In the Matter of County of Atlantic In the Matter of Township of Bridgewater (077447) (Statewide)

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.)
In the Matter of County of Atlantic; In the Matter of Township of Bridgewater (077447) (A-98/99/100-15)
Argued March 13, 2017 – Decided August 2, 2017
SOLOMON, J., writing for the Court.
In this appeal the Court considers whether the parties to the specific collective negotiations agreements
(CNAs) at issue in this case were required to continue scheduled salary increases during the period between the
expiration of those contracts and the formation of their successor agreements.
The Fraternal Order of Police, Atlantic Lodge #34 (FOP Lodge 34), and the Atlantic County Prosecutor’s
Office, P.B.A. Local #77 (PBA Local 77), are two unions that represent certain public employees in Atlantic
County. The Policeman’s Benevolent Association, Local #174 (PBA Local 174), is a collective bargaining unit for
police officers in Bridgewater Township. The two Atlantic County unions entered CNAs with the County that
expired on December 31. 2010; the CNA between PBA Local 174 and Bridgewater Township expired on December
31, 2012. All three CNAs provided that, while the contracts were in effect, covered individuals would receive
annual salary increases under an automatic increment system. The CNAs further provided that, when they expire,
the provisions of the agreement will continue in effect until a successor agreement is negotiated. Since 1996, when
the CNAs expired before a successor agreement was executed, the County adhered to the terms and conditions of the
most recently expired CNA, including the step-increment process. A similar practice existed in the Township.
On December 22, 2010, Atlantic County informed FOP Lodge 34 and PBA Local 77 that the officers’
movement through the salary guides would cease when their respective CNAs expired. The County acknowledged
that customary practice was to continue the previously negotiated payment scheme, but it maintained that it was no
longer reasonable to follow that practice, given that the entire negotiations landscape has undergone major changes.
The County asserted that the Property Tax Levy Cap and the Interest Arbitration Award Cap, preempt the previous
standards of practice and render continued salary guide movement impractical and unduly burdensome.
The two unions filed charges against Atlantic County with the Public Employment Relations Commission
(PERC), claiming that the County had engaged in an unfair labor practice in violation of the Employer-Employee
Relations Act (EERA) by refusing to pay the salary increments after each CNA expired. The hearing examiner
found that case law requires the application of the “dynamic status quo” doctrine, which was first adopted by PERC
in 1975, when it upheld the generally accepted view that an employer is normally precluded from altering the status
quo while engaged in collective negotiations. Given the contract language and the County’s history of continuing
the payments after previous CNAs had expired, the examiner found that the refusal to pay was a departure from the
dynamic status quo and therefore constituted a unilateral change in a mandatory subject of negotiations, in violation
of the EERA. The County petitioned for review. PERC disagreed that the contract language required continuation
of incremental salary increases after the contract expiration. Additionally, PERC found that the dynamic status quo
doctrine was impractical and burdensome in light of economic conditions and legislative changes since the
recession. PERC abandoned the dynamic status quo doctrine and found that the County was within its authority to
stop applying the salary increment systems in the expired CNAs. PERC dismissed the charges.
After PERC’s decision in the Atlantic County matters, Bridgewater Township notified PBA Local 174 that
it too would cease the salary step increments once the current CNA expired. The union filed a grievance, which the
Township denied. The union then submitted the matter to PERC for arbitration. The grievance was sustained and
Bridgewater Township was “ordered to advance all eligible unit members . . . one step on the salary guide
retroactive to the employee’s 2013 anniversary date of hire.” That award was subsequently affirmed by the Law
Division. While the matter was still in arbitration, the Township filed a scope-of-negotiations petition with PERC,
which granted the Township’s request for a restraint of binding arbitration and held that public employers were no
longer required, as a matter of law, to fund automatic advancement on a salary guide after a contract has expired.
1
All three unions appealed the PERC decisions. The Appellate Division consolidated the appeals, and
reversed. 445 N.J. Super. 1 (App. Div. 2016). The panel found that the Property Tax Levy Cap and the Interest
Arbitration Award Cap do not govern contracts that are negotiated and that neither statute preempted the viability of
the dynamic status quo doctrine. The panel ruled that the Commission adopted the dynamic status quo doctrine
decades ago, and could not abandon it now as an act of policymaking. Applying that doctrine, the panel found that
the salary increment system was a term and condition of employment that could not be unilaterally terminated
during negotiations for a successor CNA. The Court granted the petitions for certification filed by Bridgewater
Township, Atlantic County, and PERC. 227 N.J. 148 (2016); 227 N.J. 152 (2016); 227 N.J. 153 (2016).
HELD: In these cases, the governing contract language of the respective agreements required that the salary step
increases remain in place after expiration and until the parties reach agreement on a new CNA. Atlantic County and
Bridgewater Township committed an unfair labor practice when they altered those terms.
