Arbitrator Not Required To Take Into Consideration Post-Hearing Economic Evidence

Where the negotiations process ends in arbitration, an employer or labor union seeking to challenge an arbitrator’s opinion has an extremely heavy burden of proof. Though the standard varies little from state to state – the arbitrator’s decision usually must be shown to be without any basis in fact or the product of fraud – some states, including New Jersey, require an arbitrator to specifically consider each of the criteria a collective bargaining statute lays out for an arbitrator’s decision.

These principles were tested in a recent decision of New Jersey’s Public Employment Relations Commission (PERC) in the review of an arbitration decision covering police officers working for the Borough of Fort Lee, New Jersey. The employer challenged the Arbitrator’s award on nine separate grounds.

PERC began its decision with a review of the deference given to the decisions of arbitrators. As PERC described it, “arriving at an economic award is not a precise mathematical process. Given that the statute sets forth general criteria rather than a formula, the treatment of the parties’ proposals involves judgment and discretion and an arbitrator will rarely be able to demonstrate that an award is the only ‘correct’ one. Some of the evidence may be conflicting and an arbitrator’s award is not necessarily flawed because some pieces of evidence, standing alone, might point to a different result.”

Perhaps the Borough’s most prominent argument was that the Arbitrator failed “to take into account the recent downturn in the economy and its impact on the state and local governments.” The Borough submitted to PERC copies of numerous newspaper articles and Bureau of Labor Statistics reports from December 2008 and January 2009, many of which were published after the Arbitrator issued his award. PERC was not swayed by the Borough’s arguments, holding: “The arbitration hearing in this case took place on February 14, 2008. The record closed on April 23, 2008. We will not fault an arbitrator for failing to consider evidence not in the record, particularly evidence that did not exist before he issued his award. Nothing in our rules prohibits a party from seeking special permission of the arbitrator to introduce new factual material should circumstances change significantly after a record closes. On August 27, 2008, the Arbitrator denied the Borough’s request to introduce four rebuttal exhibits in evidence. However, the Borough did not seek special permission to appeal that determination. Nor has it explained what those exhibits were, their relevance, or whether they bear on the state of the economy.”

The Borough focused in large part on the Arbitrator’s decision that holiday pay should be “folded into base salary,” something that would result in an increase in pension costs. The Borough contended that the officers’ labor organization, the Patrolmen’s Benevolent Association, failed to show a need for the change in practice. PERC again disagreed with the Borough, concluding: “We are unpersuaded by the Borough’s assertion that the PBA did not meet its burden in showing a need for holiday pay to be folded into base salary. As acknowledged by the Arbitrator in his award, the inclusion of holiday pay into base salary was supported by the exhibits in the record that showed that a large number of municipalities in Bergen County include holiday pay in base salary. A review of the PBA and Borough exhibits shows that 75% of the jurisdictions cited include holiday pay in base salary.”

PERC did find fault in one area of the Arbitrator’s opinion. New Jersey law requires an arbitrator to compare wages and benefits paid to similar employees in other jurisdictions, and also to wages and benefits in public and private employment “in general.” While the Arbitrator did base his decision on comparable police wages and benefits, PERC found, he failed to reference in his decision the issue of comparability with other employees “in general.” Accordingly, PERC remanded the matter to the Arbitrator for explicit consideration of the “in general” factor and, if he deemed it appropriate, any modification of his decision.

Borough of Fort Lee, PERC No. 2009-64 (N.J. PERC 2009).

This article appears in the December 2009 issue