Board of Educ. of Watertown City School Dist. (Watertown Educ. Ass'n), In re

Decision Date01 April 1999
Citation93 N.Y.2d 132,688 N.Y.S.2d 463,710 N.E.2d 1064
Parties, 710 N.E.2d 1064, 134 Ed. Law Rep. 984, 1999 N.Y. Slip Op. 2771 In the Matter of the Arbitration between BOARD OF EDUCATION OF WATERTOWN CITY SCHOOL DISTRICT, Respondent, and WATERTOWN EDUCATION ASSOCIATION, Appellant. In the Matter of the Arbitration between Indian River Central School District, Respondent, and Thomas Passino, as President of Indian River Education Association, Appellant.
CourtNew York Court of Appeals Court of Appeals

Terrence F. Nieman, Albany, and James S. Sandner, New York City, for appellants in the first and second above-entitled proceedings.

O'Hara & O'Connell, P.C., Syracuse (Dennis G. O'Hara and James P. Evans, of counsel), for respondent in the first above-entitled proceeding.

Ferrara, Fiorenza, Larrison, Barrett & Reitz, P.C., East Syracuse (Craig M. Atlas and Marc H. Reitz, of counsel), for respondent in the second above-entitled proceeding.

OPINION OF THE COURT

ROSENBLATT, J.:

The questions of law common to the two appeals before us involve public sector arbitration under the Taylor Law. In each appeal the ultimate question is whether the claimed grievance is arbitrable, but the cases raise broader concerns that involve presumptions relating to arbitrability in the public sector, the respective roles of courts and arbitrators, and an examination of this Court's decision in Matter of Acting Supt. of Schools of Liverpool Cent. School Dist. [United Liverpool Faculty Assn.], 42 N.Y.2d 509, 399 N.Y.S.2d 189, 369 N.E.2d 746.

THE WATERTOWN DISPUTE

In this litigation the Watertown City School District and the Watertown Education Association are opponents. The Association is the collective bargaining representative of teachers and other employees in the District. The parties entered into a collective bargaining agreement (CBA) that defined various terms and conditions of employment. It contained provisions relating to health insurance benefits that included the District's choice of insurance carriers and the percentage breakdown of premium costs allocable to the parties.

Shortly before the CBA went into effect, the District, along with other school districts (including Indian River, the district involved in the companion appeal), entered into a Municipal Cooperation Agreement to provide health insurance benefits for employees of participating districts. The insurance was provided through the Jefferson-Lewis Health Plan, an entity managed by a Board of Trustees The CBA contained a broad arbitration clause which provided that "any alleged violation of this Agreement, or any dispute with respect to its meaning or application" was arbitrable. Notwithstanding this language, Supreme Court ruled in favor of the District, granted its application for a stay, and denied the Association's cross-application to compel arbitration, holding that the parties had not agreed to arbitrate the dispute at issue. The Appellate Division affirmed, for reasons stated in the decision at Supreme Court.

comprised of the chief executive officers of the Plan participants, including the Watertown City School District and the Indian River Central School District. Subsequently, owing to financial considerations, the Plan raised the employees' co-payment cap. The Association filed a grievance alleging, in essence, that this change constituted an impermissible, unilateral reduction in employee benefits and a violation of the District's obligations under the CBA. After the District denied the grievance, the Association made a demand for arbitration, which the District then sought to stay, claiming that the dispute was not covered by the CBA. The Association cross-moved to compel arbitration.

THE INDIAN RIVER DISPUTE

This dispute is identical to Watertown. The parties are the School District and the Indian River Education Association (by its President). They entered into a CBA which contained a broad arbitration clause identical to the one in Watertown. The Indian River School District acquired health insurance coverage for its members under the same Municipal Cooperation Agreement as in Watertown. The Indian River CBA also contained a clause setting the percentage breakdown for health insurance premiums allocable to the parties. The case followed a procedural history similar to Watertown. Following the District's denial of the Association's grievance when the Plan raised the employees' co-payment, the Association sought arbitration, the District resisted it, and Supreme Court, in an order issued the same day as in Watertown, ruled with the District. It granted the District's application for a stay, and in language similar to its holding in Watertown, denied the Association's cross-application to compel arbitration. Supreme Court noted that in light of its decision it need not consider whether the Association failed to comply with a condition precedent to arbitration. The Appellate Division affirmed, without opinion, citing Watertown.

We reverse both Appellate Division orders and direct that both cases proceed to arbitration.

The Taylor Law

Based on their status as employee organizations and public employers (Civil Service Law § 201, ), both parties couch their arguments in the context of the Taylor Law (Civil Service Law art. 14).

