The 2013 CBA between the Newark Fire Officers Union and the City of Newark provided two terminal leave options for retiring officers. The traditional option allowed the officer to remain on the payroll and receive full salary, earning pension credits, while not reporting for work during their terminal “compensation leave period [(CLP)].” The lump sum option, negotiated in 1987, provides for a payment of 100% of the total cost that the City would have incurred had the retiree remained on the payroll under the current procedure in lieu of terminal leave.
In August 2010, Gary Palmerson, a firefighter from another bargaining unit with a different contract, notified the City of his intent to retire and elected to take the lump sum option. The Chief Clerk calculated his CLP by including time he would have been on the payroll but would not have been working, without adding additional vacation or personal days that he would not have worked. Palmerson and his union objected, claiming that under either terminal leave option, firefighters continued to accrue vacation and personal days during their CLP, and that these days should be included in calculating the length of the lump sum terminal leave period. The City maintained that the firefighters no longer earned personal days or vacation once they had retired.
An arbitrator sided with Palmerson’s union; he ordered the City to recalculate the terminal leave of all future retirees using this method and to do so retroactively.
More than a year after the Palmerson award, the Newark Fire Officers Union filed a grievance, contending that the language of their CBA relating to lump sum terminal leave benefits was “virtually identical” to the language in the firefighters’ agreement that was the subject of the Palmerson arbitration. The Union demanded the City apply the method used in the Palmerson case to the fire officers, retroactive to Palmerson’s retirement date.
A second arbitrator, despite acknowledging the City’s 30-year past practice of calculating lump sum terminal leave by not including additional personal or vacation days, upheld the Union’s position. He reasoned that the plain language of the contract, in specifying payment of the cost the City “would have incurred had the retiree remained on the payroll under the current procedure,” meant that the lump sum payout should mirror the calculation of time if a retiree chose traditional terminal leave, which does credit vacation and personal time. The City appealed, but the trial court confirmed the second award, finding that the Arbitrator was free to disregard past practice in light of the contract language, which was “clear and unambiguous” and “reasonably debatable.” The City appealed again.
The Superior Court of New Jersey, Appellate Division reversed the lower court’s decision and vacated the arbitration award. The Court found that the second arbitrator exceeded his power by disregarding the parties’ 30-year past practice and finding “no ambiguity” in the contract language. The Court agreed that the contract required the City to calculate the CLP for a lump sum retiree as if they had elected traditional terminal leave, but it disagreed that such calculation must include personal and vacation days accruing during the leave period when they were not actually working.
“We agree that the relevant provision requires the City to ‘calculate the CLP for a lump sum terminal leave retiree to include the same benefits that would have been received by that retiree had he or she elected the traditional terminal leave benefit. The ambiguity arises from the drafters’ decision to qualify that statement by providing the lump sum payment is 100% of the City’s cost ‘had the retiree remained on the payroll under the current procedure in lieu of terminal leave.’ The Arbitrator’s near single-minded focus on establishing the unambiguity of the parties’ agreement – that officers electing a lump sum payment receive the same amount they would have received had they elected the traditional terminal leave option – is a proposition the City accepts. The issue is whether the parties agreed that an officer electing the lump sum option would not be credited for vacation time and personal days accruing during a terminal leave period ‘under the then current procedure’ for retirees taking terminal leave.”
The Court reasoned that the language in the CBA regarding lump sum terminal leave was ambiguous enough to consider the parties’ long-standing past practice. Additionally, the Court noted that the language in the firefighters’ contract, which had been the subject of the first arbitration, was materially different than that of the fire officers’ contract. Finally, while acknowledging the public policy concerns regarding terminal leave payments to public employees, the Court found the arbitration award did not violate any established public policy of the state. The matter was reversed and remanded to the New Jersey State Board of Mediation for a new arbitration hearing.
Newark Fire Officers Union, Loc. 1860 v. City of Newark, 2024 N.J. Super. Unpub. LEXIS 2969 (N.J. Super. Ct. App. Div., 2024).