Interest Arbitration Reform: The Rocket Docket - Are You Ready? We Are!!!

December 30, 2010

On December 21st, Governor Christie signed Arbitration Reform Bill A-3393 into law. The Reforms mark a dramatic change to the interest arbitration process. Our firm, as labor counsel to the League of Municipalities, was involved throughout the legislative process leading to this compromise bill. The reforms, which take effect on January 1, 2011, cap arbitration awards on base salaries to no more than 2%, provide for random selection of arbitrators, expedite the determination of awards, require the arbitrator to provide a written report detailing the weight accorded to each of the statutory requirements and expedite the appeal process. Specifically, the reforms provide:
  • Refusal to Negotiate in Good Faith: If a party is found to have not negotiated in good faith, PERC shall order respondent to pay all legal and administrative costs associated with the filing and resolution of the Charge; if Charge is dismissed, charging party shall pay the costs associated with the filing of the Charge.
  • Terminal Procedure: conventional arbitration as sole procedure for resolving the dispute.
  • 2% Cap on Base Salary Items: No arbitrator shall render an Award that, on an annual basis, increases base salary items (including step increments, longevity and anything else the parties include in base salary) by more than 2.0% of aggregate amount expended by employer on base salary items for the members of the union in the 12 months immediately preceding expiration of the Agreement. The Arbitrator can distribute the aggregate monetary value over the term of the Agreement in unequal annual percentages. The cap does not apply to non-salary economic issues, such as paid time off, health/medical benefits, pension costs, etc.
  • No New Base Salary Items or Non-Salary Economic Issues: Arbitrator cannot Award a new base salary item or a new non-salary economic issue that was not included in the prior Agreement.
  • Expedited Arbitration: On first business day after Petition is filed, PERC will randomly select an Arbitrator from special panel of arbitrators. Written response to petition due within 5 days of receipt of petition. Award must be issued no later than 45 days from date that Arbitrator was assigned and parties can no longer mutually agree to extend this time-frame.
  •  Penalty for Untimely Award: $1000 per day penalty for Arbitrator that fails to render an Award within 45 days of the date he/she was assigned by PERC.
  •  Expedited Appeals: Time to file appeal of Award with PERC reduced from 14 to 7 days from receipt of Award. PERC’s decision must be rendered no later than 30 days from the date the appeal was filed.
  •  Arbitrator Costs: $1,000 per day, max $7500; $500 max cancellation fee.
  •  Applicability: The Act takes effect January 1, 2011. The 2% cap only applies to collective negotiations agreements expiring on or after January 1, 2011 to March 31, 2014. The 2% cap becomes inoperative on April 1, 2014 except for those agreements in the time frame that do not a final settlement in place. Moreover, to the extent that any contract that expires between January 1, 2011 and April 1, 2014 has terms that are at or below the 2% cap, those parties shall not be subject to the 2% cap in interest arbitration following negotiations of a future contract.
We understand that further guidance with respect to the interpretation of the new legislation is forthcoming from the State. Should you need assistance or have any questions, please contact Brian W. Kronick or Douglas E. Solomon of our Public Sector Labor Group at (973) 535-7112 or you can e-mail them at or