Teamsters Local 97 v. State of New Jersey

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3274-10T3
A-3868-10T3
A-3916-10T3
A-4086-10T3
TEAMSTERS LOCAL 97, affiliated
with the INTERNATIONAL BROTHERHOOD
OF TEAMSTERS, and PROFESSIONAL
FIREFIGHTERS ASSOCIATION OF NEW
JERSEY, I.A.F.F., AFL-CIO, APPROVED FOR PUBLICATION
Plaintiffs-Appellants, January 31, 2014
APPELLATE DIVISION
v.
STATE OF NEW JERSEY, CHRISTOPHER J.
CHRISTIE, as Governor of the State
of New Jersey, THE NEW JERSEY SENATE
AND ITS MEMBERS, STEPHEN M. SWEENEY,
as its President and as a Representative
of the Individual Members of the New
Jersey Senate, THE NEW JERSEY GENERAL
ASSEMBLY AND ITS MEMBERS, SHEILA Y.
OLIVER, as its Speaker and as a
Representative of the Individual
Members of the New Jersey General
Assembly, and ANDREW P. SIDAMON-ERISTOFF,
Treasurer of the State of New Jersey,
Defendants-Respondents.
_________________________________________________
NEW JERSEY STATE FIREFIGHTERS'
MUTUAL BENEVOLENT ASSOCIATION,
NEW JERSEY STATE POLICEMAN'S
BENEVOLENT ASSOCIATION, GLOUCESTER
CITY FMBA LOCAL NO. 51, NORTH
WILDWOOD FMBA LOCAL NO. 56, TRENTON
FMBA LOCAL NO. 6, KEARNY FMBA LOCAL
NO. 18, NEW BRUNSWICK FMBA LOCAL
NO. 17, BELLEVILLE FMBA LOCAL NOS.
29 AND 229, SPRINGFIELD FMBA LOCAL
57, SPRINGFIELD FMBA LOCAL 57A,
SOUTH ORANGE PBA LOCAL NO. 12, NEPTUNE
PBA LOCAL NO. 74, ESSEX COUNTY SHERIFF'S
OFFICERS PBA LOCAL NO. 183, KEYPORT PBA
LOCAL NO. 223, PASSAIC COUNTY SHERIFF'S
OFFICERS PBA LOCAL NO. 286, RUTHERFORD PBA
LOCAL NO. 300, PATERSON PBA LOCAL NO. 1 and
SUPERIOR OFFICERS ASS'N WILLIAM LAVIN, ROBERT
BROWER, and ANTHONY F. WEINERS,
Plaintiffs-Appellants,
v.
STATE OF NEW JERSEY, NEW JERSEY
DEPARTMENT OF THE TREASURY, NEW JERSEY
STATE HEALTH BENEFITS COMMISSION,
ANDREW P. SIDAMON-ERISTOFF, TREASURER,
STATE OF NEW JERSEY, individually and
officially, NEW JERSEY STATE SENATE,
as a body politic of the State of New
Jersey, and NEW JERSEY STATE GENERAL
ASSEMBLY, as a body politic of the
State of New Jersey,
Defendants-Respondents.
_________________________________________________
NEW JERSEY EDUCATION ASSOCIATION,
Plaintiff-Appellant,
v.
STATE OF NEW JERSEY, CHRISTOPHER J. CHRISTIE,
as Governor of the State of New Jersey, NEW
JERSEY DEPARTMENT OF THE TREASURY, ANDREW P.
SIDAMON-ERISTOFF, TREASURER, STATE OF NEW
JERSEY, individually and officially,
NEW JERSEY STATE HEALTH BENEFITS COMMISSION,
NEW JERSEY SCHOOL EMPLOYEES HEALTH BENEFITS
COMMISSION, NEW JERSEY STATE SENATE, as a
body politic of the State of New Jersey,
STEPHEN M. SWEENEY, as President and as a
Representative of the Members of the New
Jersey State Senate, NEW JERSEY STATE GENERAL
2 A-3274-10T3
ASSEMBLY, as a body politic of the State of
New Jersey, SHEILA Y. OLIVER, as its Speaker
and Representative of the Members of the
New Jersey General Assembly,
Defendants-Respondents.
_________________________________________________
NEW JERSEY FRATERNAL ORDER OF POLICE,
Plaintiff,
v.
STATE OF NEW JERSEY, NEW JERSEY DEPARTMENT
OF THE TREASURY, NEW JERSEY STATE HEALTH
BENEFITS COMMISSION, ANDREW P. SIDAMON-ERISTOFF,
TREASURER, STATE OF NEW JERSEY, individually and
officially, NEW JERSEY STATE SENATE, as a body
politic of the State of New Jersey, NEW JERSEY
STATE GENERAL ASSEMBLY, as a body politic of
the State of New Jersey,
Defendants.
_________________________________________________
KEARNY FIREMEN'S MUTUAL BENEVOLENT
ASSOCIATION, LOCAL NO. 18,
Plaintiff,
v.
TOWN OF KEARNY,
Defendant.
_________________________________________________
BELLEVILLE FIREMEN'S MUTUAL BENEVOLENT
ASSOCIATION, LOCAL NOS. 29 & 229,
Plaintiffs,
v.
3 A-3274-10T3
TOWNSHIP OF BELLEVILLE,
Defendant.
_________________________________________________
Argued February 27, 2013 - Decided January 31, 2014
Before Judges Sapp-Peterson, Nugent and Haas.
On appeal from the Superior Court of New
Jersey, Law Division, Mercer County, Docket
Nos. L-1004-10, C-31-10, C-32-10, L-1291-10,
L-2287-10, and L-2312-10.
James M. Mets argued the cause for
appellants Teamsters Local 97 and
Professional Firefighters Association of New
Jersey (Mets Schiro & McGovern, LLP,
attorneys; Mr. Mets, of counsel and on the
brief; Brian J. Manetta, on the brief).
David I. Fox argued the cause for appellants
New Jersey State Firefighters' Mutual
Benevolent Association, its locals and
members (Fox and Fox, LLP, attorneys; Mr.
Fox, Craig S. Gumpel, and Jessica S.
Swenson, of counsel and on the brief).
Paul L. Kleinbaum argued the cause for
appellants New Jersey State Policemen's
Benevolent Association (Zazzali Fagella
Nowak Kleinbaum & Friedman, attorneys; Mr.
Kleinbaum, of counsel and on the brief;
Edward M. Suarez, Jr., on the brief).
Richard A. Friedman argued the cause for
appellant New Jersey Education Association
(Zazzali Fagella Nowak Kleinbaum & Friedman,
attorneys; Mr. Friedman, of counsel and on
the brief; Edward M. Suarez, Jr., on the
brief).
