In the Matter of Chenango Forks Central School District, Appellant,v.New York State Public Employment Relations Board et al., Respondents.

Brief

N.Y.April 25, 2013

Time Requested: 10 Minutes To Be Argued by David P. Quinn STATE OF NEW YORK – COURT OF APPEALS In the Matter of the Application of the CHENANGO FORKS CENTRAL SCHOOL DISTRICT, Petitioner-Appellant, v. NEW YORK STATE PUBLIC EMPLOYMENT RELATIONS BOARD and the CHENANGO FORKS TEACHERS ASSOCIATION, NYSUT, AFT, AFL-CIO LOCAL 2561, Respondents-Respondents. __________________ Albany County Index No. 3444-10 __________________ BRIEF OF RESPONDENT-RESPONDENT NEW YORK STATE PUBLIC EMPLOYMENT RELATIONS BOARD DAVID P. QUINN Attorney for Respondent NYS Public Employment Relations Board Office and P. O. Address 80 Wolf Road - Fifth Floor- Room 500 Albany, NY 12205-2656 Telephone: (518) 457-2678 Fax: (518) 457-2664 Dated: January 4, 2013 Table of Contents Page Preliminary Statement................................................................................................1 Questions Presented ...................................................................................................2 Statement of The Case Statutory Framework ............................................................................................4 Procedural History and Record Facts ...................................................................6 ARGUMENT POINT I PERB WAS NOT ARBITRARY, CAPRICIOUS OR AFFECTED BY ERROR OF LAW IN CONCLUDING THAT THE REIMBURSEMENT OF MEDICARE PART B INSURANCE PREMIUMS FOR ACTIVE EMPLOYEES AFTER THEY RETIRE UPON REACHING AGE 65 IS MANDATORILY NEGOTIABLE UNDER THE TAYLOR LAW .....................................................13 POINT II PERB WAS NOT ARBITRARY, CAPRICIOUS OR AFFECTED BY ERROR OF LAW IN CONCLUDING THAT THE DISTRICT’S PRACTICE OF REIMBURSING MEDICARE PART B INSURANCE PREMIUMS FOR ACTIVE EMPLOYEES AFTER THEY RETIRE UPON REACHING AGE 65 ESTABLISHED A NEGOTIABLE PAST PRACTICE COGNIZABLE UNDER THE TAYLOR LAW...............................................................................................15 POINT III PERB WAS NOT ARBITRARY, CAPRICIOUS OR AFFECTED BY ERROR OF LAW IN CONCLUDING THAT IT WAS NOT BOUND BY THE ARBITRATOR’S OPINION THAT THE DISTRICT HAD NO BINDING PAST PRACTICE OF REIMBURSING ACTIVE EMPLOYEES FOR MEDICARE PART B PREMIUMS AFTER THEY RETIRE UPON REACHING AGE 65...............................................................................................19 1 A. The arbitrator’s opinion that there is “no binding past practice” is dicta to the extent it was intended to determine the District’s obligations under the Taylor Law..........................................................................................19 B. The arbitrator’s opinion that there is “no binding past practice” is repugnant to the Taylor Law to the extent it was intended to determine the District’s collective bargaining obligations.. ................................................22 C. The Court should defer to PERB’s decision to reject the standard for a past practice applied by the arbitrator in interpreting the contract and to reopen the improper practice charge...................................................................24 POINT IV PERB WAS NOT ARBITRARY, CAPRICIOUS OR AFFECTED BY ERROR OF LAW IN CONCLUDING THAT THE RECORD DOES NOT SUPPORT THE DISTRICT’S AFFIRMATIVE DEFENSES THAT IT SATISFIED ITS DUTY TO NEGOTIATE WITH THE ASSOCIATION CONCERNING ITS ANNOUNCEMENT THAT IT WAS TERMINATING THE AT-ISSUE PRACTICE OR THAT THE ASSOCIATION WAIVED ITS BARGAINING RIGHTS CONCERNING THAT ANNOUNCEMENT .........................................26 Conclusion ...............................................................................................................31 2 TABLE OF AUTHORITIES Page(s) CASES Bergstein v Bd of Ed Union Free Sch Dist No. 1 of Town of Ossining, 34 NY2d 318 (1974) ...........................................................................................18 Board of Educ of the City Sch Dist of the City of Buffalo v Buffalo Tchrs Fedn, Inc, 89 NY2d 370, 377 (1996)..............................................................4, 24 Bryant v Board of Educ, 4 Misc.3d 423 [Sup Ct Broome County 2004], revsd and remanded 21 AD3d 1134 [3d Dept 2005], or remand 29 Misc.3d 706 [Sup Ct Broome County 2010]), app pending .................................................................................6 Ciba-Geigy Pharmaceuticals Division v N.L.R.B.,72, 2F.2d 1120, 1124-26 (3d Cir 1983) ....................................................................25 City of Oneida Police Benevolent Assn (City of Oneida), 15 PERB ¶ 3096 (1982) ......................................................................................14 County of Erie (Civil Serv Emps Assn, Inc., Local 1000, AFSCME, AFL- CIO), 26 PERB ¶ 3054 (1993), confd sub nom. Civil Serv Emps Assn Inc., Local 1000, AFSCME, AFL–CIO v New York State Pub Empl Relations Bd, 213 AD2d 897 (3d Dept 1995) ....................................................20 Ferreri v New York State Thruway Auth, 62 NY2d 855 (1984) ...........................................................................................27 Greece Support Service Employees Assn, NEA/New York v Pub Empl Relations Bd, 250 AD2d 980, 982 (3d Dept 1998) ............................................30 Herkimer County BOCES, 20 PERB ¶ 3050 (1987)..................................................7 In Matter of Civil Serv Empls Assn. v Newman, 88 AD2d 685, 686 (3d Dept 1982), affd on opinion below 61 NY2d 1001 (1984) ..................................................................................................................27 Manhasset Union Free Sch Dist v New York State Pub Empl Relations Bd, 61 AD3d 1231 (3d Dept, 2009) ..........................................................................23 Matter of Berenhaus v Ward, 70 NY2d 436, 444 (1987) ...................................................................................18 Matter of Board of Educ of City School Dist of City of New York v New York State Pub Empl Relations Bd, 75 NY2d 660 (1990) .............................................................................................5 Matter of Board of Educ Union Free Sch Dist No. 3 of the Town of Huntington v Associated Teachers of Huntington, Inc, 30 NY2d 122 (1972) ...........................................................................................14 Matter of City of Poughkeepsie v Newman, 95 AD2d 101 (3d Dept), appeal dismissed 60 NY2d 859 (1983), lv denied 62 NY2d 602 (1984) .................................................................................6 