Subway-Surface Sup'rs Ass'n v. New York City Transit Authority

• Decision Date: 28 March 1978
• Docket Number: SUBWAY-SURFACE
• Citation: 44 N.Y.2d 101,404 N.Y.S.2d 323,375 N.E.2d 384
• Parties: , 375 N.E.2d 384, 23 Wage & Hour Cas. (BNA) 1020 In the Matter ofSUPERVISORS ASSOCIATION, Appellant, v. NEW YORK CITY TRANSIT AUTHORITY, Respondent, and State of New York, Intervenor-Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 323

404 N.Y.S.2d 323

44 N.Y.2d 101, 375 N.E.2d 384, 23

Wage & Hour Cas. (BNA) 1020

In the Matter of SUBWAY-SURFACE SUPERVISORS ASSOCIATION, Appellant, v. NEW YORK CITY TRANSIT AUTHORITY, Respondent and State of New York, Intervenor-Appellant.

Court of Appeals of New York.

March 28, 1978.

Moss K. Schenck, Brooklyn, for appellant

John A. Murray, Alphonse E. D'Ambrose, Helen R. Cassidy and James P. McMahon, Brooklyn, for respondent.

Louis J. Lefkowitz, Atty. Gen. (George D. Zuckerman and Samuel A. Hirshowitz, New York City, of counsel), for intervenor-appellant.

W. Bernard Richland, Corp. Counsel, New York City (Stanley Buchsbaum and James Greilsheimer, New York City, of counsel), for City of New York and another, amici curiae.

OPINION OF THE COURT

JONES, Judge.

In this case we confront the issue not reached in Patrolmen's Benevolent Assn. of City of N. Y. v. City of New York, 41 N.Y.2d 205, 391 N.Y.S.2d 544, 359 N.E.2d 1338 whether the New York State Financial Emergency Act for the City of New York is unconstitutional insofar as it precluded payment of wage increases provided in an existing collective bargaining agreement. We conclude that it is not.

Petitioner is the certified exclusive bargaining representative of several classes of supervisory personnel employed by respondent New York City Transit Authority, which is the public benefit corporation created by the New York State Legislature for the purpose of operating and maintaining mass surface and subway transit facilities owned by the City of New York and leased to the authority. Under a collective bargaining agreement entered into by the parties for the period from October 1, 1974 through September 30, 1976 the authority was obligated on October 1, 1975 to provide certain wage increases namely, a 5% general wage increase, continuation of increased payments of specified increments and a 4% increase in shift differential.

Payment of these increases was barred however by action of the State Legislature in August, 1975 when it enacted the New York State Financial Emergency Act for the City of New York (FEA; L.1975, chs. 868-870). ¹ The legislation by which this was accomplished, adopted at an extraordinary session, contained findings that a financial emergency existed in the City of New York, recited disasters that might be expected to befall the city in the event of its failure to meet its obligations to holders of outstanding securities and the need for the State to exercise its police and emergency powers under the Constitution to bring the emergency under control, and provided for a number of remedial measures, including the suspension of increases in salaries and wages, shift-differentials and increments effective after June 30, 1975 to employees of the city and of "covered organizations", one of which as expressly named was respondent Transit Authority. It was also provided that for the purposes of computing the pension base of retirement allowances the suspended increases should not be considered as part of compensation or of annual salary earned or earnable. The suspensions were to be effective for the first pay period ending on or after September 1, 1975 and to continue for one year or until such later date as deemed necessary by the Emergency Financial Control Board (also created by the statute) to Following implementation of the wage freeze by the Transit Authority, petitioner instituted the present article 78 proceeding by which it sought a judgment declaring the legislation unconstitutional as violative of the contract impairment clause of the Federal Constitution, the equal protection clauses of the Federal and State Constitutions, and the provisions of the State Constitution prohibiting impairment of pension rights, and directing respondent to comply with the provisions of the collective bargaining agreement. Special Term treated the proceeding as a declaratory judgment action and rejected petitioner's claims of unconstitutionality but ordered that a wage deferment agreement similar to those already executed and certified as to other groups of employees under FEA be made available to petitioner. The Appellate Division modified by declaring that, insofar as the wage freeze of FEA affects the calculation of pension benefits, it is in violation of section 7 of article V of the New York State Constitution and by adding a provision that the wage deferment agreement that Special Term had directed be made available to petitioner should be subject to the provisions of subdivision 2 of section 10 of the act. As so modified the judgment was affirmed.

achieve the objectives of a financial plan devised by it, but in no event later than the end of the emergency period. Subdivision 2 of section 10 of FEA, which section imposed the wage freeze, provided that the section would be inapplicable to employees of the city or of a covered organization whose collective bargaining representative executed an agreement for deferment of salary or wage increases which was certified by the Mayor prior to September 1, 1975, or thereafter by the Financial Control Board, "as being an acceptable and appropriate contribution toward alleviating the fiscal crisis of the city".

