting redeployment, without any job losses, of Port Authority police officers to other portions of the JFK Airport -- gave rise to an obligation on the part of the Port Authority to collectively bargain with the Port Authority Police Benevolent Association, Inc. (PBA).
The Port Authority is a self-supported, bi-state agency that was established to administer the common harbor interests of New York and New Jersey. In 1947, the Port Authority entered into an agreement with the City of New York to lease and operate the municipal airports then owned by the City, including the airport now known as JFK Airport. The agreement provides that the Port Authority will provide police for patrolling, guarding and traffic control, and that the Port Authority has discretion to operate and maintain the terminals and to enter into subleases to carry out those functions.
In 1976, the Port Authority adopted the Port Authority Labor Relations Instruction (Labor Relations Instruction), which provided for collective bargaining rights, created the Port Authority Employment Relations Panel (Panel) to administer disputes between the Port Authority and its employee organizations, established procedures for processing those disputes, and provided for judicial review of Panel decisions. Pursuant to the Labor Relations Instruction, "the mission and management responsibilities of the Port Authority, including its organization, staffing, planning, operating and financial policies, shall not be subjects of negotiation with employee organizations."
In 1991, the Port Authority and the PBA entered into a Memorandum of Agreement, which provides that the PBA is the sole representative of Port Authority police officers for collectively negotiating pay rates, hours of work and other conditions of employment. The Memorandum provides that there will be no transfer of work performed by unit employees without negotiation, and that all unit work shall be maintained as long as the work "continues to be performed by or on behalf of the Port Authority." The Memorandum states that any "practice, procedure or policy" governing existing terms of police officer employment shall "not be limited, restricted, impaired, removed or abolished unilaterally." However, any complaint that the Port Authority has unilaterally limited a "practice, procedure or policy governing an existing term and condition of employment which is not specifically enumerated or set forth in this Memorandum of Agreement shall not be subject to or processed through the grievance-arbitration procedure."
In 1997, the Port Authority accepted JFKIAT's proposal to construct a new international terminal at a cost of $1.2 billion. They entered into a lease recognizing that the Port Authority is obligated to have in effect an airport "Security Plan" consistent with federal regulations, which outlines law enforcement responsibilities of the airport operator. JFKIAT agreed to "assume and fulfill all of the Port Authority's obligations and responsibilities under the Security Plan."
Prior to entering into the lease, the Port Authority explained the proposal to the PBA, assuring it that no officers would be negatively affected. When the lease took effect, JFKIAT assumed all security functions at the international terminal. Port Authority officers formerly assigned there were redeployed to other airport locations. None lost their jobs.
In July 1997, the PBA filed an improper practice charge with the Panel, alleging that the Port Authority hired or permitted non-unit personnel to perform unit work at the international terminal without prior negotiations, in violation of the Labor Relations Instruction and the Memorandum. The Panel assigned the matter to a hearing officer, who recommended dismissal of the improper practice charge. The hearing officer determined that the disputed work is "unit work," but that the Port Authority did not "transfer" the work; with JFKIAT's takeover of the international terminal, the Port Authority went out of the business of managing and operating that facility. The hearing officer also decided that even if the work was unit work that was transferred to JFKIAT, the PBA failed to establish that the Port Authority's decision that led to the loss of unit work -- the sublease of operational control of the international terminal -- was a mandatory subject of negotiations.
The Panel rejected the hearing officer's recommendation, concluding that the Port Authority violated the Labor Relations Instruction by transferring unit work to non-unit employees without negotiating with the PBA. Based solely on its interpretation of the lease to JFKIAT, the Panel concluded that unit work was not eliminated but was subcontracted by the Port Authority, and therefore unit work was transferred. Applying its four-part standard of review known as the "Fibreboard plus substantial impact" test, the Panel concluded that the Port Authority was required to negotiate because the Port Authority had not altered its basic operation as a result the lease; the issue did not involve a capital investment which would, if collectively negotiated, significantly abridge the Port Authority's freedom to manage its business; the issues were peculiarly suitable for resolution within the collectivve bargaining process; and th decision to have the work performed by non-unit personnel had a significant impact upon the wages, hours and working conditions of the PBA bargaining unit.
The Port Authority filed an action in lieu of prerogative writs to challenge the Panel's decision. The trial court affirmed, concluding that the Panel's decision was supported by substantial credible evidence and was not arbitrary or unreasonable. The Port Authority appealed. In an unpublished opinion, the Appellate Division also afforded deference to the Panel and affirmed. The Supreme Court granted the Port Authority's petition for certification. 191 N.J. 317 (2007).
HELD: The Port Authority's plan to lease the international terminal, which resulted in the redeployment of Port Authority police officers, directly implicated the Port Authority's management and operating policies. It thus was excluded, pursuant to the Labor Relations Instruction, from any mandatory collective bargaining requirement. Even if the Panel had authority to resolve the dispute and even if the Port Authority transferred unit work, application of the Panel's "Fibreboard plus substantial impact" test leads to the conclusion that there was no obligation to collectively bargain that transfer.
