RUTHERFORD PBA LOCAL 300 VS. BOROUGH OF RUTHERFORD (C-000144-15, BERGEN COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: September 10, 2018
• Docket: A-2055-16T1
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2055-16T1

RUTHERFORD PBA LOCAL 300,

Plaintiff-Appellant,

v.

BOROUGH OF RUTHERFORD,

Defendant-Respondent.

___________________________________

Argued February 5, 2018 – Decided September 10, 2018

Before Judges Accurso and DeAlmeida.

On appeal from Superior Court of New Jersey, Chancery Division, General Equity Part, Bergen County, Docket No. C-000144-15.

Michael A. Bukosky argued the cause for appellant (Loccke, Correia & Bukosky, attorneys; Michael A. Bukosky, of counsel and on the brief; Corey M. Sargeant, on the brief).

Eric M. Bernstein & Associates, LLC, attorneys for respondent (Eric M. Bernstein, of counsel and on the brief; Stephanie M. Platt, on the brief). PER CURIAM

Plaintiff Rutherford PBA Local 300 appeals from a December 9, 2016

judgment of the Chancery Division confirming an arbitration award under a

collective negotiated agreement (CNA) with defendant Borough of Rutherford,

and an August 29, 2016 Order from that court barring Local 300's claim that the

arbitration award violates the New Jersey Law Against Discrimination (LAD),

N.J.S.A. 10:5-1 to -49. We affirm.

I.

Local 300 is the exclusive collective bargaining representative for all full-

time, law enforcement personnel employed by the Borough. At the times

relevant to this appeal, the parties were operating under a CNA that provided

health insurance benefits to active employees and retirees. The CNA provided

in relevant part, as follows:

Article XXXII

(1) The Borough shall provide and pay the full cost of the following medical coverages: Blue Cross, Blue Shield, Rider J, Major Medical Insurance, and dental insurance for Employees and their families, of the same type as presently exists.

....

(3) The Borough shall provide a medical assistance program providing medical and dental coverages to all police retirees subject to the following guidelines: A-2055-16T1 2 ....

(b) Retiree Medical and dental coverage entitlement as is set forth in this article shall be provided by the Borough for the entire lifetime of the retiree and the entire lifetime of the employee's spouse. In the event that the retiree and the retiree's spouse become eligible for [M]edicare then the Borough shall be responsible for maintaining a wrap[-]around plan as a [M]edicare supplement so as to ensure the provision of the same level of medical and dental benefits to the retiree and spouse of the retiree. The level of medical and dental benefits shall be defined as that level of benefits provided to each retiree immediately before said retiree's separation from active police service with the Borough.

The Bergen Municipal Employee Benefits Fund, a joint insurance plan of

which the Borough is a member, requires all Borough employees who are

Medicare eligible to enroll in the full Medicare program to be eligible for retiree

coverage. A wrap-around plan bridges the difference in benefits between

Medicare and the employer's plan so that the total benefits provided by Medicare

and the wrap-around plan to retirees equal the benefits provided by the

employer's plan to active employees.

In March 2011, a retired Borough employee's wife became eligible for

Medicare Part B. She enrolled in the program, and was provided a wrap-around

plan at Borough expense. In early 2012, she received a statement from the

federal government indicating that $1154 had been deducted from her Social A-2055-16T1 3 Security benefits for Medicare Part B premiums during 2011. Her spouse

thereafter sent a letter to the Borough Administrator seeking reimbursement of

the premiums, asserting that pursuant to the CNA, "[m]edical coverage is

provided without cost to the retiree and spouse." The Borough decli ned the

reimbursement request.

Local 300 filed a grievance on behalf of the retired employee. The

grievance was denied and Local 300 invoked arbitration. On September 20,

2012, the Public Employment Relations Commission (PERC) referred the matter

to an arbitrator for a hearing. The parties stipulated that the issue to be decided

was "whether the Borough violated the parties' collective negotiated agreement

. . . when it declined to reimburse a retiree for a Medicare Part B premium paid

by his wife and, if so, what shall the remedy be."

