P.E.R.C. No. 2000-36, NJ/State

CaptionSTATE OF NEW JERSEY BEFORE THE PUBLIC EMPLOYMENT RELATIONS COMMISSION In the Matter of STATE OF NEW JERSEY, Respondent, -and- Docket No. CO-H-98-471 COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO, Charging Party. ¶

AppearancesAppearances: ¶

For the Respondent, John J. Farmer, Jr., Attorney General ¶

(Mary Cupo-Cruz, Senior Deputy Attorney General) ¶

For the Charging Party, Weissman & Mintz, attorneys ¶

(Steven P. Weissman, of counsel) ¶

DECISION ¶

On June 23, 1998, the Communications Workers of America, AFL-CIO, filed an unfair practice charge against the State of New Jersey. The charge alleges that the State violated the New Jersey Employer-Employee Relations Act, specifically 5.4a(1) and (5), 1/ when the State Health Benefits Commission ("SHBC") announced increases, effective July 1, 1998, in certain co-payments for employees participating in Dental Plan Organizations ("DPO"). The ¶

Note1/ These provisions prohibit public employers, their representatives or agents from: "(1) Interfering with, restraining or coercing employees in the exercise of the rights guaranteed to them by this act. (5) Refusing to negotiate in good faith with a majority representative of employees in an appropriate unit concerning terms and conditions of employment of employees in that unit...." ¶

charge further alleges that the previous co-payment schedule had existed for 14 years and was an established employment condition; and that when CWA objected that the scheduled increases would violate the parties' contracts, the State responded that the increases were not negotiable. 2/ ¶

On July 9, 1998, a Complaint and Notice of Hearing issued. The State's Answer admits that the SHBC increased certain DPO co-payments, but it asserts that the SHBC is a separate regulatory agency and its actions preempt negotiations. It also asserts that the parties' contracts do not address DPO co-payment levels or prohibit increases; the Commission does not have jurisdiction to review SHBC actions; and there was no timely demand to negotiate. ¶

CWA requested interim relief, but withdrew that request and instead moved for summary judgment. The State cross-moved. Both parties filed certifications, exhibits, and briefs. ¶

On July 21, 1998, the Chair of the Commission referred the motion and cross-motion to Senior Hearing Examiner Arnold H. ¶

Note2/ The charge refers to an exchange of letters between CWA's New Jersey Director and the State's Deputy Director of the Office of Employee Relations. CWA's letter asserted that the parties' contracts prohibited increasing the co-payments, but added that CWA would be willing to have the issue discussed by the Health Care Cost Containment Committee, a joint labor/management committee including several unions representing State employees. The State responded that the SHBC's co-payment increases were not negotiable, but it would also be willing to have the issue discussed by the cost containment committee. ¶

Zudick. The parties filed further submissions, the last of which was received on February 19, 1999. ¶

On March 10, 1999, the Senior Hearing Examiner issued his report. H.E. No. 99-19, 25 NJPER 281 (¶30119 1999). He denied CWA's motion, granted the State's cross-motion, and recommended dismissing the Complaint. He found that the SHBC had increased co-payments to shore up the DPO program against abandonments by carriers and that the increases were based on a consultant's report and not influenced by any employer representatives. Relying on N.J.S.A. 52:14-17.29(B) and State of New Jersey (OER ), P.E.R.C. No. 99-40, 24 NJPER 522 (¶29243 1998), he concluded that the SHBC's actions preempted negotiations and were appealable only in court. ¶

On May 27, 1999, having received an extension of time, CWA filed exceptions. Asserting that P.E.R.C. No. 99-40 was wrongly decided, it argues that we have jurisdiction to hold that the SHBC exceeded its power since its actions allegedly are not authorized by N.J.S.A. 52:14-17.29(B) and contravene N.J.S.A . 52:14-17.29(F). In the alternative, it asks for a hearing if we believe there are factual issues concerning the influence of employer representatives on SHBC actions. 3/ ¶