Matter of City of Watertown v New York State Pub Empl Relations Bd, 95 NY2d 73, 81 (2000) .......................................................................................25 Matter of Civil Serv Emps Assn Inc., Local 1000, AFSCME, AFL–CIO v New York State Pub Empl Relations Bd, 213 AD2d 897 (3d Dept 1995) ...........................................................................26 Matter of Cohoes Police Benevolent Protective Assn (City of Cohoes), 27 PERB ¶ 3058 (1994) ..................................................................................4, 13 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 AD3d 605 (1st Dept 2009) ...................16 Matter of Gray v Adduci, 73 NY2d 741, 742 (1988) ...................................................................................18 Matter of Incorporated Vil of Lynbrook v New York State Pub Empl Relations Bd, 48 NY2d 398 (1979) .................................................................................4, 13, 14 Matter of JMH, Inc. v New York State Liq Auth, 61 AD3d 1260 (3d Dept 2009) ...........................................................................18 Matter of Manhasset Union Free Sch Dist (Manhasset Educational Support Personnel Assn, 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 AD3d 1231 (3d Dept 2009) .....................................15, 23 Matter of New York City Trans Auth v New York State Pub Empl Relations Bd, 174 AD2d 574 (2d Dept 1989).....................................................................28 Matter of Newark Valley Cent Sch Dist v New York State Pub Empl Relations Bd, 83 NY2d 315, 320 (1994) ........................................................5, 24 Matter of Patrolmen's Benevolent Assn. of Vil. of Walden v Kinsella, 263 AD2d 885, 888 (3d Dept 1999) ...................................................................30 Matter of Pell v Board of Educ, 34 NY2d 222, 231 (1974) ...................................................................................17 Matter of Poughkeepsie Professional Firefighters’ Assn, Local 596, IAFF, AFL-CIO-CLC v New York State Pub. Empl Relations Board, 6 NY3d 514, 522 (2006) .....................................................................................24 Matter of State of New York (Div of Military & Naval Affairs) v New York State Pub Empl Relations Bd, 187 AD2d 78, 82 (3d Dept 1998), lv denied 72 NY2d 808 (1988)......................5 Mobil Exploration and Producing U.S., Inc. v N.L.R.B, 200 F.3d 230, 242-44 (5th Cir 1999) ...................................................................26 N.L.R.B. v Owners Maintenance Corp., 581 F.2d 44, 48 (2d Cir 1978) ............................................................................25 New York City Transit Authority (Bordansky), 4 PERB ¶ 3031 (1971) ........................................................................................20 Troy Uniformed Firefighters Assn, Local 2304, IAFF [City of Troy], 10 PERB ¶ 3015 [1977])............................................................................................6 Waverly Cent Sch Dist (Waverly Assn of Support Personnel), 20 PERB ¶ 4569 (1997) ......................................................................................28 STATUTES CPLR 7804 (g) .........................................................................................................12 CPLR Article 78.........................................................................................................1 Civil Service Law (“CSL”) § 205.5 (d)....................................................................................................passim CSL § 200................................................................................................................4, 24 § 201.4...................................................................................................................4 § 209-a ..................................................................................................................5 § 209-a.1 (d).................................................................................................passim §§ 203, 204............................................................................................................4 OTHER AUTHORITIES 4 NYCRR § 212.4 (d) ..............................................................................................18 PRELIMINARY STATEMENT Respondent-Respondent New York State Public Employment Relations Board (“PERB” or “Board”) submits this brief in opposition to the appeal taken by Petitioner-Appellant Chenango Forks Central School District (“District”) from a May 12, 2012 Judgment of the Appellate Division, Third Department, in a CPLR Article 78 proceeding that the District commenced for review of an April 22, 2010 final administrative decision and remedial order that PERB issued after a hearing in an improper practice proceeding conducted pursuant to Civil Service Law (“CSL”) § 205.5 (d). In the Judgment under appeal, the Appellate Division confirmed PERB’s determination that the District violated CSL § 209-a.1 (d) by failing to satisfy its collective bargaining obligations with Respondent-Respondent Chenango Forks Teachers Association, NYSUT, AFT, AFL-CIO, Local 2561 (“Association”) before it announced to employees in the Association’s collective bargaining unit that it was terminating its longstanding practice of reimbursing them for Medicare Part B premiums after they retire, upon reaching age 65. In reaching that conclusion, the Court rejected the District’s argument that PERB was bound by an arbitrator’s November 6, 2004 opinion under the parties’ collective bargaining agreement. In that award, the arbitrator concluded that the parties’ agreement contained no language requiring the at-issue reimbursements and that it did not - 1 - provide for the maintenance of non-contractual practices. In considering the merits of the contract grievance, the arbitrator observed that “[t]he voluntariness of the District’s conduct, given the origin of the District’s Medicare Part B reimbursements, does not contain sufficient evidence of a mutual understanding and agreement to establish a binding past practice.” The Appellate Division agreed with PERB that the arbitrator’s opinion regarding the past practice was not binding on PERB’s authority to determine the merits of the alleged violation of CSL § 209- a.1 (d), and, in any event, that it was repugnant to the provisions and policies of CSL Article 14 (“Taylor Law”). Two Justices dissented, stating that they would grant the petition on the grounds that PERB should have deferred to the arbitrator’s