1. The EERA affords public employees an array of rights, including the ability to appoint a majority representative
to represent their interests and negotiate agreements with their employer. In addition, the EERA requires that
proposed new rules or modifications of existing rules governing working conditions be negotiated with the majority
representative before they are established. Employers are barred from unilaterally altering mandatory bargaining
topics, whether established by expired contract or past practices, without first bargaining to impasse. (p. 19)
2. For a subject matter to be mandatorily negotiable between public employers and employees, it must: (1) be one
that intimately and directly affects the work and welfare of public employees; (2) be a topic that has not been fully
or partially preempted by statute or regulation; and (3) involve a matter where a negotiated agreement would not
significantly interfere with the determination of a governmental policy. Salary step increments is a mandatorily
negotiable term and condition of employment because it is part and parcel of an employee’s compensation for any
particular year. (pp. 19-20)
3. Here, it is not necessary to look beyond the contracts themselves to conclude that the step increases continued
beyond the expiration of the contracts. It is well-settled that courts enforce contracts based on the intent of the
parties, the express terms of the contract, the surrounding circumstances, and the underlying purpose of the contract.
Where an agreement is ambiguous, courts will consider the parties’ practical construction of the contract as evidence
of their intention and as controlling weight in determining a contract’s interpretation. (pp. 21-23)
4. The expired CNAs contain clear and explicit language that the respective salary guides, and all other terms and
conditions set forth in the agreements, will continue until a successor agreement is reached. Atlantic County and
Bridgewater Township could have negotiated different terms. (pp. 23-24)
5. Had the Atlantic County and Bridgewater Township agreements been silent about whether the terms of the salary
increment system were to continue, the issue in this appeal would be more complicated. It might well have required
careful consideration of past practices, custom and the viability of the dynamic status quo doctrine. But the
unilateral modification at issue here directly contradicted the parties’ binding written agreement. Because the salary
increment system was a term and condition of employment that governed beyond the CNAs’ expiration date,
Atlantic County and Bridgewater Township committed an unfair labor practice when they altered that condition
without first attempting to negotiate in good faith. (pp. 24-25)
6. The Appellate Division based its conclusion on the dynamic status quo doctrine. Given its reliance on contract
principles, the Court did not reach that issue. The Court notes that its decision does not govern future negotiations,
other than to suggest that parties would be wise to include explicit language indicating whether a salary guide will
continue beyond the contract’s expiration date. (p. 25)
The judgment of the Appellate Division is AFFIRMED on other grounds.
CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, PATTERSON, FERNANDEZ-
VINA, and TIMPONE join in JUSTICE SOLOMON’s opinion.
2
SUPREME COURT OF NEW JERSEY
A-98/99/100 September Term 2015
077447
IN THE MATTER OF
COUNTY OF ATLANTIC,
Respondent-Appellant,
and
PBA LOCAL 243,
Charging Party,
and
FOP LODGE 34 and PBA LOCAL 77,
Charging Parties-Respondents.
IN THE MATTER OF
TOWNSHIP OF BRIDGEWATER,
Petitioner-Appellant,
and
PBA LOCAL 174,
Respondent-Respondent.
Argued March 13, 2017 – Decided August 2, 2017
On certification to the Superior Court,
Appellate Division, whose opinion is
reported at 445 N.J. Super. 1 (App. Div.
2016).
Eric M. Bernstein argued the cause for
appellant Township of Bridgewater (Eric M.
Bernstein & Associates, attorneys; Eric M.
Bernstein, of counsel and on the brief, and
Philip G. George, on the briefs).
1
Robin T. McMahon argued the cause for
appellant New Jersey Public Employment
Relations Commission (Robin T. McMahon,
General Counsel, attorney; Robin T. McMahon
and Don Horowitz, Senior Deputy General
Counsel, on the briefs).
David A. Rapuano argued the cause for
appellant County of Atlantic (Archer &
Greiner, attorneys; David A. Rapuano, of
counsel and on the briefs, and Ashley M.
Lebrun, on the brief).
James M. Mets argued the cause for
respondent PBA Local 174 (Mets Schiro
McGovern & Paris, attorneys; James M. Mets,
of counsel and on the briefs, and David M.
Bander, on the briefs).
Ira W. Mintz argued the cause for
respondents FOP Lodge 34 and PBA Local 77
(Weissman & Mintz and Selikoff & Cohen,
attorneys; Ira W. Mintz and Steven R. Cohen,
on the briefs).
Todd A. Wigder, Assistant Attorney General,
submitted a brief on behalf of amicus curiae
Governor’s Office of Employee Relations
(Christopher S. Porrino, Attorney General,
attorney; Melissa Dutton Schaffer, Assistant
Attorney General, of counsel, and Todd A.
Wigder, on the brief).
Arnold Shep Cohen submitted a letter brief
on behalf of amicus curiae International
Federation of Professional and Technical
Engineers Local 195 (Oxfeld Cohen,
attorneys).
Louis P. Bucceri submitted a brief on behalf
of amicus curiae New Jersey Education
Association (Bucceri & Pincus, attorneys;
Louis P. Bucceri, of counsel and on the
brief, and Albert J. Leonardo, on the
brief).
2
Cynthia J. Jahn submitted a letter brief on
behalf of amicus curiae New Jersey School
Boards Association (Cynthia J. Jahn, General
Counsel, attorney).
Craig S. Gumpel submitted a letter brief on
behalf of amicus curiae New Jersey State
Firefighters’ Mutual Benevolent Association
(Law Offices of Craig S. Gumpel, attorneys).
