Borough of Ellwood City v. Ellwood City Police Department Wage & Policy Unit
Borough of Ellwood City v. Ellwood City Police Department Wage & Policy Unit
Concurring Opinion
concurring.
Although I agree with the majority’s ultimate conclusion that Act 205 requires its provisions to apply notwithstanding an agreement to the contrary, and thus compels the conclusion that the arbitrator exceeded his authority in this case, I disagree with its treatment of Grottenthaler v. Pennsylvania State Police, 488 Pa. 19, 410 A.2d 806 (1980). Specifically, I cannot concur with the majority’s reasoning that Grottenthaler is distinguishable from this case because the Grottenthaler court “emphasized the identity of the employer as the Commonwealth in and of itself, as opposed to a political subdivision such as the Borough.” Slip op. at 10-11. In my view, this does not constitute a principled reason for distinguishing Grottenthaler because that case did not hinge on such a distinction, as evidenced by the fact that the Grottenthaler court specifically relied on a collective bargaining case involving a municipal employer to support its conclusion that the Commonwealth was barred from asserting the applicable statutory prohibition. See Grottenthaler, 410 A.2d at 809 (citing
Concurring in Part
concurring and dissenting.
I agree with the Majority Opinion that Act 205 precludes this Court from affirming the arbitration award because, in the realm in which the Act applies, the Act clearly controls over any contrary provision in a collective bargaining agreement (CBA). I respectfully dissent, however, from the Court’s mandate, which simply affirms the Commonwealth Court’s reversal of the trial court and vacatur of the arbitration award. In my view, there is a middle ground, adverted to
I come to this view because, while I agree that a grievance arbitration award that conflicts with Act 205 cannot be upheld, I also believe that the salutary principles animating cases such as Grottenthaler v. Pennsylvania State Police, 488 Pa. 19, 410 A.2d 806 (1980) and Pittsburgh Joint Collective Bargaining Comm. v. City of Pittsburgh, 481 Pa. 66, 391 A.2d 1318 (1978) should be applicable to this Court’s analysis of the consequences arising from a conflict between the Act and a CBA. I believe it is fundamentally unfair to permit an employer, or a bargaining unit for that matter, to gain a retroactive advantage when an existing statute is later found by the courts to operate to alter a fundamental term of a labor agreement reached after arms’ length bargaining. As this Court noted in Pittsburgh Joint Collective Bargaining Comm., and as the Majority echoes here:
We have already stressed the importance of grievance arbitration in facilitating the development and maintenance of harmonious relationships between the public employer and employee. It is even more supportive of a favorable employment climate where this dispute resolution mechanism arises from the good faith bargaining of the parties rather than being required by statute. To permit an employer to enter into agreements and include terms such as grievance arbitration which raise the expectations of those concerned, and then to subsequently refuse to abide by those provisions on the basis of its lack of capacity would invite discord and distrust and create an atmosphere where*370 in a harmonious relationship would virtually be impossible to maintain.
Good faith bargaining would require that questions as to the legality of the proposed terms of a collective bargaining agreement should be resolved by the parties to the agreement at the bargaining stage.
391 A.2d at 1322-23. Accord Grottenthaler, 410 A.2d at 809 (“To permit the Commonwealth to ignore its mandate with impunity in two successive bargaining contracts following the promulgation of [the statute at issue], and then to assert it as a bar to a claim for recovery under the bargaining agreement would be manifestly unfair. The demoralizing effect of such a result on the relationship between employer and employee in the public sector is readily apparent.”) (footnote omitted). These observations are as instructive today as they were when uttered by this Court a quarter of a century ago, and I believe they should still play a role in our analysis.
This is not to say that I would embrace the other extreme in Act 205 cases and hold that the employer here should be deemed estopped from invoking the Act as a basis to avoid the consequences of a bargained-for term, as occurred in the Pittsburgh Joint Collective Bargaining Comm, case, or that the employer should be deemed to have waived the statutory argument, as occurred in the Grottenthaler case. In addition to ignoring the very plain statutory command here, such a course would ignore the fact that not all of these disputes involve circumstances where a party could be fairly accused of overreaching or bad faith. It may well be that the parties did not perceive, or did not fully perceive, the complication which arose; or the area in issue was unsettled; or the parties had conflicting but reasonable interpretations of their bargaining authority over a particular question. Indeed, in this very case, the employer has forwarded a cogent argument based upon the plain language of Act 205, while the bargaining unit has forwarded a logical argument based upon the essentially equitable analysis that controlled cases like Pittsburgh Joint Collective Bargaining Comm, and Grottenthaler. Thus, I do not view the issue as a simple matter of identifying good and
Accordingly, although I would not estop employer from invoking Act 205, neither would I suggest that employer is entitled to have Act 205 essentially amend to the employer’s advantage an otherwise controlling CBA. Instead of permitting the employer to unilaterally reap the unintended benefit of a perhaps unforeseen and certainly unaccounted-for circumstance in a situation such as this, I would return the parties to the bargaining table to negotiate a new CBA which may account for that circumstance. Thus, although I concur in most of the Majority’s analysis, including its conclusion that Act 205 precludes approval of the arbitration award as entered, I would remand the matter to permit the parties to return to the bargaining table.