conclusion that there was no binding past practice and that the award is not repugnant to the Taylor Law. QUESTIONS PRESENTED 1. Was PERB arbitrary, capricious or affected by error of law in concluding that the reimbursement of Medicare Part B insurance premiums for active employees after they retire upon reaching age 65 is mandatorily negotiable under the Taylor Law? The Appellate Division correctly answered the question: “No.” - 2 - 2. Was PERB arbitrary, capricious or affected by error of law in concluding that the District’s practice of reimbursing Medicare Part B insurance premiums for active employees after they retire upon reaching age 65 established a negotiable past practice cognizable under the Taylor Law? The Appellate Division correctly answered the question: “No.” 3. Was PERB arbitrary, capricious or affected by error of law in concluding that it was not bound by the arbitrator’s opinion that the District had no binding past practice of reimbursing active employees for Medicare Part B premiums after they retire upon reaching age 65? The Appellate Division correctly answered the question: “No.” Two dissenting Justices answered the question: “Yes.” 4. Was PERB arbitrary, capricious or affected by error of law in concluding that the record does not support the District’s affirmative defenses that it satisfied its duty to negotiate with the Association concerning its announcement that it was terminating the at-issue practice or that the Association waived its bargaining rights concerning that announcement? The Appellate Division correctly answered the question: “No.” - 3 - STATEMENT OF THE CASE Statutory Framework PERB is an executive agency of the State of New York, established to administer the Public Employees’ Fair Employment Act (CSL, Article 14), known as the Taylor Law. The Taylor Law grants public employees the rights of organization and collective representation in order to ameliorate conditions that can lead to strikes and other interruptions in the orderly flow of government services. See CSL § 200; Board of Educ of the City Sch Dist of the City of Buffalo v Buffalo Tchrs Fedn, Inc, 89 NY2d 370, 377 (1996). It requires public employers and employee organizations to negotiate in good faith in the determination of represented employees’ terms and conditions of employment (CSL §§ 203, 204), which are broadly defined as “salaries, wages, hours and other terms and conditions of employment” (CSL § 201.4). Among the panoply of “other terms and conditions of employment” for which there is a bargaining obligation under the Taylor Law is the payment of medical insurance premiums for active employees after they retire, because such payments are wages earned during employment, albeit paid later. See, Matter of Incorporated Vil of Lynbrook v New York State Pub Empl Relations Bd, 48 NY2d 398 (1979); Matter of Cohoes Police Benevolent Protective Assn (City of Cohoes), 27 PERB ¶ 3058 (1994). - 4 - Under CSL § 205.5 (d), PERB has exclusive, nondelegable jurisdiction to develop procedures to prevent conduct defined in CSL § 209-a, called improper practices, and to issue remedial orders. However, CSL § 205.5 (d) further provides that PERB “shall not have authority to enforce an agreement between an employer and an employee organization and shall not exercise jurisdiction over an alleged violation of such an agreement that would not otherwise constitute an improper employer or employee organization practice.” It is an improper practice for a public employer to refuse to negotiate concerning mandatorily negotiable terms and conditions of employment. See, CSL § 209-a.1 (d); Matter of Board of Educ of City School Dist of City of New York v New York State Pub Empl Relations Bd, 75 NY2d 660 (1990). Therefore, a public employer violates CSL § 209-a.1 (d) by unilaterally terminating non-contractual past practices concerning represented employees’ mandatorily negotiable terms and conditions of employment. Id. See also, Matter of Newark Valley Cent Sch Dist v New York State Pub Empl Relations Bd, 83 NY2d 315, 320 (1994); Matter of State of New York (Div of Military & Naval Affairs) v New York State Pub Empl Relations Bd, 187 AD2d 78, 82 (3d Dept 1998), lv denied 72 NY2d 808 (1988). Fiscal advantages associated with such unilateral actions do not affect the negotiability of the subject or the duty to negotiate concerning the desired changes, but go to the merits of the parties’ positions in negotiations and the wisdom of any - 5 - agreement reached. See Matter of City of Poughkeepsie v Newman, 95 AD2d 101 (3d Dept), appeal dismissed 60 NY2d 859 (1983), lv denied 62 NY2d 602 (1984). Procedural History and Record Facts On June 12, 2003, Kathy Blackman, the District’s Business Administrator, sent a letter to all District employees, stating (Record on Review [“R.”], 133, 355): 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. [Emphasis added.] In response, on September 12, 2003, the Association filed an improper practice charge, alleging that the District violated CSL § 209-a.1 (d) by failing to satisfy its bargaining obligations concerning Blackman’s announcement. R., 66-69.1 After the District filed an answer to the improper practice charge (R., 70-79), the parties stipulated that the Association had filed a contract grievance concerning 1 The District also notified current retirees that they too would no longer be reimbursed for Medicare Part B premiums (R., 134, Stipulation ¶ 8). In response, several retirees brought a proceeding challenging that action. They prevailed at Supreme Court (Bryant v Board of Educ, 4 Misc.3d 423 [Sup Ct Broome County 2004]). On appeal, the Appellate Division reversed and remanded the matter for additional facts (21 AD3d 1134 [3d Dept 2005]). On remand, Supreme Court held that the District could not terminate the practice for current retirees (29 Misc.3d 706 [Sup Ct Broome County 2010]). The District recently perfected its appeal form that Judgment. However, because the District has no Taylor Law duties regarding current retirees, (see, e.g., Troy Uniformed Firefighters Assn, Local 2304, IAFF [City of Troy], 10 PERB ¶ 3015 [1977]), the merits of that case are not relevant here. - 6 - the dispute, suggesting that the Association might have had a contractual source of right to receive the at-issue benefits and, therefore, that PERB lacked jurisdiction to entertain the matter under CSL § 205.5 (d), which bars PERB from asserting jurisdiction over a breach of contract. Accordingly, without assessing the merits of the Association’s grievance, an Administrative Law Judge (“ALJ”) deferred the dispute to the parties’ contractual grievance procedure pursuant to the Board’s policy under Herkimer County BOCES, 20 PERB ¶ 3050 (1987) for a determination in the appropriate forum as to whether the Association, in fact, had a contractual source of right regarding the at-issue dispute. R., 80-81. In a November 6, 2004 award, an arbitrator denied the Association’s grievance, finding that the District had no contractual obligation to reimburse the premiums. R., 82-92. The arbitrator emphasized that the agreement lacked language requiring such payments and that it did not contain a maintenance-of- benefits clause requiring the continuation of non-contractual practices. R., 89-90. 