IN THE MATTER OF NORTH HUDSON REGIONAL FIRE & RESCUE

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0006-13T3

IN THE MATTER OF NORTH HUDSON

REGIONAL FIRE & RESCUE and

NORTH HUDSON FIREFIGHTERS

ASSOCIATION.

__________________________________________________________

March 2, 2015

Argued October 21, 2014 Decided

Before Judges Messano, Hayden and Sumners.

On appeal from the Public Employment Relations Commission, Docket No. CO-2011-153.

Ramon E. Rivera and Thomas R. Kobin argued the cause for appellant North Hudson Regional Fire and Rescue (Scarinci & Hollenbeck, LLC and Chasan Leyner & Lamparello, PC, attorneys; Mr. Rivera, Mr. Kobin, and Christina M. Michelson, on the brief).

Bruce Leder argued the cause for respondent North Hudson Firefighters Association (Cohen, Leder, Montalbano & Grossman LLC, attorneys; Mr. Leder, on the brief).

Martin R. Pachman, General Counsel, attorney for respondent Public Employment Relations Commission (Christine R. Lucarelli, Deputy General Counsel, on the statement in lieu of brief).

PER CURIAM

In this case we consider a final decision of the Public Employment Relations Commission (PERC) holding that a public employer committed unfair labor practices by extending the payment of terminal leave benefits due under a collective negotiations agreement (CNA) without negotiating with the employees' representative. Specifically, North Hudson Regional Fire and Rescue (Regional) appeals from PERC's final decision that Regional committed unfair labor practices against respondent North Hudson Firefighters Association (the Association) by unilaterally changing its terminal leave benefits payment schedule. On appeal, Regional's principal argument is that the subject was not negotiable as it was preempted by recent legislation that permitted a local unit of government to appropriate emergency funding for terminal leave benefits, and at "its sole discretion" change the payout term to five years. Regional also argues that summary judgment was not appropriate as there were material facts in dispute about Regional's ability to pay the benefits in one lump sum. For the reasons that follow, we affirm PERC's decision, albeit on a somewhat different ground than the agency did. Shim v. Rutgers, 191 N.J. 374, 378 (2007); Isko v. Planning Bd. of Livingston, 51 N.J. 162, 175 (1968); State v. Maples, 346 N.J. Super. 408, 417 (App. Div. 2002) ("[W]e affirm or reverse judgments and orders, not reasons.").

Regional was formed in 1999 as a joint meeting1 pursuant to the New Jersey Consolidated Municipal Services Act, N.J.S.A. 40:48B-2.1, out of five municipalities: Guttenberg, North Bergen, Union City, Weehawken, and West New York. Since 1999, the Association has been the exclusive majority representative of all firefighters employed by Regional. The Association and Regional negotiated a CNA covering the period from July 1, 2004 to June 30, 2009. After the contract expired without the parties agreeing on a new CNA, they submitted the dispute to PERC for interest arbitration.2 Following the selection of an arbitrator, the parties engaged in a series of joint mediation sessions for over a year.

The CNA provided a method for calculating terminal leave benefits payable "upon retirement." Although the contract is silent concerning the exact timing of payment, Regional had a long-standing practice of offering retiring firefighters the option of receiving a lump sum payment. While the parties were engaged in mediation, the Management Committee of Regional issued a "Resolution Authorizing the Deferral of Terminal Leave Benefits Pursuant to Public Law 2010, Chapter 46, N.J.S.A. 40A:4-53" (Emergency Resolution) on August 10, 2010. The Emergency Resolution abolished the lump sum payment option by declaring "Any existing . . . or future severance liabilities of [Regional] shall be paid in equal annual installments over a period of five years pursuant to [N.J.S.A. 40A:4-53(h)]."

When mediation did not result in agreement on a new CNA, the parties submitted formal proposals to the arbitrator for his determination as to their relative merits. In its final submission, Regional proposed a change to the contract's terminal leave provision authorizing extended payments of benefits, which varied the number of years for payments based on the amount owed to an individual firefighter. The Association's final proposal did not request any changes to the provision on terminal leave benefit payments.

Responding to the Emergency Resolution, on October 10, 2010, the Association filed an unfair labor practice charge with PERC. The charge alleged that Regional violated the Employer-Employee Relations Act, N.J.S.A. 34:13A-1 to -29 (the Act) by unilaterally changing a term or condition of employment. PERC issued a complaint on September 16, 2011 charging Regional with violations of N.J.S.A. 34:13A-5.4(a)(1) and (a)(5).

