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May 16, 2016

A court’s review of a PERB's decision is limited to determining if it was affected by an error of law or it was arbitrary and capricious or an abuse of discretion


A court’s review of a PERB's decision is limited to determining if it was affected by an error of law or it was arbitrary and capricious or an abuse of discretion
Kent v Lefkowitz, 2016 NY Slip Op 03650, Court of Appeals

In response to New York State Racing and Wagering Board* (the Racing Board) reducing per diem wages for its seasonal employees* by 25%, the Public Employees Federation, AFL-CIO [PEF], the certified collective bargaining representative for the Professional, Scientific and Technical Services Unit of New York State employees, which unit includes seasonal track personnel employed by the Racing Board** filed an improper practice charge, alleging that the reduction in wages violated Civil Service Law §209-a(1)(d) with the Public Employment Relations Board [PERB]. PERB dismissed the improper practice charge and PEF appealed contending that PERB’s decisions “was affected by an error of law or was arbitrary and capricious or an abuse of discretion.”

The Appellate Division reversed, with two Justices dissenting, vacated PERB’s determination [119 AD3d 1208]. The majority held that "PERB's determination . . . was arbitrary and capricious" because it "d[id] not believe" that the Side Letter Agreement demonstrated that the Racing Board negotiated the unilateral 25% reduction in wages. The dissent opined that "when PERB's interpretation of the [S]ide [L]etter [A]greement is afforded the deference it is due, its determination that the [Racing] Board met its burden of establishing that it satisfied its duty to negotiate with [PEF] is rational and not arbitrary and capricious."

The Court of Appeals, [Judge Fahey dissenting in an opinion; Judge Stein taking no part], reversed the Appellate Division’s ruling, thus sustained PERB’s determination.

The genesis of this dispute was a collective bargaining agreement negotiated by PEF and the New York State Governor's Office of Employee Relations [GOER] that was operative from 1995 to 1999. The CBA included a "Memorandum of Interpretation," or side-letter agreement that addressed terms and conditions of the employment of seasonal employees and provided for Compensation wherein Paragraph A provided for lump-sum payments and salary increases for eligible employees; Paragraph B set out the specific fiscal years covered by the CBA; [3] Paragraph C addressed the effect on a seasonal employee's rate of compensation "[i]f during the term of th[e] Agreement the rate of compensation of any employee in a seasonal position [wa]s increased at the discretion of the Director of the Budget for the purpose of making such rate equal to the [f]ederal minimum wage level;" and Paragraph D of the Side Letter Agreement [SLA] expressly made Paragraphs A through C applicable to seasonal employees paid on a per diem basis.

Approximately two months after the Side Letter Agreement was executed, the Racing Board's chair announced a 25% reduction in the per diempay of seasonal track employees, effective with the January 1996 appointments. In response, PEF filed an improper practice charge with PERB, alleging that this reduction violated the Racing Board's duty to negotiate in good faith under Civil Service Law § 209-a (1) (d). The Racing Board answered, raising the affirmative defense of waiver.

After administrative hearings, PERB's Assistant Director rejected the Board’s waiver defense and found a violation of Civil Service Law §209-a(1)(d). The Board filed exceptions to Assistant Director’s decision as did PEF with respect to the relief awarded by the Assistant Director. PERB dismissed the improper practice charge finding that the SLA was "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" and, therefore, the duty to negotiate was satisfied.

Supreme Court dismissed the PEF’s petition challenging PERB's decision. The Appellate Division, however, reversed the Supreme Court’s decision, with two Justices dissenting. The majority held that "PERB's determination . . . was arbitrary and capricious" because it ‘d[id] not believe’ that the Side Letter Agreement demonstrated that the Racing Board negotiated the unilateral 25% reduction in wages.” The dissent, in contrast, opined that "when PERB's interpretation of the [S]ide [L]etter [A]greement is afforded the deference it is due, its determination that the [Racing] Board met its burden of establishing that it satisfied its duty to negotiate with [PEF] is rational and not arbitrary and capricious.

The Court of Appeals ruled that the order of the Appellate Division should be reversed and the judgment of Supreme Court reinstated. The court explained that its scope of review in this context is limited to whether PERB's decision "was affected by an error of law or was arbitrary and capricious or an abuse of discretion." Further, said the court, it has recognized that "PERB is accorded deference in matters falling within its area of expertise," which includes "the resolution of improper practice charges."

The Court of Appeals said that the SLA “was comprehensive in addressing all conditions of employment for seasonal employees for 1996 to 1999,” including specific pay increases for specific years, but not for the fiscal year in which the 25% reduction took effect. Further, the SLA “did not rule out pay reductions and did not impose any conditions precedent to pay reductions.”

Accordingly, said the court, PERB's conclusion that it was "reasonably clear" that both sides intended the SLA "to act as a negotiated limitation upon the State Budget Director's discretion" as to compensation for seasonal employees was not arbitrary and capricious. 

Reading the Side Letter Agreement as a whole, the Court of Appeals concluded that the language of the SLA "implicitly demonstrate[s] that the parties had reached accord" with respect to any limitations on the discretionary authority of the Budget Director to change the per diem compensation of seasonal employees, noting that “[e]ach of the compensation sections of the Side Letter Agreement demonstrates negotiation with respect to the statutorily authorized discretion."

* Effective February 1, 2013, the Racing Board merged into the New York State Gaming Commission, a newly created entity.
 
** Seasonal track employees are in the exempt class [Civil Service Law §41] and are appointed each year by the chair of the Racing Board to work during a specific season from opening date until closing date.

The decision is posted on the Internet at:

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