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Township of East Windsor v. Teamsters Local Union No. 676


August 3, 2011


On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1573-10.

Per curiam.


Argued: March 16, 2011

Before Judges Cuff, Fisher and Fasciale.

Laurence M. Goodman argued the cause for appellant (Willig, Williams & Davidson, attorneys; Mr. Goodman, on the brief). Michael J. Herbert argued the cause for respondent (Herbert, Van Ness, Cayci & Goodell, attorneys; Mr. Herbert, of counsel and on the brief; Rachel U. Doobrajh, on the brief).

In this appeal, we review an order vacating an arbitrator's award in favor of defendant Teamsters Local Union No. 676 (Local 676). Defendant Local 676 argues that the arbitrator's determination was reasonably debatable and should have been affirmed. We agree and reverse.

The underlying dispute arises from an anomaly in the Gregorian calendar in 2009, which allowed twenty-seven biweekly pay dates rather than the normal twenty-six. In response, plaintiff Township of East Windsor (Township) divided union members' annual pay by twenty-seven rather than twenty-six and Local 676 filed a grievance arguing that its members were hourly workers rather than salaried workers.*fn1

Local 676 represents seven non-uniformed police dispatchers and clerical employees employed by the Township. On April 13, 2004, the Township and Local 676 entered an Agreement on all bargainable issues. The Agreement was effective from January 1, 2000 until December 31, 2003, and was to remain "in full force and effect" until replaced by a successor agreement. In 2009, the Agreement remained in effect.

The Agreement defines several classes of employees, including full-time, part-time, hourly, and probationary. Art. 7, Section A of the Agreement defines a full-time employee as:

A permanent employee appointed to a regular Township position, who has served the requisite probationary period, who regularly performs assigned recurring duties each week for thirty-five (35) hours (Clerical), forty (40) hours, or forty (40) hour equivalent schedule (Radio Officer) and who receives all rights and benefits.

An hourly worker is defined as:

An employee working on an hourly basis is not eligible for paid benefits or seniority rights. An employee is considered hourly who is hired for seasonal or temporary work either full-time for a fixed duration or part-time for a fixed duration and who is not eligible for benefits.

Article 32 sets out the rates of compensation for the years covered by the Agreement. As of January 1, 2003, "all bargaining unit members on Township's payroll shall receive an across the board salary increase of four percent (4.00%) over their 2002 base salary." The schedule for 2003 was as follows:

Title Minimum Maximum Min. Hourly Max. Hourly Clerk Typist $23,581 $33,040 $12.96 $18.15 Police Radio $35,778 $50,127 $17.20 $24.10 Officer

The Township adopted this salary schedule in ordinance 2004-06 on April 13, 2004. The ordinance refers to the minimum and maximum annual salaries; it does not include the minimum hourly rates cited in the Agreement.

The Agreement also addresses holiday pay. Article 31, Section D provides that compensation for holidays will be calculated in accordance with the rate paid for a day of work. If a holiday falls on a scheduled shift and the employee actually works the holiday, the employee "shall receive his/her schedule hours of pay at double time." Art. 31, Sec. D, para.

1. If a holiday falls on a normal day off, "the employee shall be compensated with an additional day off or holiday pay at the rate paid for a seven (7), an[] eight (8) or an[] eight and one-half (8-1/2) hour day, depending on regular schedule, at the employee's option." Art. 31, Sec. D, para. 2.

Article 34 governs hours of work and overtime. Police radio officers must work "eight (8) consecutive hours per day on a twenty-eight day cycle to include eight (8) days off." These officers may also work on a forty hour equivalent schedule, "which is a rotating schedule of eight and one-half (8-1/2) consecutive hours per day, four (4) days of work followed by two (2) days off." In addition, these officers must also work seventeen hours "on regularly scheduled days off without additional compensation." Art. 34, Sec. A, para. 1. Clerical employees are to work "seven (7) hours per day Monday through Friday, exclusive of a one (1) hour lunch period." Art. 34, Sec. A, para. 2. Overtime compensation is paid "at the rate of one and one-half (1-1/2) times the employee's regular base rate of pay." Art. 34, Sec. B, para. 1.

The Agreement also provides that the pay period commences at 12:01 a.m. Sunday and extends to midnight the following Saturday. Art. 41, Sec. B. Wages are payable in full every two weeks. Art. 41, Sec. A.

On October 31, 2008, Alan M. Fisher, the Township Manager, notified the Business Agent for Local 676 that there would be twenty-seven pay periods in the 2009 calendar year. Fisher noted that the Township would "divide the 2009 salary figures by 27 pays to correspond with circled paydays on the enclosed 2009 calendar." He provided Local 676 with an opportunity to comment. In a letter dated November 4, 2008, Local 676 argued that its members "are hourly and eligible for overtime under the provisions of our [Agreement]. We expect the [T]ownship to pay our members their appropriate rate of pay for every day they work." On January 2, 2009, the Township Manager sent a memorandum to "All Salaried Employees" noting that the Township had decided to issue twenty-seven paychecks, dividing the annual salary figures by twenty-seven. He further stated that "[o]vertime pay rate will be continued to be calculated by dividing your annual salary by 2,080 hours for 40 hour a week employees and 1,820 hours for 35 hour per week employees, for those employees eligible for overtime payments."