Joseph M. Hannon submitted a brief on behalf
of amicus curiae New Jersey State League of
Municipalities, New Jersey Association of
Counties, and New Jersey Council of County
Colleges (Genova Burns, attorneys; Joseph M.
Hannon, of counsel and on the brief, Joseph
V. Manney, on the brief).
Matthew D. Areman submitted a letter brief
on behalf of amicus curiae New Jersey State
Lodge of the Fraternal Order of Police
(Markowitz and Richman, attorneys).
Paul L. Kleinbaum submitted a letter brief
on behalf of amicus curiae New Jersey State
PBA (Zazzali, Fagella, Nowak, Kleinbaum &
Friedman, attorneys).
Stephen E. Trimboli submitted a brief on
behalf of amicus curiae County of Morris
(Trimboli & Prusinowski, attorneys; Stephen
E. Trimboli, of counsel and on the brief,
and Lauren Kavanagh, on the brief).
David M. Bander submitted a letter brief on
behalf of amicus curiae Professional
Firefighters Association of New Jersey (Mets
Schiro McGovern & Paris, attorneys).
Steven P. Weissman submitted a letter brief
on behalf of amicus curiae Communications
Workers of America, AFL-CIO (Weissman &
Mintz, attorneys).
JUSTICE SOLOMON delivered the opinion of the Court.
3
We are called upon to determine whether the parties to the
specific collective negotiations agreements (CNAs) at issue in
this case were required to continue scheduled salary increases
during the period between the expiration of those contracts and
the formation of their successor agreements.
This appeal involves the CNAs between (1) Atlantic County
and the Fraternal Order of Police, Atlantic Lodge #34 (FOP Lodge
34); (2) Atlantic County and the Atlantic County Prosecutor’s
Office, P.B.A. Local #77 (PBA Local 77); and (3) Bridgewater
Township and the Policemen’s Benevolent Association, Local #174
(PBA Local 174).
Atlantic County informed FOP Lodge 34 and PBA Local 77 that
when their respective CNAs expired the County would no longer
implement the incremental salary scheme provided for in those
contracts. Both unions filed charges with the Public Employment
Relations Commission (PERC or the Commission), claiming that
Atlantic County had engaged in an unfair labor practice,
contrary to the Employer-Employee Relations Act (EERA), N.J.S.A.
34:13A-1 to -43.
The hearing examiner agreed with the unions and found that
Atlantic County’s “departure from the dynamic status quo -- in
this case, the refusal to pay automatic increments --
constitute[d] a unilateral change in a mandatory subject of
negotiations in violation of the [EERA].” Atlantic County
4
petitioned PERC for review, and the Commission came to the
opposite conclusion. It found that in light of economic
conditions and legislative changes since the recession, the
dynamic status quo doctrine, which would have required the
continuance of the step increment system, was impractical and
burdensome. Accordingly, PERC abandoned the dynamic status quo
doctrine and found that Atlantic County was within its authority
to stop applying the salary increment systems in the expired
CNAs.
Subsequently, Bridgewater Township informed PBA Local 174
that it too would cease the salary step increments once the
current CNA expired. PBA Local 174 filed for grievance
arbitration. The Commission, citing its Atlantic County
decision, found for Bridgewater Township. Because the dynamic
status quo doctrine had been abandoned, PERC found that salary
step increases beyond the contract’s expiration were not a term
and condition of employment that mandated negotiation or
arbitration.
All three unions appealed.1 The Appellate Division
consolidated the cases and reversed the Commission. In re
County of Atlantic and PBA Local 243 and FOP Lodge 34 and PBA
1PBA Local 243 was originally a party to the dispute with
Atlantic County. However, it withdrew its charges prior to
PERC’S decision in this matter and was not involved in the
appeal below.
5
Local 77; In re Township of Bridgewater and PBA Local 174, 445
N.J. Super. 1 (App. Div. 2016). The panel ruled that the
Commission adopted the dynamic status quo doctrine decades ago
and could not simply abandon it now “as an act of mere
policymaking.” Id. at 16, 19, 22. Applying that doctrine, the
Appellate Division found that the salary increment system was a
term and condition of employment that could not be unilaterally
terminated during negotiations for a successor CNA. Id. at 16-
18.
We need not determine whether, as a general rule, an
employer must maintain the status quo while negotiating a
successor agreement. In these cases, the governing contract
language requires that the terms and conditions of the
respective agreements, including the salary step increases,
remain in place until a new CNA is reached. Therefore, the
judgment of the Appellate Division is affirmed on other grounds.
I.
A.
We glean the following facts from the record. We begin
with the dispute between Atlantic County and the two unions with
which it contracted.
FOP Lodge 34 represents all full-time, Atlantic County
employees who are classified as “Corrections Officers”; it
excludes Captains, Lieutenants, Sergeants, and temporary
6
employees. PBA Local 77 represents the “Sergeants, Detective I,
and Detectives” working for the Atlantic County Prosecutor’s
Office. Both of those unions had CNAs with Atlantic County that
expired on December 31, 2010.
