Pennsylvania Commonwealth Reports
BOROUGH v. SCHUYLKILL HAVEN, 2489 C.D. 2005 (Pa.Commw.
12-22-2006) SCHUYLKILL HAVEN BOROUGH v. SCHUYLKILL HAVEN
POLICE OFFICERS ASSOCIATION, Appellant. No. 2489 C.D.
2005. Commonwealth Court Of Pennsylvania. Submitted: June
8, 2006. Filed: December 22, 2006.
BEFORE: HONORABLE DAN PELLEGRINI, Judge HONORABLE BONNIE
BRIGANCE LEADBETTER, Judge HONORABLE JAMES R. KELLEY,
Senior Judge.
OPINION BY JUDGE PELLEGRINI[fn1].
[fn1] This case was reassigned to the author on November 8,
2006.
Schuylkill Haven Police Officers Association (Union)
appeals from an order of the Court of Common Pleas of
Schuylkill County (trial court) vacating in part an “Act
111″[fn2] interest arbitration award (Award) providing the
terms and conditions of employment with Schuylkill Haven
Borough (Employer) for 2005 through 2007.
The Union and Employer entered into a collective bargaining
agreement (CBA) effective January 1, 2002, through December
31, 2004. Upon expiration of the CBA, the Union and
Employer reached an impasse with respect to the adoption of
a successor CBA and, in accordance with Act 111, a Board of
Arbitrators was appointed[fn3] At the hearing, Employer
alleged, among other things, that provisions in the expired
CBA regarding mandatory employer contributions to an
employee deferred compensation plan, limitations on the
amount of employee pension contributions and a no-layoff
clause were either not authorized by The Borough Code[fn4]
and/or illegal and/or infringed on Employer’s managerial
rights. Effectively continuing the challenged provisions,
the Board of Arbitrators, by a 2-1 vote, issued an Award
governing the terms and conditions of employment between
January 1, 2005, and December 31, 2007, providing:
5. Deferred Compensation — If contributions to a
deferred compensation plan are determined to be illegal,
they are to be discontinued.[fn5]
7. No Layoff — There shall be no layoffs of
currently full-time Officers during the term of this
Agreement.
8. Reopener — In 2005, for effect in 2006, there
will be a reopener in the contract solely to address
issues of officer pension contributions and part-timer
participation in overtime opportunities.
Because Paragraph 9 of the Award left in place “all
existing benefits contained in previous awards and written
agreements not modified by this award shall remain as is,”
the net effect was that mandatory Employer contributions
and limitations on employee contributions were carried over
from the expired CBA.
Contending again that those provisions were illegal or in
derogation of its management rights, Employer appealed
those provisions of the Award to the trial court. Agreeing
with Employer, the trial court vacated the challenged
provisions reasoning: while Employer was allowed to create
a deferred compensation accounts plan under Section 8.1 of
the Fiscal Code, Act of March 30, 1811, P.L. 145, as
amended, 72 P.S. § 4521.1, nowhere in that Act or
the Borough Code was there any authority that allowed a
borough to match those contributions; that the no-layoff
provision impermissibly infringed upon Employer’s inherent
managerial right to determine the number of police officers
required to police the Borough; and by declining to address
the issue of officer pension contributions contained in the
expired CBA, the Award continued an illegal carry-over
provision from the expired CBA because the amount of police
officer pension contributions were within Employer’s
exclusive managerial prerogative and were controlled by the
express language of the Police Pension Fund Act (Act 600),
Act of May 29, 1956, P.L. (1955) 1804, as amended, 53 P.S.
§ 767, as modified by Act of 2002 of 2002. The Union
then filed this appeal.[fn6]
A.
The Union contends that the trial court erred in vacating
that portion of the Award requiring Employer to make
mandatory contributions to an employee deferred
compensation plan because it had no authority under the
Borough Code to voluntarily contribute to an employee’s
deferred compensation plan. While recognizing that an
arbitration award can only mandate a benefit that a public
employer could voluntarily grant by law, the Union argues
that Employer had the authority to match contributions to a
deferred compensation plan under Section 8.1(a) of the
Fiscal Code[fn7] and Sections 1006(6)[fn8] and 1125[fn9] of
the Borough Code.[fn10]
Section 8.1(a) of the Fiscal Code allows public employers
to establish deferred compensation plans so that
governmental employees can take advantage of tax incentives
contained in the Internal Revenue Code. Absent this
provision, public employers could not establish and manage
such plans because the public employer would be undertaking
an activity for the private benefit of its employees and
not for any governmental purpose. Recognizing that a
deferred compensation plan “defers” compensation presently
due, is a tax plan device and participation depends on the
financial and personal circumstances of each employee,
Section 8.1(a) of the Fiscal Code only permits voluntary
participation by employees. Correspondingly, because this
provision was enacted to enable employees to take advantage
of tax benefits available to private sector employees,
nothing in that provision envisions or authorizes a public
employer to match contributions that employees made to the
deferred compensation plan.
