In re City of Camden and International Ass’n of Firefighters, Local 788, 429 N.J. Super. 309 (App. Div. 2013). For over ten years, the City of Camden has been in such dire financial straits that the State of New Jersey has provided “extraordinary payments of state aid” to the City. More recently, however, the State reduced that aid, perhaps in light of its own financial difficulties. When the City ended up in compulsory labor contract arbitration with its firefighters about a new contract, the arbitrator awarded a salary increase that the union, the City, and the arbitrator all acknowledged the City could not afford to pay. The arbitrator therefore ruled that, given the importance of firefighting to the public interest and the public welfare of citizens of the City, the State would be required to make up the difference. The State was not a party to any labor contract and was a non-party to the arbitration.
The Public Employee Relations Commission (“PERC”) affirmed that award. The City then appealed to the Appellate Division. That court reversed in an opinion by Judge Espinosa.
After reviewing in detail the statutory regime that governs public sector labor negotiations and arbitration, Judge Espinosa observed that the scope of review of PERC decisions, like other decisions of administrative agencies, is whether the ruling was arbitrary and capricious. But since “a public interest arbitration award is [at issue], judicial scrutiny is more stringent because such arbitration is statutorily-mandated and public funds are at stake.”
The panel agreed with the City on three independent grounds. The most important of those, and seemingly the most obvious, was that the arbitrator had exceeded his authority in purporting to require the State, a non-party, to assume responsibility for funding part of the salary increases. “[T]he nature of the policy decision that is the keystone to the arbitration award is not a proper subject for arbitration.” Moreover, only the Legislature has the power to appropriate funds. The arbitrator had no right or power to force the State to expend monies.
Second, Judge Espinosa ruled that the arbitrator;’s ruling disregarded statutory provisions that mandated the contributions employees had to make toward their health benefits. Unlike in private arbitrations, where the parties may authorize an arbitrator to deviate from otherwise applicable law, “this freedom is not available in the public sector.”
Finally, the governing statute lists factors that arbitrators in public sector cases must consider, and requires the arbitrator to “indicate which of the factors are deemed relevant, satisfactorily explain why the others are not relevant, and provide an analysis of the evidence on each relevant factor.” N.J.S.A. 34:13A-16(g). This is generally similar to the requirement of Rule 1:7-4 that judges make findings to support their rulings. Judge Espinosa found that the arbitrator had failed to comply with this statutory requirement of identifying and analyzing relevant and irrelevant factors.
The panel remanded the case to another arbitrator. This was because the prior arbitrator’s decisional process, overall, called into question his ability to “have an open mind” on a remand.