October 21, 2009
TOWNSHIP OF IRVINGTON, PLAINTIFF-APPELLANT,
IRVINGTON PBA LOCAL 29 AND IRVINGTON SUPERIOR OFFICERS ASSOCIATION, DEFENDANTS-RESPONDENTS, AND THE IRVINGTON WORKERS ASSOCIATION, DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9445-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 29, 2009
Before Judges Lisa, Baxter and Alvarez.
The Township of Irvington (Township) appeals from the Law Division orders of April 13, 2007 and July 25, 2008 that respectively confirmed an arbitration award and supplemental arbitration award rendered in arbitration proceedings resulting from grievances filed by Irvington PBA Local 29 and Irvington Superior Officers Association (unions). In the initial award, the arbitrator required the Township to pay the employees represented by the unions for an additional two-week pay period in 2004. Although the court confirmed the award, it remanded the matter to the arbitrator for further consideration of the remedy, namely the manner in which the Township would be required to pay the award, in light of the Township's claim that payment of the total amount required would cause it a severe adverse fiscal impact. In his supplemental award, the arbitrator modified the remedy to lessen the fiscal impact on the Township.
In its appellate brief, the Township argued that (1) the initial award should not have been confirmed because the arbitrator exceeded his authority by disregarding the clear terms of the parties' collective bargaining agreements (CBAs), and (2) the supplemental award should not have been confirmed because the arbitrator did not adequately consider the fiscal impact on the Township, and because the court incorrectly ruled as a matter of law that it lacked authority to determine the public policy impact of the award. The unions dispute the arguments raised by the Township, and further argue that the supplemental award was properly confirmed because the Township's motion to vacate it was untimely.
At oral argument, counsel for the Township withdrew argument (1) described above, and advised us that the Township now limits its argument to the fiscal impact issue. Our review of the record satisfies us that the court did not err in finding that the arbitrator sufficiently considered and addressed the fiscal impact issue in rendering his supplemental award, as a result of which the award was properly confirmed. We therefore affirm. In light of this disposition, it is unnecessary for us to address the timeliness issue.*fn1
The CBAs between each union and the Township set forth the annual salaries of the represented officers and then contained provisions for the payment of those salaries as follows:*fn2
3. Salaries shall be paidin accordance with past practice in approximately equal payments at fourteen (14) day intervals (pay periods).
(a) The bi-weekly pay shall be determined by dividing the Gross Annual Salary by twenty-six (26).
Due to a peculiarity in the Gregorian calendar, the year 2004 contained twenty-seven pay periods rather than the typical twenty-six. This phenomenon occurs about every seven to ten years because twenty-six pay periods, each consisting of fourteen days, equals only 364 days. Three of every four calendar years consist of 365 days, and the fourth year in the cycle has 366 days. As a result, with the biweekly pay periods, there is some carryover each year which, in effect, is made up for every seven to ten years.
In December 2003, Township officials notified all salaried Township employees that in the upcoming year, instead of their annual salaries being divided by twenty-six, they would be divided by twenty-seven and be paid in the twenty-seven biweekly pay periods. Of course, each paycheck would be smaller than if the twenty-six pay period schedule was followed. After some objections and discussions, the Township changed its position. Employees would be paid in twenty-six pay periods, and their annual salaries would be divided by twenty-six, but some of the mid-year pay dates would be adjusted so the pay periods were longer than fourteen days.
On July 30, 2004, the unions filed a grievance claiming that the Township's adjustment to the four pay dates violated the terms of their CBAs. The unions requested that the Township refrain from adjusting the payroll dates, or else pay all union members the eighty "unpaid" hours at the overtime rate of time-and-one-half. After going through all of the required procedural steps for a grievance, the matter was presented to Arbitrator Gerard G. Restaino, who was mutually selected by the parties. The stipulated issues presented to the arbitrator were: "Did the Township of Irvington violate the collective bargaining agreements when [it] changed pay dates for the calendar year 2004? If so, what shall be the remedy?"
