Michael D. Roche & a. v. City of Manchester

THE STATE OF NEW HAMPSHIRE

SUPREME COURT

In Case No. 2017-0277, Michael D. Roche & a. v. City of
Manchester, the court on August 2, 2018, issued the following
order:

Having considered the briefs and oral arguments of the parties, the court
concludes that a formal written opinion is unnecessary in this case. The
plaintiffs, a group of former employees of the defendant, City of Manchester,
appeal two orders of the Superior Court (Ruoff, J., and Kissinger, J.) in favor of
the City. We affirm in part, reverse in part, and remand.

The record reflects the following facts. The plaintiffs are a group of now-
retired former City of Manchester employees who were enrolled in the
Manchester Employees’ Contributory Retirement System (MECRS). MECRS is
governed by Laws 1973, chapter 218, as repealed and reenacted by Laws 2002,
chapter 194, and as thereafter amended. See Laws 1973, ch. 218 (repealed
and reenacted by Laws 2002, ch. 194) (the Act). Section 8 of Chapter 218
requires the City to “appropriate annually to the retirement board the amounts
required to fund the benefits” that the plan provides. Laws 1973, 218:8
(repealed and reenacted by Laws 2002, 194:1). Sections 9 and 28 require
employees to contribute a total of 5% of their calendar year earnings in
addition to the City’s contribution. See Laws 1973, 218:9, I (repealed and
reenacted by Laws 2002, 194:1); Laws 1973, 218:28, II (repealed and reenacted
by Laws 2002, 194:1 and amended by Laws 2005, 41:1).

One group of plaintiffs is union-affiliated, and the rest of the plaintiffs
are nonaffiliated, meaning they were not members of, or represented by, any
collective bargaining units. Prior to retiring, all plaintiffs entered into
agreements that provided for severance packages. The union-affiliated
plaintiffs, represented by three different unions, entered into collective
bargaining agreements with the City (CBAs). The CBAs contained nearly
identical severance clauses stating, in pertinent part, that employees who:

retire on or after March 1, 2012 and prior of June 30, 2015 shall
have earned a severance benefit of $13,000. The City may
withhold from this benefit such amounts as are necessary to pay
the employer and the employee contributions to the [MECRS].

The CBAs also contained substantially similar clauses defining “grievance” as
“a claim or dispute arising out of the application or interpretation of this
agreement,” and specifying a procedure for resolving grievances, culminating in
binding arbitration. The nonaffiliated plaintiffs all agreed to an employees’
benefits package (the Understanding) with the City. The Understanding
provided that “[r]etirements between 3/1/2012 and 6/30/2015 shall earn
$13,000 severance. The City may withhold the employee and the employer
contributions to the retirement system.”

It is undisputed that all of the plaintiffs retired from City employment
within the time period specified by the severance provisions. Upon their
retirements, the plaintiffs accepted severance payments in the gross amount of
$13,000. Both employee and employer contributions were withheld from that
amount pursuant to the CBAs and the Understanding. As a result of the
severance payments, the plaintiffs’ retirement benefits increased.

The plaintiffs subsequently filed a complaint alleging that the provisions
of the CBAs and the Understanding permitting the City to withhold the
employer contributions from the employees’ severance payments are “ultra
vires,” as contrary to the Act, and, therefore, unenforceable. The plaintiffs
requested that the court order the City to refund the amount of employer
contributions withheld from the severance payments. The City moved to
dismiss the union-affiliated plaintiffs’ claims, arguing that the Public Employee
Labor Relations Board (PELRB) had primary jurisdiction. The trial court
granted the City’s motion to dismiss, concluding that, because the union-
affiliated plaintiffs’ claims relate to the application of CBA provisions, the
PELRB had primary jurisdiction. The trial court also reasoned that it lacked
jurisdiction based upon the language of the grievance clauses of the CBAs,
which required claims arising out of the application or interpretation of a CBA
to be submitted to binding arbitration. The trial court denied the union-
affiliated plaintiffs’ motion to reconsider.