While the contracts were in effect, covered individuals
would receive annual salary increases in accordance with an
increment system. Each contract contained a grid that set forth
this payment scheme.2 The columns in the grid represented a year
of the contract, and the rows (steps) represented an employee’s
year(s) of service. An individual’s salary could be found at
the intersection of the column and row that matched the year in
question and the total number of years the specific employee had
served up to that point. Under both grid systems, an officer
was advanced horizontally by one column at the end of each
contract year and vertically by one step on the anniversary of
his or her hire date. The employee’s new, increased salary
would match the amount provided at that intersecting point.
Each contract contained language that touched on the
continuation of benefits. PBA Local 77’s most recent contract,
and the three that preceded it, stated that “[a]ll provisions of
this Agreement will continue in effect until a successor
Agreement is negotiated.” PBA Local 34’s CNA provided that
2 The respondents’ Salary Guides are attached in the Appendix for
reference.
7
“[a]ll terms and conditions of employment, including any past or
present benefits, practices or privileges which are enjoyed by
the employees covered by this Agreement that have not been
included in this Agreement shall not be reduced or eliminated
and shall be continued in full force and effect.”
Typically, as the Atlantic County Department of Law
explained, after a CNA expires, “the officers who remain on the
salary guide continue to move through the guide of the expired
contracts and then salaries are adjusted retroactively when a
successor agreement is reached.” Indeed, every CNA entered into
between Atlantic County and PBA Local 77 since 1996 expired
before a successor agreement was executed. During the interim
periods between CNAs, Atlantic County adhered to the terms and
conditions of the most recently expired CNA, including the step-
increment system. Similarly, Atlantic County continued to pay
step increments to employees on their anniversary dates from
2007 through 2010 in accordance with their CNA, which expired on
December 31, 2006. The successor agreement, which covered the
period from January 1, 2007 through December 31, 2010, was not
executed until October 2011.
On December 22, 2010, however, Atlantic County informed FOP
Lodge 34 and PBA Local 77 that the officers’ movement through
the salary guides would cease nine days later, when their
respective CNAs expired on December 31. The County acknowledged
8
that customary practice was to continue the previously
negotiated payment scheme, but it maintained that it was “no
longer efficacious or reasonable” to follow that practice, given
that “the entire negotiations landscape has undergone major
changes.” The County asserted that the Property Tax Levy Cap,
N.J.S.A. 40A:4-45.44 to -45.47, and the Interest Arbitration
Award Cap, N.J.S.A. 34:13A-16.7, “preempt[] the previous
standards of practice and render continued salary guide movement
impractical and unduly burdensome.”3 According to the County,
“[b]oth of these legislative enactments w[ould] significantly
restrict the salary increases that can be given and this would
include the increments from the salary guide.” Specifically,
the County explained that “movement of officers through an
expired salary guide [would] likely result in increases that
exceed the amounts that [could] legally be granted under the
recently enacted legislation.”
FOP Lodge 34 and PBA Local 77 each filed unfair practice
charges with PERC, and shortly thereafter, Atlantic County
stopped paying step increments. The unions alleged that
Atlantic County had violated the EERA, N.J.S.A. 34:13A-
3 The Property Tax Levy Cap prohibits local governments from
increasing property tax levies by more than two percent year-
over-year. N.J.S.A. 40A:4-45.44(b). The Interest Arbitration
Award Cap places a two percent cap on increases to salaries
under contracts that are created through interest arbitration.
N.J.S.A. 34:13A-16.7(b).
9
5.4(a)(1), (2), (3), (5), and (7), by refusing to pay the salary
increments after each CNA expired, thereby unilaterally altering
the status quo. The unions also filed applications for interim
relief seeking an order directing the County to pay the
increments.
The PERC chair denied the applications for interim relief
and referred the cases to the Director of Unfair Practices. The
Director reviewed the charges and issued a Complaint, ordering a
hearing on the alleged violations of Sections 5.4(a)(1) and (5)
of the EERA, which prohibit a public employer from “interfering
with, restraining or coercing employees in the exercise of”
their rights under the EERA and “refusing to negotiate in good
faith” the terms and conditions of employment. The Director
dismissed the claims relating to Sections 5.4(a)(2), (3), and
(7)4 and issued an Order consolidating the cases.
The PERC hearing examiner conducted a hearing and issued a
report and recommended decision. The hearing examiner found
that “[f]or non-education employees, the case law requires the
4 Under those provisions, a public employer is prohibited from:
(1) “[d]ominating or interfering with the formation, existence
or administration of any employee organization”; (2)
“[d]iscriminating in regard to hire or tenure of employment or
any term or condition of employment to encourage or discourage
employees in the exercise of the rights guaranteed to them by”
the EERA; and (3) “[v]iolating any of the rules and regulations
established by the commission.” N.J.S.A. 34:13A-5.4(a)(2), (3),
and (7).
10
application of the dynamic status quo” doctrine, which was first
adopted by PERC in 1975, when it upheld “the generally accepted
view . . . that an employer is normally precluded from altering
the status quo while engaged in collective negotiations.” In re
Piscataway Twp. Bd. of Educ., P.E.R.C. No. 91, 1975 N.J. PERC
LEXIS 23 at 6 (1975).
