P.E.R.C. No. 2010-9, Rockaway Boro B/E

CaptionSTATE OF NEW JERSEY BEFORE THE PUBLIC EMPLOYMENT RELATIONS COMMISSION In the Matter of ROCKAWAY BOROUGH BOARD OF EDUCATION, Respondent, -and- Docket No. SN-2010-002 ROCKAWAY BOROUGH EDUCATION ASSOCIATION, Petitioner. ¶

SynopsisSYNOPSIS ¶

Pursuant to a Court Order, the Public Employment Relations Commission finds an arbitration award to be legally arbitrable. In that award, the arbitrator sustained a grievance filed by the Rockaway Borough Education Association against the Rockaway Borough Board of Education . The arbitrator found that the Board violated Article XIV A.1 of the parties’ collective negotiations agreement by failing to provide medical benefits to the Association’s members at the level in effect on January 1, 2007. As a remedy, the arbitrator directed the Board to reimburse employees who submit evidence that their medical expenses exceeded the amount they would have been if the level of benefits had not been changed from the level in effect on January 1, 2007. The arbitrator retained jurisdiction regarding the implementation of the remedy. The Commission finds the grievance was legally arbitrable. The arbitrator had the legal authority to decide the contractual level of benefits and whether that benefit level was breached. The arbitration award is not preempted by statute or regulation. The question of whether a school board can reimburse employees for differences between the contractual level of benefit s and the level of benefits set by the School Employees Health Benefits Commission (SEHBC) is a question for the SEHBC. ¶

This synopsis is not part of the Commission decision. It has been prepared for the convenience of the reader. It has been neither reviewed nor approved by the Commission. ¶

CaptionSTATE OF NEW JERSEY BEFORE THE PUBLIC EMPLOYMENT RELATIONS COMMISSION In the Matter of ROCKAWAY BOROUGH BOARD OF EDUCATION, Respondent, -and- Docket No. SN-2010-002 ROCKAWAY BOROUGH EDUCATION ASSOCIATION, Petitioner. ¶

AppearancesAppearances: ¶

For the Respondent, Schenck, Price, Smith & King, LLP, attorneys (Brian R. Lehrer, of counsel) ¶

For the Petitioner, Zazzali, Fagella, Nowak, Kleinbaum & Friedman, attorneys (Richard A. Friedman, of counsel) ¶

DECISION ¶

This matter comes to us by way of an Order of Superior Court Judge Catherine M. Langlois, P.J. The Court has ordered us to submit to the Court our position regarding the legality of the arbitration award entered by Arbitrator Jeffrey B. Tener on December 22, 2008. In that award, the arbitrator sustained a grievance filed by the Rockaway Borough Education Association against the Rockaway Borough Board of Education.1/ The arbitrator found that the Board violated Article XIV A.1 of the parties’ collective negotiations agreement by failing to provide medical benefits to the Association’s members at the level in effect on January 1, 2007. As a remedy, the arbitrator directed the Board to reimburse employees who submit evidence that their medical expenses exceeded the amount they would have been if the level of benefits had not been changed from the level in effect on January 1, 2007. The arbitrator retained jurisdiction regarding the implementation of the remedy. ¶

Our jurisdiction to determine the legality of a grievance arbitration award is narrow. Ridgefield Park Ed. Ass’n v. Ridgefield Park Bd. of Ed., 78 N.J. 144, 154 (1978). We have jurisdiction to determine whether subjects for negotiation and arbitration are within the scope of negotiations. N.J.S.A. 34:13A-5.4d. ¶

When a subject is within the scope of negotiations or mandatorily negotiable, agreements over those subjects may be enforced through binding arbitration. Ridgefield Park. When making a scope of negotiations determination, we address the abstract issue: is the subject matter in dispute within the scope of negotiations. Thus, we do not consider the merits of the grievance or any contractual defenses the employer has raised. ¶

In this case, we derive the facts from the arbitrator’s decision and the parties’ arguments from their briefs to the Court. ¶