On July 6, 1999, the State, having received an extension of time, filed its response. It urges that the Complaint be ¶

Note3/ CWA also asks for oral argument. We deny that request. Both parties have briefed this matter thoroughly. ¶

dismissed based on the Senior Hearing Examiner's preemption analysis and P.E.R.C. No. 99-40. ¶

We have reviewed the record. The Senior Hearing Examiner's findings of fact (H.E. at 4-11) are accurate. We adopt and incorporate them. We decline CWA's request to reopen the record now, after both parties asked for summary judgment based on the record they compiled and the Senior Hearing Examiner issued his report based on that record. ¶

The question presented is whether a negotiations duty was violated when the SHBC approved a DPO contract renewal package increasing certain co-payments. We must analyze the nature and limits of our jurisdiction and the SHBC's authority. Under the circumstances, we conclude that the SHBC's actions did not repudiate the parties' contracts or trigger a statutory negotiations obligation and that any challenge to the validity of the SHBC's actions must be made in another forum. ¶

A. Our Unfair Practice Jurisdiction ¶

N.J.S.A . 34:13A-5.3 specifies the negotiations obligations of public employers and their employees' representatives. The majority representative and the public employer must "meet at reasonable times and negotiate in good faith with respect to grievances, disciplinary disputes, and other terms and conditions of employment." When the parties reach an agreement, they must write it down and sign it. The agreement must contain grievance procedures for resolving contractual disputes. In addition, an employer must negotiate with a majority representative over "[p]roposed new rules or modifications of existing rules governing working conditions." This requirement applies at all times, not just during negotiations for a new or successor contract. Galloway Tp. Bd. of Ed. v. Galloway Tp. Ed. Ass'n, 78 N.J . 25, 48-49 n.9 (1978). ¶

N.J.S.A . 34:13A-5.4 prohibits specified unfair practices by public employers and employee organizations. Section 5.4a(5) prohibits a public employer from refusing to negotiate in good faith as required by section 5.3. Violating 5.4a(5) also violates 5.4a(1) since the Act guarantees employees the right to have a majority representative negotiate on their behalf. We have exclusive power to prevent unfair practices. N.J.S.A. 34:13A-5.4(c). ¶

We have addressed three types of cases involving allegations that an employer changed an employment condition: (1) cases where the majority representative claims a contractual right to prevent a change; (2) cases where a working condition is changed and neither party claims a contractual right to prevent or impose that change; and (3) cases where the employer alleges that the majority representative has waived any right to negotiate over a working condition change. Middletown Tp., P.E.R.C. No. 98-77, 24 NJPER 28 (¶29016 1997), aff'd 25 NJPER 357 (¶30151 App. Div. 1999), pet. for certif. pending; Barnegat Tp. Bd. of Ed ., P.E.R.C. No. 91-18, 16 NJPER 484 (¶21210 1990), aff'd NJPER Supp .2d 268 (¶221 App. Div. 1992). ¶

In the first type of case, the representative alleges that the employer agreed to provide a benefit. If such a commitment exists, the employer must adhere to the contract until it expires -- there is nothing to negotiate. However, we usually defer contractual disputes to the negotiated grievance procedures required by section 5.3. State v. Council of New Jersey State College Locals, 153 N.J. Super . 91 (App. Div. 1977), certif. den. 78 N.J. 328 (1978); Brookdale Community College, P.E.R.C. No. 83-131, 9 NJPER 266 (¶14122 1983). We are not grievance arbitrators and cannot find an unfair practice based on a mere breach of contract. State of New Jersey (Dept. of Human Services), P.E.R.C. No. 84-148, 10 NJPER 419 (¶15191 1984). Unfair practice liability requires more than a simple contract violation: for example, a showing that an employer has acted in bad faith by repudiating a clearcut contractual obligation. Id.; see also Bridgewater Tp ., P.E.R.C. No. 95-28, 20 NJPER 399 (¶25202 1994), aff'd 21 NJPER 401 (¶26245 App. Div. 1995)(employer repudiated express agreement to pay the full cost of HMO coverage). ¶

