(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
(NOTE: This is a companion case to Township of Washington v. New Jersey State Policemen's
Benevolent Association, Inc., Local 206 also decided today.)
Argued January 3, 1994 -- Decided May 17, 1994
POLLOCK, J., writing for a unanimous Court.
This appeal arises from a salary dispute between the Borough of Hillsdale (Hillsdale) and its local
police department. Hillsdale PBA Local 207 (Local 207) and Hillsdale could not agree on the terms of a
collective-negotiation agreement for the Hillsdale police force for the years 1991, 1992 and 1993. Pursuant to
an amendment to the Employer-Employee Relations Act, commonly known as the Compulsory Interest
Arbitration Act (the Act), Local 207 petitioned the Public Employment Relations Commission (PERC) to
initiate interest arbitration.
In their negotiations, Hillsdale and Local 207 resolved all the non-economic issues for the 1991-1993
collective bargaining contract, but could not agree on two economic issues concerning salary increases and
the "banking" of compensatory time beyond a calendar year. In response to Local 207's petition, PERC
appointed an arbitrator to conduct compulsory interest arbitration to resolve those two issues. Under section
16 of the Act, the arbitrator must choose the most reasonable final offer submitted by each party. Hillsdale's
last offer proposed banking up to eighty hours in compensatory time and annual salary increases. Local
207's last offer proposed banking up to one hundred hours of compensatory time and semi-annual salary
increases.
Section 16g of the Act mandates that interest arbitrators, when choosing between two final offers,
consider eight factors. Those factors include the public welfare, comparisons of salaries and conditions of
employment to certain other public and private employees, overall compensation, stipulations of the parties,
the lawful authority of the municipality, financial effect on the community, the cost of living, and the
continuity and stability of police- and fire-department employment.
Hillsdale argued that the salaries of its police department should be compared not with those in
communities throughout Bergen County generally, but with salaries of the other nine "Pascack Ten"
municipalities a group of communities in northern Bergen County. Hillsdale argued that its offer, when
compared with other Pascack Ten communities that had negotiated police contracts in 1991, would have
made Hillsdale police officers the second highest paid officers in that group. Local 207 urged as the
appropriate basis for comparison the salary and non-wage benefits of police officers throughout Bergen
County. Local 207 claimed that Hillsdale's final offer would result in a diminution in salary increases. Local
207 also contended that Hillsdale had the ability to pay Local 207's final offer.
The arbitrator selected Local 207's offer, finding the increases reasonable and modest. The
Chancery Division confirmed the award. The Appellate Division reversed, finding that the arbitrator's
decision was flawed and was not supported by substantial credible evidence. The court reasoned that, under
section 16g, each factor was presumptively relevant and required arbitrators to compel the parties to produce
evidence on each factor and provide a factor-by-factor analysis of their final offers. The Appellate Division
found that from a review of the statutory factors, neither the parties nor the arbitrators sufficiently
considered the 16g statutory factors.
The Supreme Court granted certification.
HELD: The arbitrator's award did not comply with the requirements of section 16g of the Compulsory
Interest Arbitration Act. The award failed to identify the relevant factors, analyze the evidence
pertaining to those factors, and explain why other factors are irrelevant. However, because
Hillsdale has already paid the police in accordance with the arbitration award, that Court will not
disturb those payments.
1. Either party may institute judicial proceedings to enforce the interest arbitration award. However,
the standards that govern judicial review of interest arbitration is whether the award is supported by
substantial credible evidence in the record as a whole. A reviewing court may vacate an award when the
decision fails to give due weight to the section 16g factors, when the award has been procured by corruption,
fraud or undue means, when arbitrators have refused to hear relevant evidence or committed other
prejudicial errors, or when arbitrators have so imperfectly executed their power that they have not made a
final award. Specifically, an award may be found deficient if it does not expressly consider the interests and
welfare of the public. (pp. 9-13)
2. An arbitrator's award should identify the relevant factors, analyze the evidence pertaining to those
factors, and explain why other factors are irrelevant. Section 16g requires more than a comparison of police
salaries in other communities; section 16g(2) allows comparison with other jobs in both the public and
private sectors. In this case, there is no reasoned explanation for accepting Local 207's submission of the
salary increases from other municipalities nor is there an explanation for rejecting other bases for
comparison. (pp. 13-17)
3. The arbitrator improperly placed on Hillsdale the burden of proving a substantial detriment from
the arbitrator's selection of Local 207's final offer. Section 16g(6) does not require a municipality to prove
its financial inability to meet to the other party's final offer. That factor directs consideration of the final
impact on the municipality, which includes more than the ability to pay the increase. (pp. 17-18)
4. In this case, the arbitrator's award did not discuss all the section 16g factors. Instead it unduly
emphasized the comparison with police salaries in other communities and inappropriately relied on
Hillsdale's perceived ability to pay. Moreover, missing from the award is the reasoned explanation required
under the Act. Normally, the Court would reverse the award and remand the matter to an arbitrator.
