In the Matter of Susan M. Kent,, Respondent,v.Jerome Lefkowitz,, et al., Appellants.BriefN.Y.March 30, 2016APL-2014-00229 To be argued by: JULIE M. SHERIDAN Time requested: 10 minutes App. Div. Third Dept. No. 518219 Court of Appeals of the State of New York IN THE MATTER OF THE APPLICATION OF SUSAN M. KENT, AS PRESIDENT OF THE NEW YORK STATE PUBLIC EMPLOYEES FEDERATION, AFL-CIO, Petitioner-Respondent, -AGAINST- JEROME LEFKOWITZ, AS CHAIRMAN OF THE NEW YORK STATE PUBLIC EMPLOYMENT RELATIONS BOARD; THE NEW YORK STATE PUBLIC EMPLOYMENT RELATIONS BOARD; THE NEW YORK STATE GOVERNOR’S OFFICE OF EMPLOYEE RELATIONS, BY GARY JOHNSON, DIRECTOR; AND THE NEW YORK STATE RACING AND WAGERING BOARD, BY JOHN D. SABINI, CHAIRMAN, Respondents-Appellants. BRIEF FOR APPELLANTS NYS GOER AND RACING AND WAGERING BOARD BARBARA D. UNDERWOOD Solicitor General ANDREA OSER Deputy Solicitor General JULIE M. SHERIDAN Assistant Solicitor General of Counsel ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Appellants NYS GOER, Racing & Wagering Board The Capitol Albany, New York 12224-0341 Telephone No. (518) 776-2029 Facsimile No. (518) 915-7724 Dated: February 3, 2015 Reproduced on Recycled Paper TABLE OF CONTENTS PAGE TABLE OF AUTHORITIES ................................................................................ ii PRELIMINARY STATEMENT ............................................................................1 QUESTION PRESENTED ...................................................................................3 STATEMENT OF JURISDICTION .....................................................................3 STATEMENT OF THE CASE .............................................................................3 A. Statutory Background .....................................................................3 B. The Civil Service Classification of Seasonal Racetrack Workers and the Process for Setting Their Wage Rates ...............5 C. The 1995-1999 Collective Bargaining Agreement ..........................7 D. The 25% Wage Rate Reduction and the Ensuing Contract Grievance and Arbitration ............................................ 10 E. The Improper Practice Charge and PERB’s Decision and Order ....................................................................................... 12 F. This Article 78 Proceeding and the Decisions Below ................... 16 ARGUMENT PERB’S DETERMINATION IS ENTITLED TO DEFERENCE BECAUSE PERB RATIONALLY CONCLUDED THAT THE STATE SATISIFIED ITS DUTY TO BARGAIN BEFORE SETTING THE 1996 PER DIEM WAGE RATES FOR THE BOARD’S SEASONAL WORKERS ........................................................ 19 CONCLUSION ................................................................................................... 27 i TABLE OF AUTHORITIES CASES PAGE Chenango Forks Cent. Sch. Dist., Matter of v. New York State Pub. Empl. Relations Bd., 21 N.Y.3d 255 (2013) ............................................................................... 21 Monroe County, Matter of v. New York State Pub. Empl. Relations Bd., 85 A.D.3d 1439 (3d Dep’t 2011) ............................................................... 20 New York City Tr. Auth. v. New York State Pub. Empl. Relations Bd., 19 N.Y.3d 876 (2012) ..................................................................................4 Patrolmen’s Benevolent Assn. of Vil. of Walden, Matter of v. Kinsella, 263 A.D.2d 885 (3d Dep’t 1999) ............................................................... 20 Poughkeepsie Professional Firefighter’s Assn., Matter of v. New York State Pub. Empl. Relations Bd., 6 N.Y.3d 514 (2006) ........................................................................... 19, 20 Prof. Staff Congress-City Univ. of N.Y., Matter of v. New York State Pub. Empl. Relations Bd., 7 N.Y.3d 458 (2006) ........................................................................... 20, 21 Town of Islip, Matter of v. New York State Pub. Empl. Relations Bd., 23 N.Y.3d 482 (2014) ............................................................................... 20 Zuckerman, Matter of v. Board of Educ. of City School Dist. of City of N.Y., 44 N.Y.2d 336 (1978) ..................................................................................4 STATE STATUTES Civil Service Law article 14 ......................................................................................................3 § 40 ...............................................................................................................5 § 41 ...............................................................................................................5 § 201(4) ........................................................................................................6 ii Table of Authorities (cont’d) STATE STATUTES (cont’d) PAGE Civil Service Law (cont’d) § 204(2) ........................................................................................................6 § 205(5)(d) ....................................................................................................3 § 209-a(1)(d) .......................................................................................... 