Wilkes-Barre v. POLICE BENEVOLENT ASS'N

• Decision Date: 31 December 2002
• Citation: 814 A.2d 285
• Parties: CITY OF WILKES-BARRE, Appellant v. CITY OF WILKES-BARRE POLICE BENEVOLENT ASSOCIATION.
• Court: Pennsylvania Commonwealth Court

814 A.2d 285

CITY OF WILKES-BARRE, Appellant v. CITY OF WILKES-BARRE POLICE BENEVOLENT ASSOCIATION.

Commonwealth Court of Pennsylvania.

Argued November 6, 2002.

Decided December 31, 2002.

John P. McLaughlin, Philadelphia, for appellant.

Sean T. Welby, Harrisburg, for appellee.

BEFORE: PELLEGRINI, Judge, and SIMPSON, Judge, and MIRARCHI, Jr., Senior Judge.

OPINION BY Judge SIMPSON.

In this public employer's appeal, we address the impact of The Third Class City Code (City Code)¹ and a city home rule charter on an interest arbitration award regarding retirement benefits, a residency requirement and a change in the health care plan. The Court of Common Pleas of Luzerne County (trial court) (1) affirmed the award limiting excessive retirement benefits for future but not current police officers, (2) affirmed the award to the extent it failed to incorporate the city home rule charter's residency requirement, and (3) vacated that portion of the award permitting a change in health care plan. We affirm in part and reverse in part, thereby reinstating the arbitrators' award.

The City of Wilkes-Barre (City) brought a petition for review of an interest arbitration award pursuant to the act commonly known as Act 111² involving the City of Wilkes-Barre Police Benevolent Association (Police). Within 30 days of receipt of the award, the Police filed a response and new matter in which they sought vacation of a paragraph of the arbitration award. Substantive and procedural issues were submitted to the trial court.

By way of background, City is a home rule municipality organized pursuant to the Home Rule Charter and Optional Plans Law (HRC & OPL), 53 Pa.C.S. §§ 2901-2984, as well as a "public employer" within the meaning of Section 1 of Act 111, 43 P.S. § 217.1. Police are an unincorporated association recognized as collective bargaining agent for the police officers of the City of Wilkes-Barre. The parties engaged in collective bargaining over the terms and conditions of employment for police officers. When an impasse was declared, the parties referred the issues to binding arbitration. After hearings, a majority of the board of arbitrators rendered the award from which the City appealed.

An interest arbitration award issued pursuant to Act 111 may only be reviewed by this Court to determine whether the arbitrators lacked jurisdiction to decide the issues in dispute, whether the proceedings were conducted properly, whether the arbitrators exceeded their authority, or whether the arbitrators decided constitutional questions properly decided by a court. Monroeville v. Monroeville Police Dep't, Wage Policy Comm., 767 A.2d 596 (Pa.Cmwlth.), appeal denied, 566 Pa. 672, 782 A.2d 551 (2001). A board of arbitrators: 1) may not order the employer to perform an illegal act; 2) is limited to requiring that a public employer do that which it could do voluntarily; and 3) must craft an award that only encompasses the terms and conditions of employment. Butler v. Butler Police Dep't, Fraternal Order of Police, Lodge # 32, 780 A.2d 847, 850 (Pa.Cmwlth.), appeal denied, 568 Pa. 620, 792 A.2d 1255 (2001). An error of law alone is not sufficient to reverse an award under this narrow scope of review. Id.

I. Retirement Benefits

Paragraph 7 of the award provides that "[a]ll officers hired after the issuance of this award shall be entitled to pension benefits not in excess of the Third Class City Code." Thus, the award did not diminish retirement benefits for past or current police officers, but did require that benefits for future officers conform to the City Code. The trial court affirmed this portion of the award.

City seeks vacation of paragraph 7 of the award arguing that it conflicts with retirement provisions of the City Code and requires City to perform an illegal act. Without contesting the assertion that some aspects of current retirement benefits are excessive under the City Code, Police contend that the award is enforceable in light of constitutional and statutory prohibitions against diminution of existing retirement rights.³

Article I, § 17 of the Pennsylvania Constitution provides:

No ex post facto law, nor any law impairing the obligation of contracts, or making irrevocable any grant of special privileges or immunities, shall be passed.

