NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-1263-11T1
PATERSON POLICE PBA LOCAL 1 and PATERSON POLICE PBA LOCAL 1 APPROVED FOR PUBLICATION SUPERIOR OFFICERS November 27, 2013 ASSOCATION, APPELLATE DIVISION Plaintiffs-Respondents,
v.
CITY OF PATERSON, a municipal corporation of the State of New Jersey,
Defendant-Appellant.
________________________________________________________________
Argued April 29, 2013 – Decided November 27, 2013
Before Judges Graves, Espinosa and Guadagno.
On appeal from Superior Court of New Jersey, Chancery Division, General Equity Part, Passaic County, Docket No. C-33-11.
Brian W. Kronick argued the cause for appellant (Genova, Burns, Giantomasi & Webster, attorneys; Mr. Kronick, of counsel; David K. Broderick and Brett M. Pugach, on the briefs).
Mark C. Rushfield argued the cause for respondents (Shaw, Perelson, May & Lambert, LLP, attorneys; Mr. Rushfield, of counsel and on the brief).
Robert Fagella argued the cause for amicus curiae New Jersey State Police Benevolent Association (Zazzali, Fagella, Nowak, Kleinbaum & Friedman, attorneys; Paul L. Kleinbaum, of counsel and on the brief; Marissa A. McAleer, on the brief).
Eileen Schlindwein Den Bleyker, Senior Deputy Attorney General, argued the cause for amicus curiae Division of Local Government Services and New Jersey Department of the Treasury, Division of Pensions and Benefits (Jeffrey S. Chiesa, Attorney General, attorney; Robert Lougy, Assistant Attorney General, of counsel; Ms. Den Bleyker, on the brief).
Matthew Weng, Staff Counsel, argued the cause for amicus curiae New Jersey State League of Municipalities (William J. Kearns, Jr., General Counsel, attorney; Mr. Weng, on the brief).
Craig S. Gumpel argued the cause for amicus curiae New Jersey State Firefighters' Mutual Benevolent Association (Fox & Fox, LLP, attorneys; Mr. Gumpel, on the brief).
The opinion of the court was delivered by
ESPINOSA, J.A.D.
After collective negotiation agreements (CNAs) between
defendant City of Paterson and plaintiffs, Paterson Police PBA
Local 1 and Paterson Police PBA Local 1 Superior Officers
Association,1 expired, the parties engaged in compulsory interest
1 Plaintiffs Paterson Police PBA Local 1 (PBA) and Paterson Police PBA Local 1 Superior Officers Association (SOA) are public sector labor organizations organized under the laws of the State of New Jersey. The PBA is the collective bargaining representative for all rank-and-file police officers of the City of Paterson, and the SOA is the collective bargaining (continued)
2 A-1263-11T1 arbitration. The resulting award required, in part, that police
officers "shall make contributions toward health insurance
coverage in the amount of 1.5% of base salary" pursuant to L.
2010, c. 2. Defendant interpreted base salary as an officer's
base pensionable salary and made deductions accordingly.
Plaintiffs initiated this action, contending that "base salary"
meant base contractual salary and excluded additional items of
compensation such as longevity, educational incentives, and
night and detective differentials. The trial judge agreed with
plaintiffs and entered judgment in their favor.
Although base salary was not defined in either the statute
or the award, it was defined in a subsequent statute that was
applicable to the award here. See N.J.S.A. 34:13A-16.7. In the
absence of any statement to the contrary, we assume the
arbitrator used the term "base salary" as directed by the
Legislature. Therefore, and for the reasons that follow, we
agree with defendant's interpretation of the interest
arbitration award and reverse.
I.
On February 8, 2010, the Legislature introduced Senate Bill
Numbers 2, 3, and 4, which were passed and signed into law on
(continued) representative for all superior police officers in the ranks of sergeant through deputy chief.