Local 676 filed grievances on January 21, 2009, and February 4, 2009, alleging the Township erred in distributing compensation to its members because they are hourly employees.

Pursuant to the Agreement, the matter proceeded to arbitration. Arbitrator Robert T. Simmelkjaer held a hearing on October 23, 2009, where the parties were given the chance to present documentary and testimonial evidence.

Following submission of post-hearing briefs, the arbitrator issued an opinion and award on April 3, 2010. He found the Township violated the Agreement, and awarded damages to those members of Local 676 who sustained losses as a result. He framed the issue: "Did the Township violate the [Agreement] when it reduced the biweekly pay of the members of the bargaining unit in 2009 by implementing a 27 paycheck plan effective January 1, 2009? And if so, what shall be the remedy?"

The arbitrator began by summarizing the relevant contractual provisions, and discussing the background leading up to the dispute. He stated:

Although a year is commonly considered to have 52 weeks, the usual 365 day [year] actually consists of 52.14 weeks. In order to adjust this anomaly in the Gregorian calendar, "Leap years" are added every four years. Another result is that once every 11 or 12 years, a pay year will have 27 biweekly pay days instead of the usual 26.

Since every calendar year has more days than are accounted for in 26 pay periods, with an extra day or two, there can be 27 pay days.

He then noted that these employees are paid in arrears. That is, "they are paid for work they have performed in the previous payroll period; they are not paid for work they are to perform in the future." He based this conclusion on testimony from Fisher, who noted that a hypothetical employee who was hired on October 20, 2008, would not receive any money on the October 23, 2008 pay day, "even though he would have actually performed work for the Township for at least three days prior to the pay day." The arbitrator cited Communications Officers Victor Raczka's and Veronica Nash's paychecks as examples. The arbitrator further concluded that the rate of compensation was determined by dividing the salary by 2080 hours per year.

In his discussion, the arbitrator noted: "Inextricably connected to the issue of [Local 676]'s grievance regarding the reduction in biweekly pay is whether the unit members should be classified as salaried or hourly employees." He determined that the unit members are hourly, rather than salaried employees. He noted that Local 676 relied on the method of calculating overtime and the provisions for vacation and sick leave in support of this contention. He found that "the annual salary terminology is actually a construct that is used to calculate the employees' hourly rate."

Thus, "contrary to the Township's position, unit members do not receive an annual salary per se. They are paid for work they have performed during the previous payroll period on a lag payroll basis - omitting some days worked prior to the payday." Moreover, he concluded: "Inasmuch as unit members' paychecks represent the distribution of accrued earnings during a two week period ending on the previous Saturday and paid on a date that fluctuates from month to month, [he] finds unconvincing the Township's claim that they are salaried employees." He noted that "the distinctions drawn by the Township among permanent, part-time and hourly employees (without seniority or benefits) does not negate compelling evidence that unit members are hourly rather than salaried employees." He further found that the employees "will have been paid the negotiated wage rate for 2009, since the first paycheck in 2009 was, in part, an accrual of 2008 wages and the last payment an accrued expense not payable until 2010."

Thus, the Township violated the [Agreement] when it converted the hourly rate standard based on 26 pay periods into 27 pay periods based on the anomaly of a 27th pay date in 2009. By dividing the "annual salary" by 27 instead of 26, the Township improperly reduced the biweekly paychecks of unit members. When the Township opted to spread the annual base salary over 27 periods, it violated the parties' past practice that annual employee compensation is earned over the course of 26 pay periods per year -albeit not distributed in that year.

The arbitrator also noted that "[t]he weight of the case law submitted by the parties supports [Local 676]'s position."

Finally, the arbitrator rejected the Township's contention that "it would violate New Jersey statutes by paying the employees 1/26th more during 2009" than the amount approved in the budget, in the absence of persuasive financial data. Thus, "[i]nasmuch as the aggregate annual salary paid to employees in 26 payments for 2009 encompasses monies paid in both 2008 and 2010, the Arbitrator maintains that this procedure, which the Township has utilized for several years to make 26 biweekly payments, probably has been accounted for in the budgetary process." In the alternative, the arbitrator "considers a budget modification feasible to avoid violation of the parties' collective bargaining agreement." Thus, he directed the Township to "reimburse employees for any economic losses they sustained as a result of the Township's reduction of their biweekly pay during calendar year 2009 caused by the implementation of a 27th pay date."