4, 12 § 209-a(1)(e) .............................................................................................. 22 C.P.L.R. article 78 ........................................................................................... 1, 2, 16 § 5601(a) ......................................................................................................3 Racing, Pari-Mutuel Wagering and Breeding Law § 102 ......................................................................................................... 1n State Finance Law § 44 ............................................................................................................ 10 § 44(1) ..................................................................................................... 1, 6 § 44(4) ....................................................................................................... 8n § 49 .......................................................................................................... 1, 6 ADMINISTRATIVE ADJUDICATIONS Herkimer County BOCES, 20 PERB ¶ 3050 (1987) ............................................................................ 12 Police Benevolent Assoc. of Police Dept. of County of Nassau, 31 PERB ¶ 3064 (1998) ...............................................................................4 Transport Workers Union of Greater New York, 41 PERB ¶ 3014 (2008) ...............................................................................4 iii PRELIMINARY STATEMENT In this C.P.L.R. article 78 proceeding, petitioner Susan M. Kent, President of the New York State Public Employees Federation (PEF), challenges as arbitrary and capricious a determination by respondent Public Employment Relations Board (PERB) dismissing an improper employer practice charge filed by PEF. The subject improper practice charge alleges that the State unlawfully failed to negotiate with PEF before unilaterally announcing that the per diem wages that would be paid to seasonal workers employed by the New York State Racing and Wagering Board (Board)1 for the 1996 racing season would be less than those paid to seasonal workers during the 1995 racing season. The reduced wage rates had been approved by the State Budget Director, who has the authority pursuant to State Finance Law §§ 44(1) and 49 to establish wage rates for the Board’s seasonal workers. PERB dismissed the charge upon finding that the State satisfied its duty to negotiate with PEF before announcing the reduction at issue. Applying its expertise in public-sector bargaining practices, PERB 1 Effective February 1, 2013, the Board merged into the newly-created New York State Gaming Commission. See Racing, Pari-Mutuel Wagering and Breeding Law § 102. rationally concluded that the State and PEF negotiated the topic of wages for the Board’s seasonal workers and agreed to limit the Budget Director’s wage-setting discretion under certain circumstances, which they set forth in a side letter to their collective bargaining agreement. The side-letter agreement did not restrict the Budget Director’s statutory discretion to set wage rates for the 1996 season. PERB rationally concluded that it was therefore not unlawful for the State unilaterally to set those rates below those in effect the previous season. In the underlying C.P.L.R. article 78 proceeding, Supreme Court, Albany County (McNamara, J.), deferred to PERB’s judgment and dismissed the petition. The Appellate Division, Third Department, however, reversed in a 3-to-2 decision. The Third Department erred by failing to defer to PERB’s determination. As explained in PERB’s brief to this Court and further explained below, PERB’s determination is entitled to deference because it was based on a rational understanding of the side-letter agreement. The Third Department should not have substituted its judgment for PERB’s, and should have sustained PERB’s determination. 