3 A-1263-11T1 March 22, 2010. The three bills implemented some of the
recommendations of the Joint Legislative Committee on Public
Employee Benefits Reform, Final Report (Dec. 1, 2006) (Final
Report),2 which was created to identify "proposals that will
terminate abuses of the pension systems and control the cost of
providing public employee retirement, health care and other
benefits." Id. at 1; see also Commc'ns Workers of Am. v. State
of N.J., Dep't of Treasury, 421 N.J. Super. 75, 83 (Law Div.
2011). The law at issue here, which provided changes to the
health benefits program, was introduced as S. 3, enacted as L.
2010, c. 2, and codified as amended at N.J.S.A. 40A:10-21. The
two other bills provided changes to public pension benefits (S.
2, enacted as L. 2010, c. 1), and employee benefits (S. 4,
enacted as L. 2010, c. 3).
In the Final Report, the Committee noted that its
investigation of "health benefits issues revealed a system
plagued by the skyrocketing costs of health care that have
dramatically increased the cost of health benefits for both
current and retired public employees." Final Report, supra, at
57. The Committee recommended forty-one reforms to public
employee pensions, health care benefits, and other employee
2 Available at www.njleg.state.nj.us/PropertyTaxSession/ OPI/jcpe_final_report.pdf (last visited on Nov. 20, 2013).
4 A-1263-11T1 benefits, which it found were long "overdue." Id. at 2-5. With
regard to health care costs, the Committee recommended that the
Legislature require all active public employees and future
retirees to pay some portion of the cost of their health
insurance premiums. Id. at 113-18. The resulting legislation
was "designed to improve the fiscal strength of State and local
governments, reduce taxpayer burdens, and ensure the health and
pension systems remain viable for current and future employees."3
Commc'ns Workers of Am., supra, 421 N.J. Super. at 83.
L. 2010, c. 2, added subsection (b) to N.J.S.A. 40A:10-21.
As amended, N.J.S.A. 40A:10-21(b) provides:
Commencing on the effective date [May 21, 2010] of P.L. 2010, c. 2 and upon the expiration of any applicable binding collective negotiations agreement in force on that effective date, employees of an employer shall pay 1.5 percent of base salary, through the withholding of the contribution from the pay, salary or other compensation, for health care benefits coverage provided pursuant to N.J.S. 40A:10- 17, notwithstanding any other amount that may be required additionally pursuant to subsection a. of this section for such coverage.
3 In June 2011, the Legislature enacted a successor health benefits law, L. 2011, c. 78 (codified in part at N.J.S.A. 40A:10-21.1), that requires all public employees, including employees covered under local unit self-insured programs, to contribute to their health benefits based on a percentage of the cost of coverage, and not base salary, which shall under no circumstances be less than 1.5% of an employee's base salary.
5 A-1263-11T1 "Base salary" is not defined under the statute. Adding to
the resulting ambiguity is the fact that the employee's
contribution is made "through the withholding of the
contribution from the pay, salary or other compensation."
N.J.S.A. 40A:10-21(b) (emphasis added). No administrative
regulations defining the term "base salary" were promulgated
under the amended statute.
However, guidelines were published by the State Department
of the Treasury, Division of Pensions and Benefits (DPB), and
the New Jersey Department of Community Affairs, Division of
Local Government Services (DLGS) to be provided to the affected
groups. DLGS was established in the Department of Community
Affairs under the Local Government Supervision Act (1947),
N.J.S.A. 52:27BB-1 to -23, and exercises regulatory and
supervisory powers over local governments. It is authorized to
"assist local government in the solution of its problems, and
plan and guide needed readjustments for effective local self-
government." N.J.S.A. 52:27BB-6. To this end, the Director of
DLGS may provide instruction to local government units through
Local Finance Notices (LFNs). N.J.A.C. 5:30-1.8.
DLGS issued LFN 2010-12 to provide "guidance for complying
with" N.J.S.A. 40A:10-21(b) to local units, such as defendant,
that provide non-State Health Benefits Program (SHBP) coverage.