However, these contracts extended from 1991 through 1993. Hillsdale did not seek a stay from the Appellate
Division. Instead, Hillsdale implemented the award by paying five of the six semi-annual payments
authorized by the award. Hillsdale did not implement the sixth and final payment because of the Appellate
Division's judgment vacating the award. Therefore, the appropriate decision, under the circumstances, is not
to disturb the payments Hillsdale has made to its police officers. Because the sixth payment was not
implemented, the matter is remanded to the arbitrator for a hearing limited to the officers' entitlement to
that payment. (pp. 18-19)
Judgment of the Appellate Division is AFFIRMED in part and REVERSED in part, and the matter
is REMANDED for arbitration limited to choosing between the last offers of the parties for the second half
of 1993.
CHIEF JUSTICE WILENTZ and JUSTICES CLIFFORD, HANDLER, O'HERN, GARIBALDI and
STEIN join in JUSTICE POLLOCK's opinion.
SUPREME COURT OF NEW JERSEY
A-
68 September Term 1993
HILLSDALE PBA LOCAL 207,
Plaintiff-Appellant,
v.
BOROUGH OF HILLSDALE,
Defendant-Respondent.
Argued January 3, 1994 -- Decided May 17, 1994
On certification to the Superior Court,
Appellate Division, whose opinion is
reported at
263 N.J. Super. 163 (1993).
Leon B. Savetsky argued the cause for
appellant (Loccke & Correia, attorneys).
Raymond R. Wiss argued the cause for
respondent (Wiss & Cooke, attorneys; Mr. Wiss
and Thomas K. Bouregy, Jr., on the brief).
James R. Zazzali argued the cause for amicus
curiae New Jersey State Policemen's
Benevolent Association (Zazzali, Zazzali,
Fagella & Nowak, attorneys).
Gerald L. Dorf argued the cause for amicus
curiae New Jersey State League of
Municipalities.
Robert E. Anderson argued the cause for
amicus curiae Public Employment Relations
Commission.
Raymond G. Heineman, Jr., submitted a brief
on behalf of amicus curiae Fire Fighters
Association of New Jersey (Kroll & Gaechter,
attorneys; Mr. Heineman and James P. Madden,
on the brief).
Stephen E. Trimboli submitted a brief on
behalf of amicus curiae New Jersey
Association of Counties (Genova Burns,
attorney).
Steven S. Glickman and Mark S. Ruderman
submitted letters in lieu of briefs on behalf
of amicus curiae New Jersey Conference of
Mayors and Bergen Municipal Coalition
(Ruderman & Glickman, attorneys).
The opinion of the Court was delivered by
POLLOCK, J.
This case, like its companion case, Township of Washington v. New Jersey State Policemen's Benevolent Ass'n, Local 206, ___ N.J. ___ (1994), involves the sufficiency of a compulsory-interest-arbitration award. Petitioner, Hillsdale PBA Local 207 (Local 207 or the PBA), and respondent, Borough of Hillsdale (the Borough or Hillsdale), could not agree on the terms of a collective-negotiation agreement for the Borough police force for the years 1991, 1992, and 1993. Pursuant to N.J.S.A. 34:13A-14 to -21, an amendment to the Employer-Employee Relations Act, N.J.S.A. 34:13A-1 to -21, commonly known as the Compulsory Interest Arbitration Act (the Act), Local 207 petitioned the Public Employment Relations Commission (PERC) to initiate interest arbitration. N.J.S.A. 34:13A-16 (section 16) requires the arbitrator to choose between the parties' final offers. The arbitrator chose Local 207's offer, and the Chancery Division confirmed the award. The Appellate Division reversed, 263 N.J. Super. 163 (1993), vacating the award and remanding the matter for a new hearing before a new arbitrator. We granted Local
207's petition for certification,
134 N.J. 478 (1993), and now
affirm in part, reverse in part, and remand for further
arbitration.