The City then moved for summary judgment on the nonaffiliated
plaintiffs’ claims, arguing that the Act does not prohibit the withholding of City
contributions from employees’ severance packages. The trial court granted the
motion, concluding that the Understanding is not ultra vires because the Act
merely provides a framework for funding the retirement plan and neither
entitles employees to a severance payment nor prohibits severance agreements
such as the Understanding. In support of this ruling, the court noted that the
MECRS Board of Trustees reviewed, but did not object to, the severance
provision contained in the Understanding. The trial court denied the
nonaffiliated plaintiffs’ motion to reconsider. This appeal followed.

On appeal, the plaintiffs argue that the trial court erred when it
dismissed the union-affiliated plaintiffs’ claims on jurisdictional grounds, and
when it granted summary judgment to the City on the nonaffiliated plaintiffs’
claims. We turn first to the plaintiffs’ argument that the trial court should
have retained jurisdiction because the union-affiliated plaintiffs’ claims arise
out of a violation of the Act, rather than a violation of the terms of the CBAs

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themselves. The City counters that the trial court was correct that the union-
affiliated plaintiffs’ claims arise out of the application or interpretation of the
CBAs, and, therefore, the PELRB had primary jurisdiction. The City further
contends that, while the PELRB has jurisdiction to determine whether a
dispute involves a matter covered by a CBA, it does not typically have
jurisdiction to interpret the CBA when it provides for binding arbitration. It
asserts that, because the CBAs include grievance provisions providing for
binding arbitration, the trial court correctly found that an arbitrator, not the
trial court, would have jurisdiction to resolve this dispute. We agree with the
plaintiffs.

“In reviewing the trial court’s grant of a motion to dismiss, we consider
whether the allegations in the plaintiff[s’] pleadings are reasonably susceptible
of a construction that would permit recovery.” England v. Brianas, 166 N.H.
369, 371 (2014). However, “[w]hether the trial court had jurisdiction is a
question of law subject to de novo review.” Univ. Sys. of N.H. Bd. of Trs. v.
Dorfsman, 168 N.H. 450, 453 (2015).

Generally, “claims involving public employment disputes must be
resolved before the PELRB in the first instance.” Collins v. City of Manchester,
143 N.H. 708, 710 (1999); see also RSA 273-A:6, I (2010) (providing that
PELRB has jurisdiction over all violations of RSA 273-A:5); RSA 273-A:5, I(h)
(2010) (prohibiting breach of collective bargaining agreement by public
employer). However, the PELRB’s jurisdiction does not extend to claims that do
not emanate from a CBA. See Stankiewicz v. City of Manchester, 156 N.H.
587, 591-92 (2007). In Stankiewicz, we held that the superior court had
jurisdiction over a union employee’s claim. Id. Although the employee’s union
had entered into a CBA with the City, the employee argued that his claim
stemmed from a controlling ordinance. Id. at 588-89. We stated, “while the
determination of arbitrability is generally within the jurisdiction of the
arbitrator or the [PELRB], that rule applies when the relevant claim arises
under the CBA.” Id. at 591 (citation omitted). We concluded that because “the
plaintiff’s claim . . . arises out of a right conferred by [the controlling
ordinance,] . . . the plaintiff is seeking to vindicate a right that does not
emanate from the CBA.” Id.; see also Fowler v. Town of Seabrook, 145 N.H.
536, 539 (2000) (“Where the plaintiff seeks to vindicate a statutory right, the
presumption of arbitrability does not pertain. Such a claim is not arbitrable
unless there is a ‘clear and unmistakable waiver’ of the employee’s right to
pursue his statutory claim.” (citation omitted)).

Here, the merits of the plaintiffs’ claims do not arise out of an alleged
violation, misinterpretation, or misapplication of the CBAs. Rather, the
plaintiffs’ complaint states: “The City has reported the entire $13,000.00 to the
Retirement Board as earnings and upon information and belief withheld both
the employee’s 5% contribution and the City’s actuarially determined
contribution contrary to the provisions of Laws 218:4, VIII and laws 218:8.”

