N.J. Supreme Court Holds Public Employer Must Reimburse Co-Payment Increases to Union

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On March 19, 2013 the Supreme Court of New Jersey held that the Borough of East Rutherford must reimburse co-payment increases for doctors’ visits to its police union, PBA Local 275.  The Supreme Court concluded that the Borough violated the parties’ collective negotiations agreement (“CNA”) when it doubled the PBA’s co-payments for doctors’ visits prior to the CNA’s expiration.  Pursuant to the CNA effective January 1, 2005 through December 31, 2009, the Borough provided health insurance coverage to PBA members through the State Health Benefits Plan (“SHBP”).  Prior to and at the commencement of the CNA’s effective date, the SHBP required a $5 co-payment from plan participants for doctors’ visits.  Effective January 1, 2007, the SHBP statute was amended and the co-payment requirement was increased from $5 to $10.  The Borough passed along this increase to the PBA.

The PBA filed a grievance and claimed that the co-payment increases directly violated the terms of the CNA.  In turn, the Borough filed a scope of negotiations petition with the New Jersey Public Employment Commission (“PERC”) to restrain arbitration and argued that 2007 SHBP amendment preempted the arbitrability for reimbursement of co-payment increases.  PERC denied the Borough’s request to restrain arbitration and the matter proceeded to arbitration.  The Arbitrator determined, consistent with PERC’s determination, that the grievance was arbitrable because there was no preempting statute or regulation. The Arbitrator also concluded that the Borough violated the CNA.  In interpreting and applying the plain language of “Preservation of Rights” article of the CNA, the Arbitrator determined that the prior existing co-payment obligation must be maintained throughout the duration of the agreement. Additionally, the Arbitrator characterized the former level of co-payment required of PBA members as a past practice between the parties.  Thereafter, the award was appealed.  Ultimately, the Supreme Court held that the award was not contrary to existing law or public policy and the Arbitrator reasonably interpreted the CNA.  Therefore, the Borough must reimburse the co-payment increases to the PBA.

Public employers should be aware that prior existing co-payment obligations set forth in a CNA must be maintained throughout the duration of the agreement unless the parties agree to alter the terms.  Public employers are advised to consult with labor counsel prior to implementing any changes to the terms set forth in a CNA.

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