In the Matter of Chenango Forks Central School District, Appellant,v.New York State Public Employment Relations Board et al., Respondents.BriefN.Y.April 25, 2013To Be Argued By: Frederick K. Reich, Esq. Time Requested: 15 minutes Court of Appeals State of New York In the Matter of the Application of CHENANGO FORKS CENTRAL SCHOOL DISTRICT, Petitioner-Appellant, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules -against- N E W Y O R K STATE PUBLIC E M P L O Y M E N T RELATIONS BOARD and CHENANGO FORKS TEACHERS ASSOCIATION, NYSUT, AFT, AFL-CIO, L O C A L 2561, Respondents-Respondents. BRIEF OF RESPONDENT-RESPONDENT, CHENANGO FORKS TEACHERS ASSOCIATION Brief Submitted: January 7, 2013 RICHARD E. CASAGRANDE, ESQ. Attorney for Respondent-Respondent, Chenango Forks Teachers Association Office & P.O. Address 800 Troy-Schenectady Road Latham, New York 12110-2455 Tel. No. (518)213-6000 Fax No. (518)213-6488 Albany County Index No. 3444-10 Appellate Division Case No. 512983 FREDERICK K. REICH, Of Counsel T A B L E OF CONTENTS Page T A B L E CASES A N D AUTHORITIES i PRELIMINARY STATEMENT 1 A. Article 78 Petition and Decision and Order Sought To Be Reviewed 3 B. Prior Administrative and Arbitral History of Case 4 C. Decision of the Appellate Division, Third Department 6 STATEMENT OF QUESTIONS 7 STATEMENT OF FACTS 8 ARGUM ENT POINT I JUDICIAL DEFERENCE SHOULD BE GIVEN TO PERB'S DETERMINATION 17 POINT II THE CONTINUATION OF MEDICARE PART B REIMBURSEMENT TO CURRENT BARGAINING UNIT MEMBERS WHO RETIRE AND R E A C H A G E 65 IS A M A N D A T O R Y SUBJECT OF NEGOTIATION 18 POINT III A N ENFORCEABLE T A Y L O R L A W PAST PRACTICE EXISTS 20 T A B L E OF CONTENTS (con't) Page POINT IV SUBSTANTIAL EVIDENCE SUPPORTS PERB'S DETERMINATION THAT THE RELEVANT HISTORY OF REIMBURSING MEDICARE PART B INSURANCE PREMIUMS CONSTITUTES A NEGOTIABLE PAST PRACTICE 25 POINT V THE COURT SHOULD DEFER TO PERB'S DETERMINATION THAT THE RECORD DOES NOT ESTABLISH THAT THE DISTRICT SATISFIED ITS DUTY TO NEGOTIATE WITH THE ASSOCIATION OR THAT THE ASSOCIATION WAIVED ITS BARGAINING RIGHTS .31 POINT VI THE AT ISSUE BENEFIT IS NOT A N UNCONSTITUTIONAL GIFT OF PUBLIC FUNDS CONCLUSION 36 37 T A B L E OF CASES A N D AUTHORITIES Page CASES Bergstein v. Bd. of Ed. Union Free Sch. Dist. No. 1 of Town of Ossining, 34 N.Y.2d 318 (1974) 29 City of Oneida Police Benevolent Ass % 15 PERB 3096 (1982) 19 Civil Serv. Empls. Ass 'n. v. New York State Pub. Empl. Relations Bd, 2 A.D.3d 1197, 1198 (3d Dep't 2003) 28 Cohoes Police Benevolent Ass 'n, 27 PERB ^ 3058 (1994) 19 County of Nassau, 24 PERB 13029 (1991) 21 Gagliardo v. Dinkins, 89 N.Y.2d 62, 74-75 (1996) 36 Greece Support Service Employees Ass 'n., NEA/New York v. Pub. Empl. Relations Bd, 250 A.D.2d 980, 982 (3d Dep't 1998) 36 Herkimer County BOCES, 20 PERB f 3050 (1987) 4, 9, 24, 25 Matter of Aeneas McDonald Police Benevolent Assn. v. City of Geneva, 92 N.Y.2d 326 (1998) 18, 20, 22 Matter of Baker v. Board ofEduc, 29 A.D.3d 574 (2d Dep't 2006), Iv. denied, 7 N.Y.2d 708, 709 (2006) 19 Matter of Bd. ofEduc. of the City Sch. Dist. of the City of New York v. New York State Pub. Empl. Relations Bd., 75 N.Y.2d 660, 666 (1990) 17-18 - i - T A B L E OF CASES AND AUTHORITIES Page CASES Matter of Bd. Of Educ. Union Free Sch. Dist. No. 3 of the Town of Huntington v. Associated Teachers of Huntington, Inc., 30 N.Y.2d 122 (1972) 36 Matter of Bryant v. Board of Educ, Chenengo Forks Cent. School Dist., 21 A.D.3d 1134 (3d Dep't 2012; on remand 29 Misc.3d 706 (Sup. Ct , Broome Co. 2010) 19 Matter of Civil Serv. Empls. Ass 'n. v. Newman, 88 A.D.2d 685, 686 (3d Dep't 1982), appeal dismissed 57 N.Y.2d 775 (1982) 32 Matter of Fashion Inst, of Tech. (United College Empls. of the Fashion Inst, of Tech.), 41 PERB If 3010 (2008), confirmed sub. nom. Fashion Inst, of Tech. v. New York State Pub. Empl. Relations Bd., 68 A.D.3d 605 (1st Dep't 2009) 20, 36-37 Matter of Gray v. Adduci, 73 N.Y.2d 741, 742 (1988) 29 Matter of Incorporated Vil. of Lynbrook v. New York State Pub. Empl. Relations Bd, 48 N.Y.2d 398, 404 (1979) 17, 18, 19, 21 Matter ofJMH, Inc. v. New York State Liq. Auth., 61 A.D.3d 1260 (3d Dep't 2009) 29 Matter of Manhasset Union Free Sch. Dist. (Manhasset Educational Support Pers. Ass 'n., NYSUT, AFT, AFL-CIO), 41 PERB \ 3005 (2008), confirmed and remitted on other grounds sub. nom. Manhasset Union Free Sch. Dist. v. New York State Pub. Empl. Relations Bd, 61 A.D.3d 1231 (3d Dep't 2009) 20, 21, 27 Matter of New York Transit Authority [Bordanski], 4 PERB Tl 3031(1971) 24 - i i - T A B L E OF CASES A N D AUTHORITIES Page CASES Matter of Roma v. Ruffo, 92 N.Y.2d 489 (1998) 22 Matter of Uniondale Union Free Sch. Dist. v. Newman, 1 67 A.D.2d 475, 477 (2d Dep't 1990), appeal denied 77N.Y.2d809(1991) 27 NYSCOPBA v. State, 94 N.Y.2d 321, 327 (1999) 23 United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 597-598 (1960) 23 W. Irondequoit Teachers Ass 'n v. Helsby, 35 N.Y.2d 46, 50 (1974) 18 Waverly Cent. Sch. Dist. (Waverly Ass'n of Support Pers.), 20 PERB \ 4569 (1997) 33 STATUTES 4 NYCRR§ 212.4(d) 29 CSL§ 205.5 (d) 3,10,22,25,36 CSL § 209-a.l (d) 3, 4, 5, 8, 11, 14, 21, 22, 31 CPLR § 7804(g) 3 Taylor Law (CSL §§ 200-214) 2, 5, 7, 9, 20, 22, 23, 24, 30, 32, 33, 34, 36 N Y Const, art VIII, section 1 36 STATE OF NEW Y O R K COURT OF APPEALS In the Matter of the Application of CHENANGO FORKS CENTRAL SCHOOL DISTRICT, Petitioner-Appellant, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules -against- NEW Y O R K STATE PUBLIC EMPLOYMENT RELATIONS BOARD and CHENANGO FORKS TEACHERS ASSOCIATION, NYSUT, AFT, AFL-CIO, L O C A L 2561, Respondents-Respondents. PRELIMINARY STATEMENT Respondent-Respondent Chenango Forks Teachers Association, NYSUT, AFT, AFL-CIO, Local 2561 ("Association") submits this brief in response and opposition to the brief filed by the Petitioner-Appellant Chenango Forks Central School District ("District"). This appeal reviews a decision made by the New York State Public Employment Relations Board ("PERB"), a decision entitled to great deference and based on substantial evidence in the record, holding that the District violated the Taylor Law by unilaterally changing an established past practice of reimbursing l bargaining unit members' Medicare Part B premiums upon their retirement and reaching age 65. PERB reached this conclusion even though it had previously conditionally dismissed and deferred this dispute to the parties' grievance arbitration procedure. There, the arbitrator stated that there was no past practice under the parties' collective bargaining agreement. This suggested to the dissent below that PERB should have deferred to that arbitral finding. The law and the record show, however, that the standard for finding a past practice under the Taylor Law and the standard the arbitrator may have used to decide whether a past practice existed under the parties' particular collective bargaining agreement differ. Accordingly, PERB properly found under the Taylor Law standard that there was a non-contractual past practice of reimbursing the Medicare Part B premiums and that such reimbursement was a form of deferred compensation, not a gift of public funds. Finally, as the Association was under no duty to demand bargaining with respect to the established past practice, the matter has not been mooted by the successor agreements, reached by the parties during the ten-year pendency of this litigation. Indeed, the District never satisfied its duty to negotiate in this matter, that duty being to negotiate prior to changing an established past practice regarding a mandatory subject of bargaining. 