Pennsylvania Legislature Restores Jurisdiction of Act 47 over Interest Arbitration Awards

by Ballard Spahr LLP

[author: John P. McLaughlin, Patrick J. Harvey]

Governor Corbett last week signed SB 1321, which requires that Act 111 interest arbitration awards comply with a municipality’s Financial Recovery Plan under the Municipalities Financial Recovery Act (Act 47). The law becomes effective on September 3, 2012—60 days after being signed by the Governor.

Officially numbered Act 133, the new law effectively supersedes the Pennsylvania Supreme Court’s controversial October 2011 holding in City of Scranton. In that decision, the Supreme Court held that, despite Act 47’s requirement that collective bargaining agreements comply with a Financial Recovery Plan, no such requirement exists for police and fire interest arbitration awards under Act 111.

The court’s decision created a critical loophole in Act 47, severely reducing the ability of distressed municipalities to regain fiscal health, because the personnel costs of uniformed employees are a principal cost for most municipalities, particularly those operating under Act 47.

The new law’s restoration of Act 47’s mandate over Act 111 awards re-establishes a necessary fiscal recovery tool for municipalities, though the overall effectiveness of the legislation for municipal fiscal recovery depends on careful presentation of an Act 47 case.

While the Act mandates that collective bargaining agreements and arbitration settlements “shall not in any manner violate, expand or diminish” the provisions of a Financial Recovery Plan, it allows for arbitration settlements, including interest arbitration awards, to deviate from the Plan under very limited circumstances. Deviation is permitted if it is established that the award:

  • Will not cause the distressed municipality to exceed any limits on expenditures for individual collective bargaining units imposed under the plan—except if such limit on expenditures is determined to be arbitrary, capricious or established in bad faith
  • Will not “further” jeopardize the financial stability of the distressed municipality
  • Is not inconsistent with the policy objectives of the Act

 Act 133 requires that the interest arbitration panel determine if the above criteria are met. In doing so, the panel must make findings of fact that are supported by substantial evidence and by expert municipal finance testimony. The Act also specifically defines the credentials necessary for an “expert in municipal finance.” An arbitration award that deviates from the Financial Recovery Plan must be provided to the municipality’s Financial Recovery Coordinator by the chairman of the arbitration panel within 48 hours of issuance. The coordinator, however, does not have authority to take any action to prevent the implementation of the arbitration award, except for appealing the award.

Act 133 authorizes appeals to be taken by the municipality, union, coordinator, or secretary within the typical 30-day appeal period. However, the new law provides that the standard of review on appeal will be “de novo,” meaning that the court will not be bound by factual or legal conclusions of the arbitration panel. Act 133 also clarifies that nothing in the Act “otherwise affect[s] the scope or standard of review” applicable to interest arbitration awards. The Act further requires municipalities to obtain approval from the Department of Community and Economic Development prior to filing for Chapter 9 Bankruptcy protection.

Although the Act restores the jurisdiction of Act 47 over interest arbitration awards, it also creates new obligations for employers in such Act 111 arbitration proceedings. Public employers operating under a Fiscal Recovery Plan and their Act 47 coordinators must work closely with labor counsel experienced in litigating matters under Act 47 to ensure that any arbitration proceeding and contract award complies with the new law.

Ballard Spahr attorneys represent municipalities across Pennsylvania in contract negotiations and Act 111 arbitrations. If you have questions about Act 133 and its ramifications, please contact John P. McLaughlin at 215.864.8241 or, Patrick J. Harvey at 215.864.8240 or, or the member of the Labor and Employment Group with whom you work.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ballard Spahr LLP | Attorney Advertising

Written by:

Ballard Spahr LLP

Ballard Spahr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.