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Language of Collective Bargaining Agreements Entitled Retirees to the Same Health Benefits As Were In Effect at the Time of Retirement

In a full-fledged opinion by Judge Lippman, the Court of Appeals determined the language used in successive collective bargaining agreements established a vested right to a continuation of the same health coverage in effect at the time of an employee’s retirement:

We hold that the contracts establish a vested right to a continuation of the same health coverage under which plaintiffs retired, until they reach age 70, and that the Insurance Moratorium Law does not provide a basis for abrogating retirees’ vested contractual rights.  However, because issues of fact remain as to the intended scope of plaintiffs’ right, remittal for further factual development is required to determine whether the challenged increases in co-pays for prescription drugs amount to a breach of contract. Kolbe… v Tibbetts…, 235, CtApp 12-12-13

 

 

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Arbitrator Exceeded His Authority by Modifying Punishment Imposed by Town Upon Employee for Misconduct

The Second Department determined an arbitrator exceeded his authority (by modifying punishment) as that authority was described in a stipulation prior to the hearing, and further determined objection to the arbitrator’s exceeding his authority was not waived by the town. Petitioner was a town employee who had been suspended for thirty days for misconduct.  The arbitrator determined there was just cause for the town’s action, but imposed a lesser penalty.  The town brought the Article 75 proceeding to address whether the arbitrator had exceeded his authority by modifying the punishment:

“Judicial review of an arbitrator’s award is extremely limited” … . A court may vacate an arbitration award pursuant to CPLR 7511(b)(1)(iii) “only if it violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator’s power” (…see CPLR 7511[b][1][iii]…).

A party can only waive its contention that an arbitrator acted in excess of his or her power “by participating in the arbitration with full knowledge” of the alleged error that is being committed and “by failing to object until after the award” is issued … . * * *

At the beginning of the arbitration, the issue to be determined was defined as whether there was just cause to punish [the employee] and, “if not,” what the remedy should be. As framed in this manner, the issue to be determined by the arbitrator was in accordance with his powers, as set forth in Article X(E)(6) of the [Collective Bargaining Agreement], which only empowered the arbitrator to provide [the employee] with a remedy upon a finding that the imposition of discipline was not founded on just cause. Since the arbitrator found that there was just cause for the discipline imposed, the arbitrator exceeded his authority in reducing the penalty imposed. Matter of Town of Babylon v Carson, 2013 NY Slip Op 07980, 2nd Dept 11-27-13

 

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NYC Fire Department Cannot Be Compelled to Bargain Over the “Zero Tolerance” Drug-Test Policy for EMS Personnel

In a full-fledged opinion by Justice Richter, the First Department determined the “zero tolerance” policy requiring the termination of emergency medical services personnel who fail or refuse a drug test was not subject to mandatory collective bargaining:

This appeal raises the question of whether the New York City Fire Department’s “zero tolerance” policy, requiring automatic termination of certain emergency medical services [EMS] employees who fail or refuse to provide a specimen for a drug test, should have been subject to mandatory collective bargaining. The New York City Board of Collective Bargaining found that this issue was not required to be bargained, and unions representing the employees brought this article 78 proceeding. We now uphold the Board’s decision because the City Charter provides that the discipline of these EMS employees is the sole province of the New York City Fire Commissioner, and because the Fire Department’s determination of an appropriate penalty for illegal drug use relates to its primary mission of providing public safety. * * *

The Court of Appeals recently reiterated that a public employer cannot be compelled to bargain over “inherent[] and fundamental[] policy decisions relating to the primary mission of the public employer” … . FDNY’s interest in ensuring that its EMS workers are drug-free directly relates to the primary mission of treating and providing transport for sick and injured citizens and ensuring that EMS workers do so safely. This Court of Appeals precedent provides further support for our conclusion that FDNY cannot be compelled to bargain over this fundamental public safety policy decision. Matter of Roberts v NYC Off of Collective Bargaining, 2013 NY Slip Op 07870, 1st Dept 11-26-13

 

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School District Attorney Was “Employee” Not “Independent Contractor”

The Third Department reversed the Comptroller’s finding that an attorney for a school district was an independent contractor, not an employee, requiring the attorney to refund retirement benefits already paid.  In explaining the criteria for an “employee” who provides professional services, the Third Department wrote:

Where professional services are involved, the absence of direct control is not dispositive of the existence of an employer-employee relationship … .  Rather, such an employment relationship may be evidenced by “control over important aspects of the services performed other than results or means” …, i.e., “over-all control is sufficient to establish the employee relationship where [professional] work is concerned” … .  In our view, the Comptroller’s determination that petitioner was not an employee of the school district is not supported by substantial evidence.