6 A-1263-11T1 LFN 2010-12 highlighted important elements of the law and
included Frequently Asked Questions (FAQs) in which it defined
"base salary" as the "salary on which pension contribution . . .
is based." This definition was consistent with the definition
of base salary in a statewide informal guideline issued by the
DPB for the administration of SHBP.4
Defendant sought to comply with the dictates of N.J.S.A.
40A:10-21 by following LFN 2010-12. Accordingly, it deducted
1.5% of base pensionable salary from all its employees' pay as
their contribution toward their health benefits.
II.
Prior to the enactment of N.J.S.A. 40A:10-21(b), plaintiffs
and defendant were parties to two separate CNAs, which governed
the terms of employment of all member police officers, including
salary ranges by step and rank, and percentage increases for
longevity. Officers assigned as detectives received an annual
$2000 "detective differential" that was "payable bi-weekly in
addition to their base pay." An officer who worked the night
shift received a five percent "night differential," as part of
his or her "regular base salary," and an officer who completed
eighteen years of service received an annual "base salary
4 See also New Jersey State League of Municipalities' website, http://www.njslom.org/letters/ml042110-pensions.html (last visited Nov. 20, 2013).
7 A-1263-11T1 increase" of $2000. As part of his or her "regular salary," an
officer received an "education incentive reimbursement" in the
amount of $22.50 for each credit hour earned toward a degree or
certificate. Officers also received periodic compensation for
overtime, court attendance, rescheduled duty tours, clothing and
equipment allowances, and off-duty assignments. Under the
agreement, officers paid deductibles for medical care, but did
not contribute toward the cost of their health insurance
benefit.
Because the parties were unable to negotiate successor
agreements, their CNAs expired on July 31, 2008, and they
submitted to compulsory interest arbitration pursuant to
N.J.S.A. 34:13A-16 with New Jersey Public Employment Relations
Commission (PERC). Hearings were conducted by an arbitrator in
October 2009. On February 17, 2011, the arbitrator issued an
Interest Arbitration Decision and Award, which established the
terms of the CNAs between the parties for August 1, 2008, to
July 31, 2012. The arbitration award set a new salary schedule
and modified the longevity schedule, but continued the
provisions of the prior agreements regarding educational
incentives, and night and detective differentials.
The arbitration award recognized the applicability of the
amendment to N.J.S.A. 40A:10-21. Noting that neither party
8 A-1263-11T1 "made a proposal regarding employee co-payments toward health
insurance," the arbitrator nevertheless took "official notice of
an act by the New Jersey Legislature requiring the payment of
1.5% of base salary towards health insurance effective May 21,
2010." Accordingly, the award included the following language
in Article 31:
Pursuant to P.L. 2010, c. 2, unit employees shall make contributions toward health insurance coverage in the amount of 1.5% of base salary. This level of employee contribution shall be inclusive of, rather than in addition to, any statutory obligation towards an employee's requirement to make contributions toward the payment of health insurance.
Neither party filed an appeal of the award to PERC.
After the arbitrator's award was issued, defendant began
withholding 1.5% of each police officer's pensionable salary,
retroactive to the effective date of the statute. Defendant
calculated pensionable salary as base salary wages plus
additional items of compensation, including longevity,
educational incentives, and night and detective differentials,
but not overtime pay. Plaintiffs filed a verified complaint to
confirm the February 17, 2011, compulsory interest arbitration
award pursuant to N.J.S.A. 34:13A-16, challenging defendant's
calculation of base salary, as well as an order to show cause
for summary action pursuant to Rule 4:67-1. Defendant filed an
9 A-1263-11T1 answer and counterclaim, alleging that it had withheld 1.5% of
each employee's "pensionable salary" in accord with LFN 2010-12.
Defendant also sought modification or correction of the
arbitrator's award to clarify that "it shall withhold 1.5% of
pensionable salary in conformance with P.L. 2010, c. 2 . . . ."
The trial court held that defendant could not assert a
counterclaim to "modify the award" because it failed to appeal
the arbitrator's decision to PERC and because defendant failed
to establish grounds for such modification pursuant to N.J.S.A.
