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City of Scranton v. Fire Fighters Local Union No. 60

October 29, 2010

CITY OF SCRANTON
v.
FIRE FIGHTERS LOCAL UNION NO. 60, THE PENNSYLVANIA DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT AND THE PENNSYLVANIA ECONOMY LEAGUE CENTRAL PA, LLC, AS THE ACT 47 COORDINATOR FOR THE CITY OF SCRANTON
APPEAL OF: THE CITY OF SCRANTON, PENNSYLVANIA AND THE PENNSYLVANIA DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT, AND THE PENNSYLVANIA ECONOMY LEAGUE CENTRAL PA., LLC, AS THE ACT 47 COORDINATOR FOR THE CITY OF SCRANTON
CITY OF SCRANTON
v.
FIRE FIGHTERS LOCAL UNION NO. 60
APPEAL OF: FIRE FIGHTERS LOCAL UNION NO. 60 OF THE INTERNATIONAL ASSOCIATION OF FIRE FIGHTERS, AFL-CIO



The opinion of the court was delivered by: Judge Simpson

Argued: June 21, 2010

BEFORE: HONORABLE BERNARD L. McGINLEY, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge.

OPINION

I. Introduction

In these consolidated appeals originating in a 2008 interest arbitration award (2008 Award) involving the City of Scranton (City) and its fire fighters, we 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 The City, its allied intervenors,*fn3 and the Fire Fighters Local Union No. 60 of the International Association of Fire Fighters (Fire Fighters), appeal from an order of the Court of Common Pleas of Lackawanna County (common pleas court)*fn4 that denied the City's petition to vacate the award, but modified the wage, health insurance benefits and pension provisions of the award. In light of our en banc decisions in City of Scranton v. Fire Fighters Local Union No. 60, of the International Association of Fire Fighters, AFL-CIO, 964 A.2d 464 (Pa. Cmwlth. 2009), appeal granted, ___ Pa. ___, 995 A.2d 1180 (2010) (Scranton Fire Fighters (2009)) and City of Scranton v. E.B. Jermyn Lodge No. 2 of the Fraternal Order of Police, 965 A.2d 359 (Pa. Cmwlth. 2009), appeal granted, ___ Pa. ___, 995 A.2d 1181 (2010) (Scranton FOP (2009)), we affirm the common pleas court's order as modified.

II. Background

A. Distressed Status

The background in this matter has not changed significantly since our decision in Scranton Fire Fighters (2009). In January, 1992, DCED determined the City to be a "financially distressed municipality" under Act 47 and appointed the Pennsylvania Economy League, LLC, as the City's Act 47 Coordinator (Coordinator), to develop a recovery plan.*fn5 The City is still operating under its third recovery plan, which it adopted in May 2002 (2002 Recovery Plan). The City remains a financially distressed municipality; DCED has not terminated the City's financially distressed status. See Section 253 of Act 47, 53 P.S. §11701.253 (termination of status); Borough of Wilkinsburg v. Dep't of Cmty. & Econ. Dev., 728 A.2d 389 (Pa. Cmwlth. 1999) (it is within sole discretion of the Secretary of DCED to determine whether to terminate a municipality's distressed status).

B. 2002 Recovery Plan

Chapter II-B of the 2002 Recovery Plan, titled "LABOR RELATIONS, COST CONTAINMENT, AND RELATED PROVISIONS," sets forth specific requirements for the City's employees. It states in part:

The following are the labor relations, cost containment, and related provisions of the [2002 Recovery Plan]. They become effective as of the date of the plan's adoption. They cover the remainder of 2002 as well as the period 2003-2005 and beyond; provided that the terms and provisions of any existing collective bargaining agreement shall be followed for the remainder of its current term.

These cost containment provisions are both reasonable and necessary to the recovery of the City. It is the intention of the City to negotiate these cost containment provisions with the bargaining unit representatives in good faith.