Jean P. Reilly, Deputy Attorney General,
argued the cause for respondents State of
New Jersey, Governor Christopher J.
Christie, and Treasurer Andrew P. Sidamon-
Eristoff (Jeffrey S. Chiesa, Attorney
4 A-3274-10T3
General, attorney; Robert T. Lougy,
Assistant Attorney General, of counsel;
Natalia T. Chan, Deputy Attorney General, on
the brief).
Leon J. Sokol argued the cause for
respondents New Jersey Senate, General
Assembly, Stephen M. Sweeney, and Sheila Y.
Oliver (Sokol, Behot & Fiorenzo, attorneys;
Mr. Sokol, of counsel; Steven Siegel, on the
brief).
This opinion of the court was delivered by
NUGENT, J.A.D.
The issues in these consolidated appeals involve public
employees of the State, its political subdivisions, and their
agencies. As compensation for their services, many public
employees receive, among other benefits, health care insurance
and pensions. To the extent the employees are required to
contribute toward their benefits, their disposable income is
reduced. Yet, the money that funds employee benefits is not
unlimited. The State's officials are charged with the profound
responsibility not only of ensuring that the health care and
pension systems remain fiscally sound, but also that the State
remains fiscally strong and that the burden on the State's
taxpayers does not become intolerable. The interests of public
employees and their representatives sometimes clash with the
obligations of State government. Such is the case in this
appeal.
5 A-3274-10T3
Plaintiffs, who represent state and local public employees
in collective negotiations with public employers, challenge the
constitutionality of three laws: L. 2010, c. 1 (Chapter 1),
which made changes to State-administered retirement systems; L.
2010, c. 2 (Chapter 2), which made changes to eligibility
requirements for and benefits provided through the State Health
Benefits Program (SHBP) and School Employees' Health Benefits
Program (SEHBP); and L. 2010, c. 3 (Chapter 3), which made
changes to other public employee benefits. The trial court
dismissed plaintiffs' consolidated complaints for failure to
state a claim.
In these consolidated appeals, plaintiffs argue that the
trial court misapplied the standard for evaluating a motion to
dismiss a complaint under Rule 4:6-2(e) for failure to state a
claim upon which relief can be granted. Plaintiffs also argue
that the trial court erred when it concluded that Chapters 1, 2,
and 3 did not violate either the State or Federal Constitution.
Having considered plaintiffs' arguments in light of the record
and controlling law, we conclude that the trial court properly
construed and applied Rule 4:6-2(e) when it dismissed
plaintiffs' complaints. We further conclude that plaintiffs
have not carried their heavy burden of demonstrating that the
laws are unconstitutional. Accordingly, we affirm.
6 A-3274-10T3
I.
The plaintiffs in these consolidated appeals are Teamsters
Local 97 (Teamsters); the Professional Firefighters Association
of New Jersey (PFANJ); the New Jersey State Firefighters' Mutual
Benevolent Association (FMBA) and affiliated locals; the New Jersey
State Policeman's Benevolent Association (PBA) and affiliated
locals; and the New Jersey Education Association (NJEA). New
Jersey Fraternal Order of Police, Kearny Firemen's Mutual
Benevolent Association, and Belleville Firemen's Mutual Benevolent
Association Local Nos. 29 and 229, parties to the actions that
were consolidated in the trial court, have not filed separate
appeals. Defendants are the State of New Jersey, Governor
Christopher J. Christie, the New Jersey Department of the Treasury
and State Treasurer Andrew P. Sidamon-Eristoff, the State Health
Benefits Commission (SHBC), and the School Employees Health
Benefits Commission (SEHBC) (collectively, the Executive
Defendants); the State Senate and its President, Stephen M.
Sweeney, and the State General Assembly and its Speaker, Sheila
Y. Oliver (collectively, the Legislative Defendants).
Plaintiffs seek to have Chapters 1, 2, and 3 declared void
as unconstitutional. Because courts assessing constitutional
challenges to state legislation must consider, among other
factors, the governmental interests furthered by the
7 A-3274-10T3
legislation, we begin our analysis with the legislative history
of Chapters 1, 2, and 3. We also review the legislative history
of L. 2011, c. 78, which has superseded certain sections of
Chapter 2.
On February 8, 2010, the Legislature introduced Senate Bill
Numbers 2, 3, and 4. S. 2, 214th Leg. (N.J. 2010); S. 3, 214th
Leg. (N.J. 2010); S. 4, 214th Leg. (N.J. 2010). The legislation
was "designed to improve the fiscal strength of State and local
governments, reduce taxpayer burdens, and ensure the health and
pension systems remain viable for current and future employees."
Commc'ns Workers of Am. v. State of N.J., Dept. of Treasury,
421 N.J. Super. 75, 83 (Law Div. 2011).
The three Senate bills implemented some of the
recommendations of a Special Session Joint Legislative Committee
on Public Employee Benefits Reform (Special Joint Committee),
while leaving other recommendations to collective negotiations.
See Special Session Joint Legislative Comm. on Pub. Emp.
Benefits Reform, Final Report (2006), available at http://
www.njleg.state.nj.us/propertyTaxSession/JCPE_final_report.pdf.
The Special Joint Committee was created pursuant to a Concurrent
Resolution that declared "[t]his State's high property taxes are
a matter of great concern to the people of New Jersey." Assemb.
Con. Res. 3, 212th Leg. (N.J. 2006). The resolution created
four legislative committees, including one on public employee
8 A-3274-10T3
benefits, tasked with developing proposals to reduce property
taxes. N.J. Ass'n of Sch. Adm'rs v. Schundler, 211 N.J. 535,
540 (2012). The Special Joint Committee was specifically
"charged with identifying proposals that will terminate abuses
of the pension systems and control the cost of providing public
employee retirement health care and other benefits." Final
Report, supra, at 1.
In its final report, the Special Joint Committee found that
New Jersey's retirement systems had an $18 billion unfunded
liability. Ibid. SHBP expenditures, which then totaled $3.6
billion annually, had risen by over 150% in the previous five
years and were expected to double by 2010. Ibid. "State and
local governments will soon have to recognize the long-term
implications of these employee health care benefits on their
financial statements . . . ." Ibid. The Special Joint
Committee found that for the benefit of taxpayers, public
employees, retirees, and employers, measures to ensure the
fiscal stability of the retirement system, and measures to
control health care costs, needed to be implemented. Id. at 2.
The Special Joint Committee recommended forty-one reforms
to public employee pensions, health care benefits, and other
employee benefits. Id. at 2-5. The recommendations identified
"long term savings through wide-ranging reforms while
maintaining the essential components of a competitive system of
9 A-3274-10T3
pensions and benefits[.]" Id. at 2. With regard to health care
costs, the Special Joint Committee's investigation of
health benefits issues revealed a system
plagued by the skyrocketing costs of health
care that have dramatically increased the
cost of health benefits for both current and
retired public employees. The investigation
also found that New Jersey public employees
contribute less toward their health benefit
costs than public employees of other states.