Given the contract language, which indicated an intention
to continue the increment payments into the future, and Atlantic
County’s history of continuing the payments even after previous
CNAs had expired, the hearing examiner concluded that “the
payment of annual automatic increments constituted a practice”
that was “an existing term and condition of employment.” In
other words, the hearing examiner found that the County’s
“refusal to pay automatic increments” was a “departure from the
dynamic status quo” and therefore “constitute[d] a unilateral
change in a mandatory subject of negotiations in violation of
the [EERA].”
In rendering this decision, the hearing examiner rejected
the County’s argument that the two-percent Property Tax Levy Cap
conflicted with the EERA. Contrary to the County’s
understanding, he clarified that “the tax levy cap statute does
not mandate that the County limit any particular salary increase
to a maximum of 2%.” In the hearing examiner’s view, paying the
salary increments was still possible because the legislation
11
“requires that the County’s overall tax levy not exceed 2% more
than the prior year’s tax levy.”
PERC adopted the hearing examiner’s findings of fact, but
then clarified that it was “asked to review . . . the continuing
propriety of what is known as the dynamic status quo doctrine.”
Looking to the doctrine’s inception and evolution, the
Commission found that the doctrine had not yet been applied in a
situation such as this, where there is “a post expiration
increase in remuneration.” PERC found that the dynamic status
quo doctrine was intended to establish a predictable environment
that favors neither party during negotiations, and that in this
case “a post expiration requirement that employers continue to
pay and fund a prior increment system creates myriad
instabilities in the negotiations process.”
First, PERC found that the Property Tax Levy Cap and the
Interest Arbitration Award Cap are legislative initiatives that
“were unanticipated thirty years ago” when it adopted the
dynamic status quo doctrine. Those restrictions, in the
Commission’s view, were “designed to control the rate of growth
in government spending” and, therefore, “[i]t is in both sides’
interest to have the ability to negotiate over adjustments in
the number” and dollar amounts attributed to incremental salary
steps in successor agreements. Second, PERC suggested that the
12
“public policy underlying labor negotiations in New Jersey” has
changed. The Commission found
that the dynamic status quo no longer fulfills
the needs of the parties in that it serves as
a disincentive to the prompt settlement of
labor disputes, and disserves rather than
promotes the prompt resolution of labor
disputes. While public employers will
continue to be bound by the strictures of the
status quo, that will be defined as “static”
rather than a dynamic status quo.
PERC also disagreed with the hearing examiner’s finding
that the contracts’ language indicated “an express agreement . .
. to continue to provide incremental increases beyond the
termination date of the agreements.” Because it repudiated the
dynamic status quo doctrine, and because it found no other basis
to require the incremental payments beyond contract expiration,
the Commission dismissed the unions’ unfair labor charges.
B.
Also relevant to this appeal is a CNA between Bridgewater
Township and PBA Local 174, a collective bargaining unit for
police officers below the rank of sergeant, which expired on
December 31, 2012. That agreement provided for a salary
increment system that mirrored the systems set forth in the CNAs
between Atlantic County and FOP Lodge 34 and PBA Local 77.
Although the contract expired on December 31, 2012, Article XIX,
Section 2 of the CNA stated that “[t]his agreement shall remain
in full force and effect during collective negotiations between
13
the parties beyond the date of expiration set forth herein until
the parties have mutually agreed on a new agreement.”
After PERC’s decision in the Atlantic County matters,
Bridgewater Township notified PBA Local 174 that it would not
pay annual step increases beyond the expiration date of the
current CNA until a successor agreement was reached, relying on
the same reasoning as that of Atlantic County for doing so.
Soon after the CNA expired, PBA Local 174 filed a grievance
against the Township, alleging violations of: Article XV of the
parties’ CNA,5 past practice, and the covenant of good faith and
fair dealing. Bridgewater Township denied the grievance and,
four days later, PBA Local 174 submitted the matter to PERC for
arbitration.
The arbitrator found in PBA Local 174’s favor, concluding
that the parties had an “unequivocal past practice show[ing]
that they interpreted the contract as requiring that an officer
be advanced on the salary guide on his or her anniversary date,
both during the term of the agreement and in the hiatus period
following expiration.” The arbitrator also emphasized that PERC
has “long held that the status quo includes the extension of
5 Article XV of the CNA between Bridgewater Township and PBA
Local 174 is entitled “COMPENSATION.” Within this Article is a
“Salary Guide” provision that states, “Effective January 1,
2009, 2010, 2011, and 2012, the wage rates shall be those set
forth in Appendix A and will be paid on the 15th and second to
last day of the month or immediately preceding work day.”
14
automatic increments beyond the life of the agreement because
the salary guide system calling for such increments is a term
and condition of employment.” (internal quotation marks
omitted). Accordingly, the grievance was sustained and
Bridgewater Township was “ordered to advance all eligible unit
members . . . one step on the salary guide retroactive to the
employee’s 2013 anniversary date of hire.” That award was
subsequently affirmed by the Law Division.
