NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-1263-11T1

PATERSON POLICE PBA LOCAL 1 and PATERSON POLICE PBA LOCAL 1 APPROVED FOR PUBLICATION SUPERIOR OFFICERS November 27, 2013 ASSOCATION, APPELLATE DIVISION Plaintiffs-Respondents,

v.

CITY OF PATERSON, a municipal corporation of the State of New Jersey,

Defendant-Appellant.

________________________________________________________________

Argued April 29, 2013 – Decided November 27, 2013

Before Judges Graves, Espinosa and Guadagno.

On appeal from Superior Court of New Jersey, Chancery Division, General Equity Part, Passaic County, Docket No. C-33-11.

Brian W. Kronick argued the cause for appellant (Genova, Burns, Giantomasi & Webster, attorneys; Mr. Kronick, of counsel; David K. Broderick and Brett M. Pugach, on the briefs).

Mark C. Rushfield argued the cause for respondents (Shaw, Perelson, May & Lambert, LLP, attorneys; Mr. Rushfield, of counsel and on the brief).

Robert Fagella argued the cause for amicus curiae New Jersey State Police Benevolent Association (Zazzali, Fagella, Nowak, Kleinbaum & Friedman, attorneys; Paul L. Kleinbaum, of counsel and on the brief; Marissa A. McAleer, on the brief).

Eileen Schlindwein Den Bleyker, Senior Deputy Attorney General, argued the cause for amicus curiae Division of Local Government Services and New Jersey Department of the Treasury, Division of Pensions and Benefits (Jeffrey S. Chiesa, Attorney General, attorney; Robert Lougy, Assistant Attorney General, of counsel; Ms. Den Bleyker, on the brief).

Matthew Weng, Staff Counsel, argued the cause for amicus curiae New Jersey State League of Municipalities (William J. Kearns, Jr., General Counsel, attorney; Mr. Weng, on the brief).

Craig S. Gumpel argued the cause for amicus curiae New Jersey State Firefighters' Mutual Benevolent Association (Fox & Fox, LLP, attorneys; Mr. Gumpel, on the brief).

The opinion of the court was delivered by

ESPINOSA, J.A.D.

After collective negotiation agreements (CNAs) between

defendant City of Paterson and plaintiffs, Paterson Police PBA

Local 1 and Paterson Police PBA Local 1 Superior Officers

Association,1 expired, the parties engaged in compulsory interest

1 Plaintiffs Paterson Police PBA Local 1 (PBA) and Paterson Police PBA Local 1 Superior Officers Association (SOA) are public sector labor organizations organized under the laws of the State of New Jersey. The PBA is the collective bargaining representative for all rank-and-file police officers of the City of Paterson, and the SOA is the collective bargaining (continued)

2 A-1263-11T1 arbitration. The resulting award required, in part, that police

officers "shall make contributions toward health insurance

coverage in the amount of 1.5% of base salary" pursuant to L.

2010, c. 2. Defendant interpreted base salary as an officer's

base pensionable salary and made deductions accordingly.

Plaintiffs initiated this action, contending that "base salary"

meant base contractual salary and excluded additional items of

compensation such as longevity, educational incentives, and

night and detective differentials. The trial judge agreed with

plaintiffs and entered judgment in their favor.

Although base salary was not defined in either the statute

or the award, it was defined in a subsequent statute that was

applicable to the award here. See N.J.S.A. 34:13A-16.7. In the

absence of any statement to the contrary, we assume the

arbitrator used the term "base salary" as directed by the

Legislature. Therefore, and for the reasons that follow, we

agree with defendant's interpretation of the interest

arbitration award and reverse.

I.

On February 8, 2010, the Legislature introduced Senate Bill

Numbers 2, 3, and 4, which were passed and signed into law on

(continued) representative for all superior police officers in the ranks of sergeant through deputy chief.

3 A-1263-11T1 March 22, 2010. The three bills implemented some of the

recommendations of the Joint Legislative Committee on Public

Employee Benefits Reform, Final Report (Dec. 1, 2006) (Final

Report),2 which was created to identify "proposals that will

terminate abuses of the pension systems and control the cost of

providing public employee retirement, health care and other

benefits." Id. at 1; see also Commc'ns Workers of Am. v. State

of N.J., Dep't of Treasury,

(Law Div.

2011). The law at issue here, which provided changes to the

health benefits program, was introduced as S. 3, enacted as L.

2010, c. 2, and codified as amended at N.J.S.A. 40A:10-21. The

two other bills provided changes to public pension benefits (S.

2, enacted as L. 2010, c. 1), and employee benefits (S. 4,

enacted as L. 2010, c. 3).