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. It was then assigned to an ALJ for further processing. The parties submitted the matter for decision by the ALJ on a stipulated record. R., 132-138. As stipulated, “[t]he District has reimbursed Medicare Part B - 7 - premiums to members and/or retirees 65 years of age or older, since minimally 1980.” R., 135, Stipulation (“Stip.”) ¶ 19. Until 1988, the duty to pay the reimbursements was imposed by the District’s insurance provider, Empire Plan, but in 1988, the District changed the insurance provider to Blue Cross/Blue Shield, which did not require the payments. R. 135-136. However, the District continued to pay the reimbursements. R., 136, Stip. ¶ 23. On June 12, 2003, Blackman announced to all active and retired employees that “[e]ffective July 1, 2003, this practice will no longer continue.” R., 133, 355; Stip. ¶ 6. In an August 22, 2006 decision and recommended order, the ALJ held that the District violated CSL § 209-a.1 (d) and directed it to rescind Blackman’s announcement. R., 139-144. The District filed exceptions to the ALJ’s decision and order with the Board, alleging, inter alia, that: a) the ALJ should have deferred to the arbitrator’s opinion and award where the arbitrator found that the District’s action did not violate the contract and denied the Association’s grievance; b) the District did not have a past practice of reimbursing the cost of the premiums; c) there is no contractual right to such reimbursement; d) the reimbursement of those premiums to retirees is not a term and condition of employment; e) the improper practice charge was rendered moot by the parties’ 2004-2007 collective bargaining agreement, which covers health insurance for current and retired employees and contains a “supersession” - 8 - clause; and (f) the continued payment of the reimbursements would be an unconstitutional gift of public funds. R., 145-146. By interim decision and order dated July 25, 2007, the Board held that the reimbursement of Medicare Part B premiums for current employees after they retire is mandatorily negotiable, and it articulated a test to determine whether a bargaining obligation attaches to non-contractual practices. R., 147-158. As relevant to the instant practice, the Board noted that the parties stipulated that there is no evidence that any active employee had ever received Medicare Part B reimbursements (R., 136, Stip. ¶ 24), which created an ambiguity as to one of the elements of the applicable test to determine the negotiability of the District’s practice – the presumption, established by the duration of the practice, that active employees knew of it and, thus, could reasonably expect it to continue. Therefore, the Board remanded the matter to the ALJ for the limited purpose of taking evidence as 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. 157-158. In all other respects, the Board denied the District’s exceptions. R., 158 On January 30, 2008, the ALJ conducted a hearing for the limited purpose directed by the Board. Fourteen witnesses testified on behalf of the Association - 9 - and two on behalf of the District, and certain documents were introduced into the record. The witnesses were sequestered. R. 168-169. On May 7, 2009, the ALJ issued a decision and order containing an exhaustive analysis of the testimony. R., 300-315. All but one of the Association’s witnesses (David Andrus) are, or had been, members of its bargaining unit; most had been officers of the Association. Because Mr. Andrus was not a member of the bargaining unit, the ALJ found that his awareness of the practice was irrelevant, and she did not consider it further. The ALJ also discounted the testimony of another Association witness (Jeannine Andrus), because she was not an active employee at the time of Blackman’s announcement. Each of the Association’s remaining witnesses testified that he or she was aware of the District’s practice of reimbursing retirees for Medicare Part B premiums upon reaching age 65 at the time of the District’s June 12, 2003 announcement that it was terminating the practice. R., 171, 176, 186-191, 193- 194, 199, 201, 206-207, 210-211, 213, 217, 220-221, 223-225, 228-230, 233-241, 243-247, 249-251, 253-256. All testified that they learned of the practice during conversations with other active and former unit employees before the Districts’ announcement. Id. Therefore, assessing the relevant testimony, the ALJ held: [T]he record credibly 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 - 10 - 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. Accordingly, the ALJ again concluded that the District violated CSL § 209-a.1 (d) by unilaterally announcing the termination of its practice. R. 300-315. Again, the District filed exceptions with the Board. R., 316-317. In its final decision and order, dated April 22, 2010, the Board affirmed the ALJ after carefully reviewing and summarizing the record and the parties’ arguments. R., 15-24. The Board found no basis to reject the ALJ’s assessment of the testimony, including the weight it should be accorded and the credibility of the witnesses that formed the basis of her conclusion that active unit employees were aware of the practice and, thus, could reasonably expect it to continue. After examining and summarizing that testimony, the Board held that the witnesses’ testimony established sufficient awareness of the practice to extinguish the apparent ambiguity associated with the stipulated fact that no active employee had ever received the benefit. It rejected the District’s assertion that the witnesses’ testimony was inadmissible hearsay or required written corroboration, and it again denied the rest of the District’s exceptions. Because each of the elements necessary to establish a negotiable practice was established in the stipulated record and subsequent testimony, the Board concluded that the District violated CSL § 209-a.1 (d) by unilaterally announcing - 11 - the termination of the practice. To remedy