In part, this case presents the first type of claim. In the letter referenced in its unfair practice charge and in its briefs, CWA has asserted that the co-pay increases violated a contractual requirement that fringe benefits be maintained; the State disputes this assertion. We will not resolve that dispute because it involves at most a breach of contract rather than a repudiation. It appears that after the parties negotiated for a ¶

DPO program, the SHBC unilaterally set the initial DPO co-pays; the parties' contracts do not expressly address DPO co-pays or the SHBC's power to set them; and the parties have never directly negotiated over DPO co-pays as opposed to prescription drug co-pays. CWA may (or may not) have a contractual claim, but it is not clear enough to demonstrate a bad faith repudiation within our unfair practice jurisdiction. 4/ ¶

In the second type of case, a working condition is changed and the majority representative does not claim a contractual right to prevent that change while the employer does not claim, or cannot prove, a contractual right to impose that change without negotiations. Such a change triggers section 5.3's duty to negotiate. Middletown; Sayreville Bd. of Ed., P.E.R.C. No. 83-105, 9 NJPER 138 (¶14066 1983). To prove a violation, absent a defense, the representative must show only that the employer changed an employment condition without first negotiating. No violation will be found, however, if the changed condition was not negotiable. ¶

This is the second type of case also. For 14 years, DPO co-pays remained unchanged. In 1998, the SHBC entered into a contract renewal package with DPO carriers increasing several co-pays while decreasing others. As litigated by the parties in ¶

Note4/ The issue has not been presented so we do not consider whether CWA could legally seek an arbitral determination that the employer had contractually agreed to maintain co-payment levels. ¶

their briefs, the heart of this dispute is over whether negotiations were required before co-pays were increased. 5/ ¶

Local 195, IFPTE v. State, 88 N.J . 393 (1982), sets forth the tests for determining whether a subject is mandatorily negotiable. Negotiations are required if an employment condition intimately and directly affects employees, does not significantly interfere with governmental policymaking, and is not preempted. Id. at 404-405. ¶

Applying Local 195 's tests, we have held that health benefits generally and co-payments specifically are mandatorily negotiable unless preempted. See, e.g., Stratford Tp. Bd. of Ed ., P.E.R.C. No. 94-65, 20 NJPER 55 (¶25019 1993); Newark Bd. of Ed ., P.E.R.C. No. 94-52, 19 NJPER 588 (¶24282 1993); Tenafly Bd. of Ed ., P.E.R.C. No. 93-83, 19 NJPER 210 (¶24100 1993); West Orange Bd. of Ed ., P.E.R.C. No. 92-114, 18 NJPER 272 (¶23117 1992), aff'd NJPER Supp .2d 291 (¶232 App. Div. 1993); Middlesex Cty ., P.E.R.C. No. 79-80, 5 NJPER 194 (¶10111 1979), aff'd in relevant part, 6 NJPER 338 (¶11169 App. Div. 1980). While State v. State Troopers Fraternal Ass'n, 91 N.J . 464, 470 (1982), stated that co-pay levels implicate governmental policy, that opinion implicitly recognized the negotiability of co-pay levels in that case and ¶

Note5/ The third type of case centers on waiver issues. Given our analysis of our jurisdiction and the SHBC's actions, we do not reach the waiver issue in this case. We note, however, that CWA did not demand negotiations and instead invoked an asserted right to block co-pay increases altogether unless it agreed in discussions to permit them. ¶

simply vacated an arbitration award because a contractual violation had not been proved. ¶