The case is before us on cross appeals; petitioner appeals from that portion of the Appellate Division's order that upheld the constitutionality of the wage freeze apart from its effect on pension computations, and the Attorney-General of the State of New York as intervenor ² appeals from that portion of the order that held FEA constitutionally invalid insofar as it affects pension computations.

The latter appeal may be disposed of promptly. Following determination of the appeal at the Appellate Division, as contemplated by the provisions of subdivision 2 of section 10 of FEA and the orders in both courts below, on March 10, 1977 petitioner, as collective bargaining representative of Transit Authority employees, and the Transit Authority entered into a wage deferment agreement, subsequently ratified by the Financial Control Board, which provided that a portion of the wage increases included in the collective bargaining agreement would be paid but that another portion would be deferred. The agreement further provided however that "For the purposes of computing retirement allowances * * * the salary rate during the period of deferral shall be treated as including the amount of the deferred increase". As a consequence of this provision agreed to by the Transit Authority, pension computations have been made as though the wages provided for in the collective bargaining agreement had in fact been paid; thus there has been no change in the wage base used in calculation of pension benefits as a result of the enactment of FEA over what the base would have been had the statute not been enacted. Petitioner therefore now has no standing to challenge the bare provision of the statute as an impairment of the right to pension benefits protected by section 7 of article V of the New York State Constitution. Accordingly, the case should be remitted to Special Term for dismissal of the petition insofar as it seeks a judgment We turn then to petitioner's assertions that the wage freeze mandated by subdivision 1 of section 10 of FEA is an impairment in violation of the contract clause of the Federal Constitution. Indisputably FEA worked an impairment of contract rights under the collective bargaining agreement between the parties. We reject the contention, however, that such impairment violates the constitutional contract clause. It is conceded that the protection constitutionally extended to the integrity of contracts is not unlimited. Petitioner acknowledges that the State, in the exercise of its police power, may override the provisions of a contract when the impairment is "reasonable and necessary to serve an important public purpose" (United States Trust Co. v. New Jersey, 431 U.S. 1, 25, 97 S.Ct. 1505, 1517, 52 L.Ed.2d 92), it is asserted, however, that the police power "must be exercised for an end which is in fact public and the means adopted must be reasonably adapted to the accomplishment of that end and must not be arbitrary or oppressive" (Treigle v. Acme Homestead Assn., 297 U.S. 189, 197, 56 S.Ct. 408, 411, 80 L.Ed. 575, reh. den. 297 U. S. 728, 56 S.Ct. 587, 80 L.Ed. 1010). We note that petitioner quotes, without distinction, the standard for the exercise of police power that results in an alleged impairment of a public contract and that applicable when it is claimed that the provisions of a private contract are being impaired. If by "standard" it is intended to refer to the general proposition that "an impairment may be constitutional if it is reasonable and necessary to serve an important public purpose" (United States Trust Co. v. New Jersey, 431 U.S. 1, 25, 97 S.Ct. 1505, 1519, 52 L.Ed.2d 92, supra ), the standard is indeed the same. In the present instance, such verbalization does not, however, advance analysis or aid in resolution. What is of legal and practical significance is to recognize that the application of this standard will be different in public contract cases than it is in private contract cases. "(C)omplete deference to a legislative assessment of reasonableness and necessity is not appropriate (in the former category) because the State's self-interest is at stake" (id., p. 26, 97 S.Ct., p. 1519).

that the statute is violative of that constitutional provision.

At the threshold of the application of the general standard to the present case, we note that petitioner fully accepts without intimation of doubt the reality of the financial crisis found by the Legislature to confront the City of New York. No challenge is raised to the validity of the Legislative finding and no invitation is made to judicial scrutiny of the Legislature's determination in this regard. ³ Thus, it is undisputed that the FEA wage freeze serves "an important purpose". The critical focus of...