2A:24-9. The court found the award was "still subject to
confirmation . . . as written on its face." The court concluded
that the "clear and common meaning of the term 'base salary' in
P.L. 2010, c. 2" excluded "additional payments or allowances . .
. such as overtime pay, educational incentives, detective and
night differentials, and longevity pay." The court entered
final judgment, ordering defendant to "immediately adjust the
deductions taken from its police employees' wages to reflect a
deduction of 1.5% of 'base salary' for health contributions,
excluding from 'base salary' such benefits as longevity,
overtime, educational incentives, and night and detective pay
differentials." The judge also ordered defendant to refund the
amounts in excess of that definition previously deducted from
police officers' salary.
10 A-1263-11T1 The judge later issued an order that granted a stay as to
retroactive excess deductions, but denied a stay of the
prospective deductions. After defendant filed a notice of
appeal, we granted defendant's motion for a stay.
III.
Defendant argues that the trial court erred in interpreting
the term "base salary" as meaning base contractual salary,
rather than "base pensionable salary," and thereby improperly
excluded such additional items of compensation as educational
incentives, detective and night differentials, and longevity pay
from the calculation of base salary. Amici DLGS, DPB, and the
State League of Municipalities support defendant's position.
Amici New Jersey State Firefighters' Mutual Benevolent
Association (FMBA) and New Jersey Policemen's Benevolent
Association support plaintiffs' interpretation of base salary.
A.
The judgment, which enforced an arbitration award pursuant
to N.J.S.A. 34:13A-19, turned upon the trial judge's
interpretation of the term "base salary" in the arbitration
award and, in effect, as used in N.J.S.A. 40A:10-21(b). When
construing a law, a reviewing court conducts "a de novo review"
and does not "accord any special deference to a trial court's
interpretation." US Bank, N.A. v. Hough, 210 N.J. 187, 198
11 A-1263-11T1 (2012). See Manalapan Realty, L.P. v. Twp. Comm. of Manalapan,
140 N.J. 366, 378 (1995).
B.
We first review the nature of the award that was the
subject of interpretation by the trial court and now, in this
appeal.
Compulsory interest arbitration, which is governed by the
"Police and Fire Public Interest Arbitration Reform Act" (the
Reform Act), N.J.S.A. 34:13A-14(a) to -19, provides a mechanism
for the speedy resolution of collective negotiation disputes
between police and fire departments and their employers.
Hillsdale PBA Local 207 v. Borough of Hillsdale, 137 N.J. 71, 80
(1994). Arbitration conducted pursuant to the Reform Act is
subject to a statutorily mandated procedure. The arbitrator
must "decide the dispute based on a reasonable determination of
the issues, giving due weight to [enumerated statutory factors]
that are judged relevant for the resolution of the specific
dispute." N.J.S.A. 34:13A-16(g); see also In re City of Camden,
429 N.J. Super. 309, 325 (App. Div.), certif. denied, 215 N.J.
485 (2013).
The arbitrator's decision is final and binding upon the
parties. N.J.S.A. 34:13A-16(f)(5). There is, however, a
procedure for appealing the decision to PERC. See ibid.
12 A-1263-11T1 Although none of the parties appealed, they were permitted to
seek enforcement of the decision in the Superior Court.
N.J.S.A. 34:13A-19. In our view, the relief sought by defendant
was not a modification of the award but rather, a clarification
that use of the term "base salary" in the award was consistent
with applicable law.
C.
The new Article 31 in the award explicitly referred to L.
2010, c. 2, reciting the requirement that employees contribute
1.5% of their "base salary" toward the cost of their health
insurance. Therefore, to understand the meaning of "base
salary" within the award, we must determine the meaning of that
term in the statute.
The court's "task in statutory interpretation is to
determine and effectuate the Legislature's intent." Bosland v.
