City of Wilkes-Barre v. Wilkes-Barre City Fire Fighters Local Union No. 104 ( 2018 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
City of Wilkes-Barre :
:
v. : No. 1575 C.D. 2017
: Argued: September 14, 2018
Wilkes-Barre City Fire Fighters :
Local Union No. 104, :
Appellant :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
JUDGE COHN JUBELIRER FILED: October 11, 2018
The Wilkes-Barre City Fire Fighters Local Union No. 104 (Union) and the
City of Wilkes-Barre (City) dispute what forms of compensation are included in the
term “salary” for purposes of calculating pension contributions. The Union appeals
the Luzerne County Court of Common Pleas’ (common pleas) Order vacating the
Arbitrator’s Award (Award), which required the City to include disputed forms of
compensation in pension calculations. At issue is whether the Award was an
impermissible modification to the pension plan, because no actuarial study was
performed first. This issue is almost identical to the one presented before this Court
recently in City of Wilkes-Barre v. Wilkes-Barre Police Benevolent Association
(Wilkes-Barre PBA) (Pa. Cmwlth., No. 1145 C.D. 2017, filed June 4, 2018) petition
for allowance of appeal filed, (Pa., No. 440 MAL 2018, filed July 6, 2018).1 Given
the Arbitrator’s findings, and the narrow certiorari scope of review, consistent with
Wilkes-Barre PBA, we reverse.
I. Factual Background
The Union and the City are governed by Act 111,2 commonly referred to as
the Policemen and Firemen Collective Bargaining Act, and bound under a Collective
Bargaining Agreement (CBA) first executed in 2004. The CBA was extended until
December 31, 2016, through an Act 111 Interest Arbitration Award and a 2012
settlement agreement between the parties (Settlement Agreement). These
documents, along with the relevant city ordinances, collectively govern the present
terms of the CBA. Article 21 of the CBA relating to the pension plan (Plan) provides
that a pension is “computed on the basis of the Fire Fighter’s final year average
salary.” (Reproduced Record (R.R.) at 35a.) As defined under the governing
ordinances of the Plan, contributions are based on monthly compensation. Wilkes-
Barre, Pa., Code of Ordinances, No. 25-76, § 2-202, 7-8-76 (2018).3 “Monthly
compensation” is defined as “basic monthly compensation, plus longevity
payments, acting officer’s pay, EMT bonuses, overtime pay, night shift
differential, educational incentive payments, holiday pay and annual buy back
1
Wilkes-Barre PBA, an unpublished opinion, is cited for its persuasive value in accordance
with Section 414(a) of the Commonwealth Court’s Internal Operating Procedures. 210 Pa. Code
§ 69.414(a).
2
Act of June 24, 1968, P.L. 237, as amended, 43 P.S. §§ 217.1 – 217.10.
3
The Wilkes-Barre City Ordinances are not provided in the record, but are available online.
Chapter 2, Article III, Division 4 contains the provisions relating to the fire fighters’ pension fund.
“Monthly compensation” is defined in Section 2-202 and participant contribution requirements are
set forth in Section 2-205. The relevant Article and Division are available here:
https://library.municode.com/pa/wilkesbarre/codes/code_of_ordinances?nodeId=PTIICOOR_CH
2AD_ARTIIIEMOFBE_DIV4FIPEFU (last accessed Oct. 10, 2018).
2
of sick leave,” and salary is noted as “includ[ing] a base monthly salary.” (Id. §§ 2-
202, 2-205 (emphasis added).) With the exception of base pay and longevity, the
forms of compensation included in this definition are collectively the disputed forms
of compensation in the present case.
The Settlement Agreement in 2012 not only extended but also added new
language to the CBA, particularly Article 21 relating to pensions. The additional
language in the Settlement Agreement relevant to this dispute states that “[a]ll fire
fighters hired after January 1, 2013 shall be entitled to pension benefits not in excess
of [T]he Third Class City Code.[4]” (R.R. at 62a (emphasis added).) The Third
Class City Code defines “salary” as “the fixed amount of compensation paid at
regular, periodic intervals by the city to the member . . . .” (R.R. at 307a; Section
14319 of the Third Class City Code formerly 53 P.S. § 39328.5) The governing
ordinances of the Plan were not amended to include this specific definition provided
under The Third Class City Code. Three Auditor General Reports, collectively
auditing from January 2007 to December 2013, state that “salary,” as defined in the
governing ordinances, has been inconsistent with The Third Class City Code
throughout that time. (R.R. at 294a, 307a, 324a.) Each of these reports notes the
same cause for the lack of compliance, namely that “pension benefits are a
mandatory subject of collective bargaining,” which the City has been unsuccessful
in bargaining to amend. (R.R. at 296a, 311a, 328a.) The reports acknowledge that
because of this lack of amendment, the City has “been ordered by the Pennsylvania
4
Act of June 23, 1931, P.L. 932, as amended, formerly 53 P.S. §§ 35101-39701. This
version of The Third Class City Code was repealed by Section 2(2) of the Act of November 24,
2015, P.L. 242, No. 67, effective January 25, 2016. The Third Class City Code is now codified at
11 Pa. C.S. §§ 10101-14702. The former code is cited here, as that was the one in effect at the
time of the proceedings.