Regional filed an answer denying the charges, contending that negotiations about the manner of payment of terminal leave benefits were preempted by subsection (h) of the Special Emergency Appropriations law, N.J.S.A. 40A:4-53,3 which in relevant part read

A local unit may adopt an ordinance authorizing special emergency appropriations for the carrying out of any of the following purposes

. . .

(h) Contractually required severance liabilities resulting from the layoff or retirement of employees. Such liabilities shall be paid without interest and, at the sole discretion of the local unit, may be paid in equal annual installments over a period not to exceed five years.

[N.J.S.A. 40A:4-53(h).]

Both parties moved for summary judgment, contending that no material facts were in dispute. In a written decision issued July 16, 2012, the PERC hearing officer rejected Regional's contentions. According to the hearing officer, the Special Emergency Appropriations law did not preempt negotiations because it did not mandate that all local units have extended payouts, but preserved discretion by stating that a local unit "may" adopt an ordinance. The hearing officer rejected Regional's contention that its current budgetary problems made the issue non-negotiable, but pointed out that these were legitimate concerns to bring to the negotiation sessions. The hearing officer concluded that Regional did not have a management prerogative to set the method of terminal leave payments and that this was a mandatorily negotiable term and condition of employment. Thus, the hearing officer recommended that PERC find that Regional violated the Act, and order Regional to cease and desist from violating the Act, provide future retirees the option of receiving severance benefits in a lump sum, give retirees currently affected by the change the option to receive remaining payments in a lump sum, and negotiate with the Association in good faith over future changes.

Meanwhile, on August 12, 2012, the arbitrator denied Regional's proposal to change the CNA's terminal leave benefits provision to include extended payment of benefits. The arbitrator concluded that Regional "has not met its burden of showing that this proposal is warranted." The arbitrator added, "I note as well that [Regional] has exercised its option under N.J.S.A. 40A:4-53(h) to authorize 'special emergency appropriations' to fund 'contractually required severance liabilities' resulting from employee retirements. That statute allows the payments to be made over a period of five years."

Regional filed exceptions to the hearing officer's recommendations. PERC issued its final decision on May 30, 2013, concluding that Regional had committed unfair labor practices by unilaterally changing a practice and failing to negotiate in good faith with the Association about the method of payment of terminal leave benefits. PERC rejected Regional's argument that it did not have to negotiate because N.J.S.A. 40A:4-53(h) referred to the employer's "sole discretion" in extending payments. PERC found that the 2010 amendment to the Special Emergency Appropriations law preserved a level of discretion with the local unit as to whether to issue an emergency appropriation, and thus it did not preempt negotiating over the terms. PERC also rejected Regional's contention that the method of payment was a management prerogative. PERC reasoned that the change concerned deferred compensation and it adversely affected the retiring firefighters' contractual rate of pay as "there is a substantial difference in the employees' availability and access to funds with the installment payment option." The agency also found Regional's argument that the unfair labor practice charge should have been deferred to the grievance procedure to be without merit. PERC reasoned that deferral was inappropriate since the contract was silent as to the manner of payment and long-standing practices had given firefighters the option of receiving a lump sum payment.

Regional next filed a motion for reconsideration, which PERC denied. This appeal followed.

On appeal, Regional argues that PERC's decision was arbitrary and capricious because N.J.S.A. 40A:4-53(h) preempts negotiations by leaving the decision on severance payments to the local unit's sole discretion. In the alternative, Regional contends that PERC erred in granting summary judgment, because there was a material dispute over its ability to pay.

We begin with a review of the well-established applicable legal principles. "PERC is charged with administering the [Act], N.J.S.A. 34:13A-1 to -29, and its interpretation of the Act is entitled to substantial deference." CWA, Local 1034 v. N.J. State PBA, Local 203, 412 N.J. Super. 286, 291 (App. Div. 2010) (citing N.J. Tpk. Auth. v. AFSCME, Council 73, 150 N.J. 331, 352 (1997)). "Generally we will not upset a State agency's determination in the absence of a showing that it was arbitrary, capricious or unreasonable, or that it lacked fair support in the evidence, or that it violated a legislative policy expressed or implicit in the governing statute." In re Camden Cnty. Prosecutor, 394 N.J. Super. 15, 22-23 (App. Div. 2007) (internal quotations omitted) (quoting Cnty. of Gloucester v. Pub. Emp't Relations Comm'n, 107 N.J. Super. 150, 156 (App. Div. 1969) aff'd, 55 N.J. 333 (1970)).