1. The Panel's decision is to be measured by the standards applicable to administrative agency decisions. A court owes substantial deference to an agency's decision when it involves the agency's expertise in a particular field;the agency followed the law; the record contains substantial evidence to support the agency's findings; and the agency reached a conclusion that could reasonably have been made on the record. The deferential standard of review is appropriate only in situations where agency expertise is essential towards understanding the proper context of a dispute. (pp. 19-23)
2. No special deference is owed to the Panel's decision that the Port Authority violated the Labor Relations Instruction by transferring PBA unit work to non-unit employees without negotiating with the PBA. The Panel did not follow the law because the Labor Relations Instruction limited the Panel's jurisdiction. According to the Instruction, the "management responsibilities of the Port Authority, including its organization, staffing, planning, operating and financial policies, shall not be subjects of negotiation with employee organizations." The lease with JFKIAT relieved the Port Authority from day-to-day operational responsibility for the international terminal. Thus, the Port Authority's plan to lease the terminal directly implicated "its organization, staffing, planning, operating and financial policies." The Panel also did not rely on any special expertise in reaching its decision, which hinged exclusively on its interpretation of the JFKIAT lease. (pp. 23-24)
3. Even if the Panel had jurisdiction to decide the matter, the record does not support the Panel's conclusion that Port Authority police officer work at the international terminal was transferred to JFKIAT in a manner akin to a delegation as opposed to an outright assignment. The record supports the hearing officer's view that under the lease, the Port Authority withdrew from any further operational responsibility for that terminal. (pp. 24-25)
4. Even if the Panel had the authority to determine the dispute, and even if the Port Authority transferred unit work to JFKIAT, there was no obligation to collectively bargain the transfer of the Port Authority's obligations under the Security Plan in respect of the international terminal. Once it is determined that unit work has been transferred, the "Fibreboard plus substantial impact" test requires the Panel to perform a four-part analysis. Subjecting the record to that test, the Court concludes that the Port Authority fundamentally altered its basic operations by transferring all of its obligations in respect of the international terminal to JFKIAT. Further, the JFKIAT transaction involved a capital investment, which would, if collectively negotiated, significantly abridge the Port Authority's freedom to manage its business. Also, the removal of the work from the PBA did not have a significant impact upon the PBA. No police officer positions were lost as a result of the JFKIAT lease. The Court adopts the hearing officer's conclusion that the Port Authority's decision to sublease operational control of the international terminal at JFK Airport was not a mandatory subject of negotiations. (pp. 25-30)
The judgment of the Appellate Division is REVERSED, and the cause is REMANDED to the Law Division for the entry of an order vacating the Panel's order and dismissing the improper practice charge filed by the PBA.
JUSTICE ALBIN has filed a separate DISSENTING opinion, in which JUSTICE WALLACE joins, expressing the view that the Panel has been widely recognized as having the expertise and authority to determine the types of labor disputes that are subject to collective bargaining; that deference was owed to the Panel's decision; and that the Panel's decision was amply supported by the record and the Panel's own precedent.
CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA and HOENS join in JUSTICE RIVERASOTO's opinion. JUSTICE ALBIN has filed a dissenting opinion, in which JUSTICE WALLACE joins. JUSTICE LONG did not participate.
The opinion of the court was delivered by: Justice Rivera-soto
For over a decade, the Port Authority of New York and New Jersey (Port Authority) and the union representing its police officers, the Port Authority Police Benevolent Association, Inc. (PBA), have litigated a discrete issue: whether the May 1997 lease of the international terminal at John F. Kennedy International Airport (JFK Airport) -- and the resulting redeployment, without any job losses or terminations, of Port Authority police officers to other portions of the JFK Airport --gave rise to an obligation on the part of the Port Authority to collectively bargain that redeployment with the PBA.
Based on an improper practice charge filed by the PBA, a hearing officer assigned by the Port Authority Employment Relations Panel (Panel) concluded that "the Port Authority's unilateral decision to sublease operational control and management of the [international terminal] to [a private entity] was not a mandatory subject of negotiations." The hearing officer further concluded that, even if redeployment of the PBA-represented police officers constituted a transfer of work covered by the collective bargaining agreement, the PBA nevertheless had failed to satisfy the legal requirements necessary to find that such redeployment was a mandatory subject of negotiations. As a result, the hearing officer recommended that the PBA's improper practice charge be "dismissed in its entirety." The Panel rejected the hearing officer's recommendations, and concluded instead that "the Port Authority violated the [Port Authority of New York and New Jersey Labor Relations] Instruction [that provided for collective bargaining rights to employees of the Port Authority and created the Panel] when it transferred PBA unit work to non-unit employees without negotiating with the PBA." Citing to the deference owed to administrative agencies, both the Law Division and the Appellate Division sustained the Panel's determination.
