                          State of New York
                   Supreme Court, Appellate Division
                      Third Judicial Department
Decided and Entered: July 17, 2014                     518219
_________________________________

In the Matter of SUSAN M.
   KENT, as President of the
   NEW YORK STATE PUBLIC
   EMPLOYEES FEDERATION,
   AFL-CIO,
                    Appellant,
      v

JEROME LEFKOWITZ, as                        MEMORANDUM AND ORDER
   Chair of the NEW YORK STATE
   PUBLIC EMPLOYMENT RELATIONS
   BOARD, et al.,
                    Respondents,
                    et al.,
                    Respondents.
________________________________


Calendar Date:   June 6, 2014

Before:   Lahtinen, J.P., Stein, Egan Jr., Devine and Clark, JJ.

                             __________


      Lisa M. King, New York State Public Employees Federation,
AFL-CIO, Albany (Steven M. Klein of counsel), for appellant.

      David P. Quinn, New York State Public Employment Relations
Board, Albany (Alicia L. McNally of counsel), for New York State
Public Employment Relations Board and another, respondents.

                             __________



Egan Jr., J.

      Appeal from a judgment of the Supreme Court (McNamara, J.),
entered April 3, 2013 in Albany County, which dismissed
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petitioner's application, in a proceeding pursuant to CPLR
article 78, to review a determination of respondent Public
Employment Relations Board dismissing an improper practice charge
filed by petitioner against respondent New York State Racing and
Wagering Board.

      Petitioner is the president of the Public Employees
Federation, AFL-CIO (hereinafter PEF), which is the duly
certified collective bargaining representative of various state
employees, including – insofar as is relevant here – seasonal
personnel employed at the state's race tracks. These seasonal
employees are exempt from civil service classification pursuant
to Civil Service Law § 41 and are appointed by the chair of
respondent New York State Racing and Wagering Board (hereinafter
the Board)1 to work during a specific track meet. Such employees
are not allocated to a statutory salary grade and, as such, their
compensation is set each year by the Board's chair – subject to
the approval of the Director of the Budget (see State Finance Law
§§ 44, 49).

      Effective January 1, 1996, the Board's then chair announced
a 25% reduction in the per diem pay rates of seasonal track
employees, prompting PEF to file both a class action grievance
under the collective bargaining agreement then in effect and an
improper practice charge with respondent Public Employment
Relations Board (hereinafter PERB), alleging – as to the latter –
that the unilateral reduction in per diem wages for the affected
track workers violated Civil Service Law § 209-a (1) (d). The
improper practice charge was conditionally dismissed pending
resolution of the related grievance but, after an arbitrator
ruled, among other things, that the subject employees were not
covered by the collective bargaining agreement, PEF successfully
moved to reopen the improper practice charge. In response, the


    1
        Effective February 1, 2013, the Board merged into a
newly-created entity known as the New York State Gaming
Commission (see Racing, Pari-Mutuel Wagering and Breeding Law
§ 102).
                              -3-                518219

Board answered and raised the affirmative defense of waiver.

      Administrative hearings ensued in 2005 and, in January
2010, PERB's Assistant Director found that the wages for seasonal
track employees were "a mandatory subject of bargaining" and,
therefore, the unilateral pay reduction imposed by the Board
violated Civil Service Law § 209-a (1) (d). Both PEF and the
Board filed exceptions to this decision – with PEF's exceptions
limited to the extent of the relief awarded. In September 2012,
PERB dismissed the improper practice charge finding, among other
things, that although the Board indeed had an obligation to
negotiate wages for the seasonal workers, its duty in this regard
was satisfied through the execution of a side letter agreement
entered into between PEF and the state in October 1995.
Petitioner thereafter commenced this CPLR article 78 proceeding
to challenge PERB's determination. Supreme Court dismissed
petitioner's application, prompting this appeal.

      Petitioner initially contends that the Board failed to
assert "duty satisfaction" as an affirmative defense in its
answer to the improper practice charge and, therefore, PERB erred
in considering this defense on the merits. We disagree.
Although PERB has now drawn a distinction between the concept of
"waiver" and "duty satisfaction," a review of PERB's decisions
reveals that, prior to 1998, such terms often were used
interchangeably to designate any defense based upon a prior
fulfillment of the duty to negotiate (see Matter of Nassau County
Sheriff's Corr. Officers Benevolent Assn., Inc. [County of
Nassau], 46 PERB ¶ 3002 [2013], citing Matter of Police
Benevolent Assn. of Police Dept. of County of Nassau [County of
Nassau Police Dept.], 31 PERB ¶ 3064 [1998]; see also Matter of
Civil Serv. Empls. Assn., Inc., Local 1000, AFSCME, AFL-CIO,
Livingston County Local 826, Livingston County Empl. Unit [County
of Livingston], 26 PERB ¶ 3074 [1993]). As the Board's answer,
which raised the affirmative defense of waiver, was interposed in
1997, i.e., at a point in time when waiver and duty satisfaction
still were regarded as essentially one and the same defense, we
deem the Board's answer to have properly raised the duty
satisfaction defense.
                              -4-                518219