However, to the extent that the City is unable to reach agreement with any of its Unions, it is the express intention of the City that implementation of these cost containment provisions is mandatory. All cost containment provisions must be addressed. The only exception to the mandatory intent and nature of these provisions will be by amendment to said provisions, based upon approval from the Coordinator, in conjunction with [DCED]. Any such change must be in conformance with the financial parameters of the Recovery Plan.

Reproduced Record (R.R.) at 480a (emphasis added). Chapter II-B contains mandatory provisions applying to all City employees, departments, bureaus and offices, R.R. at 480a-87a, provisions specifically for the fire department, R.R. at 487a-90a, provisions specifically for the police department, R.R. at 490a-95a, and provisions for other employees. Act 47 prohibits clear, specific recommendations of a recovery plan from being violated, expanded or diminished. City of Farrell v. Fraternal Order of Police, Lodge No. 34, 538 Pa. 75, 645 A.2d 1294 (1994).

Chapter II-C of the 2002 Recovery Plan, titled "GENERAL PLAN PROVISIONS," sets forth the Plan's general provisions for 2002-05 "and beyond." R.R. at 501a-16a. Chapter II-C provides in part (with emphasis added):

Employee Benefits/Pensions. The City will continue to follow the requirements of Act 205[*fn6 ] particularly as they relate to budgeting the entire cost of the Minimum Municipal Obligation. The Recovery Plan provides for $800,000 per year to be made as a contribution to the Pension Plans to amortize the cost of the advance payment made by Provident Mutual in the year 2000 to meet the City's unfunded MMO's as of that date. The City shall review on an annual basis in conjunction with the pension actuarial reports the status of this payment and its required MMO payments. Finally, all pension plan amendments shall be made in accordance with cost containment provisions outlined in Chapter II-B.

R.R. at 502a (footnote added).

C. Scranton Fire Fighters (2009)

1. Generally

Pursuant to Act 111, the City and Fire Fighters operate under a collective bargaining agreement (CBA). Their last CBA expired on December 31, 2002. After negotiations for a 2003-2007 CBA reached an impasse, the parties selected an interest arbitration panel to establish the terms and conditions of employment for fire personnel.

On May 30, 2006, following extensive hearings and deliberations, a divided arbitration panel issued an interest award (2006 Award) covering the period from January 1, 2003 through December 31, 2007. Among other provisions, the 2006 Award directed retroactive wage increases and lump sum bonuses in excess of the 2002 Recovery Plan's mandates.

In response, the City immediately filed a petition to vacate or modify with the common pleas court. Fire Fighters answered and raised new matter.*fn7

Ultimately, after argument and deliberations, the common pleas court determined the 2006 Award violated the 2002 Recovery Plan and directed modification of the award. Fire Fighters appealed to this Court.

In Scranton Fire Fighters (2009), we undertook limited review under a narrow certiorari standard. We rejected the argument that Act 47 is an unconstitutional limitation on Act 111 collective bargaining. See Wilkinsburg Police Officers Ass'n by Harder v. Commonwealth, 564 A.2d 1015 (Pa. Cmwlth. 1989), aff'd, 535 Pa. 425, 636 A.2d 134 (1993) (Wilkinsburg I) (restrictions embodied in Act 47 are constitutional; even if Section 252 of Act 47 operates as a bar to prospective bargaining agreements; it would not violate the Pennsylvania Constitution); Wilkinsburg Police Officers Ass'n by Harder v. Commonwealth, 535 Pa. 425, 636 A.2d 134 (1993) (Wilkinsburg II) (plurality decision of Supreme Court affirming Wilkinsburg I; Act 47 did not unconstitutionally delegate municipality's fiscal authority because municipality retains its fiscal authority; Act 47 is not a prohibited special law regulating labor).

Further, we dismissed Fire Fighters' contention that the arbitration panel could compel the City to amend the 2002 Recovery Plan. Here, the City adopted the Coordinator's Recovery Plan. Because Coordinator developed the 2002 Recovery Plan, only Coordinator may initiate amendments to it. Id.