While we defer to an agency's interpretation of a statute that it is charged to enforce, we do not accept interpretations that are "plainly unreasonable, contrary to the language of the Act, or subversive of the Legislature's intent." CWA Local 1034, supra, 412 N.J. Super. at 291 (quoting In re Camden Cnty. Prosecutor, supra, 394 N.J. Super. at 23) (internal quotations omitted). Furthermore, no special deference is necessary when an agency interprets a statute outside of its charge. Ibid. (citing In re Camden Cnty. Prosecutor, supra, 394 N.J. Super. at 23).

N.J.S.A. 34:13A-5.3 requires that public employers "negotiate in good faith with respect to grievances, disciplinary disputes, and other terms and conditions of employment." In order to determine whether a subject is negotiable with an employee's representative or is a non-negotiable managerial prerogative, the Supreme Court has provided a three-prong test for negotiability

[A] subject is negotiable between public employers and employees when (1) the item intimately and directly affects the work and welfare of public employees; (2) the subject has not been fully or partially preempted by statute or regulation; and (3) a negotiated agreement would not significantly interfere with the determination of governmental policy.

[City of Jersey City v. Jersey City Police Officers Benevolent Ass'n, 154 N.J. 555, 568 (1998) (quoting In re Local 195, IFPTE, 88 N.J. 393, 404-05 (1982)).]

While Regional concedes that the subject of terminal leave benefits is negotiable, it maintains that the timing of payment is a management prerogative because it raises budgetary concerns. We concur with PERC that the issue concerns deferred compensation, a type of wage, and wage issues are fundamental subjects of mandatory negotiations. See Local 195, supra, 88 N.J. at 403 (finding that issues such as rates of pay and working hours are negotiable if not preempted or significantly interfering with determination of government policy); Franklin Twp. v. Franklin Twp. PBA Local 154, 424 N.J. Super. 369, 381 (App. Div. 2012) (change in work schedule resulting in change in annual compensation is negotiable); Rutgers Council of AAUP Chapters v. Rutgers, The State Univ., 381 N.J. Super. 63, 73-74 (App. Div. 2005) (quoting City of Jersey City, supra, 154 N.J. at 568) ("Such issues of compensation, which 'intimately and directly affect[] the work and welfare' of the employee[,]" are mandatorily negotiable.) (alterations in original); Piscataway Twp. Bd. of Educ. v. Piscataway Twp. Principals Ass'n, 164 N.J. Super. 98, 101 (App. Div. 1978) (reduction of work year with consequential reduction in annual compensation implicates wages and is negotiable).

We reject Regional's claim that Morris Cnty. Sheriff's Office v. Morris Cnty. PBA, Local 208, 418 N.J. Super. 64 (App. Div. 2011), supports its position that its management prerogative to "spend public money wisely" makes the timing of contractually obligated payments a managerial prerogative due to the fiscal crisis. Morris County is inapposite here as it involved an employer unilaterally ending an abusive practice of featherbedding and did not adversely affect any officers' pay or reduce work hours. Here, the extended payout clearly diminishes the benefits payable "on retirement." While the dollar amount is the same, payment of a large sum of money over five years results in a significant decrease in the retiree's access to the benefits and a diminished real value of the funds, which directly affects compensation. See Franklin Twp., supra, 424 N.J. Super. at 382. ("[T]he proposed modifications strike at the heart of negotiated CNAs terms because they attempt to alter the level of compensation and work hours [] without compensation."). Thus, as the subject concerns a diminution of the value of a negotiated form of compensation, a mandatory issue of negotiation, the first criterion of negotiability has been met.

Regional also contends that the subject is not negotiable based upon the 2010 amendment to the Special Emergency Appropriation law, N.J.S.A. 40A:4-53, claiming it explicitly preempted the subject of the timing of the terminal leave benefit payout. The Association argues that the Special Emergency Appropriation law does not apply to Regional as it is a joint meeting, which cannot pass an ordinance or make appropriations. Hence, we must carefully consider the Special Emergency Appropriation law to determine its applicability to this dispute.

