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Borough of East Rutherford v. East Rutherford Pba Local 275

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 18, 2011

BOROUGH OF EAST RUTHERFORD, PLAINTIFF-RESPONDENT,
v.
EAST RUTHERFORD PBA LOCAL 275,*FN1 DEFENDANT-APPELLANT.

On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2732-10.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 22, 2011

Before Judges Wefing, Payne and Hayden.

Defendant, East Rutherford PBA Local 275 (PBA), appeals from the order of a Law Division judge vacating an arbitrator's decision requiring, until the expiration of the existing collective bargaining agreement, that plaintiff, Borough of East Rutherford (Borough), reimburse PBA members five dollars of the ten-dollar co-pay for physician visits mandated by the State Health Benefits Plan (SHBP), effective January 1, 2007. See N.J.S.A. 52:14-17.29(C). We reverse.

I.

The PBA entered into a collective bargaining agreement (CBA) with the Borough effective from January 1, 2005 to December 31, 2009. A number of the provisions of the CBA are relevant to the present dispute. Article 5.01 provided:

The provisions of this Agreement shall be subject to [and] subordinate to and shall not annul or modify existing applicable provisions of State or Federal Laws.

Article 7, governing preservation of rights, contained a provisions that stated:

7.02 Nothing contained herein shall be construed to deny or restrict the Borough of its rights, responsibilities and authority, under R.S. 11.40 and 40A, or any other national, state, country [sic], or other applicable laws.

7.03 The Borough agrees that all benefits, terms and conditions of employment relating to the status of Employees, which benefits, terms and conditions of employment are not specifically set forth in this Agreement, shall be maintained at not less than the highest standards in effect at the time of the commencement of the collective bargaining negotiations between the parties leading to the execution of this Agreement.

7.04 Unless a contrary intent is expressed in this Agreement, all existing benefits, rights, duties, obligations and conditions of employment applicable to any Employee pursuant to any rules, regulations, instruction, directive, memorandum, practice, statute or otherwise shall not be limited, restricted, impaired, removed or abolished.

Article 29, which pertained to medical and insurance coverage, provided, in relevant part:

29.01 The Borough will continue to provide and pay for existing Medical and prescription plans and coverage for Employees covered by this Agreement and their families. Any change in carrier or source of coverage shall result in equal or better coverage.

29.02 A Three ($3.00) Dollar Co-Payment will be attached to the Prescription Insurance Plan, per prescription.

29.03 All increases in premiums during the term of this Agreement shall be borne entirely by the Borough pursuant to present practice.

The Borough has been enrolled in the SHBP as a voluntary participant since December 2001. As such, it has offered medical insurance coverage to PBA members and their families who chose to enroll in its NJ Plus or HMO plans. From 2002 to the end of 2006, PBA members made a five-dollar co-payment in connection with each office visit to a physician. As we have previously stated, effective January 1, 2007, that co-pay was statutorily increased to $10.00.

On January 24, 2007, the PBA filed a grievance regarding the increased co-pay. The PBA indicated that the "Adjustment Desired" was "[r]e-imbursement of additional co-payment cost and return to negotiated co-payments." When the Borough denied the grievance, on March 30, 2007, the PBA demanded arbitration pursuant to the CBA.

On May 24, 2007, the Borough responded to the demand for arbitration by filing a petition with the New Jersey Public Employment Relations Commission (PERC) for a scope of negotiations determination, seeking a restraint of binding arbitration of the grievance filed by the PBA. On September 25, 2008, PERC rendered its decision declining to restrain arbitration without prejudice to the Borough's right to refile its petition "should the arbitrator find a contractual violation and a dispute arise over the negotiability of any remedy issued." I/M/O Borough of East Rutherford and East Rutherford P.B.A. Local 275, P.E.R.C. No. 2009-15 (2008). In doing so, it rejected the Borough's argument that the matter was preempted by N.J.S.A. 52:14-17.29(C), the provision increasing member co-pays for doctor visits to ten dollars. It noted that the Borough and Rockaway Township had both requested a ruling by the State Health Benefits Commission (SHBC) on whether reimbursement of the increased co-pay cost was either authorized or permitted under the SHBP, but that no response from the SHBC had been received.*fn2 (Slip op. at 5-6.) It then held:

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. Absent a preemptive statute or regulation not present here, an employer must reconcile its contractual obligations with its choice of health insurance benefits. [Id. at 7.]

As a final matter the PERC noted that an arbitrator could not order the employer to continue previous co-pay levels for NJ PLUS and HMO office visits, because the SHBC had exercised its authority to set higher levels. Id. at 8. We affirmed the PERC's conclusions in a decision rendered after the arbitrator had made her award in this matter. I/M/O Borough of East Rutherford and East Rutherford P.B.A. Local 275, No. A-1260-08 (March 4, 2010).

