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Castille, C.J., Saylor, Eakin, Baer, Todd, Mccaffery, Greenspan v. Pennsylvania State Corrections Officers Association

January 20, 2011


Appeal from the Order and published opinion of the Commonwealth Court dated 09/10/2007 at No. 445 CD 2006 vacating Paragraph 18 of the Act 195 Interest Arbitration Award of the Panel of Arbitrators dated 01/31/2006

The opinion of the court was delivered by: Mr. Justice Saylor

ARGUED: December 1, 2009


We granted review to consider whether a provision of an interest arbitration award was properly vacated by the Commonwealth Court as being in excess of the arbitration panel's authority. The disputed provision pertains to a requirement that the Commonwealth furnish legal representation to certain public safety employees in any legal proceeding arising from employment-related conduct, including criminal or otherwise intentional or malicious conduct, and that it indemnify such employees against civil judgments resulting from such conduct.

I. Background

The Commonwealth of Pennsylvania and the Pennsylvania Corrections Officers Association (the "Union"),*fn1 were subject to a collective bargaining agreement ("CBA") that expired on June 30, 2004. Article 33, Section 21 of the CBA provided employees with legal representation and indemnification for civil judgments in various types of proceedings brought against them. It provided that the Commonwealth, as employer, must supply liability coverage and a legal defense in civil suits as detailed in, inter alia, Chapter 39 of Title 4 of the Pennsylvania Administrative Code. See 4 Pa. Code §§39.1-39.6 (pertaining to the defense of actions against Commonwealth employees). Pursuant to Chapter 39, the Commonwealth provides employees with counsel in civil cases where the conduct is alleged to have been unintentional. If the conduct is alleged to have been malicious or intentional, the General Counsel retains the discretion to determine whether the employee is to be provided with a defense and indemnification. Under the CBA, the Commonwealth was also authorized to provide an employee with counsel in criminal cases, and if it did not do so, it would be obligated to advance reasonable attorney fees. In the event of a conviction, the fees would be recouped from the employee's retirement account. With an acquittal, the Commonwealth was responsible for all reasonable attorney fees. The amount of reimbursement was subject to adjustment, however, if the employee's defense was successful on some basis other than acquittal.

When the Union and the Commonwealth began negotiating for a new CBA, they could not agree on the new provisions of Article 33, Section 21. They ultimately submitted their dispute to binding arbitration pursuant to Section 805 of the Public Employee Relations Act ("PERA").*fn2 PERA (also known as Act 195) requires public employers and their employees to bargain in good faith over "wages, hours, and other terms and conditions of employment[.]" 43 P.S. §1101.701.*fn3 Section 805 of the act states that where representatives of units of guards at prisons or mental hospitals or units of employes directly involved with and necessary to the functioning of the courts of this Commonwealth have reached an impasse in collective bargaining[,] and mediation as required in [43 P.S. §1101.801] has not resolved the dispute, the impasse shall be submitted to a panel of arbitrators whose decision shall be final and binding upon both parties with the proviso that the decisions of the arbitrators which would require legislative enactment to be effective shall be considered advisory only.

43 P.S. §1101.805.

During the arbitration hearings, the Union expressed dissatisfaction with the way the Commonwealth exercised its discretion. It submitted evidence regarding the lack of reimbursement where certain criminal matters had been dismissed, and referenced two instances where an employee was not reimbursed for civil actions that were settled or dismissed. The Union thus proposed changes to Article 33, Section 21, to require the Commonwealth to provide legal representation for all civil and criminal cases, regardless of whether the underlying conduct was alleged to have been malicious or negligent. The Commonwealth opposed the Union's proposal and offered testimony from the DOC's Chief Counsel that it contradicted the regulations promulgated by the Executive Board of the Commonwealth (the "Executive Board"), which prohibit Commonwealth attorneys from representing employees in criminal matters. See 4 Pa. Code §39.1.*fn4 The Chief Counsel explained that this prohibition seeks to avoid a conflict of interest and that it was rare that a Commonwealth employee was not reimbursed for legal expenses. Indeed, according to the Chief Counsel, employees are almost always defended and indemnified in civil cases and the two incidents to the contrary cited by the Union were unique in this regard because of their particular circumstances.

The arbitration panel issued an award in January 2006 (the "Award"), one paragraph of which adopted verbatim the Union's proposed amendatory language for Article 33, Section 21. In particular, Paragraph 18 of the Award provides:

(a) If a bargaining unit member is charged with a criminal action arising from the performance of his/her duties, he/she shall select local counsel in consultation with the Commonwealth. The Commonwealth shall pay for the fees of such counsel to the extent the fees are in line with prevailing rates in the area.

(b) If a bargaining unit member is a defendant in a civil suit arising from the performance of his/her duties, the Commonwealth shall immediately furnish counsel and defend the member.

(c) The Commonwealth shall be responsible for judgments rendered against the member in job-related suits where the bargaining unit member has acted within the scope and responsibility of his/her office.

Award at 10,

¶18. The arbitrator appointed by the Commonwealth dissented from Paragraph 18 on the theory that it was contrary to law and not within the panel's jurisdiction.

