August 25, 2009
PLEASANTVILLE BOARD OF EDUCATION AND JOHN DESERABLE, STATE MONITOR, PLAINTIFFS-RESPONDENTS,
PLEASANTVILLE EDUCATION ASSOCIATION, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. C-109-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued August 4, 2009
Before Judges Lihotz and Baxter.
Defendant Pleasantville Education Association (PEA) appeals from a November 20, 2008 order, which granted the request of plaintiff the Pleasantville Board of Education (Board) to vacate an arbitration award, thus denying plaintiff's request to confirm the award. The arbitration hearing was held to review the PEA's challenge to a reduction in force (RIF) notification, ordered by John Deserable, appointed as the state monitor of the Pleasantville School District (the District), pursuant to the School District Financial Accountability Act (Act), N.J.S.A. 18A:7A-55 to -60. The RIF terminated twenty-two non-tenured special education aides. Defendant argues the trial court erred in vacating the arbitration award. We affirm.
The PEA and the Board are parties to a 2004-2007 Collective Negotiation Agreement (the agreement), which commenced in July 2004 and remained in effect until June 2007. In Article 3, the agreement contained a specific multi-step grievance procedure to be followed in the event of an "alleged . . . violation of th[e] [a]greement."
During the 2006-07 school year, the District employed ninety-one special education aides. The PEA asserts the Board notified all ninety-one aides of their proposed continued employment for the 2007-08 school year. In March 2007, Deserable was appointed by the Commissioner of Education to "provide direct oversight of [the Board's] business operations and personnel matters[.]" N.J.S.A. 18A:7A-55(a). In May 2007, the District's Superintendent and Deserable recommended the RIF to reduce the District's overall expenditures. See N.J.S.A. 18A:28-9. Despite the proposed layoffs, the District would continue to satisfy the requirements of the Individuals with Disabilities Act, 20 U.S.C.A. § 1400, which regulates the number of aides a school district must provide in its special education programs.*fn1
The Board rejected the RIF recommendation. Relying on N.J.S.A. 18A:7A-55(b)(5), Deserable ignored the Board's resolution and implemented the RIF, advising the aides their employment would terminate on August 23, 2007.*fn2
On behalf of the aides, the PEA filed a verified complaint and order to show cause in the Law Division on August 27, 2007, seeking to restrain Deserable from participating in the Board's closed sessions and challenging Deserable's authority to terminate the aides. The PEA acted as the majority representative of the affected employees, as allowed by Article 3.H of the agreement. As such, the PEA also challenged the RIF by instituting grievance proceedings under the agreement, asserting there was no "just cause" for termination of the aides.*fn3
The grievance was first presented to the Superintendent, who denied the PEA's request. The matter was next heard by the Board, which reversed the Superintendent's denial and ordered reinstatement of the aides. Deserable exercised his statutory authority by declaring the Board's action "null and void." Two days later, at the PEA's suggestion, the aides reported to work. The Assistant Superintendent told them to "go home" as they had not been reinstated.
The PEA then initiated the fourth step in the contractual grievance procedure and filed a request with the Public Employees Relations Commission (PERC) for commencement of binding arbitration to settle the dispute, as provided in Article 3.C.5(a) of the agreement. The parties to the arbitration were the PEA and the Board. PERC appointed Frank Cocuzza as the arbitrator.
Meanwhile, in the Law Division matter, Judge Armstrong, in a March 5, 2008 written opinion, dismissed the PEA's complaint, which she interpreted as a constitutional challenge to Deserable's appointment as a monitor under the Act. Judge Armstrong found the appointment constitutional and transferred the matter to the Department of Education (Department) for "whatever departmental disposition, if any, may be appropriate." The record contains no information showing further action was pursued before the Department.
On April 30, 2008, Cocuzza conducted the arbitration hearing. The PEA and the Board stipulated the issue for determination as follows:
Did the District and/or the school administration have just cause for the termination of the 22 Aides (List attached) for the 2007-2008 school year and, if not, what shall be the remedy?