Restaino filed an opinion and award on July 28, 2006. He found that the Township violated the CBAs and therefore sustained the unions' grievances and ordered that union members be awarded two weeks' pay. He rejected the Township's argument that union members could not receive a twenty-seventh pay check because they were "salaried" and therefore limited in their pay to their specified annual salary. In addition to the contract language, Restaino placed substantial reliance on the testimony of the Township Revenue and Finance Director that although the CBAs contained annual salary figures, the union members were not paid their full annual salaries in any given year because part of the pay for one year was paid in the next year. Restaino concluded that the controlling provisions in the CBAs required biweekly salary payments, and that those payments were calculated by dividing the gross annual salary by twenty-six. He reasoned that within each calendar year affected employees were not actually receiving the annual salary specified for them in the CBA "but would in effect receive a composite of an annual salary." This composite incorporated the carryover days from 2003, which were added into the 2004 salary.
Accordingly, Restaino sustained the unions' grievances and ordered the Township to pay each member an additional biweekly salary payment, representing the twenty-seventh biweekly pay period in 2004.
On October 31, 2006, the Township filed this action, seeking to vacate the award. On March 1, 2007, the unions filed an answer and counterclaim seeking to confirm the award. On April 13, 2007, the trial court entered an order confirming the award, but ordered a limited remand on the "sole issue of public impact on the Township of Irvington that will ensue from the enforcement of the Award."
As we stated at the beginning of this opinion, the Township has abandoned its argument that the trial court erred in confirming the aspect of the award which held that the Township violated the CBAs by failing to make the twenty-seventh salary payment in 2004. In other words, the Township now concedes that the arbitrator's construction of the CBAs to that effect was reasonably debatable and therefore not subject to judicial interference.
In the remand proceeding, both parties presented additional evidence and arguments regarding the fiscal impact of the award on the Township. The Township contended that the additional payment to its police officers would total about $1.4 million. The Township contended it had not budgeted for payment of that sum. Its State aid was reduced by about $1 million. Its financial circumstances were precarious. If required to pay this amount, it would be forced to raise taxes, cut services, and lay off employees. This would result in a downward spiral that would be detrimental to the health, safety, and welfare of the residents, and place an undue burden on the taxpayers. Considering the public interest involved, the Township argued that the burden of the loss would be more fairly absorbed by the affected employees.
In the remand proceedings, each side presented proposals for a remedy that would reduce the fiscal impact on the Township. The Township proposed that it be required to pay nothing up front, that each officer could use five of the ten days as paid vacation, and bank the remaining five days to be cashed in at the time of retirement, or, alternatively, bank all ten days to be cashed in at retirement. The unions offered two alternative proposals. Under the first, each officer would be given eighty hours on the books and, commencing January 1, 2008, an officer could cash in up to ten hours every other month up to sixty hours, and the remaining hours must be used as time due or cashed in upon retirement. Under the second, each officer would receive 100 hours on the books to be used as time due or to be cashed in at retirement or any combination of the two. Although the unions offered these proposals as suggested remedies, they adhered to their primary position that they were entitled to be paid for all ten days immediately. The unions also offered to modify their first proposal to allow their members to have the ability to cash in up to fifty percent of all time due, with the remaining hours to be used as time due or cashed in upon retirement.
In rendering his supplemental award, Restaino summarized the unions' position as follows:
The [unions] are offering to delay payment of a certain portion of the amounts due and in some instances for more than twenty (20) years when junior officers affected by the Award can retire.
The Unions also contend that by requiring the officers to keep some of the time on the books, their members may be inclined to use some of that time as time due throughout the remainder of their careers. This will save the Township money because when the [union] members use time due, the Township does not replace them with officers on overtime.