the violation of CSL § 209-a.1 (d), the Board directed the District to “rescind the June 12, 2003 announcement discontinuing reimbursement of Medicare Part B premiums to current employees aged 65 or more once they are retired” and to sign and post a PERB-issued notice reflecting the order at locations used to post notices to unit employees R., 23-24. In reaching its conclusion, the Board agreed with the ALJ’s determination that the arbitrator’s opinion that there was no “binding past practice” was dicta in the context of the contractual dispute within the arbitrator’s jurisdiction and, in any event, to the extent that his determination was intended to address the District’s bargaining obligations, it was repugnant to the Taylor Law. This proceeding ensued, and the matter was transferred to the Appellate Division by Albany County Supreme Court under CPLR 7804 (g). The Appellate Division confirmed PERB’s determination, with two Justices dissenting. - 12 - ARGUMENT POINT I PERB WAS NOT ARBITRARY, CAPRICIOUS OR AFFECTED BY ERROR OF LAW IN CONCLUDING THAT THE REIMBURSEMENT OF MEDICARE PART B INSURANCE PREMIUMS FOR ACTIVE EMPLOYEES AFTER THEY RETIRE UPON REACHING AGE 65 IS MANDATORILY NEGOTIABLE UNDER THE TAYLOR LAW In Incorporated Vil of Lynbrook v New York State Pub Empl Relations Bd, 48 NY2d 398, 404 (1979), this Court held that compensation earned while employed, to be paid after retirement, including insurance premiums, is mandatorily negotiable. See, also, Cohoes Police Benevolent Protective Assn (City of Cohoes), 27 PERB ¶ 3058 (1994) (relying on Lynbrook, the Board held that a union's bargaining demand that would require an employer to fund the cost of health insurance premiums for the life of employees retiring on or after the effective date of the agreement was a mandatory subject of negotiations). Under Lynbrook and Cohoes, the negotiability of the subject is not affected by the possibility that no current employees yet qualify to receive the benefit. Therefore, contrary to the District’s argument, the payment of Medicare Part B premiums to active employees after they retire is mandatorily negotiable, as in Lynbrook and Cohoes, because it is compensation that is earned while employed but paid later. - 13 - The District’s reliance on the Board’s decision in City of Oneida Police Benevolent Assn (City of Oneida), 15 PERB ¶ 3096 (1982), lacks merit. In Oneida, the Board held that the at-issue retirement benefits must be paid out during the life of the agreement. However, in Cohoes, the Board reversed that finding based upon its re-examination of Lynbrook. See, Cohoes, note 1. Moreover, contrary to the District’s argument, the practice of reimbursing employees for Medicare Part B premiums after they retire is not an unconstitutional gift of public funds, again, because the right to receive such reimbursements during retirement is compensation earned during active employment. See, Matter of Board of Educ Union Free Sch Dist No. 3 of the Town of Huntington v Associated Teachers of Huntington, Inc, 30 NY2d 122 (1972). Accordingly, PERB respectfully submits that the Appellate Division properly confirmed PERB’s determination that the reimbursement of Medicare Part B insurance premiums for active employees after they retire upon reaching age 65 is mandatorily negotiable. PERB’s determination was legally permissible and breached no constitutional limitations, rights or protections. See, Lynbrook, supra. - 14 - POINT II PERB WAS NOT ARBITRARY, CAPRICIOUS OR AFFECTED BY ERROR OF LAW IN CONCLUDING THAT THE DISTRICT’S PRACTICE OF REIMBURSING MEDICARE PART B INSURANCE PREMIUMS FOR ACTIVE EMPLOYEES AFTER THEY RETIRE UPON REACHING AGE 65 ESTABLISHED A NEGOTIABLE PAST PRACTICE COGNIZABLE UNDER THE TAYLOR LAW A public employer violates CSL § 209-a.1 (d) by unilaterally altering a non- contractual past practice concerning a mandatorily negotiable term and condition of employment for represented employees where the practice was unequivocal and continued uninterrupted for a period of time under the circumstances to create a reasonable expectation among the affected unit employees that the practice would continue. The reasonableness of the expectation among the affected employees that a practice will continue can be presumed from the practice’s duration, with consideration of the specific circumstances under which the practice has existed. Following the prima facie showing, an employer may present a defense demonstrating that it lacked either actual or constructive knowledge of the practice. However, constructive knowledge exists when the past practice is reasonably subject to the employer’s managerial and/or supervisory responsibilities and obligations. See, Matter of Manhasset Union Free Sch Dist (Manhasset Educational Support Personnel Assn, NYSUT, AFT, AFL-CIO), 41 PERB ¶ 3005 - 15 - (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 AD3d 1231 (3d Dept 2009); 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 AD3d 605 (1st Dept 2009). Applying that test here, the stipulated record and testimony show that the District’s pattern of reimbursing active employees’ Medicare Part B premiums after they retire, upon reaching age 65, was unequivocal and continued uninterrupted for a substantial period of time. While the payments were required by the District’s previous insurance provider until 1988, the District voluntarily continued to pay the reimbursements after the new provider no longer required it to do so. That the District had actual or constructive knowledge of the practice is established by the stipulated fact that it paid the reimbursements for many years. In fact, Blackman’s announcement both confirmed the existence of the District’s practice and unilaterally announced its termination. As for the employees’ reasonable expectation that the practice would continue, all but two of the Association’s witnesses were active employees at or near the time of Blackmans’ announcement, and several were officers of the Association. Each testified that he or she learned of the practice from other active or former employees before Blackman’s announcement. Therefore, the Board held - 16 - that the practice was sufficiently known to active employees to bolster the presumption that its duration established a reasonable expectation among them that the practice would continue. Thus, the Board held that a bargaining obligation attached to the District’s announcement that it was terminating its practice. While the Appellate Division properly applied a “substantial evidence” standard of review, for purposes of this Court’s review, PERB respectfully submits that its conclusion was