The Joint Committee recommends that all
employees share in the cost of their health
benefits at some level and that local
governments be accorded increased
flexibility when negotiating cost sharing
with local employees.
[Id. at 57.]
The Special Joint Committee suggested, under
Recommendations 22 and 23, that the Legislature require all active
public employees and future retirees "to pay some portion of the
cost of health care insurance premiums," id. at 4, but deferred
to the various public employers and employee
representatives to determine the appropriate
level of premium sharing through collective
bargaining.
. . . The Benefits Review Task Force
suggested that employees carry a share of 5%
to 10%. In order to recognize differences
in ability to pay and to provide appropriate
flexibility in negotiations, this could be
achieved by mandating a certain overall
percentage employee share, with the
distribution of that share among income
groups to be subject to collective
bargaining.
[Id. at 115.]
10 A-3274-10T3
Recommendation 25 suggested that the Legislature "[r]equire
that SHBP benefits changes negotiated by State be applied to
local governments."1 Id. at 4. The Special Joint Committee
recommend[ed] that legislation be enacted to
ensure that basic changes made in the
provisions of SHBP benefits to State
employees, such as the amount of copayments
for office visits and prescription drugs, be
applicable at the same time to all
individuals covered by SHBP.
The Joint Committee believes that it is
important that SHBP benefits changes
negotiated by the State with its employees
be applicable to employees of local
employers not only to reduce administrative
expenses for all through conformity but also
to extend to those local employers the same
cost savings enjoyed by the State. The
. . . Committee believes that it is
important to ensure consistency in health
benefit coverage and cost for all public
employees.
[Id. at 121-22.]
With regard to other benefits, Recommendation 36 suggested that
the Legislature "[l]imit sick leave compensation payable upon
retirement to $15,000," and Recommendation 37 suggested a
limitation on the accumulation of vacation leave. Id. at 5.
On March 22, 2010, Senate Bill Numbers 2, 3, and 4 were
signed into law (Chapters 1, 2, and 3). They became effective
on May 21, 2010. Chapter 1 made reforms to pension systems,
1
SHBP is a multiple-option program that offers health benefits
coverage through a variety of plans and managed care programs.
Final Report, supra, at 121.
11 A-3274-10T3
Chapter 2 made reforms to health benefits programs, and Chapter
3 made reforms to payments for employee benefits, including
accumulated sick leave and vacation time.
The following sections of Chapters 1, 2, and 3 are central
to this appeal. Chapter 1, Section 22 (codified at N.J.S.A.
43:16A-1) changed the definition of "final compensation" used in
calculating retirement benefits for persons who became members
of the Police and Fireman's Retirement System (PFRS) after the
law's effective date. Instead of defining "final compensation"
for such new members as compensation received in the last twelve
months of creditable service – the definition for members as of
the effective date – the law changed the meaning of "final
compensation" for such new members to "the average annual
compensation for service for which contributions are made during
any three fiscal years of membership providing the largest
possible benefit to the member or the member's beneficiary."
The Department of the Treasury estimated that Chapter 1 would
reduce the required contribution to the State-administered
retirement systems for State and local employers "by $13.2
million in State FY 2013, $25.3 million in FY 2014 and $40.9
million in FY 2015." Fiscal Note to S. 2 (June 3, 2010). FMBA
is the only plaintiff who has argued on appeal that those
provisions of Chapter 1 are unconstitutional, though other
plaintiffs have joined in FMBA's argument.
12 A-3274-10T3
Chapter 2 made changes to the SHBP, as well as to the
SEHBP, concerning eligibility, cost sharing, choice of plan,
application of benefit changes, waiver of coverage, and multiple
coverage. Section 1 (codified in relevant part at N.J.S.A.
52:14-17.28b(c)(2)) required participating SHBP employees to
contribute toward the cost of health benefits coverage:
Commencing on the effective date of
P.L.2010, c. 2 and upon the expiration of
any applicable binding collective
negotiations agreement in force on that
effective date, the amount of the
contribution required pursuant to paragraph
(1) of this subsection by State employees
and employees of an independent State
authority, board, commission, corporation,
agency, or organization for whom there is a
majority representative for collective
negotiations purposes shall be 1.5% of base
salary, notwithstanding any other amount
that may be required additionally pursuant
to this paragraph by means of a binding
collective negotiations agreement.
Section 1 (codified in relevant part at N.J.S.A. 52:14-
17.28b(d)) also required retirees to contribute an amount equal
to "1.5% of the retiree's monthly retirement allowance," if the
retirees became "a member of a State or locally-administered
retirement system on or after the effective date of P.L.2010, c.
2[.]" Section 6 (codified in relevant part at N.J.S.A. 52:14-
17.46.9(b)) required the same contribution of SEHBP employees,
"[c]ommencing on the effective date of P.L.2010, c. 2 and upon
13 A-3274-10T3
the expiration of any applicable binding collective negotiations
agreement in force on that effective date[.]"
The State Department of the Treasury, Division of Pensions
and Benefits (DPB) estimated that contributions by active and
retired public employees (the 1.5% contribution) under Chapter 2
toward the cost of health care benefits would "result in a
savings to those entities and boards of $314 million in State
Fiscal Year 2011, $324 million in Fiscal Year 2012, and $333
million in Fiscal Year 2013." Fiscal Note to S. 3 (March 1,
2010).
Chapter 2, Section 8 (amending N.J.S.A. 52:14-17.36(b))
(the Section 8 Applicability Provision), made those changes in
health care benefits included in collective negotiations
agreements between the State and its employees applicable to
other public employers and employees:
All changes in the provision of health care
benefits through the program that are
included in collective negotiations
agreements between the State and its
employees entered into on or after the
effective date of P.L.2010, c. 2 shall be
made applicable by the commission to
participating employers and their employees
at the same time and in the same manner as
to State employees. This subsection shall
be applicable to the [SHBP] . . . and to the
[SEHBP] . . . to the extent not inconsistent
with the provisions of . . . P.L.2007, c.
103 (C.52:14-17.46.1 et seq.).
14 A-3274-10T3
Chapter 2, Section 11 (amending N.J.S.A. 52:14-17.31a(c)),
provides that in consideration for a waiver of health insurance,
an employer may pay to the employee an amount not to exceed 25%
of the cost saved by the employer, or $5000, whichever is less.