In the Final Report, the Committee noted that its

investigation of "health benefits issues revealed a system

plagued by the skyrocketing costs of health care that have

dramatically increased the cost of health benefits for both

current and retired public employees." Final Report, supra, at

57. The Committee recommended forty-one reforms to public

employee pensions, health care benefits, and other employee

2 Available at www.njleg.state.nj.us/PropertyTaxSession/ OPI/jcpe_final_report.pdf (last visited on Nov. 20, 2013).

4 A-1263-11T1 benefits, which it found were long "overdue." Id. at 2-5. With

regard to health care costs, the Committee recommended that the

Legislature require all active public employees and future

retirees to pay some portion of the cost of their health

insurance premiums. Id. at 113-18. The resulting legislation

was "designed to improve the fiscal strength of State and local

governments, reduce taxpayer burdens, and ensure the health and

pension systems remain viable for current and future employees."3

Commc'ns Workers of Am., supra,

.

L. 2010, c. 2, added subsection (b) to N.J.S.A. 40A:10-21.

As amended, N.J.S.A. 40A:10-21(b) provides:

Commencing on the effective date [May 21, 2010] of P.L. 2010, c. 2 and upon the expiration of any applicable binding collective negotiations agreement in force on that effective date, employees of an employer shall pay 1.5 percent of base salary, through the withholding of the contribution from the pay, salary or other compensation, for health care benefits coverage provided pursuant to N.J.S. 40A:10- 17, notwithstanding any other amount that may be required additionally pursuant to subsection a. of this section for such coverage.

3 In June 2011, the Legislature enacted a successor health benefits law, L. 2011, c. 78 (codified in part at N.J.S.A. 40A:10-21.1), that requires all public employees, including employees covered under local unit self-insured programs, to contribute to their health benefits based on a percentage of the cost of coverage, and not base salary, which shall under no circumstances be less than 1.5% of an employee's base salary.

5 A-1263-11T1 "Base salary" is not defined under the statute. Adding to

the resulting ambiguity is the fact that the employee's

contribution is made "through the withholding of the

contribution from the pay, salary or other compensation."

N.J.S.A. 40A:10-21(b) (emphasis added). No administrative

regulations defining the term "base salary" were promulgated

under the amended statute.

However, guidelines were published by the State Department

of the Treasury, Division of Pensions and Benefits (DPB), and

the New Jersey Department of Community Affairs, Division of

Local Government Services (DLGS) to be provided to the affected

groups. DLGS was established in the Department of Community

Affairs under the Local Government Supervision Act (1947),

N.J.S.A. 52:27BB-1 to -23, and exercises regulatory and

supervisory powers over local governments. It is authorized to

"assist local government in the solution of its problems, and

plan and guide needed readjustments for effective local self-

government." N.J.S.A. 52:27BB-6. To this end, the Director of

DLGS may provide instruction to local government units through

Local Finance Notices (LFNs). N.J.A.C. 5:30-1.8.

DLGS issued LFN 2010-12 to provide "guidance for complying

with" N.J.S.A. 40A:10-21(b) to local units, such as defendant,

that provide non-State Health Benefits Program (SHBP) coverage.

6 A-1263-11T1 LFN 2010-12 highlighted important elements of the law and

included Frequently Asked Questions (FAQs) in which it defined

"base salary" as the "salary on which pension contribution . . .

is based." This definition was consistent with the definition

of base salary in a statewide informal guideline issued by the

DPB for the administration of SHBP.4

Defendant sought to comply with the dictates of N.J.S.A.

40A:10-21 by following LFN 2010-12. Accordingly, it deducted

1.5% of base pensionable salary from all its employees' pay as

their contribution toward their health benefits.

II.

Prior to the enactment of N.J.S.A. 40A:10-21(b), plaintiffs

and defendant were parties to two separate CNAs, which governed

the terms of employment of all member police officers, including

salary ranges by step and rank, and percentage increases for

longevity. Officers assigned as detectives received an annual

$2000 "detective differential" that was "payable bi-weekly in

addition to their base pay." An officer who worked the night

shift received a five percent "night differential," as part of

his or her "regular base salary," and an officer who completed

eighteen years of service received an annual "base salary

4 See also New Jersey State League of Municipalities' website, http://www.njslom.org/letters/ml042110-pensions.html (last visited Nov. 20, 2013).

7 A-1263-11T1 increase" of $2000. As part of his or her "regular salary," an

officer received an "education incentive reimbursement" in the

amount of $22.50 for each credit hour earned toward a degree or

certificate. Officers also received periodic compensation for

overtime, court attendance, rescheduled duty tours, clothing and

equipment allowances, and off-duty assignments. Under the

agreement, officers paid deductibles for medical care, but did

not contribute toward the cost of their health insurance

benefit.