2 QUESTION PRESENTED Whether PERB rationally concluded that the State satisfied its duty to negotiate before setting the 1996 per diem wage rates for the Board’s seasonal employees. STATEMENT OF JURISDICTION This Court has jurisdiction to entertain this appeal pursuant to C.P.L.R. § 5601(a) because the proceeding originated in the Supreme Court and the appeal is from an order of the Appellate Division, Third Department, which finally determines the proceeding and there is a dissent by two justices on a question of law in appellants’ favor. STATEMENT OF THE CASE A. Statutory Background PERB is the agency charged with administering the New York Public Employees’ Fair Employment Act, which is codified at Civil Service Law article 14 and known as the Taylor Law. PERB has exclusive jurisdiction over all matters covered by the Taylor Law, including disputes alleging that a public employer has committed an improper labor practice. See Civil Service Law § 205(5)(d); see also Matter of New York City Tr. Auth. v. New York State Pub. Empl. 3 Relations Bd., 19 N.Y.3d 876, 879 (2012); Matter of Zuckerman v. Board of Educ. of City School Dist. of City of N.Y., 44 N.Y.2d 336, 342 (1978). The Taylor Law makes it an improper labor practice for a public employer to refuse to negotiate in good faith with the duly recognized or certified representatives of its public employees. See Civil Service Law § 209-a(1)(d). However, where a public employer and union have bargained a subject to completion and reached agreement on that subject, the employer has satisfied its duty to negotiate and therefore does not violate the Taylor Law when it unilaterally takes an action permitted by the negotiated terms of the agreement. See Transport Workers Union of Greater New York, 41 PERB ¶ 3014 (2008); Police Benevolent Assoc. of Police Dept. of County of Nassau, 31 PERB ¶ 3064 (1998). The burden of proving this so-called “duty satisfaction” defense rests with the employer. See Transport Workers Union of Greater New York, 41 PERB ¶ 3014 (2008). To meet its burden, the employer must proffer “record evidence of facts establishing that the parties negotiated an agreement upon terms which are reasonably clear on the subject” that is at issue in the improper practice charge. Id. 4 B. The Civil Service Classification of Seasonal Racetrack Workers and the Process for Setting Their Wage Rates The Board hires seasonal workers before opening day at various State-operated thoroughbred and harness horse racing tracks (Record on Appeal [“R”] 130, 789). These workers serve at the pleasure of the Board’s Chairperson and are paid on a per diem basis (R130). They are typically appointed for a two- to six-month period, from opening day until closing day, at which point their appointments end and their positions expire (R130, 789, 833, 915). At the beginning of the next racing season, new positions are created and new appointments are made (R833). The positions to which seasonal racetrack workers are appointed are in the “exempt” class of the classified civil service (R130, 789), meaning the workers are not subject to civil service examination requirements and serve at the pleasure of the appointing authority. See Civil Service Law §§ 40, 41. The positions are not allocated to a statutory salary grade and therefore do not have a statutorily established pay range, “hiring rate” or “job rate” (R789, 908-913). Instead, State Finance Law §§ 44(1) and 49 afford the State Budget Director discretion to set the per diem wage rates for each position 5 before the start of each racing season in consultation with the Board (R789-790, 913-914, 918). To begin the process, the Board prepares a schedule of positions listing the number and types of workers it hopes to hire for the upcoming racing season (R790, 914-915). It submits this schedule along with a proposed wage rate for each position to the New York State Division of the Budget (DOB) for review and approval (R790, 918, 920-921). State Finance Law §§ 44(1) and 49 afford the Budget Director discretion to approve, disapprove, or modify both the schedule of positions and the proposed wage rates (R789-790, 918, 920). Although the State Finance Law thus affords the Budget Director broad discretion to set the per diem wage rates for the seasonal workers at issue, including the discretion to reduce rates from those in effect the previous season, PERB takes the position that the exercise of that discretion may nevertheless be limited through collective bargaining because wages are a mandatory subject of collective bargaining. See Civil Service Law §§ 201(4), 204(2). 6 C. The 1995-1999 Collective Bargaining Agreement The 1995-1999 collective bargaining agreement (CBA) between PEF, representing employees in the Professional, Scientific and Technical Services (PS&T) bargaining unit, and the State addressed salaries, wages, hours and other terms and conditions of employment of PS&T employees represented by PEF (R202-426). Article 7 of the CBA addressed the compensation of employees other than seasonal employees, and provided for certain lump-sum payments, salary increases, and performance awards (R216-225). Appendix I of the CBA contained a salary schedule for employees in positions allocated to a statutory salary grade of 1 through 38; for each such salary grade, it listed a specific hiring rate, job rate, and advance amount (R320-325). Appendix II of the CBA contained a “Memorandum of Interpretation,” or