FRATERNAL ORDER OF POLICE NEWARK LODGE NO. 12 v. CITY OF NEWARK

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

FRATERNAL ORDER OF POLICE,

NEWARK LODGE NO. 12,

Plaintiff-Appellant,

v.

CITY OF NEWARK,

Defendant-Respondent.

_______________________________________________

February 26, 2015

Submitted February 3, 2015 Decided

Before Judges Messano, Hayden and Sumners.

On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C-0082-13.

Markowitz and Richman, attorneys for appellant (Matthew D. Areman, on the brief).

Anna P. Pereira, Corporation Counsel, City of Newark, Department of Law, attorney for respondent (Michael A. Oppici, Assistant Corporation Counsel, on the brief).

PER CURIAM

At all times relevant to this appeal, plaintiff, Fraternal Order of Police, Newark Lodge No. 12 (the FOP), was the labor organization representing rank-and-file police officers employed by defendant, the City of Newark (Newark). The facts that gave rise to the appeal are undisputed.

On February 14, 2002, D.M. was placed on the "eligible list"1 of police officer candidates, but his name was later removed "on the basis of psychological unfitness to perform . . . the duties of the position." D.M. appealed to the Medical Review Panel, and, on January 26, 2005, the Merit Systems Board (the Board) accepted and adopted the Review Panel's recommendation, finding that Newark had not met its burden of proving D.M. was unfit.2

The Board concluded that "absent the erroneous disqualification, [D.M.] would have been employed in the position." Accordingly, the Board ordered that D.M. be restored to the eligible list, and, unless an updated background check disclosed disqualifying information, D.M.'s "appointment [was] otherwise mandated[,]" and he was "granted a retroactive date of appointment to the date he would have been appointed if his name had not been removed from the subject eligible list." The Board added: "[t]his date is for salary step placement and seniority-based purposes only. . . . [T]he Board does not grant any other relief, such as back pay or counsel fees." D.M. began working for Newark's police department on April 26, 2005.

Pursuant to Article 33 of the collective negotiations agreement (the CNA) between the FOP and Newark, entitled "Wages," officers' salaries are determined in accordance with a series of incremental salary "steps" contained in Appendix A of the CNA.3 For officers like D.M. who were hired after January 1, 2000, there were steps for "Academy" pay, i.e., "the salary recruits receive while in the police academy," "Probationary" pay, four additional steps, and a final "Senior Step." Appendix A provided that "Senior Step pay commences on the 1st day of the 10th year of employment." The difference between Step 4 pay and Senior Step pay was significant, with the differential increasing in each of the four years of the CNA.

In June 2011, D.M. petitioned the CSC to enforce the Board's prior order, claiming that Newark refused to place him on the Senior Step as of February 14, 2011, the first day of the tenth year after his retroactive appointment day, i.e., February 14, 2002. Newark responded by contending D.M. was ineligible for Senior Step pay because he had not physically begun work until 2005, and the CNA required that he be "'in service'" for the necessary period of years in order to be eligible.

In its final administrative action dated June 6, 2012, the CSC concluded that the Board's prior order "pertained only to [D.M.'s] initial salary step placement." The CSC determined that it lacked jurisdiction over the dispute, which it characterized as "a disagreement as to the achievement of the Senior Salary Step, which is a negotiated item in the parties' [CNA]." The CSC dismissed D.M.'s petition for enforcement.

The FOP then filed a grievance on behalf of D.M., and the matter was subject to binding arbitration under the terms of the CNA. The question presented to the arbitrator was whether D.M. was "entitled to senior officer pay on or about February [1]4, 2011? [A]nd, if so, what shall be the remedy?"

The arbitrator took testimony from the president of the FOP, as well as Jerome Morgan, from Newark's Office of Management and Budget. Morgan testified that "Senior [S]tep [P]ay is a step that was granted to employees for nine plus years of service in title. . . . A person can be hired on a date but the date that they're actually in title is a specific date" (emphasis added). However, Morgan also testified that within Newark's personnel software program, D.M. was listed as having an employment date of February 14, 2002.

Morgan referenced a 1990 consent arbitration award between Newark and the FOP that stated "[t]he employees' date for longevity benefits [was] based upon the date that they actually started to work for the City." Morgan also cited other past departmental circumstances in which officers were given appointment dates for "record and seniority purposes only."