Concurring Opinion
concurring.
I join the Opinion of the Majority, which correctly determined that the finding contained in the Act 205 Actuarial Report, that the Pension Fund was unsound, required the Bargaining Unit members to contribute to the Fund, despite the existence of an arbitrator’s definition of actuarial soundness as being one in which Fund assets exceed Fund liabilities. However, I write separately to note that (1) there is no provision in either Act 600 or Act 205 that supports this definition, and (2) the CBA explicitly recognizes that member contributions are required when an actuary determines that the Fund is unsound.
First, neither Act 600 nor Act 205 permits the elimination of employee contributions to a municipal pension plan merely because the Fund’s assets exceed its liabilities. Instead, both Acts require that an independent actuary in an Act 205 Actuarial Report make the determination of actuarial soundness. 53 P.S. § 895.201(a), (b); 55 P.S. § 772(c). At the time of the 1992 McDaniel Award, we cannot tell whether the Pension Fund was actuarially sound; we only are aware of the fact that the arbitrator was called upon to make that determination.
The Bargaining Unit asserts that the definition of actuarial soundness is set forth in the 1992 McDaniel Arbitral Award and controls any determination concerning whether member contributions are required. It further states that its position is supported by the fact that the 1993, 1995, and 1997 successor agreements made no change to the definition and these agreements limit the meaning of the term. However, this issue was previously challenged by the Bargaining Unit and
Second, pursuant to Section 6 of Act 600,
In the instant matter, the CBA explicitly recognizes that member contributions must be made when an actuary deter
(3) In the event it is actuarially determined that the amount of annual contribution is not keeping the Plan actuarially sound, then such contribution shall be increased at a percentage necessary to make the Pension fund again actuarially sound.
(Emphasis added). Because the actuary in this case determined that the Fund was unsound and mandated that member contributions be required in the amount of 5.6%, the Bargaining Unit members must contribute. The language of the CBA itself requires an actuarial determination, not a Borough or arbitral determination, that member contributions are required. Thus, I do not believe that the McDaniel Award is applicable, but is reserved for those instances in which the actuary has not declared the Pension Fund unsound and the Borough has not reduced the contributions required. That is not the factual predicate before us; here, it was “actuarially determined” that contributions were required.
Finally, I observe that the basis for our decision today is that the imposition of a 5.6% Pension Fund contribution is consistent with Act 205, Act 600, and the CBA. There is no term of employment set forth in the CBA in this case that was agreed to by the Borough to obtain a favorable bargaining position. The Bargaining Unit has always been required to accept the imposition of member contributions to the Pension Fund when it is “actuarially determined” that such contribu-' tions are required.
. Section 6 of Act 600 provides, in pertinent part:
(c) If an actuarial study shows that the condition of the police pension fund of any borough ... police department is such that the payments into the fund by members may be reduced below the minimum percentages hereinbefore prescribed, or eliminated, and that if such payments are reduced or eliminated contributions by the borough .. . will not be required to keep the fund actuarially sound[,] the governing body of the borough ... may, on an annual basis, by ordinance or resolution reduce or eliminate payments into the fund by its members.
55 P.S. § 772(c).
Opinion of the Court
In the arena of municipal police pension contributions and funding, we consider an asserted conflict between the terms of a collective bargaining agreement and requirements of the Police Pension Fund and Municipal Pension Plan Funding Standard and Recovery Acts.