Here, both the school board president and the assistant superintendent testified that the school board routinely engaged in discussions about whether to retain petitioner’s services as an employee or an independent contractor, and the board continually chose the former because it was more cost effective for the school district.  The testimony also indicated that, although there was no written contract with petitioner, the board and the assistant superintendent directed petitioner as to what work needed to be completed and when services were to be performed, the assistant superintendent and board reviewed petitioner’s work for its sufficiency and the president monitored petitioner’s performance and conducted annual performance evaluations.  Additionally, both the testimony and documentary evidence indicated that petitioner was a salaried employee paid every two weeks by paycheck, from which income taxes, Social Security, Medicare and health insurance premiums were deducted, and petitioner received a W-2 form annually.  Further, petitioner’s appointment as an employee of the school district was recognized by the County Department of Civil Service as a “School Attorney” – an exempt position – at a salary in 1974 of $3,400 per year.  Matter of Mowry v DiNapoli, 516295, 3rd Dept 11-21-13

 

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Village Properly Withdrew Its Defense and Indemnification of Officials When Officials Refused a Reasonable Settlement Offer

The Court of Appeals, in a full-fledged opinion by Judge Lippman (with a dissent), determined “that a municipality, consistent with its obligations under Public Officers Law, may withdraw its defense and indemnification of current and former municipal officials and officers in a civil action for their failure to accept a reasonable settlement offer, and that First Amendment concerns with respect to the settlement’s nondisclosure clause do not warrant a different conclusion:”

The Freeport Village Code § 130-6 adopts Public Officers Law § 18 (3)(a), which provides that “public entity shall provide for the defense of [an] employee in any civil action or proceeding, state or federal, arising out of any alleged act or omission which occurred or allegedly occurred while the employee was acting within the scope of his public employment or duties.”  The Village’s duty to defend and indemnify “shall be conditioned upon: . . . the full cooperation of the employee in the defense of such action or proceeding against the Village based upon the same act or omission” (Freeport Vil. Code § 130-6 [A][1] [emphasis added]; Public Officers Law § 18 [5][ii]). * * *

A municipal employer’s statutory duty to defend a public officer under Public Officers Law § 18 is similar to an insurance company’s contractual duty to defend an insured (Matter of Dreyer v City of Saratoga Springs, 43 AD3d 586, 588 [3d Dept 2007]).  As in the insurance context, petitioners were obligated to cooperate in the defense of the action as a condition of their defense and indemnification (Public Officers Law § 18 [5][ii]; Freeport Vil. Code § 130-6 [A][1]).

“In order to disclaim coverage on the ground of an insured’s lack of cooperation, the carrier must demonstrate that (1) it acted diligently in seeking to bring about the insured’s cooperation, (2) the efforts employed by the carrier were reasonably calculated to obtain the insured’s cooperation, and (3) the attitude of the insured, after cooperation was sought, was one of willful and avowed obstruction”… . Matter of Lancaster v Incorporated Village of Freeport…, 181, CtApp 11-19-13

 

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Portions of Covenant Not to Compete Unenforceable/Liquidated Damages Clause Constituted a Penalty

The Fourth Department determined a covenant not to compete was ambiguous with respect to the scope of prohibited activity, unenforceable to the extent it attempted to bind third parties, and the liquidated damages clause in the covenant was an unenforceable penalty:

…[T]he liquidated damages clause is an unenforceable penalty.  Liquidated damages are enforceable only to the extent that they constitute “ ‘an estimate, made by the parties at the time they enter into their agreement, of the extent of the injury that would be sustained as a result of breach of the agreement’ ” … .  Typically, a liquidated damages clause is enforceable if the stipulated amount of damages “bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation” … .  However, if the clause provides for damages “ ‘plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced’ ” … .   Here, although the amount of actual damages is incapable of precise estimation, the amount of liquidated damages was grossly disproportionate to the probable loss and was designed to penalize plaintiff for his interference with the Agreement, as well as the interference of others with the Agreement.  Moreover, the liquidated damages clause here eliminates the balance due under the Agreement based on minor breaches of the covenant not to compete such that it is an “unconscionable penalty and should not be enforced” … .  Del Nero v Colvin…, 911, 4th Dept 11-8-13

 

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Collective Bargaining Agreement Subsequently Made Retroactive to Cover Period When it Had Expired Did Not Include Firefighters Hired During the Period the Agreement Had Expired

The Third Department affirmed Supreme Court’s determination that newly hired firefighters [hired January 9, 2010] were not eligible, pursuant to a collective bargaining agreement (CBA), for participation in a retirement plan to which they need not contribute a portion of their salary.  The collective bargaining agreement which would have allowed participation in the noncontributory program had expired at the time the firefighters were hired and was made effective retroactively when it was subsequently signed:

Petitioners’ reliance on the continued effect of the terms of the 2008-2009 CBA is unavailing in light of the recent decisions of the Court of Appeals expressly rejecting the application of the Triborough Amendment to the tier 5 retirement legislation … .  Accordingly, the expired 2008-2009 CBA cannot be considered to have been “in effect” on January 9, 2010 for the purpose of permitting the new hires to qualify for the statutory exception (see L 2009, ch 504, Part A, § 8).

