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In the Matter of the Borough of Fort Lee

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


April 15, 2011

IN THE MATTER OF THE BOROUGH OF FORT LEE, APPELLANT, AND PBA LOCAL NO. 245, RESPONDENT.

On appeal from a Final Decision of the New Jersey Public Employment Relations Commission, P.E.R.C. No. 2010-17.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 22, 2010

Before Judges Cuff, Sapp-Peterson, and Simonelli.

This matter involves a public sector compulsory interest arbitration award rendered pursuant to the Police and Fire Public Interest Arbitration Reform Act (Act), N.J.S.A. 34:13A-14 to -16.6.*fn1 Appellant Borough of Fort Lee (Borough) appeals from two decisions of the Public Employment Relations Commission (PERC): (1) the initial decision of May 28, 2009, remanding the matter to the arbitrator; and (2) the supplemental decision of September 24, 2009, affirming the arbitrator's award. We affirm.

Respondent PBA Local 235 (PBA) represents approximately 100 Borough police officers. The Borough and the PBA are parties to a 2003-2006 collective bargaining agreement (CBA), which expired on December 31, 2006. Their attempt to negotiate a successor agreement for the period January 1, 2007 to December 31, 2010 failed. As a result, the PBA filed a petition with PERC seeking compulsory public interest arbitration pursuant to the Act. In accordance with N.J.A.C. 19:16-5.6, the parties mutually selected, and PERC appointed, an arbitrator.

The parties stipulated to a four-year successor agreement for the period January 1, 2007 to December 31, 2010, but differed on salary and other items. The PBA proposed an across-the-board 5% salary increase in each year on each rank, step, and position. The Borough proposed an across-the-board 3% increase on January 1 and a 1% increase on June 1 of each year, and a freeze on starting pay/academy step for new hires. The Borough's proposal would result in a 16% salary increase over four years.

The PBA also proposed folding holiday pay into base salary as compensated time to be paid with regular payroll and utilized for all computation purposes, including overtime and pensions.*fn2

The Borough opposed this proposal because of its financial impact on overtime and pension contributions. It filed a scope of negotiations petition with PERC seeking a determination that this proposal is an illegal subject for negotiation and outside the arbitrator's jurisdiction. PERC dismissed the petition as untimely pursuant to N.J.A.C. 19:16-5.5(c), but noted that "both parties recognize that the placement of holiday pay into base pay is mandatorily negotiable and that only the Division on Pensions [and Benefits] may determine whether that form of holiday pay is creditable for pension purposes."

The PBA also proposed a medical opt-out provision of 50% of the amount of premium the Borough saved to be paid to the opting-out officer no later than November in each calendar year; the establishment of an IRS Plan Code Section 125(b) Cafeteria Plan to allow for the voluntary allocation on a pre-tax basis; a $100 annual increase in clothing allowance from 2007 to 2010; and a modification of Article XLII to require the Borough to pay the PBA $150 annually to provide legal services.

The Borough did not propose a medical opt-out provision; rather, it proposed a health and prescription plan that would transfer officers from the PBA Traditional and Direct Access plans to the less-costly civilian Traditional and Direct Access plans, effective July 1, 2008. It also proposed paying $150 per year per officer toward legal defense insurance to be purchased by the officers through the PBA.

The arbitrator acknowledged that he must decide the dispute giving due weight to the factors listed in N.J.S.A. 34:13A-16g.*fn3

Those factors are as follows:

(1) The interests and welfare of the public. . . .

(2) Comparison of the wages, salaries, hours, and conditions of employment of the employees involved in the arbitration proceedings with the wages, hours, and conditions of employment of other employees performing the same or similar services and with other employees generally:

(a) In private employment in general . . . .

(b) In public employment in general . . . .

(c) In public employment in the same or similar comparable jurisdictions . . . .

(3) The overall compensation presently received by the employees, inclusive of direct wages, salary, vacations, holidays, excused leaves, insurance and pensions, medical and hospitalization benefits, and all other economic benefits received.

(4) Stipulations of the parties.

(5) The lawful authority of the employer . . . .

(6) The financial impact on the governing unit, its residents and taxpayers. When considering this factor in a dispute in which the public employer is a county or a municipality, the arbitrator . . . shall take into account . . . how the award will affect the municipal or county purposes element, as the case may be, of the local property tax; a comparison of the percentage of the municipal purposes element or, in the case of a county, the county purposes element, required to fund the employees' contract in the preceding local budget year with that required under the award for the current local budget year; the impact of the award for each income sector of the property taxpayers of the local unit; the impact of the award on the ability of the governing body to (a) maintain existing local programs and services, (b) expand existing local programs and services for which public moneys have been designated by the governing body in a proposed local budget, or (c) initiate any new programs and services for which public moneys have been designated by the governing body in a proposed local budget.