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(Emphasis added.) The plaintiffs’ claims concern the validity of the CBAs’
provisions in light of the Act — their claims do not emanate from provisions of
the CBAs. The CBAs’ arbitration clauses are not triggered for the same reason.
In other words, the plaintiffs’ claims are not arbitrable “grievance[s]” because
they do not “arise[] out of the application or interpretation of [the CBAs].”
Accordingly, we conclude that the trial court erred when it ruled that it did not
have jurisdiction to hear the union-affiliated plaintiffs’ claims.

We now turn to the plaintiffs’ argument that the trial court erred when it
granted summary judgment to the City, with regard to the nonaffiliated
plaintiffs, on the merits of their claim that the severance provision of the
Understanding is contrary to, or violates, the Act. “When reviewing a trial
court’s grant of summary judgment, we consider the affidavits and other
evidence, and inferences properly drawn from them, in the light most favorable
to the non-moving party.” Sabinson v. Trustees Of Dartmouth College, 160
N.H. 452, 455 (2010). “We review the trial court’s application of the law to the
facts de novo.” Id.

Deciding whether the severance provision violates the Act requires us to
engage in statutory interpretation. “Statutory interpretation is a question of
law, which we review de novo.” Petition of Malisos, 166 N.H. 726, 729 (2014).
“We first look to the language of the statute itself, and, if possible, construe
that language according to its plain and ordinary meaning.” Id. “We interpret
legislative intent from the statute as written, and will not consider what the
legislature might have said or add language that the legislature did not see fit
to include.” Id. “When the language of the statute is plain and unambiguous,
we need not look beyond the statute itself for further indications of legislative
intent.” Id.

The nonaffiliated plaintiffs argue that the severance provision is contrary
to the Act for two reasons: (1) it requires employees to contribute and have
withheld from their severance payment more than the 5% employee
contribution rate set forth in the Act; and (2) it allows the City’s contributions
to be deducted from the employees’ severance payments, rather than from the
City’s own funds.

As a threshold matter, we observe that the Act does not explicitly refer to
severance packages. However, the City alleged in its cross-complaint — and
the plaintiffs admitted in their answer — that the $13,000 severance payments
are “earnings” as defined by the Act. See Laws 1973, 218:4, VIII (repealed and
reenacted by Laws 2002, 194:1) (defining “earnings” as “the total salary or
wages of a member for the member’s employment with the city”). The City also
alleged, and the plaintiffs admitted, that, because the severance payments are
“earnings” under the Act, they are subject to the employee and employer
contribution requirements. Based upon the parties’ allegations and
admissions, we assume, without deciding, that the severance payments

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constitute “earnings” that are subject to the employee and employer
contributions required by the Act.

The plaintiffs first argue that the employee and employer contribution
formulas provided in the Act are mandatory, and that neither the employer nor
the employee may contribute more or less than the amounts provided for in the
Act. They argue that, if the City can withhold from the employee’s severance
payment an amount equal to both its contribution and the employee’s
contribution, then the employee’s total contribution exceeds the 5% employee
contribution mandated by the Act, thereby violating it. The plaintiffs argue, in
the alternative, that even if employees are permitted to contribute more than
5% of their earnings, they can do so “only when required or allowed by the
[Act].” The plaintiffs acknowledge that certain provisions of the Act allow
employees to elect to contribute more than 5% in order to enhance their
retirement benefits. However, they assert that, because they did not elect to
increase their contributions under those specific provisions, the withholding
violates the Act.

The City counters that 5% of earnings is not the maximum amount an
employee can contribute and that certain provisions of the Act specifically allow
employees to elect to contribute more than 5% in order to increase their
retirement benefits. It argues, therefore, that the employees’ election in the
severance provision to contribute more than 5% in order to receive an
increased retirement benefit does not violate the Act. We agree with the City.

Reading the Act in its entirety, it establishes a minimum mandatory
amount of employee contributions: 5% of employee earnings. See Laws 1973,
218:9 (repealed and reenacted by Laws 2002, 194:1 and amended by Laws
2003, 102:1, Laws 2008, 90:4); Laws 1973, 218:28, II (repealed and reenacted
by Laws 2002, 194:1 and amended by Laws 2005, 41:1). It also provides
specific opportunities for employees to contribute more than this minimum
amount in exchange for enhanced retirement benefits. For example, Laws
1973, 218:9, III(a), as amended by Laws 2003, 102:1, provides that, in addition
to the standard employee contributions:

[A]ny member may provide an additional retirement allowance by
making contributions at an additional rate not in excess of the rate
computed to be sufficient to provide an additional retirement
allowance which . . . will result in a total retirement allowance not
in excess of 50 percent of his final average earnings.