not arbitrary or capricious, because it was supported by a factual foundation yielding a rational basis for the decision. See, Matter of Pell v Board of Educ, 34 NY2d 222, 231 (1974). Indeed, the testimony revealing the employees’ knowledge of the practice was meticulously scrutinized by the ALJ who presided at the hearing and was again carefully reviewed by the Board. Both reached the same conclusion – the witnesses credibly testified that they knew of the practice before Blackman announced its termination. Contrary to the District’s argument, the witnesses’ awareness of the practice does not require documentary corroboration. Each testified under oath to what they knew and how they came by that knowledge. The absence of documentary evidence does not defeat their sworn testimony that they knew of the practice. Moreover, the District itself understood that active employees knew of the practice, as revealed by Blackman’s announcement, which affirmatively advised each of them that the practice would be discontinued. There would have been no - 17 - need for the District to so notify the active employees if it did not believe that they knew of the practice. Likewise, contrary to the District’s argument, the testimony on which the Board relied to show that the witnesses knew of the practice is not hearsay. Although the witnesses testified that they learned of the practice from other active and former employees, the testimony was adduced to establish their awareness of the practice, not to establish the stipulated fact of its existence. See, Bergstein v Bd of Ed Union Free Sch Dist No. 1 of Town of Ossining, 34 NY2d 318 (1974). Moreover, each of the credited witnesses testified that he or she learned of the existence of the practice from other active and former employees, showing that others were also aware of the practice. To the extent that the latter testimony shows that others were also aware of the practice may be grounded in hearsay, it is, nonetheless, probative and admissible in PERB’s administrative proceedings, where the technical rules of evidence do not apply. See, 4 NYCRR § 212.4 (d). See also, Matter of Gray v Adduci, 73 NY2d 741, 742 (1988); Matter of JMH, Inc. v New York State Liq Auth, 61 AD3d 1260 (3d Dept 2009). Most of the District’s remaining arguments regarding the testimony ask the Court to weigh the evidence and reject the choice made by PERB where the evidence is conflicting and there exists room for choice, which a reviewing Court should not do. See, Matter of Berenhaus v Ward, 70 NY2d 436, 444 (1987). - 18 - PERB submits that it correctly applied the relevant test to determine the negotiability of the District’s practice, and that its conclusion that a bargaining obligation attached to the District’s announcement that it was terminating that practice was supported by a factual foundation – indeed, substantial evidence. Accordingly, the Appellate Division committed no error by confirming PERB’s determination that the District violated CSL § 209-a.1 (d). POINT III PERB WAS NOT ARBITRARY, CAPRICIOUS OR AFFECTED BY ERROR OF LAW IN CONCLUDING THAT IT WAS NOT BOUND BY THE ARBITRATOR’S OPINION THAT THE DISTRICT HAD NO BINDING PAST PRACTICE OF REIMBURSING ACTIVE EMPLOYEES FOR MEDICARE PART B PREMIUMS AFTER THEY RETIRE UPON REACHING AGE 65 A. The arbitrator’s opinion that there is “no binding past practice” is dicta to the extent it was intended to determine the District’s obligations under the Taylor Law. Under CSL § 205.5 (d), PERB does not have jurisdiction over an alleged breach of a collectively negotiated agreement. Here, because the Association had filed a grievance concerning the conduct at issue in the improper practice charge, there appeared to be a reasonably arguable basis to conclude that the District’s conduct may have amounted to a breach of the parties’ collective bargaining - 19 - agreement beyond PERB’s jurisdiction. Accordingly, PERB refrained from asserting jurisdiction over the improper practice charge until a determination was made in the appropriate forum as to whether the Association, in fact, had a contractual source of right to prevent the District’s action at issue in the improper practice charge. R., 80. However, in deferring the matter for a determination as to the Association’s contractual rights, PERB did not defer its jurisdiction under the Taylor Law. In County of Erie (Civil Serv Emps Assn, Inc., Local 1000, AFSCME, AFL-CIO), 26 PERB ¶ 3054 (1993), confd sub nom. Civil Serv Emps Assn Inc., Local 1000, AFSCME, AFL–CIO v New York State Pub Empl Relations Bd, 213 AD2d 897 (3d Dept 1995), the Board observed that such a jurisdictional deferral “does not alter the nature of the jurisdictional question and, as we are without power to consider charges outside the scope of our jurisdictional grant, we, not an arbitrator, are responsible for making the jurisdictional determination. . . . [T]herefore, an arbitration award is merely an aid to our determination of that jurisdictional question.” Accordingly, PERB will defer to the arbitrator’s award regarding matters within the arbitrator’s authority subject to review under criteria specified in New York City Transit Authority (Bordansky), 4 PERB ¶ 3031 (1971). As relevant here, in his November 6, 2004 award, the arbitrator stated the stipulated question presented to him by the parties (R., 83): - 20 - Did the District violate the 2002-2004 collective bargaining agreement when the District sent letters to active bargaining unit members on June 12, 2003, informing them that the District would no longer pay their Medicare Part B premiums at 65 years of age or older? If so, what shall the remedy be? The arbitrator further stated that he “approaches the Parties’ contractual interpretation dispute with the primary understanding that his jurisdiction is limited to and derives from the Parties’ Collective Bargaining Agreement” (R., 89). He further observed that “PERB rulings interpreting Taylor Law obligations cannot alter this Arbitrator’s responsibility to resolve a dispute based on the language contained in the Parties’ Agreement” (id.). Consistent with the stipulated issue before him and his strictly contractual jurisdiction, the arbitrator held that the parties’ collective bargaining agreement contained no language requiring the District to reimburse active employees for Medicare Part B premiums after they retire. He further observed that the agreement did not contain a “maintenance of benefits provision” or a “provision addressing any matters not covered by the Agreement.” Accordingly, the arbitrator denied the Association’s grievance. In concluding that the contract