(7) The cost of living.

(8) The continuity and stability of employment including seniority rights and such other factors . . . which are ordinarily or traditionally considered in the determination of wages, hours, and conditions of employment through collective negotiations and collective bargaining between the parties in the public service and in private employment.

(9) Statutory restrictions imposed on the employer . . . [N.J.S.A. 34:13A-16g.]

After extensively analyzing the parties' respective proposals, arguments and evidence, the arbitrator rendered a decision on December 18, 2008, making the following award for salary and fold-in of holiday pay:

2007: 3% increase effective January 1, 2007, and 1% effective July 1, 2007; 2008: 3% increase effective January 1, 2008, and 1% effective July 1, 2008; 2009: inclusion of holiday pay in base salary effective January 1, 2009 by 5% increase, plus 2.5%, and 1% effective July 1, 2009; effective January 1, 2009, new hires would be subject to a new salary schedule;*fn4 and 2010: 2.5% increase effective January 1, 2010, and 1% effective July 1, 2010.

The arbitrator also analyzed the Borough's and PBA's respective health and prescription plans and awarded the Borough's health and prescription plan proposal effective January 1, 2009. He also awarded the PBA's medical opt-out proposal, effective January 1, 2009, applicable to both the medical insurance and prescription plans; required the Borough to contribute $150 annually per officer for the purchase of legal defense insurance, effective January 1, 2009;*fn5 and denied the PBA's proposal to increase the clothing allowance.

Addressing N.J.S.A. 34:13A-16g(6), the financial impact of the award on the Borough, its residents and taxpayers, the arbitrator noted that the awards for 2007 and 2008 were the same as the Borough's proposal, except the Borough sought a 1% increase effective June 1 of each year. His award delayed the 1% increase to July 1, thus saving the Borough $52,324 in 2007, $54,432 in 2008, $56,351 in 2009, and $58,338 in 2010. Also, the total salary increase for four years was $1,402,788, which was $151,451 less than the Borough's proposal and $786,665 less than the PBA's proposal.*fn6 In sum, the award reflected a 15% salary increase over four years, 1% less than the Borough proposed.

The arbitrator also noted that awarding the Borough's health and prescription plan proposal will save the Borough $124,588 in both 2009 and 2010. He also estimated, based on the Borough's past hiring patterns, that the new salary schedule for new hires could save the Borough nearly $1 million in cumulative earnings as each officer moved through the salary guide with the two extra steps.

The arbitrator also found folding-in holiday pay was supported by evidence that a large number of municipalities in Bergen County fold holiday pay into base salary. He relied on the Borough's calculations in assessing the financial impact of folding-in holiday-pay on increased overtime costs, and determined there would be an initial 5% increase; however, he estimated the actual cost at between 3% and 15% due to the compounding of holiday pay on an officer's longevity pay. He acknowledged his inability to confirm his calculations; however, he offset the financial impact of the estimated costs by (1) awarding below average wage increases; (2) reducing annual costs of salary increases by "split" raises; (3) awarding the Borough's health and prescription plan proposal; and (4) adding two steps for new hires.

In assessing the financial impact of folding-in holiday pay on increased pension contributions, the arbitrator emphasized he made no finding it was creditable for pension purposes. Nonetheless, he was obligated to cost-out the economic impact in the event the Division on Pensions and Benefits (Division on Pensions) found folding-in holiday pay creditable for pension purposes. He set forth the awarded salary increases for 2008 and noted that the new base salary was the same under the awarded salary increases as it was under the Borough's proposal.*fn7

Using the Borough's figures, he calculated the approximate*fn8 increased pension contribution cost for 2009 and 2010. The arbitrator also acknowledged that the 2008 base salary would increase by 5%, and noted that this increase, along with the 3.5% increase for 2009, would be the same amount of holiday pay the Borough had to pay under the previous CBA. Using the Borough's annual pension contribution rate and the rate increase that would occur on April 1, 2009, he calculated the increased pension contribution costs for holiday pay and the total cost in 2009 for increased pension contributions. The costs were consistent with the Borough's calculations. Again, the arbitrator balanced the financial impact by his aforementioned offsets.

The arbitrator also found that the award satisfied the interests and welfare of the public, N.J.S.A. 34:13A-16g(1), "to maintain labor harmony and high morale and to provide adequate compensation levels to attract and retain the most qualified employees[,]" and "maintain the Borough's ability to recruit and retain qualified and experienced police officers consistent with the requirements of this factor."