2 A. Article 78 Petition and Decision and Order Sought To Be Reviewed The District commenced a proceeding on or about May 24, 2010 pursuant to Article 78 of the Civil Practice Law and Rules ("CPLR") (R.1 4-332) to annul the April 22, 2010 Decision and Order of the Respondent-Respondent New York State Public Employment Relations Board ("PERB" or "Board") issued after a hearing in an improper practice proceeding conducted pursuant to Civil Service Law ("CSL") § 205.5 (d). (R. 15-24; 757). The District appeals from the decision of the Appellate Division, Third Department, confirming the Decision and Order of PERB. (R. 764-775)2. PERB's April 2010 Decision and Order affirmed a May 2009 Decision of its Administrative Law Judge ("ALJ") finding that the District violated CSL § 209-a.l (d) when in June 2003 it unilaterally announced by memorandum that it was discontinuing the past practice of reimbursing for the cost of Medicare Part B health insurance premiums with respect to current bargaining unit employees once they are retired and reach age 65. To remedy the violation, PERB ordered the References to the Record on Review are cited as "R. ." 2 By order dated November 29, 2010, the Albany County Supreme Court transferred the matter to the Appellate Division pursuant to CPLR § 7804(g). (R. 2- 3). 3 District to rescind the announcement and to sign and post a notice reflecting PERB's order. (R. 300-315; 714; 15-24; 757). B. Prior Administrative and Arbitral History of the Case In a prior decision, issued in December 2003, a PERB A L J determined that because the Association had also filed a grievance concerning the conduct of the District, the improper practice charge would be conditionally dismissed to permit an arbitrator to determine whether the parties' collective bargaining agreement provided a source of right to the Association. PERB conditionally dismissed the improper practice charge, subject to a motion by the Association to reopen, post- arbitration, pursuant to the criteria set forth in Herkimer County BOCES, 20 PERB 1 3050 (1987). (R. 80-81; 633-634). The District had requested such a deferral in its answer to the improper practice charge. (R.74). In November 2004, the arbitrator issued an award denying the Association's grievance (R. 82-92; 621). In December 2004, over the objections of the District (R. 648-650), the A L J granted the Association's motion to reopen the improper practice charge (R. 622-623; 631-632; 93; 624; 652). Thereafter, in August 2006 (R. 139-144; 670-675), the ALJ , on a stipulated record, dismissed the District's defenses, and found that the District violated CSL § 209-a.l (d) when it unilaterally discontinued the past practice of reimbursing 4 current unit employees for the cost of Medicare Part B health insurance premiums after they retire and reached age 65. To remedy the violation, PERB ordered the District to rescind the discontinuation and to sign and post a notice reflecting PERB's order. The District filed exceptions to the Decision of the A L J (R. 145-146). In July 2007 (R. 147-158; 714; 742-753), PERB reversed, in part, the Decision of the ALJ , and remanded the case to the A L J for the purpose of supplementing the record on the limited issue of whether the Association and/or current employees had actual or constructive knowledge of the District's practice of reimbursing the costs of the premiums. PERB determined that the parties' stipulated record was "ambiguous regarding to what extent, if any, the Association and/or current employees had actual or constructive knowledge of the benefit, and, therefore, had a 'reasonable expectation' that the practice would be continued." (R. 752-753). Such knowledge is an element necessary to establish a past practice under the Taylor Law (CSL §§ 200-214). (Id.). The employer's unilateral discontinuance of a past practice concerning a term or condition of employment is a violation of § 209-a.l(d). (Id.). The A L J , on remand, held a hearing on the issue referred to her. By Decision rendered in May 2009 (R. 300-315; 714), she found that the record 5 established that the Association and unit employees employed as of the date of the violation had been aware of the at issue reimbursement practice for many years prior to the June 2003 announcement of the District's discontinuation of the practice. (R. 315). The A L J therefore confirmed her earlier ruling and order. The District again filed exceptions. (R. 316-318; 714). PERB's April 22, 2010 Decision and Order, which the District seeks to annul in this proceeding, affirmed the ALJ's May 2009 Decision. C. Decision of the Appellate Division, Third Department The Appellate Division, with two Justices dissenting, confirmed the April 2010 Decision and Order of PERB, and dismissed the petition. This Appeal ensued. 6 QUESTIONS PRESENTED 1. Did the Appellate Division correctly conclude that PERB's detennination that an enforceable past practice under the Taylor Law exists is entitled to deference by the courts, and properly confirm PERB's Decision and Order? Yes. 2. Did the Appellate Division dissent incorrectly conclude that PERB should have deferred to the decision of the contractual grievance arbitrator and dismissed the improper practice charge? Yes. 3. Did the Appellate Division dissent incorrectly suggest that the at issue payments may constitute unconstitutional gifts of public funds? Yes. 7 STATEMENT OF FACTS The Association is the exclusive collective bargaining representative for a bargaining unit comprised of all professional teaching faculty, registered nurses and long-term substitutes employed by the District. (R. 28). In June 2003, Kathy Blackman, the District's Business Administrator, sent a memorandum to all District employees, including members of the collective bargaining unit represented by the Association (R. 133,355), stating: The District currently reimburses retirees 65 years of age or older for Medicare B premiums withheld from Social Security Administration checks. Effective July 1, 2003, this practice will no longer continue. The District is currently paying in excess of $100,000 per year and cannot afford this expense in addition to the significant funds spent on health insurance. The District will continue to pay your health insurance premiums to the same extent as the District will pay premiums for active employees. In response to the District's change in practice, in September 2003 the Association filed an improper practice charge with PERB, alleging that the District violated CSL § 209-a.l (d) when it announced to unit members that the District was unilaterally discontinuing the past practice of reimbursing Medicare Part B premiums with respect to unit members who retire and become eligible for Medicare. (R. 66-69). 