Millcreek Tp. Police Ass'n v. Millcreek Tp.

• Decision Date: 21 November 2008
• Docket Number: No. 433 C.D. 2008.,433 C.D. 2008.
• Parties: MILLCREEK TOWNSHIP POLICE ASSOCIATION, Appellant v. MILLCREEK TOWNSHIP.
• Court: Pennsylvania Commonwealth Court

960 A.2d 904

MILLCREEK TOWNSHIP POLICE ASSOCIATION, Appellant v. MILLCREEK TOWNSHIP.

No. 433 C.D. 2008.

Commonwealth Court of Pennsylvania.

Argued October 14, 2008.

Decided November 21, 2008.

Eric C. Stoltenberg, Pittsburgh, for appellant.

Richard W. Perhacs, Erie, for appellee.

BEFORE: LEADBETTER, President Judge, and LEAVITT, Judge, and BUTLER, Judge.

OPINION BY Judge LEAVITT.

Millcreek Township Police Association (Association) appeals an order of the Court of Common Pleas of Erie County denying the Association's petition to vacate an arbitration award issued pursuant to the act commonly known as Act 111.¹ In this case we consider whether the arbitrator exceeded his jurisdiction by considering issues outside the scope of the grievances filed by two police officers, and whether the arbitration award unlawfully reduced the officers' retirement benefits. We affirm.

The Association and Millcreek Township have been parties to a series of collective bargaining agreements (CBA) governing the terms and conditions of employment of the Township's police officers. The first CBA pertinent to this case was effective from January 1, 2000, through December 31, 2002 (2000 CBA). Article 13(B) of the 2000 CBA provided post-retirement health insurance for police officers and their spouses in accordance with the following terms:

ARTICLE 13—HEALTH, WELFARE AND PENSION

* * *

B. Health. ... Upon retirement, the officer may at his option, continue his hospitalization insurance at the group rate with coverage provided for the retirees and their spouses of the group plan. Premiums will be paid by the Township for future retirees and their spouses as follows:

(1) The Township will pay the premium cost for an officer and spouse, coverage will be provided by Blue Cross and Blue Shield, or its equivalent, with the same or comparable benefits as before retirement.

* * *

(4) The Officer will certify in writing to the Township at time of retirement and no less often than annually thereafter that he and his spouse are not eligible for hospitalization coverage without cost to them by virtue of other employment, spousal coverage, etc. Officers and their spouses who are eligible will not qualify for this benefit during such eligibility.

Reproduced Record at 36a-37a (R.R. ___). The 2000 CBA provided health insurance to its active and retired police officers through an indemnity plan type of coverage.

At the end of 2002, the Association and the Township agreed to extend the terms of the 2000 CBA until December 31, 2004. The contract extension also created a Deferred Retirement Option Program (DROP) for officers.² Under the DROP provision, an officer chooses a retirement date, after which he continues working and receives the same salary, sick days and vacation days as an active officer. During the DROP period, the participant's monthly pension benefits are paid into an interest-bearing account, available for withdrawal upon final separation from service. Final separation must take place no later than 36 months after the date the officer elects to enroll in the DROP. Participation in the DROP program is voluntary.

The Association and the Township negotiated a new CBA at the end of 2004, effective from January 1, 2005, through December 31, 2007 (2005 CBA). The 2005 CBA modified health insurance benefits for active and retired officers in several important ways. These new provisions, set forth in Article 13(A), stated as follows:

ARTICLE 13—HEALTH, WELFARE AND PENSION

A. Health Insurance.

(1) Effective January 1, 2005, health insurance/drug coverage shall change to a PPO for all current employees and retirees retiring after December 31, 2004....

As used in Paragraphs (1), (2), and (3) below, the term "retired" means employees who apply for pension benefits after December 31, 2004.

(2) Retirees, or spouses of retirees, who are eligible for insurance from a source other than the Township, must take advantage of such coverage. If that coverage is not comparable to active employees' coverage or requires a payroll contribution by the retiree or spouse, the Township will reimburse that expense to the retiree or spouse. If the retiree or spouse exceeds a maximum limit of coverage under subsequent employer's plan, the Township plan's maximum will provide such coverage as secondary coverage.

* * *

(5) All retired employees, regardless of the date of retirement, and their spouses, including participants in the DROP program, shall have the option, at any time after retirement, of choosing to accept the insurance program prevailing from time to time for active employees, under all of the terms and conditions prevailing for active employees. . . .

