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Borough of Ellwood City v. Ellwood City Police Dep't Wage Policy Committee

July 1, 2010


The opinion of the court was delivered by: Judge Brobson

Argued: April 21, 2010



Appellant Ellwood City Police Department Wage and Policy Committee (Union) appeals from an order of the Court of Common Pleas of Lawrence County (trial court), vacating an interest arbitration award that required the Borough of Ellwood City (Borough) to create a deferred retirement compensation (or option) plan-or DROP*fn1 -as part of its police officers' pension plan. The trial court found that the arbitrators exceeded their authority by requiring the Borough to create the DROP, which the trial court concluded would be an illegal act. For the reasons that follow, we reverse the trial court.

The Union is the certified collective bargaining representative for Borough's police force. The Union and the Borough entered into a collective bargaining agreement (CBA) for the period from January 1, 2003 through December 31, 2005. Article IX of the CBA, entitled "D.R.O.P. Program Account," provides:

A. The Borough will meet with representatives of the [Union] and develop a [DROP]. The DROP plan will be incorporated in its entirety into this contract as set forth in full. The Borough shall not be obligated to agree to any plan, which does require the Borough to make any additional payments to the Police Pension Plan.

B. Within 180 days after the execution of this agreement, the parties shall negotiate the precise provisions of the DROP Program conforming to the requirements of Section 1. In the event the parties are unable to agree to the provisions of the plan, either party may invoke the procedure of Act 111 to resolve the issues. The attached "Appendix A", referred to as the DROP Account, shall be used as a guide. Upon negotiation of the DROP Program, the Borough shall amend all Police Pension related ordinances to comply with the [CBA].

C. In the event it is determined that the DROP Program is not permitted under the laws of Pennsylvania, the Borough then agrees to negotiate a Deferred Compensation Program for officers who would have been eligible for DROP. (Reproduced Record (R.R.) 8a-9a (emphasis added.)

Between March and August 2005, the Borough and the Union, through meetings and correspondence, attempted to reach agreement on a DROP. In the midst of the discussions, a member of the Union provided formal notice to the Borough of his intent to enter the yet-to-be created DROP as of June 2005. In response to an August 8, 2005 letter from the Union, demanding that the Borough implement a DROP pursuant to the CBA, the Borough informed the Union in writing of its solicitor's conclusion that the laws of Pennsylvania did not permit the Borough to create and implement a DROP.

The Union filed a grievance on August 15, 2005, asserting that the Borough had violated Article IX, subsection A of the CBA by refusing to proceed to create and implement a DROP. William J. Miller, Jr. (Miller), serving as arbitrator, issued an award on August 10, 2006, sustaining the Union's grievance and concluding that the Borough had violated the CBA by refusing to continue to bargain with the Union regarding the DROP or by failing to submit the dispute for interest arbitration under Act 111.*fn2 The Borough filed a Petition to Vacate or Modify Arbitration Award with the trial court. In a July 30, 2007 Order, the trial court remanded the matter to a Board of Interest Arbitrators (Board), with Miller serving as chair, for the determination of whether a DROP should be added to the police officers' pension plan.

On May 22, 2008, the Board issued an award (Interest Award), directing the Borough to modify the police pension plan to provide for a DROP. The Board included in its award a definition of "DROP" and sixteen separate provisions that the Borough should include in its ordinance adopting a DROP. (R.R. 232a-235a.)

On June 3, 2008, the Borough filed a petition with the trial court, seeking to vacate or modify the Interest Award. By its April 16, 2009 Order, the trial court vacated the Interest Award. In a supporting Opinion, the trial court reasoned: "The arbitrators exceeded their authority in requiring [the Borough] to enact a DROP because the benefit is beyond those permitted by Act 600. Act 600 states that an officer's pension shall be calculated on the last thirty-six months of employment. This is not possible with a DROP participant."*fn3 (R.R. 370a.)

The Union filed a timely appeal to this Court. On appeal, the Union and the Borough directly address the trial court's stated reason for finding that the DROP violated Act 600-i.e., that the provisions of the DROP would require the Borough, in violation of Section 5(c) of Act 600,*fn4 to ignore the employment period following official retirement (the DROP participation period) in calculating pension benefits. They also, however, brief other alleged inconsistencies between the DROP and the governing statutory scheme. Specifically, the Borough raises the following additional reasons we should affirm the trial court's decision: (1) a DROP is per se illegal because, under Section 5(b) of Act 600,*fn5 a police officer cannot be both retired, and thus receive pension benefits, and employed; (2) the DROP does not require participants to contribute to the pension plan, and thus, the DROP is in violation of Sections 1(a) and 6(a) of Act 600.*fn6

In an appeal from an interest arbitration award under Act 111, this Court exercises a narrow certiorari scope of review, which limits our analysis to the following areas: (1) the jurisdiction of the arbitrators, (2) the regularity of the proceedings, (3) the limits of the arbitrators' authority, and (4) the deprivation of constitutional rights. Upper Merion Twp. v. Upper Merion Twp. Police Officers, 915 A.2d 174, 178 (Pa. Cmwlth. 2006), allocator den., 593 Pa. 736, 929 A.2d 647 (2007). In this case, the sole issue, as noted above, concerns the question of whether the Board exceeded its authority by requiring the Borough to perform illegal acts.*fn7 Numerous decisions of this Court have held that arbitration awards may require a municipality to do only those things that they could do voluntarily, and awards may not compel a municipality to perform an act that violates the law. See, ...

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