Imo Borough of Keyport v. Local 68 (072361) , 222 N.J. 314 ( 2015 )

SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized.)
IMO Borough of Keyport v. Local 68 (A-43/44-13) (072361)
Argued October 20, 2014 -- Decided July 14, 2015
LaVECCHIA, J., writing for a majority of the Court.
The issue in this appeal is whether three municipalities were required to negotiate with union
representatives before taking layoff actions that negatively impacted the hours and wages of affected employees.
In 2009, the municipalities of Belmar, Mount Laurel, and Keyport (collectively the municipalities), were
experiencing financial strain in light of a pervading and lingering economic downturn. All three municipalities were
operating under collective negotiation agreements (CNAs) with unions representing municipal employees: For
Keyport the International Union of Operating Engineers, Local 68 (Local 68); for Belmar the Communications
Workers of America, AFL-CIO (CWA); and, for Mount Laurel the American Federation of State, County and
Municipal Employees, Council 71, South Jersey Public Employers (AFSCME). Following various efforts to
confront their individual budget crises, each municipality obtained approval from the Civil Service Commission
(Commission) for a layoff plan. Keyport’s plan called for the conversion of three full-time clerical positions into
part-time positions; as a result, the affected employees lost their eligibility for health benefits. The plan stated that
Keyport’s preliminary 2009 budget exceeded the levy cap by $135,000 and that “the Borough must reduce its
appropriations so that it may lawfully adopt a budget for 2009.” Belmar’s temporary layoff plan provided for ten
involuntary unpaid furlough days for all Department of Public Works employees. Belmar described the furloughs as
necessary to achieve a budget that would comply with the State-mandated tax levy cap. Mount Laurel’s plan called
for the imposition of eight involuntary furlough days on all township employees except police and emergency
medical personnel. Mount Laurel represented that the layoffs were necessary to help offset the township’s budget
crisis and to address restoration of the township’s budgetary surplus. None of the municipal layoff actions were
negotiated with union representatives.
The unions in each municipality brought scope-of-negotiations challenges to the municipal actions. The
Public Employment Relations Commission (PERC), in separate decisions, held that the municipalities violated the
New Jersey Employer-Employee Relations Act (EERA), N.J.S.A. 34:13A-1 to -39, and required each municipality
to negotiate the changes in terms and conditions of employment. PERC applied the three-part test set forth in Local
195, IFPTE v. State, 88 N.J. 393, 404-05 (1982) , for resolving questions about the scope of public sector
employment negotiations. In Local 195, the Court established that a subject is negotiable when: “(1) the item
intimately and directly affects the work and welfare of public employees; (2) the subject has not been fully or
partially preempted by statute or regulation; and (3) a negotiated agreement would not significantly interfere with
the determination of governmental policy.” Id. at 404. PERC determined that the layoffs in each municipality
directly affected employee work and welfare, that the subject of negotiation was not preempted by statute or
regulation, and that the municipalities did not have the managerial prerogative to unilaterally implement the layoffs
because negotiations would not significantly interfere with governmental policy.
The three municipalities appealed their PERC administrative determinations. The Appellate Division
observed that the Commission had approved all three layoff plans during the time when the Commission’s
emergency regulation permitting “temporary layoffs,” N.J.A.C. 4A:8-1.1A, was in effect. Applying the three-part
test from Local 195, the Appellate Division determined that the unions met the first prong because all of the actions
at issue directly affected the work and welfare of public employees. However, aside from Keyport’s action
eliminating health benefits, the panel concluded that “the unions did not satisfy the second and third prongs of the
[Local 195] test because the municipalities’ actions complied with the Civil Service Act and its regulations, and the
decisions to furlough and demote employees were non-negotiable policy determinations.” The panel affirmed the
order in Keyport that required arbitration of the health benefits issue but reversed PERC in respect of the reduction
in hours in Keyport and in all respects in the Mount Laurel and Belmar cases.
The Supreme Court granted Local 68’s petition for certification and CWA’s and AFSCME’s joint petition
for certification.
HELD: The three municipalities in this case acted for reasons of economy based on municipal fiscal distress
existing at the time, rendering the management choice to use a temporary or permanent layoff solution one that
constituted a managerial prerogative not subject to negotiation. The layoff actions at issue in this consolidated
appeal constituted non-negotiable subjects under prong three of the Local 195 test for negotiability. Local 195,
IFPTE v. State, 88 N.J. 393 (1982).
1. In Local 195, the Court explained that public policy properly is determined through the political process, by
which citizens hold government accountable, and not through collective negotiation. The Court articulated the
three-part test applied by PERC to the three municipalities in this case. In respect of the first factor, “rates of pay
and working hours” are noted models for the type of subjects that “‘intimately and directly affect[] the work and
welfare of public employees.’” Local 195, supra, 88 N.J. at 403. A subject is preempted, and therefore non-
negotiable under the second factor, when a statute or regulation “‘speak[s] in the imperative and leave[s] nothing to
the discretion of the public employer.’” Id. at 403-04. The third factor requires that interference with the
determination of government policy be significant in order to defeat negotiability. Id. at 404. A matter’s
negotiability turns not “on the talismanic application of labels such as ‘terms and conditions of employment’ or
‘managerial prerogatives[]’ [but r]ather, the inquiry focuses on the extent to which collective negotiations will
interfere with the establishment and effectuation of governmental policy.” Id. at 420 (Handler, J., concurring and
dissenting). (pp. 23-28)
2. Prong one of the Local 195 test is not in issue in this matter. In all three disputes, the layoff actions resulted in
reduced hours of work, with resultant reductions in pay, for the affected employees. Prongs two and three of the test
are the factors in issue. The preemption standard for prong two is clear in its limits and rigid within its parameters.
When legislation or a regulation “establishes a specific term or condition of employment that leaves no room for
discretionary action, then negotiation on that term is fully preempted.” Local 195, supra, 88 N.J. at 403. The statute
and implementing regulations that authorize a layoff of public sector employees lack an imperative nature. Thus,
they do not satisfy the essential requirement for preemption to pertain and preclude negotiation based on the second
prong of Local 195. Likewise, emergency regulation N.J.A.C. 4A:8-1.1A did not mandate an action by public
sector employers affecting terms and conditions of employment for public employees. Neither N.J.A.C. 4A:8-1.1A
nor civil service statutes and regulations governing traditional layoff actions preempt negotiation on the basis of
prong two of the Local 195 test. (pp. 28-35)
3. Based on a well-established analysis performed under prong three of the Local 195 test, layoffs consistently have
been held to be outside of the scope of negotiations: “[N]egotiation will be allowed on a subject that intimately and
directly affects the work and welfare of public employees unless such negotiated agreement would significantly
interfere with the determination of governmental policy.” Local 195, supra, 88 N.J. at 404. Application of that
balancing of interests under prong three has deep roots when it comes to the decision to lay off and thereby adjust a
public workforce involved in the delivery of public services. There is no room for mandatory negotiation in the
determination to reduce a workforce. Public managers must be the ones accountable to the people for such
substantive policy decisions. The Local 195 Court was unanimous in deciding to keep matters involving
predominantly managerial prerogative out of the negotiations process. (pp. 35-38)
4. Economic reasons are indisputably a legitimate basis for a layoff of any type. The three municipal governments
in this case took action while the Commission’s emergency regulation authorizing temporary, as well as permanent,
layoff plans was in effect. These civil service municipalities, when faced with fiscal exigency, had the right to lay
off employees under prior case law and as buttressed by the emergency regulation then in effect authorizing
temporary layoff actions. All three municipalities acted for reasons of economy based on municipal fiscal distress
existing at the time, rendering the management choice to use a temporary or permanent layoff solution one that
constituted a managerial prerogative not subject to negotiation. The layoff actions at issue in this consolidated
appeal constituted non-negotiable subjects under prong three of the Local 195 test for negotiability. (pp. 38-46)
The judgment of the Appellate Division is AFFIRMED as MODIFIED.
2
JUSTICE ALBIN, DISSENTING, expresses the view that the majority opinion sweeps away nearly fifty
years of this Court’ public-sector labor jurisprudence, giving municipal employers the unilateral power to reduce the
wages and hours of public employees promised in collective negotiations agreements.
JUSTICES PATTERSON and SOLOMON, and JUDGE CUFF (temporarily assigned) join in
JUSTICE LaVECCHIA’s opinion. JUSTICE ALBIN filed a separate, dissenting opinion. CHIEF JUSTICE
RABNER and JUSTICE FERNANDEZ-VINA did not participate.
3
SUPREME COURT OF NEW JERSEY
A-43/44 September Term 2013
072361
IN THE MATTER OF BOROUGH OF
KEYPORT,
Respondent-Respondent,
v.
INTERNATIONAL UNION OF
OPERATING ENGINEERS, LOCAL
68,
Petitioner-Appellant.
IN THE MATTER OF BOROUGH OF
BELMAR,
Respondent-Respondent,
v.
COMMUNICATIONS WORKERS OF
AMERICA, AFL-CIO,
Petitioner-Appellant.
TOWNSHIP OF MOUNT LAUREL,
Respondent-Respondent,
v.
COMMUNICATIONS WORKERS OF
AMERICA,
Petitioner,
and
AFSCME, COUNCIL 71, SOUTH
JERSEY PUBLIC EMPLOYEES,
1
Petitioner-Appellant.
Argued October 20, 2014 – Decided July 14, 2015
On certification to the Superior Court,
Appellate Division.
Steven P. Weissman argued the cause for
appellants Communications Workers of
America, AFL-CIO and AFSCME, Council 71,
South Jersey Public Employees (Weissman &
Mintz, attorneys; Mr. Weissman and Ira W.
Mintz, on the briefs).
Raymond G. Heineman argued the cause for
appellant International Union of Operating
Engineers, Local 68 (Kroll Heineman Carton,
attorneys).
Jonathan F. Cohen argued the cause for
respondent Borough of Belmar (Apruzzese,
McDermott, Mastro & Murphy, attorneys).
Joseph F. Betley argued the cause for
respondent Township of Mount Laurel
(Capehart Scatchard, attorneys; Mr. Betley
and Kelly E. Adler, on the letters in lieu
of brief).
Gordon N. Litwin argued the cause for
respondent Borough of Keyport (Litwin &
Provence, attorneys).
Martin R. Pachman, General Counsel, argued
the cause for respondent New Jersey Public
Employment Relations Commission.
Richard A. Friedman argued the cause for
amicus curiae New Jersey Education
Association (Zazzali, Fagella, Nowak,
Kleinbaum & Friedman, attorneys; Mr.
Friedman and Edward M. Suarez, Jr., on the
brief).
Edward W. Purcell, Associate Counsel, argued
the cause for amici curiae New Jersey State
League of Municipalities and New Jersey
Institute of Local Government Attorneys
2
(William J. Kearns, Jr., General Counsel,
attorney).