This case arises from a salary dispute between a municipality and its police department, but its resolution inevitably will affect the public. In an era of rising costs and budget caps, a municipality feels the initial impact of salary increases for police and fire departments. The taxpayers, however, feel the ultimate effect. Generally speaking, salary and related costs constitute a large part of a municipal budget. According to the Borough, most of those costs are attributable to police and fire departments. The Borough contends that police and fire department salary increases have exceeded increases for other public and private employees and have outstripped the cost of living. From its perspective, police and fire fighters have received disproportionately high wage increases. From another perspective, police and fire fighters perform essential public services, often at great risk and with little recognition. Accordingly, we proceed with an appreciation for the services that police and fire departments render and for the Legislature's attempt to limit the amount that arbitrators may order municipalities to pay for them. We also appreciate the public concern over the mounting costs of state and local government.
Control of these costs, however, primarily rests in the hands of
other branches and levels of government.
In their negotiations, Hillsdale and Local 207 resolved all
non-economic issues for the 1991-93 collective contract, but not
two economic issues concerning salary increases and the "banking"
of compensatory time beyond a calendar year. In response to
Local 207's petition, PERC appointed an arbitrator to conduct
compulsory interest-arbitration to resolve the two issues.
Hillsdale's last offer proposed banking up to eighty hours
of compensatory time and annual salary increases:
1991 7%
1992 6.5%
1993 6.2%.
By comparison, Local 207's last offer proposed banking up to
100 hours of compensatory time and semi-annual salary increases.
Such increases, which are peculiar to police and fire-fighter
contracts, compound annual salary increases. Local 207 proposed
increases:
January 1, 1991 5%
July l, 1991 3%
January 1, 1992 4%
July 1, 1992 4%
January 1, 1993 3%
July l, 1993 4%.
Section 16g mandates that interest arbitrators, when
choosing between two final offers, shall consider eight factors.
The factors include the public welfare, comparisons of salaries
and conditions of employment to certain other public and private
employees, overall compensation, stipulations of the parties, the
lawful authority of the municipality, financial effect on the
community, the cost of living, and the continuity and stability
of police- and fire-department employment.
Before the arbitrator, the dispute centered on a comparison of the parties' final offers with salaries and non-wage benefits paid to police officers in similar communities. Local 207 urged as the appropriate basis for comparison the salary and non-wage benefits of police officers throughout Bergen County. It further contended that even if the comparison were limited to a smaller group of Bergen County communities, the Hillsdale police salaries and benefits were lower. Local 207 argued that, contrary to the trend in similar communities, the Borough's final offer would result in a diminution in salary increases. In addition to the data on comparable employment, the PBA also sought to show that
arrests as well as juvenile and motor vehicle offenses had
increased in the Borough. Finally, it contended that the Borough
had the ability to pay Local 207's final offer.
Hillsdale argued that the salaries of its police department should be compared not with those in communities throughout Bergen County generally, but with salaries of the other nine "Pascack Ten" municipalities (Emerson, Montvale, Old Tappan, Oradell, Park Ridge, River Vale, Washington Township, Westwood, and Woodcliff Lake), a group of communities in northern Bergen County. According to Hillsdale, a comparison with the "Pascack Ten" establishes that the Hillsdale police are well compensated. In Hillsdale, the base pay for police officers with eleven years experience was $49,069 in 1990, the third highest in the "Pascack Ten." Hillsdale's final offer, when compared with the other "Pascack Ten" communities that had negotiated police contracts in 1991, would have made Hillsdale's police officers the second highest paid. Under Hillsdale's last offer, the base pay for an officer with eleven years experience would have been $52,278. Fringe benefits would raise the pay to $73,258, a sum that would have placed Hillsdale first among all communities in the "Pascack Ten." Hillsdale also contended that the police enjoyed more stable and secure employment than other Borough employees and that police salaries were higher than the salaries of those other employees. The Borough pointed out that it had a high tax rate
with low assessed valuation per capita, that it depended heavily
on the taxation of residential real estate, and that it had
limited land available for development. Finally, it also
demonstrated that over the preceding nine years Hillsdale police
had received a sixty-six percent salary increase, which far
exceeded the forty-six percent increase in the Consumer Price
Index over the same period.