The Commonwealth petitioned the Commonwealth Court to vacate Paragraph 18, arguing that it requires the Commonwealth to take actions that are expressly prohibited by the first three sections of Title 4, Chapter 39 of the Administrative Code. See 4 Pa. Code §§39.1-39.3. The Union countered that the portions of the Code cited by the Commonwealth are statements of policy, and not binding regulations with the force and effect of law.*fn5

The Commonwealth Court vacated Paragraph 18 of the Award. See DOC v. Pa. State Corr. Officers Ass'n, 932 A.2d 359 (Pa. Cmwlth. 2007) (en banc). The court first explained that judicial scrutiny of Section 805 arbitration awards has been limited to narrow certiorari review, under which a court only considers questions relating to the arbitrator's jurisdiction, the regularity of the proceedings, an excess of the arbitrators' powers, and constitutional deprivations. See id. at 364 n.7 (citing Pa. State Police v. Pa. State Troopers' Ass'n (Betancourt), 540 Pa. 66, 71, 656 A.2d 83, 85 (1995)). Recognizing that the present dispute only concerns the third question -- whether the arbitration panel exceeded its powers -- the Commonwealth Court observed that an award will be vacated on such basis when it requires the public employer to perform an act that is not within its authority, see Appeal of Upper Providence Police, 514 Pa. 501, 513, 526 A.2d 315, 321 (1987), or that it is legally precluded from performing, i.e., that it could not do voluntarily, see Betancourt, 540 Pa. at 79, 656 A.2d at 90. The court reasoned that the threshold question for purposes of such analysis "is the precise nature of Chapter 39 of Title 4 of the Pennsylvania Code," that is, whether it is a regulation with the force of law, or merely a statement of policy, as the Union claimed. See Pa. State Corr. Officers Ass'n, 932 A.2d at 365.

The court then discussed the distinction between a regulation and a statement of policy under the Commonwealth Documents Law.*fn6 It noted that a provision in the Administrative Code may constitute a statement of policy issued pursuant to the agency's interpretive rule-making power, in which case it would not bind a reviewing court. See Borough of Pottstown v. Pa. Mun. Ret. Bd., 551 Pa. 605, 609-10, 712 A.2d 741, 743 (1998). However, a regulation promulgated pursuant to the agency's legislative rule-making power would be as binding upon a reviewing court as a statute. The court stated that a regulation is legislative in nature if it is: (a) adopted within the agency's granted power; (b) issued pursuant to proper procedure; and (c) reasonable. See Tire Jockey Serv., Inc. v. DEP, 591 Pa. 73, 108, 915 A.2d 1165, 1186 (2007).

Analyzing these three prongs, the court first held that, in promulgating Chapter 39, the Executive Board acted under its legislatively granted power reflected in Section 709(f) of the Administrative Code of 1929,*fn7 see 71 P.S. §249(f) (authorizing the Executive Board to make regulations providing for travel, lodging, and other expenses for which executive branch employees may be reimbursed), cited in note 4, supra, and followed all of the correct procedures for adopting a regulation, as opposed to a statement of policy. The Commonwealth Court also indicated that the Executive Board followed the same procedures for every amendment to Chapter 39. The court then proceeded to conclude that Chapter 39 is reasonable.

Having determined that Chapter 39 contains regulations with the force of law, the Commonwealth Court considered whether Paragraph 18 of the Award forced the Commonwealth to violate those regulations. First, the court explained, the regulations generally preclude the Commonwealth from providing an attorney for criminal matters, see 4 Pa. Code §39.1(a), but the Award requires the employer to consult with the employee in the selection of an attorney and pay that attorney's fees. This requirement, the court reasoned, violates Section 39.1(a).*fn8 In addition, the court noted that the General Counsel has discretion vested by Section 39.1(b) to allow or disallow reimbursement of attorney fees where it is determined that the prosecution had some basis in law or fact, but the employee's defense is ultimately successful. See 4 Pa. Code §39.1(b). Under Paragraph 18, however, the Commonwealth must pay the employee's legal fees, even where the General Counsel determines that the prosecution is meritorious. See Pa. State Corr. Officers Ass'n, 932 A.2d at 368-69 & n.18.

As to civil actions, the Commonwealth Court explained that Paragraph 18 requires the employer to provide counsel and indemnify the employee in all civil suits involving job-related conduct, even for intentional or malicious behavior by the employee. Chapter 39, however, only requires legal representation for negligent or other unintentional misconduct occurring in the course and scope of employment. See 4 Pa. Code §39.2.*fn9 With regard to intentional conduct, Chapter 39 requires defense and indemnification only where the General Counsel concludes that the conduct was within the scope of employment and involved a good faith exercise of the employee's authority.*fn10 See 4 Pa. Code §39.3(a). The Commonwealth Court found that Paragraph 18 disregards the mandate that the General Counsel must assess the nature of the employee's conduct before deciding whether to defend the employee or provide indemnification. As such, the court deemed Paragraph 18 to constitute an excess of the arbitration panel's authority, as it divested the General Counsel of the decision-making power she would otherwise be required to undertake in accordance with Chapter 39. See Pa. State Corr. Officers Ass'n, 932 A.2d at 369. As for the Union's contention that the General Counsel could abuse her discretion, the court observed that the employee choosing at its retains the right to lodge an administrative appeal that is reviewable by the Commonwealth Court or by this Court upon allowance.*fn11

Judge Pellegrini authored a dissent, which Judges Smith-Ribner and Friedman joined. The dissent first focused on Section 805 and its directive that an arbitration award is final and binding unless it requires a legislative enactment to be effective. Explaining that no such enactment is necessary under the present award, the dissent would have found Paragraph 18 final and binding. The dissent also opined that the provisions of the Administrative Code vesting authority in the Executive Board had been superseded by PERA, which gives public employees the right to bargain. Furthermore, it observed that the award is only at odds with a regulation, which is not a legislative enactment. In the dissent's view, the majority's reasoning would effectively eliminate public employee collective bargaining because of the numerous statutes vesting exclusive ...

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