The arbitrator issued his opinion on February 8, 2013. In recapping the parties' respective positions and the evidence from the hearing, the arbitrator summarized the FOP's argument, which it claimed was "consistent with the seniority provision" of the CNA.

Under the Agreement, police officers who are laid off and later recalled are given credit for the period of their lay off for purposes of salary step placement and senior officer pay. Credit toward senior office[r] pay and salary placement is also given to police officers who take a leave of absence. [D.M.'s] eligibility for senior officer pay is consistent with the definition of salary placement found in the Agreement . . . .

The arbitrator also took note of the FOP's argument that, contrary to Newark's primary contention, there was no provision in the CNA "that specifies 'a police officer actually be "in service" with [Newark] for purposes of obtaining any salary step placement at any of the steps, including senior officer step.'"

The arbitrator found that the longevity provisions contained in Article 8 of the CNA "separately list[ed] the percent employees of the police department receive[d] in additional salary every five . . . years. Article 8 contain[ed] no reference to Senior Step pay." He also found that the Board- ordered retroactive appointment date, February 14, 2002, "was 'the date [D.M] would have been appointed if his name had not been removed from the subject eligible list.'" Given the Board's order, and in "the absence of specific contract language" to the contrary, the arbitrator concluded that D.M. was entitled to Senior Step pay" as of February 14, 2011, and he ordered Newark to "make [D.M.] whole for the period he was not compensated for Senior Step salary."

Approximately two months after the award, the FOP filed a verified complaint and order to show cause in the Chancery Division asking the court to "[d]eclar[e] that the Arbitration Award . . . is fully valid and binding on the parties hereto."4 Newark responded, arguing the award should be vacated because the arbitrator exceeded his authority. See N.J.S.A. 2A:24-8(d) ("The court shall vacate the award . . . [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.").

After considering oral argument, the judge vacated the award. Quoting the CNA, he noted that "the arbitrator . . . ha[d] no right to vary or modify the terms and conditions of the agreement." The judge quoted the Court's decision in Communications Workers, Local 1087 v. Monmouth County Board of Social Services, 96 N.J. 442, 450 (1984): "'Under such narrow arbitration clauses, disputes that do not involve rights traceable to the agreement are beyond the jurisdiction of the arbitrator and therefore are not properly arbitrable.'"

The judge further observed that his review was "generally[] '[l]imited to whether or not the [arbitrator's] interpretation of the contractual language [was] reasonably debatable'" (third alteration in original) (quoting Kearny PBA Local # 21 v. Town of Kearny, 81 N.J. 208, 221 (1979)). However, citing our decision in Port Authority Police Sergeants Benevolent Association v. Port Authority, 340 N.J. Super. 453, 461 (App. Div. 2001), the judge added that the arbitrator was not free to "insert[] additional terms into a contract as opposed to interpreting a contract." The judge concluded

[I]t seems . . . that the arbitrator here did not interpret or construe the agreement . . . by determining the meaning of [the] language. Rather, the arbitrator . . . gave his meaning or interpretation to the . . . Board's ruling . . . and applied his understanding of that decision to the agreement. . . . [The Board's decision] provides that [D.M.] was granted a retroactive date of appointment for . . . salary step placement and seniority based purposes. There was no mention of other bases such as medical benefits, vacations, senior step pay and longevity. There's nothing in the agreement that indicates that [S]enior [S]tep pay is synonymous with step pay. In fact, [S]enior [S]tep pay is distinct and separate from step pay. And in one sense it is tied into longevity . . . and . . . Article 8 talks about rewarding employees for long and faithful service. So . . . [S]enior [S]tep pay is certainly different from step pay and the . . . Board's determination was that [D.M.] be given a retroactive date of employment for step placement and seniority only.

. . . .

Here[,] the arbitrator . . . changed or added to the [Board's] decision by having that decision apply to something other than what the [Board] ruled. . . . The arbitrator went beyond the contract and fashioned a remedy that in any event was already fashioned by the . . . Board (emphasis added).

The judge signed an order memorializing his decision and this appeal followed.

