In the Matter of State of New Jersey and New Jersey Law ( 2016 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3111-13T2
APPROVED FOR PUBLICATION
IN THE MATTER OF
STATE OF NEW JERSEY and January 15, 2016
NEW JERSEY LAW ENFORCEMENT
SUPERVISORS ASSOCIATION. APPELLATE DIVISION
______________________________
Argued September 21, 2015 – Decided January 15, 2016
Before Judges Messano, Simonelli and
Carroll.
On appeal from the New Jersey Public
Employment Relations Commission, PERC Docket
No. IA-2014-003.
Frank M. Crivelli argued the cause for
appellant New Jersey Law Enforcement
Supervisors Association (Crivelli & Barbati,
LLC, attorneys; Mr. Crivelli and Donald C.
Barbati, on the brief).
Jeffrey J. Corradino argued the cause for
respondent State of New Jersey (Jackson
Lewis P.C., attorneys; Mr. Corradino, of
counsel and on the brief; James J.
Gillespie, on the brief).
Don Horowitz, Acting General Counsel,
attorney for respondent New Jersey Public
Employment Relations Commission (Mary E.
Hennessy-Shotter, Deputy General Counsel, on
the statement in lieu of brief).
The opinion of the court was delivered by
SIMONELLI, J.A.D.
Appellant New Jersey Law Enforcement Supervisors
Association (NJLESA) appeals from that part of the March 10,
2014 final decision of respondent Public Employment Relations
Commission (PERC), which affirmed a compulsory interest
arbitration salary award rendered pursuant to the Police and
Fire Public Interest Arbitration Reform Act (Act), N.J.S.A.
34:13A-14 to -21. On appeal, NJLESA contends that PERC erred in
affirming the arbitrator's acceptance of the scattergram and
methodology offered by respondent State of New Jersey (State) to
calculate the salary award within the confines of N.J.S.A.
34:13A-16.7(b), commonly known as "the 2% salary cap." 1 For the
following reasons, we affirm.
We begin with a review of the pertinent authority. At the
time of the arbitration in this matter, the Act prohibited an
interest arbitrator from rendering a salary award
which, on an annual basis, increases base
salary items by more than 2.0 percent of the
aggregate amount expended by the public
employer on base salary items for the
members of the affected employee
organization in the twelve months
1
We decline to address NJLESA's additional contention, raised
for the first time on appeal, that PERC's and the arbitrator's
failure to consider its unique status as an intermediary,
transitional bargaining unit led to an improper determination of
the amount of monies available for distribution in a salary
award rendered under the 2% salary cap. See Bryan v. Dep't of
Corr., 258 N.J. Super. 546, 548 (App. Div. 1992) (citing Nieder
v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973)).
2 A-3111-13T2
immediately preceding the expiration of the
collective negotiation agreement subject to
arbitration; provided, however, the parties
may agree, or the arbitrator may decide, to
distribute the aggregate monetary value of
the award over the term of the collective
negotiation agreement in unequal annual
percentages.
[N.J.S.A. 34:13A-16.7(b).2]
In rendering an award, the arbitrator must provide a reasoned
explanation for the award, state which factors in N.J.S.A.
34:13A-16(g) were relevant, satisfactorily explain why the other
factors were not relevant, and provide an analysis of the
evidence on each relevant factor. Hillsdale PBA Local 207 v.
Borough of Hillsdale, 137 N.J. 71, 83-84 (1994). An arbitrator
need not rely on all factors in fashioning the award, but must
consider the evidence on each. Ibid.In cases where the 2% salary cap applies, "the arbitrator
must state what the total base salary was for the last year of
the expired contract and show the methodology as to how base
salary was calculated." Borough of New Milford and PBA Local
83, P.E.R.C. No. 2012-53, 38 N.J.P.E.R. ¶340, 2012 N.J. PERC
LEXIS 18 at 13 (2012). Where the parties dispute the actual
base salary amount, "the arbitrator must make the determination
2
N.J.S.A. 34:13A-16.7(b) was amended, effective June 24, 2014,
retroactive to April 2, 2014. P.L. 2014, c. 11, § 2. The
amendment does not apply in this case.