2. Terms of 2006 Award

In Scranton Fire Fighters (2009), we reviewed each component of the 2006 Award to determine whether the mandatory requirements of the 2002 Recovery Plan preclude its implementation, and modified the terms of the award to comply with the Plan.

a. Expiration of Recovery Plan

First, we rejected Fire Fighters' argument that the 2002 Recovery Plan expired by its own terms on December 31, 2005. We noted Chapter II-B of the Plan clearly states its labor relations and cost containment provisions apply "for the remainder of 2002 as well as the period 2003-2005 and beyond." Scranton Fire Fighters (2009), 964 A.2d at 479 (emphasis added). As specified in the 2002 Recovery Plan, "some provisions apply in certain years, while other provisions contain no limit to their duration." Id.

b. Wages

As to wages, we determined the 2006 Award violated Section IIB(3) of the 2002 Recovery Plan ("Personnel Costs")*fn8 because it awarded back wages or retroactive adjustments for 2003, 2004, 2005 and part of 2006. Id. at 480. However, we rejected the City's contention that specific wage limitations in Section II-B(2) ("Wages")*fn9 for the years 2003-2005 remained in effect indefinitely. Id. Accordingly, we modified the common pleas court's orders to vacate the bonuses for 2003, 2004, and 2005, to vacate the 5.5% wage increase effective December 31, 2005, and to make the 3.5% wage increase for 2006 effective May 30, 2006, the date of the 2006 Award. Id. at 480-81. We confirmed the 4.0% wage increase effective January 1, 2007. Id. at 481.

c. Health Care

As to health care costs, we recognized that Section II-B(5) of the Recovery Plan ("Health Insurance Benefits")*fn10 capped annual health care costs at $7,191,812, the City's actual 2001 cost to provide these benefits. Section II-B(5) also provided for the cessation of health care benefits to City employees who retire on or after January 1, 2003. The 2006 Award increased the existing insurance deductibles and benefits. It also extended health care benefits for a period of five years, effective January 1, 2007, to retiring bargaining unit members eligible to receive such benefits under the 1996-2002 CBA.

We rejected the City's assertion that the 2006 Award's increases in health care benefits violated the maximum health care costs clause. Scranton Fire Fighters (2009), 964 A.2d at 482. We noted the City's broad assertion was not supported by the record or clarified by argument. Id. The City simply failed to quantify the claimed excess or explain how it could be ascertained. Id.

However, we rejected Fire Fighters' argument that the Recovery Plan provision addressing cessation of health care benefits for those retiring after January 1, 2003 lapsed. Id. We noted nothing in the plain language of Section IIB(5) limited the duration of the plan's "Health Insurance Benefits" provisions. Accordingly, we prospectively modified*fn11 the common pleas court's orders by substituting the following language: "Effective January 23, 2009, the City will cease to extend health care benefits to employees who retire on or after that date." Id. at 482.

d. Staffing and Management

In Scranton Fire Fighters (2009), we also rejected Fire Fighters' contention that the "Management Positions" provision of the 2002 Recovery Plan specifically applying to the Fire Department, and the "Paid Leave" provision in Sections II-B(4) of the Plan, expired at the end of 2005. We noted the 2006 Award did not allow the City to exclude the Deputy Chief from the bargaining unit contrary to the "Management Positions" provision. The award also violated the "Paid Leave" provision by not requiring that vacation time be used in the year earned or in some circumstances, within the first three months of the following year. We therefore modified the common pleas court's orders to require that the 2006 Award comply with the recovery plan in these matters. Id. at 486.

We further modified the common pleas court's orders to require the 2006 Award to comply with the "Elimination of Minimum Manning" provision in Section II-B(7) of the 2002 Recovery Plan*fn12 and the "Organization and Scheduling" provision specifically applying to the Fire Department, the latter of which states in pertinent part, "the City shall provide for a minimum of three firefighters on each piece of responding fire apparatus." R.R. at 488a. We noted two provisions of the 2006 Award required the assignment of more than three fire fighters to a piece of equipment in violation of the 2002 Recovery Plan. See Scranton Fire Fighters (2009), 964 A.2d at 486-87.