In January of 1999, the Borough of Ellwood City (the “Borough”) began withholding, via payroll deduction, contributions to the police pension plan from its employee police officers, at a rate of five and six-tenths percent of each officer’s gross monthly wages. Such action was based upon an actuarial valuation report for the plan, prepared pursuant to the Borough’s obligations under the Municipal Pension Plan Funding Standard and Recovery Act,
The bargaining unit for Ellwood City’s police officers, the Ellwood City Police Department’s Wage and Policy Unit (the
*357 (c) If an actuarial study shows that the condition of the police pension fund of any borough, town, township or regional police department is such that payments into the fund by members may be reduced below the minimum percentages hereinbefore prescribed, or eliminated, and that if such payments are reduced or eliminated contributions by the borough, town, township or regional police department will not be required to keep the fund aetuarially sound, the governing body of the borough, town, township or regional police department may, on an annual basis, by ordinance or resolution, reduce or eliminate payments into the fund by members.
53 P.S. § 772(c). Pursuant to this provision, a term of the CBA requiring Act 600 compliance,
The dispute proceeded to arbitration, at which, following a healing, an award was issued sustaining the grievance. In his decision, the arbitrator adopted the Bargaining Unit’s position that the interpretation of actuarial soundness from the 1992 arbitration—focusing solely upon the predomination of actuarially determined assets over liabilities—controlled.
The Borough then filed a petition to vacate the award in the court of common pleas, contending that the arbitrator exceeded his authority, because Act 600 and Act 205 prohibit the elimination of police officer contributions to a pension where Borough contributions are required to maintain actuarial soundness on broader terms than the mere maintenance of assets exceeding liabilities. The common pleas court, however, denied relief on the petition, indicating that the record did not demonstrate that the arbitrator’s award directed the Borough to make contributions. See, e.g., Borough of Ellwood City v. Ellwood City Police Dep’t Wage and Policy Unit, No. 10904 of 1999, slip op. at 13 (C.P. Lawrence Dec. 21, 2000) (“Based on the understanding that a pension plan with a surplus of assets over liabilities, resulting in a negative unfunded actuarial liability of more than $60,000.00 would require no contributions for the year, the [c]ourt concludes that the arbitrator’s award did not violate Act 600 nor did it mandate any illegal action by the Borough”).
In its further appeal to the Commonwealth Court, the Borough maintained its position that the arbitrator exceeded his authority by mandating what was tantamount to an illegal act in eliminating employee contributions to the plan, thereby forcing the municipality to supply the necessary funding. In this regard, the Borough highlighted that the common pleas court’s decision gave no account for Act 205’s effective proscription against utilization of more than ten percent of surpluses in meeting annual financial requirements of the plan. The Commonwealth Court agreed that the existence of a surplus in the pension fund by itself is insufficient as a basis for reducing or eliminating employee contributions; rather, it found that such action must be grounded upon an actuarial report prepared in accordance with Act 205, which sets forth
This Court allowed appeal to examine a municipality’s statutory obligations in conjunction with a long-standing term of a collective bargaining agreement that has been interpreted through arbitration. Per this Court’s prior decisions, our review is in the nature of narrow certiorari, which limits the inquiry to matters implicating the jurisdiction and authority of the arbitrator, the regularity of the proceedings, and the
Generally, Act 111 establishes a right to collectively bargain concerning the terms and conditions of employment, see 43 P.S. § 217.1, and is designed to alleviate labor strife in occupations involving critical government functions by, inter alia, providing an expedited means of dispute resolution, with limited judicial intervention. See 43 P.S. § 217.7(a). As the Commonwealth Court observed, in a series of decisions, this Court has found this and similar policies associated with other labor law legislation to be of sufficient magnitude that they may, in certain circumstances, vest authority in judicial and quasi-judicial tribunals to enforce a collective bargaining agreement containing a provision that is not fully in accordance with other requirements of the law.
For example, in Pittsburgh Joint Collective Bargaining Comm. v. City of Pittsburgh, 481 Pa. 66, 391 A.2d 1318 (1978), the Court held that a city was precluded from asserting that a grievance arbitration procedure to which it had agreed in a collective bargaining agreement conflicted with various provisions of the Second Class City Civil Service Act, 53 P.S. §§ 23431-23457, and the Public Employee Relations Act of 1970, 43 P.S. §§ 1101.101-1101.2301, despite a provision of the latter enactment proscribing effectuation or implementation by the parties of a conflicting agreement. See 43 P.S. § 1101.703 (“The parties to the collective bargaining process shall not effect or implement a provision in a collective bargaining agreement if the implementation of that provision would be in violation of, or inconsistent with, or in conflict with any statute or statutes enacted by the General Assembly of the Commonwealth of Pennsylvania or the provisions of municipal home rule charters.”). Stressing the importance of grievance arbitration in facilitating the development and maintenance of harmonious relationships between the public employer and employee, the Court explained:
To permit an employer to enter into agreements and include terms such as grievance arbitration which raise the expecta*361 tions of those concerned, and then to subsequently refuse to abide by those provisions on the basis of its lack of capacity would invite discord and distrust and create an atmosphere wherein a harmonious relationship would virtually be impossible to maintain.