side-letter agreement, addressing the terms and conditions of employment of PS&T seasonal employees represented by PEF, including the racetrack workers whose compensation is at issue here (R92-95, 130, 326-331). The side-letter agreement expressly incorporated more than 50 provisions from the main body of the CBA, including provisions pertaining to health insurance, vacation credit, 7 sick and personal leave, and discipline (R92-94). The side-letter agreement also contained detailed provisions addressing compensation, holiday compensation and workers’ compensation leave with pay (R94- 97). In contrast to Appendix I, which contained a specific salary schedule for employees in positions allocated to a statutory salary grade, the side-letter agreement did not specify the per diem wage rate to be paid to any seasonal employee in any position for any of the fiscal years covered by the agreement. This left undisturbed the discretion of the Budget Director to set seasonal employees’ per diem wage rates. But the side-letter agreement did modify the Budget Director’s discretion in carefully enumerated ways, as set forth in sections 2A, 2B, 2C and 2D. Section 2A provided for the payment of specified lump sums in fiscal years 1996-1997 and 1997-1998 to seasonal employees who were in employment status on March 31, 1996 and March 31, 1997, respectively, and had at least six months in pay status during the preceding fiscal year (R94-95).2 Section 2B provided for a 3.5% salary 2 Although the wage rates for seasonal racetrack workers are established on a calendar-year basis, see State Finance Law § 44(4), the lump-sum payments provided for in section 2A were to be paid on a fiscal-year basis. 8 increase in fiscal years 1997-1998 and 1998-1999 for seasonal employees who met defined eligibility requirements (R95-96). Section 2C specifically recognized the discretion of the Budget Director to set seasonal workers’ wage rates and placed additional limits on the exercise of that discretion, demonstrating the parties’ mutual understanding that such discretion existed. Section 2C addressed how the section 2A lump-sum payments and section 2B salary increases were to be implemented if “the rate of compensation of any employee in a seasonal position is increased at the discretion of the Director of the Budget” specifically for the purpose of complying with Federal minimum wage requirements (R96 [emphasis supplied]). In that case, the wage rate would “remain at the adjusted rate established by the Director of the Budget from the effective date established by the Director” until the date of the next general salary increase provided for in the side-letter agreement, at which point the wage rate would be the higher of the “adjusted rate established by the Director of the Budget” or the wage rate prior to the adjustment increased by the percentage provided for in the side-letter agreement (R96 [emphasis supplied]). But 9 section 2C did not place any other limits on the discretion of the Budget Director to set wage rates. Finally, section 2D simply made clear that the section 2A lump- sum payments and section 2B salary increases were to be applied on a pro rata basis to per diem employees, such as the Board’s seasonal employees (R96). Other than the limits set forth in those four detailed provisions, the side-letter agreement did not purport to modify the Budget Director’s wage-setting discretion. D. The 25% Wage Rate Reduction and the Ensuing Contract Grievance and Arbitration In the fall of 1995, DOB implemented a management review process with state agencies in an attempt to reduce operating costs by 25% (R787). Among other measures, the Board proposed reducing the per diem wage rates for the seasonal workers who would be appointed for the upcoming 1996 track season (R788, 791). The Board prepared a schedule of positions for the upcoming season with recommended wage rates for each position that were 25% less than those in effect the previous season and submitted the plan to DOB for review and approval pursuant to State Finance Law § 44 (R791). DOB approved the Board’s schedule of positions and the Board’s proposed reduced wage rates 10 (R791). The Board thereafter announced that seasonal racetrack workers appointed on or after January 1, 1996 would be paid the reduced per diem wage rates (R137). PEF challenged the 1996 wage rates in two ways. First, on January 30, 1996, PEF filed a class action contract grievance pursuant to Article 34 of the CBA (R19). The grievance proceeded to arbitration, and the arbitrator ultimately ruled by opinion and order, dated September 2, 1997, that the State did not violate the CBA or the side-letter agreement when it set the per diem wage rates for the 1996 racing season (R145-151). Preliminarily, the arbitrator explained that because the racetrack workers at