Nor are we persuaded that the 2009-2013 CBA can be considered to be retroactively “in effect” on January 9, 2010, as it was not executed until seven months later in August 2010.  At that time, newly hired firefighters were required by law to contribute to the retirement system (see Retirement and Social Security Law §§ 1201, 1204) and, as a result, the Union and NFTA [Niagara Frontier Transportation Authority] were prohibited from agreeing to a noncontributory retirement plan (see Civil Service Law § 201 [4]; Retirement and Social Security Law § 470).  Moreover, while the Union and NFTA were able to retroactively bind each other to the terms of the 2009-2013 CBA, they were unable to bind third parties such as the Comptroller … . Matter of Buffalo Niagara Airport Firefighters Association v DiNapoli, 515811, 3rd Dept 11-7-13

 

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“At Will” Clause in Employment Contract Precluded Action Based Upon Promissory Estoppel, Fraud and Negligent Representation/Criteria for Tortious Interference With Contract and Prima Facie Tort Not Met

The Third Department affirmed the dismissal of a complaint brought by a doctor against the hospital where he was employed and the doctor who supervised him.  The plaintiff was hired pursuant to an agreement which included an “at will” clause allowing termination without cause upon 60 days notice. Plaintiff was terminated upon 90 days notice. Plaintiff sued the hospital for promissory estoppel, fraud, and negligent representation.  Plaintiff sued his supervisor [Hussain] for tortious interference with contract and prima facie tort:

Plaintiff’s claims against the hospital all required a showing that, among other things, he reasonably relied on any alleged promises or misrepresentations made to him by the hospital … .  In this regard, we note that “[w]here, as here, ‘a plaintiff is offered only at-will employment, he or she will generally be unable to establish reasonable reliance on a prospective employer’s representations'” … . * * * Inasmuch as any oral assurances made by the hospital as to the security of plaintiff’s position could not have altered the at-will nature of the employment contract, the hospital established its prima facie entitlement to judgment as a matter of law dismissing the claims against it, shifting the burden to plaintiff “‘to establish the existence of material issues of fact which require a trial of the action’”… . * * *

… [A] claim of tortious interference with contract requires (1) the existence of a valid contract between a plaintiff and a third party, (2) a defendant’s knowledge of such contract, (3) the intentional inducement of a breach of that contract, and (4) damages … .  Significantly, as the contract here was terminable at will, plaintiff was also required to “show that [Hussain] employed wrongful means, such as fraud, misrepresentation or threats[,] to effect the termination of employment”… .No such showing was made here. * * *

“[Prima facie tort] requires a showing of an intentional infliction of harm, without excuse or justification, by an act or series of acts that would otherwise be lawful . . . and that malevolence was the sole motivating factor” … .  Considering plaintiff’s acknowledgment that Hussain prevented him from examining patients as a result of complaints made by patients who wanted to be treated by Hussain and not plaintiff, plaintiff could not establishthat Hussain’s actions were motivated solely by “disinterested malevolence”… . Hobler v Hussain…, 516381, 3rd Dept 11-7-13

 

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Material Breach and Abandonment of Subcontract Waived Notice of Termination and Opportunity to Cure and Warranted Cost-to-Complete Damages

The First Department explained the criteria for cost-to-complete damages for a subcontractor’s breach before completion of performance.  The court noted that plaintiff was not entitled to overpayment damages in addition to the cost-to-complete damages because receipt of both would amount to a double recovery:

Defendants are entitled to cost-to-complete damages because plaintiff materially breached and abandoned the subcontract, and waived any right to notice of termination or an opportunity to cure. The subcontract explicitly provides that time is of the essence, that plaintiff’s delay or failure to meet scheduling requirements warrants termination, and that plaintiff must perform work even if the parties dispute that work’s characterization, yet plaintiff repeatedly failed to timely perform and complete work, despite defendant E-J Electric Installation Co.’s repeated demands … . Among other material breaches, plaintiff repudiated the subcontract by abandoning the work site when only 73.49% of plaintiff’s work was complete … . Accordingly, plaintiff waived any right to notice of termination … .

It is well-settled that if a subcontractor breaches before completing performance, the contractor is entitled to recover reliance, or cost-to-complete damages from the subcontractor… . Kleinberg Elec Inc v E-J Elec Installation Co, 2013 NY Slip Op 07256, 1st Dept 11-7-13

 

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School Employee Stated Discrimination Cause of Action City Department of Education

The Court of Appeals affirmed the appellate division and found plaintiff had presented sufficient evidence of employment discrimination to survive a motion to dismiss:

Defendants are of course correct that evidence only that the principal made stray discriminatory comments without any basis for inferring a connection to the termination would be insufficient to defeat defendants’ motion (see Forrest, 3 NY3d at 308 [comments made years before the plaintiff’s termination failed to raise a triable issue of fact in light of the clear evidence of plaintiff’s misconduct]).  But that is not the case here.  Plaintiff has offered evidence of, among other things: defendant principal’s repeated homophobic remarks directed at plaintiff; his decision to report to the Department of Education (DOE) allegations that plaintiff had engaged in misconduct while working at an after-school program that he did not supervise; his close relationship with the alleged victims of the misconduct; his independent decision to terminate plaintiff’s employment; and the after-school program supervisor’s opinion that plaintiff had not engaged in any misconduct worthy of reporting to the DOE. This is sufficient to deny defendants’ motion for summary dismissal.  Sandiford v City of New York Dept of Education, 157, CtApp 10-17-15

 

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