Because the parties were unable to negotiate successor

agreements, their CNAs expired on July 31, 2008, and they

submitted to compulsory interest arbitration pursuant to

N.J.S.A. 34:13A-16 with New Jersey Public Employment Relations

Commission (PERC). Hearings were conducted by an arbitrator in

October 2009. On February 17, 2011, the arbitrator issued an

Interest Arbitration Decision and Award, which established the

terms of the CNAs between the parties for August 1, 2008, to

July 31, 2012. The arbitration award set a new salary schedule

and modified the longevity schedule, but continued the

provisions of the prior agreements regarding educational

incentives, and night and detective differentials.

The arbitration award recognized the applicability of the

amendment to N.J.S.A. 40A:10-21. Noting that neither party

8 A-1263-11T1 "made a proposal regarding employee co-payments toward health

insurance," the arbitrator nevertheless took "official notice of

an act by the New Jersey Legislature requiring the payment of

1.5% of base salary towards health insurance effective May 21,

2010." Accordingly, the award included the following language

in Article 31:

Pursuant to P.L. 2010, c. 2, unit employees shall make contributions toward health insurance coverage in the amount of 1.5% of base salary. This level of employee contribution shall be inclusive of, rather than in addition to, any statutory obligation towards an employee's requirement to make contributions toward the payment of health insurance.

Neither party filed an appeal of the award to PERC.

After the arbitrator's award was issued, defendant began

withholding 1.5% of each police officer's pensionable salary,

retroactive to the effective date of the statute. Defendant

calculated pensionable salary as base salary wages plus

additional items of compensation, including longevity,

educational incentives, and night and detective differentials,

but not overtime pay. Plaintiffs filed a verified complaint to

confirm the February 17, 2011, compulsory interest arbitration

award pursuant to N.J.S.A. 34:13A-16, challenging defendant's

calculation of base salary, as well as an order to show cause

for summary action pursuant to Rule 4:67-1. Defendant filed an

9 A-1263-11T1 answer and counterclaim, alleging that it had withheld 1.5% of

each employee's "pensionable salary" in accord with LFN 2010-12.

Defendant also sought modification or correction of the

arbitrator's award to clarify that "it shall withhold 1.5% of

pensionable salary in conformance with P.L. 2010, c. 2 . . . ."

The trial court held that defendant could not assert a

counterclaim to "modify the award" because it failed to appeal

the arbitrator's decision to PERC and because defendant failed

to establish grounds for such modification pursuant to N.J.S.A.

2A:24-9. The court found the award was "still subject to

confirmation . . . as written on its face." The court concluded

that the "clear and common meaning of the term 'base salary' in

P.L. 2010, c. 2" excluded "additional payments or allowances . .

. such as overtime pay, educational incentives, detective and

night differentials, and longevity pay." The court entered

final judgment, ordering defendant to "immediately adjust the

deductions taken from its police employees' wages to reflect a

deduction of 1.5% of 'base salary' for health contributions,

excluding from 'base salary' such benefits as longevity,

overtime, educational incentives, and night and detective pay

differentials." The judge also ordered defendant to refund the

amounts in excess of that definition previously deducted from

police officers' salary.

10 A-1263-11T1 The judge later issued an order that granted a stay as to

retroactive excess deductions, but denied a stay of the

prospective deductions. After defendant filed a notice of

appeal, we granted defendant's motion for a stay.

III.

Defendant argues that the trial court erred in interpreting

the term "base salary" as meaning base contractual salary,

rather than "base pensionable salary," and thereby improperly

excluded such additional items of compensation as educational

incentives, detective and night differentials, and longevity pay

from the calculation of base salary. Amici DLGS, DPB, and the

State League of Municipalities support defendant's position.

Amici New Jersey State Firefighters' Mutual Benevolent

Association (FMBA) and New Jersey Policemen's Benevolent

Association support plaintiffs' interpretation of base salary.

A.

The judgment, which enforced an arbitration award pursuant

to N.J.S.A. 34:13A-19, turned upon the trial judge's

interpretation of the term "base salary" in the arbitration

award and, in effect, as used in N.J.S.A. 40A:10-21(b). When

construing a law, a reviewing court conducts "a de novo review"

and does not "accord any special deference to a trial court's

interpretation." US Bank, N.A. v. Hough,

, 198

11 A-1263-11T1 (2012). See Manalapan Realty, L.P. v. Twp. Comm. of Manalapan,

(1995).

B.