While the matter was still in arbitration, Bridgewater
Township filed a scope-of-negotiations petition with PERC,
alleging that the grievance was outside the scope of
negotiations because, “based upon an undue hardship,” the
Township is allowed to “freeze step increases pending the
outcome of collective bargaining negotiations.” After the Law
Division affirmed the grievance arbitration, PERC granted the
Township’s request for a restraint of binding arbitration. PERC
found that “the issue of automatic movement on a salary guide
after a contract has expired is not a term and condition of
employment and therefore not mandatorily negotiable and legally
arbitrable.” As such, the Commission held that public employers
were no longer required, “as a matter of law, to fund automatic
advancement on a salary guide after a contract has expired.”
C.
15
FOP Lodge 34, PBA Local 77, and PBA Local 174 appealed the
PERC decisions. The Appellate Division consolidated the appeals
and, in a published decision, reversed the Commission. In re
County of Atlantic, supra, 445 N.J. Super. at 6.
The panel found that the Property Tax Levy Cap and the
Interest Arbitration Award Cap do not govern contracts that are
negotiated and that neither statute preempted the viability of
the dynamic status quo doctrine. Id. at 14-16. The panel noted
that those laws were enacted to restrict overall municipal
budgets and reasoned that, if the Legislature wished to place a
cap on negotiated agreements specifically, it would have done so
through amending statutes or passing additional legislation.
Id. at 15-16. The Appellate Division therefore found that PERC
went beyond the permissible scope of its authority to interpret
and administer the EERA because its decision was “undertaken in
an area in which the Legislature did not act” and was “driven by
the tax levy cap, [and] concerns regarding government budgets,
and not the [EERA].” Id. at 15.
Moreover, the panel concluded that PERC could not discard
the dynamic status quo doctrine, which was originally derived
from PERC’s interpretation of N.J.S.A. 34:13A-5.3, “as an act of
mere policymaking.” Id. at 15-17. Importantly, the Appellate
Division highlighted that the parties negotiated their CNAs with
the understanding that the dynamic status quo doctrine would
16
govern any hiatus between contracts, and that PERC undermined
the parties’ legitimate expectations. Id. at 17-18. The panel
acknowledged that “government employers can[] negotiate to avoid
paying salary increments after the lapse of CNAs” if they wish
to and can “recoup salary increments in a new contract” during
negotiations. Id. at 18.
Finally, with regard to PERC’s decision on the scope-of-
negotiations petition by Bridgewater Township, the Appellate
Division found that “[s]alary is a mandatory subject of
negotiation, and the Township’s decision not to pay automatic
salary increments in accordance with the earlier CNAs and past
practice was indeed arbitrable.” Id. at 22-23.
Accordingly, the Appellate Division reversed PERC’s
decisions as to both the Atlantic County and Bridgewater
Township matters, holding that “the fiscal health of
municipalities and tax rates are not within PERC’s charge” and
that “PERC cannot abandon the adjudicative doctrine it long ago
adopted.” Ibid.
Bridgewater Township, Atlantic County, and PERC each filed
petitions for certification, which this Court granted. 227 N.J.
148 (2016); 227 N.J. 152 (2016); 227 N.J. 153 (2016). The
following parties were granted amicus curiae status and wrote in
favor of overturning the Appellate Division: the Governor’s
Office of Employee Relations; the New Jersey State League of
17
Municipalities, New Jersey Association of Counties, and New
Jersey Council of County Colleges; the County of Morris; and the
New Jersey School Boards Association. The following parties
were also granted amicus curiae status and argue that the
Appellate Division judgment should be affirmed: the New Jersey
Education Association; the Communications Workers of America,
AFL-CIO; the New Jersey State Firefighters Mutual Benevolent
Association; the New Jersey State Lodge of the Fraternal Order
of Police; the New Jersey State PBA; and the Professional
Firefighters Association of New Jersey.
II.
PERC, Bridgewater Township, Atlantic County, and supporting
amici seek reversal of the Appellate Division. They argue that
the dynamic status quo doctrine was never adopted by this Court
and that the Commission appropriately abandoned the principle,
after considering relevant factors, under its authority to
interpret and administer the EERA.
PBA local 77, PBA Local 174, FOP Lodge 34, and accompanying
amici argue that the Appellate Division properly reversed the
Commission because the salary step increases are a term and
condition of employment that Atlantic County and Bridgewater
Township unilaterally altered without first negotiating, in
violation of the EERA. In addition, they assert that PERC
18
impermissibly abandoned the dynamic status quo doctrine, a
“bedrock principle of labor relations law.”
III.
The EERA affords public employees a vast array of rights,
including the ability to appoint a majority representative to
represent their interests and negotiate agreements on their
behalf with an employer. N.J.S.A. 34:13A-5.3. In addition, the
EERA provides that “[p]roposed new rules or modifications of
existing rules governing working conditions shall be negotiated
with the majority representative before they are established.”
Ibid. Thus, employers are barred from “unilaterally altering .
. . mandatory bargaining topics, whether established by expired
contract or by past practice, without first bargaining to
impasse.” Bd. of Educ. v. Neptune Twp. Educ. Ass’n, 144 N.J.
16, 22 (1996); accord Galloway Twp. Bd. of Educ. v. Galloway
Twp. Educ. Ass’n, 78 N.J. 25, 48 (1978) (finding Legislature,
through enactment of EERA, “recognized that the unilateral
imposition of working conditions is the antithesis of its goal
that the terms and conditions of public employment be
established through bilateral negotiation”).
