PBA wins Chapter 78 Grievance Arbitration

In this case, the Policemen’s Benevolent Association Local 260 (“PBA”) filed a grievance and request for arbitration to PERC against the Township of Pemberton challenging its practice of requiring retirees to contribute to their healthcare coverage as a violation of the terms under the January 1, 2018 – December 31, 2021 collective negotiation agreement. Article X, Section A, Paragraph Four of the CNA provided the following health benefits for active employees:

“Eligibility for medical benefits is dependent upon an employee’s permanent full-time status with the Township (regularly scheduled to work an average of 35 or more hours per week). Employees electing benefits under this plan shall be required to pay contributions based on a percentage of the cost of coverage as set forth in [Chapter 78], subject to any right which may exist in the future to negotiate contributions . . .”

Article X, Section A, Paragraph Five of the CNA, addressing retiree benefits, provides,

“[t]he Township will assume the cost of health benefits coverage and pay all premiums for [eligible retirees]…at the ‘single’ level of coverage.” “Retirees will receive the same health benefits and under the same terms and conditions as current active [employees].

The Township claimed retirees were required to contribute along Chapter 78 rates because active employees were required to do the same. Chapter 78 requires employees to pay “one-fourth of the . . . contribution” during the first year (tier one), “one-half” in the second year (tier two), and “three -fourths” during the third year (tier three). See N.J.S.A. 40A:10-21.1(a). Tier four, the full premium rate, was reached by the fourth year. Ibid. No matter the percentage dictated by the employee’s salary or the proportion dictated by the tier, the law requires the contribution by current employees to not “under any circumstance be less than the 1.5 percent of [the employee’s] base salary . . . .” Ibid. Chapter 78’s “sunset” provision provided that N.J.S.A. 40A:10-21.1 would “expire four years after the effective date,” on June 28, 2015. N.J.S.A. 40A:10-21.2 provides that “[a]fter full implementation, those contribution levels . . . shall then be subject to collective negotiations” and parties to a CNA “shall . . . negotiat[e] . . . for health care benefits as if the full premium share was included in the prior contract.” N.J.S.A. 40A:10-21.2.

The issue presented in this case was whether the Township violate Paragraph 5 of the collective negotiations agreement when it charged eligible retirees for healthcare contribution. The Appellate Division affirmed the Arbitrator’s award finding the contract language to unambiguously require the Township to pay retirees’ benefits. The Appellate Division had no reason to substitute its interpretation because its decision met “reasonably debateable” standard. Furthermore, Chapter 78 contemplated that contribution rate and timeframe would be negotiated through successor CNAs, thus the arbitrator’s award was not in conflict with public policy.

Policemen’s Benevolent Ass’n Local No. 260 v. Twp. of Pemberton, No. A-1340-22, 2024 N.J. Super. Unpub. LEXIS 186 (App. Div. Feb. 7, 2024)