In the Matter of Camden and the International Association of Firefighters, Local 788, A-1244-11T2; Appellate Division; opinion by Espinosa, J.A.D.; decided and approved for publication January 29, 2013. Before Judges Graves, Espinosa and Guadagno. On appeal from the New Jersey Public Employment Relations Commission, No. IA-2009-065. DDS No. 03-2-8845 [38 pp.]

For more than a decade, New Jersey has responded to the dire financial circumstances of Camden by providing extraordinary payments of state aid pursuant to the Municipal Rehabilitation and Economic Recovery Act, N.J.S.A. 52:27BBB-1 to -65. However, the amount of state aid has declined in recent years.

When the collective-bargaining agreement between Camden and defendant International Association of Firefighters, Local 788 expired in December 2008 and negotiations for a successor agreement failed, the parties engaged in compulsory interest arbitration pursuant to the Police and Fire Public Interest Arbitration Reform Act, 34:13A-14 to -21. In issuing his opinion and award, the arbitrator acknowledged the harsh realities of decreased state aid and said that his task was to balance the city’s fiscal situation with its citizens’ expectations of services and the goal of professional fire fighters to maintain compensation equivalent to their service. Stating his intention to recognize the importance of the firefighters’ service through a minimal wage increase, the arbitrator issued an award granting an 8.5 percent increase to base wages over four years. Acknowledging that the city could not pay the award from its tax base, he deemed the state a “fourth party” to the arbitration and concluded that it is required to pay the shortfall.

Camden appeals the Public Employee Relations Commission’s decision affirming the award, arguing that the decision is arbitrary and capricious because it violates 34:13A-16(g); it is predicated on unsupported findings and violates the standards in 2A:24-8; and the arbitrator failed to consider evidence that was material to the controversy. Camden also argues that the matter must be remanded to a new arbitrator.

Held: PERC’s decision affirming the award is reversed and the award is vacated because the arbitrator exceeded his authority by deeming the state a fourth party required to fund the award; the award was the result of undue means because the arbitrator failed to comply with statutory mandates regarding employee contributions to the cost of health benefits; and the arbitrator failed to give due consideration to the factors in N.J.S.A. 34:13A-16g and failed to explain how each affected the final award. The matter is remanded to a different arbitrator because the nature of his errors suggests a commitment to his stated intention to award the firefighters a salary increase.

The panel begins by reviewing the legal principles governing the appeal. It notes that the New Jersey Arbitration Act, 2A:24-1 to -11, provides that a court may vacate an arbitration award when the award was procured by corruption, fraud or undue means; there was evident partiality or corruption in the arbitrators; the arbitrators were guilty of misconduct prejudicial to the rights of any party; or the arbitrators exceeded or so imperfectly executed their powers that a mutual, final and definite award was not made.

Arbitration pursuant to the Compulsory Interest Arbitration Act is further subject to a statutorily mandated procedure that requires the arbitrator to consider the factors in 34:13A-16(g) and to indicate which are deemed relevant, satisfactorily explain why the others are not relevant, and provide an analysis of the evidence on each relevant factor.

The panel agrees with Camden’s contention that the arbitrator exceeded his authority by stating the state was a “fourth party” to the arbitration and by concluding the state must fund the award, and that PERC’s decision to affirm the award was therefore arbitrary and capricious.

It says the state was neither a party to the original CBA nor to the successor agreement the arbitrator was charged to craft. Therefore, the arbitrator lacked the authority to render an award that essentially required the state to fund the salary increases. Also, the arbitrator made a policy decision — that the services could not be reduced further, that equity mandated a reasonable adjustment of compensation, and that drastic steps were necessary to address budget obstacles — but the nature of that decision is not a proper subject for arbitration. Moreover, the power and authority to appropriate funds lie solely and exclusively with the legislative branch of government.

The panel also concludes that the arbitrator’s failure to follow substantive law constituted undue means, requiring that the award be vacated under 2A:24-8(a).

A court may vacate an award in a public-sector case if it is contrary to existing law. N.J.S.A. 40A:10-21(b) required that IAFF members contribute 1.5 percent of base salary toward the cost of health-care benefits beginning May 2010. Any new agreement would be subject to 40A:10-21.1, which phased in a scale of employee contributions of no less than 1.5 percent of base salary. However, the award, which was issued after the effective date of 40A:10-21.1, provides that effective on the execution of a successor agreement, the employees shall contribute 1.5 percent of their base salary as a contribution for health insurance. The arbitrator said he was attempting to limit the contributions to 1.5 percent.

The panel holds that the arbitrator’s action in declining to be “guided” by 40A:10-21.1 was clearly contrary to law. He also improperly delayed the time when the contributions would commence, contrary to 40A:10-21(b).

The panel also finds that the arbitrator failed to discharge his obligation under 34:13A-16(g) to indicate which of the factors are deemed relevant, satisfactorily explain why the others are not relevant, and provide an analysis of the evidence on each relevant factor. His discussion of the statutory factors was essentially limited to a discussion of the parties’ positions as to each factor.

Finally, the panel says that although a failure to fully analyze the mandatory statutory criteria will be sufficient to vacate an award, that failure alone will not be sufficient to require that the arbitration proceed before a different arbitrator on remand. However, the nature of the arbitrator’s errors suggests a commitment to his stated intention to award firefighters a wage increase and requires that the matter proceed before a different arbitrator.

For appellant Camden — William M. Tambussi (Brown & Connery; Tambussi, Michael J. DiPiero and Kristin L. Van Arsdale on the briefs). For respondents: IAF Local 788 — Raymond G. Heineman (Kroll Heineman Carton); New Jersey Public Employment Relations Commission — Martin R. Pachman, General Counsel (David N. Gambert, Deputy General Counsel, on the statement in lieu of a brief). For amicus curiae New Jersey — Sally Ann Fields, Senior Deputy Attorney General (Jeffrey S. Chiesa, Attorney General; Robert Lougy, Assistant Attorney General, of counsel).