issue were properly designated as seasonal, the terms of their compensation were governed by the side-letter agreement, not article 7 of the CBA (R149-150). The arbitrator then found that nothing in the side-letter agreement precluded the Budget Director from exercising the discretion afforded him by the State Finance Law to set the per diem wage rates for the 1996 season, even at rates below those in effect the previous season (R150). The arbitrator explained that “there is simply no language therein which could be interpreted so as to support the Union’s claim” 11 to the contrary (R150). There was thus no “contractual basis” for rescinding the wage-rate reductions (R150). E. The Improper Practice Charge and PERB’s Decision and Order While PEF’s contract grievance was still pending, PEF also challenged the 1996 wage rates by filing an improper practice charge with PERB (R131, 134-136). PEF noted that wages are a mandatory subject of bargaining and argued that the State’s failure to negotiate the 1996 wage rates with PEF violated § 209-a(1)(d) of the Taylor Law (R134-136). Because PEF’s contract grievance and improper practice charge involved the same issue, the parties agreed to defer the improper practice charge pending the outcome of the grievance (R131, 143-144). See Herkimer County BOCES, 20 PERB ¶ 3050 (1987) (discussing this practice). Once the arbitrator issued his decision denying the grievance, PERB reopened the improper practice charge and ordered the State to file and serve an answer (R131, 152-155). The State’s answer asserted that PEF failed to state a claim and also asserted four affirmative defenses: (1) that PERB lacked jurisdiction over PEF’s challenge to the 1996 wage rates because the 12 rates were set before the affected seasonal workers were appointed to their positions; (2) that for the same reason, PEF lacked standing to challenge the 1996 wage rates; (3) that the State did not violate any past practice with respect to wage rates, because the affected workers are in the exempt class and are seasonally appointed; and (4) that PEF waived its right to challenge the 1996 wage rates by entering into a side-letter agreement that comprehensively covered the issue of compensation and did not guarantee minimum per diem wage rates (R140). PEF subsequently asked PERB to schedule the matter for a hearing (R158). The State responded by asking PERB to consider whether the arbitrator’s decision precluded PERB’s consideration of the improper practice charge (R158). Before PERB could respond, PEF requested that the matter be placed on PERB’s “hold calendar” (R158, 162). Four years later, in late 2001, PEF renewed its request for a hearing on the improper practice charge (R162). The State opposed reopening the matter, arguing that the arbitrator had already exercised jurisdiction over the dispute and made findings that precluded PERB’s 13 exercise of jurisdiction over the charge (R131, 156-159). The administrative law judge agreed with the State, but only in part (R131, 162-163). While he found that PEF’s improper practice charge could proceed, he explained that four of the arbitrator’s factual findings were relevant to the charge and could not be re-litigated before PERB: (1) the State properly designated the affected PS&T unit members as seasonal employees; (2) as seasonal employees, their wages were governed by the side-letter agreement; (3) the State did not violate the side-letter agreement when it reduced their per diem wages by 25% from those in effect the previous season; and (4) neither the CBA nor any other statute, rule or regulation cited by the parties precluded the State from reducing the subject per diem wages in this fashion (R163). After protracted efforts by the parties to narrow the remaining factual issues (see R129-133, 165-201), a hearing was finally convened on March 3 and May 27, 2005. A large portion of the hearing testimony described PEF’s unsuccessful attempts to negotiate language in subsequent CBAs to preclude future reductions in per diem wage rates for seasonal workers (see, e.g., R807-808, 827-828). The hearing officer did not render a decision until January 28, 2010, when she ruled that 14 the State violated the Taylor Law by unilaterally setting the reduced 1996 wage rates (R1175-1195). In rendering her ruling, the hearing officer rejected in two sentences the State’s fourth affirmative defense, which she characterized as a waiver defense (R1193). Upon the parties’ exceptions and responses (R1196-1226), PERB reversed the hearing officer’s decision and dismissed the improper practice charge by decision and order dated September 20, 2012 (R1227-1237). Preliminarily, PERB reasoned that the State’s fourth affirmative defense of waiver was properly viewed to encompass the so-called “duty satisfaction” defense (R1234-1235). PERB then