We now turn to Local 195 's preemption prong. Ordinarily, a statute or regulation will not preempt negotiations unless it speaks in the imperative and fixes an employment condition specifically, expressly, and comprehensively. See, e.g., Bethlehem Tp. Ed. Ass'n v. Bethlehem Tp. Bd. of Ed ., 91 N.J. 38, 44 (1982); Local 195 at 403-404; State v. State Supervisory Employees Ass'n, 78 N.J . 54, 80-82 (1978); State of New Jersey (State Colleges ), P.E.R.C. No. 2000-12, 25 NJPER 402 (¶30174 1999). No statute or regulation specifies DPO co-payment levels. ¶

However, negotiations may also be preempted if the Legislature vests an agency or committee with the power to take certain action and such action is taken. See P.E.R.C. No. 99-40; State of New Jersey (Dept. of Human Services ), P.E.R.C. No. 97-136, 23 NJPER 343 (¶28157 1997), rev'd on other grounds, 24 NJPER 432 (¶29200 App. Div. 1998); State of New Jersey (DEP), P.E.R.C. No. 95-115, 21 NJPER 267 (¶26172 1995), aff'd 285 N.J. Super . 541 (App. Div. 1995), certif. den. 143 N.J. 519 (1996); State of New Jersey (State Troopers), P.E.R.C. No. 86-139, 12 NJPER 484, 486-487 (¶17185 (1986); State of New Jersey (State Troopers), P.E.R.C. No. 86-16, 11 NJPER 497 (¶16177 1985); State of New Jersey (DOT ), P.E.R.C. No. 84-77, 10 NJPER 42 (¶15024 1983), aff'd 11 NJPER 333 (¶16119 App. Div. 1985); State of New Jersey (DHS), P.E.R.C. No. 82-83, 8 NJPER 209, 214-215 (¶13088 ¶

1982); cf. In re Boyan, 127 N.J . 266, 268 (1992)(Legislature delegated authority to Salary Adjustment Committee to fix salaries for workers' compensation judges). In this line of cases, the action in effect becomes part of the statute for preemption purposes fixing the disputed employment condition, thus eliminating any negotiations duty. ¶

B. The SHBC's Authority and Actions ¶

We now review the statutes creating the SHBC and authorizing it to act. We will then determine whether the Act's negotiations duty was triggered under the circumstances. ¶

Section 27 of the New Jersey State Health Benefits Act, N.J.S.A . 52:14-17.25 et seq ., creates the SHBC and specifies its membership: the State Treasurer, the Commissioner of Insurance, and the Commissioner of Personnel. The SHBC is charged with establishing a health benefits program for State employees and with adopting reasonable and necessary rules and regulations for administering the act. ¶

Section 28 entrusts the SHBC with negotiating and purchasing contracts providing hospital, surgical, obstetrical, medical and major medical expense benefits for State employees and their dependents. The SHBC has power to enter contracts with insurance carriers "on such terms as it deems to be in the best interests of the State and its employees" and to execute all contracts "for and on behalf and in the name of the State." ¶

Section 28a, added in 1989, prohibits the SHBC from entering into a contract providing lower benefits than those provided by the contract in effect on October 1, 1988 unless those benefits are modified by a collective bargaining agreement made on the State's behalf. This section permitted the State, for the first time, to negotiate for reductions in statutorily-prescribed health benefits. ¶

Section 28b, added in 1996, permits health insurance premiums and periodic charges to be determined by a collective negotiations agreement. Before 1996, the State had to pay all premiums and charges. The State and CWA agreed upon cost-saving arrangements in their 1995 negotiations and then received legislative authorization to implement them. ¶

Section 29 specifies the required coverage in contracts purchased by the SHBC. Subsection (B), however, states: ¶

(B) Benefits under the contract or contracts purchased as authorized by this act may be subject to such limitations, exclusions, or waiting periods as the commission finds to be necessary or desirable to avoid inequity, unnecessary utilization, duplication of services or benefits otherwise available,... or for other reasons.... ¶

Finally, subsection (F) permits employee representatives to negotiate for forms of health insurance coverage supplementing the statutorily-prescribed coverage. This subsection states: ¶