Warnock Dodge, Inc., 197 N.J. 543, 553 (2009). Courts "look
first to the plain language of the statute, seeking further
guidance only to the extent that the Legislature's intent cannot
be derived from the words that it has chosen." McGovern v.
Rutgers, 211 N.J. 94, 108 (2012) (quoting Bosland, supra, 197
N.J. at 553).
As noted, "base salary" is not defined in the statute
itself or in any administrative regulation promulgated to
13 A-1263-11T1 implement the statute. Moreover, it is susceptible to multiple
interpretations. "Salary" has been defined as "monies received
by a person on a fixed and continuous basis, i.e., normally paid
in regular periodic intervals in specific regular amounts."
Koribanics v. Bd. of Educ. of Clifton, 48 N.J. 1, 6 (1966);
Wilson v. Bd. of Trs. of Police and Firemen's Ret. Sys., 322
N.J. Super. 477, 481 (App. Div. 1998); see Black's Law
Dictionary 1454 (9th ed. 2009) (defining salary "[a]s an agreed
compensation for services . . . usually paid at regular
intervals on a yearly basis"); but see Webster's II New College
Dictionary 92 (1995) ("defining base pay" as "[a]n amount or a
rate of compensation for a specified job or activity, excluding
any other payments or allowances").
We therefore turn to "extrinsic evidence from which [we]
hope[] to glean the Legislature's intent." Klumb v. Bd. of
Educ. of Manalapan-Englishtown Reg'l High Sch. Dist., 199 N.J.
14, 24 (2009) (citing Bedford v. Riello, 195 N.J. 210, 222
(2008)). "When a statute is subject to more than one plausible
reading," the court's "role is 'to effectuate the legislative
intent in light of the language used and the objects sought to
be achieved.'" Velazquez v. Jiminez, 172 N.J. 240, 256 (2002)
(quoting State v. Hoffman, 149 N.J. 564, 578 (1997)). "Both the
statute's words and its goals must be considered." Kas Oriental
14 A-1263-11T1 Rugs, Inc. v. Ellman, 407 N.J. Super. 538, 569 (App. Div.),
certif. denied, 200 N.J. 476 (2009).
Such extrinsic evidence properly includes legislative
history and statutory context. See McGovern, supra, 211 N.J. at
108; TAC Assocs. v. N.J. Dep't of Envtl. Prot., 202 N.J. 533,
541 (2010). As we have noted, the enactment here was part of a
comprehensive legislative effort to control costs by making
changes to public employees' pension benefits, health benefits
programs, and other benefits.
In addition, we have the benefit of other legislative
action, enacted by the same legislative body in the same year as
L. 2010, c. 2, which also served the legislative goal of
controlling costs associated with public employees compensation
and benefits. N.J.S.A. 34:13A-16.75 amended the provisions of
the Reform Act applicable to compulsory interest arbitration
involving police and firefighters, the arbitration that led to
the award here. It imposed a two percent "cap" on police and
firefighter arbitration awards issued from January 1, 2011 to
April 1, 2014, pursuant to N.J.S.A. 34:13A-16.9.6 In addition,
5 L. 2010, c. 105, § 2 (effective Jan. 1, 2011). 6 N.J.S.A. 34:13A-16.7(b) states:
An arbitrator shall not render any award pursuant to [N.J.S.A. 34:13A-16] which, on (continued)
15 A-1263-11T1 N.J.S.A. 34:13A-16.7(a) provides the definition for "base
salary" to be used in police and firefighter arbitrations:
"Base salary" means the salary provided pursuant to a salary guide or table and any amount provided pursuant to a salary increment, including any amount provided for longevity or length of service. It also shall include any other item agreed to by the parties, or any other item that was included in the base salary as understood by the parties in the prior contract. Base salary shall not include non-salary economic issues, pension and health and medical insurance costs.
"Non-salary economic issues" means any economic issue that is not included in the definition of base salary.
(continued) 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 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. An award of an arbitrator shall not include base salary items and non-salary economic issues which were not included in the prior collective negotiations agreement.