We first review the nature of the award that was the

subject of interpretation by the trial court and now, in this

appeal.

Compulsory interest arbitration, which is governed by the

"Police and Fire Public Interest Arbitration Reform Act" (the

Reform Act), N.J.S.A. 34:13A-14(a) to -19, provides a mechanism

for the speedy resolution of collective negotiation disputes

between police and fire departments and their employers.

Hillsdale PBA Local 207 v. Borough of Hillsdale,

(1994). Arbitration conducted pursuant to the Reform Act is

subject to a statutorily mandated procedure. The arbitrator

must "decide the dispute based on a reasonable determination of

the issues, giving due weight to [enumerated statutory factors]

that are judged relevant for the resolution of the specific

dispute." N.J.S.A. 34:13A-16(g); see also In re City of Camden,

(App. Div.), certif. denied,

(2013).

The arbitrator's decision is final and binding upon the

parties. N.J.S.A. 34:13A-16(f)(5). There is, however, a

procedure for appealing the decision to PERC. See

12 A-1263-11T1 Although none of the parties appealed, they were permitted to

seek enforcement of the decision in the Superior Court.

N.J.S.A. 34:13A-19. In our view, the relief sought by defendant

was not a modification of the award but rather, a clarification

that use of the term "base salary" in the award was consistent

with applicable law.

C.

The new Article 31 in the award explicitly referred to L.

2010, c. 2, reciting the requirement that employees contribute

1.5% of their "base salary" toward the cost of their health

insurance. Therefore, to understand the meaning of "base

salary" within the award, we must determine the meaning of that

term in the statute.

The court's "task in statutory interpretation is to

determine and effectuate the Legislature's intent." Bosland v.

Warnock Dodge, Inc.,

(2009). Courts "look

first to the plain language of the statute, seeking further

guidance only to the extent that the Legislature's intent cannot

be derived from the words that it has chosen." McGovern v.

Rutgers,

(2012) (quoting

).

As noted, "base salary" is not defined in the statute

itself or in any administrative regulation promulgated to

13 A-1263-11T1 implement the statute. Moreover, it is susceptible to multiple

interpretations. "Salary" has been defined as "monies received

by a person on a fixed and continuous basis, i.e., normally paid

in regular periodic intervals in specific regular amounts."

Koribanics v. Bd. of Educ. of Clifton,

, 6 (1966);

Wilson v. Bd. of Trs. of Police and Firemen's Ret. Sys.,

(App. Div. 1998); see Black's Law

Dictionary 1454 (9th ed. 2009) (defining salary "[a]s an agreed

compensation for services . . . usually paid at regular

intervals on a yearly basis"); but see Webster's II New College

Dictionary 92 (1995) ("defining base pay" as "[a]n amount or a

rate of compensation for a specified job or activity, excluding

any other payments or allowances").

We therefore turn to "extrinsic evidence from which [we]

hope[] to glean the Legislature's intent." Klumb v. Bd. of

Educ. of Manalapan-Englishtown Reg'l High Sch. Dist.,

(2009) (citing Bedford v. Riello,

(2008)). "When a statute is subject to more than one plausible

reading," the court's "role is 'to effectuate the legislative

intent in light of the language used and the objects sought to

be achieved.'" Velazquez v. Jiminez,

(2002)

(quoting State v. Hoffman,

(1997)). "Both the

statute's words and its goals must be considered." Kas Oriental

14 A-1263-11T1 Rugs, Inc. v. Ellman,

(App. Div.),

certif. denied,

(2009).

Such extrinsic evidence properly includes legislative

history and statutory context. See

; TAC Assocs. v. N.J. Dep't of Envtl. Prot.,

(2010). As we have noted, the enactment here was part of a

comprehensive legislative effort to control costs by making

changes to public employees' pension benefits, health benefits

programs, and other benefits.

In addition, we have the benefit of other legislative

action, enacted by the same legislative body in the same year as

L. 2010, c. 2, which also served the legislative goal of

controlling costs associated with public employees compensation

and benefits. N.J.S.A. 34:13A-16.75 amended the provisions of

the Reform Act applicable to compulsory interest arbitration

involving police and firefighters, the arbitration that led to

the award here. It imposed a two percent "cap" on police and

firefighter arbitration awards issued from January 1, 2011 to

April 1, 2014, pursuant to N.J.S.A. 34:13A-16.9.6 In addition,

, c. 105, § 2 (effective Jan. 1, 2011). 6 N.J.S.A. 34:13A-16.7(b) states:

An arbitrator shall not render any award pursuant to [N.J.S.A. 34:13A-16] which, on (continued)

15 A-1263-11T1 N.J.S.A. 34:13A-16.7(a) provides the definition for "base

salary" to be used in police and firefighter arbitrations:

"Base salary" means the salary provided pursuant to a salary guide or table and any amount provided pursuant to a salary increment, including any amount provided for longevity or length of service. It also shall include any other item agreed to by the parties, or any other item that was included in the base salary as understood by the parties in the prior contract. Base salary shall not include non-salary economic issues, pension and health and medical insurance costs.