Albert G. Kroll submitted a brief on behalf
of amicus curiae New Jersey State AFL-CIO
(Kroll Heineman Carton, attorneys).
Cynthia J. Jahn, General Counsel, and Robert
A. Greitz submitted a brief on behalf of
amicus curiae New Jersey School Boards
Association.
JUSTICE LaVECCHIA delivered the opinion of the Court.
In this appeal we review whether three municipalities were
required to negotiate with union representatives before taking
layoff actions that negatively impacted the hours and wages of
affected employees. Two of the municipalities imposed on
certain units of public employees mandatory, but temporary,
layoffs, in the form of a reduced number of work days over a
specified period of time, without negotiating those actions with
union representatives. The third municipality eliminated as
part of an overall layoff plan three full-time clerical
positions and replaced them with part-time positions; as a
result, the affected employees lost their eligibility for health
benefits. That layoff action also was not negotiated with union
representatives. However, all three layoff plans had been
submitted and approved by the Civil Service Commission
(Commission) as compliant with all civil service requirements
for a layoff action.
3
After unions for public employees in each municipality
brought scope-of-negotiations challenges to the municipal
actions, the Public Employment Relations Commission (PERC), in
separate decisions, held that the municipalities violated the
New Jersey Employer-Employee Relations Act (EERA), N.J.S.A.
34:13A-1 to -39, and required each municipality to negotiate the
changes in terms and conditions of employment.
The Appellate Division consolidated these appeals and
reversed PERC’s determinations, finding the municipal actions
non-negotiable in all but one respect not pertinent to this
appeal.
Employee rights in these three circumstances are determined
by application of the three-part test set forth in Local 195,
IFPTE v. State, 88 N.J. 393, 404-05 (1982), for resolving
questions about the scope of public sector employment
negotiations. Based on that test, we conclude that the
negotiability of these three layoff plans hinges on application
of the third prong of the Local 195 analysis that takes into
account whether negotiation would significantly interfere with a
management determination of governmental policy. Ibid.Municipalities governed by the civil service system have
the right to lay off employees when facing exigent financial
circumstances. A regulation authorizing temporary layoffs,
which enabled municipalities to address fiscal distress in such
4
a manner, was in effect when these layoff plans were developed
and approved by the Commission, although the municipalities
claim that they did not act pursuant to its authority when
seeking Commission approval. Although the regulation since has
been repealed, its validity is not challenged in this matter.
The fact that it authorized temporary periods of layoffs during
times of exigent fiscal circumstances is significant in our
review. Whether the municipalities actively relied on that
existing regulation is not controlling of our analysis.
In reviewing each of these disputes under the third prong
of Local 195, PERC initially took the position that the civil
service employer had to show that it had no other option but to
engage in the layoff in order for managerial policy interests to
predominate over the interests of employees in maintaining the
terms and conditions of their employment. According to PERC,
only upon making such a showing could a public entity employer
demonstrate the necessary fiscal urgency to support a finding
that the layoff action was non-negotiable based on Local 195’s
third, or managerial-prerogative, prong. PERC has retreated
from that position in this appeal and in a subsequent agency
quasi-judicial determination that it has brought to our
attention. In our view, PERC’s former position mistakenly set
the bar too high when assessing managerial prerogative exercised
5
by local governments confronting fiscal distress, as was the
case in these matters.
For the reasons expressed herein, we hold that at the time
that they occurred, the layoff actions at issue were non-
negotiable under the third prong of the Local 195 test. We
therefore affirm the Appellate Division judgment, as modified by
this opinion.
I.
In 2009, the New Jersey municipalities of Belmar, Mount
Laurel, and Keyport (collectively the municipalities or
respondents), were experiencing financial strain. All three
municipalities were operating under collective negotiation
agreements (CNAs) with unions representing municipal employees.
Following various efforts to confront their individual budget
crises, each municipality obtained approval from the Commission
for a layoff plan, described in detail hereinafter. Generally
stated and as pertinent to this appeal, the layoff plans, in
varying ways, reduced workers’ hours and therefore impacted
wages. The following facts and procedural history are culled
from the record created before PERC.
A.
The Borough of Keyport (Keyport) and the International
Union of Operating Engineers, Local 68 (Local 68), representing
Keyport’s clerical employees, entered into a CNA effective
6
January 1, 2008, through December 31, 2010. Among other terms,
Article 33 granted Keyport the management right to assign
employees’ schedules, and Article 5 provided that in the event
of a layoff, Keyport would respect employees’ seniority rights.
Article 8 specified that the “work week for all bargaining unit
employees shall be from Monday through Friday, and shall consist
of five (5) consecutive seven and one-half (7½) hour work days
for a thirty-seven and one-half (37½) hour work week.”
In 2009, Keyport was experiencing significant financial
difficulties in light of a pervading and lingering economic
downturn. Keyport faced increased healthcare, pension, and
labor costs without an increase in tax revenues; in 2008, it had
a budget surplus of less than $6,000. After efforts to control
expenses did not alleviate the strain, Keyport submitted a
traditional layoff plan to the Commission on May 20, 2009. In
order to reduce personnel expenses, the plan, in pertinent part,
converted three full-time clerical positions -- two in the
Construction Department and one in the Office of the Registrar -
- into part-time positions.1 Those layoffs did not have an
1 The plan also demoted one police sergeant to a police officer
and permanently laid off one police officer; however, those
decisions are not at issue in this appeal. Also, by virtue of
the change to part-time positions, the three clerical employees
would lose health insurance coverage. That issue too is not on
appeal, as a result of the Appellate Division’s unchallenged
affirmance of PERC’s remand for arbitration on that benefits
issue.
7
identified end date; the proposed layoff therefore permanently
eliminated the full-time positions and converted them to part-
time positions. The layoff plan represented that the reductions
“[we]re necessary for reasons of economy and efficiency.” In
particular, the plan stated that Keyport’s preliminary 2009
budget exceeded the levy cap by $135,000 and that “the Borough
must reduce its appropriations so that it may lawfully adopt a
budget for 2009.” The Commission approved the plan on May 22,
2009.
In August 2009, Local 68 filed an unfair-practice charge
with PERC, alleging that Keyport violated the parties’ CNA by
reducing the three employees’ hours without first negotiating
with union representatives. Prior to that, Keyport had filed a
scope-of-negotiations petition with PERC, seeking to restrain
binding arbitration of a grievance filed by the union. That
grievance had claimed a violation of the CNA as a result of the
reduction in the workweek of the employees in the Building
Department and Registrar’s Office. Thus, both the grievance and
the unfair-practice charge related to the claim of work hour
reduction. The parties filed cross-motions for summary judgment
on the unfair-practice charge. On September 23, 2010, PERC
granted Local 68’s motion, concluding that EERA required Keyport
to negotiate with Local 68 before reducing the employees’ hours
8
from full-time to part-time and ordering that Keyport commence
negotiations immediately.
In determining that the reduction in hours was mandatorily
negotiable, PERC applied the three-part negotiability test from
Local 195, supra, 88 N.J. at 404-05. After determining that the
hour and benefits decision “intimately and directly affects the
work and welfare” of the clerical workers (the first Local 195
factor), see id. at 404, PERC, in analyzing Local 195’s third
factor, determined that Keyport did not have the managerial
prerogative to unilaterally implement the position reductions to
part-time because negotiations in the present case would not
significantly interfere with governmental policy. In support,
PERC cited “the long line of judicial and Commission precedents”
determining that workweek reductions are mandatorily negotiable,
and reasoned that even significant budgetary concerns “must be
presented and protected through the negotiations process.”
PERC also concluded that Keyport’s compliance with the
Civil Service Act, N.J.S.A. 11A:1-1 to 12-6, and regulations did
not preempt negotiation over the employees’ hours (Local 195’s
second factor). PERC reasoned that the Civil Service Act and
regulations “do not mandate a reduction in work hours or
otherwise restrict the Borough’s discretion to decide whether or
not to reduce work hours,” and, moreover, that “the Civil
Service Act and [EERA] provide employees with separate and
9
distinct rights,” such that compliance with the Civil Service
Act does not negate employees’ right to negotiate under EERA.
In so holding, PERC distinguished the present case from State of
New Jersey (Department of Environmental Protection) v.
Communications Workers of America, AFL-CIO, 285 N.J. Super. 541,
544, 546, 553 (App. Div. 1995), certif. denied, 143 N.J. 519(1996) [hereinafter DEP], in which the Appellate Division
affirmed a prior PERC determination that the New Jersey
Department of Environmental Protection’s decision to reduce
employee workweeks from forty to thirty-five hours was preempted
and non-negotiable. PERC’s reasoning emphasized that DEP
represented a “‘narrow exception to the normal preemption
analysis, because of the nature and amount of pertinent
regulations regarding State employees,’” (quoting id. at 550).
B.
The Borough of Belmar (Belmar) and the Communications
Workers of America, AFL-CIO (CWA), the union representing all
employees of the Department of Public Works (DPW), entered into
a CNA effective January 1, 2005, through December 31, 2009.
Article 7 of the CNA provided that “working hours shall be forty
(40) hours per week for all employees in the bargaining unit,”
and Article 11 provided that each of the covered employees would
receive a 3.9% wage increase in 2005 and a four percent increase
each year from 2006 through 2009. In addition, Article 18
10
provided that Belmar would “discuss any proposed layoff with the
union, in order to explore all avenues and methods.”
Like Keyport, Belmar was experiencing financial
difficulties in 2009 as a result of the economic downturn. To
combat its fiscal trouble, borough administrators agreed to wage
cuts; in addition, Belmar met with unions representing municipal
employees to ask them to accept a wage freeze. Some unions
acquiesced to a freeze, but Belmar and CWA could not reach an
agreement. In August 2009, Belmar submitted a “temporary layoff
plan” to the Commission for approval, which provided for ten
involuntary unpaid furlough days for all DPW employees during
the period of October 6, 2009, through December 15, 2009. In
its plan, Belmar described the furloughs as necessary to achieve
a budget that would comply with the State-mandated tax levy cap.
The Commission approved the plan.
CWA filed an unfair-practice charge with PERC in October
2009, alleging that Belmar’s imposition of the unpaid furlough
days violated the parties’ CNA and that Belmar was required to
negotiate that change in terms and conditions of employment.
The parties filed cross-motions for summary judgment and, on
October 28, 2010, PERC granted CWA’s motion. As in the Keyport
decision, PERC determined that the furloughs met the first prong
of the Local 195 test given that the furloughs reduced working
hours. PERC largely relied on its analysis in Keyport to
11
determine that the Civil Service Act did not preempt EERA under
the second Local 195 factor.
Finally, in respect of the third Local 195 prong, PERC
determined that Belmar “did not have a managerial prerogative to
unilaterally reduce the employees’ compensation and workweek.”