We conclude that, pursuant to the Instruction governing labor relations at the Port Authority, the redeployment of Port Authority police officers occasioned by the 1997 lease of the international terminal at JFK Airport was exempt from any collective bargaining requirement. We further conclude that, even if the Port Authority was required to collectively bargain the effects of the 1997 lease of the international terminal at JFK Airport, and even if the work on the leased premises may well have constituted "unit work," the Port Authority was not obligated to collectively bargain its transfer in any event.
Recognizing the special legal status of the Port Authority, we start with an overview of the parties and their interlocking relationships:
On April 30, 1921, The Port of New York Authority was established to administer the common harbor interests of New York and New Jersey. The first of its kind in the Western Hemisphere, the organization was created under a clause of the [United States] Constitution permitting Compacts between states, with Congressional consent. An area of jurisdiction called the "Port District," a bistate region of about 1,500 square miles centered on the Statue of Liberty, was established. In 1972, the organization's name was changed to The Port Authority of New York and New Jersey to more accurately identify [its] role as a bistate agency. [http://www.panynj.gov/AboutthePortAuthority/ HistoryofthePortAuthority/.]
The Port Authority is a financially self-supporting public agency that receives no tax revenues from any state or local jurisdiction and has no power to tax. It relies almost entirely on revenues generated by facility users, tolls, fees, and rents. The Governor of each state appoints six members to the Board of Commissioners, subject to state senate approval. Board Members serve as public officials without pay for overlapping six-year terms. The Governors retain the right to veto the actions of Commissioners from his or her own state. Board meetings are public.
The Board of Commissioners appoints an Executive Director to carry out the agency's policies and manage the day-to-day operations. [http://www.panynj.gov/AboutthePortAuthority/ Governance/.]
See generally, N.J.S.A. 32:1-1 to 2-37; N.Y. Unconsol. Laws Ch. 151 § 1 (2007).
In 1976, the Port Authority adopted its Labor Relations Instruction. Among other things, the Instruction (1) safeguarded the right to collectively bargain via employee organizations for Port Authority non-managerial employees; (2) created the Panel to administer disputes between the Port Authority and its employee organizations; (3) established procedures for the processing of those disputes; and (4) provided for judicial review of any decisions of the Panel. The grant of authority to the Panel was subject to a significant exemption: Section III(D) of the Instruction specifically provides that "[n]otwithstanding the foregoing, the mission and management responsibilities of the [Port] Authority, including its organization, staffing, planning, operating and financial policies, shall not be subjects of negotiation with employee organizations." (Emphasis supplied.)*fn1
Finally, as provided in its collective bargaining agreement with the Port Authority, the PBA is "the sole and exclusive representative of [Port Authority] Police Officers for the purpose of collective negotiations with respect to rates of pay, hours of work and other terms and conditions of employment."
Having defined the triangle of parties in this dispute --the Port Authority, the Panel and the PBA -- we turn to the facts underlying this controversy.
In April 1947, the Port Authority entered into an agreement with the City of New York. That agreement provided that the Port Authority would lease and operate the municipal airports then owned by New York City; among them was Idlewild Airport, now known as JFK Airport. Section 11(c) of the agreement stipulates that "[t]he Port Authority will provide police for patrolling, for guarding and for traffic control in the demised premises [and that t]he City will have no responsibility for maintaining . . . police personnel in the demised premises." Section 37 of the agreement further provides that the Port Authority shall have full power and discretion to proceed with the financing, rehabilitation, expansion, improvement, development, operation and maintenance of the municipal air terminals, and to enter into such contracts, agreements, subleases or other arrangements with respect thereto as it may deem necessary and desirable, and all matters connected therewith, including but not limited to, all details of financing, construction, leasing, charges, rates, tolls, contracts, and operation shall be within the sole discretion of the Port Authority; and the decisions of the Port Authority in connection with any and all matters concerning the municipal air terminals shall be controlling, provided that all such things shall be done by the Port Authority in its own name and on its own credit.
In July 1991, the Port Authority entered into a Memorandum of Agreement with the PBA. That Memorandum recognized the PBA as the sole and exclusive representative of the Port Authority police officers for collective bargaining purposes. Section XXI(1) of the Memorandum of Agreement explains that, "[d]uring the term of this Memorandum of Agreement, no Police Officer . . . shall be deprived of his employment as a Port Authority Police Officer . . . by reason of the abolition or modification of the requirements for additional police coverage at [JFK] Airport, . . . pursuant to . . . Federal Aviation Regulations." It also states, in Sections XXX(1) and (7), as follows:
Subject to other provisions herein, and except as otherwise set forth in this Agreement, during the term of this Agreement, there will be no further or additional transfer and/or reassignment of unit work currently and heretofore performed by unit employees without negotiation and all other unit work currently and heretofore performed by Police Officers shall be maintained.
All existing Police Officer positions and/or assignments shall be maintained during the term of this Memorandum of Agreement in accordance with the Police Position and/or Assignment List agreed upon between the parties so long as the work being performed ...