      As to the merits, "[a] duty satisfaction defense . . . is
grounded upon a claim that the subject sought to be bargained has
already been negotiated to completion, that the employer and the
union have bargained and reached agreement on a subject and the
employer is thereafter privileged to act in conformance with that
agreement" (Matter of Amalgamated Tr. Union Local 1342 [Niagara
Frontier Tr. Metro Sys., Inc.], 41 PERB ¶ 4566 [2008]). Although
the agreement under review need not expressly reference the
contested subject matter in order to come within the scope of the
duty satisfaction defense (see id.), the party asserting the
defense bears "the burden of proving that the parties have
negotiated terms in an agreement that are reasonably clear on the
specific subject at issue" (Matter of Nassau County Sheriff's
Corr. Officers Benevolent Assn., Inc. [County of Nassau], 46 PERB
¶ 3002, supra [emphasis added]; see Matter of Transport Workers
Union of Greater N.Y., Local 100 [New York City Tr. Auth.], 41
PERB ¶ 3014 [2008]). Stated another way, it must be reasonably
clear – reading the relevant agreement as a whole – that the
parties intended for it to encompass the specific subject matter
under review, even if the agreement itself did not directly speak
to that now contested issue.

      Here, there is no question that the Board was under a duty
to negotiate in good faith with PEF regarding compensation for
the affected seasonal employees (see Civil Service Law §§ 200,
201 [4]; 203, 204 [3]; 209-a [1] [d]; State Finance Law §§ 44,
49) and, further, that the 25% reduction in such employees' wages
was not in fact negotiated. There also is no dispute that the
side letter agreement made no express reference to the
circumstances under which the seasonal employees' compensation
could be reduced. Hence, the only question remaining is whether
the side letter agreement entered into between PEF and the state
makes it reasonably clear that such document was intended to
represent the parties' full agreement as to the compensation to
be afforded to the seasonal track employees – including the 25%
reduction in wages. In this regard, the side letter agreement
covered discrete compensation issues, including seasonal
employees' eligibility for certain lump-sum payments (paragraph
A), salary increases (paragraph B) and holiday compensation
(paragraph D). Paragraph C of the agreement, entitled "Effect of
Minimum Wage Level," provided as follows: "If during the term of
                              -5-                518219

this [a]greement the rate of compensation of any employee in a
seasonal position is 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, the provisions of [p]aragraphs A
and B . . . shall be applied to such seasonal employees in the
following manner: 1. The seasonal employee's rate of compensation
shall remain at the adjusted rate established by the Director of
the Budget from the effective date established by the Director of
the Budget until the date of the next general salary increase
provided for in [p]aragraphs A or B. 2. Effective on the
effective date of the next general salary increase provided for
in [p]aragraphs A or B such employee's rate of compensation shall
be either the adjusted rate established by the Director of the
Budget; or his/her rate prior to the adjustment, increased by the
percentage provided for in the applicable paragraph, whichever is
higher." Pursuant to paragraph D of the agreement, all of these
provisions applied on a pro rata basis to seasonal employees paid
on an hourly or per diem basis.

      According to respondents, the foregoing language evidences
the parties' intent to resolve any and all compensation issues
relative to seasonal track employees – including a unilateral 25%
reduction in their salaries. Although we are mindful that PERB
is to be afforded a measure of deference with respect to the
interpretation of collective bargaining agreements and similar
binding contracts between the state and its workers (see Matter
of Monroe County v New York State Pub. Empl. Relations Bd., 85
AD3d 1439, 1441 [2011]), we simply do not believe that the side
letter agreement at issue here is amenable to the expansive
construction adopted by PERB and urged by respondents. To be
sure, the side letter agreement did not have to expressly address
the circumstances under which the affected employees' salaries
could be reduced in order to satisfy the state's duty to
negotiate in good faith. The terms set forth and the language
utilized in the side letter agreement did, however, have to make
it reasonably clear that PEF and the Board "bargained and reached
[an] agreement" on this subject, thus demonstrating that the
subject that formed the basis for the improper practice charge
"already [was] negotiated to completion" (Matter of Amalgamated
Tr. Union Local 1342 [Niagara Frontier Tr. Metro. Sys., Inc.], 41
PERB ¶ 4566, supra). To our analysis, the provision in the side
                              -6-                518219

letter agreement addressing the discretion afforded to the
Director of the Budget to increase the rate of compensation to be
paid to seasonal track employees in order to comply with federal
minimum wage requirements does not evidence the intent of the
parties thereto to address any and all situations under which the
Director of the Budget could unilaterally adjust wage rates for
the affected employees. In other words, the side letter
agreement is not, to our reading, sufficiently broad to
demonstrate that the subject matter that formed the basis for the
improper practice charge, i.e., the unilateral 25% reduction in
wages, was negotiated to completion, and PERB's determination to
the contrary was arbitrary and capricious. Accordingly, the
underlying determination is annulled, and this matter is remitted
to PERB for further proceedings not inconsistent with this
Court's decision. In light of our resolution of this matter, we
need not address petitioner's remaining contentions.

     Devine and Clark, JJ., concur.


Stein, J. (dissenting).