Before the arbitrator, Local 300 argued that the provision in Article

XXXII of the CNA defining retiree coverage "as is set forth in this article" must

be read in pari materia with the earlier provision in the Article pro viding that

the Borough "shall provide and pay the full cost of" specified types of medical

coverage for active employees and their families. In addition, Local 300 argued

that the provision of Article XXXII providing that the level of medical and

dental benefits for the retiree or his or her spouse "shall be defined as that level

of benefits provided to each retiree immediately before said retiree's separation A-2055-16T1 4 from active police service" obligates the Borough to pay the Medicare Part B

premiums of retirees and their spouses, as the cost of coverage for medical

insurance is a component of the level of benefits. According to Local 300,

because the retiree who filed the grievance was not paying Medicare Part B

premiums for his wife when he retired, it is the Borough's contractual obligation

to pay those premiums after retirement.

Local 300 also argued that requiring retirees to pay Medicare Part B

premiums while active officers pay no premiums for health insurance coverage

would violate regulations promulgated under the Age Discrimination in

Employment Act (ADEA), 29 U.S.C. § 623. See C.F.R. 1625.10(d)(4)(ii)(B)

("[W]here younger employees are not required to contribute any portion of the

total premium cost, older employees may not be required to contribute any

portion."); See Erie Cty. Retiree Ass'n v. Cty. of Erie, 140 F. Supp. 2d 466, 477

(W.D. Pa. 2001) ("The fact that Plaintiffs are required to pay their Medicare Part

B premiums to maintain . . . coverage while younger retirees are not required to

make any payments to maintain . . . coverage is . . . a violation of the

regulation[.]"). Local 300 argued that the CNA should be construed to comport

with the ADEA and its implementing regulations.

The Borough, on the other hand, argued that Article XXXII guarantees

parity in only the "level of benefits" provided to active officers and retirees, not A-2055-16T1 5 in the cost of those benefits. According to the Borough, this interpretation of

the CNA is evident in the provision of Article XXXII obligating the Borough to

pay for a wrap-around plan to fill the gap between the benefits provided by

Medicare Part B and the benefits provided to the retiree at the time of separation

from active service. That provision does not require the Borough to pay the cost

of Medicare Part B premiums. In addition, the Borough argued that the term

"level of benefits," as used in the insurance industry, does not encompass the

cost of benefits, further supporting its proposed interpretation of the CNA.

The Borough also argued that its position is consistent with the negotiation

history of the CNA, and its implementation over many years. The Borough

never budgeted for reimbursement of Medicare Part B premiums, and, prior to

the present matter, which arose ten years after the relevant provisions became

part of the CNA, was never presented with a request for reimbursement of

Medicare Part B premiums. This is true despite the fact that four officers,

including a member of the CNA negotiating team, who were eligible for

Medicare Part B retired after the CNA was executed.

On March 19, 2013, the arbitrator issued a written opinion concluding that

Local 300 did not establish by a preponderance of the evidence that the Borough

breached the CNA when it declined to reimburse the retiree for his wife's

Medicare Part B premiums. The arbitrator found that the provision of Article A-2055-16T1 6 XXXII obligating the Borough to pay the cost of benefits applies only to the

insurance coverage of active employees and their families. He concluded th at

the provision addressing retirees required the Borough to provide a parity in

benefits, not costs, between active employees and retirees, with an obligation on

the Borough to bear the cost only of a wrap-around plan to bridge any gap in

benefits.

In addition, the arbitrator was persuaded by the fact that Medicare Part B

premiums were never discussed during the negotiations that resulted in the

CNA, and that the Borough did not budget to pay those premiums. Finally, the

arbitrator distinguished the holding in Erie. He found that in that case the

Medicare-eligible employees were required to participate in a plan that had

lesser benefits than those provided to younger retirees. He also noted that in

Erie the employer's plan assumed the government's responsibilities under

Medicare for the retirees. Thus, the retiree's Medicare Part B premiums were

deemed to be tantamount to paying the premiums of the employer's plan, which

resulted in a disproportionate contribution when compared to younger

employees.