PERC reasoned that case law has “consistently distinguished the
non-negotiability of permanent staffing reductions from the
negotiable issues of reductions in employees’ work years,
workweeks, and work hours. . . . That is so even when the
latter reductions could be labeled layoffs under education or
Civil Service Laws.” In addition, in applying the balancing of
interests called for under this third factor of Local 195, PERC
concluded that “the interest in a viable negotiations process is
preeminent because the budgetary considerations are dominant and
there is no particularly significant governmental policy purpose
at stake.” PERC noted that the hour cuts allowed Belmar to
avoid laying off just one employee and criticized Belmar for not
proving “that reducing the workweek rather than laying off a
single employee was needed to keep any programs running or to
achieve any governmental policy purpose.”
Accordingly, PERC concluded that negotiation was required
before Belmar could impose the furloughs.
C.
12
The Township of Mount Laurel (Mount Laurel) and the
American Federation of State, County and Municipal Employees,
Council 71, South Jersey Public Employers (AFSCME), entered into
a CNA effective January 1, 2005, through December 31, 2008. The
CNA provided for yearly salary increases from 2005 through 2008.
Article 2, entitled “Management Rights,” stated that Mount
Laurel had the right to institute layoffs “in the event of lack
of work or funds or under conditions where continuation of work
would be inefficient and non-productive.” Additionally, Article
7 stated that “the regularly scheduled workweek shall consist of
five (5) consecutive days, Monday through Friday,” and that an
employee’s regular hours of work were not subject to change,
“except as required under emergency conditions or agreed upon by
both parties.”
Like Keyport and Belmar, Mount Laurel faced serious
financial problems in 2009. In June 2009, Mount Laurel
representatives met with union representatives to request
temporary salary and wage concessions to alleviate the financial
strain, but the parties could not reach an agreement. In August
2009, Mount Laurel submitted a temporary layoff plan to the
Commission, which called for the imposition of eight involuntary
furlough days between November 20, 2009, and June 18, 2010, on
all township employees except police and emergency medical
personnel. In its proposal, Mount Laurel stated that the
13
purpose of the temporary layoffs was to help offset the
township’s budget crisis and to address restoration of the
township’s budgetary surplus, which had decreased by half in
2009. The Commission approved the plan in October 2009.
Shortly thereafter, AFSCME filed an unfair-practice charge
with PERC, alleging that Mount Laurel’s unilateral imposition of
the furlough days without negotiation violated the employees’
rights under the parties’ CNA and EERA. The parties filed
cross-motions for summary judgment. On October 28, 2010 --
coincident with PERC’s issuance of its negotiability
determination in the Belmar case -- PERC issued a decision on
the cross-motions for summary judgment, holding that Mount
Laurel’s decision to impose furloughs was a mandatory subject of
negotiation. PERC’s decision relied on its analysis in the
Belmar case in respect of the first two prongs of the Local 195
test, thus concluding that the furloughs directly affected
employee work and welfare and that the subject of negotiation
was not preempted by statute or regulation.
On the third Local 195 factor, PERC engaged in the fact-
specific balancing of interests test to conclude that this
factor also weighed in favor of negotiability. See Local 195,
supra, 88 N.J. at 404-05. Weighing the interests of the
parties, PERC noted that decisions affecting compensation and
hours of work are traditionally negotiable. PERC concluded that
14
Mount Laurel’s objective was to increase the size of its
budgetary surplus, finding that Mount Laurel had failed to
“produce[] any evidence to establish that it [wa]s without
alternatives to achieve the same savings without furloughing its
employees.” Accordingly, PERC determined that Belmar did not
have the managerial prerogative to reduce employees’ workweek,
stating that, on balance, “the interest in a viable negotiations
process is preeminent because the budgetary considerations are
dominant and there is no particularly significant governmental
policy purpose at stake.” Having concluded that the furlough
decision required negotiations, PERC ordered the parties to
commence negotiations.
D.
The three municipalities appealed their PERC administrative
determinations to the Appellate Division, see R. 2:2-3(a)(2),
which consolidated the cases on appeal. The panel reversed
PERC’s decisions as to Belmar and Mount Laurel and as to
Keyport’s hour reduction, holding that the towns were not
obligated to negotiate the imposition of unpaid furloughs or the
reduction from full-time to part-time status. The Appellate
Division observed that the Commission had approved all three
municipalities’ layoff plans during the time when the
Commission’s emergency regulation permitting “temporary
layoffs,” N.J.A.C. 4A:8-1.1A, was in effect. The panel further
15
noted that the emergency temporary layoff regulation previously
had been challenged and upheld in the Appellate Division. It
thus framed the present issue as “whether the public employers’
actions, which were effectuated in compliance with the Civil
Service Act, were nevertheless subject to negotiation under the
EERA.”
Applying the three-part test from Local 195 for determining
the scope of public sector employment negotiations, the panel
determined that the unions met the first prong because all of
the actions at issue directly affected the work and welfare of
public employees. However, aside from Keyport’s action
eliminating health benefits, the panel concluded that “the
unions did not satisfy the second and third prongs of the [Local
195] test because the municipalities’ actions complied with the
Civil Service Act and its regulations, and the decisions to
furlough and demote employees were non-negotiable policy
determinations.” The panel affirmed the order in Keyport that
required arbitration of the health benefits issue but reversed
PERC in respect of the reduction in hours in Keyport and in all
respects in the Mount Laurel and Belmar cases.
Local 68 filed a petition for certification, and CWA and
AFSCME filed a joint petition for certification, collectively
raising the issue of whether the municipalities’ reduction in
hours -- via furloughs in Belmar and Mount Laurel, and via
16
permanent reduction from full-time to part-time status in
Keyport –- were mandatorily negotiable decisions under EERA.
The Court granted both petitions. 216 N.J. 366 (2013).
II.
A.
Petitioners CWA, AFSCME, and Local 68 (collectively
petitioners) argue that the Appellate Division erred in holding
that the respondents’ decisions to implement layoff plans by
imposing unpaid furlough days and by demoting full-time
employees to part-time positions were non-negotiable. Each
petitioner contends that the Appellate Division failed to
properly apply the three-prong negotiability balancing test set
forth in Local 195, supra, 88 N.J. at 404-05.
First, petitioners argue that, under the second prong of
the Local 195 test, the Appellate Division should have held that
temporary layoff plans are negotiable because EERA imposes a
negotiation requirement on public employers and that obligation
is not preempted by the Civil Service Act and accompanying
regulations (Civil Service law). Petitioners point out that,
although the Civil Service law grants civil service employers
the discretion to reduce labor costs by unilaterally imposing
layoffs, the Civil Service law does not compel them to do so.
Therefore, petitioners argue, civil service employers are not
precluded from complying with the provisions of EERA as well as
17
Civil Service law. CWA and AFSCME cite the Appellate Division’s
holding in Piscataway Township Board of Education v. Piscataway
Township Principals Ass’n, 164 N.J. Super. 98 (App. Div. 1978),
as support for that proposition.
Second, petitioners argue that, under the third prong of
the Local 195 test, mandatory negotiations in these cases would
not significantly interfere with any managerial prerogatives or
governmental policies of the civil service employers.
Addressing the arguments of Mount Laurel and Belmar in
particular, CWA and AFSCME argue that the employees’ interest in
negotiating work hours and compensation outweighs Mount Laurel’s
interest in increasing its budget surplus, as well as Belmar’s
interest in avoiding the need to lay off a single employee. CWA
and AFSCME add that neither Mount Laurel nor Belmar produced
evidence to prove that the inability to increase a budget
surplus or the loss of one employee would adversely affect any
public operations or programs. All petitioners argue that
although workforce reductions are non-negotiable managerial
prerogatives, work-hour and compensation reductions of the type
at issue here are not. Petitioners contend that if these
temporary layoff plans are deemed managerial prerogatives, civil
service employers would be permitted to disguise unilateral cuts
in hours and compensation as “layoffs” in order to avoid their
obligation to negotiate those changes under EERA. Petitioners
18
also argue that the temporary layoff plans are not managerial
prerogatives because the purely fiscal or budgetary
considerations that petitioners assert were at issue in all
three cases do not involve governmental policy.
Finally, all petitioners express concern that if civil
service employers are permitted to reduce hours and compensation
without negotiating and without demonstrating exigency, the
provisions of CNAs may be violated with impunity, undermining
the salutary public policy of promoting labor-relations
stability through the collective negotiations process.
B.
Respondents Keyport, Belmar, and Mount Laurel maintain that
the Appellate Division properly applied the Local 195
negotiability test in determining that the layoff plans were
non-negotiable.
First, respondents argue that their layoff actions are non-
negotiable under prong two of the Local 195 test because the
Civil Service law preempts the negotiation requirement imposed
by EERA. All respondents argue that the Legislature must have
intended the Civil Service law governing layoffs to fully occupy
that field because it provides specific, comprehensive
procedures by which civil service employers may implement layoff
plans, which require consultation rather than negotiation.
Belmar asserts that both Civil Service law and EERA contain
19
references indicating that the Civil Service law should prevail
in case of a conflict. N.J.S.A. 11A:11-2(j); N.J.S.A. 34:13A-
8.1. Keyport and Mount Laurel cite to DEP, supra, 285 N.J.
Super. at 551-52, where the Appellate Division referred to Civil
Service law as providing a comprehensive layoff scheme that
preempts the EERA negotiation requirement.
Relatedly, respondents contend that requiring civil service
employers to negotiate before implementing temporary layoff
plans in compliance with Civil Service law would negate
Commission regulations designed to help civil service employers
pass legally compliant budgets in times of fiscal exigency
without permanently cutting employee positions. Respondents
maintain that mandated negotiations would likely derail and
certainly delay implementation of temporary layoff plans,
undermining the feasibility of using temporary layoff plans to
address the immediate effects of present fiscal distress.
Further, respondents argue that even if the Civil Service
law does not preempt EERA’s negotiation requirement, the
decision to implement a temporary layoff plan must be non-
negotiable under the third prong of the Local 195 analysis
because it involves managerial prerogatives pertaining to the
determination of governmental policy. All respondents argue
that case law generally has established that a civil service
employer’s decision to reduce employees’ work weeks or work year
20
for economic reasons is a non-negotiable matter of governmental
policy. Belmar argues that its temporary layoff plan was non-
negotiable, relying on Council of New Jersey State College
Locals v. State Board of Higher Education, 91 N.J. 18, 32
(1982), which supports that the determination of whether layoffs
are necessary involves a matter of managerial prerogative.
Keyport and Mount Laurel again point to DEP, supra, 285 N.J.
Super. at 551-52, in arguing that the Appellate Division has
recognized that work week reductions stemming from good-faith
economic, efficiency, or budgetary concerns are matters of non-
negotiable managerial prerogative.