The test for determining whether a subject is mandatorily
negotiable between public employers and employees was
established in In re Local 195, IFPTE, 88 N.J. 393, 403-05
(1982). This Court held in Local 195 that to be negotiable, the
19
subject matter must (1) be an “item [that] intimately and
directly affects the work and welfare of public employees”; (2)
be a topic that “has not been fully or partially preempted by
statute or regulation”; and (3) involve a matter where “a
negotiated agreement would not significantly interfere with the
determination of governmental policy.” Id. at 404-05;
Robbinsville Twp. Bd. of Educ. v. Washington Twp. Educ. Ass’n,
227 N.J. 192, 199 (2016) (applying “[t]he now time-honored test”
to determine whether subject at issue was mandatorily
negotiable).
We find that salary step increments is a mandatorily
negotiable term and condition of employment because it is part
and parcel to an employee’s compensation for any particular
year. This conclusion is supported by precedent that dates back
to the inception of Local 195’s three-part test. Robbinsville,
supra, 227 N.J. at 199 (“The ‘prime examples’ of mandatorily
negotiable terms and conditions of employment under New Jersey
case law ‘are rates of pay and working hours.’” (quoting Local
195, supra, 88 N.J. at 403)); Borough of Keyport v. Int’l Union
of Operating Eng’rs, 222 N.J. 314, 352 (2015) (“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.”); In re Hunterdon Cty. Bd. of Chosen
20
Freeholders, 116 N.J. 322, 331 (1989); Bd. of Educ. of City of
Englewood v. Englewood Teachers Ass’n, 64 N.J. 1, 6-7 (1973)
(“Surely working hours and compensation are terms and conditions
of employment within the contemplation of the [EERA].”).
Accordingly, we must determine whether the salary increment
systems provided for in the expired CNAs still governed working
conditions during the hiatus period between agreements. See
N.J.S.A. 34:13A-5.3, -5.4(a)(1), and -5.4(a)(5).
IV.
A.
Here, we need not look beyond the contracts themselves to
conclude that the step increases continued beyond the expiration
of the contracts. Normally “contractual obligations will cease,
in the ordinary course, upon termination of the bargaining
agreement.” Litton Fin. Printing Div. v. NLRB, 501 U.S. 190,
207, 111 S. Ct. 2215, 2226, 115 L. Ed. 2d 177, 198 (1991).
However, “[e]xceptions are determined by contract
interpretation. . . . And of course, if a collective-bargaining
agreement provides in explicit terms that certain benefits
continue after the agreement’s expiration, disputes as to such
continuing benefits may be found to arise under the agreement.”
Ibid.
It is well-settled that “[c]ourts enforce contracts ‘based
on the intent of the parties, the express terms of the contract,
21
surrounding circumstances and the underlying purpose of the
contract.’” Manahawkin Convalescent v. O’Neill, 217 N.J. 99,
118 (2014) (quoting Caruso v. Ravenswood Developers, Inc., 337
N.J. Super. 499, 506 (App. Div. 2001)). A reviewing court must
consider contractual language “‘in the context of the
circumstances’ at the time of drafting and . . . apply ‘a
rational meaning in keeping with the expressed general
purpose.’” Sachau v. Sachau, 206 N.J. 1, 5-6 (2011) (quoting
Atl. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302 (1953)).
“[I]f the contract into which the parties have entered is clear,
then it must be enforced” as written. Maglies v. Estate of Guy,
193 N.J. 108, 143 (2007); accord Kampf v. Franklin Life Ins.
Co., 33 N.J. 36, 43 (1960) (“Courts cannot make contracts for
parties. They can only enforce the contracts which the parties
themselves have made.” (quoting Sellars v. Cont’l Life Ins. Co.,
30 F.2d 42, 45 (4th Cir. 1929))). Where an agreement is
ambiguous, “courts will consider the parties’ practical
construction of the contract as evidence of their intention and
as controlling weight in determining a contract’s
interpretation.” County of Morris v. Fauver, 153 N.J. 80, 103
(1998).
When as here, there are no material factual disputes, “the
interpretation of a contract is subject to de novo review by an
appellate court.” Kieffer v. Best Buy, 205 N.J. 213, 222-23
22
(2011) (“[I]t is a general rule that the construction of a
contract is a question of law . . . .” (quoting Jennings v.
Pinto, 5 N.J. 562, 569-70 (1950))).
B.
Applying those principles to the contracts at issue here,
the expired CNAs involving PBA Local 174 and PBA Local 77
contain clear and explicit language that the respective salary
guides -- and all other terms and conditions set forth in those
agreements -- will continue until a successor agreement is
reached. Specifically, PBA Local 174’s CNA with Bridgewater
Township reads, “[t]his agreement shall remain in full force and
effect during collective negotiations between the parties beyond
the date of expiration set forth herein until the parties have
mutually agreed on a new agreement.” Similarly, the CNA between
PBA Local 77 and Atlantic County provides that “[a]ll provisions
of this Agreement will continue in effect until a successor
Agreement is negotiated.” Accordingly, we find that the salary
increment systems remained in effect after the agreements’
expiration dates under basic principles of contract law.