Similarly, nothing in Sections 1006(6) and 1125 of the
Borough Code vests in an employer the authority to match
contributions; all that they do is authorize boroughs to
“fix” compensation, i.e., what employees are paid for their
services. Matching contributions are anything but “fixed”
compensation because the amount “fixed” is not determined by
the governmental entity, but by the employees who determine
whether they want to defer any compensation and in what
amount. In addition, requiring Employer to contribute to
“the current voluntary 401(k) styled pension plan (which is
presently through the Pennsylvania State Association of
Boroughs) created a separate pension plan where only one
plan is authorized by the Borough Code as well as Act
600.[fn11]
Because Employer had no legal authority to match employee
contributions even if it wanted to, the trial court, when
vacating Paragraph 5 of the Award, properly found that the
Board of Arbitrators was acting illegally by requiring
Employer to match employees’ contributions.
B.
Regarding the provision providing that no employed
full-time police officer may be laid off, the Union
contends that the trial court erred in vacating that
provision because it violated an inherent management right.
It contends that a no lay-off issue was properly raised
before the Board of Arbitrators, and it was within their
jurisdiction and authority to decide because it affected
terms and conditions of the employees’ employment.
Where a managerial policy concern substantially outweighs
any impact the issue will have on employees, the subject
will be deemed a managerial prerogative and
non-bargainable. Ellwood City Police Wage and Policy Unit
v. Pennsylvania Labor Relations Board, 731 A.2d 670 (Pa.
Cmwlth. 1999) (citing Delaware County Lodge No. 27,
Fraternal Order of Police v. Pennsylvania Labor Relations
Board, 722 A.2d 1118, 1121 (Pa. Cmwlth. 1998)). One area
that has been consistently recognized as an inherent
management prerogative is the total number of police
officers or firemen that a municipality desires to employ.
City of Philadelphia v. Pennsylvania Labor Relations Board,
588 A.2d 67 (Pa.Cmwlth. 1991); International Association of
Fire Fighters, Local 669 v. City of Scranton, 429 A.2d 779
(Pa.Cmwlth. 1981). We noted in International Association of
Fire Fighters, Local 669, that:
The courts that have dealt with this issue have drawn a
very fine line in distinguishing between the total number
of persons on the force (not arbitrable), and the number
of persons on duty at a station, or assigned to a piece of
equipment, or to be deployed to a fire (all arbitrable
because they are rationally related to the safety of the
firefighters). However, this Court finds merit in that
distinction, because the result still leaves in the
municipality the ultimate decision concerning what level
of fire protection it wishes, or can afford, to provide to
the citizens. If it finds that the arbitrable situations
cause an imbalance in certain areas of the force, it
retains the authority to decide whether to hire more
employees, close stations, revamp the force, or take some
other managerial action. Since the method of resolving
the imbalance may have far-reaching political and
economic implications, especially if taxes must be raised,
it should remain within the purview of those who were
elected and/or appointed to make such decisions. (Emphasis
in original.)
Id. at 781.
Because the number of police officers that Employer desired
to employ was a management prerogative and not subject to
bargaining, the trial court properly vacated Paragraph 7
from the Award as the Board of Arbitrators exceeded its
authority by providing that any current employee may not be
laid off for the term of the award.
C.
Paragraph 8 of the Award provided, “[i]n 2005, for effect
in 2006, there will be a reopener in the contract solely to
address issues of officer pension contributions,” and
Paragraph 9 provided, “[a]ll existing benefits contained in
previous awards and written agreements not modified by this
award shall remain as is.” The net effect was that the
Award carried over Article 12.2(d) of the expired
CBA,[fn12] limiting the maximum employee contribution to 5%
percent of wages. The trial court vacated that paragraph
from the Award because it infringed on an exclusive
management prerogative given to Employer by Section 6(a) of
Act 600, 53 P.S. § 772(a), to set the level of
contributions police officers have to make to their pension
fund.[fn13] The Union contends that the trial court erred
because the Award did not impermissibly defer resolution of
police officer compensation because it merely continued
provisions that were the permissive subject of collective
bargaining, not inherent management rights under Act
600.[fn14]
Recently, in the Borough of Jefferson Hills v. Jefferson
Hills Police Department Wage and Policy Committee, 904 A.2d
61 (Pa.Cmwlth. 2006), we addressed the effect of Act 30’s
amendment of Act 600 on when employee contributions to the
police pension fund could be eliminated or reduced, albeit
in the context of whether Act 30 applied retroactively to a
collective bargaining agreement entered before its
enactment. In holding that it did not, we explained:
Section 6(a) of Act 600, 53 P.S. § 772(a),
provides that “[m]embers shall pay into the fund, monthly,
an amount equal to not less than five per centum nor more
than eight per centum of monthly compensation.” [Before
the amendment,] Section 6(c) of Act 600, 53 P.S. §
772(c), provided:
If an actuarial study shows that the condition of the
police pension fund of any borough, town, township or
regional police department is such that payments into the
fund by members may be reduced below the minimum
percentages hereinbefore prescribed, or eliminated, and
that if such payments are reduced or eliminated
contributions by the borough, town, township or regional
police department will not be required to keep the fund
actuarially sound, the governing body of the borough,
town, township or regional police department may, on an
annual basis, by ordinance or resolution, reduce or
eliminate payments into the fund by members. (Emphasis in
original).