In interpreting a statute, "[w]ell-known principles of statutory construction guide [our] analysis[.]" State v. Hudson, 209 N.J. 513, 529 (2012). "The overriding goal is to determine as best we can the intent of the Legislature, and to give effect to that intent." Ibid. To that end, we must look to the plain language of the statute as the best indicator of the intent of the Legislature. Ibid. "If the plain language leads to a clear and unambiguous result, then our interpretive process is over." Richardson v. Bd. of Trs., Police & Firemen's Ret. Sys., 192 N.J. 189, 195 (2007); see also N.J.S.A. 1:1-1 (A statute's "words and phrases shall be read and construed with their context, and shall . . . be given their generally accepted meaning, according to the approved usage of the language.").

In deciphering the plain meaning of a statute, courts utilize the statute's internal structure and conventional meanings of its phrases and words. Evans v. Atlantic City Bd. of Educ., 404 N.J. Super. 87, 91 (App. Div. 2008). The court may utilize the doctrine of "expressio unius est exclusio alterius," which suggests that when items are specifically listed, those excluded were excluded purposefully. Id. at 92. Where a list is illustrative rather than exclusive, it should ordinarily be preceded by the following types of phrases: "such as," "including," "may include," "in any of the following ways," or "including but not limited to." Ibid.

If a statute is ambiguous and capable of more than one plausible interpretation, then we will use legislative history and other extrinsic guides as an aid in interpretation. Wilson ex rel. Manzano v. City of Jersey City, 209 N.J. 558, 572 (2012). Legislative history is also helpful in cases where "a literal reading of the statute would yield an absurd result, particularly one at odds with the overall statutory scheme." Ibid. And when interpreting a statute that is part of a larger framework, the statute should be read in connection with the other parts to give meaning to the entire legislative scheme. Ibid.

The pertinent part of the Special Emergency Appropriation law, which is part of the Local Budget Law, N.J.S.A. 40A:4-1 to -89, states that "local units" may pass an ordinance giving it sole discretion to pay accrued severance liabilities over a five-year period." N.J.S.A. 40A:4-53(h). The term "local unit" is defined as a "county or municipality." N.J.S.A. 40A:1-1. A joint meeting is "a public body corporate and politic constituting a political subdivision of the State exercising public and essential governmental functions to provide for the public health and welfare." N.J.S.A. 40:48B-2.1. Since a joint meeting is neither a county nor municipality, given the specific definition of local unit, a joint meeting is not included within the Special Emergency Appropriation law's purview.4 Consequently, we need not determine whether N.J.S.A. 40A:4-53(h) expressly preempts negotiations by local units on the subject of terminal leave benefits payouts, because we find that N.J.S.A. 40A:4-53(h) does not apply here as Regional is a joint meeting, not a local unit.

Further, the Special Emergency Appropriation law permits the local unit to pass an ordinance authorizing severance liabilities to be paid over a period of five years. N.J.S.A. 40A:4-53(h). Joint meetings do not possess authority to pass ordinances. See N.J.S.A. 40A:65-15. Indeed, when Regional took its action in the present case, it passed the Emergency Resolution rather than an ordinance, underscoring the inapplicability of this section. Notably, the record contains no evidence that any of the five municipalities composing the joint meeting have passed an emergency appropriation ordinance pursuant to N.J.S.A. 40A:4-53(h).

A statement issued by the Office of Legislative Services concerning this amendment also supports this interpretation. Its Fiscal Estimate stated that any potential increase in costs was "indeterminate" because "[t]hese costs would result from the issuance of short-term notes to finance the special emergency appropriations." Regional is completely funded by its member municipalities and does not have authority to issue bonds; therefore, it seems that the Legislature intentionally chose to exclude consolidated service providers from the relief provided in the statute. N.J.S.A. 40A:65-15.

A "Legislature is presumed to be thoroughly conversant with its legislation." State v. Galicia, 210 N.J. 364, 380 (2012) (quoting State v. Grunow, 102 N.J. 133, 144 (1986)) (internal quotations omitted). A statement that a statute applies to a list of items implies that the statute does not apply to items not included in the list. Evans, supra, 404 N.J. Super. at 92. Where, as here, local unit is defined as including only counties and municipalities, the most reasonable interpretation is that the Legislature did not intend to include "joint meetings" in that definition.