found that the State had established its duty satisfaction defense (R1235- 1236). PERB explained that the language of the side-letter agreement “reveal[s] recognition by the parties of the State Budget Director’s discretionary authority to approve unilateral rate adjustments for per diem employees in the PEF-represented unit and that the application of such discretion is subject to negotiations under the Act” (R1237). PERB then found, based on the explicit language in sections 2A, 2B and 2C of the side-letter agreement, that the State had satisfied its duty to negotiate that subject. Those provisions of the side-letter agreement, in 15 PERB’s judgment, made it “reasonably clear that both parties intended the [side-letter agreement] to act as a negotiated limitation upon the State Budget Director’s discretion with respect to unilateral adjustments in the rates of compensation for seasonal positions in the unit” (R1236). Having found that the State satisfied its duty to negotiate, PERB found it “unnecessary” to address the State’s other exceptions to the hearing officer’s decision (R1237). F. This Article 78 Proceeding and the Decisions Below In the underlying C.P.L.R. article 78 proceeding, PEF challenged PERB’s determination as arbitrary, capricious and contrary to law (R23-31). PEF sought annulment of PERB’s determination and a remand to PERB “for a determination consistent with the Court’s Decision” (R32). PERB answered and submitted a certified copy of the record of proceedings before it (R101-1237). The State respondents (the Board and GOER) answered the petition separately (R1238-1241). By judgment entered April 3, 2013, Supreme Court, Albany County (McNamara, J.), dismissed the petition (R5-11). The court reasoned that PERB’s knowledge and “expertise,” specifically its “experience with the subtleties of how parties negotiate a collective 16 bargaining agreement,” made it “uniquely qualified” to find that the detailed wage provisions of the side-letter agreement established that the parties had negotiated to completion the subject of wages, including whether to limit the Budget Director’s authority to set the 1996 wage rates for the seasonal workers at issue (R9-10). PERB’s determination was therefore entitled to deference. On PEF’s appeal, the Appellate Division, Third Department, reversed, with Justices Stein and Lahtinen dissenting (R1250-1258). The majority, while “mindful” that PERB’s decision was to be “afforded a measure of deference,” nevertheless “[did] not believe that the side letter agreement at issue here is amenable to the expansive construction adopted by PERB” (R1254). Instead, the majority found that the references in section 2C of the side-letter agreement to the Budget Director’s discretion to set wage rates did “not evidence the intent of the parties thereto to address any and all situations under which the Director of the Budget could unilaterally adjust wage rates for the affected employees” (R1255). Accordingly, the majority concluded that PERB’s determination was arbitrary and capricious. 17 Writing for the dissent, Justice Stein agreed with PERB that the side-letter agreement reflected a “comprehensive” agreement on wages covering “a broad range of issues regarding the compensation to be paid to seasonal personnel from 1995 through 1999” (R1256). She noted that it did not merely cover “discrete compensation issues,” as the majority reasoned, but rather incorporated more than 50 articles from the 1995-1999 CBA relating to a variety of employment and benefit-related issues, and that nothing in the side-letter agreement indicated “that it was intended to be anything less than a comprehensive agreement as to [seasonal] employees” (R1256). She thus concluded that it was reasonable for PERB to determine that the side-letter agreement constituted the full agreement between the parties as to any limits on the Budget Director’s wage-setting discretion. Indeed, Justice Stein concluded that PERB’s determination reflected the “only practical interpretation” of the side-letter agreement’s language (R1256-57). This appeal by PERB and the State respondents ensued (R1244-1249). 