June 29, 2011
COUNTY OF PASSAIC AND OFFICE OF THE PASSAIC COUNTY SHERIFF, PLAINTIFFS-RESPONDENTS,
POLICEMEN'S BENEVOLENT ASSOCIATION LOCAL 286, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-3207-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted June 8,2011
Before Judges Payne and Baxter.
The sole question presented by this appeal is whether the Law Division judge erred when he vacated an arbitrator's award in favor of defendant Policemen's Benevolent Association Local 286 (PBA) in which the arbitrator had ordered plaintiffs, the County of Passaic and the Office of the Passaic County Sheriff (the County), to prospectively restore a five-percent pay differential to all detectives, which the County had been paying for six years in lieu of overtime compensation, until it discontinued the practice. We agree with the judge's conclusion that the arbitrator's decision was contrary to public policy, and improperly applied past practices to override the unambiguous terms of the contract for which the parties had bargained. We therefore affirm the order under review.
I. The PBA is an employee organization representing Passaic County Sheriff's Officers including sheriff's officers holding the rank of detective. The parties were bound by a collective bargaining agreement (CBA), which was valid from January 1, 2003 through December 31, 2006. Although the agreement was set to expire at that time, it is still in effect because a new agreement has not been finalized. At issue in this appeal is the agreement between the County and the PBA, in which the County agreed to pay the detectives working in the Sheriff's Department a five-percent pay differential.
The CBA contains four sections pertinent to our review. The first is Article 6, which provides for overtime pay:
Article 6 (Overtime Payment)
For Correctional, Courthouse and Patrol Officers, time and one-half (1 1/2) the Employee's regular rate of pay shall be paid in fifteen (15) minute segments after such Employee has worked ten (10) minutes beyond the normal eight (8) hours work shift for both four and two (4 & 2) and five and two (5 & 2) personnel, provided that such Employee reported for work on time for his/her original shift, and further provided that said Employee worked the full shift.
A separate provision, Article 9, "Night Differential," specifies that any detective working the night shift, between 3:00 p.m. and 7:00 a.m., would be entitled to a pay differential of either five or ten percent in addition to the employee's regular pay. This section authorizes extra pay, based on working the night shift, and does not require the employee to have worked overtime. It provides:
Article 9 (Night Differential)
Employees working on shifts whose working hours fall between 3:00 PM and 7:00 AM shall receive, in addition to their regular pay, an additional ten (10%) percent of their base salary which shall be incorporated in the base pay. This ten (10%) percent night differential shall be divided equally into the number of pay periods in each year, and said amount, incorporated into the base salary, shall be paid each regular pay. Said amount shall also be paid to all Employees working the second and third shifts when on vacation, personal, sick and holiday leave.
An additional ten (10%) percent may also be paid to Employees who do not strictly fall into the above categories if their responsibilities sometimes call for odd hours, and if authorized by the Sheriff or his designated representative.
Effective January 1, 2000, the current night differential paid to Employees working the 11:00 PM to 7:00 AM shift, will decrease to five (5%) percent for all new Employees hired after January 1, 2000. [Emphasis added).]
The contract also contains a "Miscellaneous" provision, Article 16, which provides, in relevant part:
Article 16 (Miscellaneous)
Except a[s] otherwise provided herein, all benefits which Employees have heretofore enjoyed and are presently enjoying shall be maintained and continued by the county during the term of this agreement. The personnel policies and regulations of this department, established for all Employees of all divisions, which have [been] mutually agreed upon and are in effect, shall continue to be applicable to all officers except as otherwise provided herein. [(Emphasis added).]
Also contained is a "No Waiver" provision, Article 19, which provides that a party's failure to enforce any portion of the CBA will not constitute a waiver of a subsequent right to seek enforcement of the provision in question:
Article 19 (No Waiver)
Except as otherwise provided in this Agreement, the failure to enforce any provision of this Agreement shall not be deemed a waiver thereof.
This agreement is not intended and shall not be construed as a waiver of any right or benefit to which the Employees herein are entitled by law.
In July 2008, the PBA filed a grievance challenging the County's
refusal to pay the night shift differential. An arbitration hearing
was held on October 20, 2009, where the issue was described as
follows: "Whether the County violated the collective negotiations
agreement or past practice by stopping the night shift differential
payment to Detectives in June 2008?" Local 286 President James Weston
was the only witness to testify at the arbitration hearing.*fn1
Weston was hired in May 2002 as a detective in the Sheriff's
Office and worked there until he became the president of Local 286.
According to Weston, ninety percent of the detectives work the day shift, and have little opportunity to earn overtime. He explained that "management 'frowned upon' detectives working overtime" and if they did, "supervisory approval was required."
