Commission Rules That in Applying the 2% Cap On Base Salary Increases for Police Officers and Firefighters, an Interest Arbitrator Cannot Pass Along to the Employees Any Savings the Employer Receives From Retirements or Any Other Legislation That May Reduce the Employer’s Costs

By Ira W. Mintz, Esq.

Borough of New Milford and PBA Local 83

In P.E.R.C. No. 2012-53, the Commission amended its interest arbitration review standard to include a requirement that the Commission determine whether the arbitrator established that the award not increase base salary by more than 2% per contract year or 6% in the aggregate for a three-year contract award.

By way of background, an amendment to the interest arbitration law governing police and fire negotiations that went into effect on January 1, 2011 provides that an arbitrator cannot render an award which, on an annual basis, increases base salary items by more than 2% of the aggregate amount expended by the public employer on base salary items for the members of the affected employee organization in the twelve months immediately preceding the expiration of the collective negotiation agreement subject to arbitration; however, the parties may agree, or the arbitrator may decide, to distribute the aggregate monetary value of the award over the term of the collective negotiation agreement in unequal annual percentages.  Base salary is defined by the statute as the salary provided pursuant to a salary guide or table and any amount provided pursuant to a salary increment, including any amount provided for longevity or length of service, and any other item agreed to by the parties, or any other item that was included in the base salary as understood by the parties in the prior contract.  Base salary does not include non-salary economic issues, pension and health and medical insurance costs.

The arbitrator in New Milford awarded a three-year contract effective January 1, 2012 through December 31, 2014 with a 1% salary increase effective July 1, 2012, 2% effective January 1, 2013, and 2.5% effective January 1, 2014.  The Commission remanded the case to the arbitrator to explain which figures were taken into his accounting of base salary and the costs of each year of the award.  What is significant about the Commission’s decision is that it ruled that in making these cap calculations, an arbitrator cannot pass along to the employees any savings the employer receives from retirements or any other legislation that may reduce the aggregate amount expended by the employer during the life of the new agreement.


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