To aid public employers in interpreting Chapter 2, the DPB
issued a document entitled "Frequently Asked Questions Regarding
Chapter 2, P.L.2010 and Changes to Public Employee Health
Benefits" (DPB's FAQs). The questions and answers included the
following:
2. Q. Is the 1.5% of base pay contribution
in addition to previously negotiated premium
contributions?
A. No. The 1.5% contribution is
intended to be a floor, or minimum,
contribution that an employee will make
toward medical and/or prescription drug plan
coverage. If another contribution
arrangement has been negotiated, the higher
of the two will prevail. All employees must
contribute an amount equivalent to at least
1.5% of the employee's base pay. . . .
. . . .
4. Q. On what salary is the calculation of
the 1.5% contribution based?
A. The calculation is based on the
employee's base contractual salary. In most
instances, that means the salary on which
pension contributions are based. However,
for employees hired after July of 2007 for
whom pensionable salary is limited to the
salary on which Social Security
contributions are based, the employee's
total base salary would be used. As an
employee receives salary increases during
15 A-3274-10T3
the year, the amount of contribution would
need to be adjusted accordingly.
. . . .
6. Q. Our union contract expired last year
and has not been settled. Will these
employees be required to contribute the 1.5%
contribution after May 21st [2010]?
A. If the contract is not ratified by
May 21st, those employees will be required
to pay the 1.5% contribution for health
coverage. If the contract is ratified
before May 21st, those employees will not be
required to pay the 1.5% contribution until
the expiration of the contract.
. . . .
10. Q. Will non-SHBP/SEHBP participating
employers be required to follow the 1.5%
minimum contribution?
A. Yes. Chapter 2 stipulates that
employees of non-participating employers
must pay a minimum of 1.5% of annual base
salary as a health benefits contribution.
. . . .
17. Q. Will employees who waive coverage
still have to pay 1.5% towards health
benefit costs as all local employees and
then receive waiver incentive based on the
reduced employer cost?
A. No. An employee who waives coverage
is not required to pay the 1.5%
contribution.
On May 18, 2010, the Department of Community Affairs,
Division of Local Government Services (DLGS), issued Local
Finance Notice 2010-12 (LFN 2010-12), based on the materials
16 A-3274-10T3
issued by the DPB, which also provided guidance for complying
with Chapter 2 for both SHBP and non-SHBP local units, and
included answers to "Frequently Asked Questions."
Plaintiffs assert that the foregoing provisions of Chapter
2, particularly those that require the 1.5% contribution and
those that bind local employees to changes in health care
benefits negotiated by State employees, violate various rights
guaranteed by the State and Federal Constitutions.
Chapter 3 made
various changes concerning payments to
public employees for unused sick leave, sick
leave for injury while in State service, and
accidental and ordinary disability
retirement for members of the Public
Employees’ Retirement System (PERS) and the
Teachers Pension and Annuity Fund (TPAF).
The bill also limits to one year the amount
of vacation leave that certain local
government and school district officers and
employees would be permitted to carry
forward, under most circumstances.
[S. State Gov't Wagering, Tourism &
Historical Preservation Comm., Statement to
S. 4 (Feb. 18, 2010).]
FMBA challenges as unconstitutional the provisions of
Chapter 3, Sections 1 and 2 (codified at N.J.S.A. 11A:6-19.2 and
N.J.S.A. 40A:9-10.4), that prohibit the State's political
subdivisions, agencies, and authorities from paying supplemental
compensation to officers or employees for accumulated unused
sick leave in an amount in excess of $15,000. FMBA also
17 A-3274-10T3
challenges the provisions of Section 4 (codified at N.J.S.A.
40A:9-10.5) that prohibit officers and employees "of a political
subdivision of the State, or an agency, authority, or
instrumentality thereof, that has not adopted the provisions of
Title 11A of the New Jersey statutes," from carrying over
accrued vacation leave beyond the next succeeding year.
On June 28, 2011, after the trial court dismissed
plaintiffs' complaints, the Legislature enacted the Pension and
Health Care Benefits Act, L. 2011, c. 78 (Chapter 78) (codified
in relevant part at N.J.S.A. 52:14-17.28c to -17.28d, N.J.S.A.
18:16-17.1, and N.J.S.A. 40A:10-21.1), which requires all public
employees to pay a sliding scale percentage of the cost of
health benefits for themselves and their dependents, but
maintains a "floor" for employee contributions of 1.5% of base
salary. S. Budget & Appropriations Comm., Statement to S. 2937
(June 16, 2011). See DePascale v. State, 211 N.J. 40, 45 (2012)
(addressing challenge to Chapter 78 as applicable to justices
and judges).
Section 45 (codified in relevant part at N.J.S.A. 52:14-
17.27(b)) established the SHBP Design Committee and vested it
with
the responsibility for and authority over
the various plans and components of those
plans, including for medical benefits,
prescription benefits, dental, vision, and
any other healthcare benefits, offered and
18 A-3274-10T3
administered by the program. The committee
shall have the authority to create, modify,
or terminate any plan or component, at its
sole discretion. Any reference in law to
the State Health Benefits Commission in the
context of the creation, modification, or
termination of a plan or plan component
shall be deemed to apply to the committee.
Similarly, Section 46 (codified in relevant part at
N.J.S.A. 52:14-17.46.3(e)) established a SEHBP Design Committee
and vested it with
the responsibility for and authority over
the various plans and components of those
plans, including for medical benefits,
prescription benefits, dental, vision, and
any other healthcare benefits, offered and
administered by the program. The committee
shall have the authority to create, modify,
or terminate any plan or component, at its
sole discretion. Any reference in law to
the School Employees' Health Benefits
Commission in the context of the creation,
modification, or termination of a plan or
plan component shall be deemed to apply to
the committee.
Section 47 (codified in relevant part at N.J.S.A. 52:14-
17.29(J)) provides that "[n]otwithstanding any other provision
of law to the contrary the [SHBP Design Committee] shall have
the sole discretion to set the amounts for maximums, co-pays,
deductibles, and other such participant costs for all plans in
the program." Section 49 (codified in relevant part at N.J.S.A.
52:14-17.46.7) provides the SEHBP Design Committee with
identical discretion.
19 A-3274-10T3
The State argues that Chapter 78 supersedes and renders
moot plaintiffs' constitutional challenges to the Section 8
Applicability Provision.
As noted previously, the Governor signed Chapters 1, 2, and
3 into law on March 22, 2010. The following month, plaintiffs
filed complaints seeking injunctive relief and judgments
declaring the laws unconstitutional and unenforceable. Several
plaintiffs later amended their complaints. Judge Linda R.
Feinberg denied plaintiffs' motions for injunctive relief and
also denied motions by the Senate and Assembly to dismiss the
complaints against them.