      We agree with the majority that respondent New York State
Racing and Wagering Board (hereinafter the Board) properly raised
the duty satisfaction defense in its answer in response to the
improper practice charge filed by the Public Employees
Federation, AFL-CIO (hereinafter PEF). However, we are of the
view that respondent Public Employment Relations Board
(hereinafter PERB) correctly determined that the Board satisfied
its obligation to negotiate wages for seasonal employees and
dismissed the improper practice charge. Thus, we disagree with
the majority's conclusion to the contrary and, therefore,
respectfully dissent.

      The Board's chair is authorized to set the compensation of
seasonal employees, which is then subject to approval by the
Director of the Budget (see State Finance Law §§ 44, 49). In
1996, the chair exercised that discretionary authority and set a
per diem compensation rate for seasonal personnel that was 25%
lower than the prior year. While there is no disagreement that
the Board was under a duty to negotiate in good faith with
                              -7-                518219

respect to the rate of compensation (see Civil Service Law
§§ 200, 204 [3]; 209-a [1] [d]), we hold the view that it
satisfied such obligation by means of its negotiations with PEF,
which resulted in the execution of the October 1995 side letter
agreement.

       A review of such agreement – titled "MEMORANDUM OF
INTERPRETATION BETWEEN THE STATE OF NEW YORK AND THE PUBLIC
EMPLOYEES FEDERATION CONCERNING SEASONAL EMPLOYEES" – reveals
that it was comprehensive and covered a broad range of issues
regarding the compensation to be paid to seasonal personnel from
1995 through 1999. In fact, the agreement not only encompassed
matters pertaining to specific compensation issues, it also
incorporated more than 50 articles from the 1995-1999 collective
bargaining agreement between PEF and the state regarding
employees in the Professional, Scientific and Technical Services
Units relating to a variety of employment and benefit related
issues, such as health insurance, vacation credit, accidental
death benefits and sick and personal leave. Viewed in this
context, we disagree with the majority's characterization of the
agreement as merely covering "discrete compensation issues."

      Further, that portion of the side letter agreement that
deals specifically with compensation covers lump-sum payments to
be paid to seasonal employees for the 1996-1997 and 1997-1998
fiscal years, salary increases for 1997-1998 and 1998-1999
(including the effect of any increase in the federal minimum wage
on the employees' next scheduled pay increase), holiday
compensation and workers' compensation leave with pay. Notably,
aside from the negotiated raises for 1997-1998 and 1998-1999, the
agreement neither sets forth any limitation on the chair's
discretion to set the seasonal employees' per diem compensation
rates nor indicates that it was intended to be anything less than
a comprehensive agreement as to such employees. Thus, despite
the absence of any express reference to the exact compensation
rates to be paid to such employees (see Matter of Amalgamated Tr.
Union Local 1342 [Niagara Frontier Tr. Metro Sys., Inc.,], 41
PERB ¶ 4566 [2008]), it was reasonable for PERB to determine that
the side letter agreement constituted the full agreement between
the Board and PEF as to any limitations on the Board's wage-
setting discretion. Indeed, when read in its entirety, the only
                                   -8-           518219

"practical interpretation" (Matter of United Pub. Serv. Empl.
Union [Inc. Vil. of Mineola], 47 PERB ¶ 4540 [2014]) that can be
applied to the language of the side letter agreement is that the
parties reached an accord on the subject at issue in PEF's
improper practice charge.

      Accordingly, when PERB's interpretation of the side letter
agreement is afforded the deference it is due (see Matter of Town
of Islip v New York State Pub. Empl. Relations Bd., ___ NY3d ___,
___, 2014 NY Slip Op 04043, *7 [2014]; Matter of Professional
Staff Congress-City Univ. of N.Y. v New York State Pub. Empl.
Relations Bd., 7 NY3d 458, 465 [2006]; Matter of Incorporated
Vil. of Lynbrook v New York State Pub. Empl. Relations Bd., 48
NY2d 398, 404 [1979]; Matter of Monroe County v New York State
Pub. Empl. Relations Bd., 85 AD3d 1439, 1441 [2011]), its
determination that the Board met its burden of establishing that
it satisfied its duty to negotiate with petitioner is rational
and not arbitrary and capricious (see Matter of Town of Islip v
New York State Pub. Empl. Relations Bd., 2014 NY Slip Op 04043 at
*7; Matter of Chenango Forks Cent. Sch. Dist. v New York State
Pub. Empl. Relations Bd., 21 NY3d 255, 265 [2013]; Matter of
Monroe County v New York State Pub. Empl. Relations Bd., 85 AD3d
at 1441).2 We would, therefore, affirm Supreme Court's dismissal
of the CPLR article 78 petition.

        Lahtinen, J.P., concurs.




    2
        Nor are we persuaded by petitioner's argument that
application of the duty satisfaction defense is contrary to
public policy under the circumstances here.
                              -9-                  518219

      ORDERED that the judgment is reversed, on the law, without
costs, determination annulled and matter remitted to respondent
Public Employment Relations Board for further proceedings not
inconsistent with this Court's decision.




                             ENTER:




                             Robert D. Mayberger
                             Clerk of the Court