8 The District filed an answer to the improper practice charge. (R. 70-74). The parties stipulated before PERB's A L J that the Association had filed a contract grievance concerning the dispute. Upon motion of the District and pursuant to PERB's deferral policy under Herkimer County BOCES, 20 PERB ^ 3050 (1987), the improper practice charge was conditionally dismissed and deferred to the grievance/arbitration process to determine if the parties' collective bargaining agreement provided a source of right to the Association. (R. 80-81). The limited issue before the arbitrator was whether the District was under a contractual obligation to make Medicare Part B reimbursement payments to retirees age 65 and older. (R. 638; 642). In an award issued in November 2004, the arbitrator denied the Association's grievance. (R. 635-647). As stated by the arbitrator at the very outset of his analysis, his jurisdiction was derived solely from the parties' collective bargaining agreement and limited to interpreting the language contained in the four corners of that agreement. (R. 644). Therefore, he specifically disavowed any pretense to jurisdiction to adjudicate the parties' rights and obligations under the Taylor Law, and therefore rejected the Association's arguments that, in the absence of a contractual obligation, the Taylor Law required continuation of this mandatory subject of negotiation. (R. 644). 9 The arbitrator, agreeing with the District, found that the District had absolutely no contractual obligation to reimburse the Medicare Part B premiums. (R. 644-647). Indeed, he found that no part of the parties' collective bargaining agreement addressed Medicare Part B reimbursement payments and, further, that it did not contain a maintenance of standards clause requiring the continuation of non-contractual past practices or any other provision addressing matters not covered by the Agreement. (R. 644-647). In a comment that was entirely dicta, the arbitrator also commented that the parties' historical practices did not evidence any contractual obligation on the part of the District regarding the payments. He stated that the District's voluntary reimbursement of Medicare Part B payments, after an obligation to do so under the parties' prior Empire Plan no longer existed, did "not contain sufficient evidence of a mutual understanding and agreement to establish a binding past practice" under the collective bargaining agreement. (R. 646). In other words, he found no agreement between the District and the Association requiring the District, as a matter of contract, to make the payments. There being no contractual source of right to the reimbursement of Medicare Part B premiums impairing PERB's jurisdiction under CSL § 205.5 (d), PERB reopened the improper practice proceeding on the Association's motion (R. 93), 10 assigning the matter to an A L J for further processing. The parties submitted the matter for decision on a stipulated record. (R. 132-138). Among the parties' stipulations were that: the District had reimbursed the at- issue Medicare Part B premiums "since minimally 1980" (R. 135, 19); that while the benefits have been paid over the years, "[t]he parties are unaware of any evidence that a current employee has ever received" the benefit (R. 136, \ 24, emphasis supplied); and that until 1988, the duty to reimburse Medicare Part B premiums was imposed by the District's insurance provider, the Empire Plan but, in 1988, the District changed the insurance provider to Blue Cross/Blue Shield, which did not require the District to reimburse Medicare Part B premiums. (R. 135-136). In an August 2006 Decision, the A L J found that the District violated CSL § 209-a.l (d) and directed the District to rescind the benefit discontinuation announcement. (R. 139-144). The District filed exceptions to this decision. (R. 145-146). In July 2007, PERB held that the reimbursement of the at-issue Medicare Part B premiums is mandatorily negotiable, while exhaustively reviewing and again articulating its test to determine whether a bargaining obligation attaches to non-contractual practices. (R. 147-158). n Regarding the arbitrator's statement about the lack of a past practice concerning the at-issue benefit, the Board found that the A L J properly found that the arbitrator's statement was entirely dicta, and was neither convincing nor binding on PERB, and further found that to the extent that the arbitrator's statement regarding the practice could have been intended to apply the Taylor Law's criteria for the establishment of a past practice, it was repugnant to the Act. (R. 747). The Board also found that the parties stipulated that there is no evidence that any active employee has ever received Medicare Part B reimbursements. (R. 136, \ 24). The Board found, as a result, that the stipulated record was ambiguous as to an element of the applicable test to determine the mandatory negotiability of the District's practice, i.e., the presumption, established by the duration of the practice, that affected bargaining unit employees knew of the practice and, thus, could reasonably expect it to continue. (R. 156-158). The Board remanded the matter to the A L J for the limited purpose of taking evidence as to "what extent, i f any, the Association and/or current employees had actual or constructive knowledge of the benefit and, therefore, had a 'reasonable expectation' that the practice would be continued." In all other respects, the Board found the District's exceptions to be without merit. (R. 157-158). 