The Borough and the PBA provided an extensive analysis of the comparison of the wages, salaries, hours, and condition of employment of the Borough's police officers to those of employees performing the same or similar services with other employees generally in public employment in the same or similar comparable jurisdictions. See N.J.S.A. 34:13A-16g(2)(c). Accordingly, the arbitrator focused extensively on this factor and did not compare private and public sector employment in general, N.J.S.A. 34:13A-16g(2)(a) and (b), or explain why such a comparison was not relevant.

The arbitrator gave considerable weight to the overall compensation factor, N.J.S.A. 34:13A-16g(3), in analyzing the Borough's healthcare proposal and the holiday pay fold-in. He found that the award's terms were consistent with other settlements in Bergen County and throughout the State, and maintained consistent levels of benefits.

The arbitrator also considered the parties' stipulation. See N.J.S.A. 34:13A-16g(4). He also noted that his findings with regard to lawful authority, N.J.S.A. 34:13A-16g(5), apply to his analysis of the financial impact on the governing unit, its residents and taxpayers. He found no evidence in the record that the award will cause the Borough to approach the limits of its financial authority or violate the constraints of N.J.S.A. 34:13A:16g(1), (5) and (9). He further considered the CAP laws*fn9 in conjunction with N.J.S.A. 34:13A-16g(6), financial impact, and concluded there would be no adverse financial impact on the Borough, its residents and taxpayers.

As for the cost of living, N.J.S.A. 34:13A-16g(7), the arbitrator acknowledged that the base salary increases are moderately higher than the 2007 and 2008 cost of living increases; however, he found they "provide for an acceptable increase in real earnings that must be measured against the continued delivery of quality services by the Borough's police officers." He also emphasized that the Borough's final proposal was above the Consumer Price Index in 2008, and found the award provides for base salary increases that over four years "will allow for a modest increase in real earnings consistent with historical trends."

The arbitrator gave considerable weight to the continuity and stability of employment. N.J.S.A. 34:13A-16g(8). He found the new salary schedule for new hires also benefits the bargaining unit as a whole. He also found the police officer salaries in Bergen County to be very competitive and that Bergen County police officers are the highest paid in the State. That being so, he found that the current salary schedule that allows movement to the maximum step in four to five years will eventually undermine the parties' ability to negotiate salaries for maximum step police officers because "a significant expenditure of available funds will be needed to pay less experienced officers high salaries." Accordingly, he crafted the salary schedule in order to avert problems in future negotiations and "to ensure that experienced officers continue to receive competitive salary increases."

The arbitrator also found that the new salary schedule for new hires will produce considerable savings that will offset the cost of paying senior officer salaries, "thus, maintaining a competitive salary and the continuity and stability of employment that is essential to a productive and effective police department." He concluded these changes will not impact the Borough's ability to recruit and retain police officers because the maximum salaries on both salary schedules will remain the same.

After the arbitration hearing, the Borough sought to introduce four rebuttal exhibits and other evidence. The arbitrator denied the request. The Borough did not seek special permission to appeal that determination.

The Borough appealed to PERC, challenging folding-in holiday pay, the two salary steps for new hires, and the $150-per-officer annual payment for legal defense insurance. PERC concluded the arbitrator properly addressed the financial impact of folding-in holiday pay and its effect on overtime. PERC found that the arbitrator identified the initial increase to overtime costs at 5% and balanced the impact of folding-in holiday pay by his offsets.

PERC noted the arbitrator made no finding folding-in holiday-pay was creditable for pension purposes but felt obligated to cost-out the financial impact. PERC concluded the arbitrator properly addressed the financial impact and the effect on pension costs, his calculations were sound, and the evidence supported folding-in holiday pay.

PERC emphasized that the Borough presented no evidence of an economic downturn and its impact on State and local governments to the arbitrator, and the evidence the Borough presented to PERC of an economic downturn post-dated the award. Further, the Borough failed to seek special permission to appeal the arbitrator's decision to exclude the four rebuttal exhibits and other evidence, or explain this evidence, its relevance, or what bearing it had on the state of the economy. Nonetheless, PERC stayed implementation of the award and remanded for the arbitrator to address two issues: (1) comparability to private and public sector employees in general, N.J.S.A. 34:13A-16g(2)(a) and (b); and (2) the impact of the $1 million in projected savings from the new salary schedule for new hires based on evidence of a hiring freeze the Borough submitted to PERC.

In a supplemental decision, the arbitrator found no basis to modify the award. He analyzed and calculated the projected savings of the new salary steps for new hires in light of the hiring freeze and concluded the Borough will experience immediate savings, and there would be an even greater offset against the holiday pay fold-in than the projected savings for new hires on the new salary schedule.