Good faith bargaining would require that questions as to the legality of the proposed terms of a collective bargaining agreement should be resolved by the parties to the agreement at the bargaining stage. For instance, the section 703 question should have been raised by the [public employer] during the ... contract negotiations.
Pittsburgh Joint Collective Bargaining Comm., 481 Pa. at 74-75, 391 A.2d at 1322-23.
Again in Hickey, 499 Pa. at 194, 452 A.2d at 1005, an Act 111 case in which the Court considered whether a provision of a collective bargaining agreement was within the legitimate subject-matter scope of bargaining, the plurality drew a critical distinction between circumstances in which an arbitration panel attempts to mandate a governing body, over its objection, to carry out an illegal act, and situations in which the public employer “attempts to belatedly avoid compliance with a term of a bargaining agreement it voluntarily agreed to during the bargaining process and thereby secure an unfair advantage in the bargaining process.” Id. at 199, 452 A.2d at 1008.
In Grottenthaler, 488 Pa. at 19, 410 A.2d at 806, also an Act 111 case, the Court extended the reasoning of Pittsburgh Joint Collective Bargaining Comm, to a substantially different context. Grottenthaler determined that certain pension-related provisions of a collective bargaining agreement would be enforced despite countervailing terms of the State Employees’ Retirement Code, 71 Pa.C.S. §§ 5101-5956, and its requirement that “[pjension rights of State employees shall be determined solely by this part or any amendment thereto, and no collective bargaining agreement ... shall be construed to change any of the provisions herein.” See id at 22, 410 A.2d at 807 (quoting 71 Pa.C.S. § 5955). While recognizing that the purport of this section was clearly to remove pension
In none of these decisions, however, was Act 205’s directive that its provisions apply notwithstanding contrary provisions of law or agreement, see 53 P.S. § 895.301(a), at issue. This prescription, in contrast to those at issue in Pittsburgh Joint Collective Bargaining Comm, and Hickey, does not merely prohibit the making of a contrary agreement or one that exceeds the permissible subject-matter scope of bargaining.
Thus, although we are cognizant of the emphasis given to the sanctity of the bargaining process in the Pittsburgh Joint Collective Bargaining Comm, line of cases, in this instance, we conclude that the Legislature’s express decision to subordinate such policy to the consistent application of minimum funding standards for municipal pension plans manifested in Act 205, directed to the pernicious consequences of under-funding, should be respected.
Certainly, aspects of pension plans and their funding remain cognizable within the collective bargaining scheme under Act 111,, see 43 P.S. § 217.1, as expressly recognized in Act 205. See, e.g., 53 P.S. § 895.607(c)(6) (outlining remedies for distressed pension plans and noting that member contributions are within the scope of collective bargaining). See generally Butler, 780 A.2d at 855 (reviewing the statutory structure and discussing Act 205 in connection with the bargaining of pension issues). However, within the statutory framework, the General Assembly has bounded bargaining over and modification of pension benefits by a requirement of actuarial soundness as contemplated by Act 205 and its interrelationship with Act 600 in police pension funding cases, see, e.g., 53 P.S. § 895.202 (setting forth the contents of actuarial reports); 53 P.S. § 895.302 (denoting minimum funding standards); 53 P.S. § 772(c) (incorporating the concept of actuarial soundness in delineating circumstances in which member contributions may be eliminated), and has constrained the power of the judiciary accordingly.
Thus, whatever potential there may be for rescission of a collective bargaining agreement on appropriate challenge (thereby returning the parties to the bargaining table) where a political subdivision secures material advantage by way of promises that the Legislature has rendered incapable of enforcement,
The order of the Commonwealth Court is affirmed.
. Act of Dec. 18, 1984, P.L. 1005, No. 205, §§ 101-803 (as amended 53 P.S. §§ 895.101-895.803) ("Act 205”). Pursuant to Act 205, municipalities maintaining pension funds must have actuarial valuations performed at least biennially. See 53 P.S. § 895.302(b). Although municipal police pensions are, in the first instance, administered pursuant to the Police Pension Fund Act, Act of May 29, 1956, P.L. (1955) 1804, §§ 1-12 (as amended 53 P.S. §§ 767-778) ("Act 600”), the General Assembly has directed that the terms of Act 205 control over any other provision of law or pension plan agreement. See 53 P.S. § 895.301.