12 On remand, the A L J conducted a hearing for the limited purpose directed by the Board, at which 14 witnesses testified for the Association. Two witnesses testified for the District, and documents were introduced into the record. (R. 159- 299). In May 2009, the A L J issued a Decision containing a comprehensive and meticulous review and analysis of the testimony. (R. 300-315). A l l of the Association's witnesses except David Andrus, a former District Superintendent of Schools, are, or had been, members of its bargaining unit, and most had been Association officers. The A L J did not consider Mr. Andrus' awareness of the practice. (R. 304). The A L J discounted the testimony of another Association witness (Jeannine Andrus), who had received her information from her financial advisor, had retired in 1998 and had never held an Association office. (R. 304). Every one of the Association's other witnesses, however, testified that at the time of the June 2003 District announcement that it was terminating the practice, that he or she was aware of the at-issue practice. (E.g., R. 171, 176, 186-191, 193- 194, 199, 201, 206-207, 210-211, 217, 220-221, 223-225, 228-230, 233-241, 243- 247, 249-251, 253-256). In her analysis of the relevant testimony, the A L J concluded (R. 314-315): Despite some weaknesses in the testimony of certain of the Association's witnesses, the record credibly 13 evidences that both the Association, through some of its officials, and unit employees employed as of June 12, 2003, among them witnesses who testified at the instant hearing and those identified individually and collectively in the record testimony, had been aware of the at-issue reimbursement for many years prior to the June 12, 2003 memorandum. The A L J again concluded that the District violated CSL § 209-a.l(d) by unilaterally announcing the termination of the practice. (R. 300-315). The District once again filed exceptions with the Board. (R. 316-317). In a decision rendered in April 2010, after another exacting and careful review and analysis of the record and the parties' arguments, the Board affirmed the A L J . (R. 15-24). In rejecting the District's challenges, PERB found no basis to depart from the ALJ's analysis of the testimony, including the weight to accord it and the credibility of the witnesses that formed the basis of the ALJ's conclusion that active unit employees and the Association were aware of the practice and, thus, reasonably expected it to continue. After noting that the District's business administrator sent a memorandum to all current employees announcing the discontinuance of the benefit, the Board in its summary of the testimony before the A L J , emphasized that (R. 19-20): During the hearing, numerous Association witnesses testified that during their tenure as District employees they learned of the premium reimbursement practice prior to 2003 from current and former unit members. Theodora Bryant (Bryant), a former Association President from 1991-1995, testified she learned of the District's premium reimbursement practice in the 1980s from another unit member preparing to retire. In 2002, Bryant retired from the District, and in May 2002 she received her first reimbursement payment from the District. Barbara Slocum, the Association President when the District issued its 2003 memorandum, testified that she first became aware of the District's practice in the late 1990s or in 2000 during conversations with Bryant. Victoria Kwartller, the Association President at the time of the hearing, testified that she learned of the practice in the late 1980s from Bryant and fellow unit member Roberta Furth (Furth). Similarly, Mary Madigan testified that she learned of the practice in the 1990s from Bryant, Furth and other unit members who were members of the Association's negotiation team. Jaime Fiore, who retired from the District in 2004, testified that she first learned of the practice in 1998, during a conversation with two unit members who were planning to retire. Betty Cheesemen also testified that she learned of the practice from a former unit member, Muriel Rossi, who retired in 1999. The Board further found: Many other Association witnesses testified to having knowledge of the practice while unit members prior to 2003, and explained how they learned of the practice. These witnesses included John Connors, John Ferranti, Shelley Deuel, and Patricia Swartout. (R. 20 at footnote 9). Upon the review of the entire record, including the testimony of the District's witnesses, the Board concluded that: "The evidence presented at the 15 hearing demonstrates that both the Association and unit employees had sufficient knowledge of the District's practice at the time of the announced discontinuation of that practice to demonstrate a reasonable expectation that the practice would continue." (R. 22). The Board rejected the District's assertion that the witnesses' testimony should be rejected as hearsay, or required written corroboration, and it again denied the rest of the District's exceptions. (R. 21). The District commenced this proceeding, asserting that: (1) the benefit does not constitute a term and condition of employment that can support a past practice; (2) the arbitrator made a conclusive finding that no past practice existed and PERB should have deferred to such finding; (3) the record does not establish that the Association and/or current bargaining unit employees had a reasonable expectation that the practice would continue, an essential prong of the acknowledged PERB test to determine the existence of an enforceable Taylor Law past practice; (4) there is no contractual obligation on the part of the District to continue the at-issue benefit, and the parties' negotiating history and series of "supersession" clauses in successive collective bargaining agreements 3 The Appellate Division majority held that the District failed to raise in its petition or brief to the Appellate Division that PERB abused its discretion by declining to defer to the arbitrator's findings. The Association had raised the affirmative defense/objection that the Petition failed to state a cause of action because it was conclusory and failed to allege in what way the Decision and Order of PERB was infirm (R. 333-335). Regardless, we brief the issue, infra, should the Court reach this claim. 16 confirm the lack of such a contractual right or a reasonable expectation that the past practice of continuing the benefit would continue; (5) PERB should have determined the matter is moot on the basis that the "supersession" clause and a "complete agreement" clause negotiated as part of the parties 2004-2007 collective bargaining agreement foreclosed continuation of an otherwise binding past practice; and (6) continuation of the Medicare Part B benefit would constitute a impermissible gift of public funds. As set forth more fully below, PERB's determination should be confirmed as it is supported by substantial evidence in the record and is legally permissible. ARGUMENT POINT I JUDICIAL DEFERENCE SHOULD BE GIVEN TO PERB'S DETERMINATION As this Court has repeatedly held, the scope of judicial review of a PERB decision is extremely limited. PERB is presumed to have developed an expertise and judgment that requires acceptance of its constructions if legally permissible, such that its decisions are entitled to great