The opinion of the court was delivered by: Judge Simpson
BEFORE: HONORABLE ROBERT SIMPSON, Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE JIM FLAHERTY, Senior Judge.
This appeal originating in a grievance arbitration award involving fire fighters of a distressed municipality requires this Court to again examine the effect of the Municipalities Financial Recovery Act (Act 47)*fn1 on collective bargaining rights under the statute known as the Policemen and Firemen Collective Bargaining Act (Act 111).*fn2
In particular, we are asked whether a 2006 amendment to the City of Chester's (City) Act 47 Recovery Plan, which caps annual wage increases at 3%, prohibits an Act 111 arbitration award of a wage increase for the year 2007 in excess of 3% based on the parties' collective bargaining agreement covering the years 2002-2006 (2002-06 CBA). The International Association of Fire Fighters Local 1400, Chester City Fire Fighters (Fire Fighters) appeals from an order of the Court of Common Pleas of Delaware County (common pleas court) granting the City of Chester's (City) petition to set aside an Act 111 grievance arbitration award. We affirm as modified.
In 1995, the City petitioned the former Department of Community Affairs, now the Department of Community and Economic Development (Department), for assistance under Act 47. Thereafter, the Department determined the City to be a "financially distressed municipality" under Act 47, and it appointed an initial coordinator to develop a recovery plan.*fn3 In 1996, the City adopted its initial plan (Original Recovery Plan).
Chapter V of the Original Recovery Plan (Collective Bargaining Issues) addressed the City's high labor costs, which, at that time, amounted to 80% of the City's annual budget. As to the City's Fire Department, the Original Recovery Plan's recommendations provided that any wage increases resulting from collective bargaining or interest arbitration must not result in increases to the "Total Average Cost Per Fire Employee" in excess of 1.5% over the preceding year's cost per employee. Reproduced Record (R.R.) at 116a-17a. These recommendations also provided the plan could be amended as circumstances require. Id. at 115a-16a. Following the enactment of the Original Recovery Plan, the City and Fire Fighters reached agreement on two CBAs. The 2002-06 CBA, at issue here, had a stated term of January 1, 2002 through December 31, 2006.
In 2006, the City adopted an updated recovery plan (2006 Recovery Plan) developed by a successor coordinator. The 2006 Recovery Plan included the following recommendation for a salary growth cap (with emphasis added):
7. The predominance of labor related costs makes it critical to contain labor and benefit expense growth .. The following provisions shall apply to all collective bargaining contracts entered into following adoption of this 2006 Recovery Plan:
a. Cap annual wage and salary growth for both represented and non-represented employees at the lower of 3 percent or the annual inflation rate as represented by the change in the Consumer Price Index (which might require employees to pay a portion of their benefit costs, as is done in many other jurisdictions) ..
Relevant here, the parties' 2002-06 CBA, included a "parity provision," which provides (with underline added):
SCHEDULE A -- ANNUAL SALARIES
The following wage increases will be effective on the dates indicated:
Effective January 1 of each successive year of this Agreement (2003-2006), each member will receive a percentage or flat dollar wage increase or bonus equal to the wage increase or bonus provided to members of the bargaining unit of City employees represented by the Fraternal Order of Police, plus an additional increase of $500 in his or her base annual wage.
Unlike Fire Fighters, the City's police employees, represented by the Fraternal Order of Police (FOP), reached an agreement on the terms of a successor contract to replace their 2002-06 CBA. The FOP and City negotiated a one-year contract maintaining the terms and conditions of the 2002-06 CBA. However, the parties agreed to a 3% wage increase for FOP members in 2007.
In December, 2007, Fire Fighters filed a grievance alleging the City violated the parity provision in Schedule A of the 2002-06 CBA by failing to pay them the 3% wage increase given to the police in 2007, plus $500. The parties could not resolve the grievance, and it proceeded to binding arbitration.