granted the Association no contractual basis to contest the District’s action, the arbitrator noted that he “is mindful of the evidence regarding historical practices” (R., 91). In that regard, he observed that the District was initially required to pay the at-issue reimbursements, and that it - 21 - continued to pay them after it was no longer required to do so. According to the arbitrator, “[t]he voluntariness of the District’s conduct, given the origin of the District’s Medicare Part B reimbursements, does not contain sufficient evidence of a mutual understanding and agreement to establish a binding past practice” (id.). While the arbitrator may consider parol evidence of past practices in interpreting contractual obligations without regard to PERB’s past practice standards described in Point II, supra, the arbitrator had no jurisdiction to determine whether there existed a binding past practice cognizable under the Taylor Law. Indeed, the arbitrator expressly stated the question presented to him and the contractual confines of his jurisdiction, adding that he is not bound by PERB’s Taylor Law analysis of past practices. Therefore, the arbitrator’s conclusion that there is no binding past practice was necessarily limited to his construction of the District’s contractual obligations. However, to the extent his opinion may have been intended to mean that there is no binding past practice cognizable under the Taylor Law, it was dicta in the context of his contractual jurisdiction, as the Appellate Division properly concluded. B. The arbitrator’s opinion that there is “no binding past practice” is repugnant to the Taylor Law to the extent it was intended to determine the District’s collective bargaining obligations. Assuming that the arbitrator had contractual jurisdiction to determine whether there existed a binding past practice cognizable under the Taylor Law (an - 22 - assumption lacking any support), his conclusion that there is no binding past practice is wholly contrary to PERB’s Taylor Law precedents and the public policies giving rise to the duty to negotiate concerning such practices. As described in Point II, supra, the District’s practice of reimbursing active employees for Medicare Part B premiums after they retire 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” (R. 153, quoting County of Nassau, 24 PERB ¶ 3029, at 3058 [1991]). Therefore, the District’s unilateral termination of that practice violated CSL § 209-a.1 (d). See, e.g., Manhasset Union Free Sch Dist v New York State Pub Empl Relations Bd, 61 AD3d 1231 (3d Dept, 2009) (deferring to the test applied by PERB in determining a binding past practice under the Taylor Law). Contrary to the test applied by the arbitrator, that the District voluntarily paid the reimbursements for a substantial period of time after it was no longer required to do so is precisely what formed the negotiable past practice cognizable under the Taylor Law that PERB found here. Indeed, had the District not voluntarily paid the reimbursements after it was no longer required to do so, arguably, there would be no negotiable past practice upon termination of the involuntary payments. Thus, the test that the arbitrator applied to determine whether there existed a “binding past practice” was wholly contrary to PERB’s - 23 - precedents and repugnant to the policies giving rise to the duty to negotiate concerning such matters – assuming that determination was intended to be cognizable under the Taylor Law. See, CSL § 200; Board of Educ of the City Sch Dist of the City of Buffalo v Buffalo Tchrs Fedn, Inc, 89 NY2d 370, 377 (1996). C. The Court should defer to PERB’s decision to reject the standard for a past practice applied by the arbitrator in interpreting the contract and to reopen the improper practice charge. This Court has repeatedly reaffirmed that it will afford deference to PERB’s decisions that implement or apply the provisions of the Taylor Law. See, Matter of Poughkeepsie Professional Firefighters’ Assn, Local 596, IAFF, AFL-CIO-CLC v New York State Pub. Empl Relations Board, 6 NY3d 514, 522 (2006) (“PERB, as the agency charged with interpreting the Civil Service Law, is accorded deference in matters falling within its area of expertise, including the resolution of improper practice charges”); Newark Valley Cent Sch Dist v New York State Pub Empl Relations Bd, 83 NY2d 315, 320 (1994) (“The scope of our review is well settled. We accord deference to PERB, as the agency charged with implementing the Taylor Law (Civil Service Law art 14), as to matters falling within the agency's special competence developed in administering the statute—whether, for example, a particular matter is a term or condition of employment”). Therefore, when a subject is consigned to PERB’s discretion under the Taylor Law, the agency’s - 24 - determination will not be disturbed unless irrational. See, Matter of City of Watertown v New York State Pub Empl Relations Bd, 95 NY2d 73, 81 (2000). Accordingly, PERB is entitled to deference concerning the appropriate test to determine the existence of a negotiable past practice cognizable under the Taylor Law. The standard applied by the arbitrator is not even remotely consistent with PERB’s standard. Contrary to the dissent below, once the arbitrator determined that the Association had no contractual source of right to the at-issue reimbursements, there was no impediment to PERB’s assertion of its statutory jurisdiction over the alleged violation of CSL § 209-a.1 (d). See, CSL § 205.5 (d). And PERB had discretion whether to defer to the arbitrator’s award. Indeed, PERB’s decision to reopen the Association’s improper practice charge was a discretionary act that is entitled to judicial deference. See, N.L.R.B. v Owners Maintenance Corp., 581 F.2d 44, 48 (2d Cir 1978) (“We find no requirement of law that the [NLRB] must invariably defer to the decisions of arbitrators. The mere presence of an arbitration award does not oust the [NLRB’s] jurisdiction to adjudicate unfair labor practices on the same subject matter”). See also, Ciba-Geigy Pharmaceuticals Division v N.L.R.B.,722 F.2d 1120, 1124-26 (3d Cir 1983); Mobil Exploration and Producing U.S., Inc. v N.L.R.B, 200 F.3d 230, 242-44 (5th Cir 1999). While it is rare for PERB to find that an arbitrator’s award is repugnant to the Taylor Law, when it - 25 - does, the Courts should defer to that determination. Cf., Matter of Civil Serv Emps Assn Inc., Local 1000, AFSCME, AFL–CIO v New York State Pub Empl Relations Bd, 213 AD2d 897 (3d Dept 1995) (Court deferred to PERB’s rational determination that an arbitrator’s award was not repugnant to the Taylor