In Ass'n of Pennsylvania State Coll. and Univ. Faculties v. State Sys. of Higher Educ., 505 Pa. 369, 479 A.2d 962 (1984), our Supreme Court determined that a public employer's unilateral reduction of retirement benefits was an unconstitutional impairment of the employment contracts of non-vested as well as vested employees. Accordingly, the Pennsylvania Constitution and interpretive Supreme Court decisions support paragraph 7 of the arbitration award.

In addition to constitutional limits on modification of existing retirement benefits, there are statutory limits. Specifically, the HRC & OPL limits City's home rule municipal powers by providing (in pertinent part):

(c) Prohibited powers.—A municipality shall not:

...

(3) Be authorized to diminish the rights or privileges of any former municipal employee entitled to benefits or any present municipal employee in his pension or retirement system.

53 Pa.C.S. § 2962(c)(3).

The Constitution of Pennsylvania and the HRC & OPL prohibit a home rule municipality, such as City, from unilaterally diminishing rights of any former or present municipal employee in his retirement system. There is no corresponding limitation on consensual modification of existing retirement benefits, nor is there authority limiting arbitrators' ability to modify retirement benefits as part of a statutory dispute resolution process. Nevertheless, here the arbitrators did not require an illegal act by confining limitation on excessive retirement benefits to future, but not current, police officers. Also, the trial court correctly declined to modify this provision of the award.

Regarding City's contention that retirement benefits in excess of the City Code are unlawful and therefore unenforceable, we find guidance in Restatement (Second) of Contracts, § 178(1), which provides:

§ 178. When a Term Is Unenforceable on Grounds of Public Policy (1) A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.

Under the Restatement approach, unless the statute provides for the unenforceability of excessive retirement benefits, enforceability shall be determined by balancing of interests. "Enforcement will be denied only if the factors that argue against enforcement clearly outweigh the law's traditional interest in protecting the expectations of the parties, its abhorrence of any unjust enrichment, and any public interest in the enforcement of the particular term." Restatement (Second) of Contracts, § 178, Comment (b).

Here, the City Code does not address the enforceability of excessive retirement benefits. Therefore, a balancing of interests is appropriate to determine enforceability. This balancing has already been performed by our Supreme Court, which determined that existing retirement benefits for public employees shall be enforced. In re Appeal of Upper Providence Police, Delaware County Lodge # 27, 514 Pa. 501, 526 A.2d 315 (1987); Ass'n of Pennsylvania State Coll. Faculties. Thus, we find no error in the rejection of City's contention based on the claimed unenforceability of existing excessive retirement benefits.

II. Residency

It is uncontested that § 8:02 of the City of Wilkes-Barre Home Rule Charter requires all City employees to reside in the City. This issue was submitted to the arbitrators, but the resulting award contained no residency requirement.

City contends that because the home rule charter is its controlling law, any contract lacking the home rule residency requirement for municipal employees will require it to perform an illegal act. Police contend that because residency is a mandatory subject of collective bargaining under Act 111, the right of police officers to bargain for residency cannot be supplanted by a home rule charter.

The trial court held that a home rule charter cannot violate Act 111 and that therefore a home rule charter cannot supersede the authority of the arbitrators to address residency. The trial court affirmed the award to the extent it declined to include a residency requirement.

As previously noted, the HRC & OPL limits home rule authority. Thus, the HRC & OPL provides in pertinent part:

(c) Prohibited powers.—A municipality shall not:

...

(2) Exercise powers contrary to, or in limitation or enlargement of, powers granted by statutes which are applicable in every part of this Commonwealth.

...

(e) Statutes of general application.— Statutes that are uniform and applicable in every part of this Commonwealth shall remain in effect and shall not be changed or modified by this subpart. Statutes shall supersede any municipal ordinance or resolution on the same subject.

53 Pa.C.S. § 2962(c), (e).

Regarding its application in every part of the Commonwealth, Section 9 of Act 111, 43 P.S. § 217.9, provides:

The provisions of this act shall be applicable to every political subdivision of this Commonwealth notwithstanding the fact that any such political subdivision, either before or after the passage of this act, has adopted or adopts a home rule charter.

Thus, the General Assembly intended Act 111 to apply despite existence of a home rule charter. Neither the home rule charter, nor an enactment by a home rule municipality, may contain provisions contrary to or in limitation or enlargement of powers established by Act 111.

Act 111 provides policemen employed by a political subdivision the power to bargain with their public employers concerning the terms and conditions of their employment. See Section 1 of Act 111, 43...