RUTHERFORD PBA LOCAL 300 VS. BOROUGH OF RUTHERFORD (C-000144-15, BERGEN COUNTY AND STATEWIDE) ( 2018 )

NOT FOR PUBLICATION WITHOUT THE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:
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....
(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
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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
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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
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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
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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.
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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
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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
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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
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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.
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"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
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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
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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.
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