The Board agreed there was no just cause for the aides' termination.
On June 16, 2008, Cocuzza issued his award determination. Noting the matter was "extremely unusual," Cocuzza determined the agreement alone provided the manner in which to resolve the grievance and "the [PEA's] grievance had been 'validated' by the Board," which agreed there was no just cause for the termination of the aides. Cocuzza concluded Deserable's authority, as defined by N.J.S.A. 18A:7A-55, did not extend to override the Board's resolution of a PEA grievance, which was filed under the terms of the collective bargaining agreement. Cocuzza ordered the aides be made monetarily whole for the 2007-2008 school year and receive back pay, less outside earnings, and the reimbursement of medical bills or COBRA payments. Cocuzza did not set aside the RIF or order reinstatement of the aides.
The Board and Deserable filed this matter to vacate the arbitrator's award. The PEA counter-claimed seeking to enforce the award.
Judge William Todd reviewed the matter and ordered the arbitrator's award vacated. He concluded, "it would be inappropriate to permit the [B]oard to override [Deserable's] action through the grievance procedure" and held the monitor's statutory authority, pursuant to N.J.S.A. 18A:7A-55(b)(5), allowed him to override the Board's action. Accordingly, the "public policy" fostered by the Act mandates the arbitration award be vacated. This appeal ensued.
On appeal, the PEA argues the court erred in interpreting N.J.S.A. 18A:7A-55(b)(5) because the monitor's powers are subject to "the education, labor, and employment laws and regulations, including the 'New Jersey Employer-Employee Relations Act,' [N.J.S.A. 34:13A-1 to -39 (EERA)], and collective bargaining agreements entered into by the school district[.]" N.J.S.A. 18A:7A-55(b)(5). According to the PEA, the arbitrable issue was whether "just cause for termination" of the aides existed. Because the Board conceded it did not, and Deserable lacked authority to invalidate the Board's resolution of the PEA's grievance, the Board's decision must be followed. The PEA's argument is predicated on the position that Deserable's assertion that the RIF fell outside the scope of the arbitration was waived when no action to enjoin the arbitration process was taken.
However, Deserable maintains his right to enforce a RIF was not arbitrable. Moreover, he asserts the court properly enforced the public policy undergirding the monitor's appointment under the Act, which required the award be set aside.
"A trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty v. Manalapan Tp. Comm., 140 N.J. 366, 378 (1995). Therefore, we subject a trial court's interpretation of the law to de novo review. Ibid.
The District has been identified as one of the poorer urban districts whose limited financial resources severely disadvantage its pupils, commonly known as an "Abbott District."*fn4
The Court has required additional State funds to properly provide for the students' education. Thus, the State developed "a funding formula that would provide all children with equal educational opportunity as measured by the state constitution's th[o]rough and efficient education clause." Abbott v. Burke, 199 N.J. 140 (2009) (Abbott XX). The Court later added a requirement that funding be coupled with a set of educational programs. Abbott v. Burke, 136 N.J. 444 (1994) (Abbott III). The Legislature responded by implementing comprehensive core curriculum standards accompanying a funding formula. See N.J.S.A. 18A:7F-1 to -34.