This language permitted a governing body to reduce or
eliminate pension contributions by police officers only if
the governing body would not thereafter be required to
make contributions to keep the fund actuarially sound.
Prior contributions were based upon the funding
requirements of the plan. Officers had to contribute at
least 5% of their salaries to meet actuarial funding
requirements before the Borough would be required to
contribute to the plan. Thus, a request to eliminate or
reduce officer pension contributions could not legally be
granted if it resulted in the Borough being required to
make contributions in order to keep the plan actuarially
sound.
On April 17, 2002, Act 600 was amended by Act 30,
effective immediately. Act 30 deleted the first part of
Section 6(c) (as italicized above) to provide:
The governing body of the borough, town, township or
regional police department may, on an annual basis, by
ordinance or resolution, reduce or eliminate payments into
the fund by members. Except as otherwise provided in this
subsection, reduction or elimination of member
contributions shall not permit the return of contributions
or any interest or fund earnings to be made to members
while actively employed as a police officer by any
borough, town or township subject to this act. [Where an
agreement, collectively bargained or otherwise,
arbitration award or court decision was agreed to, issued
or rendered on or prior to February 23, 1994, which provided
for a return of contributions, with or without interest,
or fund earnings to members, a return of contributions,
with or without interest, or fund earnings shall be made
to members and any such return of contributions shall
reduce or eliminate any entitlement to refunds pursuant to
section 9. No borough . . . making such return or member
receiving such return shall be required to restore to the
fund any such contributions, interest or fund earnings.]
The passage of Act 30 eliminated the statutory
requirement that a police officer contribute to the
pension fund of which he or she is a member before
municipal contributions are required to keep the fund
actuarially sound. In other words, members of the fund
will no longer be legally required to contribute to their
own plan before the municipality is required to
contribute. The parties can now reduce or eliminate
officer contributions regardless of the actuarial status
of the pension fund. (Emphasis added.)
Id. at 63-64.
Employer contends that it has the sole discretion to decide
whether police officer contributions should be reduced
because Section 6(c) of Act 600, 53 P.S. § 772(c),
provides only the “governing body of the borough . . . may,
on an annual basis, by ordinance or resolution, reduce or
eliminate payments into the fund by members.” However,
notwithstanding such language, pension obligations have
always been the subject of collective bargaining. See,
e.g., Pennsylvania State Troopers Association v.
Pennsylvania State Employes’ Retirement Board, 677 A.2d
1329, 1330-31 (Pa.Cmwlth. 1996). Consistent with that
understanding, Section 6(c) of Act 600, in prohibiting the
return of pension contributions, recognizes that pension
contributions could be the subject of “an agreement,
collectively bargained or otherwise, arbitration award.”
See also Borough of Jefferson Hills, 904 A.2d at 64. (“The
parties can now reduce or eliminate officer contributions
regardless of the actuarial status of the pension.”) Because
the subject matter carried over in Article 12.2(d) of the
expired CBA was bargainable, and limiting the maximum
employee contribution to 5% percent of wages was not
illegal under Act 600 as amended by Act 30, that portion of
the order vacating Paragraph 8 of the award is reversed and
that Paragraph is reinstated.
Accordingly, that portion of the trial court’s order
vacating Paragraphs 5 and 7 of the Award is affirmed, and
that portion of the order vacating Paragraph 8 of the Award
is reversed.
DAN PELLEGRINI, JUDGE
ORDER
AND NOW, this 22nd day of December, 2006, the order of the
Court of Common Pleas of Schuylkill County, dated November
30, 2005, at No. S-1145-2005, vacating Paragraphs 5 and 7
of the Board of Arbitrator’s Award, dated April 12, 2005,
at No. 14 L 360 00527, is affirmed, and that portion of the
order vacating Paragraph 8 of the Board of Arbitrator’s
Award regarding payment of pension contributions is
reversed.
DAN PELLEGRINI, JUDGE