In addition, we agreed with the City that the "Management Rights" provision in Section II-B(1) of the 2002 Recovery Plan contains no express limitation on duration. We noted the 2006 Award did not permit the City to change job duties for each position, change schedules for each employee, and to assign work to any employee, as expressly required by Section II-B(1).*fn13

Accordingly, we added the operative language in the "Management Rights" provision to the 2006 Award.

Moreover, in Scranton Fire Fighters (2009), we rejected Fire Fighters' arguments that inclusion of the "Management Rights" language in the 2006 Award essentially eliminated collective bargaining. See Fraternal Order of Police, Fort Pitt Lodge No. 1 v. Yablonsky, 867 A.2d 658 (Pa. Cmwlth. 2005) (en banc) (legislature gave bargaining units the power to continue to be protected by Act 111, but only to the extent the bargaining does not interfere with the terms of an Act 47 recovery plan; bargaining rights bestowed by legislature may be limited or revoked by it); Wilkinsburg I and II (even if Section 252 of Act 47 operates as a bar to prospective bargaining agreements or arbitration awards, it would not violate the Pennsylvania Constitution). In addition, we noted in Scranton Fire Fighters (2009) that Section 241(3) of Act 47 specifically authorizes recovery plan provisions involving "[p]ossible changes in collective bargaining agreements and permanent and temporary staffing level changes or changes in organization." 53 P.S. §11701.241(3).

e. Other Provisions of Recovery Plan Not Adopted

In Scranton Fire Fighters (2009), we further determined the 2006 Award violated the 2002 Recovery Plan by failing to include the following provisions of the Plan:

* Section II-B (6), titled "Regular Part-time Employees;"

* Section II-B (8), titled "Clothing Allowance;"

* Section II-B (9), titled "Longevity;"

* Section II-B (10), titled "Elimination of Subcontracting Clauses;"

* Section II-B (11), titled "Duplication of Benefits;"

* Section II-B (12), titled "Sick Leave/Doctors Evaluation;"

* Section II-B (13), titled "Family Medical Leave Act;"

* Section II-B (14), titled "Short-term Disability Insurance;"

* Section II-B (15), titled "Workers' Compensation;"

* Section II-B (16), titled "Elimination of Past Practices;"

* Section II-B (17), titled "Grievance Procedures;"

* Section II-B (18), titled "Drug and Alcohol Testing;"

* Section II-B (19), titled "Modified Duty;"

* Section II-B (20), titled "Absence Report;" and

* Section II-B (21), titled "Job Descriptions."

Id. at 487.

We noted the 2002 Recovery Plan specifically states "to the extent that the City is unable to reach agreement with any of its Unions, resulting in interest arbitration or other legal proceedings, it is the express intention of the City that the implementation of these cost containment provisions is mandatory." R.R. at 480a. Therefore, we modified the common pleas court orders to expressly include those provisions into the Award. See Scranton Fire Fighters (2009), 964 A.2d at 488.

D. 2008 Award

1. Generally

In 2007, the City and Fire Fighters reached an impasse in their negotiations regarding the terms and conditions of a new CBA to become effective January 1, 2008. As a result, the parties requested interest arbitration proceedings under Act 111. Fire Fighters selected Thomas W. Jennings, Esquire, as their designated arbitrator. The City selected Kenneth M. Jarin, Esquire, as its designated arbitrator. Arbitrators Jennings and Jarin designated Ralph H. Colflesh, Jr., Esquire, to serve as the panel's impartial chairman.

The arbitration panel held evidentiary hearings in February and April 2008. It closed the record in May 2008.

In November, 2008, prior to this Court's decisions in Scranton Fire Fighters (2009) and Scranton FOP (2009), the divided arbitration panel issued its 2008 Award for a seven-year term, starting on January 1, 2008, and continuing through December 31, 2014. The panel majority, noting the pending appeals of the 2006 Award, recognized that Section 252 of Act 47 may apply to interest arbitration awards, but nevertheless found that the 2008 Award did not violate, expand or diminish the provisions of the 2002 Recovery Plan.