All respondents argue that temporary layoff plans involve
non-negotiable governmental policy determinations because civil
service employers must make delicate decisions concerning the
allocation of funds in order to provide services to taxpayers
and residents in times of financial exigency. Specifically,
Mount Laurel emphasizes that mandatory negotiation would
interfere with civil service employers’ ability to use temporary
layoff actions to adjust in a timely manner to exigent changes
in economic conditions.
C.
Amici New Jersey State AFL-CIO (NJ AFL-CIO) and New Jersey
Education Association (NJEA) reinforce petitioners’ arguments
that temporary layoffs in the form of unpaid furlough days and
21
demotions must be negotiated pursuant to EERA. NJ AFL-CIO adds
that the PERC decisions below were entitled to a high degree of
deference and asserts that the Appellate Division decision
conflicts with decades of legal precedent and the public
interest in maintaining stable labor relations. NJEA similarly
advances many of petitioners’ arguments, emphasizing that Civil
Service law does not contain preemptive language and that,
regardless of whether labeled a “layoff,” a public employer’s
decision to reduce work hours or compensation is mandatorily
negotiable.
New Jersey School Boards Association (NJSBA) and New Jersey
State League of Municipalities (NJSLM) support the arguments
advanced by the municipal respondents. They argue that layoff
plans implemented in compliance with the Civil Service Act and
regulations are non-negotiable. NJSBA analogizes the
municipalities’ authority to implement layoff plans pursuant to
the Civil Service law to its authority to reduce teaching staff
pursuant to N.J.S.A. 18A:28-9.2 NJSLM adds that an appellate
court does not owe deference to PERC interpretations of Civil
Service regulations or of the doctrine of preemption.
D.
2 NJSBA maintains that Piscataway Township Board of Education,
supra, 164 N.J. Super. 98 -- relied upon by petitioners -- has
been impliedly rejected by courts because it incorrectly
interprets and applies N.J.S.A. 18A:28-9.
22
PERC filed a statement in lieu of brief, asserting that
PERC’s “expert judgment should be accepted” in these cases.
However, at oral argument, PERC’s general counsel indicated that
PERC had changed its position and informed the Court that PERC
now asserts that sufficient information in the record
established that the municipalities’ decisions in these three
cases were non-negotiable managerial prerogatives under prong
three of the Local 195 test. Underscoring that point, PERC’s
counsel brought to the Court’s attention a November 2013 PERC
decision in which PERC determined that the Robbinsville Township
Board of Education’s decision to implement furlough days was a
proper exercise of managerial prerogative.
III.
The analytic framework for this matter is derived from this
Court’s seminal case Local 195, supra, 88 N.J. 393, in which the
scope of collective negotiations for public employers and
employees was addressed.
In that case, the State and several unions representing
public employees disagreed as to the negotiability of
contractual provisions concerning limitations on contracting and
subcontracting, establishment of a workweek, and transfer and
reassignment determinations. Id. at 398-400. The Court’s
decision focused on establishing a test for determining whether
those types of decisions came within the proper scope of
23
collective negotiations for the public sector. See id. at 403-
05. The Court stated that although “public employees have a
legitimate interest in . . . collective negotiations” in respect
of issues affecting the terms and conditions of their
employment, “the scope of [collective] negotiation[] in the
public sector is more limited than in the private sector.” Id.
at 401. Unlike a private employer, a public employer, as
government, has “the unique responsibility to make and implement
public policy.” Id. at 401-02 (citing Paterson Police PBA Local
No. 1 v. City of Paterson, 87 N.J. 78, 86 (1981); State v. State
Supervisory Emps. Ass’n, 78 N.J. 54, 67 (1978)). Public policy,
the Court explained, properly is determined through the
political process, by which citizens hold government
accountable, and not through collective negotiation. Id. at 402
(citing Ridgefield Park Educ. Ass’n v. Ridgefield Park Bd. of
Educ., 78 N.J. 144, 163 (1978)). Thus, public employment
negotiation has been divided into two categories: “‘mandatorily
negotiable terms and conditions of employment and non-negotiable
matters of governmental policy.’” Ibid. (quoting Ridgefield
Park Educ. Ass’n, supra, 78 N.J. at 162).
In light of the competing interests of a public employer
and public employees, the Court stated in Local 195 that “[t]he
role of the courts in a scope of negotiations case is to
determine . . . whether an issue is appropriately decided by the
24
political process or by collective negotiations.” Ibid. Thus,
in Local 195, the Court articulated a three-part test for
weighing those interests, establishing that a subject is
negotiable when: “(1) the item intimately and directly affects
the work and welfare of public employees; (2) the subject has
not been fully or partially preempted by statute or regulation;
and (3) a negotiated agreement would not significantly interfere
with the determination of governmental policy.” Id. at 404.
In respect of the first factor, “rates of pay and working
hours” are noted models for the type of subjects that
“‘intimately and directly affect[] the work and welfare of
public employees.’” Id. at 403 (quoting Paterson Police PBA,
supra, 87 N.J. at 86). A subject is preempted, and therefore
non-negotiable under the second factor, when a statute or
regulation “‘speak[s] in the imperative and leave[s] nothing to
the discretion of the public employer.’” Id. at 403-04 (quoting
State Supervisory Emps. Ass’n, supra, 78 N.J. at 80). However,
under this prong of the analysis, the Court explained that a
subject remains negotiable when a statute or regulation related
to that subject preserves employer discretion; similarly, when
statutes or regulations set minimum or maximum standards in
respect of a subject, the subject is negotiable within the
limits of those standards. Id. at 403.
25
The third factor requires that interference with the
determination of government policy be significant in order to
defeat negotiability. Id. at 404. The Court explained that
consideration of the third factor arises out of recognition
“that most decisions of the public employer affect the work and
welfare of public employees to some extent and that negotiation
will always impinge to some extent on the determination of
governmental policy.” Ibid. (citing Paterson Police PBA, supra,87 N.J. at 91-92). Thus, in order to determine whether
negotiation on a particular subject would significantly
interfere with the formulation of government policy,
it is necessary to balance the interests of
the public employees and the public employer.
When the dominant concern is the government’s
managerial prerogative to determine policy, a
subject may not be included in collective
negotiations even though it may intimately
affect employees’ working conditions.
[Id. at 405.]
Neatly summed up, a matter’s negotiability turns not “on the
talismanic application of labels such as ‘terms and conditions
of employment’ or ‘managerial prerogatives[]’ [but r]ather, the
inquiry focuses on the extent to which collective negotiations
will interfere with the establishment and effectuation of
governmental policy.” Id. at 420 (Handler, J., concurring and
dissenting).
26
Applying those factors to the facts at hand, the Local 195
Court concluded that the contractual provisions under review
relating to the subjects of contracting and subcontracting were
non-negotiable because negotiation would interfere significantly
with the determination of government policy. Id. at 408
(majority opinion). The Court analogized the dominant policy
concerns in respect of decisions about contracting and
subcontracting to the policy determinations present in decisions
to reduce the work force for economy and efficiency, which this
Court has recognized as non-negotiable.3 Ibid. (citing State
Supervisory Emps. Ass’n, supra, 78 N.J. at 88). The Court
further held that the provisions regarding workweek hours by
individual employees were negotiable –- the balance of interests
on the third prong favored negotiation because negotiation would
not impede the State’s ability “to determine the number or
classification of employees on duty at any time.” Id. at 411.
Finally, the Court held that provisions relating to the
substantive decision to transfer or reassign an employee were
non-negotiable policy determinations, but that provisions
3The Court noted that a CNA “could contain a provision requiring
[a public employer] to discuss . . . economic aspects of
subcontracting” when it is being considered “for purely fiscal
reasons,” but discussion was not equated to negotiation; that
said, the procedural aspects to subcontracting were held to be a
proper subject of collective negotiations. Id. at 420.
27
relating to procedures for transfer and reassignment were
negotiable. Id. at 417.
With the Local 195 test as the indisputable test guiding
our analysis in scope of negotiations matters, we apply it to
the public employer actions in issue here.
IV.
A.
Prong one of the Local 195 test is not in issue in this
matter. In all three disputes, the layoff actions resulted in
reduced hours of work, with resultant reductions in pay, for the
affected employees. Those actions by each municipality impacted
terms and conditions of work for their employees. See, e.g.,
Bd. of Educ. of the Woodstown-Pilesgrove Reg’l Sch. Dist. v.
Woodstown-Pilesgrove Reg’l Educ. Ass’n, 81 N.J. 582, 589 (1980)
(noting “[r]ates of pay and working hours . . . appear to be
items most clearly falling within th[e]” terms-and-conditions
“category” (citation omitted)). PERC and the Appellate Division
properly so found, and all respondents recognize as much. There
is no need to dwell further on Local 195’s first prong.
Prongs two and three of the Local 195 test are the factors
in issue in these matters. The Appellate Division concluded
that the preemption prong precluded negotiation of the layoff
actions in all three matters and reversed PERC on that basis.
The panel also found that PERC erred in concluding that
28
negotiation was not barred under prong three, basing that
determination upon assessment of the predominant managerial
prerogative interest in pursuing the layoffs in these three
civil service communities facing financial distress. We
therefore turn to prongs two and three.
B.
1.
The preemption standard for prong two of the Local 195 test
is clear in its limits and rigid within its parameters. When
legislation or a regulation “establishes a specific term or
condition of employment that leaves no room for discretionary
action, then negotiation on that term is fully preempted.”
Local 195, supra, 88 N.J. at 403; see State Supervisory Emps.
Ass’n, supra, 78 N.J. at 80-82 (establishing that preemption
doctrine applies to validly promulgated regulations, such as
civil service regulations).
That principle was reinforced in Bethlehem Township Board
of Education v. Bethlehem Township Education Ass’n, 91 N.J. 38,
44 (1982): “Negotiation is preempted only if the regulation
fixes a term and condition of employment expressly, specifically
and comprehensively.” (Citation and internal quotation marks
omitted); see also Council of N.J. State Coll. Locals, supra, 91
N.J. at 26 (reiterating that preemption applies unqualifiedly to
regulations affecting terms or conditions of employment when
29
adopted by regulatory agency having no direct employer interest
over employees affected). For preemption to apply, there must
be no room for debate on the matter of discretion: “The
legislative provision must ‘speak in the imperative and leave
nothing to the discretion of the public employer.’” Bethlehem
Twp., supra, 91 N.J. at 44 (quoting Local 195, supra, 88 N.J. at
403-04). Thus, it is beyond dispute that specific terms and
conditions for public employment set by civil service statutes
or regulations may not permissibly be negotiated. See State
Supervisory Emps. Ass’n, supra, 78 N.J. at 80-82.
2.
Here the Appellate Division determined preemption to apply
based on the promulgation of a civil service regulation that had
permitted temporary layoffs of employees in State or local
service, and that thereby benefitted civil service
municipalities such as the three here claiming fiscal distress.