The Unions argue that they are making these concessions despite the fact that the Township did not hesitate or delay taking ten (10) days pay from each bargaining unit members' [sic] paycheck. The Town did not consider the impact on the officer who lives paycheck to paycheck when it deducted this money. Now it comes pleading with hat-in-hand begging the [unions] to forgive it for "the wickedness of its ways in the debt it owes to each member." The Unions query why they should provide the Town with more time to pay. The [union members] did not receive more time to lend the Town their money.
Despite having no such obligation, [the Unions] have offered reasonable alternatives to delay some of the re-payment. Thus, they respectfully ask the Arbitrator to issue an Award consistent with [union] Proposal 1. Restaino concluded as follows:
The issue before me started with the 2004 calendar year and to now ask employees to begin to accept partial resolution in 2008 is inappropriate and disingenuous at best.
I express sympathy for the Employer's plight, the change in the economy, markets and the tax base and tax structure in Irvington. However, that does not give me license to grant the Employer a pardon from its solemnly negotiated promises. . . .
My original Award determined that approximately 170 officers were to receive ten (10) days pay, which would create a monumental financial impact to the Employer. Recognizing the financial circumstances the Employer presently has, as well as reviewing [the trial judge]'s Order that I look at the public impact on the Township of Irvington that will ensue from the enforcement of my Award, I have concluded that the modified [union] Proposal 1 is the most appropriate for the resolution of the instant matter.
He therefore ordered that each officer may cash in up to a maximum of fifty percent of all hours due, valued as of the salary then in effect. The remaining hours must be used as time due or cashed in upon separation from employment, also to be valued as of that time.
The Township then moved to vacate both the initial and supplemental awards. It argued that the arbitrator did not adequately consider the serious fiscal impact on the Township, and that even the modified award would be contrary to the public interest.
By way of opposition, the unions argued that the arbitrator indeed considered the financial circumstances of the Township and the impact the required payment would have. They praised the arbitrator for crafting an extremely fair and reasonable remedy that substantially reduced the fiscal impact on the Township. They argued:
The Arbitrator's ruling cleverly ties together the concept of deferral (a benefit to the employer) with the concept of value (a benefit to the employee). By ruling that hours "on the books" would be paid at the salary in effect at the time of cash-out, the Arbitrator provided an incentive for police officers to wait as long as possible to be paid. The reason is simple - salaries increase over time. As salaries increase, so too will the value of the 80 hours in the employee's "bank." Simply put, the longer an officer is willing to wait to be paid, the more money he will receive. This obviously benefits the employee, but it also benefits the Township, since lengthy deferrals of payment will better position the employer to appropriate funds in future budgets, thereby avoiding the need for hasty tax increases or program cuts.
By giving employees a vested interest in deferring payment for many years, the Arbitrator softened the blow to the Township while respecting the rights of the employees.
The result of the supplemental award was that, even if every affected officer immediately cashed in the maximum number of hours permitted, the fiscal impact on the Township would be cut in half. Assuming that some officers would refrain from cashing in the maximum and use some of the time as paid vacation or wait until salaries increased in future years to cash some of the allowable time in on an as-needed basis, the burden would be reduced by more than half.
After hearing oral argument, the trial court issued an order confirming the supplemental award and denying the Township's motion to vacate either award. The judge did not render a statement of reasons. However, it is fair to infer that the judge accepted the reasons set forth in the unions' written and oral presentations, which are essentially those summarized above.
We now address the sole issue necessary to decide this appeal, namely whether the trial court erred in affirming the supplemental award because the arbitrator did not adequately consider the public impact of the award. The Arbitration Act provides for the conditions under which a court may vacate an arbitration award. It states in relevant part: "The court shall vacate the award . . . [w]here the award was procured by corruption, fraud or undue means." N.J.S.A. 2A:24-8a. Moreover, "[i]t is virtually axiomatic that unlike private arbitration, the standard of review of public-employment arbitration in an action to confirm or vacate an award requires the court to consider the consistency of the award both with the law and with the public interest." In re City of Newark v. Newark Council 21, 320 N.J. Super. 8, 20 (App. Div. 1999).
