Appeal from the Order of the Commonwealth Court at No. 2314 CD 2007 dated 01/23/09 affirmed as modified the order of Lackawanna County Court of Common Pleas, Civil Division, at No. 06 CV 3131 dated 10/23/07 Appeal from the Order of the Commonwealth Court at No. 213 CD 2008 dated 1/23/09 affirmed as modified the order of the Lackawanna County Court of Common Pleas, Civil Division, at No. 06 CV 3131 dated 1/15/08 Appeal from the Order of the Commonwealth Court at No. 2322 CD 2007 dated 2/6/09 affirmed as modified the order of Lackawanna County Court of Common Pleas, Civil Division, at No. 06 CV 2255 dated 10/23/07 Appeal from the Order of the Commonwealth Court at No. 232 CD 2008 dated 2/6/09 affirmed as modified the order of Lackawanna County Court of Common Pleas, Civil Division, at No. 06 CV 2255 dated 1/15/08
The opinion of the court was delivered by: Mr. Justice Saylor
CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, ORIE MELVIN, JJ.
ARGUED: November 30, 2010
In these consolidated appeals, we address the effect of a municipal employer's financial distress and recovery planning on an interest arbitration award per the Policemen and Firemen Collective Bargaining Act.
For nearly twenty years, the City of Scranton has maintained the status of a distressed municipality under the Municipalities Financial Recovery Act.*fn1 Under Act 47, the City's financial affairs have been administered under various recovery plans with the assistance of -- and oversight by -- the Pennsylvania Economy League of Central PA, LLC, serving as a plan coordinator per an appointment by the Commonwealth's Department of Community Affairs (now the Department of Community and Economic Development ("DCED")). See 53 P.S. Â§Â§11701.221 (providing for the designation of Act 47 plan coordinators), 11701.241 (specifying requirements for an Act 47 recovery plan).
As concerns the initial (1993) recovery plan, it appears there was a fair amount of cooperation between the City and the labor organizations representing its firefighters and police officers -- Appellants Local Union No. 60 of the International Association of Fire Fighters, AFL-CIO (the "IAFF"), and E.B. Jermyn Lodge No. 2 of the Fraternal Order of Police (the "FOP" and, collectively with the IAFF, the "Unions").*fn2 However,over the years, as recovery efforts faltered, and with changes in City administration, the relationship between the City and the Unions deteriorated.
The City's second amended recovery plan -- implemented in 2002 -- interposed substantial cost containment measures addressing the City's deficit and debt, including various labor relations provisions applicable to employees, encompassing police officers and firefighters. Furthermore, this recovery plan reflects a manifest intention, on the City's part, for full enforcement of such terms and conditions. See Revised and Updated Act 47 Recovery Plan for the City of Scranton, Ch. II-B (May 16, 2002) (the "Recovery Plan" or the "Plan") ("[T]o 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." (emphasis added)). Notably, however, the Plan did allocate some funding toward upward adjustments in personnel-related costs, albeit there was an associated prohibition against retroactive changes.*fn3
The most recent collective bargaining agreements between the City and the Unions expired at the close of 2002. Negotiations as to future terms and conditions of employment for members of the Unions resulted in impasses. Accordingly, pursuant to the Policemen and Firemen Collective Bargaining Act,*fn4 panels of interest arbitrators were selected to establish appropriate terms and conditions. See 43 P.S. Â§217.4(b) ("The board of arbitration shall be composed of three persons, one appointed by the public employer, one appointed by the body of policemen or firemen involved, and a third member to be agreed upon by the public employer and such policemen or firemen."). Both Unions appointed Thomas W. Jennings, Esquire; the City selected Kenneth Jarin for the IAFF case, and Timothy P. O'Reilly, Esquire, for the FOP case; and the neutral arbitrators were Ralph H. Colflesh, Jr. and Alan A. Symonette, Esquire, respectively.
Throughout the arbitrations, the City maintained that the arbitrators lacked legal authority to award relief impinging upon the Recovery Plan. In this regard, the municipality relied on Section 252 of Act 47, which provides:
A collective bargaining agreement or arbitration settlement executed after the adoption of a plan shall not in any manner violate, expand or diminish its provisions. 53 P.S. Â§11701.252 (emphasis added). At the center of their dispute, the parties differed as to whether an Act 111 arbitration award is an "arbitration settlement" for purposes of Section 252.
Hearings before the arbitrators continued into 2004, and divided awards were issued in the spring of 2006. These pertained to the five-year period covering January 2003 through December 2007.
In both awards, the panel majorities recognized the City's financial distress and the remedial measures implemented by the Recovery Plan. The majorities concluded, nonetheless, that compensation of City public-safety employees was significantly lower than the wages and benefits afforded to others throughout the state. The panel majorities awarded: lump sum bonuses to police and fire personnel of $1,000 for 2003, $1,000 (firefighters) and $1,220 (police) for 2004, and $1,250 (firefighters) and $1,500 (police) for 2005; salary increases of five and one-half percent as of the last day of 2005, three and one-half percent for 2006, and four percent for 2007; and adjustments of health insurance deductibles. Further, the awards provided health benefits for police and firefighter employees retiring after January 1, 2007, for five years. In the IAFF case, the majority opined that the changes would not violate the City's maximum health care costs permitted in Section II-B of the 2002 Recovery Plan.
Separately, the IAFF panel majority expressed substantial concern over the safety of firefighters, in light of the impending expiration of a long-standing floor of 150 such employees. See In re Fire Fighters Local Union No. 60 IAFF & City of Scranton, No. 14L 360 01805 02, slip op. at 3, 7 (Act 111 Award May 30, 2006). Accordingly, the majority abolished the 150-person department limit in the previous CBA and replaced it with various manning requirements.*fn5 The FOP majority allowed ten hour shifts, modified manning schedules, and addressed assignment of detectives and drug and alcohol testing.