However, the panel majority's decision erroneously states that even if the City believes that the terms of the 2008 Award violate the 2002 Recovery Plan, Act 111 mandates that the City work with Coordinator to amend the Plan to conform to the Award. We rejected this precise argument in Scranton Fire Fighters (2009). See also Int'l Ass'n of FireFighters Local 1400, Chester City FireFighters v. City of Chester, 991 A.2d 1001 (Pa. Cmwlth. 2010) (Chester FireFighters (2010)) (same). The 2008 Award included the following terms.

2. Wages

In its 2008 Award, the arbitration panel majority noted that prior to the City being declared "financially distressed" in 1992, Fire Fighters received wages that were 7% above the average of comparable third class cities and surrounding communities. 2008 Award, Maj. Op., at 6. By 2008, Fire Fighters earned 78% of the average salary earned by other fire fighters in comparable departments. Id. Noting this and other factors, including the City's improving financial condition, the panel majority determined the time was appropriate to return Fire Fighters to the historical parity they traditionally enjoyed. Id. at 7. Accordingly, the 2008 Award then provided for the following wage increases:

* January 1, 2008 -- 8.0% increase across the board;

* January 1, 2009 -- 3.0% increase across the board;

* July 1, 2009 -- 3.0% increase across the board;

* January 1, 2010 -- 3.0% increase across the board;

* July 1, 2010 -- 3.0% increase across the board;

* January 1, 2011 -- 3.0% increase across the board;

* July 1, 2011 -- 3.0% increase across the board;

* January 1, 2012 -- 3.0% increase across the board;

* July 1, 2012 -- 3.0% increase across the board;

* January 1, 2013 -- 3.2% increase across the board;

* July 1, 2013 -- 3.2% increase across the board;

* January 1, 2014 -- 3.2% increase across the board;

* July 7, 2014 -- 3.2% increase across the board.

See 2008 Award, Maj. Op., at 7-8. The panel majority found that, in the absence of any express recommendations in the 2002 Recovery Plan for the above years, the above increases do not violate, expand or diminish the Plan, and take into account the City's ability to pay as evidenced by the record. 2008 Award, Maj. Op., at 8.

The panel majority further stated that if any of the wage increases in the 2006 Award were confirmed:

the net effect will be that the members of this bargaining unit will not have had to endure a six-year wage freeze. Should this happen, the Panel wishes to avoid a "windfall" as a result. Accordingly, should any of the wage increases of the 2003-2007 Award ultimately be reinstated and confirmed the wage increases stated above for this bargaining unit will be reduced on a percentage or, part of a percentage basis, accordingly and the reduction shall be spread evenly over the entire term of this Award.

2008 Award, Maj. Op., at 8-9.

In response, the City filed a petition to vacate the 2008 Award. The City averred the Award diminishes the provisions of 2002 Recovery Plan and directs the City to violate its obligations under Act 47. In particular, the City averred the Award's wage increases violate the 2002 Recovery Plan inasmuch as they are retroactive and exceeded the Plan's salary mandates.

The common pleas court denied the City's petition to vacate. However, the court, in light of the 2002 Recovery Plan and our decision in Scranton Fire Fighters (2009), modified the 2008 Award.

Regarding the Award's wage increases, the common pleas court recognized the wage limitations in the 2002 Recovery Plan applied only in the years 2003, 2004 and 2005. Scranton Fire Fighters (2009). However, the common pleas court determined "the attempt by the arbitration panel to retroactively adjust wages by semi-annual increases does violate the recovery plan." Comm. Pleas Ct. Slip Op., 11/18/09, at 6. Accordingly, the court modified the Award by deleting the mid-year increases in the years 2009-2014.

3. Health Care

Section 3 of the 2008 Award included the following health care provisions:

Health Insurance.

..