3 A-3111-13T2
and explain what was included based on the evidence submitted by
the parties." Ibid. The arbitrator must then "calculate the
costs of the award to establish that the award will not increase
the employer's base salary costs in excess of 6% in the
aggregate." Ibid. In calculating the award, the arbitrator
must
review the scattergram of the
employees' placement on the guide to
determine the incremental costs in
addition to the across-the-board raises
awarded. The arbitrator must then
determine the costs of any other
economic benefit to the employees that
was included in base salary, but at a
minimum this calculation must include a
determination of the employer's cost of
longevity.
[Ibid.]
"Once these calculations are made, the arbitrator must make a
final calculation that the total economic award does not
increase the employer's costs for base salary by more than 2%
per contract year[.]" Id. at 13-14.
In reviewing an interest arbitration award, PERC must
determine whether: (1) the arbitrator failed to give due weight
to the N.J.S.A. 34:13A-16(g) factors he deemed relevant to the
resolution of the specific dispute; (2) the arbitrator violated
the standards in N.J.S.A. 2A:24-8 and -9; or (3) the award is
not supported by substantial credible evidence in the record as
4 A-3111-13T2
a whole. Hillsdale, supra, 137 N.J. at 82. In cases where the
2% salary cap applies, PERC must also determine whether the
award does not increase the employer's costs for base salary by
more than 2% per contract year or, in this case, 8% in the
aggregate. New Milford, supra, P.E.R.C. No. 2012-53, 38
N.J.P.E.R. ¶340, 2012 N.J. PERC LEXIS 18 at 13-14.
"Judicial scrutiny in public interest arbitration is more
stringent than in general arbitration . . . [because it] is
statutorily-mandated and public funds are at stake." Hillsdale,
supra, 137 N.J. at 82. Accordingly, the "scope of our review of
PERC's decisions reviewing arbitration is 'sensitive,
circumspect, and circumscribed.'" In re City of Camden and the
Int'l Ass'n of Firefighters, Local 788, 429 N.J. Super. 309, 327
(App. Div.) (quoting Twp. of Teaneck v. Teaneck Firemen's Mut.
Benevolent Ass'n Local No. 42, 353 N.J. Super. 289, 300 (App.
Div. 2002)), certif. denied, 215 N.J. 485 (2013). We defer to
PERC's decisions because of its expertise and will only reverse
if the decision is clearly demonstrated to be arbitrary,
capricious, or unreasonable. In re Hunterdon Cty. Bd. of Chosen
Freeholders, 116 N.J. 322, 328 (1989).
The record in this case reveals that NJLESA represents 665
primary-level law enforcement supervisors in several negotiation
units. NJLESA and the State were parties to a collective
5 A-3111-13T2
negotiations agreement (CNA) that expired on June 30, 2011.
Following unsuccessful negotiations and mediation, on September
16, 2013, NJLESA filed a petition with PERC seeking compulsory
interest arbitration pursuant to the Act.
Regarding the salary award, the arbitrator first determined
that $56,945,856.70 was total base-year salary in the final
twelve months of the CNA. The arbitrator then multiplied two
percent of the total base-year salary ($1,138,917) by four and
determined that $4,555,668 was the amount of money available
under the 2% salary cap for the four-year successor CNA. The
arbitrator next determined the amount the State would expend
during the successor CNA based on each NJLESA member being moved
through the salary schedule over the four years by achieving
annual step movement, or annual increments, pursuant to the
salary schedule regardless of whether they continued to be
employed beyond the date the monies were projected to be spent.
Using the State's scattergram, the arbitrator determined the
cost of the step movement alone to be $3,734,295 or 6.56% of the
original base salary amount. The arbitrator concluded that
$821,373 remained to be awarded under the 2% salary cap, and
ultimately granted a total salary award of $757,833, which was
within the 2% salary cap. The arbitrator found that although
6 A-3111-13T2
$821,373 was available to be awarded, there was "no basis for
the expenditure or that requires any additional amounts."
NJLESA did not claim that the arbitrator failed to comply
with N.J.S.A. 34:13A-16(g) or violated the standards in N.J.S.A.
2A:24-8 and -9, and agreed that $56,945,856.70 was the total
base-year salary in the final twelve months of the CNA.