Thereafter, defendants moved to dismiss the consolidated
complaints for failure to state a claim upon which relief can be
granted. FMBA cross-moved for summary judgment. Following
argument, Judge Feinberg issued a comprehensive written opinion
granting defendants' motions and dismissing the complaints.
This appeal followed.
II.
We first address plaintiffs' contentions that the court
misapplied the standard of review for dismissing a complaint for
failure to state a claim upon which relief can be granted.
Plaintiffs argue that the court misapplied the applicable
standard by improperly considering material outside of the
pleadings. According to plaintiffs, because the court
20 A-3274-10T3
considered external materials, it should have treated the
motions as summary judgment motions and given the parties an
opportunity to take discovery. Plaintiffs also argue that
instead of evaluating the complaints to determine whether they
suggested a cause of action, the court made factual or
substantive determinations.
The standard a trial court must apply when considering a
Rule 4:6-2(e) motion to dismiss a complaint for failure to state
a claim upon which relief can be granted is "whether a cause of
action is 'suggested' by the facts." Printing Mart-Morristown
v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989). "In evaluating
motions to dismiss, courts consider 'allegations in the
complaint, exhibits attached to the complaint, matters of public
record, and documents that form the basis of a claim.'"
Banco Popular N. Am. v. Gandi, 184 N.J. 161, 183 (2005) (quoting
Lum v. Bank of Am., 361 F.3d 217, 221 n.3 (3d Cir.), cert.
denied, 543 U.S. 918, 125 S. Ct. 271, 160 L. Ed. 2d 203 (2004)).
Our Supreme Court has explained that "[i]t is the existence of
the fundament of a cause of action in those documents that is
pivotal[.]" Ibid.
A motion to dismiss a complaint for failure to state a
claim "may not be denied based on the possibility that discovery
may establish the requisite claim; rather, the legal requisites
for plaintiffs' claim must be apparent from the complaint
21 A-3274-10T3
itself." Edwards v. Prudential Prop. & Cas. Co., 357 N.J.
Super. 196, 202 (App. Div.), certif. denied, 176 N.J. 278
(2003). For that reason, our courts have not hesitated to
dismiss complaints with prejudice when a constitutional
challenge fails to state a claim. See J.D. ex rel. Scipio-
Derrick v. Davy, 415 N.J. Super. 375, 397 (App. Div. 2010).
When we review a trial court's decision to dismiss a
complaint under Rule 4:6-2(e), we apply the same standard but
our review is de novo. Frederick v. Smith, 416 N.J. Super. 594,
597 (App. Div. 2010), certif. denied, 205 N.J. 317 (2011). We
conclude from our de novo review of the record on appeal that
the trial court correctly stated and applied the standard of
review for evaluating a Rule 4:6-2(e) motion. Contrary to
plaintiffs' arguments, the court did not engage in factfinding
and did not improperly consider materials outside of the
pleadings. Plaintiffs' arguments are, for the most part,
unsupported by the record. Their arguments also overlook our
Supreme Court's pronouncement about what materials a trial court
may consider when evaluating a motion to dismiss a complaint for
failure to state a claim.
In her opinion, Judge Feinberg stated explicitly that she
had considered "the pleadings, the relevant statutes,
regulations and cases cited by the parties." She noted that
FMBA had included in its "application for injunctive relief . . .
22 A-3274-10T3
a large notebook consisting of approximately four hundred
pages." The judge also noted that FMBA and PBA had submitted
certifications. Acknowledging that she had "reviewed the
certifications in reaching a decision whether to grant
injunctive relief," Judge Feinberg stated that "neither the
certifications nor material in the notebook has been considered
in deciding the motion to dismiss."
Plaintiffs identify only three sources of information they
claim the judge improperly considered: the Special Joint
Committee's final report, the DPB FAQs, and a DPB website. But
FMBA and PBA referred at length in their complaints to the
Special Joint Committee's final report and to DPB's FAQs, and no
plaintiff has alleged that the DPB website contained any
materials that were both relied upon by the trial court and
significantly different in content from the content of the
Special Joint Committee report and DPB FAQs. Because FMBA and
PBA referred to the Special Joint Committee report and DPB FAQs
in their complaint, the court properly considered them under
Rule 4:6-2(e). See In re Burlington Coat Factory Sec. Litig.,
114 F.3d 1410, 1426 (3d. Cir. 1997); E. Dickerson & Son, Inc. v.
Ernst & Young, LLP, 361 N.J. Super. 362, 365 n.1 (App. Div.
2003), aff'd, 179 N.J. 500 (2004); N.J. Sports Prods., Inc. v.
Bobby Bostick Promotions, LLC, 405 N.J. Super. 173, 178 (Ch.
Div. 2007).
23 A-3274-10T3
Aside from FMBA's and PBA's discussions in their complaints
of materials they now suggest the court should not have
considered, no plaintiff disputes that the Special Joint
Committee report and DPB FAQs are matters of public record. See
Hall v. Virginia, 385 F.3d 421, 424 n.3 (4th Cir. 2004) (noting
that the court can consider publicly available statistics on
Virginia Division of Legislative Services' official website),
cert. denied, 544 U.S. 961, 125 S. Ct. 1725, 161 L. Ed. 2d 602
(2005). Plaintiffs' arguments overlook our Supreme Court's
explicit statement that courts evaluating motions to dismiss
under Rule 4:6-2(e) may consider, in addition to the complaint
and its attachments, matters of public record. Banco Popular N.
Am., supra, 184 N.J. at 183. Accordingly, we reject plaintiffs'
argument that the trial court misapplied the applicable standard
when it granted defendants' Rule 4:6-2(e) motions.
III.
Plaintiffs next argue that defendants' motions should have
been denied, and FMBA's cross-motion for summary judgment
granted, because Chapters 1, 2, and 3 are unconstitutional, and
their complaints so stated. While addressing those arguments,
we bear in mind the following fundamental principles. Statutes
are presumed to be constitutional. DePascale, supra, 211 N.J.
at 63. This is because
24 A-3274-10T3
[i]n our tripartite form of government
[judicial review of legislation] has always
been exercised with extreme self-restraint,
and with a deep awareness that the
challenged enactment represents the
considered action of a body composed of
popularly elected representatives. As a
result, judicial decisions from the time of
Chief Justice Marshall reveal an unswerving
acceptance of the principle that every
possible presumption favors the validity of
an act of the Legislature. . . . [A]ll the
relevant New Jersey cases display faithful
judicial deference to the will of the
lawmakers whenever reasonable men might
differ as to whether the means devised by
the Legislature to serve a public purpose
conform to the Constitution.
[N.J. Sports & Exposition Auth. v. McCrane,
61 N.J. 1, 8 (citation omitted), appeal
dismissed sub nom., Borough of E. Rutherford
v. N.J. Sports & Exposition Auth., 409 U.S.
