P.E.R.C. No. 2005-26, Warren Hills Reg B/E

CaptionSTATE OF NEW JERSEY BEFORE THE PUBLIC EMPLOYMENT RELATIONS COMMISSION In the Matter of WARREN HILLS REGIONAL BOARD OF EDUCATION, Respondent, -and- Docket No. CO-2003-002 WARREN HILLS REGIONAL HIGH SCHOOL EDUCATION ASSOCIATION, Charging Party. ¶

AppearancesAppearances: ¶

For the Respondent, Broscious & Fischer, attorneys ¶

(John M. Zaiter, of counsel) ¶

For the Charging Party, Oxfeld Cohen, P.C., attorneys ¶

(Gail Oxfeld Kanef, of counsel) ¶

DECISION ¶

On August 17, 2004, the Warren Hills Regional Board of Education filed exceptions to a Hearing Examiner’s report and recommendations. The Hearing Examiner found that the Board committed unfair practices and violated the New Jersey Employer- Employee Relations Act, N.J.S.A. 34:13A-1 et seq ., specifically 5.4a(1), (3) and (5),1/ by subcontracting the work of its full- time and regular part-time bus drivers and mechanic and terminating those employees in retaliation for their recently electing the Warren Hills Regional High School Education Association to represent them and to avoid negotiating with the Association. We conclude that the Board committed these unfair practices. ¶

The Association filed this unfair practice charge on July 1, 2002 and amended it on September 10 and 26. On October 25, a Complaint and Notice of Hearing issued. On December 16, the Board filed its Answer denying that it subcontracted because of its superintendent’s alleged anti-union animus. ¶

Hearing Examiner Arnold H. Zudick conducted three days of hearing. The parties examined witnesses and introduced exhibits. They waived oral argument, but filed post-hearing briefs. ¶

On July 21, 2004, the Hearing Examiner issued his report and recommendations. H.E. No. 2005-2, 30 NJPER 298 (¶105 2004). He found that the decision to subcontract was motivated by the superintendent’s hostility toward the drivers’ organizing and that the Board did not prove that it would have privatized the bus service absent that hostility. Accordingly, he found that the Board violated 5.4a(3), and, derivatively, a(1) of the Act. The Hearing Examiner also found that the Board violated 5.4a(5) because it sought to avoid negotiations with the Association. He recommended that the Board be ordered to offer employees reinstatement with back pay, and to negotiate upon demand with the Association. The Hearing Examiner recommended dismissing an allegation that the Board refused to negotiate over terms and conditions of employment for its eight Activity Drivers. 2/ ¶

The Board’s exceptions ask us to reject the Hearing Examiner’s credibility findings and his conclusion based on those findings that the superintendent’s anti-union animus motivated the recommendation and decision to subcontract bus services. The Association’s answering brief asks us to adopt and implement the Hearing Examiner’s recommendations. ¶

We have reviewed the record. We adopt and incorporate the Hearing Examiner’s findings of fact (H.E. at 3-20). Absent any compelling reasons to do otherwise, we specifically adopt his factual findings based on his credibility determinations. ¶

In re Bridgewater Tp., 95 N.J . 235 (1984), establishes the test for assessing allegations that anti-union animus illegally motivated the exercise of a managerial prerogative. A public employer has a prerogative to subcontract government services, but it cannot do so for anti-union reasons. ¶

Under Bridgewater , no violation will be found unless the charging party has proved, by a preponderance of the evidence on the entire record, that protected conduct was a substantial or motivating factor in the adverse action. This may be done by direct evidence or by circumstantial evidence showing that the employee engaged in protected activity, the employer knew of this activity and the employer was hostile toward the exercise of the protected rights. Id. at 246. ¶

If the employer did not present any evidence of another motive or if its explanation has been rejected as pretextual, there is sufficient basis for finding a violation without further analysis. Sometimes, however, the record demonstrates that both motives unlawful under our Act and other motives contributed to a personnel action. In these dual motive cases, the employer will not have violated the Act if it can prove, by a preponderance of the evidence on the entire record, that the adverse action would have taken place absent the protected conduct. Id . at 242. This affirmative defense, however, need not be considered unless the charging party has proved, on the record as a whole, that anti-union animus was a motivating or substantial reason for the personnel action. Conflicting proofs concerning the employer's motives are for us to resolve. ¶

There is no dispute that the bus drivers engaged in protected activity and that the superintendent knew of that activity. During the first week of March 2002, Association President Ralph Fiore approached Board Superintendent Peter Merluzzi and informed him of the drivers’ interest in organizing with the Association. Thus, the Association established the first two elements of the Bridgewater test. ¶

The Association also established that hostility to that protected activity motivated the subcontracting decision. This third Bridgewater element was established through the timing of the subcontracting decision and two statements of the superintendent. ¶