In the meantime, the arbitration proceeded. A hearing was held on July 15, 2008, the issue being: "Did the Borough violate the collective bargaining agreement when it raised the co-pay for doctor visits from $5.00 to $10.00 per visit? If so, what shall the remedy be?" On December 29, 2009, within days of the expiration of the CBA, the arbitrator rendered her decision. After detailing the positions of the parties, she noted that there was no dispute that the change was unilaterally imposed by the Borough in response to the decision of the SHBC to raise the amount of the co-pay. Further, she noted that the CBA did not specifically address co-payments for office visits to doctors but that, in § 29.01, the Borough committed to paying for the "existing medical and prescription plans and coverage for employees" and their families covered by the CBA. It was also undisputed that, beginning in 2002, PBA members had paid a five-dollar co-pay for doctor's office visits. She then held:

In § 7.03 the Borough agreed that " . . . all benefits, terms and conditions of employment relating to the status of Employees, which benefits, terms and conditions of employment are not specifically set forth . . ." in the Agreement would be ". . . maintained at not less than the highest standards" in effect when bargaining for the Agreement commenced. Similarly, in § 7.04, the parties agreed that "[u]nless a contrary intent is expressed. . ." in the Agreement, ". . . all existing benefits, rights, . . . and conditions of employment applicable to any Employee pursuant to any rules, regulations, . . . or otherwise shall not be limited, restricted, impaired, removed or abolished."

In agreeing to include these provisions in Article 7, the parties plainly acknowledged that it was not possible to catalog all benefits, terms and conditions of employment through the use of express contractual language. Therefore, unless they expressed a contrary intent in their contract, the parties agreed that "all existing benefits, rights . . . and conditions of employment . . ." applicable to the employees pursuant to any rules or regulations, etc. would continue for the term of the Agreement. . . . In giving meaning to this language, the Arbitrator is not exceeding her contractual authority by adding to the Agreement. Rather, she is interpreting and applying its provisions, notably those in Article 29, in a manner that also gives effect to those set forth in §§ 7.03 and 7.04.

The arbitrator recognized that under the PERC precedent that we have discussed, she lacked the authority to order the Borough to restore the five-dollar co-pay until the parties had negotiated a change. However, she found no legal or contractual reason why she could not direct the Borough to reimburse the employees for co-payments in excess of five dollars for the period commencing on January 1, 2007 and continuing thereafter until the expiration of the CBA. She therefore sustained the grievance and ordered the reimbursement remedy.

Shortly thereafter, the Borough instituted an action in the Law Division seeking to vacate the arbitrator's award. The PBA filed an answer and counterclaim seeking an order confirming the award. The matter was heard on June 1, 2010, and in an oral opinion delivered that day, the judge granted the Borough's motion. In doing so, the judge relied on Article 5.01, which stated: "The provisions of this agreement shall be subject to and shall not annul or modify existing applicable provisions of State or Federal laws." The judge determined that that provision, when read with N.J.S.A. 52:14-17.29(C) governing co-payments for visits to the doctor, barred the reimbursement relief ordered by the arbitrator, because her order constituted a violation of a clear mandate of public policy as statutorily expressed, was the product of undue means, and was in excess of the arbitrator's authority. The judge held:

The award . . . effectively returns the co-payment to $5 by ordering reimbursement of HMO co-payments under the S.H.B.P. Since such an award directs the Borough to violate the uniformity requirements of the S.H.B.P., the award is contrary to existing law and the public policy of New Jersey.

The statute and regulation showing that the S.H.B.C. has clear authority to determine uniform rules and regulations for administration of the S.H.B.P. which the Borough must abide by if it intends to remain an S.H.B.P. participant, states in pertinent part - and I'm referencing N.J.S.A. 52:14-17.36 regarding participation in [the] Health and Benefits Program.

And it states, "The commission established by Section 3 of Chapter 49 is hereby authorized to prescribe rules and regulations satisfactory to the carrier or carriers under which employers may participate in the Health Benefits Program provided by that act. All provisions of that act will, except as expressly stated herein, be construed as to participating employers and to their employees and to dependents of such employees the same as for the State employees of the State and dependents of such employees."

The judge found that N.J.A.C. 17:9-1.4 likewise required such uniformity. Because N.J.S.A. 52:14-17.29(C) required co-payments of ten dollars, the "arbitration award legally could not provide for a remedy requiring HMO co-payments of less than $10." Having found that the arbitrator's award violated public policy, the judge additionally found that it constituted a mistake of law, that the award was procured by undue means and that it exceeded the arbitrator's authority.

II.