On June 6, 2013, the Borough filed a complaint in the Chancery Division

seeking to confirm the arbitration award pursuant to N.J.S.A. 2A:24-7. On July

11, 2013, Local 300 filed a counterclaim seeking to vacate the arbitration award. A-2055-16T1 7 On March 24, 2014, the Chancery Division issued a comprehensive

written opinion confirming the arbitrator's interpretation of the CNA. However,

the court remanded the matter to the arbitrator to clarify his analysis of whether

the CNA violates the ADEA because "older retirees will pay more to receive

[the] same level of benefits than . . . younger retirees." See Tretina Printing,

Inc. v. Fitzpatrick & Assocs., Inc., 135 N.J. 349, 353-64 (1994) (allowing

remand to an arbitrator "for consideration or clarification" in limited

circumstances).

In its submissions to the arbitrator on remand, Local 300 raised for the

first time a claim that the CNA, as interpreted by the arbitrator, also violated the

LAD by requiring older retirees to pay premiums for health insurance that

younger retirees, who are not eligible for Medicare Part B because of their age,

are not required to pay. On February 17, 2015, the arbitrator issued an amended

decision. After an examination of the holding in Erie, the arbitrator noted that

in 2007, the Equal Employment Opportunity Commission (EEOC), in response

to the Erie decision, promulgated a regulation exempting from ADEA liability

certain practices relating to the coordination of employer health care benefits

with Medicare benefits available to retirees. The regulation provides that:

Some employee benefit plans provide health benefits for retired participants that are altered, reduced or eliminated when the participant is eligible for Medicare A-2055-16T1 8 health benefits or for health benefits under a comparable State health benefit plan, whether or not the participant actually enrolls in the other benefit program. Pursuant to the authority contained in section 9 of the [ADEA], and in accordance with the procedures provided therein and in § 1625.30(b) of this part, it is hereby found necessary and proper in the public interest to exempt from all prohibitions of the [ADEA] such coordination of retiree health benefits with Medicare or a comparable State health benefit plan.

[29 C.F.R. § 1625.32(b).]

The Third Circuit rejected a challenge to the regulation, holding that "this

narrow exemption from the ADEA is a reasonable, necessary and proper

exercise of its . . . authority, as over time it will likely benefit all retirees."

AARP v. EEOC, 489 F.3d 558, 565 (3d Cir. 2007). This is so because under the

holding in Erie, employers had an incentive to reduce benefits for retirees not

eligible for Medicare or to eliminate retiree benefits entirely.

Finding that the exemption created by the 2007 regulation applies to the

CNA, the arbitrator concluded that the Borough's rejection of the reimbursement

request did not violate the ADEA. The arbitrator did not mention Local 300's

LAD claim, presumably because the claim was outside the scope of the

Chancery Division's remand order.

On May 4, 2015, Local 300 filed a new complaint in the Chancery

Division to vacate the arbitrator's amended award. The complaint was A-2055-16T1 9 accompanied by Local 300's motion to vacate the amended arbitration award .

That motion included Local 300's LAD claims. Local 300 argued, in part, that

although an EEOC regulation exempts the disparate treatment of retirees with

respect to health care benefits from the strictures of the ADEA, no such

exemption exists with respect to the LAD.

The Borough counterclaimed to confirm the amended arbitration award

and subsequently moved to strike Local 300's LAD claim. The Borough argued

that Local 300's LAD claim is barred as being beyond the scope of the dispute

before the arbitrator, untimely, and precluded by the entire controversy doctrine.

In addition, the Borough argued that the record before the arbitrator contains no

evidence regarding an LAD claim because the parties and the arbitrator

proceeded in the absence of any such claim by Local 300.

In response, Local 300 argued that the trial court should decide the LAD

claim because the arbitrator's award is clearly contrary to the law and is not

procedurally barred. Local 300 argued that the question of the Borough's

compliance with the LAD is one of substantial public interest, which should be

heard even though not raised in the arbitration. See Oliveri v. Y.M.F. Carpet,

Inc. 186 N.J. 511 (2006).

