In the Matter of State of New Jersey and New Jersey Law

• Court: New Jersey Superior Court Appellate Division
• Decided: January 15, 2016
• Docket: A-3111-13T2
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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