If a detective worked overtime, the supervisor typically instructed the detective to "take a 'wash day,'" which meant the detective was directed not to report to work the next day. This practice of taking a "wash day" was the detectives' only option because detectives were not permitted to apply for the overtime pay that was available to other sheriff's officers under Article 6.
To address this disparity in overtime availability, in June 2002, prior to negotiating the CBA, the parties established -- for detectives only -- a practice of awarding the detectives a five-percent pay differential, which meant that their salary was augmented by five percent, regardless of whether they worked any overtime and regardless of whether they worked the day shift or the night shift. Stated differently, the detectives were temporarily awarded a five-percent pay increase, in lieu of overtime. Notably, the parties never documented this agreement, nor did they incorporate it into the CBA that was signed in December 2003, to be retroactive to January 1, 2003.
The County paid detectives the five-percent differential for approximately six years until June 2008, when the County unilaterally advised the PBA that due to budget constraints it would no longer do so. Instead, detectives would be entitled to augment their salary only if they were approved for, and worked, overtime.
At the arbitration, the PBA argued that the County "violated the past practice clause of the agreement when it unilaterally ceased paying a 5% detective differential." This practice, according to the PBA should be "binding on both parties . . . [because] it is unequivocal; clearly enunciated and acted upon; and readily ascertainable over a reasonable period of time."
The PBA also maintained that even though the differential was referred to as a "Night Differential," it is a "separate and distinct" benefit from that provided under Article 9, "Night Differential," in the contract. To further support its position that Article 9 does not apply to the differential at issue, the PBA noted that Article 9 provides a ten-percent differential for employees hired before June 1, 2000, and five-percent for those hired thereafter; however, all detectives, regardless of date of hire, received the five-percent differential.
In contrast, the County contended that an "employer may unilaterally discontinue a practice of granting benefits more generous than those set out in the contract . . . and return to the benefit level provided for by the agreement."
The arbitrator found that the "detectives received the differential in exchange for foregoing the overtime compensation set forth in Article 6." The arbitrator observed that this was not an Article 9 "night" differential because it was "remitted to all detectives 'in lieu of overtime.'" The arbitrator reasoned that the five-percent differential did not "parallel the Article 9 benefit" because "if the County had intended to apply the [Article 9] night differential to all detectives, some of them presumably would have received a 10% differential based on a pre-2000 date of hire." Thus, the arbitrator found that the five-percent differential "was an unwritten benefit that is not addressed in the contract."
Next, the arbitrator concluded that the pay differential constituted a binding past practice because the County's action of paying the five-percent differential "represented a fixed and mutually accepted practice." Notably, the County had advised the PBA that "the cessation was temporary" for "budgetary reasons." Even though the County argued that the practice of paying the differential was "temporary," the arbitrator found there was "no evidence that the parties contemplated a specific endpoint to the practice," thereby negating the County's contention that the practice was merely "temporary." As such, the arbitrator concluded that the "County's actions reflect its understanding that it was suspending a fixed and established practice, not a temporary one." Therefore, according to the arbitrator, the County violated a "binding and enforceable past practice" when it discontinued the five-percent differential payment for detectives. The arbitrator awarded the detectives prospective payment of the differential, but no retroactive compensation, because the PBA had agreed to a temporary "halt" of the differential payments.
On June 23, 2010, the County filed a verified complaint in the Law Division, arguing that the arbitration award should be vacated because "the Arbitrator exceeded the scope of [his] authority by ignoring the clear and unambiguous language of the Agreement concerning the night differential payment and overtime payment" and because it "was premised on an incorrect legal rule and in conflict with established case law." The PBA's counterclaim argued that the arbitrator's findings, "that the past practice was unequivocal, clearly enunciated and acted upon, and ascertainable over a reasonable period of time," should be confirmed by the Law Division, because: it was "proper and lawful in all respects"; the arbitrator "based his decision upon his interpretation of the contract language"; the arbitrator "did not exceed or imperfectly execute his powers"; the arbitrator's "interpretation of the collective bargaining agreement was reasonably debatable"; and the County "cannot establish any of the elements of N.J.S.A. 2A:24-8."
In a written opinion and confirming order issued on November 16, 2010, Judge Rothstadt vacated the arbitration award and entered judgment in favor of the County. The judge observed that in June 2008 the County unilaterally terminated the agreement to pay the detectives a five-percent differential and "reverted to payment of overtime as established under Article 6." As such, the "award must be vacated because the arbitrator ignored the express terms of the [CBA] by substituting a past practice for the express provisions applicable to overtime pay," in violation of N.J.S.A. 2A:24-8(a). Specifically, "[t]he [CBA] expressly contained provisions for overtime." Thus, "[t]he arbitrator did not have to look any further than the contract to resolve the parties' dispute." The judge noted that although it is appropriate to consider past practices to help resolve an ambiguity in the language of the agreement, consideration of past practices is not appropriate where, as here, the agreement's language and meaning were clear.