The arbitrator quoted section 16g, recited the parties'
final offers, and selected Local 207's offer, stating:
Initially it should be noted that the
statutory criteria usually dissolves [sic]
into a determination of the more reasonable
offer. Rarely is a determination reached
under any single criteria [sic] which proves
dispositive of the issue in and of itself.
In this case the expert testimony established
to my satisfaction the Borough's ability to
pay. Dr. Werner's [Local 207's expert
witness'] credentials were impressive and his
testimony was convincing. Undoubtedly any
award of wages will have an impact on the
Borough but no substantially detrimental
result was proven by the Borough.
Analyzing the numerous exhibits,
particularly those relating to comparability
-- whether narrow and limited to "The Pascack
Ten" or viewed county-wide, leads me to the
inevitable conclusion that the increases
sought by the PBA are reasonable. The only
issue remaining is whether it is the more
reasonable of the two.
The Association has met that burden also -- i.e., proving that its offer is more reasonable. A review of the comparables shows that the Association's request is
modest. Although one can certainly question
the level of increase in light of the current
economic times, nevertheless, this is the
neighborhood out there. Clearly the PBA's
offer is midstream . . .. Had circumstances
been demonstrated that would have created
financial difficulties, or operational
problems or any difficulty created or
worsened by the award of the PBA Last Offer,
then Hillsdale's offer may well have been
deemed the more reasonable.
Although the Chancery Division confirmed the award, the
Appellate Division reversed, finding that the arbitrator's
decision was flawed and not supported by substantial credible
evidence. 263 N.J. Super. at 187-88. The court determined that
the parties' failure to adduce evidence on each of the section
16g factors did not excuse the arbitrator from obtaining such
evidence. Id. at 185. Reasoning that under section 16g each
factor was presumptively relevant, the court required arbitrators
to compel the parties to produce evidence on each factor and to
provide a factor-by-factor analysis of their final offers. The
Appellate Division explained:
A presumption that all of the statutory factors are relevant requires parties to submit evidence on each subject, either to negate or reinforce a given factor's relevance. This would afford a proper basis for public interest arbitrators to make an informed decision as to relevance. As a corollary, the interest arbitrators must detail in their opinions the specific reasons why an enumerated factor is not "judged relevant" in arriving at a final determination. This would also facilitate
judicial review of public sector interest
arbitration awards. See N.J.S.A.
34:13A-16f(5). We do not hold that each
factor be accorded equal weight. We merely
require that the arbitrator's award indicate
what factors are deemed relevant,
satisfactorily explain why a certain factor
(or factors) is not relevant, and provide an
analysis of the evidence on each relevant
factor.
The court found "from a review of the statutory factors,
neither the parties nor arbitrators sufficiently considered the
statutory factors set forth in N.J.S.A. 34:13A-16g." Id. at 187.
It then detailed the deficiencies of the arbitrator's award in a
factor-by-factor analysis. Id. at 188-96.
In general, compulsory interest arbitration is a statutory method of resolving collective-negotiation disputes between police and fire departments and their employers. Unlike "grievance" arbitration, which is a voluntary method of resolving disputes under an existing contract, compulsory interest arbitration does not depend on either the existence of a contract or on the agreement of the parties to proceed to arbitration. New Jersey State Policemen's Benevolent Ass'n, Local 29 v. Town of Irvington, 80 N.J. 271, 284 (1979). It is a statutorily mandated procedure for resolving the terms of a new contract.
If the parties reach an impasse in negotiations, either
party may initiate compulsory interest arbitration by filing a
petition with PERC. N.J.S.A. 34:13A-16b. PERC and the parties
then select an arbitrator from a panel of arbitrators maintained
by PERC. N.J.S.A. 34:13A-16e; N.J.A.C. 19:16-5.6. The parties
may also select which terminal procedure the arbitrator will use
to resolve the issues in dispute. N.J.S.A. 34:13A-16b and -16c.
These procedures include, but are not limited to, conventional
arbitration, arbitration confined to a choice between the last
offers of the parties as a single package, and last-offer
arbitration on an issue-by-issue basis. N.J.S.A. 34:13A-16c. If
the parties cannot agree on a terminal procedure, the parties are
confined to the last-offer procedure. N.J.S.A. 34:23A-16d.