"Non-salary economic issues" means any economic issue that is not included in the definition of base salary.

(continued) an annual basis, increases base salary items by more than 2.0 percent of the aggregate amount expended by the public employer on base salary items for the members of the affected employee organization in the twelve months immediately preceding the expiration of the collective negotiation agreement subject to arbitration; provided, however, the parties may agree, or the arbitrator may decide, to distribute the aggregate monetary value of the award over the term of the collective negotiation agreement in unequal annual percentages. An award of an arbitrator shall not include base salary items and non-salary economic issues which were not included in the prior collective negotiations agreement.

As we have noted, neither party appealed the arbitration award to PERC and neither party contends that the award failed to comply with these limitations.

16 A-1263-11T1 Significantly, the arbitration award here was not issued until

February 17, 2011, after the effective date of N.J.S.A. 34:13A-

16.7, and therefore was subject to these definitions.

"[T]he arbitrator in a public employment case is obliged to

resolve [a dispute] in accordance with the law and the public

interest." Commc'ns Workers of Am., Local 1087 v. Monmouth

Cnty. Bd. of Soc. Servs.,

(1984). If an award

in a public sector case is contrary to existing law, it may be

vacated by the court. N.J. Tpk. Auth. v. Local 196, I.F.P.T.E.,

(2007); see, e.g., Monmouth Cnty. Bd. of Soc.

Servs., supra,

; In re City of Camden, supra,

; Jersey City Educ. Ass'n v. Bd. of Educ.,

(App. Div.), certif. denied,

(1987).

The arbitrator was therefore required to employ the

definition of "base salary" the Legislature mandated for use in

making arbitration awards involving police and firefighters.

Had he failed to comply with this statutory mandate, the award

would be subject to being vacated. In the absence of any

affirmative statement by the arbitrator to the contrary, we

assume the arbitration award used the term "base salary" as

directed by the Legislature in N.J.S.A. 34:13A-16.7(a).

17 A-1263-11T1 We also note that, months before the award was rendered,

DLGS issued LFN 2010-12 and sent it to all public employers to

provide guidance for complying with L. 2010, c. 2. The FAQs in

LFN 2010-12 advised, "'base salary' on which the 1.5%

contribution is calculated" is the "salary on which pension

contribution . . . is based." This definition was consistent

with that contained in the guidelines published by DPB, also

prior to the award, to assist public employers in complying with

L. 2010, c. 2, regarding SHBP and the School Employees Health

Benefits Program.

The guidelines issued by DLGS were informal in nature and

not the equivalent of an administrative agency's interpretation

of a statute it is empowered to enforce, which would warrant our

"substantial deference." See

;

Baylor v. N.J. Dep't of Human Servs.,

(App. Div. 1989) (Petrella, P.J.A.D., dissenting), aff’d,

(1990). Still, the guidelines merit our consideration

because they represent the practical interpretation of the

statute by the agency charged with instructing local

governmental units on how they were to comply with the new law.

Id. at 36-37.

The Legislature did not disavow the interpretation adopted

by DLGS and DPB. Generally, "the fact that the Legislature has

18 A-1263-11T1 not acted in response to an agency's interpretation . . . is

'granted great weight as evidence of its conformity with the

legislative intent.'"

-25 (quoting

Malone v. Fender,

(1979)). That conformity is

evident by the Legislature's action in enacting N.J.S.A. 34:13A-

16.7 after the guidelines were issued and effectively adopting

the same definition of base salary for use in police and

firefighter arbitration. It is, therefore, reasonable to infer

that the arbitrator was aware of the applicable guidelines from

DLGS as well as the statute that governed the arbitration here

and acted in conformity therewith.7

The orders dated October 12 and November 3, 2011, are

reversed because the arbitration award must be enforced

consistent with the definition of "base salary" contained in

N.J.S.A. 34:13A-16.7(a).

Reversed and remanded for further proceedings consistent

with this opinion. We do not retain jurisdiction.

7 We note further that the definition of "base salary" we find applicable here has the salutary effect of serving a "longstanding" legislative goal to provide "uniformity in health benefits among all government employees." Commc'ns Workers of Am., supra,

-97

19 A-1263-11T1