Furthermore, Judge Rothstadt concluded that the arbitrator's award "violate[d] public policy" because it ignored the "required public approval process" for governing bodies, in violation of N.J.S.A. 2A:24-8(d).
On appeal, the PBA argues:
I. THE ARBITRATOR'S AWARD IS A REASONABLY DEBATABLE INTERPRETATION OF THE PARTIES['] COLLECTIVE BARGAINING AGREEMENT AND THE ARBITRATOR DID NOT EXCEED HIS POWER IN RENDERING THE AWARD.
II. THE ARBITRATION AWARD WAS BASED ON AN UNREFUTED PAST PRACTICE AND THEREFORE NOT PROCURED BY UNDUE MEANS.
III. THE ARBITRATION AWARD DOES NOT VIOLATE PUBLIC POLICY AND THEREFORE SHOULD BE CONFIRMED.
II. "New Jersey jurisprudence favors the use of arbitration to resolve labor-management disputes." Linden Bd. of Educ. v. Linden Educ. Ass'n, 202 N.J. 268, 275-76 (2010) (internal quotation marks and citation omitted). Arbitration "should be the end of the labor dispute, not a way-station on route to the courthouse." Id. at 276. By choosing arbitration, the parties bargain for the arbitrator's construction of the language of the contract, and the ability to fill gaps. Ibid. Parties who choose to submit their disputes to arbitration pursuant to a CBA agree they will ordinarily be bound by the award rendered, no matter how disappointing it may be. Int'l Ass'n of Machinists Lodge 1292, Ind. v. Bergen Ave. Bus Owners' Ass'n, 3 N.J. Super. 558, 566 (Law Div. 1949). As our Supreme Court observed: [i]n promoting a sense of finality, there is a strong preference for judicial confirmation of arbitration awards.
Judicial review of an arbitration award is very limited, and the arbitrator's decision is not to be cast aside lightly. In the public sector, an arbitrator's award will be confirmed so long as the award is reasonably debatable. Consistent with the reasonably debatable standard, a reviewing court may not substitute its own judgment for that of the arbitrator, regardless of the court's view of the correctness of the arbitrator's interpretation. [Linden, supra, 202 N.J. at 276 (internal citations and quotation marks omitted).]
An arbitration award is presumptively final and irrefutable, and will be vacated only in the clearest of cases. N.J. Tpk. Auth. v. Local 196, I.F.P.T.E., 190 N.J. 283, 292 (2007). Therefore, an arbitration award will be vacated only in the following narrow circumstances:
a. Where the award was procured by corruption, fraud or undue means;
b. Where there was either evident partiality or corruption in the arbitrators, or any thereof;
c. Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause being shown therefore, or in refusing to hear evidence, pertinent and material to the controversy, or of any other misbehaviors prejudicial to the rights of any party;
d. Where the arbitrators exceeded or so imperfectly executed their powers that a mutual, final and definite award upon the subject matter submitted was not made.
"Undue means" under subsection (a) encompasses those situations where the arbitrator has made a mistake of fact or law that is either apparent on the face of the record or admitted to by the arbitrator. N.J.S.A. 2A:24-8(a); State, Office of Emp. Relations v. CWA, AFL-CIO, 154 N.J. 98, 111 (1998). A court is entitled to vacate an award in public-sector labor arbitration because of a mistake in law. See CWA, Local 1087 v. Monmouth Cty. Bd. of Soc. Serv., 96 N.J. 442, 453 (1984). Under subsection (d), an arbitrator exceeds or imperfectly executes his or her powers if the arbitrator ignores the clear and unambiguous language of an agreement and the arbitrator relies solely on past practices. City Ass'n of Sup'rs & Adm'rs v. State Operated Sch. Dist. of the City of Newark, 311 N.J. Super. 300, 308, 311-12 (App. Div. 1998). An arbitrator cannot disregard or contradict the language of the agreement and its terms and conditions. Local No. 153, Office & Prof'l Emps. Int'l Union, AFL-CIO v. Trust Co. of N.J., 105 N.J. 442, 452 (1987).
Additionally, because "an arbitrator in a public employment case must consider the law and the public interest," City Ass'n, supra, 311 N.J. Super. at 313, "'where an arbitration award does not draw its essence from the bargaining agreement, it will not be enforced by the courts,'" N.J. Transit Bus Operators, Inc. v. Amalgamated Transit Union, 187 N.J. 546, 553 (2006) (citing Cnty. Coll. of Morris Staff Ass'n v. Cnty. Coll. of Morris, 100 N.J. 383, 392 (1985)).