Instead, NJLESA challenged the arbitrator's acceptance of the
State's scattergram and methodology to calculate the costs of
the salary award to establish that the award would not violate
the 2% salary cap. NJLESA asserted that its scattergram
provided a more accurate "cost out" of the salary award because
it contained the actual salary expenditures for fiscal years
2012 and 2013, the first two years of the successor CNA, which
reflected savings the State realized in those fiscal years from
retirements and attrition. In contrast, the State's scattergram
contained projected salary figures for fiscal years 2012 and
2013, and moved all NJLESA members through the salary guide
regardless of whether they retired after fiscal year 2011 or new
members joined the unit.
PERC determined that the arbitrator's acceptance of the
State's scattergram was consistent with New Milford, and
rejected NJLESA's argument that the savings the State realized
in fiscal years 2012 and 2013 should be credited. Citing
7 A-3111-13T2
Borough of Ramsey and Ramsey PBA Local No. 155, P.E.R.C. No.
2012-60, 39 N.J.P.E.R. ¶17 (2012), PERC held that "[w]hether
speculative or known, . . . any changes in financial
circumstances benefitting the employer or majority
representative [were] not contemplated by the statute or to be
considered by the arbitrator." This appeal followed.
On appeal, NJLESA argues that the arbitrator's decision to
accept the State's scattergram and methodology, and PERC's
affirmance of that decision, contravened PERC's prior decisions
in New Milford, supra, and City of Atlantic City and Atlantic
City PBA Local 24, P.E.R.C. No. 2013-82, 39 N.J.P.E.R. ¶161,
2013 N.J. PERC LEXIS 38 (2013), which compelled the arbitrator
to adopt NJLESA's scattergram and methodology. In particular,
NJLESA emphasizes a passage in New Milford, where PERC said:
Since an arbitrator, under the new law,
is required to project costs for the
entirety of the duration of the award,
calculation of purported savings resulting
from anticipated retirements, and for that
matter added costs due to replacement by
hiring new staff or promoting existing staff
are all too speculative to be calculated at
the time of the award. The Commission
believes that the better model to achieve
compliance with P.L. 2010 c. 105 is to
utilize the scattergram demonstrating the
placement on the guide of all of the
employees in the bargaining unit as of the
end of the year preceding the initiation of
the new contract, and to simply move those
employees forward through the newly awarded
salary scales and longevity entitlements.
8 A-3111-13T2
Thus, both reductions in costs resulting
from retirements or otherwise, as well as
any increases in costs stemming from
promotions or additional new hires would not
effect [sic] the costing out of the award
required by the new amendments to the
Interest Arbitration Reform Act.
[New Milford, supra, P.E.R.C. No. 2012-53,
38 N.J.P.E.R. ¶340, 2012 N.J. PERC LEXIS 18
at 15.]
NJLESA argues that this passage prevents an arbitrator from
adopting a scattergram that contains "speculative" figures.
NJLESA also points to a passage in City of Atlantic City,
where PERC said:
We further clarify that the above
information must be included for officers
who retire in the last year of the expired
agreement. For such officers, the
information should be prorated for what was
actually paid for the base salary items.
Our guidance in New Milford for avoiding
speculation for retirements was applicable
to future retirements only.
[City of Atlantic City, supra, P.E.R.C. No.
2013-82, 39 N.J.P.E.R. ¶161, 2013 N.J. PERC
LEXIS 38 at 10.]
NJLESA argues that this passage requires an arbitrator to use
actual paid salary when that data is available. NJLESA notes
that the retirements in fiscal years 2012 and 2013, which
enabled the State to realize savings, were not speculative
because they actually occurred. NJLESA, thus, argues that the
arbitrator should have used its scattergram, which reflected the
9 A-3111-13T2
State's savings from those retirements, and thus showed more
salary available for distribution to NJLESA members under the 2%
salary cap.
NJLESA's argument fails for two reasons. First, PERC
specifically rejected it:
We note that the cap on salary awards in the
new legislation does not provide for the PBA
to be credited with savings that the Borough
receives from retirements or any other
legislation that may reduce the employer's
costs. It is an affirmative calculation
based on the total 2011 base salary costs
regardless of any changes in 2012. Likewise,
the PBA will not be debited for any
increased costs the employer assumes for
promotions or other costs associated with
maintaining its workforce.
[New Milford, supra, P.E.R.C. No. 2012-53,
38 N.J.P.E.R. ¶340, 2012 N.J. PERC LEXIS 18
at 16 (emphasis added).]