The Act was passed to impose oversight on those districts that continued to experience serious fiscal difficulties, notwithstanding the infusion of State assistance. Under the Act, the Commissioner of Education is authorized to appoint a monitor when a school district receives an adverse opinion by its independent auditor or otherwise demonstrates fiscal or financial shortcomings as delineated in the Act. N.J.S.A. 18A:7A-55(a). Once appointed, the monitor has the authority to:
(1) oversee the fiscal management and expenditures of school district funds, including, but not limited to, budget reallocations and reductions, approvals of purchase orders, budget transfers, and payment of bills and claims;
(4) . . . oversee all district staffing, including the ability to hire, promote, and terminate employees;
(5) override a chief school administrator's action and a vote by the board of education on any of the matters set forth in this subsection, except that all actions of the State monitor shall be subject to the education, labor, and employment laws and regulations, including the "New Jersey Employer-Employee Relations Act," P.L.1941, c.100 (C.34:13A-1 et seq.), and collective bargaining agreements entered into by the school district;
Examining other statutes implicated by this matter, we note the EERA allows public employees to select representatives, such as the PEA, to act on their behalf in negotiations concerning the terms and conditions of employment, N.J.S.A. 34:13A-5.3. As to the Board's decision to reduce the number of aides, N.J.S.A. 18A:28-9 provides:
Nothing in this title or any other law relating to tenure of service shall be held to limit the right of any board of education to reduce the number of teaching staff members, employed in the district whenever, in the judgment of the board, it is advisable to abolish any such positions for reasons of economy or because of reduction in the number of pupils or of change in the administrative or supervisory organization of the district or for other good cause upon compliance with the provisions of this article.
Finally, "'the role of the courts in reviewing arbitration awards is extremely limited and an arbitrator's award is not to be set aside lightly.'" New Jersey Tpk. Auth. v. Local 196, I.F.P.T.E., 190 N.J. 283, 292 (2007) (quoting State v. Int'l Fed'n of Prof'l & Technical Eng'rs, Local 195, 169 N.J. 505, 513 (2001)). However, a court may vacate an arbitration award as provided in N.J.S.A. 2A:23B-23*fn5, and "[i]n a public-sector arbitration setting, a court can properly vacate an award because of mistake of law." Tretina Printing, Inc. v. Fitzpatrick & Assocs., Inc. 135 N.J. 349, 364 (1994) (citing Communications Workers v. Monmouth County Bd. of Social Servs., 96 N.J. 442 (1984)).
The PEA's view that this matter involves only an arbitrated grievance between the Board and the PEA, in accordance with step four of the collective bargaining agreement's grievance procedure, over which the monitor may not interfere, too narrowly draws the issues. Similarly, the suggestion that the Board's acquiescence in arbitrating the question of whether there was just cause for the decision not to renew the aides' employment fails to recognize the action challenged was the state monitor's ordered reduction in force. Deserable's decision to overrule the Board and implement a RIF of the non- tenured employees in an effort to reduce the excessive expenditures of this fiscally insolvent District is not covered by the agreement or the EERA.
The agreement itself recognizes the difference between a termination resulting from a disciplinary action or discharge for cause, which is discussed in Article 16, and a RIF, which is discussed in Article 18. Disciplinary terminations are subject to the grievance procedure to resolve disputed issues arising under the terms of the agreement. RIF's are exceptional and not subject to the grievance process. Instead, Article 18 discusses the rehire of laid-off employees in accordance with seniority. The PEA does not dispute that the RIF was determined to be a necessary budget measure or that the District adhered to proper procedures in its implementation.
The Board has a fiduciary obligation to manage and direct the operations and activities of the District on behalf of the public. However, due to fiscal instability, the oversight and final exercise of many of these functions was shifted to the monitor. N.J.S.A. 18A:7A-55(b). The monitor's decision to follow through with a RIF, despite the Board's opposition, rests within his statutory powers. The PEA does not dispute that a RIF is a non-negotiable subject in the context of collective bargaining agreements. In re Local 195, IFPTE, 88 N.J. 393, 408 (1982). "Our courts have recognized that a local board of education has the authority to reduce its teaching force as long as that reduction is genuinely 'for reasons of economy.'" Impey v. Bd. of Educ., 142 N.J. 388, 398 (1995) (quoting In re Maywood Bd. of Educ., 168 N.J. Super. 45, 55, certif. denied, 81 N.J. 292 (1979)); see also Spiewak v. Bd. of Educ., 90 N.J. 63, 80 (1982) (noting "the Legislature has expressly provided that tenured teachers may be dismissed if the board deems it advisable to reduce the number of teaching positions for economic reasons . . . ."). The agreement could not include a provision to allow the PEA to grieve a non-negotiable issue. IFPTE, supra, 88 N.J. at 408.