The arguments advanced are straight-forward. The FOP contends that the judge failed to apply the appropriate standard of review to the arbitrator's award, and because the arbitrator's interpretation of the CNA's provisions was "reasonably debatable," the award should have been confirmed.5 Newark, on the other hand, argues that the award is not premised upon a "reasonably debatable" interpretation of the CNA because past practice demonstrates Senior Step pay requires actual time in service, and "therefore could not be applied under the present circumstances." Newark reiterates the argument made before the Chancery judge that the arbitrator "went beyond the contract and fashioned his own remedy."

The standards that guide our review are well-known. "Arbitration is a favored form of dispute resolution, whose usefulness for labor-management issues is well-recognized in this state." Borough of E. Rutherford v. E. Rutherford PBA Local 275, 213 N.J. 190, 201 (2013) (citing Middletown Twp. PBA Local 124 v. Twp. of Middletown, 193 N.J. 1, 10 (2007)). Arbitration of public sector labor disputes in particular is meant to "be a fast and inexpensive way to achieve final resolution of such disputes and not merely 'a way-station on route to the courthouse.'" PBA, Local No. 11 v. City of Trenton, 205 N.J. 422, 429 (2011) (quoting Linden Bd. of Educ. v. Linden Educ. Ass'n, 202 N.J. 268, 276 (2010)). "Consistent with the salutary purposes that arbitration as a dispute-resolution mechanism promotes, courts grant arbitration awards considerable deference." E. Rutherford PBA, supra, 213 N.J. at 201.

"[W]here a collective [negotiations] agreement provides for binding arbitration, it is the arbitrator's construction that is bargained for, and not a court's construction." City of Trenton, supra, 205 N.J. at 429 (internal quotation marks omitted). In public sector arbitration, this translates into one overarching principle: "a court will confirm an arbitrator's award so long as the award is reasonably debatable." Middletown Twp. PBA, supra, 193 N.J. at 11 (internal quotation marks omitted). "Under the 'reasonably debatable' standard, a court reviewing an arbitration award may not substitute its own judgment for that of the arbitrator, regardless of the court's view of the correctness of the arbitrator's position." Ibid. (internal quotation marks omitted).

The Court has made clear, however, that our highly deferential standard of review

is not to suggest that an arbitrator's award is impervious to attack. Indeed, it is axiomatic that an arbitrator's "award is legitimate only so long as it draws its essence from the collective bargaining agreement. When the arbitrator's words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award."

[City of Trenton, supra, 205 N.J. at 429 (emphasis added) (quoting United Steelworkers v. Enter. Wheel & Car Corp., 363 U.S. 593, 597, 80 S. Ct. 1358, 1361, 4 L. Ed. 2d 1424, 1428 (1960)).]

It follows that the award may not "add[] new terms to [the] agreement or ignore[] its clear language." Ibid. If the arbitrator exceeds his authority by adding a new term to the contract, the award may be vacated pursuant to N.J.S.A. 2A:24-8(d). See, e.g., Cnty. Coll. of Morris Staff Ass'n v. Cnty. Coll. of Morris, 100 N.J. 383, 397-98 (1985) (declining to sustain arbitration award because arbitrator exceeded his authority by adding extra term to the negotiated agreement).

An arbitrator may, however, fill gaps in the contract so as to give meaning to a undefined term and "weave together . . . provisions that bear on the relevant question in coming to a final conclusion." City of Trenton, supra, 205 N.J. at 430 (quoting N.J. Transit Bus Operations, Inc. v. Amalgamated Transit Union, 187 N.J. 546, 555 (2006) (brackets omitted) (internal quotation marks omitted)). "When that occurs, even if the arbitrator's decision appears to conflict with the direct language of one clause of an agreement, so long as the contract, as a whole, supports the arbitrator's interpretation, the award will be upheld." Ibid. (emphasis added).

Applying these standards to the issue at hand, we are compelled to reverse and remand the matter to the Chancery Division for entry of an order confirming the arbitration award.

Contrary to the judge's decision, although the arbitrator referenced the 2005 Board decision, he did not use that as a basis for construing the CNA. Instead, he simply noted that the Board ordered D.M. be given a retroactive appointment date of February 14, 2002. It is true that the Board's decision provided D.M. only limited relief, i.e., use of that date for "salary step placement and seniority-based purposes only." However, the Board's decision did not deny D.M. benefits he otherwise was entitled to under the CNA.