Economic disputes, those that involve salaries, insurance,
vacations, holidays, and other items having a direct relationship
to employee income and can be readily calculated, are resolved as
a single package; non-economic issues are resolved on an
issue-by-issue basis. N.J.S.A. 34:13A-16d(2).
The purpose of the last-offer alternative is to encourage both parties to negotiate reasonably and to narrow their differences. Fear that the arbitrator will select the other party's offer provides each party with an incentive to be fair and reasonable. Robert J. Martin, Fixing the Fiscal Police and Firetrap: A Critique of New Jersey's Compulsory Interest
Arbitration Act, 18 Seton Hall Legis. J. 59, 72 (1993). Ideally,
the offers will converge and the parties can avoid arbitration.
Ibid. Although the Act does not expressly provide for revision
of offers during the process of arbitration, both this Court,
Newark Firemen's Mut. Benevolent Ass'n, Local No. 4 v. City of
Newark,
90 N.J. 45, 53 (1992), and PERC, N.J.A.C. 19:16-5.7(f)
and -5.7(k), have recognized that the parties may revise their
last offers and enhance their factual support at any time before
the conclusion of the hearing. See also Martin, supra, 18 Seton
Hall Legis. J. at 79 (stating that "'the arbitrator may at his or
her discretion accept a revision of position by either party on
any issue until a hearing has been deemed closed provided that
the other party is given the opportunity to respond. The
arbitrator can, therefore, permit the flow of negotiations to
continue if the parties so desire while maintaining the authority
to bring negotiations to a halt if they are not fruitful and
place the burden of proof on the parties to support their final
positions.'") (quoting James W. Mastriani, Interest Arbitration
for Protective Services in New Jersey, New Jersey Public
Employer-Employee Relations No. 6, at 27 (New Jersey Institute of
Management and Labor Relations, Rutgers University, 1977)). The
arbitrator may also supplement the factual record by issuing
subpoenas to require the attendance of witnesses and the
production of documents. See N.J.S.A. 34:13A-17; N.J.A.C. 19:16-5.7(d).
In reaching a decision, the arbitrator must choose between
the parties' final offers. As stated above, section 16g lists
eight factors that arbitrators must consider in making that
choice. In general, the relevance of a factor depends on the
disputed issues and the evidence presented. The arbitrator
should determine which factors are relevant, weigh them, and
explain the award in writing. N.J.S.A. 34:13A-16f(5); N.J.A.C.
19:16-5.9. In brief, the arbitrator's opinion should be a
reasoned explanation for the decision.
Either party may institute judicial proceedings to enforce the award. N.J.S.A. 34:13A-19 and -20. Generally speaking, the standard that governs judicial review of interest arbitration is whether the award is supported by substantial credible evidence in the record as a whole. Town of Irvington, supra, 80 N.J. at 294. Judicial scrutiny in public interest arbitration is more stringent than in general arbitration. The reason for more intensive review of public interest arbitration is that such arbitration is statutorily-mandated and public funds are at stake. Division 540, Amalgamated Transit Union, AFL-CIO v. Mercer County Improvement Auth., 76 N.J. 245, 253 (1978). Accordingly, a reviewing court may vacate an award when the decision fails to give "due weight" to the section 16g factors, Town of Irvington, supra, 80 N.J. at 295, when the award has been procured by corruption, fraud, or undue means, Kearny PBA Local #
21 v. Town of Kearny,
81 N.J. 208, 220 (1979), when arbitrators
have refused to hear relevant evidence or committed other
prejudicial errors, ibid., or when arbitrators have so
imperfectly executed their powers that they have not made a final
award, ibid.
Although compulsory interest arbitration is essentially
adversarial, the public is a silent party to the process.
Compulsory interest arbitration of police and fire fighters'
salaries affects the public in many ways, most notably in the
cost and adequacy of police and fire-protection services.
Indeed, section 16g expressly requires the arbitrator to consider
the effect of an award on the general public. See Division 540,
supra, 76 N.J. at 252 (stating that arbitrators must consider
public interest and public welfare). Hence, an award runs the
risk of being found deficient if it does not expressly consider
"[t]he interests and welfare of the public." N.J.S.A. 34:13A-16g(1).