See N.J.A.C. 4A:8-1.1A (temporarily adopted as emergency
regulation on March 25, 2009; repealed effective December 21,
2009). Specifically and in pertinent part, the regulation had
provided:
An appointing authority in State or local
service may institute a temporary layoff for
economy, efficiency or other related reasons.
A temporary layoff shall be defined as the
closure of an entire layoff unit for one or
more work days over a defined period or a
staggered layoff of each employee in a layoff
unit for one or more work days over a defined
30
period. A temporary layoff shall be
considered a single layoff action even though
the layoff of individual employees takes place
on different days during the defined period.
The defined period shall be set forth by the
appointing authority in its temporary layoff
plan; however, in a staggered layoff, the
maximum period to stagger one day off shall
not exceed 45 days.
[41 N.J.R. 1537 (Apr. 6, 2009); N.J.A.C.
4A:8-1.1A(a).]
There is important background to that emergency regulation.
The Commission adopted the emergency regulation at a time when
New Jersey law had long recognized a public sector employer’s
right to take a layoff action impacting employees working in
civil service jurisdictions of this State. The authorization
for such layoff actions is set forth in the Civil Service Act,
which provides that any “permanent employee may be laid off for
economy, efficiency or other related reason.” N.J.S.A. 11A:8-
1(a). Civil service regulations fleshing out that authority
were in place at all times relevant to these matters.
First, the regulations identify the reasons that would
support a layoff action, and a “layoff action” is defined to
include a demotion as well as loss of position:
(a) An appointing authority may institute layoff
actions for economy, efficiency, or other
related reasons.
1. Demotions for economy, efficiency, or other
related reasons shall be considered layoff
actions and shall be subject to the
requirements of this chapter.
31
[N.J.A.C. 4A:8-1.1.]
Second, the mechanics of a layoff action are detailed in
the civil service regulations. Public entity employers governed
by Civil Service law are required first to consider alternatives
to layoffs and to take a number of pre-layoff actions. See
N.J.A.C. 4A:8-1.2, 1.3. The regulations suggest alternatives to
layoffs, such as “[g]ranting voluntary furloughs,” “[a]llowing
voluntary reduction of work hours by employees,” “[p]roviding
employees with optional temporary demotional title changes,” and
other actions. N.J.A.C. 4A:8-1.2. The regulations require that
the public entity employer take certain actions pre-layoff,
“which may include, but are not limited to: 1. Initiating a
temporary hiring and/or promotion freeze; 2. Separating non-
permanent employees; 3. Returning provisional employees to their
permanent titles; 4. Reassigning employees; and 5. Assisting
potentially affected employees in securing transfer or other
employment.” N.J.A.C. 4A:8-1.3(a). Importantly, the public
employer is required to “consult with” the union representatives
of affected employees before “initiating measures under th[at]
section.” N.J.A.C. 4A:8-1.3(c).
Third, the regulations require Commission approval of a
proposed layoff; therefore, when a public employer determines to
proceed with a layoff action, civil service regulations detail
what information must be submitted. See N.J.A.C. 4A:8-1.4(a).
32
That list of required information includes “[a] detailed
explanation of all alternative and pre-layoff actions . . .
taken, or . . . considered and determined [to be] inapplicable,”
and “[a] summary of consultations with” union representatives.
N.J.A.C. 4A:8-1.4(a)(6), (7). If approved, final notice of
layoff is provided to affected employees, N.J.A.C. 4A:8-1.6, and
employees have appeal rights under the civil service system,
N.J.A.C. 4A:8-2.6, including the right to challenge the good
faith of the layoff, see N.J.A.C. 4A:8-2.6(a)(1) (permitting
challenge based on assertion that employer acted “for reasons
other than economy, efficiency or other related reasons”).
The upshot to that detailed scheme is that the decision to
proceed with a layoff is a heavily imbued management decision,
but a discretionary one, subject to approval by the Commission
for implementation.
3.
A layoff is an action that may be taken by a public sector
employer, provided the employer follows and satisfies civil
service regulatory requirements. The statute and implementing
regulations that authorize a layoff of public sector employees
do not require that such action affecting terms and conditions
of employment be taken. They lack an imperative nature. Thus,
the layoff statute and implementing regulations do not satisfy
the essential requirement for preemption to pertain and preclude
33
negotiation based on the second prong of Local 195, supra, 88
N.J. at 403-04.
Indeed, we are unaware of any case, and have been directed
to none, that has declared the determination to embark on a
traditional layoff action to be non-negotiable based on the
preemption prong of the test for determining the scope of
negotiations. But see State Supervisory Emps. Ass’n, supra, 78
N.J. at 86-87 (explaining how civil service regulations
comprehensively regulate and control mandatory scheme for
determining seniority and reemployment rights in layoff,
preempting mandatory negotiation of collateral layoff rights
involving seniority, reemployment, and reinstatement).
When the new regulation governing temporary layoff actions
was adopted as an emergency rule, its premise operated on the
same discretionary basis. N.J.A.C. 4A:8-1.1A did not mandate an
action by public sector employers affecting terms and conditions
of employment for public employees. Adopted as an emergency
measure, the regulation quickly offered public entity employers
in civil service jurisdictions new discretionary forms of
temporary layoff actions for use in addressing situations of
fiscal distress.4 Like the statute and regulations governing
traditional layoff actions, see N.J.S.A. 11A:8-1(a); N.J.A.C.
4 For history of the regulation’s repeal, see 41 N.J.R. 3139(a)
(Sept. 8, 2009) (proposal of regulation’s repeal) and 41 N.J.R.
4701(a) (adoption of regulation’s repeal) (Dec. 21, 2009).
34
4A:8-1.1(a), we do not view N.J.A.C. 4A:8-1.1A as meeting the
clear standard of an imperative required for preemption to
apply. Providing authority for a public sector employer to take
temporary layoff action that has an impact on public employees’
hours and wages -- paradigmatic examples of terms and conditions
of employment -- does not impose a mandate as called for under
Local 195’s second prong for preemption.
The Appellate Division misperceived the import of that
regulation and mistakenly found preemption to be applicable. We
conclude neither N.J.A.C. 4A:8-1.1A nor civil service statutes
and regulations governing traditional layoff actions preempt
negotiation on the basis of prong two of the Local 195 test of a
decision to proceed with a layoff because that law does not set,
as an imperative, a term and condition of employment for public
employees governed by Civil Service law. We turn therefore to
the final and critical factor in the Local 195 test.
V.
1.
Prong three of the Local 195 test holds that a subject may
affect “the work and welfare of public employees” and
nevertheless not be subject to negotiation. Supra, 88 N.J. at
404. Based on a well-established analysis performed under that
prong, layoffs consistently have been held to be outside of the
35
scope of negotiations. The reasoning is based on the balancing
of interests required by prong three.
In explaining prong three, the Local 195 Court reaffirmed
that most decisions by a public employer affect to some extent
the work and welfare of public employees and that requiring
negotiation in all such instances would impinge on the
determination of public policy. Ibid. (citing Paterson Police
PBA, supra, 87 N.J. at 91-92). When assessing the scope of
required negotiations under prong three, those interests must be
balanced: “[N]egotiation will be allowed on a subject that
intimately and directly affects the work and welfare of public
employees unless such negotiated agreement would significantly
interfere with the determination of governmental policy.”
Ibid.; see also Woodstown-Pilesgrove, supra, 81 N.J. at 591(“When the dominant issue is [a governmental] goal, there is no
obligation to negotiate and subject the matter, including its
impact, to binding arbitration.”).
Application of that balancing of interests under prong
three has deep roots when it comes to the decision to lay off
and thereby adjust a public workforce involved in the delivery
of public services. In State Supervisory Employees Ass’n,
supra, our Court declared that the decision to “cut” a work
force is “unquestionably . . . a predominantly managerial
function.” 78 N.J. at 88. There is no room for mandatory
36
negotiation in the determination to reduce a workforce. See
ibid.; cf. Council of N.J. State Coll. Locals, supra, 91 N.J. at
32 (stating same and citing examples of forms of workforce
reduction); DEP, supra, 285 N.J. Super. at 551-52; DiMattia v.
N.J. Merit Sys. Bd., 325 N.J. Super. 368, 374-75 (App. Div.
1999). That is so because such decisions go to the heart of
governmental policy determinations about what services are to be
provided and how they will be provided to the public. Public
managers must be the ones accountable to the people for such
substantive policy decisions. See Local 195, supra, 88 N.J. at
408; DEP, supra, 285 N.J. Super. at 553.
Scope-of-negotiations law addressing subcontracting follows
that same reasoning. In Local 195, supra, our Court rejected
the argument that a public employer’s civil service right to lay
off employees preempted subcontracting as a negotiable subject.
88 N.J. at 406. However, in concluding that the topic did not
belong among those subject to negotiation, the Court found that
the substantive decision to contract or subcontract
significantly interfered with a determination of public policy.
Id. at 407-08. The Local 195 Court was unanimous in stating its
test for assessing the scope of required negotiations and the
reason for keeping matters involving predominantly managerial
prerogative out of the negotiations process. That explanation
bears repeating in full.
37
The choice of how policies are
implemented, and by whom, can be as important
a feature of governmental choice as the
selection of ultimate goals. It is a matter
of general public concern whether governmental
services are provided by government employees
or by contractual arrangements with private
organizations. This type of policy
determination does not necessarily concern
solely fiscal considerations. It requires
basic judgments about how the work or services
should be provided to best satisfy the
concerns and responsibilities of government.
Deciding whether or not to contract out a
given government service may implicate
important tradeoffs.
Allowing such decisions to be subject to
mandatory negotiation would significantly
impair the ability of public employers to
resort to subcontracting. We have previously
held that decisions to reduce the work force
for economy or efficiency are non-negotiable
subjects. The decision to contact out work or
to subcontract is similarly an area where
managerial interests are dominant. This is
highlighted by the fact that allowing
subcontracting to be negotiable may open the
road to grievance arbitration. Imposing a
legal duty on the state to negotiate all
proposed instances of subcontracting would
transfer the locus of the decision from the
political process to the negotiating table, to
arbitrators, and ultimately to the courts.
The result of such a course would
significantly interfere with the
determination of governmental policy and would
be inimical to the democratic process.
[Ibid. (citations omitted).]
2.
The Local 195 rationale informs our consideration of the
expression of public policy contained in the Commission’s
temporary layoff rule. The Commission promulgated an emergency
38
regulation authorizing temporary layoffs while the extant
financially distressing conditions, pervading the State and
local communities, supported expansion of the layoff techniques
available to State and local governmental appointing authorities
governed by civil service requirements. The Commission’s
regulation authorized a layoff mechanism that offered local
governmental appointing authorities a tool through which swift
action may be taken to address pressing fiscal distress, as the
municipalities in this appeal emphasize. In recognition of that
clear expression of legitimate public policy authorizing such
actions to be taken, it appears to us that a decision to reduce
the workforce of employees within an identified layoff unit,
even on a temporary basis in accordance with a duly authorized
temporary layoff plan, is as much a managerial prerogative as
the decision to layoff permanently, or to subcontract a function
permanently or on a temporary basis.