Article XIV A.1 of the parties’ collective negotiations agreement provides: ¶

All employees shall be provided, at Board expense, Blue Cross/Blue Shield and Major Medical insurance under the Public School Employees Health Benefits Program at the benefit level in effect on January 1, 2007. Such coverage shall include dependents where applicable. ¶

Before March 31, 2008, the Board was a participant in the State Health Benefits Program ( “SHBP” ). As of April 1, the Traditional Plan component of the SHBP was eliminated and replaced by two PPOs called NJ Direct 10 and NJ Direct 15. L.2007, c. 103. As of July 1, school districts were no longer eligible to participate in the SHBP. A new plan called the School Employees Health Benefits Program ( “SEHBP” ) was created. School districts were permitted to withdraw from the State program at the time of the changeover to the SEHBP. If they did not, they were automatically rolled over into the SEHBP effective July 1. ¶

At the urging of the Association, the Board looked into withdrawing from the State program and obtaining private coverage. The Board chose not to accept a proposal for private coverage because the bid exceeded the amount the Board had budgeted for the 2008-2009 school year. That decision triggered the Association’s grievance, which asserted that the Board not only could have continued to provide the level of benefits in effect as of January 1, 2007, but that it was contractually obligated to do so. ¶

Finding that the selection of insurance providers is not mandatorily negotiable and because it was through legislative action that the change in benefits occurred, the arbitrator found that the Board did not violate the agreement by failing to leave the SHBP and by allowing itself to be enrolled in the SEHBP. However, the arbitrator found that it did not follow that school districts that have made contractual commitments to provide a specific level of benefits can evade that commitment by citing the level of benefits under the two State plans. One way of fulfilling the commitment would be by reimbursing employees for added out-of-pocket expenses that result from the change in benefits when traditional coverage was eliminated and replaced by PPOs. The arbitrator found no statute or regulation prohibiting an employer from reimbursing employees for such out-of-pocket expenses. ¶

We first address the Board’s argument that N.J.S.A. 34:13A- 18 deprived the arbitrator of jurisdiction to consider the Association’s grievance. That statute prohibits an interest arbitrator from issuing, with respect to any participating public employer, "any finding, opinion or order regarding any aspects of the rights, duties, obligations in, or associated with the State Health Benefits Program. . . ." Interest arbitration is a binding procedure for resolving initial and successor negotiations impasses between public employers and representatives of police officers and firefighters. By its terms, the statute applies only to interest arbitration and not to grievance arbitration or school districts. Borough of Bradley Beach, P.E.R.C. No. 2000-17, 25 NJPER 412 (¶30179 1999); Rockaway Tp., P.E.R.C. No. 2008-21, 33 NJPER 257 (¶96 2007), app. dismissed as moot, App. Div. Dkt. No. A-001628-07T2 . ¶

Rockaway Tp. also answers whether the Board may contractually obligate itself to maintain a level of health benefits. Accord City of Bayonne, P.E.R.C. No. 2008-41, 34 NJPER 9 (¶4 2008); Borough of East Rutherford, P.E.R.C. No. 2009-15, 34 NJPER 289 (¶103 2008), app. pending App. Div. Dkt. No. A-1260- 08T2. As we said in those cases, the level of health benefits is generally negotiable absent a preemptive statute or regulation, and a grievance contesting a change in a negotiated level of benefits is generally legally arbitrable. In re Council of New Jersey State College Locals, 336 N.J. Super. 167 (App. Div. 2001). An arbitrator may determine whether the parties made an agreement over the level of health benefits and whether an employer violated that agreement. ¶

An employer’s choice of health insurance carriers is not mandatorily negotiable so long as the negotiated level of benefits is not changed. City of Newark, P.E.R.C. No. 82-5, 7 NJPER 439 (¶12195 1981). Where changing the identity of the carrier changes terms and conditions of employment, i.e., the level of insurance benefits, and the administration of the plan, it becomes a mandatory subject for negotiations. Borough of Metuchen, P.E.R.C. No. 84-91, 10 NJPER 127 (¶15065 1984). However, parties can agree to permit an employer to change carriers consistent with the collective negotiations agreement. See Camden Cty. College, P.E.R.C. No. 2008-67, 34 NJPER 254 (¶89 2008) (many contracts permit changes to equivalent or substantially equivalent benefit plans). ¶