18 ARGUMENT PERB’S DETERMINATION IS ENTITLED TO DEFERENCE BECAUSE PERB RATIONALLY CONCLUDED THAT THE STATE SATISIFIED ITS DUTY TO BARGAIN BEFORE SETTING THE 1996 PER DIEM WAGE RATES FOR THE BOARD’S SEASONAL WORKERS In annulling PERB’s determination that the State satisfied its duty to bargain before setting the 1996 per diem wage rates for the Board’s seasonal workers, the Appellate Division substituted its own judgment for PERB’s as to the probative value of the detailed compensation provisions contained in the side-letter agreement. This was error. PERB’s understanding of the side-letter agreement—and in particular, PERB’s assessment of the nature and extent of the negotiations it reflected—was rational and supported by the language of that agreement. Under settled precedent, PERB’s determination is entitled to judicial deference, and the Appellate Division should have confirmed it. The resolution of an improper practice charge is generally committed to PERB’s sound discretion. See Matter of Poughkeepsie Professional Firefighters’ Assn. v. New York State Pub. Empl. Relations Bd., 6 N.Y.3d 514, 522 (2006). As the agency charged with 19 administering and implementing the Taylor Law, PERB is uniquely familiar with public-sector bargaining practices and collective bargaining agreement provisions. Courts therefore routinely defer to PERB’s judgments about what the parties likely negotiated and what they intended by the terms of the collective bargaining agreements that they settled upon, so long as PERB’s judgments are reasonable and supported by the language of the agreements at issue. See Matter of Prof. Staff Congress-City Univ. of N.Y. v. New York State Pub. Empl. Relations Bd., 7 N.Y.3d 458, 466, 469 (2006); Matter of Poughkeepsie Professional Firefighters’ Assn. v. New York State Pub. Empl. Relations Bd., 6 N.Y.3d at 522 (deferring to PERB’s interpretation of proposed CBA language); Matter of Monroe County v. New York State Pub. Empl. Relations Bd., 85 A.D.3d 1439, 1441 (3d Dep’t 2011) (deferring to PERB’s interpretation of parties’ CBA); Matter of Patrolmen’s Benevolent Assn. of Vil. of Walden v. Kinsella, 263 A.D.2d 885, 888 (3d Dep’t 1999) (same with respect to waiver provision in CBA); see also Matter of Town of Islip v. New York State Pub. Empl. Relations Bd., 23 N.Y.3d 482, 492 (2014) (“PERB is accorded deference in matters falling within its area of expertise such as cases involving the issue of 20 mandatory or prohibited bargaining subjects” [quotation omitted]); Matter of Chenango Forks Cent. Sch. Dist. v. New York State Pub. Empl. Relations Bd., 21 N.Y.3d 255, 265 (2013). This Court’s decision in Matter of Professional Staff Congress-City University of New York v. New York State Public Employment Relations Board, 7 N.Y.3d at 458, is particularly instructive. In sustaining PERB’s determination dismissing an improper practice charge, the Court deferred to PERB’s judgments on two issues. The first issue involved the construction of a provision in the parties’ collective bargaining agreement granting the employer City University of New York (CUNY) the right unilaterally to alter certain bylaws, policies and resolutions, so long as the alterations did not conflict with a term of the CBA. This Court unanimously deferred to PERB’s judgment that the subject provision evidenced a waiver of the union’s right to demand negotiation over alterations to CUNY’s intellectual property policy, a matter that was not addressed by the CBA. Id. at 465-66. The second issue was whether the waiver provision continued in effect after the CBA expired while the parties were negotiating a new agreement. Employers are obligated by statute to maintain the status quo in such 21 situations (see Civil Service Law § 209-a[1][e]), unless the CBA contains a so-called “sunset provision.” The parties had not included any such provision in their CBA. This Court deferred to PERB’s judgment that the parties therefore intended to maintain the status quo upon the CBA’s expiration, and that the status quo included maintaining in place the waiver provision that permitted CUNY unilaterally to change its intellectual property policy. Id. at 466-69. The Court should similarly defer to PERB’s determination here. PERB rationally concluded that the presence of detailed and comprehensive provisions in the side-letter agreement limiting the Budget Director’s statutory wage-setting discretion under certain circumstances established that the parties had negotiated to completion the subject of constraints on that discretion and set forth the entirety of the limitations they wished to implement. PERB also rationally inferred that because the side-letter agreement did not limit the Budget Director’s discretion to set the 1996 per diem wage rates below the rates in effect the previous year, the parties did not intend to impose any such limit. The State thus did not engage in an improper labor practice by doing just that. 22 PERB’s determination was grounded on its understanding of the language in the side-letter agreement. In contrast to the detailed salary schedules set out in the CBA for non-seasonal employees, the side-letter agreement did not contain a schedule specifying any base wage rate for any seasonal position for fiscal year 1995-1996, which was the first year covered by the agreement. Nor did the side-letter agreement specify any base wage rates for fiscal year 1996-1997 or provide for a percentage salary increase for that year. The side-letter agreement did, however, contain