On August 29, 2016, the trial court issued a comprehensive written

opinion barring Local 300's LAD claim. The court concluded that had Local A-2055-16T1 10 300 "wished to make an LAD claim, such a claim should have been asserted at

the outset of the original complaint, as the court finds that the cause of action

was known, or should have been know, at that time." In addition, the trial court

held that the LAD claim was outside the scope of its remand order, which was

limited to whether the arbitrator's interpretation of the CNA violated the ADEA.

The trial court also held that the public interest did not warrant allowing

the untimely LAD claim to proceed, as there had been no demonstration by

Local 300 that a failure to address the LAD claim will have a strong negative

impact beyond the interests of the parties. Finally, the trial court held that even

if a substantial public interest was at stake, Local 300's LAD claim could not

proceed, given the "complete absence of a record relating to an LAD claim."

On December 9, 2016, the trial court issued a written opinion confirming

the arbitrator's amended award with respect to the ADEA claim.

This appeal followed.

II.

Having reviewed the record in light of plaintiff's arguments and the law,

we affirm substantially for the reasons expressed by Judge Menelaos W. Toskos

in his thorough and well-reasoned written decisions confirming the arbitration

award and amended arbitration award. We add only the following.

A-2055-16T1 11 "Judicial review of an arbitration award is very limited." Bound Brook

Bd. of Educ. v. Ciripompa, 228 N.J. 4, 11 (2017) (quoting Linden Bd. of Educ.

v. Linden Educ. Ass'n ex rel. Mizichko, 202 N.J. 268, 276 (2010)). "[A]n

arbitrator's award is not . . . set aside lightly." State v. Int'l Fed'n of Prof'l &

Tech. Eng'rs, Local 195, 169 N.J. 505, 513 (2001). Pursuant to N.J.S.A. 2A:24-

8, a court may vacate an arbitration award only on narrow grounds, including

"[w]here the award was procured by corruption, fraud or undue means" or

"[w]here the arbitrators exceeded or so imperfectly executed their powers that a

mutual, final and definite award upon the subject matter submitted was not

made."

The review of an arbitration award resulting from a public-sector dispute

is somewhat broader. Habick v. Liberty Mut. Fire Ins. Co., 320 N.J. Super. 244,

252 (App. Div. 1999). So long as an arbitrator's interpretation of a contract is

"reasonably debatable" it will be upheld. Dep't of Law and Pub. Safety v. State

Troopers Fraternal Ass'n, 91 N.J. 464, 469 (1982). A decision is "reasonably

debatable" if it is "fairly arguable." Standard Oil Dev. Co. Emps. Union v. Esso

Research & Eng'g Co., 38 N.J. Super. 106, 119 (App. Div. 1955). A court "may

not substitute its own judgment for that of the arbitrator." N.J. Transit Bus

Operations v. Amalgamated Transit Union, 187 N.J. 546, 554 (2006). This is

A-2055-16T1 12 so "regardless of the court's view of the correctness of the arbitrator's

interpretation." Ibid.

The record contains ample grounds supporting the arbitrator's

interpretation of the CNA. No provision of the contract expressly provides that

the Borough will bear the cost of Medicare Part B premiums for retirees. This

contrasts with the express provisions of the CNA assigning to the Borough the

responsibility for the cost of insurance for active employees, as well as for wrap-

around plans to fill any gap in benefits for retirees enrolled in Medicare Part B.

In addition, there is no support in the CNA for Local 300's position that a parity

in benefits for retirees equates to a parity in costs. Moreover, after execution of

the CNA, the Borough never budgeted for Medicare Part B reimbursements, and

prior to the reimbursement request submitted by the grievant in this matter, no

other retiree eligible for Medicare Part B sought a premium reimbursement from

the Borough, even though the relevant provisions of the CNA had been in effect

for ten years.

We also agree that the 2007 EEOC regulation insulates the Borough from

a claim of discrimination under the ADEA and that Local 300 is barred from a

similar claim of discrimination under the LAD. Local 300 did not raise the LAD

in its initial submissions to the arbitrator. The Borough, therefore, did not have

an opportunity to create a record defending its interpretation of the CNA under A-2055-16T1 13 the LAD. Local 300's attempts to insert its LAD claim after the arbitrator issued

his award, during the remand, and before the Chancery Division, were properly

precluded.

Affirmed.

A-2055-16T1 14