The arbitrator also addressed comparability to private and public sector employees in general. He gave no weight to N.J.S.A. 34:13A-16g(2), a comparison to other employees performing the same or similar services in private employment. He found "[n]either party submitted salary data on this sub-factor since none exists[;]" "there are no easily identif[iable] private sector police officers who perform services similar to those performed by Borough police officers[;]" and "[a] police officer's position is a uniquely public sector position that does not lend itself to private sector comparisons."

The arbitrator gave no significant weight to N.J.S.A. 34:13A-16g(2)(a), a comparison to private employment in general. He found "that the awarded salary increases, while somewhat higher than private employment salary increases in general, is acceptable when measured against the totality of the terms of the award."

In comparing public employment in general, N.J.S.A. 34:13A-16g(2)(b), the arbitrator found that the public sector salary data "shows that the average annual salary increases in public employment in general are consistent with the salary increases proposed by the Borough at 4% annually and the awarded salary increases average 3.75% annually." He concluded that this sub-factor supported the award.

PERC affirmed the award. This appeal followed. On appeal, the Borough contends PERC failed to apply the standard of review applicable to interest arbitration awards. The Borough argues, in part, that the arbitrator did not sufficiently analyze all of the statutory factors but merely provided a perfunctory analysis and conclusory assertions; improperly focused on Bergen County comparative salaries and the Borough's ability to pay; and improperly grouped the CAP law factors together, effectively nullifying three mandatory factors.*fn10

N.J.S.A. 34:13A-16g requires an arbitrator to "decide the dispute based on a reasonable determination of the issues, give due weight to [nine] factors . . . that are judged relevant for the resolution of the specific dispute." The arbitrator need not rely on all nine factors-only those he deems relevant. N.J.S.A. 34:13A-16g; Hillsdale PBA Local 207 v. Borough of Hillsdale, 137 N.J. 71, 83 (1994). The arbitrator must "indicate which of the factors are deemed relevant, satisfactorily explain why the others are not relevant, and provide an analysis of the evidence on each relevant factor." N.J.S.A. 34:13A-16g; see also Hillsdale, supra, 137 N.J. at 83.

Absent violation of standards of conduct, PERC's appellate role is to determine whether the arbitrator considered the criteria in N.J.S.A. [34:13A-16g] governing the issuance of an interest arbitration award and rendered a reasonable determination of the issue or issues at impasse that was supported by substantial evidence in the record.

[Twp. of Teaneck v. Teaneck Firemen's Mut. Benev. Ass'n Local No. 42, 353 N.J. Super. 289, 306 (App. Div. 2002), (citing Hillsdale, supra, 137 N.J. at 82), aff'd o.b., 177 N.J. 560 (2003). ]

Because the Legislature entrusted arbitrators with weighing the evidence, PERC will not disturb an arbitrator's exercise of discretion unless the arbitrator failed to adhere to these standards. Id. at 308-09.

PERC's interpretations of the interest arbitration laws are particularly accorded deference, Newark Firemen's Mut. Benev. Ass'n Local No. 4 v. City of Newark, 90 N.J. 44, 55 (1982), and its decision reviewing awards are likewise entitled to the full scope of deference, see Teaneck, supra, 353 N.J. Super. at 298, 300. Accordingly, "[o]ur scope of review of PERC decisions reviewing arbitration is sensitive, circumspect and circumscribed. PERC's decision will stand unless clearly arbitrary or capricious." Id. at 300 (citing In re Hunterdon Cnty. Bd. of Chosen Freeholders, 116 N.J. 322, 328 (1989); In re Twp. of Bridgewater, 95 N.J. 235, 244--45 (1984)).

Applying these standards, we discern no reason to disturb PERC's decisions. First, the Borough's contention that the award is void because the arbitrator erroneously concluded the holiday pay fold-in was creditable for pension purposes lacks merit. The arbitrator did not assume or conclude that the holiday pay fold-in was creditable for pension purposes. He recognized, and we agree, that only the Division on Pensions can make that determination. Until such a determination is made, the holiday pay fold-in will only be creditable for all purposes as presently allowed by law.

Second, we are satisfied the arbitrator sufficiently considered and gave due weight to the N.J.S.A. 34:13A-16g factors he judged relevant, satisfactorily explained why certain factors were not relevant, and provided an adequate analysis of the evidence on each relevant factor. His reasoned analysis, as supplemented by his decision on remand, was supported by substantial credible evidence.

Finally, we are satisfied PERC applied the correct standard of review, and properly determined that the arbitrator considered the N.J.S.A. 34:13A-16g factors. PERC also rendered a reasonable determination of the issues that was supported by substantial evidence in the record, and its decision is not arbitrary or capricious.

Affirmed.


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