Our concern in the present case is with the adequacy of the
arbitrator's award, a concern that involves both the sufficiency
of the evidence and the relevance of the various section 16g
factors. Section 16g provides:
The arbitrator or panel of arbitrators shall decide the dispute based on a
reasonable determination of the issues,
giving due weight to those factors listed
below that are judged relevant for the
resolution of the specific dispute:
(1) The interests and welfare of the
public.
(2) Comparison of the wages, salaries,
hours, and conditions of employment of the
employees involved in the arbitration
proceeding with the wages, hours, and
conditions of employment of other employees
performing the same or similar services and
with other employees generally:
(a) In public employment in the same or
similar comparable jurisdictions.
(b) In comparable private employment.
(c) In public and private employment in
general.
(3) The overall compensation presently
received by the employees, inclusive of
direct wages, salary, vacation, holidays,
excused leaves, insurance and pensions,
medical and hospitalization benefits, and all
other economic benefits received.
(4) Stipulations of the parties.
(5) The lawful authority of the
employer.
(6) The financial impact on the
governing unit, its residents and taxpayers.
(7) The cost of living.
(8) The continuity and stability of
employment including seniority rights and
such other factors not confined to the
foregoing which are ordinarily or
traditionally considered in the determination
of wages, hours, and conditions of employment
through collective negotiations and
collective bargaining between the parties in
the public service and in private employment.
As the statute states, an arbitrator need rely not on all
factors, but only on those that the arbitrator deems relevant.
An arbitrator should not deem a factor irrelevant, however,
without first considering the relevant evidence. An arbitrator
who requires additional evidence may request the parties to
supplement their presentations. Contrary to the Appellate
Division, 263 N.J. Super. at 186, however, the arbitrator need
not require the production of evidence on each factor. See
N.J.A.C. 19:16-5.7(d) (stating, "[t]he arbitrator may administer
oaths, conduct hearings, require the attendance of witnesses and
the production of such books, papers, contracts, agreements, and
documents as the arbitrator may deem material to a just
determination of the issues in dispute . . .." (emphasis added)).
Such a requirement might unduly prolong a process that the
Legislature designed to expedite collective negotiations with
police and fire departments.
Whether or not the parties adduce evidence on a particular factor, the arbitrator's opinion should explain why the arbitrator finds that factor irrelevant. Without such an explanation, the opinion and award may not be a "reasonable determination of the issues." N.J.A.C. 19:16-5.9. Neither the parties, the public, nor a reviewing court can ascertain if the
determination is reasonable or if the arbitrator has given "due
weight" to the relevant factors.
In concluding that an arbitrator must consider all eight
factors, we need not go so far as the Appellate Division, which
presumed each factor to be relevant to every dispute. 263 N.J.
Super. at 186. A requirement that an arbitrator find facts on
each factor, even those deemed irrelevant, would undermine the
purpose of arbitration as an expeditious means of resolving
contract negotiations. We believe we come closer to satisfying
the legislative intent by requiring arbitrators to identify and
weigh the relevant factors and to explain why the remaining
factors are irrelevant. A reasoned explanation along those lines
should satisfy the requirement for a decision based on "those
factors" that are "judged relevant." Also, such an explanation
should satisfy the requirement that the arbitrator "give due
weight" to each factor. Anything less could contravene the Act's
provision for vacating an award "for failure to apply the factors
specified in subsection g. . . .." N.J.S.A. 34:13A-16f(5). In
sum, an arbitrator's award should identify the relevant factors,
analyze the evidence pertaining to those factors, and explain why
other factors are irrelevant.
One of the problems in this case, as in Township of Washington, supra, ___ N.J. ___, results from the arbitrator's
emphasis on a comparison of salaries and benefits of police and
fire departments in similar communities. As Professor Martin
writes, "local officials believe that arbitrators give excessive
weight to comparisons of the wages and salaries of a particular
municipality with those of neighboring jurisdictions." Martin,
supra, 18 Seton Hall Legis. J. at 62. An examination of section
16g reveals that the Legislature did not intend that any one
factor would be dispositive. Section 16g(2) expressly requires:
Comparison of the wages, salaries,
hours, and conditions of employment of the
employees involved in the arbitration
proceedings with the wages, hours, and
conditions of employment of other employees
performing the same or similar services and
with other employees generally:
(a) In public employment in the same or
similar comparable jurisdictions.