Generically, all of the above-referenced actions go
directly to a substantive policy determination about whether and
how to deliver public services when delivery is affected by
serious and pressing economic considerations. Economic reasons
are indisputably a legitimate basis for a layoff of any type.
See N.J.S.A. 11A:8-1(a) (authorizing layoff action based on
reason of economy); N.J.A.C. 4A:8-1.1(a) (same); see also
N.J.A.C. 4A:8-1.1(a)(1) (authorizing demotions for economy);
39
DiMattia, supra, 325 N.J. Super. at 374 (noting that civil
service statutory and regulatory amendments had authorized
public employer to take demotional layoff actions for budgetary
reasons). Thus, a layoff -- including an authorized temporary
layoff pursuant to a valid Commission regulation authorizing
such action, or demotion in position from full to part-time
status also pursuant to an approved layoff plan -- remains a
management policy determination of considerable heft so long as
economic or other recognized rationales support its use.
The temporary layoff actions at issue here were undertaken
by municipalities at a time when the Commission’s emergency
regulation made available an additional management tool to
address a pervading financial downturn that was affecting
municipal budgets generally and, in particular, those of the
municipalities involved here. Municipal budgets, structured on
a cash basis, must be balanced annually, see N.J.S.A. 40A:4-2, -
3, and regulations address proper municipal budgeting practices
to promote healthy and responsible municipal governance, see
N.J.A.C. 5:30-3.2 to -7.7. In each of these municipalities,
the municipal government endeavored to maintain services in a
responsible way in light of an economic downturn with no relief
in sight. In each, the municipal appointing authorities took
action while the emergency Commission regulation authorizing
temporary, as well as permanent, layoff plans was in effect.
40
They acted based on extant Commission public policy that made
those options available for use if other Commission layoff
requirements were satisfied, including the consultative
obligation with union representatives and the duty to pursue
prior pre-layoff alternatives.
For those reasons, in the context of the cases consolidated
before us, we cannot conclude that these matters required
compelled negotiation. These civil service municipalities, when
faced with fiscal exigency, had the right to lay off employees
under prior case law and as buttressed by the emergency
regulation then in effect authorizing temporary layoff actions.
See N.J.A.C. 4A:8-1.1A. Although the emergency regulation since
has been repealed, the regulation’s validity is not challenged
in this matter and it authorized temporary periods of layoffs
during times of exigent fiscal circumstances when these
municipal actions were taken. Whether the municipalities
actively relied on that existing regulation is not controlling
in our review of this appeal.
Even PERC, in its initial decisions in these matters,
recognized that a management policy determination was involved
in the decision to impose a temporary layoff and did not
question the ability of management to take such policy action.
Instead, it evaluated only the negotiability of the management
decision and performed a balancing-of-interests analysis under
41
prong three of the Local 195 test. PERC found the decision to
be negotiable. It based its determination on its own assessment
of the fiscal need faced by each municipality and its own
perception that other management policy choices could possibly
address the financial distress the municipalities faced within
the particular fiscal year in progress. Under PERC’s initial
analysis, each municipality was required to demonstrate that no
other option was available in order for these layoffs to
constitute a managerial prerogative that a municipal governing
body could exercise in the face of the present circumstances of
fiscal distress.
As noted, PERC now takes the position that, under the
circumstances, these layoff actions were legitimate management
prerogatives that ought not to have been ruled subject to
negotiation. That second thought demonstrated the better
judgment.
PERC erred in initially requiring each municipality to
demonstrate that no other option was available before it could
take the layoff measures of restricting workdays through a
temporary layoff or eliminating full-time positions while
covering tasks through part-time positions so services to the
public continued. Those were management policy determinations
that constituted prerogatives. They should not have been
subjected to PERC’s non-deferential “last option” standard. In
42
subjecting them to that standard, PERC’s judgment failed to
adhere to the teachings of Local 195 and related case law
addressing workforce reductions; as a result, PERC mistakenly
declared these layoff actions subject to negotiations. Adding
negotiations as PERC would have required would have injected a
whole new dimension, rendering policy determinations subject to
the decisions of arbitrators and ultimately the courts. And,
that review for negotiability -- over actions that needed to be
accomplished swiftly in order to effectuate their intended
prompt economic relief from the financial distress -- would come
months, if not years, later. More fundamentally, the wrong
decision makers would be setting policy for the municipalities.
Local 195, supra, 88 N.J. at 407-08.
Certainly, under prong three of Local 195, an artificial
“fiscal crisis” cannot outweigh important employee work and
welfare interests. Some evaluation is necessary, and does occur
during the Commission’s approval process, which requires
consideration of the asserted reason for the layoff’s necessity.
We note too that a good faith challenge is available under civil
service regulations, see N.J.A.C. 4A:8-2.6(a)(1), and provides a
more appropriate solution than invoking mandatory negotiation to
zero in on any improper basis for a reduction in workforce
action. See Local 195, supra, 88 N.J. at 425 (Handler, J.,
concurring and dissenting) (noting that mandatory negotiation
43
can be inapt solution to invoke, when other solutions for review
of management action exist, because negotiation “route is
cumbersome, inappropriate and potentially disruptive of
governmental management”).
Finally, we reject the argument that past decisions
addressing and requiring negotiation of unilaterally imposed
reductions to hours of work are at odds with the outcome reached
here. The decisions cited have not arisen in the context of a
bona fide layoff plan. See, e.g., Galloway Twp. Bd. of Educ. v.
Galloway Twp. Ass’n of Educ. Sec’ys, 78 N.J. 1, 5-6 (1978)
(addressing individual actions taken unilaterally against
certain secretaries during collective negotiations with
representative). When a layoff plan has been prepared to
accommodate policy determinations about the efficient delivery
of services when economy is a factor, the public management’s
right to reduce its workforce -- by a layoff or restructuring of
the number and type of positions, full or part-time -- must be
treated as a management prerogative. Several past appellate
decisions properly have recognized the management prerogative
present when a decision to proceed with a layoff is involved.
See, e.g., DEP, supra, 285 N.J. Super. at 551-53; DiMattia,
supra, 325 N.J. Super. at 374-75; see also Klinger v. Bd. of
Educ. of Cranbury, 190 N.J. Super. 354, 357-58 (App. Div. 1982)
(recognizing that reduction in force eliminating full-time
44
physical education teacher and creating instead two 7/10ths
part-time teachers is within management’s authority),5 certif.
denied, 93 N.J. 277 (1983).
All of the layoff actions challenged herein were reviewed
by the Commission and approved for implementation as legitimate
layoffs. There was an opportunity to appeal the “good faith” of
each layoff under civil service regulations but that avenue was
not pursued. Nor is there any challenge in any of these matters
to the validity of the temporary layoff regulation that was in
place at the time these actions were taken. At this late date,
based on our review of the records presented, we are satisfied
that all three municipalities acted for reasons of economy based
on municipal fiscal distress existing at the time, rendering the
management choice to use a temporary or permanent layoff
solution one that constituted a managerial prerogative not
subject to negotiation. We therefore hold that the layoff
actions at issue in this consolidated appeal constituted non-
negotiable subjects under prong three of the Local 195 test for
negotiability.
VI.
5We note but ascribe little weight to the earlier-in-time
decision in Piscataway Township Board of Education, supra, 164
N.J. Super. 98. The facts in Klinger are more closely aligned
to the present matter and its reasoning is more persuasive.
45
The judgment of the Appellate Division is affirmed, as
modified by the reasoning expressed herein.
JUSTICES PATTERSON and SOLOMON, and JUDGE CUFF (temporarily
assigned) join in JUSTICE LaVECCHIA’s opinion. JUSTICE ALBIN
filed a separate, dissenting opinion. CHIEF JUSTICE RABNER and
JUSTICE FERNANDEZ-VINA did not participate.
46
SUPREME COURT OF NEW JERSEY
A-43/44 September Term 2013
072361
IN THE MATTER OF BOROUGH OF
KEYPORT,
Respondent-Respondent,
v.
INTERNATIONAL UNION OF
OPERATING ENGINEERS, LOCAL
68,
Petitioner-Appellant.
IN THE MATTER OF BOROUGH OF
BELMAR,
Respondent-Respondent,
v.
COMMUNICATIONS WORKERS OF
AMERICA, AFL-CIO,
Petitioner-Appellant.
TOWNSHIP OF MOUNT LAUREL,
Respondent-Respondent,
v.
COMMUNICATIONS WORKERS OF
AMERICA,
Petitioner,
and
AFSCME, COUNCIL 71, SOUTH
JERSEY PUBLIC EMPLOYEES,
1
Petitioner-Appellant.
JUSTICE ALBIN, dissenting.
The majority opinion sweeps away nearly fifty years of this
Court’s public-sector labor jurisprudence, giving municipal
employers the unilateral power to reduce the wages and hours of
public employees promised in collective negotiations agreements.
Before today, the cardinal principle guiding public-sector labor
negotiations had been that the wages and hours of public workers
are subject to negotiation -- not to a public employer’s fiat.
The simple precept that wages and hours are mandatorily
negotiable is a common refrain not only in this Court’s
opinions, but also in the decisions of the Appellate Division,
and the Public Employment Relations Commission (PERC).
In the name of a furlough, two municipalities reduced the
wages and standard of living of an entire public-employee
workforce unit in violation of the Employer-Employee Relations
Act (EERA). Another municipality cut in half the hours and
salaries of three workers, thus depriving them of health
insurance. Each municipality could have laid off one to three
workers to achieve its budgetary goal, which was to increase the
municipal surplus. Instead, the municipalities chose to breach
their collective negotiations agreements with their employees’
unions. In all three cases, PERC -- the public body empowered
2
to enforce the EERA -- ruled that the unilateral actions of the
municipalities contravened the EERA and the principle that wages
and hours are mandatorily negotiable. The majority affirms the
overthrow of all three PERC decisions.
The majority’s endorsement of furloughs by fiat in non-
emergent circumstances is a dismal sign for the future of
public-sector collective negotiations. The temporary regulation
promulgated by the Civil Service Commission on which the
majority relies does not change the equation. When public
employers can unilaterally reduce wages and hours of employees,
there is not much left to negotiate. Because the majority’s
decision undermines the very foundation of collective
negotiations, which is at the heart of the EERA, I respectfully
dissent.
I.
A.
The Borough of Belmar and a local affiliate of the
Communication Workers of America (CWA), which represents
employees in Belmar’s public-works department, signed a
collective negotiations agreement (CNA) effective January 1,
2005 through December 31, 2009. That agreement provided that
the workweek for each employee would be forty hours and that
every employee would receive a 3.9% salary increase in 2005 and
a 4.0% increase each year from 2006 through 2009. In 2008,
3
Belmar’s budget surplus declined from $1,630,802 to $1,284,563.