In 1967 the State Legislature enacted the Taylor Law, 1 which governs labor relations in the public sector. It deals with rights and relationships involved in public employment, such as organizing, collective bargaining, the prohibition of strikes by public employees, and the creation of the Public Employment Relations Board. The Taylor Law contemplates two types of arbitration: compulsory and permissive. The former is found in Civil Service Law § 209 and involves what has been termed "interest arbitration." This deals, in essence, with terms and conditions of employment not previously agreed upon. Normally those disputed issues are settled by negotiation, but the Legislature provided that if an impasse occurs in collective negotiations involving public employees, the compulsory arbitration provisions of Civil Service Law § 209 come into play (see, City of New York v. Patrolmen's Benevolent Assn., 89 N.Y.2d 380, 386-387, 654 N.Y.S.2d 85, 676 N.E.2d 847; Matter of City of Newburgh v. Newman, 69 N.Y.2d 166, 170-171, 513 N.Y.S.2d 79, 505 N.E.2d 590; see generally, Anderson and Krouse, Interest Arbitration: The Alternative to the Strike, 56 Fordham L.Rev. 153 [1987]; Craver, The Judicial Enforcement of Public Sector Interest Arbitration, 21 B.C.L.Rev. 557 [1980] ).

In addition to imposing these obligations, the Taylor Law permits public sector parties to submit CBA grievances to arbitration (Civil Service Law § 204). This species of arbitration--grievance arbitration--is at issue in this case. The question whether a particular grievance is arbitrable under the Taylor Law has occupied the courts of this State in scores of cases over the last three decades (see also, Coleman, Grievance Arbitration in the Public Sector: Status, Issues and Problems, 17 J. Collective Negotiations 89 [1988] ).

The Liverpool Two-Step Format

In 1977 this Court decided Matter of Acting Sup. of Schools of Liverpool Cent. School Dist. [United Liverpool Faculty Assn.], 42 N.Y.2d 509, 399 N.Y.S.2d 189, 369 N.E.2d 746, supra, which established criteria for determining whether and when a particular public sector grievance is subject to arbitration.

The Liverpool protocol entails a two-step inquiry. Initially the Court must determine whether arbitration claims with respect to the particular subject matter are authorized by the terms of the Taylor Law. The second step involves "a determination of whether such authority was in fact exercised and whether the parties did agree by the terms of their particular arbitration clause to refer their differences in this specific area to arbitration" (Liverpool, supra, at 513, 399 N.Y.S.2d 189, 369 N.E.2d 746). Succinctly, the test centers on two distinct inquiries as to the public parties' purported entry into the arbitral forum: may they do so and, if yes, did they do so.

LIVERPOOL'S FIRST STEP

The first ("may-they-do-so") step calls for an examination, by the court, of the subject matter of the dispute. Drawing on earlier decisions that discussed the lawfully permissible scope of arbitrability (see, Matter of Cohoes City School Dist. v. Cohoes Teachers Assn., 40 N.Y.2d 774, 390 N.Y.S.2d 53, 358 N.E.2d 878; Matter of Susquehanna Val. Cent. School Dist. [Susquehanna Val. Teachers' Assn.], 37 N.Y.2d 614, 616-617, 376 N.Y.S.2d 427, 339 N.E.2d 132), the Court in Liverpool pointed out that owing to public policy or to statutory or constitutional restrictions there are certain matters that are off-limits for arbitration. Although this inquiry deals with whether the parties may arbitrate, it typically involves an assertion by the public employer that it may not or should not lawfully submit itself to a particular grievance arbitration. The inquiry is less concerned with the wording of the parties' intent to arbitrate than with the lawfulness of that intent.

Commentators have described this concern as having been born of a number of factors, including a reluctance to deprive the government of what has been its ultimate decision-making prerogatives (see, Abrams, Symposium: Governance of Public Enterprises: The Power Issue in Public Sector Grievance Arbitration, 67 Minn.L.Rev. 261, 271 [1982] ) or to otherwise allow sovereign authority to be delegated away (see generally, Craver, The Judicial Enforcement of Public Sector Grievance Arbitration, 58 Tex.L.Rev. 329, 338 [1980]; Hodges, Symposium on Labor Arbitration Thirty Years After the Steelworkers Trilogy: The Steelworkers Trilogy in the Public Sector, 66 Chi-Kent L.Rev. 631, 640 [1990]; NOTE: Developments in the Law--Public Employment, 97 Harv.L.Rev. 1611, 1718-1726 [1984]; Annotation, Bargainable or Negotiable Issues in State Public Employment Labor Relations, 84 A.L.R.3d 242, 1978 WL...

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