Laws 1973, 218:9, III(a) (repealed and reenacted by Laws 2002, 194:1, and
amended by Laws 2003, 102:1); see also Laws 1973, 218:12, VI (repealed and
reenacted by Laws 2002, 194:1, and amended by Laws 2004, 159:1, Laws
2005, 40:4) (allowing employees with service dates prior to January 1999,
before which the retirement benefit calculation rate was 1.5% of final average

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earnings multiplied by years of employment, to elect to pay an additional
amount to receive a retirement benefit based on 2% of final average earnings).
These provisions demonstrate that the legislature did not intend 5% of the
employee’s earnings to be his or her maximum contribution. Instead, these
optional provisions evince a legislative intent that an employee may agree to
contribute more than the mandatory contribution in exchange for an enhanced
retirement benefit.

Further, nothing in the Act demonstrates a legislative intent that these
optional provisions represent the only mechanism by which employees may
obtain increased retirement benefits. Indeed, the plain language of the Act
does not prohibit employees from contracting with the City to make additional
contributions, under other terms not provided for in the Act, in exchange for
receipt of an increase in retirement benefits. See Manchester Educ. Ass’n v.
Manchester, 114 N.H. 83, 85 (1974) (holding that city charter did not prevent
plaintiffs from receiving more favorable sick leave benefits under contract with
city where the charter imposed only a minimum leave requirement and did not
impose any prohibition on the ability to contract for greater sick benefits).
Therefore, we conclude that the severance provision — in which the employees
agreed to contribute more than 5% of their severance payment earnings to
cover the City’s contributions in exchange for the severance payment that
increased the employees’ retirement benefit — does not violate the Act’s
provisions regarding employee contributions.

Second, the nonaffiliated plaintiffs argue that the severance provision is
contrary to the Act because it allowed the City to deduct the amount of its own
contribution from the employees’ severance payment, rather than from the
City’s own funds. The City counters that the Act does not specify the source of
the City’s contribution, and, therefore, withholding the employer’s contribution
from the severance payment did not violate the Act. Again, we agree with the
City.

The Act provides that “[t]he city shall appropriate annually to the
retirement board the amounts required to fund the benefits set forth in the
[A]ct as determined by the retirement board on the basis of an actuary’s
valuation, which shall be based on sound actuarial funding methods,
assumptions, and principles.” Laws 1973, 218:8 (repealed and reenacted by
Laws 2002, 194:1). This language does not specify the source of the City’s
contribution; it requires only that the City appropriate the requisite amount to
fund the benefits provided by the Act. Nor does this language, or any other
language in the Act, prohibit employees from agreeing to allow the City to fund
its contributions through deductions from the employees’ earnings — here in
the form of severance payments — in exchange for an enhanced retirement
benefit. Accordingly, we conclude that the severance provision does not violate
the Act and that the trial court did not err when it granted summary judgment
to the City on the merits of the nonaffiliated plaintiffs’ claims.

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 Finally, the plaintiffs appear to argue that the trial court erred, in its
summary judgment order, by misrepresenting and relying upon certain rulings
of the MECRS Board of Trustees (Board). We disagree. Although the trial court
noted that the Board “made no mention of the [severance provision] being
inconsistent with the [Act],” this observation was merely offered as independent
support for its conclusion that, as a matter of law, the severance provision was
not contrary to the Act. See Petition of Malisos, 166 N.H. at 729 (recognizing
that “[s]tatutory interpretation is a question of law”). Accordingly, we conclude
that the trial court did not err in this respect.

Affirmed in part; reversed
in part; and remanded.

LYNN, C.J., and HICKS, BASSETT, and HANTZ MARCONI, JJ.,
concurred.

Eileen Fox,
Clerk

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