detailed provisions addressing the compensation of seasonal workers. It provided, in sections 2A and 2B, that seasonal workers who met defined eligibility requirements would receive a lump-sum payment in fiscal year 1996-1997; a lump-sum payment and percentage salary increase in fiscal year 1997-1998; and a percentage salary increase in fiscal year 1998-1999. And in section 2C, the parties addressed how the percentage salary increases in fiscal years 1997-1998 and 1998-1999 would be implemented if the Budget Director “at [his] discretion” had already increased wage rates to comply with Federal minimum wage 23 requirements: the percentage salary increases would still be implemented if they resulted in further wage increases (R96). PERB rationally concluded that the language in the side-letter agreement established that the parties bargained and reached agreement over the specific circumstances in which the Budget Director’s wage-setting discretion would be limited. In section 2B, the parties agreed to limit the Budget Director’s discretion to set the wage rates for fiscal years 1997-1998 and 1998-1999 by providing that those wage rates would be 3.5% higher than the prior fiscal year’s wage rates. And in section 2C, they agreed that even if the Budget Director “at [his] discretion” increased wage rates to comply with Federal minimum wage requirements, the 3.5% salary increases in fiscal years 1997-1998 and 1998-1999 would still be implemented if they resulted in further wage increases (R96). Read together, sections 2A, 2B and 2C of the side-letter agreement make it “reasonably clear,” as PERB concluded (R1236), that the parties intended to limit the Budget Director’s discretion to decrease per diem wage rates after fiscal year 1996-1997. But absent any language limiting the Budget Director’s discretionary authority to set base wage rates before the end of the 1996-1997 fiscal year, or extrinsic 24 evidence that the parties intended to impose such a limit, it was rational for PERB to conclude that the parties did not intend to limit the Budget Director’s discretionary authority to set those rates, even at levels below those in effect the prior year. Indeed, in section 2C of the side-letter agreement, the parties recognized explicitly the Budget Director’s discretion to set the per diem wage rates for the 1996 racing season. Section 2C described how the negotiated lump-sum payments and percentage salary increases would be effectuated if seasonal employees’ per diem wage rates were “increased at the discretion of the Director of the Budget” in order to satisfy federal minimum wage requirements (R96). This explicit mention of the Budget Director’s wage-setting discretion supports PERB’s conclusion that the parties were aware of that discretion and bargained over whether to limit it. The Third Department majority concluded that the language in section 2C of the side-letter agreement, standing alone, did not “evidence the intent of the parties thereto to address any and all situations under which the Director of the Budget could unilaterally adjust wage rates for the affected employees” (R1254-1255). PERB did 25 not rely on the language in section 2C alone, however. Rather, PERB read that language in conjunction with section 2B, which placed express limits on the Budget Director’s ability to decrease wage rates after fiscal year 1996-1997. The Third Department thus erred by failing to defer to PERB’s judgment that the side-letter agreement, read in its entirety, evidenced that the parties negotiated “limitations on the statutory authority and power of the State Budget Director” unilaterally to set wage rates, and made it “reasonably clear” that the parties bargained that subject to completion (R1236). Because the parties bargained that subject to completion, and nothing in the side-letter agreement precluded the Budget Director from unilaterally setting the 1996 per diem wage rates lower than those in effect the prior year, the State did not engage in an unlawful employment practice when it implemented the reduced wage rates. The Court should not substitute its judgment for PERB’s, and should confirm PERB’s determination. 26 CONCLUSION For the reasons stated above, the Appellate Division’s decision and order should be reversed. Dated: Albany, New York February 3, 2015 Respectfully submitted, ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Appellants NYS GOER, Racing & Wagering Bd. By: _______________________ JULIE M. SHERIDAN Assistant Solicitor General Office of the Attorney General The Capitol Albany, New York 12224-0341 Telephone No. (518) 776-2029 Facsimile No. (518) 915-7724 Dated: February 3, 2015 BARBARA D. UNDERWOOD Solicitor General ANDREA OSER Deputy Solicitor General JULIE M. SHERIDAN Assistant Solicitor General of Counsel Reproduced on Recycled Paper 27