943, 93 S. Ct. 270, 34 L. Ed. 2d 215
(1972).]
For those reasons, a statute "will not be declared void
unless it is clearly repugnant to the Constitution." Trautmann
ex rel. Trautmann v. Christie, 211 N.J. 300, 307 (2012) (quoting
Newark Superior Officers Ass'n v. City of Newark, 98 N.J. 212,
222 (1985)). A party seeking to rebut "[t]he strong presumption
of constitutionality that attaches to a statute . . . [must]
show[] that the statute's 'repugnancy to the Constitution is
clear beyond a reasonable doubt.'" Hamilton Amusement Ctr. v.
Verniero, 156 N.J. 254, 285 (1998) (quoting Harvey v. Bd. of
Chosen Freeholders, 30 N.J. 381, 388 (1959)), cert. denied, 527
25 A-3274-10T3
U.S. 1021, 119 S. Ct. 2365, 155 L. Ed. 2d 770 (1999).
Plaintiffs have failed to carry that heavy burden.
A.
Plaintiffs first contend that the court erred in dismissing
the counts in their complaints alleging that Chapter 2 violates
Article I, Paragraph 19 of the New Jersey Constitution. That
provision states as to public employees: "Persons in public
employment shall have the right to organize, present to and make
known to the State, or any of its political subdivisions or
agencies, their grievances and proposals through representatives
of their own choosing."
Plaintiffs chiefly challenge the 1.5% contribution required
by Chapter 2, and the Section 8 Applicability Provision. In
addition, FMBA argues that Chapter 3, Sections 1, 2, and 4,
violate Article I, Paragraph 19. Plaintiffs contend that the
trial court erred by dismissing these claims under Rule 4:6-
2(e).
The State Executive Defendants assert that Chapter 2
respects the rights guaranteed to public employees by Article I,
Paragraph 19 of the State Constitution, and that the trial court
did not err by dismissing plaintiffs' challenges to Chapter 2
under Rule 4:6-2(e) because their challenges presented legal,
not factual, issues. The State Executive Defendants also
contend that plaintiffs' argument that Chapter 2 violates
26 A-3274-10T3
Article I, Paragraph 19 of the State Constitution is moot
because it has been superseded by Chapter 78. Further, the
State Executive Defendants contend that all of plaintiffs'
arguments that the Section 8 Applicability Provision violates
various federal and state constitutional protections are moot
because the Section 8 Applicability Provision has been
superseded by Chapter 78.
We agree with the State Executive Defendants that Chapter
78 renders plaintiffs' challenges to the Section 8 Applicability
Provision moot. With the enactment of Chapter 78, the
Legislature has vested the Design Committees with the "sole
discretion" to create, modify, or terminate any plan or
component, as well as to set amounts for maximums, co-pays,
deductibles, and other participant costs for all plans offered.
The "sole discretion" of the Design Committees to create,
modify, or terminate any plan includes plans for "medical
benefits, prescription benefits, dental, vision, and any other
healthcare benefits." L. 2011, c. 78, §§ 45 and 46.
In view of the Legislature's vesting in the Design
Committees the sole discretion to make changes in the respective
healthcare plans, such changes are no longer effectuated through
collective negotiations between the State and its employees.
The provisions of Chapter 78 have superseded the Section 8
Applicability Provision. "[C]ourts should not reach
27 A-3274-10T3
constitutional questions unless necessary to the disposition of
the litigation." O'Keefe v. Passaic Valley Water Comm'n, 132
N.J. 234, 240 (1993). Because they are moot, we decline to
address plaintiffs' challenges to the Section 8 Applicability
Provision.
We turn to plaintiffs' arguments that the provisions of
Chapter 2 requiring the 1.5% contribution, as well as the
provisions of Chapter 3 limiting both supplemental compensation
for accumulated sick time and the carrying-forward of vacation
time, violate the constitutional right of public employees to
organize and to present their grievances and proposals through
their chosen representatives. We are unpersuaded by plaintiffs'
arguments.
To implement the constitutional right of public employees
to organize and present grievances and proposals, the
Legislature enacted the New Jersey Employer-Employee Relations
Act (EERA), N.J.S.A. 34:13A-1 to -43. The EERA defines the
scope of public employees' rights of collective negotiation. In
re Local 195, IFPTE, AFL-CIO, 88 N.J. 393, 401 (1982). N.J.S.A.
34:13A-5.3 provides in part that
Representatives designated or selected by
public employees for the purposes of
collective negotiation by the majority of
the employees in a unit . . . shall be the
exclusive representatives for collective
negotiation concerning the terms and
28 A-3274-10T3
conditions of employment of the employees in
such unit. . . .
The scope of collective negotiations by public sector
employees concerning "the terms and conditions of employment" is
not, however, unlimited. See Lullo v. Int'l Ass'n of Fire
Fighters, 55 N.J. 409, 440 (1970).
[A] subject is negotiable between public
employers and employees 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. To decide whether a negotiated
agreement would significantly interfere with
the determination of governmental 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.
[In re Local 195, supra, 88 N.J. at 404-05.]
We agree with Judge Feinberg that although health care
benefits are a negotiable term or condition of employment under
the EERA, the Legislature has preempted negotiation of the 1.5%
contribution. "As a general rule, an otherwise negotiable topic
cannot be the subject of a negotiated agreement if it is
preempted by legislation." Bethlehem Twp. Bd. of Educ. v.
Bethlehem Twp. Educ. Ass'n., 91 N.J. 38, 44 (1982). A topic is
29 A-3274-10T3
preempted if a "regulation fixes a term and condition of
employment 'expressly, specifically and comprehensively.'"
Ibid. (quoting Council of N.J. State College Locals v. State
Bd. of Higher Educ., 91 N.J. 18, 30 (1982)). The Legislature
has fixed the 1.5% contribution "expressly, specifically and
comprehensively."2
PBA does not dispute that the Legislature may preempt
negotiations on a term or condition of employment, but argues
that the implementation of Chapter 2 to certain matters being
arbitrated under the Police and Fire Public Interest Arbitration
Reform Act (Reform Act), N.J.S.A. 34:13A-14 to -21, violates the
constitutional right of public employees to present grievances
through their chosen representatives. Specifically, PBA argues
that in interest arbitrations where "the arbitral records were
closed prior to the new laws' effective date," representatives
were effectively "precluded from submitting evidence over the
impact of new law to the interest arbitrator." We disagree.
To begin with, Article 1, Paragraph 19 guarantees to public
employees the right to present their grievances and proposals to
"the State, or any of its political subdivisions or agencies."
The Supreme Court has interpreted this paragraph's language
2
The contribution amount was changed in Chapter 78. Chapter 78,
Section 39 requires health-care contributions based on
employees' earning levels. See N.J.S.A. 52:14-17.28c.