On June 25, 2010, the Township filed a verified complaint seeking to vacate the arbitrator's award. Local 676 filed an answer on July 30, 2010, which contained a verified counterclaim to confirm the award. Following oral argument on August 13, 2010, the judge stated three reasons in support of her decision to overturn the arbitrator's award. First, she found that the decision that covered employees were hourly workers was not reasonably debatable. Second, she found that the covered employees suffered no economic damages. Finally, the judge noted that the arbitrator improperly discounted or ignored public policy considerations. It is from her September 10, 2010 order memorializing her oral opinion that Local 676 appeals.

Judicial review of an arbitrator's award is very deferential. Linden Bd. of Educ. v. Linden Educ. Ass'n ex rel. Mizichko, 202 N.J. 268, 276 (2010). The well-established standard that "an arbitrator's award will be confirmed 'so long as the award is reasonably debatable,'" ibid. (quoting Middletown Twp. PBA Local 124 v. Twp. of Middletown, 193 N.J. 1, 11 (2007)), was reiterated recently in Policemen's Benevolent Association, Local No. 11 v. City of Trenton, 205 N.J. 422, 429 (2011). The Court explained that the arbitrator's award is granted such deference because the parties bargained for an arbitrator to construe the agreement, not a judge. Ibid.; accord, Linden, supra, 202 N.J. at 276; Local No. 153, Office & Prof'l Emps. Int'l Union v. Trust Co. of N.J., 105 N.J. 442, 452 (1987).

An arbitrator must base his decision on the four corners of the contract. PBA Local No. 11, supra, 205 N.J. at 430. The arbitrator may examine the entire contract to answer a specific question. Ibid.; N.J. Transit Bus Operations, Inc. v. Amalgamated Transit Union, 187 N.J. 546, 555 (2006). If the contract as a whole supports the arbitrator's decision, the award will be upheld. PBA Local No. 11, supra, 205 N.J. at 430. If the arbitrator adds new terms to an agreement or ignores its clear language, County College of Morris Staff Ass'n v. County College of Morris, 100 N.J. 383, 397-98 (1985), or relied on past practices rather than the specific terms of the agreement, City Ass'n of Supervisors & Administrators v. State Operated School District of Newark, 311 N.J. Super. 300, 312 (App. Div. 1998), we will vacate an arbitration award because the award cannot be considered reasonably debatable. Applying these principles to the contract, the dispute, and the award before us, the arbitrator's award is plausible. As such, it is reasonably debatable and we must reverse.

The parties argued and the arbitrator agreed that a threshold question to be resolved was whether the affected employees can be considered salaried or hourly workers. We have referred to several provisions of the Agreement that address the categories used by the Township to classify its employees. Article 7, Section A, addresses hourly employees and strongly suggests that the only hourly employees employed by the Township are temporary or seasonal employees. Yet, Article 32, which addresses compensation, states minimum and maximum annual salaries for radio operators and clerical employees and also states the minimum and maximum hourly rates of pay for these same employees. The provision for minimum and maximum hourly rates of pay for the two categories of employees subject to the Agreement introduces a measure of ambiguity into the Agreement, for it suggests that some employees, other than temporary and seasonal employees, are paid on an hourly basis. On the other hand, the minimum and maximum hourly rates correspond to the annual number of hours each specified category of employee is expected to work in a calendar year. This correlation suggests that the minimum and maximum hourly rates of pay are designated in the Agreement solely for purposes of calculating payment for overtime.

Of course, Articles 31 and 34 also address compensation for overtime and holidays worked. One interpretation of the minimum and maximum rates of pay set forth in Article 32, Section D is that the specified hourly rates govern the amount to be paid for overtime and holiday pay. However, Article 31, Section D, which addresses holiday pay, suggests that the pay for an employee who works on a holiday is calculated by reference to the daily rate of pay rather than the hourly rate of pay specified in the Agreement. In short, the Agreement appears to treat overtime and holiday pay differently than overtime pay calculated on an hourly basis.

Article 34, which governs the amount of time the employees covered by Agreement must work, also does not completely resolve the issue. Local 676 contends that this provision supports its position that the covered employees are hourly workers because it provides the number of hours each employee must work in a given period of time. The Township responds that this provision simply delineates the number of hours of work it expects in a covered period from full-time salaried workers.

In short, the Agreement contains certain ambiguities that allow both sides to fashion plausible arguments in support of their positions. These disparate and plausible interpretations render the arbitrator's award subject to attack. On the other hand, it also underscores that the arbitrator's decision that the covered employees are hourly workers and not salaried workers is plausible and thus reasonably debatable. So, too, is his finding that covered employees have suffered economic damage. If the covered employees are hourly workers, dividing their base pay calculated on the minimum number of hours they must work by the number of pay periods yields a lower hourly rate of pay in 2009 than 2008.

In the end, we have the very situation described by Justice Long in PBA Local No. 11. She stated:

That is not to suggest that the [Township's] interpretation is not a viable one. Nor is it a conclusion that the arbitrator's interpretation is the best one. That is not the standard. What is required is that the arbitrator's interpretation finds support in the Agreement, and it does. [205 N.J. at 432.]

We, therefore, reverse the September 10, 2010 order vacating the arbitrator's April 3, 2010 award.


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