To offset the decrease in the surplus, Belmar requested that its
employees forgo their 4% salary increase for 2009. The public-
works department employees demanded that Belmar adhere to its
agreement.
Taking the my-way-or-the-highway approach, Belmar
furloughed the workers one day per week from October 6, 2009
through December 15, 2009, wiping out their 4% salary increase
for 2009. Belmar could have achieved the same savings by laying
off just one worker. Instead, it chose to reduce the hours and
wages of the entire bargaining unit in violation of its
agreement.
B.
The Township of Mount Laurel and an affiliate of the
American Federation of State, County and Municipal Employees,
AFL-CIO (AFSCME), which represents the Township’s blue-collar
workers, entered into a CNA that ended on December 31, 2008.
The agreement remained in effect after December 31, while the
parties negotiated a new contract. The agreement set forth the
work hours and wages of each employee.
In 2009, Mount Laurel’s budget surplus declined to
$600,000. To increase the surplus, the Township asked its blue-
collar workers to accept a voluntary furlough of eight days over
an eight-month period. The workers declined the offer. Mount
4
Laurel then involuntarily furloughed those employees for eight
days -- a savings equivalent to laying off three employees.
C.
The Borough of Keyport and a local affiliate of the AFL-
CIO, which represents the Borough’s clerical employees, entered
into a CNA effective from January 1, 2008 through December 31,
2010. The agreement set forth each employee’s work hours and
wages, including a salary increase. The agreement provided that
the newest employees would be laid off first, if layoffs were
necessary.
Keyport experienced a decline in its budget surplus over a
six-year period. In 2009, in response to its depleted surplus,
the Borough took certain steps, which involved cutting in half
the hours and wages of three clerical employees. Halving the
salaries of those employees also resulted in the cancellation of
their health benefits. The unauthorized actions taken by the
Borough violated the CNA.
D.
In all three cases, PERC found that the municipalities
engaged in unfair labor practices by eschewing negotiations and
peremptorily decreasing the hours and wages of the targeted
employees. Relying on this Court’s jurisprudence, PERC observed
that “‘surely working hours and compensation are terms and
conditions of employment within the contemplation of the
5
Employer-Employee Relations Act.’” Borough of Belmar, P.E.R.C.
No. 2011-34, 36 NJPER 405, 407 (2010) (quoting Bd. of Educ. of
Englewood v. Englewood Teachers Ass’n, 64 N.J. 1, 6-7 (1973)).
PERC determined that the municipalities could not justify their
unilateral actions in violating their contractual commitments.
For example, in the case of Belmar, PERC held that “[t]he
Borough has not asserted that reducing the workweek rather than
laying off a single employee was needed to keep any programs
running or to achieve any governmental policy purpose.” Id. at
408. In Township of Mount Laurel, P.E.R.C. No. 2011-35, 36
NJPER 409, 411 (2010), PERC found that the Township did not
“produce[] any evidence to establish that it is without
alternatives to achieve the same savings without furloughing its
employees nor has it shown that any operations or programs would
be hindered if it had to layoff employees to achieve the same
budgetary savings instead of implementing temporary layoffs.”
PERC, in effect, concluded that the furloughing of employees was
a disguise for driving down the wages of entire work units of
employees.
PERC is a specialized administrative agency designated by
statute to interpret, implement, and enforce the EERA. N.J.
Tpk. Auth. v. AFSCME, Council 73, 150 N.J. 331, 335 (1997)
(citing N.J.S.A. 34:13A-5.2). PERC brings expertise to the
resolution of public-body labor disputes, City of Hackensack v.
6
Winner, 82 N.J. 1, 24 (1980), and its “interpretation of the
[EERA] is entitled to substantial deference,” N.J. Tpk. Auth.,
supra, 150 N.J. at 352. A PERC ruling should not be overturned
“‘unless it is clearly demonstrated to be arbitrary or
capricious.’” In re Hunterdon Cnty. Bd. of Chosen Freeholders,
116 N.J. 322, 329 (1989) (quoting State v. Prof’l Ass’n of N.J.
Dep’t of Educ., 64 N.J. 231, 258-59 (1974)).
E.
The Appellate Division turned a blind eye to the deference
owed to PERC decisions. It reversed, finding that an emergency
civil service regulation authorized the Civil Service Commission
to approve the municipalities’ furlough and wage-and-hour-
reduction plans. Relying on prong two (preemption) and prong
three (managerial prerogative) of the test set forth in Local
195, IFPTE v. State, 88 N.J. 393, 404-05 (1982), the panel held
that “the decisions to furlough and demote employees were non-
negotiable policy determinations.”
The majority concedes that the Appellate Division erred in
finding that the civil service regulation preempted PERC. Ante
at __-__ (slip op. at 35). Accordingly, the only remaining
issue is whether -- as the majority argues -- the municipalities
were exercising a managerial prerogative that allowed them to
trump the principle guiding all collective negotiations: wages
and hours are mandatorily negotiable. If the majority is
7
correct, then nearly fifty years of our jurisprudence is wrong.
This Court has never held that the process of collective
negotiations of wages and hours can be bypassed by a public
employer unilaterally arrogating to itself the power to reduce
wages and hours.
II.
“Public employees are given comprehensive rights under the
Employer-Employee Relations Act.” In re Hunterdon Cnty. Bd. of
Chosen Freeholders, supra, 116 N.J. at 327; see also N.J.S.A.
34:13A-1 to 34:13A-43. Perhaps foremost among those rights is
the right to freely negotiate with a public employer over the
terms and conditions of employment. N.J.S.A. 34:13A-5.4(a)(5).
The EERA forbids a public employer from “[r]efusing to negotiate
in good faith with a majority representative of employees in an
appropriate unit concerning terms and conditions of employment.”
Ibid. Public-sector labor negotiations break down into two
categories: “‘mandatorily negotiable terms and conditions of
employment and non-negotiable matters of governmental policy.’”
Local 195, supra, 88 N.J. at 402 (quoting Ridgefield Park Educ.
Ass’n v. Ridgefield Park Bd. of Educ., 78 N.J. 144, 162 (1978)).
Whatever else terms and conditions of employment may mean,
it has been universally accepted that wages and hours are terms
and conditions of employment that public employers must
negotiate with their employees. See id. at 412; State v. State
8
Supervisory Emps. Ass’n, 78 N.J. 54, 67 (1978) (noting that
“working hours” and “compensation” are “the essential components
of terms and conditions of employment” and must be negotiated);
Galloway Twp. Bd. of Educ. v. Galloway Twp. Ass’n of Educ.
Sec’ys, 78 N.J. 1, 6-8 (1978) (concluding that reducing full-
time secretarial positions to part-time violated public
employer’s obligation to negotiate); Bd. of Educ. of Englewood,
supra, 64 N.J. at 6-7 (“Surely working hours and compensation
are terms and conditions of employment within the contemplation
of the Employer-Employee Relations Act.”); Burlington Cnty.
Coll. Faculty Ass’n. v. Bd. of Trs., 64 N.J. 10, 12 (1973)
(noting that “days and hours of work by individual faculty
members . . . are mandatorily negotiable under the [Employer-
Employee Relations Act]”); Boonton Bd. of Educ., P.E.R.C. No.
2006-98, 32 NJPER 239, 240 (2006) (“The number of hours an
employee works and the employee’s compensation and fringe
benefits are all mandatorily negotiable terms and conditions of
employment.”); Gloucester Cnty., P.E.R.C. No. 93-96, 19 NJPER
244, 245-46 (1993) (noting that New Jersey “Supreme Court has
consistently held that work hours are a mandatorily negotiable
term and condition of employment” and that “short of abolishing
a position, an employer must negotiate over reductions in the
work year, work week, and work day of unit positions”);
Stratford Bd. of Educ., P.E.R.C. No. 90-120, 16 NJPER 429, 430
9
(1990) (“[W]ork hours and compensation . . . [are] . . .
mandatorily negotiable”); Bayshore Reg. Sewerage Auth., P.E.R.C.
No. 88-104, 14 NJPER 332, 333 (1988) (“A public employer, short
of abolishing a position, must negotiate over reductions in
hours and compensation.”); Willingboro Bd. of Educ., P.E.R.C.
No. 86-76, 12 NJPER 32, 33 (1985) (concluding that cutting wages
and hours by one-third of public employee cafeteria workers
violated EERA and required mandatory negotiations); State of New
Jersey (Ramapo State Coll.), P.E.R.C. No. 86-28, 11 NJPER 580,
581 (1985) (“[A]n employee’s work year is a mandatorily
negotiable term and condition of employment.”); Cherry Hill Bd.
of Educ., P.E.R.C. No. 85-68, 11 NJPER 44, 46 (1984) (“It has
been well established since the first precedents interpreting
the New Jersey Employer-Employee Relations Act that working
hours are mandatorily negotiable.”); Sayvreville Bd. of Educ.,
P.E.R.C. No. 83-105, 9 NJPER 138, 140 (1983) (“[A]n employer
violates its duty to negotiate when it unilaterally alters an
existing practice or rule governing a term and condition of
employment, such as the length of the work year or the amount of
an employee’s salary . . . .”); Hackettstown Educ. Ass’n,
P.E.R.C. No. 80-139, 6 NJPER 263, 263 (1980) (“[PERC] has
consistently held that the length of the work year (or the
abolition of 12 and 11 month positions and the creation of 10
10
month positions) is a mandatory term and condition of
employment.” (Footnotes omitted)).
Not just in New Jersey, but elsewhere, it has been a
categorical imperative of public-sector collective bargaining
that wages and hours must be negotiated. See Paul M. Secunda et
al., Mastering Labor Law 185-87 (2014) (noting that wages and
hours are mandatorily negotiable in public-sector collective
bargaining); see also Nat’l Educ. Ass’n v. Bd. of Educ., 512
P.2d 426, 433 (Kan. 1973) (concluding that “terms and conditions
of professional service” of public employees included wages and
hours); Detroit Police Officers Ass’n v. City of Detroit, 233
N.W.2d 49, 52 (Mich. Ct. App. 1975) (noting that wages and hours
“are mandatory subjects of collective bargaining” in public-
employment setting); Clark Cnty. Sch. Dist. v. Local Gov’t Emp.-
Mgmt. Relations Bd., 530 P.2d 114, 117-18 (Nev. 1974) (noting
that public employer must negotiate hours and wages with
employees).