What remained unanswered, therefore, was whether D.M. was entitled to Senior Step pay, which required the arbitrator to construe Appendix A. That provided, "Senior Step pay commences on the 1st day of the 10th year of employment." The arbitrator recognized the FOP's argument that the CNA did not specifically address the issue. He also found that the agreement provided no support for Newark's position that only actual time "in title" counted toward eligibility for Senior Step pay. Indeed, other provisions of the CNA implicitly contradicted this interpretation.

For example, although the judge thought Senior Step pay was "tied into longevity," the CNA had a separate provision for longevity, Article 8. Tellingly, longevity benefits were calculated at certain intervals upon an officer reaching his or her "anniversary date," which was defined, not as in Appendix A as the day of employment, but rather as that officer's "commencement . . . of service." The Arbitrator also considered and rejected the documentary evidence and Morgan's testimony regarding past practices, implicitly distinguishing the current controversy from the examples Newark cited.

In short, the arbitrator's construction of Appendix A was "a justifiable interpretation of the [CNA]." Id. at 431 (citing Kearny PBA, supra, 81 N.J. at 223-24). The award considered the CNA "as a whole." Id. at 430. The arbitrator did not exceed his authority because the award did not add terms to the CNA, but rather drew "its essence from the collective [negotiations] agreement." Id. at 429 (internal quotation marks omitted).

Lastly, we reject Newark's argument that we should affirm vacation of the award because the arbitrator failed to consider its financial consequences. We have said that in addition to considering whether the arbitrator's decision is "reasonably debatable," "a court . . . must also consider whether the award violates the law or public policy." S. Plainfield Bd. of Educ. v. S. Plainfield Educ. Ass'n, 320 N.J. Super. 281, 288 (App. Div.), certif. denied, 161 N.J. 332 (1999). In that case, we held that "[a]fter determining the meaning of a contract in a grievance arbitration case, . . . consideration of public interest and welfare, including fiscal impact, expands in significance as a relevant consideration in fashioning an appropriate remedy." Id. at 291.

This case is distinguishable. It does not deal with "multi-claim grievance arbitration," id. at 294, but rather application of the CNA's provisions to the unique factual circumstances of a particular employee, which, although capable of being repeated, are limited in number. Moreover, as the Court has more recently articulated,

If the imposition of an asserted 'financially burdensome' damages remedy were to become a determinative factor when reviewing an arbitration award, the losing party in an arbitration imposing financial damages would almost invariably seek vacation of the award. The deferential standard of review is intended, in part, to deter such litigation.

[East Rutherford PBA, supra, 213 N.J. at 207].

Reversed and remanded for entry of judgment confirming the arbitrator's award. We do not retain jurisdiction.

1 When there are vacancies for civil-service posts, the Civil Service Act provides for an examination process to determine who will obtain the new positions. N.J.S.A. 11A:4-2. "After the examination, an eligible list is published ranking all passing candidates by score, with special ranking rules for veterans and for tie scores. That list remains in force for three years . . . ." In re Foglio, 207 N.J. 38, 44 (2011) (citations omitted).

2 The Merit Systems Board is now the Civil Service Commission (the CSC). N.J.S.A. 11A:11-1.

3 The CNA at issue here commenced January 1, 2009, and ran through December 31, 2012.

4 In the same complaint, the FOP also sought to confirm another award made by a different arbitrator as to a different police officer. That is not the subject of this appeal.

5 In a footnote in its brief, the FOP also argues that "the City's request to vacate the . . . award was statutorily barred" since Newark did not seek to vacate the award until it filed its answer, in August 13, 2013, about six months after the February 8, 2013, arbitration award. See N.J.S.A. 2A:24-7 ("A party to the arbitration may, within 3 months after the award is delivered to him . . . commence a summary action in the court aforesaid for the confirmation of the award or for its vacation, modification or correction."). However, "[o]nce one of the parties . . . invoke[s] the court's jurisdiction, the other party is free to oppose the motion whether or not the three month period has expired." Harris v. Sec. Ins. Grp., 140 N.J. Super. 10, 14 (App. Div. 1976).