We reach the same result with regard to the agreement
between FOP Lodge 34 and Atlantic County. Their CNA states that
“[a]ll terms and conditions of employment, including any past or
present benefits, practices or privileges which are enjoyed by
the employees covered by this Agreement that have not been
23
included in this Agreement shall not be reduced or eliminated
and shall be continued in full force and effect.”
Atlantic County and Bridgewater Township could have simply
negotiated different contract terms. For example, an agreement
between the Board of Education of Ho-Ho-Kus and Ho-Ho-Kus
Education Association, for the time period from July 1, 2012
through June 30, 2015, provided that the parties “agree that in
the absence of a contractual settlement for a successor
agreement prior to June 30, 2015, increments for certified
personnel shall not be automatic in the 2015-2016 school year
(i.e., increments shall not be paid unless and until the parties
agree to a successor contract).” That sample of clear
contractual language leaves no room for confusion and could have
easily been incorporated into the CNAs at issue here. See In re
Hunterdon Cty., supra, 116 N.J. at 338 (“It is important to
recognize that the process of negotiation serves an important
role in effectuating the promotion of ‘permanent, public and
private employer-employee peace and the health, welfare, comfort
and safety of the people of the State.’” (citing N.J.S.A.
34:13A-2)).
Had the Atlantic County and Bridgewater Township agreements
been silent about whether the terms of the salary increment
system were to continue, the issue in this appeal would be more
complicated. It might well have required careful consideration
24
of past practices, custom and the viability of the dynamic
status quo doctrine. See Township of Middletown v. Middletown
PBA Local 124, 334 N.J. Super. 512 (App. Div. 1999), aff’d, 166
N.J. 112 (2000). But the unilateral modification at issue here
directly contradicted the parties’ binding written agreement.
Because the salary increment system was a term and condition of
employment that governed beyond the CNAs’ expiration date,
Atlantic County and Bridgewater Township committed an unfair
labor practice when they altered that condition without first
attempting to negotiate in good faith, in violation of N.J.S.A.
34:13A-5.3, -5.4(a)(1), and -5.4(a)(5).
We note that the Appellate Division based its conclusion on
the dynamic status quo doctrine, finding that it is “neither a
regulation nor a policy statement” that PERC can simply discard
in advantageous circumstances. In re County of Atlantic, supra,
445 N.J. Super. at 17-18. Given our reliance on contract
principles, we need not reach that issue.
Our decision today does not govern future negotiations,
other than to suggest that parties would be wise to include
explicit language indicating whether a salary guide will
continue beyond the contract’s expiration date.
V.
For the foregoing reasons, the judgment of the Appellate
Division is affirmed on other grounds.
25
Appendix
Salary Guide for FOP Lodge 34:
Steps 2007 2008 2009 2010
1 $31,879 $32,835 $33,987 $36,152
2 $33,939 $34,957 $36,180 $38,152
3 $34,454 $35,487 $36,729 $40,152
4 $36,514 $37,609 $38,925 $42,152
5 $40,634 $41,853 $43,317 $44,833
6 $45,269 $46,627 $48,258 $49,948
7 $51,939 $55,400 $57,339 $59,346
8 $59,228 $61,597 $63,907 $62,905
9 $66,463
Salary Guide for PBA Local 77:
Steps 2006 2007 2008 2009 2010
1 $42,800 $44,298 $45,848 $47,775 $49,677
2 $44,800 $46,368 $47,991 $50,314 $52,535
3 $46,620 $48,252 $49,941 $52,654 $55,187
4 $49,010 $50,725 $52,501 $55,626 $58,493
5 $51,400 $53,199 $55,061 $58,599 $61,799
6 $53,790 $55,673 $57,621 $61,570 $65,105
7 $56,180 $58,146 $60,181 $64,542 $68,411
8 $76,002 $68,404 $70,798 $75,852 $80,347
9 -- $79,042 $82,204 $88,404 $94,020
Sergeant $81,332 $84,575 $87,958 $94,592 $100,601
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Salary Guide for PBA Local 174:
A) For employees hired prior to January 1, 2011
Steps 2009 2010 2011 2012
1 $45,544 $45,544 $46,796 $48,083
2 $57,363 $57,363 $58,940 $60,561
3 $76,196 $76,196 $78,292 $80,445
4 $82,866 $82,866 $85,144 $87,486
5 $82,866 $82,866 $85,144 $87,486
6 $85,163 $85,163 $87,505 $89,912
7 $85,163 $85,163 $87,505 $89,912
8 $87,720 $87,720 $90,132 $92,611
9 $93,896 $93,896 $96,478 $99,131
10 $96,527 $96,527 $99,182 $101,909
B) For employees hired on or after January 1, 2011
Steps 2011 2012
1 $46,796 $48,033
2 $52,617 $54,064
3 $58,438 $60,045
4 $64,259 $66,026
5 $70,080 $72,007
6 $75,901 $77,988
7 $81,722 $83,969
8 $87,543 $89,950
9 $93,364 $95,931
10 $99,182 $101,909
CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN,
PATTERSON, FERNANDEZ-VINA, and TIMPONE join in JUSTICE SOLOMON’s
opinion.
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