5
Under the updated code, this definition is currently codified at 11 Pa. C.S. § 14319.
3
Labor Relations Board to have the benefits continue as they are currently prescribed
in the City’s governing ordinances.” (R.R. at 296a, 311a, 328a.)
It is undisputed that following the Settlement Agreement, pension
contributions from fire fighters hired after January 1, 2013, did not include the
disputed compensation but were measured by base salary and longevity alone. In
contrast, contributions of those fire fighters hired prior to that date were calculated
with the inclusion of the disputed compensation. Captain Michael Bilski grieved the
matter in December 2015.
The arbitration hearing concerning the grievance was held on October 20,
2016. The Arbitrator heard testimony from Captain Bilski, who was the Union
president, and Nicole Ference, the former payroll benefits coordinator and current
human resources director for the City.6 Captain Bilski testified regarding
negotiations of the Settlement Agreement, in particular the City’s concern of
achieving compliance with The Third Class City Code as noted in the Auditor
General Reports. (R.R. at 338a; Arbitrator Decision at 4.) According to Captain
Bilski, the City had represented its only concern in that respect was to cap pensions
at 50% of final year salary for fire fighters hired after January 1, 2013. Captain
Bilski elaborated that prior to the Settlement Agreement, there was a 1.25% increase
in pension for each year a fire fighter worked after age 50. This meant that pensions
could reach up to the maximum of 70% of the final year average salary. Given this,
Captain Bilski testified, the new language added under the Settlement Agreement
intended to eliminate those pension increases for new hires, but not to alter the
manner in which contributions were calculated. Captain Bilski further testified that
the City gave assurances, upon which he relied, that the proposed additional
6
The reproduced record does not contain a transcript of the arbitration proceeding and is
only summarized briefly in the Arbitrator’s Decision.
4
language would not change the manner in which pension contributions were
calculated.
Ms. Ference, on behalf of the City, testified that after the execution of the
Settlement Agreement, “she was instructed to limit the 5% member contributions
based on base salary and longevity alone.” (Arbitrator Decision at 5.) During Ms.
Ference’s testimony, the Auditor General Reports were introduced, along with other
exhibits illustrating how pension contributions were calculated before and after the
Settlement Agreement became effective. The Arbitrator noted the content of the
Auditor General Reports sponsored by Ms. Ference’s testimony, specifically that the
Plan’s non-compliance with The Third Class City Code resulted from the City’s
inability to successfully bargain new terms.
In the time between the hearing and the final decision in this matter, the
arbitration decision in Wilkes-Barre PBA was issued, resolving a separate dispute
with the City about nearly identical disputed language in pension provisions for the
police.7 Relying upon the arbitrator’s reasoning in Wilkes-Barre PBA and the
testimony provided by Captain Bilski, the Arbitrator in this case issued his Award
on February 16, 2017, ordering the City to include the disputed forms of
compensation in its pension contribution calculations. The Arbitrator acknowledged
that while The Third Class City Code definition of salary could be limited to only
base salary and longevity, its broad language allowed it to include income beyond
that if the parties so agreed by agreement or through past practice. Because of this
7
In Wilkes-Barre PBA, an arbitration award amended the collective bargaining agreement
to specify that officers hired after the award would be “entitled to pension benefits not in excess
of [T]he Third Class City Code.” Wilkes-Barre PBA, slip op. at 4 (quotation omitted) (alteration
in original). Given the nearly identical language at issue in both cases, the Arbitrator in this dispute
provided the parties an opportunity to comment on the arbitration award in Wilkes-Barre PBA
before the Decision was rendered.
5
ambiguous statutory language, the Arbitrator sought to determine the past practice
of the parties for calculating contributions under the CBA to conclude if the City had
altered that practice following the Settlement Agreement. Despite a parol evidence
objection8 raised by the City, the Arbitrator gave significant weight to Captain
Bilski’s testimony about Settlement Agreement negotiations, finding that the City’s
past practice included the disputed forms of compensation in pension calculations.