Since New Milford, PERC has consistently maintained that the
State's savings on salary expenditures may not be considered
when calculating a salary award under the 2% salary cap, and
PERC has never suggested otherwise. For example, immediately
after New Milford, PERC explained that
[t]he statute does not provide for a
majority representative to be credited with
savings that a public employer receives from
any reduction in costs, nor does it provide
for the majority representative to be
debited for any increased costs the public
employer assumes for promotions or other
costs associated with maintaining its
workforce.
10 A-3111-13T2
[Borough of Ramsey, supra, P.E.R.C. No.
2012-60, 39 N.J.P.E.R. ¶17 at 9 (emphasis
added).]
More recently, PERC reiterated its guidance in New Milford,
and rejected essentially the same argument advanced by NJLESA:
Additionally, the [union] asserts that
the arbitrator miscalculated longevity in
2014 because she failed to deduct the
"offsetting decreased cost in longevity from
employees who left the bargaining unit due
to retirements, promotions and terminations
from the base year 2013." We squarely
addressed this issue in New Milford wherein
we stated as follows:
. . . .
Based on the clear guidance we provided
in New Milford, we reject the union's
argument that the arbitrator miscalculated
longevity for 2014 because she did not
offset costs resulting from retirements.
[City of Camden and IAFF Local 788, P.E.R.C.
No. 2014-95 (2014) at 8-9 (emphasis added).]
A fair reading of Atlantic City does not change the
analysis. That case involved a dispute over the base salary
calculation for the twelve months preceding the expiration of
the collective bargain agreement. City of Atlantic City, supra,
P.E.R.C. No. 2013-82, 39 N.J.P.E.R. ¶161, 2013 N.J. PERC LEXIS
38 at 2. It did not purport to change the New Milford analysis,
but instead reiterated it. Id. at 6-7. Accordingly, PERC's
decision in this case was not arbitrary, capricious, or
unreasonable because it conformed to New Milford and subsequent
11 A-3111-13T2
decisions by refusing to credit NJLESA with savings from
retirements or attrition.
Second, NJLESA misreads N.J.S.A. 34:13A-16.7(b) and ignores
our standard of review. The language of the 2% salary cap
provision prohibits an interest arbitrator from rendering an
award that "increases base salary items by more than 2.0 percent
of the aggregate amount expended by the public employer on base
salary items for the members of the affected employee
organization in the twelve months immediately preceding the
expiration of the collective negotiation agreement subject to
arbitration." N.J.S.A. 34:13A-16.7(b). The statute sets a
maximum salary award, but does not require the arbitrator to
award any specified amount or prescribe the methodology for
calculating the salary award. As PERC recognized in New
Milford:
Arriving at an economic award is not a
precise mathematical process. Given that
the statute sets forth general criteria
rather than a formula, except as set forth
[in the two percent salary cap provision,
N.J.S.A. 34:13A-16.7(b),] the treatment of
the parties' proposals involves judgment and
discretion and an arbitrator will rarely be
able to demonstrate that an award is the
only "correct" one.
[New Milford, supra, P.E.R.C. No. 2012-53,
38 N.J.P.E.R. ¶340, 2012 N.J. PERC LEXIS 18
at 11.]
12 A-3111-13T2
Thus, except for failure to comply with the 2% salary cap
provision, we will not set aside an interest arbitration award
for failure to apply a specific methodology. However, NJLESA
does not suggest that the arbitrator's salary award exceeded the
2% salary cap. Instead, it argues that the arbitrator should
have used its methodology and awarded a credit for the State's
savings from retirements and attrition in fiscal years 2012 and
2013. NJLESA cites to no authority that required the arbitrator
or PERC to do so. Rather, the relevant authority requires us to
defer to PERC's decision to affirm the arbitrator's exercise of
discretion, which was based on his special expertise in labor
relations. See State v. Prof'l Ass'n of N.J. Dep't of Educ., 64
N.J. 231, 259 (1974). Stated differently, the deferential
standard of review for interest arbitration awards does not
permit us to substitute our judgment for PERC's judgment by
requiring the arbitrator to adopt NJLESA's methodology.
In sum, contrary to NJLESA's argument, PERC's decision was
not arbitrary, capricious or unreasonable. The decision fully
comported with New Milford and its progeny, and the award
complied with the 2% salary cap provision.
Affirmed.
13 A-3111-13T2