Timing is an important factor in assessing motivation and understanding the context of events. Downe Tp. Bd. of Ed., P.E.R.C. No. 86-66, 12 NJPER 3 (¶17002 1985). The decision to explore subcontracting was made immediately after the superintendent was notified of the drivers’ organizing and the decision to subcontract was made immediately after the vote for Association representation. This contrasts with other years of economic hardship, including one year where the district ran a $1.5 million deficit, when the district decided not to subcontract. ¶

When told of the drivers’ desire to organize, Merluzzi replied: “They don’t want to do that.” Merluzzi testified that bus drivers already received the same increases as other employees, he did not see that there was an issue, and it was their choice to organize if they wanted; but the Hearing Examiner discredited his testimony and found instead that Merluzzi did not want the drivers to join the union. We reject the Board’s argument that the Hearing Examiner’s interpretation of Merluzzi’s comment is merely an opinion and cannot be a fact. The Hearing Examiner observed the witnesses and is charged with determining the motivation for the subcontracting decision. He reasonably assessed the credibility of Merluzzi’s explanations for his statement to Fiore. N.J.S.A . 52:14B-10(c) (agency head may not reject or modify any findings of fact as to issues of credibility of lay witness testimony unless it is first determined from a review of the record that the findings are arbitrary, capricious or unreasonable or are not supported by sufficient, competent, and credible evidence in the record). ¶

Soon after, the Association filed a representation petition, won an election, and was certified as the majority representative of bus drivers, mechanics, and security guards. Fiore informed Merluzzi’s secretary of the results. Shortly after the call, Merluzzi told Fiore that he was exploring privatizing the bus drivers to see if it would save money. This was the first time Merluzzi had ever told Fiore that he was considering privatization. 3/ ¶

On June 25, 2002, Merluzzi recommended to the Board that it subcontract bus routes driven by its full-time and regular part- time drivers. Fiore and many bus drivers and parents attended the Board meeting. Bus driver Donna Poyer, on behalf of all the bus drivers, asked Merluzzi why they were not given the opportunity to save their jobs by negotiating a possible reduction in their salaries and benefits. Merluzzi replied that the bus drivers had “lost the right to negotiate with him.” Merluzzi testified that he meant that since the drivers had organized, the Association now represented them and thus he could not negotiate directly with the drivers without the Association’s involvement. But the Hearing Examiner discredited his explanation and found instead that this remark reflected Merluzzi’s continuing hostility towards the drivers’ becoming unionized.4/ Absent compelling contrary evidence, we will not substitute our reading of the transcript for the Hearing Examiner's credibility determination. City of Trenton, P.E.R.C. No. 80-90, 6 NJPER 49 (¶11025 1980). ¶

The Board challenges the inferences of hostility the Hearing Examiner drew from Merluzzi’s comments to Fiore and Ponty. We accept those inferences because they logically flow from an examination of the comments in the context of the unfolding events. The Board took no steps to explore privatization until just after it was informed of the drivers’ organizing. Merluzzi told Fiore that the drivers did not want to organize. The Board then solicited bids from subcontractors and at a meeting to accept a bid, Merluzzi publicly told the bus drivers that they had lost their right to negotiate with him. The Board had a decrease in State aid 5/ and a need to hire additional teachers, but it also had a surplus greater than the maximum set by statute, and had not subcontracted before, even when faced with difficult financial times. Thus, the Association proved that anti-union animus was a substantial or motivating factor in the subcontracting decision. ¶

The next question under Bridgewater is whether the Board proved that it would have subcontracted even absent Merluzzi’s hostility to the drivers’ organizing. The Board asserts that it subcontracted to save money. The Hearing Examiner, however, found that while saving money might have been a legitimate reason to justify privatization, that reason did not motivate the Board. Instead, the evidence showed that hostility towards the drivers’ organizing drive motivated the subcontracting. We accept that determination based on our review of the entire record. ¶

The Board argues that once it is established that there was a legitimate business justification for its decision, and hostility was not the sole reason for the subcontracting, the analysis is complete and the Complaint should be dismissed. The Board relies, in part, on Local 195, IFPTE v. State, 88 N.J . 393 (1982). As we have already held, we disagree with the factual predicate for this argument. Hostility was the sole reason for the subcontracting. We also disagree with the Board’s interpretation of Local 195. ¶

In Local 195 , the Supreme Court addressed the negotiability of subcontracting decisions and stated that an employer: ¶

could not subcontract in bad faith for the sole purpose of laying off public employees or substituting private workers for public workers. State action must be rationally related to a legitimate governmental purpose. Our decision today does not leave public employees vulnerable to arbitrary or capricious substitutions of private workers for public employees. [ Id. at 411] ¶

The Court was addressing whether a public employer has a managerial prerogative to subcontract -- whether subcontracting decisions should be subject to collective negotiations. The Court was not insulating subcontracting decisions from allegations of illegal discrimination, whether they be based on race, sex, or, in this case, anti-union animus. Two years after issuing Local 195, the Supreme Court in Bridgewater adopted the Commission’s test for resolving unfair practices in retaliation for the exercise of protected union activity. If the union establishes that anti-union animus was a motivating reason for the employer’s action, the employer will often assert that it acted for legitimate business reasons. ¶