Based upon Captain Bilski’s and Ms. Ference’s testimony regarding how
contributions were calculated prior to the Settlement Agreement, the Arbitrator
found both parties understood pension contributions to include the disputed forms
of compensation under both the old and new pension plans. Although the City
argued that the past practice was to exclude the disputed forms of compensation for
employees hired after January 1, 2013, the Arbitrator disagreed, noting that this
practice was perceived as a departure from the norm, thus prompting the grievance
in the first place. The Arbitrator concluded that the parties did not intend to alter the
manner of pension contribution calculation through the Settlement Agreement, and
thus the City violated the CBA when it began excluding the disputed forms of
compensation.
The City petitioned common pleas to vacate and stay the Award.
(Supplemental Reproduced Record (S.R.R.) at 2b.) Upon review, common pleas
first noted the narrow certiorari scope of review, which limited its inquiry.
(Common Pleas Opinion (Op.) at 2.) Based upon this, common pleas characterized
the issue before it as whether the Award ordering the inclusion of the disputed forms
8
The City asserted during arbitration that the unambiguous disputed language precluded
consideration of evidence about the negotiations. The Arbitrator rejected this argument, finding
that the language “raise[d] issues of different interpretations” that the use of parol evidence could
resolve. (Arbitrator Decision at 15.)
6
of compensation in pension contributions exceeded the Arbitrator’s authority.
Finding the issue to be analogous to the issues presented in Shippensburg Police
Association v. Borough of Shippensburg, 968 A.2d 246 (Pa. Cmwlth. 2009), and
Wilkes-Barre PBA, which was pending appeal before this Court at the time, common
pleas vacated the Award. Specifically, common pleas found that the Award
exceeded the Arbitrator’s authority by ordering a modification of the Plan without
an Act 2059 cost study.10
II. Issues
On appeal,11 the Union raises two main issues:12 (1) whether common pleas
correctly concluded the Award was a pension modification; and (2) whether
common pleas failed to adhere to the narrow certiorari scope of review in making
its determination. Essentially, the Union challenges whether, under narrow
certiorari review, common pleas correctly concluded that the Arbitrator exceeded
his authority and modified the Plan by ordering inclusion of the disputed
compensation. Citing to a long history of Pennsylvania case law supporting the
concept of limited judicial interference under narrow certiorari, the Union stresses
the deference provided to an arbitrator’s findings upon review and the restricted
9
Act of December 18, 1984, P.L. 1005, as amended, 52 P.S. §§ 895.101-895.803.
10
Section 305(a) of Act 205 requires a cost estimate “[p]rior to the adoption of any benefit
plan modification by the governing body of the municipality[.]” 53 P.S. § 895.305(a).
11
Narrow certiorari review is “a plenary, non-deferential standard where the resolution of
the issues turns on a question of law or application of law to undisputed facts,” but “where the
question depends on fact-finding . . . the court is bound by the arbitrator’s determination even if
the arbitrator is wrong.” City of Phila. v. Fraternal Order of Police, Lodge No. 5, 181 A.3d 485,
489 (Pa. Cmwlth. 2018) (quoting Town of McCandless v. McCandless Police Officers Ass’n, 952
A.2d 1193, 1196 n.6 (Pa. Cmwlth. 2008)).
12
The Union raises a third issue regarding whether common pleas erred in vacating the
Award. As the first two issues encompass that ultimate determination, the issue is given no
separate treatment in the Union’s Brief and is not discussed specifically here.
7
nature of the Court’s review of an Act 111 award. The Union maintains that the
Arbitrator did not exceed his powers by ordering an illegal act (a modification of the
Plan without the requisite actuarial study). Noting this Court’s deference to the
definition of salary as determined by the parties, the Union urges us to find that the
disputed pay has always been included in that definition and is not unsettled by the
Award. The Union asserts that the Award merely “ordered the restoration of the
status quo,” and common pleas’ finding of a modification without further analysis
was in error. (Union’s Brief at 18, 20.)
In response, the City argues that common pleas was directly within its scope
of review when it vacated the Award because the Award mandated a modification
of the Plan. Relying primarily upon Shippensburg and Muhlenberg Township v.
Muhlenberg Township Police Labor Organization (Pa. Cmwlth., No. 1327 C.D.