(F) The commission may purchase a contract or contracts to provide drug prescription and other health care benefits or authorize the purchase of a contract or contracts to provide drug prescription and other health care benefits as may be required to implement a duly executed collective negotiations agreement or as may be required to implement a determination by a public employer to provide such a benefit or benefits to employees not included in collective negotiations units. ¶

These provisions must be read harmoniously. Doing so, we reject interpretations that would always require or prohibit negotiations over DPO co-pay increases. ¶

CWA argues that N.J.S.A . 52:14-17.29(F) mandates that the SHBC purchase insurance contracts required to implement a collective negotiations agreement granting supplemental forms of insurance and specifies that the SHBC acts as the employer's agent in that capacity. Cf. New Jersey School Bd. Ass'n v. SHBC, 183 N.J. Super . 215 (App. Div. 1987)(SHBC increased health benefits pursuant to negotiated agreement). We will assume these propositions are true and that the State and CWA could enter into negotiated agreements specifying DPO co-payments just as their agreements set prescription drug co-payments. But the factual foundation of this argument is missing: absent a repudiation, we have not found and do not have jurisdiction to find that the parties' contracts guarantee the same DPO co-payments as in 1984. ¶

The State argues that section 28 and subsection 29(B) always authorize the SHBC to change co-payments even if the parties' contracts expressly mandate specific co-payment levels. We have reservations about that approach since it would arguably nullify subsection 29(F) and permit repudiation of negotiated agreements. However, we need not resolve that question now since this case does not evidence a repudiation. If a collective negotiations agreement does not guarantee co-payment levels, subsection (F) does not apply to that issue and the SHBC presumably may exercise whatever authority and discretion it has been granted by section 28 and subsection (B) to enter into contracts on the terms it believes best. ¶

In P.E.R.C. No. 99-40, we restrained arbitration over a challenge to the SHBC's authority to equalize HMO co-pays for office visits. We noted, but did not discuss, a contention that section 28 and subsection 29(F) authorized negotiations and arbitration over that issue. We concluded instead that section 27 and subsection 29(B) vested authority in the SHBC to equalize co-pays and precluded arbitral challenges to SHBC contracts. We added that any appeal from an SHBC action must be made to the SHBC or in court. ¶

Unlike P.E.R.C. No. 99-40, this case involves a form of supplemental coverage authorized by subsection 29(F). We repeat that this unfair practice case might be different if the parties' collective negotiations agreements unmistakably dictated co-payment levels and the SHBC was then arguably required by subsection 29(F) to purchase a contract implementing those dictates. We need not explore the outer boundaries of the SHBC's authority under the other statutory provisions or parse subsection 29(B) to determine if it authorizes the instant co-pay changes. The SHBC reasonably believed it had the authority to increase co-pays to stabilize provider participation and, under P.E.R.C. No. 99-40, the Appellate Division is the proper forum for determining the limits of the SHBC's authority. ¶

We note finally that a regulation specifying an employment condition loses any preemptive force it would otherwise have if the adopting agency is a dual regulator/employer and that agency acted in bad faith to avoid negotiations. Council of New Jersey State College Locals, NJSFT v. State Bd. of Higher Ed ., 91 N.J . 18, 27-29 (1982). Even if we assume that the SHBC is a dual regulator/employer, nothing in the record suggests that its actions were influenced by a desire to avoid a contractual commitment or negotiations duty. ¶

Accordingly, we hold that under the circumstances of this case, negotiations were not required before the SHBC approved the DPO contract renewal package. We repeat that any challenge to the SHBC's actions or authority in approving that package must be made elsewhere. ¶

OrderORDER ¶

The Complaint is dismissed. ¶

BY ORDER OF THE COMMISSION ¶

Millicent A. Wasell ¶

Chair ¶

Chair Wasell, Commissioners McGlynn, Muscato and Ricci voted in favor of this decision. Commissioners Buchanan and Madonna voted against this decision. ¶

DATED: November 15, 1999 ¶

Trenton, New Jersey ¶

ISSUED: November 16, 1999 ¶