An examination of the evidence may reveal that the asserted justification is a sham, or was not in fact relied upon. When this occurs, the reason advanced by the employer is deemed pretextual. [ Id. at 241] ¶

The Hearing Examiner found that subcontracting did save this employer money and that it would have been a legitimate business reason for subcontracting bus services. However, the Hearing Examiner also found that saving money was not this employer’s motivation for this subcontracting decision. Under these circumstances, we accept the Hearing Examiner’s recommendations and conclude that the Board violated 5.4a(3), and derivatively a(1), when it subcontracted bus services. We adopt the Hearing Examiner’s make-whole remedy. ¶

The Board argues that the Hearing Examiner’s decision tells a school district that despite its shortfalls and budget problems, it should not have tried to save $245,000. That is not what his decision says. A public employer has a non-negotiable right to subcontract the delivery of government services to save money. Local 195 . But that is not what happened here. This employer subcontracted because the bus drivers decided that they wanted to join a union. That the subcontracting saved the Board money does not make legal its illegally motivated decision. ¶

The Hearing Examiner also recommended finding that the Board violated 5.4a(5) by subcontracting to avoid negotiating over the bus drivers’ terms and conditions of employment. We accept that recommendation and order the Board to negotiate with the Association upon request. We agree with the Board that there was never an Association request to negotiate, but a request to negotiate is not a requirement for finding a violation. The Board violated 5.4a(5) because its subcontracting decision was motivated by its desire to avoid negotiations with the Association. That action constitutes a refusal to negotiate in good faith. ¶

OrderORDER ¶

The Warren Hills Regional Board of Education is ordered to: ¶

A. Cease and desist from: ¶

1. Interfering with, restraining, or coercing its employees in the exercise of the rights guaranteed to them by the Act, particularly by subcontracting its regular bus routes and terminating its full-time and regular part-time bus drivers and mechanic in retaliation for the bus drivers’ electing to have the Association represent them. ¶

2. Discriminating in regard to the hire or tenure of employment or any term and condition of employment to encourage or discourage employees in the exercise of rights guaranteed to them by the Act, particularly by subcontracting its regular bus routes and terminating its full-time and regular part-time bus drivers and mechanic in retaliation for the bus drivers’ electing to have the Association represent them. ¶

3. Refusing to negotiate in good faith with a majority representative of employees in an appropriate unit concerning terms and conditions of employment, particularly by terminating its full-time and regular part-time bus drivers and mechanic to avoid negotiations with the Warren Hills Regional High School Education Association. ¶

B. Take this action: ¶

1. Offer reinstatement to all terminated full-time and regular part-time bus drivers and the mechanic who were terminated as of June 25, 2002. ¶

2. Make the terminated employees whole for all salary and benefits due from June 25, 2002 to the present, less mitigation with interest at the rate set by Court Rules. ¶

3. Negotiate in good faith with the Association on demand over the terms and conditions of employment for the bus drivers and mechanic. If impasse is reached, utilize the Commission’s impasse procedures as provided in N.J.A.C. 19:12-1.1 et seq. ¶

4. Post in all places where notices to employees are customarily posted, copies of the attached notice marked as Appendix "A." Copies of such notice shall, after being signed by the Respondent's authorized representative, be posted immediately and maintained by it for at least sixty (60) consecutive days. Reasonable steps shall be taken to ensure that such notices are not altered, defaced or covered by other materials. ¶

5. Within twenty (20) days of receipt of this decision, notify the Chairman of the Commission of the steps the Respondent has taken to comply with this order. ¶

The remaining allegations in the Complaint are dismissed. ¶

BY ORDER OF THE COMMISSION ¶

Lawrence Henderson ¶

Chairman ¶

Chairman Henderson, Commissioners Buchanan, DiNardo, Katz, Sandman and Watkins voted in favor of this decision. None opposed. Commissioner Mastriani was not present. ¶

DATED: October 28, 2004 ¶

Trenton, New Jersey ¶

ISSUED: October 28, 2004 ¶

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. (3) Discriminating in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage 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, or refusing to process grievances presented by the majority representative.” ¶

2/ Absent Association exceptions, we adopt the Hearing Examiner’s recommendation to dismiss the allegation concerning the Activity Drivers. ¶

3/ The Board had just published a request for bids, but there is no evidence that Fiore was aware of that fact. ¶

4/ Poyer was asked on cross-examination whether Merluzzi could have meant that now that the drivers had representation, he could not negotiate with them directly. She responded affirmatively, but added that that was not what she understood him to have meant. ¶

5/ The amount of the increase in State aid the Board had been expecting and the amount of the superintendent’s raise are not material to our determinations. ¶