deference. Matter of Incorporated Vil. of Lynbrook v. New York State Pub. Empl. Relations Bd., 48 N.Y.2d 398, 404 (1979); Matter ofBd. of Educ. of the City Sch. Dist. of the City of New York v. New York State Pub. Empl. Relations Bd, 75 N.Y.2d 660, 666 17 (1990) quoting W. Irondequoit Teachers Ass'n v. Helsby, 35 N.Y.2d 46, 50 (1974) ("So long as PERB's interpretation is legally permissible and so long as there is no breach of constitutional rights and protections, the courts have no power to substitute another interpretation."). POINT II THE CONTINUATION OF MEDICARE PART B REIMBURSEMENT TO CURRENT BARGAINING UNIT MEMBERS WHO RETIRE A N D R E A C H A G E 65 IS A M A N D A T O R Y SUBJECT OF NEGOTIATION In Lynbrook, supra, this Court ruled that compensation and benefits earned while employed, to be paid after retirement, including health insurance for the families of current employees who die after retirement, are mandatorily negotiable. Health insurance benefits for current employees after they retire are a form of compensation, and thus a mandatory subject of bargaining. Matter of Aeneas McDonald Police Benevolent Assn. v. City of Geneva, 92 N.Y.2d 326 (1998); Lynbrook, supra. As this Court held in Matter of Aeneas McDonald Police Benevolent Assn. v. City of Geneva, supra, 92 N.Y.2d at 332 (1998): "Therefore, a past practice concerning health benefits for current employees, even where unrelated to any specific contractual provision, cannot be unilaterally modified by the public employer. The employer also would have a 18 duty to negotiate with the bargaining representative of current employees regarding any change in a past practice affecting their own retirement health benefits." (Emphasis in original).4 The District's reliance on PERB's decision in City of Oneida Police Benevolent Ass'n, 15 PERB 3096 (1982) is unavailing. That case was reversed by PERB in Cohoes Police Benevolent Ass 'n, 27 PERB If 3058 (1994) (PERB confirmed that under Lynbrook, supra, health insurance related benefits for current employees and their families who retire, are, without any limitation as to the duration of the current collective bargaining agreement, mandatorily negotiable). Therefore, because retiree health insurance for current employees is a mandatory subject of bargaining, the district was not free to unilaterally alter its practice with respect to this benefit. 4 In Matter of Bryant v. Board of Educ, Chenengo Forks Cent. School Dist., 21 A.D.3d 1134 (3d Dep't 2012) the Appellate Division remanded to Supreme Court an Article 78 proceeding brought by a group of retirees to annul the District's discontinuance of the Medicare Part B premium reimbursements. The retirees claimed that such discontinuance constituted an illegal diminution in retiree "health insurance benefits" in violation of L. 2003, ch. 48. In that decision, the Appellate Division held that the reimbursement of Medicare Part B benefits is a health insurance benefit protected by that statute. Accord, Matter of Baker v. Board of Educ, 29 A.D.3d 574 (2d Dep't 2006), Iv. denied, 7 N.Y.2d 708, 709 (2006). By decision dated September 30, 2010 (29 Misc.3d 706 [Sup. Ct , Broome Co. 2010] the petitioners' claim was upheld. The District has appealed that decision to the Appellate Division. 19 POINT III A N ENFORCEABLE T A Y L O R L A W PAST PRACTICE EXISTS As this Court held in Aenas McDonald Police Benevolent Association, supra (92 N Y . 2 d at 331), pursuant to the duty to negotiate: "where a past practice between a public employer and its current employees is established, involving a mandatory subject of negotiation, the Taylor Law would bar the employer from discontinuing that practice without prior negotiation [citations omitted]." In addition to the case at bar, the Appellate Division First Department and the Appellate Division Third Department have upheld PERB's use of the test articulated by PERB in its July 2007 decision, to determine whether a bargaining obligation attaches to a non-contractual past practice. Matter of Manhasset Union Free Sch. Dist. (Manhasset Educational Support Pers. Ass'n., NYSUT, AFT, AFL-CIO), 41 PERB \ 3005 (2008), confirmed and remitted on other grounds sub nom. Matter of Manhasset Union Free Sch. Dist. v. New York State Pub. Empl. Relations Bd, 61 A.D.3d 1231 (3d Dep't 2009); and Matter of Fashion Inst, of Tech. (United College Empls. of the Fashion Inst, of Tech.), 41 PERB 3010 (2008), confirmed sub nom. Fashion Inst, of Tech. v. New York State Pub. Empl. Relations Bd., 68 A.D.3d 605 (1st Dep't 2009). And, as set 20 forth above, PERB's rulings on such matters are entitled to great deference. Lynbrook, 48 N.Y.2d 404. Under this test, a public employer violates CSL § 209-a.l(d) when it unilaterally alters a non-contractual past practice concerning a mandatorily negotiable term and condition of employment (also known as a mandatory subject of negotiation) for bargaining unit employees, when the practice was unequivocal and was continued uninterrupted for a period of time sufficient, under the circumstances, to create a reasonable expectation among the affected unit employees that the practice would continue. Manhasset, 41 PERB at 3024. The reasonableness of the expectation among the affected employees that a practice will continue can be presumed from the duration of the practice, with consideration of the specific circumstances under which the practice existed. County of Nassau, 24 PERB ]f 3029 (1991). Following the prima facie showing, an employer may present a defense demonstrating that it lacked either actual or constructive knowledge of the practice. Manhasset, 41 PERB at 3024. However, constructive knowledge exists when the past practice is reasonably subject to the employer's managerial and/or supervisory responsibilities and obligations. Id. 21 A negotiable past practice that constitutes a term and condition of employment does not require a contractual source of right. Indeed, only because there is no contractual source of right to the benefit does PERB have jurisdiction to prevent the District's unilateral action to alter the practice under CSL §§ 205.5(d) and 209-a. 1(d). Matter of Aeneas McDonald Police Benevolent Assn., supra; Matter of Roma v. Ruffo, 92 N.Y.2d 489 (1998). The District does not challenge PERB's test to determine whether a binding Taylor law past practice exists. Rather, it asserts that the agency should have accepted as conclusive the arbitrator's dicta that the District's history of paying the at-issue reimbursements did not constitute a past practice cognizable under the parties' collective bargaining agreement, and that the record does not establish that the Association and/or current bargaining unit employees had a reasonable expectation that the practice would continue. The arbitrator acknowledged that he had no jurisdiction