(b) In comparable private employment.
(c) In public and private employment in
general.
The terms of section 16g require more than a comparison of police
salaries in other communities. Section 16g(2) invites comparison
with other jobs in both the public and private sectors. The
arbitrator should also consider the relationship between any such
increases and increases in comparable areas of private
employment. Having considered such additional information, an
arbitrator may still conclude that police and fire-fighters'
salaries in similar municipalities provide the most relevant
comparables. If so, the arbitrator should set forth the reasons
supporting that conclusion. Missing from the subject award is a
reasoned explanation for accepting the PBA's submission of the
salary increases from other municipalities. Also missing is an
explanation for rejecting other bases for comparison.
Another problem concerns the meaning of the factor
pertaining to "[t]he financial impact on the governing unit, its
residents and taxpayers." N.J.S.A. 34:13A-16g(6). The terms of
that factor do not equate with the municipality's ability to pay.
As the Appellate Division noted, "[i]t is not enough to simply
assert that the public entity involved should merely raise taxes
to cover the costs of a public interest arbitration award." 263
N.J. Super. at 188 n.16.
Here, the arbitrator placed on Hillsdale the burden of proving a substantial detriment from the arbitrator's selection of the PBA'S final offer. Section 16g(6), however, does not require a municipality to prove its financial inability to meet the other party's final offer. The statutory direction to
consider the financial impact on the municipality demands more
than answering the question whether the municipality can raise
the money to pay the salary increase. Given the existence of
financial constraints and budget caps, N.J.S.A. 40A:4-45.2 and
-45.3 (setting municipal budget caps), an award to police or fire
departments necessarily affects other municipal employees and the
entire municipal budget. See Martin, supra, 18 Seton Hall Legis.
J. at 70 (stating that "the statutory 'cap' on total municipal
spending must be considered in determining an employer's
financial capacity").
In the present case, the arbitrator's award did not discuss all the section 16g factors. Instead, it unduly emphasized the comparison with police salaries in other communities and inappropriately relied on the Borough's perceived "ability to pay." Although we do not have a transcript of the proceedings, the PBA apparently relied almost exclusively on contracts negotiated between other PBAs and municipalities. Perhaps for this reason the arbitrator, when selecting the last offer of the PBA over that of the Borough, simply recited that "this is the neighborhood out there." Missing from the award is the reasoned explanation required by the Act.
The Chancery Division confirmed the award on December 18,
1991. On May 4, 1992, the court denied Hillsdale's application
for a stay, and on May 15, 1992, it granted the PBA's
application for an order to enforce litigant's rights. Hillsdale
did not seek a stay from the Appellate Division. Instead, it
implemented the award by paying five of the six semi-annual
payments authorized by the award. Based on the March 17, 1993,
judgment of the Appellate Division vacating the award, however,
Hillsdale did not implement the sixth and final payment, which
was scheduled to take effect on July 1, 1993. Hillsdale has
continued to pay police officers on the basis of the increments
that took effect from January 1, 1991, through January 1, 1993.
Moreover, two police officers retired in reliance on the award
before the date of the Appellate Division decision. Under the
circumstances, we believe that the appropriate decision is not to
disturb the payments that Hillsdale has made to its police
officers. Because Hillsdale never implemented the sixth payment,
which was scheduled to take effect on July 1, 1993, we remand the
matter to the arbitrator for a hearing limited to the officers'
entitlement to that payment. We disagree with the Appellate
Division, particularly in light of the limited nature of the
remand, that the matter should proceed before a different
arbitrator.
We recognize that the result in this case differs from that
in the companion case involving the Township of Washington. In
that case, however, the Township included a clause in the order
enforcing litigant's rights expressly providing for the
readjustment of payments if the Township was successful on
appeal. The effect of that order was to prevent reliance by the
Washington police when accepting the awarded benefits.
The judgment of the Appellate Division is affirmed in part
and reversed in part, and the matter is remanded for arbitration
limited to choosing between the last offers of the parties for
the second half of 1993.
CHIEF JUSTICE WILENTZ and JUSTICES CLIFFORD, HANDLER, O'HERN, GARIBALDI, and STEIN join in JUSTICE POLLOCK's opinion.