30 A-3274-10T3
concerning public employees "to impose on the employer in the
public sector only the duty to meet with its employees or their
chosen representatives and to consider in good faith any
grievance or proposals presented on their behalf." Lullo,
supra, 55 N.J. at 416. Interest arbitrators are not employers.
Rather, interest arbitrators conduct an "essentially
adversarial" process, "a statutory method of resolving
collective-negotiation disputes." Hillsdale PBA Local 207 v.
Borough of Hillsdale, 137 N.J. 71, 80, 82 (1994).3
Additionally, arbitrators rendering a decision in
compulsory interest arbitration cases must apply the relevant
law. Paterson Police PBA Local 1 v. City of Paterson, ___ N.J.
Super. ___, ___ (App. Div. 2013) (slip op. at 17). See also
Kearny PBA Local # 21 v. Town of Kearny, 81 N.J. 208, 217
(1979). They must "decide the dispute based on a reasonable
determination of the issues, giving due weight to those factors
listed [in N.J.S.A. 34:13A-16(g)(1)-(9)]." N.J.S.A. 34:13A-
16(g). If an arbitrator requires additional evidence as to any
factor, the arbitrator "may request the parties to supplement
their presentations," PBA Local 207, supra, 137 N.J. at 83-84,
3
PBA Local 207 involved certain interest arbitration procedures
that were later eliminated from the Reform Act. In re City of
Camden, 429 N.J. Super. 309, 328 n.7 (App. Div.), certif.
denied, 215 N.J. 485 (2013). Nevertheless, "the principles set
forth in [PBA Local 207] remain controlling." Ibid.
31 A-3274-10T3
but "the arbitrator need not require the production of evidence
on each factor." Id. at 84.
Arbitrators are vested with significant discretion in the
manner in which they conduct hearings. For example, an
arbitrator may "conduct hearings, and require the attendance of
such witnesses and the production of such books, papers,
contracts, agreements, and documents as the arbitrator may deem
material to a just determination of the issues in dispute,"
N.J.A.C. 19:16-5.7(e); grant adjournments, N.J.A.C. 19:16-
5.7(j); permit the parties to submit post-hearing briefs and
grant the parties special permission to introduce new factual
material in the post-hearing briefs. N.J.A.C. 19:16-5.7(l).
PBA has cited no authority suggesting that in those limited
instances where a new law has been enacted after parties have
presented evidence in interest arbitration proceedings but
before the arbitrators have rendered decisions, and the new law
might affect pending issues, arbitrators cannot exercise their
discretion to have the parties submit supplemental briefs or new
evidence. We discern no reason for prohibiting arbitrators from
so exercising their discretion in such limited circumstances.
Nor do we discern any reason why the parties should be
prohibited from requesting permission from arbitrators to
supplement their presentations in such limited circumstances.
32 A-3274-10T3
Of course, arbitrators may reject such requests if the
arbitrators deem supplemental submissions unnecessary.
Neither the language of the State Constitution, nor our
Supreme Court's decisions concerning the obligations Article I,
Paragraph 19 imposes on public employers, supports PBA's
argument that Chapter 2 violates this constitutional provision.
In view of those considerations, PBA has not demonstrated either
that Chapter 2 violates Article I, Paragraph 19 of the State
Constitution, or that Judge Feinberg erred when she dismissed
plaintiffs' complaints for failure to state a claim.
B.
We turn to plaintiffs' contentions that the provisions of
Chapter 2 requiring public employees and retirees to make the
1.5% contribution violate the equal protection guarantees of the
Federal and State Constitutions. We are unpersuaded.
The Fourteenth Amendment to the United States Constitution
provides that "[n]o State shall make or enforce any law which
shall . . . deny to any person within its jurisdiction the equal
protection of the laws." "The Equal Protection Clause directs
that 'all persons similarly circumstanced shall be treated
alike.'" Plyler v. Doe, 457 U.S. 202, 216, 102 S. Ct. 2382,
2394, 72 L. Ed. 2d 786, 798 (1982) (quoting F. S. Royster Guano
Co. v. Virginia, 253 U.S. 412, 415, 40 S. Ct. 560, 562, 64 L.
Ed. 989, 991 (1920)). However, the "legislature must have
33 A-3274-10T3
substantial latitude to establish classifications that roughly
approximate the nature of the problem perceived, that
accommodate competing concerns both public and private, and that
account for limitations on the practical ability of the State to
remedy every ill." Id. at 216, 102 S. Ct. at 2394, 72 L. Ed. 2d
at 798-99. Thus, "[i]f a statutory distinction has some
reasonable basis, 'a State does not violate the Equal Protection
Clause merely because the classifications made by its laws are
imperfect.'" Whitaker v. Devilla, 147 N.J. 341, 358 (1997)
(quoting Dandridge v. Williams, 397 U.S. 471, 485, 90 S. Ct.
1153, 1161, 25 L. Ed. 2d 491, 501 (1970)). Accord Caviglia v.
Royal Tours of Am., 178 N.J. 460, 480 (2004). "Under the
federal equal protection clause, absent an impact on a
fundamental right or targeting of a suspect class, a statute
must be upheld 'so long as it bears a rational relation to some
legitimate end.'" Trautmann, supra, 211 N.J. at 304 (quoting
Romer v. Evans, 517 U.S. 620, 631, 116 S. Ct. 1620, 1627, 134 L.
Ed. 2d 855, 865 (1996)).
Our State Constitution does not contain an equal protection
clause. State v. Chun, 194 N.J. 54, 101, cert. denied, 555 U.S.
825, 129 S. Ct. 158, 172 L. Ed. 2d 41 (2008). Yet, the concept
of equal protection is implicit in Article I, Paragraph
1. McKenney v. Byrne, 82 N.J. 304, 316 (1980); Guaman v. Velez
(Guaman I), 421 N.J. Super. 239, 267 (App. Div. 2011). In
34 A-3274-10T3
analyzing equal protection challenges under the State
Constitution, courts apply "a more flexible balancing test that
considers three factors: '(1) the nature of the right asserted;
(2) the extent to which the statute intrudes upon that right;
and (3) the public need for the intrusion.'" Guaman I, supra,
421 N.J. Super. at 267 (quoting State v. O'Hagen, 189 N.J. 140,
164 (2007)). Although this analysis differs from the "federal
tiered approach, the tests weigh the same factors and often
produce the same result." Sojourner A. v. N.J. Dep't of Human
Servs., 177 N.J. 318, 333 (2003).