The arbitrator should "engage in the normal mode of contract interpretation and . . . not construe the terms or provisions in a way that the language [of the agreement] cannot bear." PBA, Local No. 11 v. City of Trenton, 205 N.J. 422, 433 (2011). The arbitrator should "look to the Agreement as an integrated whole and w[ea]ve together its relevant provisions to ascertain how [a specific] clause should be interpreted." Id. at 431. The arbitrator's interpretation must find support in the agreement. Id. at 432.
When a provision is ambiguous, an arbitrator may consider the past practices of the parties and the collective bargaining history. City Ass'n, supra, 311 N.J. Super. at 313. However, if the past practices conflict with the express language of the agreement, the arbitrator is not entitled to rely on past practices and must be governed by the language of the agreement. Id. at 307.
In conducting an analysis of the arbitrator's decision, the trial judge should "determine whether the arbitrator followed the inherent guidelines applicable to public sector arbitration and whether the interpretation of the contractual language is reasonably debatable." State, Dep't of Law & Public Safety, Div. of State Police v. State Troopers Fraternal Ass'n, 91 N.J. 464, 469 (1982). "'[A]n arbitrator's award will be confirmed so long as the award is reasonably debatable.'" PBA, Local No. 11, supra, 205 N.J. at 429 (quoting Linden, supra, 202 N.J. at 276).
We are satisfied, as was Judge Rothstadt, that the arbitrator's resort to past practices was a mistake of law that was apparent on the face of the record, and therefore constituted an award "procured by . . . undue means." See N.J.S.A. 2A:24-8(a). In particular, the language of the CBA clearly addressed overtime pay (Article 6), and entitlement to a night shift differential (Article 9). As the judge stated "[t]he arbitrator need not have looked any further than the contract to resolve the parties' disputes over their 2002 [unwritten] agreement."
In particular, there were only two instances in which detectives were entitled to a salary enhancement: when they worked overtime (Article 6),*fn2 or when they worked the night shift (Article 9). Consequently, to the extent that the "past practice" conferred on detectives the right to a salary enhancement that was unearned -- because it conformed to neither the requirements of Article 6 nor Article 9 -- it was contrary to the express language of the CBA. Moreover, the "past practice" did not fill a gap in Article 6. Rather, it became an additional benefit bestowed on the detectives, and paid to the detectives, even though the CBA that was signed in December 2003 never adopted the "past practice" that had begun in 2002. Thus, the arbitrator's award had the effect of requiring the County to continue to pay the detectives a benefit that was never adopted as part of the collective bargaining process and that was clearly contrary to the express provisions of the CBA. As such, it cannot be sustained. See Port Auth. Police Sergeants Benev. Ass'n, Inc. v. Port Auth. of N.Y. & N.J., 340 N.J. Super. 453, 461-62 (App. Div. 2001).
As the judge in this case aptly observed, "[t]he resolution of the problem created by the detectives not having overtime opportunities should have been addressed through the collective bargaining process that led to the C[B]A, rather than through a side deal [that] the arbitrator validated as a 'past practice.'" Because the arbitrator made a mistake that is apparent on the face of the record, his decision was "procured by . . . undue means," N.J.S.A. 2A:24-8(a), is not "reasonably debatable," and was correctly rejected by the judge.
We also agree with Judge Rothstadt's conclusion that enforcement of the past practice, as interpreted by the arbitrator, was unsustainable as it compromised public policy, N.J. Tkp. Auth., supra, 190 N.J. at 296, by granting benefits that were not part of the CBA and not subject to a formal negotiation and approval process. A part of the Local Fiscal Affairs Law (LFAL), N.J.S.A. 40A:5-1 to -50, expressly requires that the establishment or modification of any public employee's salary, benefits or other compensation must be the subject of a public meeting where it can be discussed by the responsible governing body. N.J.S.A. 40A:5-49. If the governing body takes such salary action without allowing it to be subject to public consideration, the action will be null and void. Ibid.
The arbitration award permitted the parties to adopt new compensation benefits in a manner that ran afoul of the LFAL law. The award therefore violated public policy, as it permitted public monies to be expended, as the judge observed, "contrary to the terms of the written negotiated contracts and without the required approval of all of the public officials responsible for payment." Such a procedure adversely impacts the public interest. S. Plainfield Bd. of Ed. v. Ed. Ass'n, 320 N.J. Super. 281, 291 (App. Div.), certif. denied, 161 N.J. 332 (1999).
We thus affirm Judge Rothstadt's November 16, 2010 order, as we agree with his conclusion that the arbitrator's award was both contrary to public policy and was "procured by . . . undue means, N.J.S.A. 2A:24-8(a).