In September, 2008, Arbitrator Ralph H. Colflesh, Jr. (Arbitrator) issued a decision and award sustaining Fire Fighters' grievance. Arbitrator defined the dispositive issue in the matter as: "whether the Schedule A obligation to grant [F]ire [F]ighters annual wage increases on parity with police plus a $500 annual wage increase persists in light of the expiration of the [2002-06 CBA] and [the 2006 Recovery Plan] that limits wages [sic] increases to 3%." R.R. at 11a. Citing this Court's decision in City of Scranton v. E.B. Jermyn Lodge No. 2 of the Fraternal Order of Police, 903 A.2d 129 (Pa. Cmwlth. 2006) (Scranton FOP (2006), Arbitrator determined the 2002-06 CBA continues in its entirety until it is replaced by a successor contract or an Act 111 interest arbitration award. R.R. at 12a. In so doing, Arbitrator reasoned:
I understand the broader holding of [Scranton FOP (2006)] to be that all aspects of an Act 111 labor contract survive until the contract is replaced by either a new negotiated agreement or an interest arbitration award. If that is so, it does not matter whether enforcement of the Agreement would merely restore a previously existing level of benefit that the employer had reduced or force the expansion of a benefit as per the contract's requirements. In effect, I do not think the contraction/expansion difference matters. In this case, the subsisting [2002-06 CBA] requires parity with the police along with a $500 additional wage increase each year. To find that the parity language of Schedule A is no longer effective would be to choose a portion of the Agreement for elimination while purporting to honor the remainder of the contract. That [is] both illogical and a violation of arbitral jurisdiction conferred by Article 16 of the [2002-06 CBA], under which an arbitrator may not "alter or otherwise amend" any provision of the Agreement. In plain words, either the entire contract subsists or none of it does. The current case law of the Commonwealth is clear that all of an expired contract within an Act 111 context remains effective after expiration. [Scranton FOP (2006)].
I also reject the City's argument that the [2006 Recovery Plan] would bar any increase over 3%. The [2002-06 CBA] predates the [2006 Recovery Plan], and the law governing application of such plans makes clear that a Recovery Plan cannot supersede the terms of a labor contract that precedes it.
Finally, I reject the City's argument that the language of Schedule A defeats [Fire Fighters'] claims for parity and $500 increases after 2006. If all of the Agreement survives its nominal date of expiration, then the Schedule A language . also survives. Specifically, since the Agreement is still in effect until replaced with a successor contract or Act 111 Award, it ineluctably follows that each year after December 31, 2006 is a "successive year of [the] Agreement." Moreover, I do not find that the parenthetical enumeration of the years of the Agreement in Schedule A language to be dispositive. . Such identifiers are common in the public sector where contracts tend to be merged into each other term after term and anachronistic language frequently persists for years and years. If the parties intended to end the effect of Schedule A precisely at midnight December 31, 2006, they would have done so far more expressly.
Id. at 12a-13a (citation omitted).
Accordingly, Arbitrator sustained the grievance and directed the City to pay Fire Fighters the 3% wage increase plus the additional $500 wage increase. Id. at 13a. In order to prevent a windfall, Arbitrator's award further provided that any negotiated agreement or interest arbitration award for the year 2007 shall supersede the grievance award. Id. Thus, any amounts paid pursuant to the grievance award shall be deducted from any negotiated or awarded increase equal to or greater than the 3% and $500 increase. Id. Further, in the event the negotiated or awarded increase is less than the 3% and $500 increase, the difference shall be recouped in equal installments during the first 12 months following the effective date of the negotiated contract or award. Id.
E. Petition to Set Aside Arbitration Award
Thereafter, the City petitioned the common pleas court to set aside the award. It alleged the 2002-06 CBA expired at the end of 2006 and that case law holds economic provisions in expired contracts do not carry over in the absence of a new agreement. The City further alleged Arbitrator's award is contrary to law and the 2006 Recovery Plan. The City also alleged Arbitrator exceeded his power in making the award.
F. Common Pleas Court Opinion and Order
In June, 2009, the common pleas court entered an order setting aside the award. The court's order further directed that Fire Fighters "shall remain at their current salaries until a new collective bargaining agreement . is in place." Common Pleas Ct. Order, 06/30/09.
In an opinion in support of its order, the court acknowledged its narrow certiorari review of an Act 111 arbitration award is limited. Pa. State Police v. Pa. State Troopers Ass'n (Betancourt), 540 Pa. 66, 656 A.2d 83 (1995). The court recognized the City is a financially distressed municipality under Act 47, which precludes arbitrators from issuing awards that violate the provisions of the City's recovery plan. City of Farrell v. Fraternal Order of Police, Lodge No. 34, 538 Pa. 75, 645 A.2d 1294 (1994). The City's 2006 Recovery Plan limited annual salary growth to 3%.*fn4 Therefore, the ...