to interpret or enforce the Taylor Law, nor did he. (R. 89). He also found that he had no jurisdiction with respect to matters not set forth in the contract itself. (R. 89). The arbitrator found that the agreement lacked any language addressing reimbursement, and, further, that it did not contain a maintenance of standards clause requiring the continuation of non-contractual past practices or any clause 22 addressing matters not covered by the contract. (R. 90). Having found no provision in the bargaining agreement addressing the issue of Medicare Part B reimbursement, and having no jurisdiction to consider non-contractual past practices and Taylor Law rights to reimbursement, the arbitrator's comments were wholly gratuitous dicta and without any weight or binding effect on PERB. 5 The arbitrator's suggestion that there was no past practice because the parties had not reached an agreement concerning the practice and/or that the payments were voluntary was, moreover, clearly repugnant to the Board's settled construction of negotiable past practices. It is unclear what, i f any, standards the arbitrator may have been applying regarding past practices. Not only did the arbitrator acknowledge that he did not have jurisdiction regarding past practices, he did not apply the standard that PERB applies when determining whether a past practice exists for purposes of the Taylor Law. That judicially approved test, exhaustively reviewed by PERB in its M y 2007 Decision and Order, eschews, as antithetical to the Taylor Law, any requirement 5 Notably, in the context of enforcing arbitration awards this Court and the United States Supreme Court have noted the unimportance and irrelevance of an arbitrator's opinion, as opposed to his/her award. See, NYSCOPBA v. State, 94 N.Y.2d 321, 327 (1999); and United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 597-598 (1960) (Courts may not examine arbitrator's reasoning as opposed to award; arbitrator is not even obligated to provide explanation of their awards). 23 of proof of an agreement or any mutual understanding between the public employer and the employee organization to find that a past practice exists. (R. 747-750). Therefore, PERB was not bound by and did not err in rejecting the arbitrator's dicta. As explained by PERB in Matter of New York Transit Authority [Bordanski], 4 PERB \ 3031(1971), in striking the balance between encouraging public employers and employee organizations to agree upon procedures for the resolution of disputes, and PERB's non-delegable jurisdiction to establish procedures for the prevention of improper practices and protect public employees' guaranteed Taylor Law rights, PERB can not be required to defer to a determination made by an arbitrator "and certainly should not defer to such a determination where the Board concludes that the statutory scheme is not effectuated by an award." Therefore, the Board adopted "a policy of deference to arbitration under well defined standards." Those standards include a requirement that the Board must be satisfied that "the determination of the arbitrator was not clearly repugnant to the purposes and polices of the [Taylor Law]." As later explained in Matter of Herkimer County BOCES, supra, the filing of a grievance by a public sector union does not in any way constitute an 24 election of forums that divests PERB of jurisdiction (20 PERB at 3109). Rather, PERB's deferral policy permits examination of whether the bargaining agreement is a source of right. PERB's refusal to accept as binding the dicta of the arbitrator in this case is not disrespectful of public policy favoring the resolution of contractual disputes through agreed upon arbitration procedures. PERB conditionally dismissed the charge to permit an arbitrator to determine whether a contractual source of right existed. That conditional dismissal was also consistent with the limitation of CSL § 205.5(d), which prohibits PERB from "exercising jurisdiction over an alleged violation of [a collective bargaining] agreement that would not otherwise constitute an improper employer or employee organization practice." POINT IV SUBSTANTIAL EVIDENCE SUPPORTS PERB'S DETERMINATION THAT THE RELEVANT HISTORY OF REIMBURSING MEDICARE PART B INSURANCE PREMIUMS CONSTITUTES A NEGOTIABLE PAST PRACTICE The record shows that the District's practice of reimbursing Medicare Part B premiums after retirement for employees who became Medicare eligible was unequivocal and continued uninterrupted since the early 1980s. Although the reimbursements were required by the District's previous insurance provider until 25 1988, the District continued reimbursement for Medicare Part B premiums after the new provider no longer required it to do so. (R. 136). That the District had either actual or constructive knowledge of the practice is established by the fact that it paid the reimbursements for many years, and the payments were subject to its managerial responsibilities and obligations. (R. 133-136, 355). Indeed, the June 2003 announcement confirms both the existence of the practice and the employer's actual knowledge of it. (R. 355). Although the extended period of the District's practice alone would normally have constituted sufficient circumstantial evidence to establish the presumption that the affected active employees could reasonably expect it to continue, PERB found that the stipulated fact that none had ever received the benefit created an ambiguity as to the strength of that presumption in this case. (R. 157-158). Therefore, without abandoning the presumptions altogether, the Board remanded the matter to the assigned A L J to take further evidence regarding whether the Association and/or current employees had actual or constructive knowledge of the benefit. (R. 158). Except for two, all of the Association's witnesses were active employees at or near the time of the June 12, 2003 announcement, and several were officers of the Association. Each testified that he or she learned of the reimbursement 26 practice from other active or former employees before the announcement. (E.g., R. 171, 176, 186-191, 193-194, 199, 201, 206-207, 210-211, 217, 220-221, 223- 225, 228-230, 233, 241, 243-247, 249-251, 253-256). Therefore, the Board concluded that the evidence was sufficient to resolve ambiguity the Board found in the parties' stipulation and established that both the Association and unit employees had sufficient knowledge of the practice at time of the announced discontinuance of it to demonstrate a reasonable expectation that it would continue. (R. 22). The Board held that a bargaining obligation attached. (R. 23). The standard of judicial review applicable to the factual predicate for PERB's determination based on the record of a hearing is very limited. Manhasset Union Free Sch. Dist. v. New