As we have noted, neither party appealed the arbitration award to PERC and neither party contends that the award failed to comply with these limitations.
16 A-1263-11T1 Significantly, the arbitration award here was not issued until
February 17, 2011, after the effective date of N.J.S.A. 34:13A-
16.7, and therefore was subject to these definitions.
"[T]he arbitrator in a public employment case is obliged to
resolve [a dispute] in accordance with the law and the public
interest." Commc'ns Workers of Am., Local 1087 v. Monmouth
Cnty. Bd. of Soc. Servs., 96 N.J. 442, 453 (1984). If an award
in a public sector case is contrary to existing law, it may be
vacated by the court. N.J. Tpk. Auth. v. Local 196, I.F.P.T.E.,
190 N.J. 283, 294 (2007); see, e.g., Monmouth Cnty. Bd. of Soc.
Servs., supra, 96 N.J. at 453-55; In re City of Camden, supra,
429 N.J. Super. at 334; Jersey City Educ. Ass'n v. Bd. of Educ.,
218 N.J. Super. 177, 188 (App. Div.), certif. denied, 109 N.J.
506 (1987).
The arbitrator was therefore required to employ the
definition of "base salary" the Legislature mandated for use in
making arbitration awards involving police and firefighters.
Had he failed to comply with this statutory mandate, the award
would be subject to being vacated. In the absence of any
affirmative statement by the arbitrator to the contrary, we
assume the arbitration award used the term "base salary" as
directed by the Legislature in N.J.S.A. 34:13A-16.7(a).
17 A-1263-11T1 We also note that, months before the award was rendered,
DLGS issued LFN 2010-12 and sent it to all public employers to
provide guidance for complying with L. 2010, c. 2. The FAQs in
LFN 2010-12 advised, "'base salary' on which the 1.5%
contribution is calculated" is the "salary on which pension
contribution . . . is based." This definition was consistent
with that contained in the guidelines published by DPB, also
prior to the award, to assist public employers in complying with
L. 2010, c. 2, regarding SHBP and the School Employees Health
Benefits Program.
The guidelines issued by DLGS were informal in nature and
not the equivalent of an administrative agency's interpretation
of a statute it is empowered to enforce, which would warrant our
"substantial deference." See Klumb, supra, 199 N.J. at 24-25;
Baylor v. N.J. Dep't of Human Servs., 235 N.J. Super. 22, 37
(App. Div. 1989) (Petrella, P.J.A.D., dissenting), aff’d, 127
N.J. 286 (1990). Still, the guidelines merit our consideration
because they represent the practical interpretation of the
statute by the agency charged with instructing local
governmental units on how they were to comply with the new law.
Id. at 36-37.
The Legislature did not disavow the interpretation adopted
by DLGS and DPB. Generally, "the fact that the Legislature has
18 A-1263-11T1 not acted in response to an agency's interpretation . . . is
'granted great weight as evidence of its conformity with the
legislative intent.'" Klumb, supra, 199 N.J. at 24-25 (quoting
Malone v. Fender, 80 N.J. 129, 137 (1979)). That conformity is
evident by the Legislature's action in enacting N.J.S.A. 34:13A-
16.7 after the guidelines were issued and effectively adopting
the same definition of base salary for use in police and
firefighter arbitration. It is, therefore, reasonable to infer
that the arbitrator was aware of the applicable guidelines from
DLGS as well as the statute that governed the arbitration here
and acted in conformity therewith.7
The orders dated October 12 and November 3, 2011, are
reversed because the arbitration award must be enforced
consistent with the definition of "base salary" contained in
N.J.S.A. 34:13A-16.7(a).
Reversed and remanded for further proceedings consistent
with this opinion. We do not retain jurisdiction.
7 We note further that the definition of "base salary" we find applicable here has the salutary effect of serving a "longstanding" legislative goal to provide "uniformity in health benefits among all government employees." Commc'ns Workers of Am., supra, 421 N.J. Super. at 96-97
19 A-1263-11T1