Our function is not "to rewrite a plainly-written enactment of the Legislature or presume that the Legislature intended something other than that expressed by way of the plain language." Borough of Glassboro v. Fraternal Order of Police, Lodge No. 108, 197 N.J. 1, 11 (2008) (internal quotation marks and citations omitted). Further, courts may not "read into a statute words that were not placed there by the Legislature." State v. Smith, 197 N.J. 325, 332 (2009). We decline to find that the Legislature intended to include joint meetings in the definition of local units. As N.J.S.A. 40A:4-53(h) does not apply to Regional and Regional does not suggest any other statutory grounds for preemption, the second prong of negotiability has been demonstrated.

The third criterion of negotiability requires us to consider whether negotiations on the method of payout will "significantly interfere with the determination of government policy." Local 195, supra, 88 N.J. at 404-05. The term "significantly" is critically important here as we have recognized that "nearly every determination by management in the public sector will, in some measure, implicate the governmental policy making function." Elizabeth v. Elizabeth Fire Officer's Ass'n, 198 N.J. Super. 382, 386 (App. Div. 1985). As the Supreme Court explained

To decide whether a negotiated agreement would significantly interfere with the determination of governmental policy, it is necessary to balance the interests of the public employees and the public employer. When the dominant concern is the managerial prerogative to determine policy, a subject may not be included in collective negotiations even though it may intimately affect employees' working conditions.

[Jersey City, supra, 154 N.J. at 571 (quoting Local 195, supra, 88 N.J. at 405) (internal quotations omitted).]

Regional does not claim with any specificity that negotiating over the timing of payments significantly interferes with the determination of government policy. Rather, Regional claims that due to the ongoing severe financial crisis, the continuation of the practice of making lump sum payments would create an enormous financial hardship. Regional argues that summary judgment was inappropriately granted as there was a dispute over its ability to pay.

In order to defeat summary judgment there must be a material fact in dispute. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). As discussed supra, the criteria for whether a subject is negotiable, giving rise to the duty of a public employer to negotiate, does not include the issue of the financial consequences. See City of Jersey City, supra, 154 N.J. at 568. Regional's very real fiscal concerns are an appropriate topic for negotiations; however, its assertion that the dispute over its ability to pay should have defeated summary judgment is without merit. Regional's ability to pay is not material to whether it committed an unfair labor practice by failing to bargain in good faith and unilaterally changing terms and conditions of employment. Thus, the agency did not err in granting summary judgment. See Ibid.; Brill, supra, 142 N.J. at 540.

Affirmed.

1 A "joint meeting" is a public body that exercises various defined governmental functions "for the public health and welfare." See N.J.S.A. 40:48B-2.1; 40A:65-15. While "joint meetings" existing prior to 2007 still exist, N.J.S.A. 40A:65-24, no new joint meetings can be formed as the Legislature repealed the authorizing statute under the "Uniform Shared Services and Consolidation Act." N.J.S.A. 40A:65-35 (repealing N.J.S.A. 40:48B-2).

2 Interest arbitration is a statutorily-mandated process that occurs between certain public employees, namely police officers and firefighters, and public employers if the parties reach impasse while bargaining over terms and conditions of employment. N.J.S.A. 34:13A-16. The process occurs under the supervision of PERC and is binding on the parties. Ibid.

3 The Legislature amended N.J.S.A. 40A:4-53(h) in 2010. L. 2010, c. 46, 1. This amendment changed two parts of the existing N.J.S.A. 40A:4-53(h). First, it eliminated a threshold condition that only authorized "special emergency appropriations" for severance liabilities in cases where the overall liabilities were in excess of ten percent of the "amount to be raised by taxes for municipal purposes in the fiscal year in which the layoffs or retirements take place." Proposed Bill S. 1804 (introduced Mar. 15, 2010). Second, the bill added the following language: "[s]uch liabilities shall be paid without interest and, at the sole discretion of the local unit, may be paid in equal annual installments over a period not to exceed 10 years." An amendment decreased the maximum payout period to five years. Senate Floor Amendment to S. 1804 (June 28, 2010).

4 We note that the Legislature has defined "local units" differently in another statute. In the Shared Services and Consolidation Act, N.J.S.A. 40A:65-1 to -35, the Legislature defined "local units" to include "joint meetings" as well as other kinds of consolidated service providers for purposes of that statute. See N.J.S.A. 40A:65-3.