York State Pub. Empl. Relations Bd., 61 A.D.3d 1231, 1233 (3d Dep't 2009), quoting Matter of Civil Serv. Empls. Ass'n. v. New York State Pub. Empl. Relations Bd., 301 A.D.2d 946, 947 (3d Dep't 2003) (In reviewing PERB's determination, the court's inquiry is "limited to whether [it] is supported by substantial evidence which, in turn, depends upon whether there exists a rational basis in the record as a whole to support the findings upon which such determination is based"); Matter of Uniondale Union Free Sch. Dist. v. Newman, 167 A.D.2d 475, 477 (2d Dep't 1990), appeal denied 77 N.Y.2d 809 (1991), quoting Matter of Collins v. Codd, 38 N.Y.2d 27 269, 271 (1976) ("Where an agency's determination is supported by substantial evidence, it is beyond judicial review, and a reviewing court may not 'weigh the evidence or reject the choice made by [such agency] where the evidence is conflicting and room for choices exists."). The Court should not "assess the credibility of the testimony presented." Civil Serv. Empls. Ass 'n. v. New York State Pub. Empl. Relations Bd., 2 A.D.3d 1197, 1198 (3d Dep't 2003), quoting Matter ofRomaine v. Cuevas, 305 A.D.2d 968, 969 (3d Dep't 2003). There exists an entirely rational basis in the record to support PERB's determination that active employees and the Association knew of the District's practice and, therefore, given its duration, could reasonably expect it to continue. The testimony revealing the Association's and the employees' knowledge of the practice was carefully and thoroughly scrutinized and analyzed by the A L J and by the Board, both finding that the witnesses credibly testified that they knew of the practice before the announcement of its termination. (R. 19-22, 302-315). The witnesses' awareness of the practice does not require documentary corroboration. Each testified under oath concerning his or her knowledge and how that knowledge was obtained. A lack of documentary evidence does not defeat their sworn testimony establishing that they were aware of the practice before the announcement of its termination. The District well knew that active 28 employees reasonably expected the practice to continue. The announcement affirmatively advised each active employee that the practice would be discontinued, confirming that the active employees knew of the practice and expected it to continue. (R. 355). There would be no need to notify employees of a change in practice if there were no practice. Nor was the testimony on which the Board relied hearsay. The testimony was presented to establish awareness of the practice, rather than the truth of the matter, which was already stipulated to and admitted. See, Bergstein v. Bd. of Ed. Union Free Sch Dist. No. 1 of Town of Ossining, 34 N.Y.2d 318 (1974). In addition, the credited witnesses testified that they learned of the existence of the practice from other current employees, and former employees, demonstrating that others were also aware of the practice. Without conceding that it is hearsay, to the extent that such testimony demonstrating that others were also aware of the practice may be hearsay, it is, nonetheless, probative and admissible in PERB's administrative proceedings, where the technical rules of evidence do not apply. 4 N Y C R R § 212.4(d), Matter of Gray v. Adduci, 73 N.Y.2d 741, 742 (1988); Matter of JMH, Inc. v. New York State Liq. Auth., 61 A.D.3d 1260 (3d Dep't 2009). 29 The District wants this Court to re-weigh the evidence and reject PERB's assessment of the credibility of the witnesses or reject the choice made by PERB, which a reviewing court should not do. By way of illustration, the District complains that witnesses testified that they learned of the practice from Ms. Bryant, a former employee, who the District claimed had not yet received reimbursement for her Medicare Part B premium. (District's Brief, pp. 40-41). However, that Ms. Bryant had not yet received the benefit does not mean that she did not know of the practice or diminish the fact that the active employees learned of its existence from her. Nor is the District's assertion that the Association never demanded negotiations relevant. As established by the Association, the benefit existed for the Association and its unit members by virtue of the established Taylor Law past practice. There was absolutely no need or legal duty to negotiate what already existed. Nor was the testimony proffered by two District witnesses relevant or worthy of any weight. The District asserts that its two witnesses (Janice Darling and Kathryn Blackman) conducted pre-retirement interviews with unit members, and that during those sessions none of the unidentified unit members gave any indication of awareness of Medicare Part B reimbursement. However, as 30 relevant, those witnesses were only asked i f the unidentified members offered that they had knowledge of the payments, or asked questions about the reimbursement. There was no inquiry probative of whether those members had knowledge of the reimbursement. (R. 271, 281, 282). Furthermore, the witnesses' testimony confirmed that the District made unit members who are potential retirees aware of the reimbursement (R. 275, 282), and that the reimbursement payments were made to eligible retirees (R. 265-297). The Court should defer to PERB's determination that the District violated CSL § 209-a.l(d). POINT V THE COURT SHOULD DEFER TO PERB'S DETERMINATION THAT THE RECORD DOES NOT ESTABLISH THAT THE DISTRICT SATISFIED ITS D U T Y TO NEGOTIATE WITH THE ASSOCIATION OR THAT THE ASSOCIATION WAIVED ITS BARGAINING RIGHTS The District contends that the record establishes that it satisfied its duty to negotiate with the Association before announcing that it was going to terminate the practice. There is, however, no such evidence. The absence of a contractual source of right to the Association concerning Medicare Part B reimbursements does not establish that the District satisfied its bargaining obligations concerning its desire to discontinue the practice of 31 payment. To the contrary, the stipulated fact that the District continued paying the benefits for a substantial period of time, without any contractual obligation to pay, established the enforceable past practice and the bargaining obligation recognized by PERB. Likewise, the absence of a contractual reference to Medicare Part B premiums does not establish a waiver of the Association's right to negotiate concerning termination of the practice. The party alleging a waiver of Taylor Law rights bears the burden of establishing it. To establish such a waiver, there must be evidence of an "intentional relinquishment of a known right with both knowledge of its existence and an intention to relinquish it [citations omitted]," and "[s]uch a waiver must be clear, unmistakable and without ambiguity." In