R.R. 44a. The provisions of Article 13(B) of the 2000 CBA were retained in Article 13(A)(7) of the 2005 CBA. Thus, the Township was still required to pay the premium cost for Blue Cross and Blue Shield coverage, "or its equivalent, with the same or comparable benefits as before retirement," and retired officers were still required to certify annually that they were "not eligible for hospitalization coverage without cost to them by virtue of other employment, spousal coverage, etc." R.R. 45a.

Grievants in this case are Lieutenant Richard Figaski and Corporal Thomas Stepankow. Figaski enrolled in the DROP effective March 10, 2003, and actually separated from his employment with the Township on March 10, 2006. Stepankow enrolled in the DROP effective February 1, 2003, and separated on February 1, 2006. The DROP election form signed by both officers stated:

My participation in the DROP, the benefits or payment I will receive, the interest rate I will receive, and all of the terms and conditions of my participation will be governed by the prevailing collective bargaining agreement between [the Township] and [the Association], as amended or extended from time to time....

R.R. 80a, 81a. When the Township implemented the PPO plan in the 2005 CBA, it continued to provide Figaski and Stepankow with indemnity plan coverage during 2005. As their separation dates approached, however, the Township advised Figaski and Stepankow that they would have to take health insurance coverage available to them through their spouses.³ In response, Figaski and Stepankow filed grievances.

The grievants asserted the coverage available through their spouses was not comparable to the Township's indemnity type coverage and was not available "without cost." The grievants requested to remain on the Township's indemnity plan and sought reimbursement for out-of-pocket expenses they had incurred while on their spouses' plans. In its written response to the grievances, the Township raised two arguments. First, the Township argued that each grievant did in fact have "available insurance coverage through his spouse `without cost to them' as that term is used in the contract." R.R. 78a. Second, the Township contended that "[a]lternatively, the terms of Article 13, Section A(2) of the contract apply and limit the Township's obligations to providing secondary coverage and reimbursing certain expenses." Id. The matter proceeded to arbitration.

Before the arbitrator, the Association's position was that neither Figaski nor Stepankow had coverage available to them from their spouses "without cost" pursuant to Article 13(B) of the 2000 CBA. Stepankow testified that his wife's employer, the Department of Conservation and Natural Resources, offers an HMO plan at no premium cost. However, the Stepankows incurred higher out-of-pocket costs under Mrs. Stepankow's plan for prescriptions and chiropractic office visits. Figaski offered similar testimony regarding the PPO plan offered by his wife's employer, Millcreek Township School District. Mrs. Figaski's insurance is available at no premium cost, however certain co-pays, higher deductibles and more restricted coverage result in out-of-pocket expenses for the Figaskis. Mrs. Figaski may also opt out of her employer's health insurance in return for a higher salary. Figaski and Stepankow testified that they elected to participate in the DROP because they believed they were "locking in" the indemnity plan coverage they received under the 2000 CBA. Notes of Testimony, August 1, 2006, at 16, 30 (N.T. ___); R.R. 85a, 89a.

The Township's response was that Figaski's and Stepankow's post-retirement insurance benefits were governed by the CBA in effect when they ended their active service—the 2005 CBA. The Township's attorney began his case-in-chief by informing the arbitrator that

[w]e don't think that the contractual language that [the Association's attorney] referred to that says that retired officers have to access spousal insurance if it's available at no cost to them comes into play, because we don't think that's what applies to these fellows. We think the current contract applies to these fellows because there was a change in 2005 that we think, with all due respect, applies to these fellows and to the grievance processed under that contract post 2005.

N.T. 39-40; R.R. 91a. According to the Township, this meant that the officers had to use their spouses' plans for primary coverage, with the Township providing secondary coverage and reimbursing the officers for any costs that would have been covered by the Township's plan had it been primary.

The Township presented the testimony of Township treasurer Gerald Wolf, who explained that the DROP application signed by Figaski and Stepankow is not the same as an application for pension benefits. An application for pension benefits is a separate document signed by a member at the end of his service, approximately one month before he begins drawing money out of the pension fund. Wolf verified that Figaski and Stepankow would have submitted their applications for pension benefits in late 2005 or early 2006. Wolf acknowledged on cross-examination that the Township treated Figaski and Stepankow as retired for insurance purposes while they were DROP...