Here, even though the decision to implement a RIF is a non-negotiable issue, the PEA presented a "grievance" to the Board. In defiance of the authority of the monitor, the Board then attempted to circumvent Deserable's decision by accepting the grievance. The PEA, suggesting the matter involved the application of a provision of a collective bargaining agreement, continued the "grievance" through arbitration with which the Board agreed and conceded the ultimate issue. The arbitrator constrained his determination to a review of a contract dispute, as defined by the PEA and the Board. Based on the Board's action, he did not consider the PEA's grievance challenged.
Therefore, when the arbitrator issued an award, he relied on the Board's unanimous agreement that there was no just cause for the aides' termination, which he found placed "a contractual finality on the issue."
Following our review, we conclude the PEA's characterization of its challenge to the RIF as a grievance cannot stand. The RIF decision was not an arbitrable one. In light of this mistake of law, we need not defer to the arbitrator's interpretation of the issue submitted to him. Township of Wyckoff v. PBA Local 261, __ N.J. Super. __ (App. Div. 2009) (slip op. at 15) (citing New Jersey Transit bus Operations, Inc. v. Amalgamated Transit Union, 187 N.J. 546, 553-54 (2006).
"Courts should intervene only where the arbitrator has exceeded his authority or acted improperly." Local No. 153, Office & Prof'l Employees Int'l Union v. Trust Co. of N.J., 105 N.J. 442, 449 (1987). This is such a matter. The arbitration proceeded based upon a delegation by the Board and the PEA that this matter arose under the agreement. In fact, Deserable's authority to implement the RIF, notwithstanding the Board's objection, was a non-negotiable issue subject to the terms of the agreement.
Since the issue was not properly the subject of the arbitration to which, incidentally, the monitor was not a party, and because proceeding to step four was not a proper manner to challenge the monitor's declaration that the Board's action was "null and void," the award entered must be set aside as a violative of public policy.
The Court has advised that allowing a public sector arbitration award to be vacated due to a mistake of law "is necessary because public policy demands that a public-sector arbitrator . . . consider the effect of a decision on the public interest, and welfare [and] issue a decision in accordance with the law. Tretina, supra, 135 N.J. at 364-65.
Although parties in the private sector may explicitly authorize the arbitrator to decide legal issues as he deems fit irrespective of the governing law, this freedom is not available in the public sector. The parties in a public employment case cannot clothe the arbitrator with unbridled discretion, 'for public policy demands that inherent in the arbitrator's guidelines are the public interest, welfare and other pertinent statutory criteria.'" [Communications Workers, supra, 96 N.J. 450-51 (citing Kearny PBA Local #21 v. Town of Kearny, 81 N.J. 208, 217 (1979)).]
We disagree with the PEA's argument stating the Law Division's decision ignored the monitor's statutory obligation to except from his powers the ability to intervene in "collective bargaining agreements entered into by the school district[.]" As we articulated above, the RIF was a non-negotiable issue and, therefore, not encompassed by the agreement. Deserable's appointment resulted because the Board failed to achieve fiscal stability for the District. He was authorized to override the Board's decision to reject a RIF because a state appointed monitor has the statutory right to oversee District staffing, "including the ability to . . . terminate employees[,]" and the authority to override the Board's vote to reject the RIF. The RIF was not a labor-management dispute, even though the PEA filed a grievance suggesting otherwise.
Deserable's state appointed function was to dispassionately implement policies to achieve sound fiscal management of the District. The arbitration award violates N.J.S.A. 18A:28-9 and ignores the monitor's role in maintaining the fiscal health of the District. Thus, it must be vacated as contrary to existing law and public policy. I.F.P.T.E., supra, 190 N.J. at 294.