In the public-employment context, while an arbitrator "must consider the public interest and the impact of his decision on the public welfare," Kearny PBA Local #21 v. Town of Kearny, 81 N.J. 208, 216 (1979) (quoting Division 540, Amalgamated Transit Union v. Mercer County Improvement Auth., 76 N.J. 245, 252 (1978)), "public policy sufficient to vacate an award must be embodied in legislative enactments, administrative regulations, or legal precedents, rather than based on amorphous considerations of the common weal." N.J. Tpk. Auth. v. Local 196, I.F.P.T.E., 190 N.J. 283, 295 (2007). In public-sector arbitration cases, "a court may not substitute its judgment for that of a labor arbitrator and must uphold an arbitral decision so long as the award is 'reasonably debatable.'" Id. at 301.
Without dispute, public impact must be considered in both interest and grievance arbitration in the public sector. Kearny, supra, 81 N.J. at 216. The Township relies on South Plainfield Board of Education v. South Plainfield Education Association, 320 N.J. Super. 281 (App. Div. 1999), certif. denied, 161 N.J. 332, in which we remanded for supplemental arbitration hearings to consider the public impact of the award. Id. at 296-97. However, South Plainfield is distinguishable from this case.
The arbitrator in that case suggested that she could not consider the fiscal impact of the award on the state agency, id. at 296, and the trial judge determined that "it was not incumbent upon him to determine whether the arbitrator's failure to consider the potentially catastrophic effect of the award was critical." Id. at 286. Unlike South Plainfield, in this case the trial judge ordered a remand specifically to consider public impact. Further, far from suggesting that he could not consider the public impact, Restaino's supplemental opinion stated that he was "[r]ecognizing the financial circumstances the Employer presently has."
Moreover, the terms of the supplemental award demonstrate that the arbitrator considered the public impact. The supplemental award allowed each officer to immediately cash in no more than fifty percent of the hours due as opposed to the original award which required immediate payment of all of the hours. As the unions note, this at least "halved the employer's immediate financial liability and deferred payment of the remainder until the employee left employment, or took it as time off." This clearly reflects a consideration by the arbitrator of the public impact of the award.
In South Plainfield, we emphasized that consideration of the public interest is relevant only with respect to an appropriate remedy in the face of a bona fide claim by the public entity of lay offs and service reduction. Supra, 320 N.J. Super. at 293-94. In that context, "the arbitrator must factor in such concerns in fashioning a remedy that balances the rights of the grievants with the public interest and welfare." Ibid. The record establishes that the arbitrator in this case adhered to that requirement and reached a reasoned result with due regard for the public interest. As in New Jersey Turnpike Authority, supra, 190 N.J. 283, although reasonable minds could disagree on whether the supplemental award was an appropriate remedy, it was, at the least, "reasonably debatable" and is entitled to judicial deference.
Finally, the Township claims that based upon a single statement by the trial court in rendering its April 12, 2007 decision confirming the initial award, the court incorrectly held as a matter of law that it lacked authority to determine the public policy impact of the award. The statement relied upon is as follows: "This . . . Court does not sit to determine the ramifications of public policy impact." However, our view of that statement, when considered in the overall context of the court's comprehensive oral opinion, consuming twenty-two transcript pages, is to the contrary.
The judge also said: "And on the question of public policy impact, the Court finds that the arbitrator did consider the impact of public policy, but would recommend a limited remand to review those surviving issues of public policy in effectuating a remedy." Further, at oral argument on July 7, 2008 regarding the supplemental award, the court demonstrated its awareness that consideration of fiscal impact was required to be factored into an ultimate remedy by the arbitrator, subject to the applicable standard of judicial review of an arbitrator's award.
In our view, therefore, the isolated comment relied upon by the Township was more likely an expression by the judge that it is not the function of the court to "sit to determine the ramifications of public policy impact," but the function of the arbitrator, subject to a highly deferential standard of judicial review. It goes without saying that the court was aware of the need for this consideration, as evidenced by its remand for that express purpose.