The Local 195 scope-of-negotiations test is not intended to
resolve an issue about which there can be no dispute -- the
negotiability of wages and hours in the public-sector setting.1
1 In assessing whether a matter is negotiable or non-negotiable,
the Local 195 test requires a determination whether “(1) the
item intimately and directly affects the work and welfare of
public employees; (2) the subject has not been fully or
partially preempted by statute or regulation; and (3) a
negotiated agreement would not significantly interfere with the
11
The test is intended for matters, unlike wages and hours, that
fall in the gray area between what is negotiable and non-
negotiable. This point is made clear throughout our
jurisprudence. If a matter clearly falls within the category of
wages and hours, the inquiry is over. Thus, “[w]here the
condition of employment is significantly tied to the
relationship of the annual rate of pay to the number of days
worked, then negotiation would be proper.” Bd. of Educ. of
Woodstown-Pilesgrove Reg’l Sch. Dist. v. Woodstown-Pilesgrove
Reg’l Educ. Ass’n, 81 N.J. 582, 591 (1980).
In Woodstown-Pilesgrove, we held that negotiation was
required when a board of education unilaterally extended a
single school day by two hours without any additional
compensation for the school’s teachers. Id. at 593-94.
Similarly, in Board of Education of Englewood, supra, 64 N.J. at
3, 6-7, we held that the unilateral extension of teachers’ work
day by an hour and three quarters without additional pay
undoubtedly concerned “terms and conditions of employment within
the contemplation of the Employer-Employee Relations Act” and
had to be negotiated. Moreover, in Piscataway Township Board of
Education v. Piscataway Township Principals Ass’n, 164 N.J.
determination of governmental policy.” Local 195, supra, 88
N.J. at 404.
12
Super. 98, 101 (App. Div. 1978), the Appellate Division
explained:
[T]here cannot be the slightest doubt
that cutting the work year, with the
consequence of reducing annual compensation of
retained personnel who customarily, and under
the existing contract, work the full year
(subject to normal vacations), and without
prior negotiation with the employees affected,
is in violation of both the text and the spirit
of the Employer-Employee Relations Act.
Conversely, outside of the realm of wages and hours, we
have held that a public employer is not required to negotiate
matters that fall squarely within managerial prerogatives. See,
e.g., Local 195, supra, 88 N.J. at 406-07, 417 (concluding that
subcontracting as well as transfer or reassignment of employees
are non-negotiable subjects); Paterson Police PBA Local No. 1 v.
City of Paterson, 87 N.J. 78, 98 (1981) (holding that municipal
decisions regarding organization and deployment of police forces
are not negotiable); State Supervisory Emps. Ass’n, supra, 78
N.J. at 84 (finding that seniority relating to layoffs, recall,
bumping and reemployment is preempted by civil service laws and
therefore not negotiable).
The involuntary furloughing of an entire work unit --
cutting employees hours and wages, as occurred in Belmar and
Mount Laurel -- is incompatible with this Court’s holdings in
Woodstown-Pilesgrove and Board of Education of Englewood and the
Appellate Division’s holding in Piscataway Township Board of
13
Education. The involuntary halving of hours and wages of
clerical workers is also incompatible with those cases.
III.
That the EERA and our case law require hours and wages to
be negotiated does not place municipalities and other public
entities in a budgetary strait jacket when revenues decline.
The Civil Service Act provides that “permanent employee[s] may
be laid off for economy, efficiency or other related reason.”
N.J.S.A. 11A:8-1(a). In Belmar, the laying off of a single
employee would have achieved the same savings as the furloughing
of an entire work unit -- and without violating the collective
negotiations agreement. In Mount Laurel and Keyport, the
municipalities had the option of laying off employees to
accomplish the necessary savings rather than reducing the wages
of workers.
In overturning the three PERC decisions, the majority
relies on the emergency civil service regulation that was
promulgated in March 2009 and repealed in December 2009, even
though the municipalities did not rest their arguments on that
regulation.2 Ante at __-__ (slip op. at 5). In essence, the
2 The emergency regulation provided that:
An appointing authority in State or local
service may institute a temporary layoff for
economy, efficiency or other related reasons.
A temporary layoff shall be defined as the
14
emergency regulation defined a layoff as synonymous with a
furlough. That regulation allowed a municipality to submit a
furlough plan for acceptance to the Civil Service Commission.
Acceptance of the plan, however, did not mean a furlough was not
negotiable.
A public employer’s compliance with civil service
regulations is not the end of the process, for the public
employer must also satisfy the requirements of the EERA.
Prosecutor’s Detectives & Investigators Ass’n v. Hudson Cnty.
Bd. of Chosen Freeholders, 130 N.J. Super. 30, 46 (App. Div.)
(“Our duty is to read the Civil Service Act and the Employer-
Employee Relations Act, as applied to the situations before us,
so that both are harmonized and each is given its appropriate
role.”), certif. denied, 66 N.J. 330 (1974).
closure of an entire layoff unit for one or
more work days over a defined period or a
staggered layoff of each employee in a layoff
unit for one or more work days over a defined
period. A temporary layoff shall be
considered a single layoff action even though
the layoff of individual employees takes place
on different days during the defined period.
The defined period shall be set forth by the
appointing authority in its temporary layoff
plan; however, in a staggered layoff, the
maximum period to stagger one day off shall
not exceed 45 days.
[N.J.A.C. 4A:8-1.1A(a) (repealed December 21,
2009).]
15
Even the majority acknowledges that the regulation did not
preempt the obligation of the municipality to negotiate. Ante
at __-__ (slip op. at 35). Instead, the majority submits that -
- based on the emergency regulation -- the municipalities were
exercising a managerial prerogative and thus had the right to
unilaterally furlough employees. Ante at __-__ (slip op. at
45). The majority focuses on prong three of the Local 195,
supra, test: “a subject is negotiable between public employers
and employees when . . . a negotiated agreement would not
significantly interfere with the determination of governmental
policy.” 88 N.J. at 404.
However, the majority cannot point to any true emergency
that compelled the municipalities to choose furloughs over
traditional layoffs. As noted earlier, the layoff of just one
employee in Belmar and the layoff of just three employees in
Mount Laurel would have met the budgetary needs of those
municipalities. Reducing the wages and hours of an entire unit
was an exercise of raw political power by the municipalities and
is incompatible with the EERA’s requirement that the terms and
conditions of employment be resolved through negotiation.
The majority’s reliance on the emergency civil service
regulation appears to be nothing more than preemption in
disguise. The regulation should have been harmonized with the
purposes animating the EERA. Here, furloughing is merely a name
16
invoked to justify the unilateral cutting of wages and hours of
employees -- an action previously unacceptable under our
jurisprudence.
Clearly, we live in difficult economic times in which
municipalities struggle to balance their budgets. But the
problems facing Belmar, Mount Laurel, and Keyport were and are
no different than those facing a multitude of other
municipalities. None of the municipalities in this case
confronted an economic state of emergency so severe that it was
left without other reasonable options than furloughing entire
units of public employees.
By sanctioning the path taken by these municipalities, the
majority has struck a stake in the heart of the collective
negotiations process. A collective negotiations agreement is of
little value when a municipality can unilaterally reduce the
hours and wages of public employees by calling it a furlough.
The power to furlough, moreover, is a powerful club that can be
wielded at the negotiations table to coerce concessions.
In the end, there is a right way and a wrong way to achieve
economy and efficiency consistent with the EERA. Cutting wages
and hours of an entire work unit in violation of negotiated
agreements -- by whatever name -- is not in keeping with our
time-honored jurisprudence and the EERA.
IV.
17
Before the Appellate Division, PERC filed a thirty-three
page brief arguing for affirmance of the three PERC decisions.
In a March 2011 supplemental letter to the Appellate Division,
PERC wrote: “The Commission’s management, labor, and public
members applied their knowledge of negotiations practices
concerning compensation, workweek, and work schedules and agreed
that the Borough had an obligation to negotiate the reduction in
workweek, work year and compensation of the CWA unit members.
That expert judgment should be accepted.” In a letter to the
Clerk of this Court concerning the present appeals, a Deputy
Attorney General, on behalf of PERC’s general counsel, wrote:
“[T]he Commission takes no position on the Petitions for
Certification” filed by the municipalities. PERC filed its
Appellate Division brief with this Court. Then, with no prior
notice given to this Court, PERC’s general counsel made a
complete about-face, announcing at oral argument that PERC had
changed its mind and no longer stood behind the PERC decisions
before us. In an exercise of circular reasoning, counsel
pointed to a 2013 PERC decision, Robinsville Township Board of
Education, P.E.R.C. No. 2014-30, 40 NJPER 253, 253-54 (2013),
upholding the involuntary furlough of three teachers, which in
turn relied on the very Appellate Division opinion in this case,
whose approach PERC had strenuously opposed.
18
Merely because the composition of PERC has changed
dramatically during the current administration does not mean
that our standard of review should change. Counsel cannot be
faulted for taking his orders from the newly composed PERC. But
our review is from the PERC decisions before us. Deference
applies to those decisions, regardless of the change of
personnel on PERC. The majority is mistaken in accepting PERC’s
changed position to erode the traditional standard of review of
the cases on appeal.
V.
By overruling the PERC decisions and endorsing the
furloughs in these cases, even under the emergency civil service
regulation, the majority has held that a negotiated agreement on
wages and hours significantly interferes with the determination
of government policy. That holding is not only contrary to our
jurisprudence, it is also in conflict with the legislative
policy enunciated in the EERA. Collective negotiations mean
nothing if wages and hours are not on the table for discussion.
One can only hope that the damage the majority inflicts on the
collective negotiations process will be limited to the period
the emergency civil service regulation was in effect.
I therefore respectfully dissent.
19
SUPREME COURT OF NEW JERSEY
NO. A-43/44 SEPTEMBER TERM 2013
ON CERTIFICATION TO Appellate Division, Superior Court
IN THE MATTER OF BOROUGH OF KEYPORT,
Respondent-Respondent,
v.
INTERNATIONAL UNION OF
OPERATING ENGINEERS, LOCAL 68,
Petitioner-Appellant.
IN THE MATTER OF BOROUGH OF BELMAR,
Respondent-Respondent,
v.
COMMUNICATIONS WORKERS OF
AMERICA, AFL-CIO,
Petitioner-Appellant.
TOWNSHIP OF MOUNT LAUREL,
Respondent-Respondent,
v.
COMMUNICATIONS WORKERS OF AMERICA,
Petitioner,
and
AFSCME, COUNCIL 71, SOUTH
JERSEY PUBLIC EMPLOYEES,
Petitioner-Appellant.
DECIDED July 14, 2015
Justice LaVecchia PRESIDING
OPINION BY Justice LaVecchia
CONCURRING/DISSENTING OPINIONS BY
DISSENTING OPINION BY Justice Albin
AFFIRMED AS
CHECKLIST DISSENT
MODIFIED
CHIEF JUSTICE RABNER -------------------- --------------------
JUSTICE LaVECCHIA X
JUSTICE ALBIN X
JUSTICE PATTERSON X
JUSTICE FERNANDEZ-VINA -------------------- --------------------
JUSTICE SOLOMON X
JUDGE CUFF (t/a) X
TOTALS 4 1