Matter of Civil Serv. Empls. Ass'n. v. Newman, 88 A.D.2d 685, 686 (3d Dep't 1982), appeal dismissed 57 N.Y.2d 775 (1982). This record is devoid of any evidence of waiver, much less evidence of the Association's intentional, unmistakable, unambiguous waiver of the at-issue Taylor Law bargaining right. The absence of any contractual reference to Medicare Part B premiums does not establish the Association's "intentional relinquishment" of its bargaining rights concerning the practice. Indeed, the 32 benefit was established via the existing past practice and therefore enforceable before PERB. The District's reliance on the decision of an A L J in Waverly Cent. Sch. Dist. (Waverly Ass'n of Support Pers.), 20 PERB \ 4569 (1997), is misplaced. This A L J decision would not be binding on the Board and, in any event, is materially distinguishable. In Waverly, there had been a non-contractual practice, prior to the formation of the union, of permitting employees to take leave without pay, but with benefits. After the employees obtained collective bargaining representation, the employer and the union negotiated their first collective bargaining agreement, which expressly permitted "unpaid leave without pay or benefits." The contract also stated that the agreement superseded any inconsistent practice. The A L J held that the prior practice of providing unpaid leave with benefits was inconsistent with the newly negotiated express contractual provision only allowing unpaid leave without benefits. (Waverly, 20 PERB at 4679-80). Therefore, the A L J dismissed an improper practice charge alleging that the employer violated the Taylor Law by terminating the practice of paying benefits to employees on unpaid leave. (Waverly, 20 PERB at 4680). Unlike Waverly, in this case the parties' collective bargaining agreements are entirely silent with respect to Medicare Part B insurance, and with respect to 33 whether such premiums will or will not be reimbursed. As a result, there is no basis to claim here that the practice of payment was superceded by or inconsistent with a contractual obligation to fund other forms of insurance. The collective bargaining agreements do not establish any agreement to terminate that practice or any waiver, and no such claim was raised by the District despite the existence of the relied upon contractual language in previous agreements while the practice continued. Thus, neither the District's claim that section 3.6 of the parties' bargaining agreements (R. 100), stating: "This agreement constitutes the full and complete commitments of the [parties] whether or not any item contained in the agreement was known or should have been known, or was or was not discussed by the parties at the moment when they entered into this agreement.") or section 18.1 (R. 131, stating: "The provisions of this contract shall supersede any rules, regulations, or practice of the District which shall be contrary to or inconsistent with its terms.") are relevant. Not only is there no evidence of a clear and unmistakable waiver, which can not be implied, the controlling Taylor Law past practice is not the product of any commitment by the parties subject to inclusion in the parties' various negotiated agreements; and the benefit is not inconsistent with or contrary to, and thus not subject to being superceded by the agreement. 34 Finally, this dispute did not become moot when, on January 19, 2005, while the improper practice charge was pending before PERB, the parties entered into a new collective bargaining agreement covering the period of July 1, 2004 to June 30, 2007. This agreement, like the prior agreements, is silent as to the District's obligations concerning reimbursement of Medicare Part B premiums, and the District concedes that the subject was not negotiated. Such silence cannot demonstrate that the parties reached a settlement concerning the improper practice charge, or that the Association somehow gave up its rights to the benefits of the past practice, which it was litigating before PERB to enforce. That the parties may have agreed that the District would pay premiums for other forms of insurance after retirement does not mean or even suggest that the Association was agreeing to the discontinuance of the District's practice of reimbursing employees for Medicare Part B premiums or to settlement of the improper practice charge, any more than it would mean that the District was conceding the enforceability of the practice. At issue is a non-contractual past practice that the District may not discontinue without affirmatively negotiating with the Association. The District failed to perform this duty. Because the questions posed involve "the interpretation of a collective bargaining agreement and the application of the Civil Service Law to that 35 agreement [and] are within the area of PERB's expertise and specifically delegated authority (see, Civil Service Law § 205.5 (d)), its decision is entitled to substantial deference." Greece Support Service Employees Ass'n., NEA/New York v. Pub. Empl. Relations Bd, 250 A.D.2d 980, 982 (3d Dep't 1998). The Court should defer to PERB's determination that the parties' collective bargaining agreements do not establish: that the District satisfied its bargaining obligations concerning its announced terminating the at-issue practice; that there was any waiver by the Association of its bargaining rights concerning that practice; or that the controversy is now moot. POINT VI THE AT ISSUE BENEFIT IS NOT A N UNCONSTITUTIONAL GIFT OF PUBLIC FUNDS Reimbursement of current employees for Medicare Part B premiums after they retire does not constitute an unconstitutional gift of public funds (NY Const, art VIII, section 1). The reimbursements represent a form of compensation earned by employees while employed by the District and paid pursuant to the legal obligation of the District created by the enforceable Taylor Law past practice. Gagliardo v. Dinkins, 89 N.Y.2d 62, 74-75 (1996); Matter of Bd. Of Educ. Union Free Sch. Dist. No. 3 of the Town of Huntington v. Associated Teachers of Huntington, Inc., 30 N.Y.2d 122 (1972); Matter of 36 Fashion Inst. Of Tech. (United College Empls. of the Fashion Inst of Tech.), 41 PERB 3010 (2008), confirmed sub nom Fashion Inst, of Tech. v. New York State Pub. Empl. Relations Bd., 68 A.D.3d 605 (1st Dep't 2009). CONCLUSION The Court should affirm the decision of the Appellate Division dismissing the petition and confirming PERB's determination, and grant such further relief as the Court may deem just and proper. Dated: January 7, 2013 Latham, New York 12110 Respectfully submitted, RICHARD E. CASAGRANDE Attorney for Respondent Chenango Forks Teachers Association 800 Troy-Schenectady Road Latham, New York 12110-2455 Tel. N o t e l 8) 213-6000 FREDERICK K. REICH Of Counsel 104959 37