In deciding this matter, we are mindful of the limited scope of a court's review of public sector arbitration awards. "In the public sector, the scope of review in matters of interpretation is confined to determining whether the interpretation of the contractual language is reasonably debatable." Cnty. Coll. of Morris Staff v. Cnty. Coll. of Morris, 100 N.J. 383, 390-91 (1985) (citing State v. State Troopers Fraternal Assn., 91 N.J. 464, 469 (1988)); see also State v. Int'l Fed. of Prof'l & Technical Eng'rs Local 195, 169 N.J. 505, 513-14 (2001). Nonetheless, an arbitrator's award can be vacated "when it has been shown that a statutory basis justifies such an action." Id. at 391 (citing Kearney PBA Local #21 v. Kearney, 81 N.J. 208, 221 (1979)). It may also vacate an award where there is evidence of corruption, fraud, evident partiality and "'[w]here the arbitrators exceeded or so imperfectly executed their powers that a mutual, final and definite award upon the subject matter submitted was not made.'" Id. at 514 (quoting N.J.S.A. 2A:24-8).

In the present case, the Law Division judge relied on his conclusion that the arbitrator's award violated law and public policy in vacating that award. See W.R. Grace & Co. v. Local Union 759, Int'l Union of the United Rubber, Cork, Linoleum & Plastic Workers of Am., 461 U.S. 757, 766, 103 S. Ct. 2177, 2183, 76 L. Ed. 2d 298, 307 (1983) (holding that the courts may not enforce collective bargaining agreements that are contrary to "well defined and dominant" public policy); N.J. Turnpike Auth. v. Local 196, I.F.P.T.E., 190 N.J. 283, 293-300 (2007) (endorsing a narrow view of public policy); Bd. of Educ. of Borough of Alpha v. Alpha Educ. Ass'n, 188 N.J. 595, 603 (2006) (recognizing legal principle); Weiss v. Carpenter, Bennett & Morrissey, 143 N.J. 420, 443 (1996) (imposing an enhanced level of scrutiny when arbitration award implicates a clear mandate of public policy).

We disagree, determining that the arbitrator's interpretation of the CBA does not compromise public policy by undermining the SHBC's determination, embodied in the amendment to N.J.S.A. 52:14-17.29(C), to uniformly increase co-payments for doctor visits and that she rendered a reasonably debatable interpretation of the contract. See also N.J.S.A. 52:14-17.36 (requiring that the rules and regulations of the SHBC be "construed as to participating employers and to their employees and to dependents of such employees the same as for the State, employees of the State and dependents of such employees.");

N.J.A.C. 17:9-14 ("An employer joining the SHBP must adopt the resolution furnished by the Division and must agree to comply with the statutes and rules adopted by the Commission.").

At the time that the CBA was negotiated, the co-payment required of SHBP members was five dollars. The imposition of that five-dollar charge on PBA members conformed with their CBA, which subordinated the provisions of the CBA to "existing" applicable provisions of State law.*fn3 The record establishes that PBA members enrolled in the SHBP had been paying a five-dollar co-pay for five years. Unquestionably, the payment of that amount constituted a past practice that constituted an implied term of the CBA. State Troopers Fraternal Assoc. of N.J. v. State, 149 N.J. 38, 50 (1997) (recognizing that past practices "need not be formalized to become an implied term of a contract.").

During the effective period of the 2005-2009 CBA, the law was amended to require a ten-dollar co-pay. The order of the arbitrator did not modify this requirement, which continued to be imposed uniformly on both State employees and members of the PBA as required by N.J.S.A. 52:14-17.36 and N.J.A.C. 17:9-1.4. Thus, it had no fiscal impact on the SHBP.*fn4 However, mindful of the "preservation of rights" provisions of Article 7 of the CBA, the arbitrator imposed a requirement that, for the term of the CBA, the Borough reimburse PBA members and their dependents for any funds expended as co-payments above the five-dollar figure that was the standard at the commencement of the collective bargaining negotiations, thereby insuring that existing benefits were not "limited, restricted, impaired, removed or abolished."

We have been offered no controlling statute or precedent that would establish the illegality of the remedy of reimbursement during the term of a CBA in effect at the time of the statutory change, so long as the full amount of the co-pay was remitted in the first instance by the employee enrolled in the SHBP. Therefore, we find no statutory violation or violation of the policy of uniformity in connection with the implementation of N.J.S.A. 52:14-17.29(C). As a consequence, we reverse the judge's decision determining otherwise, concluding that the construction placed on the agreement by the arbitrator was reasonably debatable. Because the other grounds of illegality found by the judge were premised upon the same reasoning that underlay his determination that the award violated public policy, they are reversed, as well.

Reversed. The award of the arbitrator is reinstated.


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