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Borough of East Rutherford v. East Rutherford P.B.A. Local 275

March 4, 2010


On appeal from the Public Employment Relations Commission, Docket No. 2008-079.

Per curiam.


Argued February 4, 2010

Before Judges Skillman, Fuentes and Simonelli.

Appellant Borough of East Rutherford and respondent East Rutherford P.B.A. Local 275 were parties to a collective negotiating agreement for the period running from January 1, 2005 to December 31, 2009. The agreement provided that "[t]he Borough will continue to provide and pay for existing Medical and prescription plans and coverage for Employees covered by this Agreement and their families," and that "[a]ll increases in premiums during the term of this Agreement shall be borne entirely by the Borough pursuant to present practice."

Since January 1, 2002, East Rutherford has provided medical insurance coverage to its employee through the State Health Benefits Plan (SHBP). When the collective negotiating agreement involved in this appeal was entered into, the SHBP required members who were enrolled in the NJ PLUS and HMO plans to make $5 co-payments for doctor office visits. However, effective in 2007, the State Health Benefits Commission (SHBC) increased the amount of this co-payment from $5 to $10.*fn1

Following this increase, P.B.A. Local 275 submitted a grievance to East Rutherford, which sought reimbursement of the increased co-payment. East Rutherford rejected this grievance, and P.B.A. Local 275 demanded arbitration of its claim that East Rutherford was violating the collective negotiating agreement by requiring its members to make an increased co-payment for doctor office visits.

East Rutherford responded to the arbitration demand by filing a scope of negotiation petition with the Public Employees Relations Commission (PERC), which sought to restrain arbitration of the P.B.A. Local 275 grievance. By a written decision dated September 25, 2008, PERC concluded that the P.B.A. Local 275 grievance was arbitrable and denied East Rutherford's request for a restraint of the arbitration. In reaching this conclusion, PERC stated:

[T]he question that will be presented to the arbitrator does not interfere with the SHBC's authority. The arbitrator will consider whether the Borough violated an alleged contractual obligation to maintain a certain level of health benefits. There may or may not be a contractual obligation, and there may or may not be a contractual violation.

If the arbitrator finds a contractual violation and orders the employer to make employees whole through reimbursement, that may be inconsistent with the employer's obligations as a participant in the SHBP. Perhaps the SHBC will not permit the Borough to remain a participant and reimburse. Perhaps it will permit the Borough to reimburse and remain a participant pending the next round of negotiations when the contract can be conformed to the higher co-pays. Perhaps the Borough would rather change providers than incur a reimbursement obligation. Nothing obligates the Borough to remain a participant in the SHBP....

To restrain arbitration, we would have to first conclude that the PBA is not entitled to pursue its claim that the Borough was obligated to maintain a contractual level of benefits. Such a holding would be a departure from well-established case law. Purchasing insurance from the SHBP does not insulate an employer from enforcement of an agreement over a level of health benefits.

PERC's decision also stated: "Should the arbitrator find a contractual violation and a dispute arise over the negotiability of any remedy issued, the Township may re-file its scope petition."

East Rutherford appeals from this decision. During the pendency of the appeal, on December 29, 2009, the arbitrator issued a decision in the arbitration proceeding that PERC had declined to restrain. The arbitrator concluded that East Rutherford violated its collective negotiating agreement with P.B.A. Local 275 "when, beginning in January 2007, it increased the co-pay for doctors' office visits from $5 to $10 per visit under the medical insurance plans it provided its employees and their families through its participation in SHBP." As a remedy for this violation, the arbitrator directed East Rutherford "to reimburse the employees for the amount of the required co- payments they were required to pay in excess of $5 per office visit when they or a member of their families went to see a doctor beginning on January 1, 2007 and continuing to the present."

On its appeal from PERC's decision declining to restrain the now concluded arbitration of P.B.A. Local 275's grievance concerning the increase in the required co-payment for doctor office ...

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