2013, filed May 2, 2014), the City asserts that the present case is of the same nature,
as the Award was an impermissible modification subject to reversal. The City
contends that the Settlement Agreement created a practice of excluding the disputed
forms of compensation, thus the Award was an impermissible modification of that
practice.
III. Analysis
The narrow certiorari scope of review restricts common pleas and this Court’s
review of the Act 111 grievance arbitration Award at issue. Under narrow certiorari,
this Court may only inquire into four aspects of the arbitration award: “(1) the
jurisdiction of the arbitrators; (2) the regularity of the proceedings; (3) an excess of
the arbitrator’s powers; and (4) deprivation of constitutional rights.” Pa. State Police
v. Pa. State Troopers’ Ass’n, 656 A.2d 83, 90 (Pa. 1995). Based upon common
8
pleas’ decision and the issues raised by the parties on appeal, only the third prong of
narrow certiorari review, whether the Award exceeds the arbitrator’s powers, is at
issue in the present case.
This Court has determined that an Act 111 arbitration order must be vacated
as exceeding an arbitrator’s authority if it requires a party to perform an illegal act.
Shippensburg, 968 A.2d at 251. An arbitrator is only able to “require a public
employer to do that which the employer could do voluntarily.” Pa. State Police, 656
A.2d at 90. Orders modifying pension plans in the absence of an Act 205 study
amount to an illegal act; thus they exceed the scope of an arbitrator’s powers.
Shippensburg, 968 A.2d at 251. An order is considered to create a modification that
requires an Act 205 study when it is “established that . . . calculations before the
award were completely and consistently different from . . . calculations after the
award.” Penn Twp. v. Penn Twp. Police Ass’n (Pa. Cmwlth., No. 2249 C.D. 2009,
filed Dec. 13, 2010), slip op. at 5 (emphasis added).13 For example, in Shippensburg,
this Court found that where a pension plan had not included the disputed pay for 25
years, an arbitration award requiring its inclusion constituted a modification.
Shippensburg, 968 A.2d at 251.
Given the nearly identical issues and disputed language, our recent decision
in Wilkes-Barre PBA is persuasive for resolving whether the Award constitutes a
modification. In that case, a prior interest arbitration award added a term in the
collective bargaining agreement stating that officers hired after the award “shall be
entitled to pension benefits not in excess of [T]he Third Class City Code.” Wilkes-
Barre PBA, slip op. at 4 (quotation omitted). The union grieved the matter when the
disputed forms of compensation (i.e., overtime, holiday pay, court pay, training pay)
13
Penn Township is cited for its persuasive value in accordance with Section 414(a) of the
Commonwealth Court’s Internal Operating Procedures. 210 Pa. Code § 69.414(a).
9
were not included in pension calculations, and the arbitrator determined the City
violated the collective bargaining agreement by excluding the compensation. Id.,slip op. at 2, 3, 8. Common pleas vacated the award, finding it constituted a pension
modification without an Act 205 study. Id., slip op. at 9. Under narrow certiorari
review, this Court reversed, reasoning that the award was not a modification of past
practice. Id., slip op. at 14. We emphasized that because the City “took no action
. . . to formalize its interpretation” of what compensation was included in the
definition of “salary” following the prior arbitration, the current arbitration award
“did not modify the plan” but simply “sought to maintain the status quo.” Id., slip
op. at 14 (emphasis in original). Distinguishing Shippensburg and Muhlenberg, we
noted those cases lacked a past practice of “includ[ing] the disputed compensation.”
Id., slip op. at 17.
Due to the narrow certiorari scope of review and the almost indistinguishable
nature of this case and Wilkes-Barre PBA, we must reverse common pleas. The
Award in this case requires the City to do what it was already required to do, which
is to include the disputed forms of compensation in pension contribution
calculations. Because the CBA and its governing ordinances have not been formally
modified to reflect exclusion of the disputed forms of compensation, the City is
bound by its past practice. Past practice, as established by the Auditor General
Reports and Captain Bilski’s testimony, is inclusion of the disputed forms of
compensation in the pension contributions. (R.R. at 296a, 349a.) In fact, the Auditor
General Reports not only establish past practice, but also confirm the lack of formal
modification to the ordinances through collective bargaining, even after the
Settlement Agreement. The most recent report, which states that the current CBA
remained effective through December 31, 2016, notes that the governing ordinances
10
were not modified to bring the Plan in compliance. Rather the City remains under
order from the Pennsylvania Labor Relations Board to continue benefits as they are
currently set forth in the ordinances. Therefore, the language from the Settlement
Agreement relating to compliance with The Third Class City Code does not suffice
as a formal modification of the definition of salary under the CBA to exclude the
disputed forms of compensation. Much like Wilkes-Barre PBA, because there was
no formal change to the definition of “salary” after the Settlement Agreement, the
exclusion of the disputed forms of pay from pension contributions for employees
hired after January 1, 2013, was not in line with the ordinances. Therefore, when
the Arbitrator ordered the City to include the disputed compensation once more, he
was requiring compliance with the CBA and its corresponding ordinances as they
stood at the time. It was not a modification triggering an Act 205 study, but rather
a return to the language and past practice under the CBA. See Wilkes-Barre PBA,
slip op. at 7.