In both matters, the City-appointed arbitrators dissented, complaining that the awards were inconsistent, in various respects, with the Recovery Plan and, therefore,were illegal. For example, the pointed dissent in the IAFF case included the following remonstration:
Aribtrators Jennings and Colflesh, despite repeated references to the Plan at the hearings in this matter and during executive sessions, have blatantly disregarded the Recovery Plan and the importance of that Plan to the entire City of Scranton in order to lift the interests of a relative few City employees over those of the City as a whole.
Fire Fighters & City of Scranton, No. 14L 360 01805 02, slip op. at 2 (Jarin, K., dissenting).
In response, the Union-appointed arbitrator set out his opposite perspective by way of a concurring opinion. He explained that Act 47 was intended to provide a distressed municipality with an opportunity to recover, not "to be a permanent bludgeon to be used by municipalities to deny their employees a fair living." Id. at 1 (Jennings, T., concurring). The concurring opinion stressed the Unions' cooperative efforts in furtherance of recovery. See id. at 2 (indicating that Union members "willingly slashed their wages, their fringe benefits, their working conditions and even their very safety in an effort to help the City 'recover' its economic health"). Nevertheless, in light of the ensuing years throughout which the City maintained its distressed status, the author couched the recovery process as amounting to "little more than a cruel hoax." Id. He continued:
As the evidence before this Panel vividly demonstrated, the explicitly promised "help" from both the Pennsylvania Economy League and of the Commonwealth that was to be freely given in exchange for the unions' sacrifices and cooperation was totally illusory. Scranton quickly became the biggest client of the Pennsylvania Economy League. PEL was billing hundreds of thousands of dollars in fees for advice that no one was following and that was producing absolutely no discernable progress. . . .
The State was little better. With the exception of one transparently-political effort to compel the City's compliance with the Recovery Plan, the State wrote lots of memos, but did nothing to substantively achieve the goals of Act 47.
The concurrence recognized that, in recent years, the City achieved a financial surplus, but the author chided the administration for continuing to "l[ay] down the Recovery plan and insist that the Panel mindlessly follow its precepts." Id. at 6. The concurring author was particularly critical of the City's management of manning levels. For example, he indicated:
Stated bluntly, while the City had a million dollars to spend on legal fees to fight its employees' efforts to make a decent, albeit modest, living, it has never spent a single penny to ascertain what level of fire fighting manpower is necessary to protect the safety of the fire fighters. Not once has anyone within [City] administration, within PEL or within the Commonwealth paused for a single moment and asked if the reduction in staffing that its budgets demanded would cost a fire fighter his life.
The City responded to the awards with petitions to vacate or modify, supported by both the Act 47 coordinator and DCED as intervenors. On its review, the common pleas court acknowledged the limited scope of judicial review of an Act 111 arbitration award, in the nature of narrow certiorari. See City of Scranton v. E.B. Jermyn Lodge No. 2 FOP, Nos. 06 CV 2255 & 3131, slip op. at 7-8 (C.P. Lackawanna, Jan. 15, 2008) [hereinafter "Scranton v. FOP"]. See generally City of Phila. v. IAFF, Local 22, 606 Pa. 447, 460-65, 999 A.2d 555, 563-65 (2010) (discussing narrow certiorari review). However, the court found that it was required to vacate the arbitration awards as in excess of the arbitrators' powers, since such determinations: did not conform to the City's Act 47 plan; would result in increased financial and operational burdens on the already distressed municipality; and, thus, would impede the effectiveness of the Plan on the City's recovery.*fn6
In this regard, the court referenced FOP ex rel. Havens v. Yablonsky, 867 A.2d 658 (Pa. Cmwlth. 2005) (en banc), for the proposition that the General Assembly implemented Section 252 of Act 47 to afford municipalities the ability to limit the bargaining power of police and firefighter unions. See id. at 663. Further, it regarded Wilkinsburg as confirming that Act 47 is a constitutionally permissible limitation on labor-relations adjustments, such as Act 111 interest arbitration awards. See Scranton v. FOP, Nos. 06 CV 2255 & 3131, slip op. at 8-9 (citing Wilkinsburg, 535 Pa. at 435, 636 A.2d at 139 ("[E]ven if section 252 of Act 47 operates as a bar to prospective bargaining agreements or arbitration awards, . . . it would not violate Article III, Section 31 of the Pennsylvania Constitution[,]" relating to binding arbitration of collective bargaining disputes)). Finally, the court alluded to City of Farrell v. FOP, Lodge No. 34, 538 Pa. 75, 645 A.2d 1294 (1994), as additional support. See id. at 83, 645 A.2d at 1298-99 (indicating that terms of an Act 111 award in conflict with an Act 47 recovery plan "would potentially invalidate [the] arbitration award"). Succinctly, the common pleas court concluded, "Act 111 bargaining rights must yield to a Recovery Plan." Scranton v. FOP, Nos. 06 CV 2255 & 3131, slip op. at 10.
On further appeal, the Commonwealth Court, en banc, also deemed Section 252 to be controlling, reasoning as follows:
[Section 252] acts to prohibit a distressed municipal employer from voluntarily making concessions during collective bargaining which violate or diminish a recovery plan under Act 47. This express prohibition has an effect on interest arbitration awards, whether or not the term "award" is present in the text. This is because of the long-standing rule that an arbitration award may only require a public employer to do that which it could do voluntarily. Washington Arbitration Case, 436 Pa. 168, 259 A.2d 437 (1969). When an arbitration award ...