For local employers like the Board, participation in the SHBP or SEHBP is not required by statute or regulation and is only one alternative for obtaining health insurance coverage. Once an employer and a union agree upon a level of health benefits, the employer has discretion to choose a health insurance carrier, and the employer is not normally required to negotiate over which health insurance carrier it contracts with to provide those benefits. City of Newark. Consistent with the negotiated level of benefits, a school board may participate in the SEHBP or purchase its health insurance from a private health insurance provider. In addition, school boards can withdraw from the SEHBP at any time consistent with their obligations under existing collective negotiations agreements. New Jersey School Bds. Ass’n v. State Health Benefits Comm’n, 183 N.J. Super. 215, 218, 224 (App. Div. 1981). Thus, the arbitrator had the legal authority to determine the contractual level of benefits and to determine whether that benefit level had been breached. ¶

The remaining question is whether the arbitrator had the legal authority to order the Board to reimburse employees for the difference between the contractual level of benefits and the level of benefits provided by the carrier chosen by the Board, the SEHBP. ¶

We know of no statute or regulation that prohibits an arbitral award directing reimbursement, nor has the Board cited to any. Thus, the award is not unlawful or preempted. Nevertheless, the question of whether the Borough can reimburse employees and remain a participant in the SEHBP is a question for the School Employees Health Benefits Commission ( “SEHBC” ), whose members are appointed by the Governor pursuant to N.J.S.A. 52:14- 17.46.3. ¶

Like a private insurance carrier, but subject to any statutory restrictions, the SEHBC has the authority to determine the conditions for participation in its plan.2/ Perhaps the SEHBC will permit the Board to remain a participant and reimburse; perhaps it will not. Perhaps the SEHBC will seek to reconcile a desire for uniform benefits with a participating employer’s collective negotiations obligations by permitting the Board to reimburse and remain a participant pending the next round of negotiations when the contract can be conformed to the SEHBC’s current level of benefits. See Borough of East Rutherford . The right of the insurance carrier to set the terms for participation in its plan would be no different if the Borough had chosen to purchase its insurance from a private insurance plan rather than the SEHBC. Whether the Borough could reimburse employees for any difference between a contractual level of benefits and the level of benefits under a private plan would be a question for the private plan to answer. ¶

OrderORDER ¶

The grievance was legally arbitrable. The arbitrator had the legal authority to decide the contractual level of benefits and whether that benefit level was breached. The arbitration award is not preempted by statute or regulation. The question of whether a school board can reimburse employees for differences between the contractual level of benefit s and the level of benefits set by the SEHBC is a question for the SEHBC. ¶

BY ORDER OF THE COMMISSION ¶

Chairman Henderson, Commissioners Colligan, Joanis and Watkins voted in favor of this decision. None opposed. Commissioner Fuller abstained. Commissioners Branigan and Buchanan were not present. ¶

ISSUED: August 13, 2009 ¶

Trenton, New Jersey ¶

Note1/ The Association also filed an unfair practice charge against the Board (CO-2008-271). The Association’s application for interim relief was denied because there were disputed material facts. I.R. No. 2008-14, 34 NJPER 82 (¶34 2008). The matter was then deferred to binding arbitration. ¶

2/ The Board relies on a letter from the Chief of the Bureau of Health Benefits written in response to its request for a ruling as to whether the Board is legally permitted to reimburse. The Chief first states that N.J.S.A. 34:13A-18 removes the SHBP and SEHBP from arbitration. As discussed above, we respectfully disagree. That statute addresses interest arbitration for police officers and firefighters, not grievance arbitration for school employees. In addition, the Chief states that the employer cannot remain in the program and somehow supplement the benefits. The Association responds that the letter is nothing more than an opinion issued by a Bureau representative, not the SEHBC; the letter is not tantamount to a regulation or formal ruling of the SEHBC; and the SEHBC must act on this question by formal rulemaking. The question of how the SEHBC makes policy is outside our jurisdiction. ¶