This is consistent with this Court’s jurisprudence, as we have generally found
that an impermissible modification to a plan exists where an established practice is
altered or there is deviation from what is set forth in the CBA. See, e.g., Upper
Merion Twp. v. Upper Merion Twp. Police Officers, 915 A.2d 174, 180 (Pa. Cmwlth.
2006) (affirming the vacation of an arbitration order requiring a retroactive
application of survivor pension benefits not contemplated within the collective
bargaining agreement); Northampton Twp. v. Northampton Twp. Police Benevolent
Ass’n, 885 A.2d 81, 85 (Pa. Cmwlth. 2005) (finding an Act 111 award that modified
pension contributions from 5% to 3% without any actuarial evidence of the effect of
that change exceeded the arbitrator’s powers); Falls Twp. v. Police Ass’n of Falls
11
Twp. (Pa. Cmwlth., No. 1972 C.D. 2010, filed Oct. 19, 2011), slip op. at 1014
(acknowledging that an arbitration award changing the manner of pension
contribution calculation from the established method under the collective bargaining
agreement constituted a modification).
The City relies heavily upon Shippensburg and Muhlenberg to support the
finding of a modification in the Award. Just as in Wilkes-Barre PBA, these cases
are distinguishable. In Shippensburg, a police officer initiated a grievance when his
unused vacation pay, paid to him in a lump sum, was not included in the calculation
of his monthly pension. 968 A.2d at 248. The trial court affirmed an arbitration
award ordering the Borough of Shippensburg to include the disputed pay. Id. at 248-
49. This Court reversed, reasoning that the arbitration award exceeded the
arbitrator’s authority by modifying the longstanding 25-year past practice between
the parties and unsettling the Borough’s pension liability. Id. at 251. As opposed to
Shippensburg, the present case contains an established past practice between the
parties that is restored rather than unsettled by the Award. The parties have
historically included the disputed forms of pay in calculations, a practice that has not
been formally modified by the Settlement Agreement nor any other collective
bargaining. As a result, the Award requiring inclusion of the disputed forms of pay
does not modify past practice, contradict the CBA, or unsettle the City’s pension
liability. It simply maintains the status quo and is within the Arbitrator’s authority.
Muhlenberg is even less dispositive, as the parties in that case agreed the
award was a modification. Thus, our analysis there focused only upon whether the
arbitrator correctly found the modification to be actuarially sound. Muhlenberg, slip
op. at 21, 27. Unlike in Muhlenberg, we are not determining whether the inclusion
14
Falls Township is cited for its persuasive value in accordance with Section 414(a) of the
Commonwealth Court’s Internal Operating Procedures. 210 Pa. Code § 69.414(a).
12
of the disputed compensation is an actuarially sound modification, but whether that
inclusion is a modification at all. The Award in this case does not modify the pension
liability of the City in a manner necessitating a study, but simply holds the City to
the ordinances governing the Plan and the past practice to which it has previously
adhered. The City’s argument that its past practice is exclusion of the disputed forms
of compensation does not succeed, as that practice was never formalized. This lack
of formalization to alter the forms of compensation that constitute salary was at the
heart of the outcome in Wilkes-Barre PBA and dictates the same outcome here.
Because the Award requires a return to the status quo rather than a modification, this
decision was within the Arbitrator’s authority and common pleas had no grounds to
reverse under narrow certiorari. Accordingly, we reverse.
_____________________________________
RENÉE COHN JUBELIRER, Judge
13
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
City of Wilkes-Barre :
:
v. : No. 1575 C.D. 2017
:
Wilkes-Barre City Fire Fighters :
Local Union No. 104, :
Appellant :
ORDER
NOW, October 11, 2018, the Order of the Luzerne County Court of Common
Pleas, dated October 6, 2017, in the above-captioned case, is hereby REVERSED.
_____________________________________
RENÉE COHN JUBELIRER, Judge