Law). PERB respectfully submits that the Appellate Division correctly deferred to its determination that the arbitrator’s opinion was repugnant to the Taylor Law. POINT IV PERB WAS NOT ARBITRARY, CAPRICIOUS OR AFFECTED BY ERROR OF LAW IN CONCLUDING THAT THE RECORD DOES NOT SUPPORT THE DISTRICT’S AFFIRMATIVE DEFENSES THAT IT SATISFIED ITS DUTY TO NEGOTIATE WITH THE ASSOCIATION CONCERNING ITS ANNOUNCEMENT THAT IT WAS TERMINATING THE AT- ISSUE PRACTICE OR THAT THE ASSOCIATION WAIVED ITS BARGAINING RIGHTS CONCERNING THAT ANNOUNCEMENT The District argues that the record establishes that it satisfied its duty to negotiate with the Association before announcing that it was going to terminate its practice of reimbursing active employees for their Medicare Part B premiums after they retire. There is, however, no such evidence. - 26 - Contrary to the District’s argument, 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 its practice of paying them. Rather, as noted in Point II, the stipulated fact that the District voluntarily continued to pay the benefits for a substantial period of time with no contractual obligation to do so created the enforceable past practice that gave rise to the bargaining obligation that PERB found. Similarly, contrary to the District’s argument, the absence of a contractual reference to Medicare Part B premiums does not establish the Associations’ waiver of its right to negotiate concerning the District’s announcement that it was terminating that practice. See, e.g., Ferreri v New York State Thruway Auth, 62 NY2d 855 (1984) (alleged waiver of employer’s right to assign mandatory overtime was not established by employer’s “raising and then abandoning the mandatory overtime question in collective bargaining.”). In Matter of Civil Serv Empls Assn. v Newman, 88 AD2d 685, 686 (3d Dept 1982), affd on opinion below 61 NY2d 1001 (1984), the Appellate Division held that in order to establish a waiver of a Taylor Law right 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],” adding that “[s]uch a waiver must be - 27 - clear, unmistakable and without ambiguity.” The burden to establish such a waiver is on the party asserting it. See, e.g., Matter of New York City Trans Auth v New York State Pub Empl Relations Bd, 174 AD2d 574 (2d Dept 1989) (Court held that waiver is an affirmative defense that must be pleaded and proved). Here, the record contains no evidence of the Association’s explicit, 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. The District’s reliance on the decision of an ALJ in Waverly Cent Sch Dist (Waverly Assn of Support Personnel), 20 PERB ¶ 4569 (1997), is unavailing. Not only is the ALJ’s decision not binding on the Board, but the case is distinguishable in material respects. There, an employer had a non-contractual practice of permitting unrepresented employees to take leave without pay, but with benefits. After the employees obtained collective representation, the employer and the union negotiated their first collective bargaining agreement that expressly permitted “unpaid leave without pay or benefits” [emphasis added]. Notably, the contract also stated that the agreement superseded any inconsistent practice. The ALJ held that the prior practice of providing unpaid leave with benefits was inconsistent with the newly negotiated express contractual right allowing the employees to take - 28 - unpaid leave without benefits. Therefore, the ALJ 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. Here, unlike the circumstances in Waverly, the parties’ prior collective bargaining agreements do not speak of Medicare Part B insurance, much less whether such premiums will or will not be reimbursed by the District. Hence, the District’s history of making such reimbursements is not superseded by or inconsistent with its prior contractual obligation to fund other forms of insurance, and it certainly does not establish the Association’s agreement to terminate the at- issue practice. Finally, contrary to the District’s argument, the instant dispute was not rendered moot when, on January 19, 2005, while the instant improper practice charge was pending before PERB, the parties entered a new collective bargaining agreement covering July 1, 2004 to June 30, 2007. As with the prior agreements, the January 2005 agreement is silent as to the District’s obligations concerning the reimbursement of Medicare Part B premiums, and the District concedes that the subject was not negotiated. However, for the same reasons discussed above, such silence does not show that the parties reached a settlement concerning the improper practice charge. That the parties agreed that the District would pay premiums for other forms of insurance after retirement does not mean that the Association agreed - 29 - to the discontinuance of the District’s practice of reimbursing employees for Medicare Part B premiums to settle the charge any more than it reveals the District’s agreement to continue the practice. It remains a non-contractual practice that the District must affirmatively negotiate with the Association before it can be discontinued – which it failed to do. As the Appellate Division accurately observed, “[w]e give deference to PERB's interpretation of a collective bargaining agreement, which is within PERB's area of expertise, as long as that interpretation is reasonable, rational and supported by the language of the agreement.” citing Matter of Monroe County v New York State Pub Empl Relations Bd., 85 AD3d 1439, 1441(3d Dept 2011). See also, Matter of Patrolmen's Benevolent Assn. of Vil. of Walden v Kinsella, 263 AD2d 885, 888 (3d Dept 1999); Greece Support Service Employees Assn, NEA/New York v Pub Empl Relations Bd, 250 AD2d 980, 982 (3d Dept 1998). Accordingly, PERB respectfully submits that the Court should affirm the Appellate Division’s determination that the parties’ collective bargaining agreements do not establish that the District satisfied its bargaining obligations concerning its announcement that it is terminating the at-issue practice or the Association’s waiver of its bargaining rights concerning that practice or that the controversy is now moot. - 30 - CONCLUSION The Court should affirm the Judgment of the Appellate Division and enforce PERB’s remedial order, and grant such further relief as the Court may deem just and proper. Respectfully submitted, DAVID P. QUINN Attorney for Respondent NYS Public Employment Relations Board Office and P. O. Address 80 Wolf Road - Fifth Floor – Room 500 Albany, New York 12205-2656 Telephone: (518) 457-2678 Fax: (518) 457-2664 _________________________________ DAVID P. QUINN January 5, 2013 - 31 -