A. The City is ordered to fully cooperate with the Health Care Committee by providing all information reasonably necessary to its function and by cooperating with the National Health Care Consultant in the Committee's efforts to contain health care costs.

B. Effective 30 days after the issuance of this Award, the applicable deductibles and/or copayments shall be adjusted as follows:

1. The maximum individual annual deductible under the medical insurance plan shall be increased from $200 to $400 for in-network and out-of-network.

2. The maximum family annual deductible shall be increased from $400 to $800 for in-net work and out-of-network.

3. The per-visit emergency room co-pay shall be increased from $35 to $75.

4. The per-visit doctor co-pay shall be increased from $5 to $10.

5. The co-payment for the prescription plan shall be increased to $6 for generics and $15 for brand name drugs.

C. Article XV, Sections 3(A) and (B) of the collective bargaining agreement shall be amended as follows:

1. Effective January 1, 2008, the City shall be liable for the cost of health insurance (over and above the listed deductibles and co-payments) up to the annual amounts listed below:

 1/1/081/1/111/1/121/1/13 Single [Cov.]$4,430$5,316$6,380$7,656 Parent/Child$8,758$10,509$12,611$15,133 Parent/Children$9,443$11,331$13,598$16,317 Husband/Wife$11,113$13,336$16,003$19,204 Family$11,920$14,304$17,164$20,597

2. As of January 1, 2008, the City shall be responsible for 50% of any increases in the cost of health care for active bargaining unit employees beyond that provided above and the active employees shall be responsible for the balance of any subsequent increases as determined by the healthcare provider.

D. Retiree Health Insurance shall be amended as follows: Effective January 1, 2008, all bargaining unit members who thereafter retire and are eligible to receive retiree health insurance under the 1996-2002 Agreement shall continue to be eligible to receive insurance for a period of 10 years following the bargaining unit member's retirement.

2008 Award, Maj. Op., at 9-11(emphasis added).

In its petition to vacate, the City averred the adjustments in the applicable deductibles and copayments for individuals and families in Sections 3(B) and (C) of the 2008 Award ignore the 2002 Recovery Plan's express limitation on health care costs. The City further alleged that Section 3(D) of the Award, which allows certain personnel to retire with health care benefits for 10 years after retirement, also violates the Plan.

The common pleas court rejected the City's argument that the health care provisions in Paragraphs 3(B) and (C) of the Award violate the maximum annual cap in Section II-B(5) of the 2002 Recovery Plan. The court found the record did not support the City's broad assertion.

Noting our decisions in Scranton Fire Fighters (2009) and Scranton FOP (2009), however, the court determined the retirement health insurance benefits provision in Paragraph 3(D) violates the Plan. The court thus modified Paragraph 3(D) as follows: "Effective February 6, 2009 [the date of this Court's Order in Scranton FOP (2009)], the City will cease to extend health care benefits to employees who retire on or after that date." Comm. Pleas Ct. Order, 11/18/2009.

4. Fire Fighter Safety

The 2008 Award included "Fire Fighter Safety" provisions similar to those included in the 2006 Award.*fn14 In its petition to vacate, the City alleged that the 2002 Recovery Plan provides that any CBA provision between the City and any of its unions concerning minimum manning requirements is eliminated. See Section II-B(7) ("Elimination of Minimum Manning.") The Plan also provides that the City has the right to determine the organizational structure and operation of each of its departments and that any inconsistent provision in a CBA is eliminated. See Section II-B(1) ("Management Rights.")

The City further contended the 2008 Award institutes staffing requirements that are inconsistent with the Plan's elimination of minimum manning requirements and the City management rights prerogatives. The City also alleged the 2008 Award's provisions regarding "unnecessarily" endangering the health and safety of bargaining unit members are vague, impracticable and without basis, and serve only as a means to interfere with the City's management rights prerogatives.

The common pleas court, however, determined the 2008 Award's fire safety provision does not in any way violate the 2002 Recovery Plan or, surprisingly, this Court's decision in Scranton Fire Fighters (2009), which ...


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