. Act of June 24, 1968, P.L. 237, No. Ill, §§ 1-10 (as amended 43 P.S. §§ 217.1-217.10) ("Act 111”).
. Section G of the CBA, entitled "Employee Contributions,” provides, inter alia:
1. Employees of the Ellwood City Police department shall not contribute any wages to the pension fund.
3. In the event that it is aetuarially determined that the amount of annual contribution is not keeping the Plan aetuarially sound, then such contribution shall be increased at a percentage necessary to make the Pension fund again aetuarially sound.
CBA, Art. V ¶ (G)(1), (3).
. See CBA amend, no. 1 ("All prior arbitration awards and agreements are hereinafter incorporated by reference and the provisions of the awards and agreements shall be applicable, except as modified herein or by mutual written agreements between the parties.”).
. See CBA, Art. V ¶ (A)(1) (“The Borough of Ellwood City Police Pension Fund shall comply with Act 600, Police Pension Act, and Borough Ordinances # 1264, enacted January 10, 1957, and # 1349, enacted November 6, 1958, attached hereto and incorporated herein, with subsequent amendments.”).
. See 53 P.S. § 895.301(a) ("Notwithstanding any provision of law, municipal ordinance, municipal resolution, municipal charter, pension plan agreement or pension plan contract to the contrary, the applicable provisions of this chapter shall apply to any municipality which has established and maintains, directly or indirectly, a pension plan for the benefit of its employees, irrespective of the manner in which the pension plan is administered, and to the respective pension plan.”).
. It is not clear from the 1992 decision whether the Borough had presented an actuarial report indicating the necessity of member contributions.
. Like Hickey, the Commonwealth Court's decision in Upper Chichester Twp., 153 Pa.Cmwlth. at 446, 621 A.2d at 1134, focused on the question of the scope of arbitrability, and is distinguishable in that Act 205's proscription against enforcement of agreements contrary to its terms does not appear to have been invoked.
. Compare 71 Pa.C.S. § 5955 ("[P]ension rights of State employees shall be determined solely by this part or any amendment thereto, and no collective bargaining agreement ... between the Commonwealth and its employees ... shall be construed to change [the State Retirement Code’s] provisions ....”), with 53 P.S. § 895.301(a) ("Notwithstanding any ... pension plan agreement or pension plan contract to the contrary, the applicable provisions of this chapter shall apply....”).
. Whether Grottenthaler should retain continuing vitality on its facts is beyond the scope of this opinion, particularly as no party to this appeal has advocated its overruling. Certainly, the Commonwealth must remain wary of the appearance of bad-faith bargaining associated with reneging on its labor agreements in reliance on pre-existing statutory pronouncements. Nevertheless, we also recognize the emphasis that the Legislature has placed on, and the measures it has taken to implement, fiscal soundness of police pension plans in the Commonwealth. See infra note 11 and accompanying text.
. See 53 P.S. § 895.306(a) (declaring the legislative finding that the failure to adhere to Act 205 requirements "threatens serious injury to the affected municipal pension plan, to the entire system of public employee pension plans in the Commonwealth and to the Commonwealth itself.”); Pennsylvania State Lodge of Fraternal Order of Police v. Hafer, 525 Pa. 265, 270, 579 A.2d 1295, 1298 (1990); Legis. L—House at 2361 (Nov. 27, 1984) (noting that the Public Employee Retirement Study Commission found that a significant number of municipal pensions were under-funded and that such liability threatened the well-being of the funds, the payments to the pensioners, and the fiscal health of the municipalities); City of Butler v. City of Butler Police Dep’t, Fraternal Order of Police, Lodge No. 32, 780 A.2d 847, 854 (Pa.Cmwlth.) (explaining that the purpose of Act 205 was to “strengthen municipal pension plans 'by requiring actuarially-based current funding stan
While Act 205 does extend a certain amount of latitude to municipalities by allowing benefit plan modification, it mandates that such change be preceded by a cost estimate describing the impact upon the plan. See 53 P.S. § 895.305(a), (e).
. The difficulty with the position advocated by Mr. Justice Castille in his concurring and dissenting opinion is that it would require the Court
Reference
- Full Case Name
- BOROUGH OF ELLWOOD CITY, a Municipal Corporation, Appellee, v. ELLWOOD CITY POLICE DEPARTMENT WAGE AND POLICY UNIT, Appellant
- Cited By
- 21 cases
- Status
- Published