Plaintiffs contend the sections of Chapter 2 that require
the 1.5% contribution violate the federal and state equal
protection guarantees because they create arbitrary
classifications among employees. For example, NJEA asserts that
the 1.5% contribution "applies to all public employees
regardless of the type or level of coverage applicable to the
individual employee, or the actual cost of coverage to the
employer." According to NJEA, under that scheme, an employee
opting for single coverage would pay the same "mandatory minimum
contribution as an employee opting for family coverage." NJEA
also asserts that the 1.5% contribution will have a
disproportionate impact on public employees "at the lower end of
the income spectrum." Teamsters add that public employees who
receive benefits "from a private insurer or from a union benefit
35 A-3274-10T3
fund" are required to pay the 1.5% contribution to offset
employer health care costs even though they receive no benefits
from the employer plans.
Chapter 2 does not, however, affect a fundamental right or
target a suspect class.4 The law does, on the other hand, bear a
rational relation to legitimate State interests. Those
interests include controlling the cost of providing health care
benefits to public employees; reducing administrative expenses;
and ensuring consistency in health benefit coverage and costs
for public employees. Moreover, the changes in Chapter 2 are
part of legislation enacted to improve the fiscal strength of
State and local governments; reduce taxpayer burdens; and ensure
that the health and pension systems remain viable for current
and future employees.
Moreover, the provisions of Chapter 2 are rationally
related to those State interests, as is evident from the DPB
estimates that the required contributions will result in savings
of hundreds of millions of dollars. Though perhaps an imperfect
scheme because imposing the 1.5% contribution may have different
4
NJEA asserts that the Section 8 Applicability Provision
violates equal protection guarantees because it infringes upon
public employees' fundamental right, under Article I, Paragraph
19 of the State Constitution, to present grievances to their
employers through their chosen representatives. We have
previously explained that plaintiffs' challenges to the Section
8 Applicability Provision are moot. We will not address those
claims again.
36 A-3274-10T3
consequences for some classes of employees, perfection is not
required. Chapter 2 falls well within the legislative "latitude
to establish classifications that roughly approximate the nature
of the problem perceived, that accommodate competing concerns
both public and private, and that account for limitations on the
practical ability of the State to remedy every ill." Plyler,
supra, 457 U.S. at 216, 102 S. Ct. at 2394, 72 L. Ed. 2d at 798-
99.
Similarly, Chapter 2 satisfies Article 1, Paragraph 1 of
the New Jersey Constitution. "There is, in this case, an
'appropriate governmental interest suitably furthered by the
differential treatment involved.'" Trautmann, supra, 211 N.J.
at 305 (quoting Barone v. Dep't of Human Servs., 107 N.J. 355,
368 (1987)). As we have stated, the State has a legitimate
interest in controlling the cost of health care benefits,
ensuring consistency in health benefit coverage, and further
ensuring that the programs that make health care coverage
available to public employees remain viable for both current and
future employees. The State has a further interest in
minimizing taxpayer burdens.
For the reasons we have previously explained, the State's
interests are furthered considerably by the 1.5% contribution
requirement. And considering the need to ensure that health
care programs remain viable for future as well as current public
37 A-3274-10T3
employees and retirees, the intrusion on the interest of current
employees and retirees not to make a minimum 1.5% contribution -
- for any reason -- is itself minimal.5
For substantially the same reasons, we reject FMBA's
argument that Chapter 1, which changes the definition of "final
compensation" used to calculate retirement benefits, violates
the equal protection guarantees of the Federal and State
Constitutions because it results in arbitrary classifications
among employees.
Chapter 1, Section 22 (codified in relevant part at
N.J.S.A. 43:16A-1(28)(a)-(b)), provides that for employees who
become members of PFRS after May 21, 2010, "final compensation"
means the average annual compensation for any three fiscal
5
Plaintiffs have not clearly defined the specific interests they
claim are impacted by the 1.5% contribution. NJEA asserts that
Chapter 2 disproportionately impacts lower-income State
employees by requiring they contribute the same percentage of
their salaries as other employees. We note that the provisions
of Chapter 2 concerning the 1.5% contribution have been
partially superseded by the provisions of Chapter 78 requiring
health care contributions based on employees' earning levels,
with a minimum, or floor, of 1.5% base salary. See L. 2011, c.
78, § 39 (codified at N.J.S.A. 52:14-17.28c); L. 2011, c. 78, §
40 (codified at N.J.S.A. 52:14-17.28d) (employees participating
in SHBP and SEHBP); L. 2011, c. 78, § 41 (codified at N.J.S.A.
18:16-17.1) (employees of boards of education); L. 2011, c. 78,
§ 42 (codified at N.J.S.A. 40A:10-21.1) (employees of a local
unit or agency thereof). These provisions of Chapter 78 also
require different contributions for individual and family
coverage. L. 2011, c. 78, § 39 (codified at N.J.S.A. 52:14-
17.28c).
38 A-3274-10T3
years of membership. 6 For employees who became members before
that date, final compensation "means the compensation received
by the member in the last 12 months of creditable service
preceding his retirement or death." N.J.S.A. 43:16A-1(28)(a).
We agree with Judge Feinberg that the classification
between current and new enrollees is rationally related to
legitimate State goals including cost savings, ensuring the
fiscal stability of the plan, and administrative
efficiency. See Brown v. State, 356 N.J. Super. 71, 82 (App.
Div. 2002) (explaining that the Legislature may limit benefits
it confers in the interest of preserving State's economic
resources). The law fully comports with the federal and state
equal protection guarantees.
C.
FMBA and Teamsters next argue that the judge erred by
dismissing their claim that the 1.5% contribution requirement of
Chapter 2 violates the Contract Clauses of the Federal and State
Constitutions because the laws impaired existing and pending
CNAs.
6
Chapter 1, Section 20 (amending N.J.S.A. 18A:66-2) and Chapter
1, Section 21 (amending N.J.S.A. 43:15A-6), change the
definition of final compensation for new enrollees in TPAF and
PERS from the average compensation for the three years prior to
retirement, to the average of five years.
39 A-3274-10T3
The federal and state constitutions prohibit the passage of
any "law impairing the obligation of contracts." U.S. Const.
art. I, § 10, cl. 1; N.J. Const. art. IV, § 7, ¶ 3. "The two
clauses are applied coextensively and provide the same
protection." N.J. Educ. Ass'n v. State, 412 N.J. Super. 192,
205 (App. Div.) (internal quotation marks omitted), certif.
denied, 202 N.J. 347 (2010). In addressing a claim for
violation of the Contract Clause, the threshold inquiry is
whether the law "operated as a substantial impairment of a
contractual relationship." Allied Structural Steel Co. v.
Spannaus, 438 U.S. 234, 244, 98 S. Ct. 2716, 2722, 57 L. Ed. 2d
727, 736 (1978). In making that determination courts inquire
whether: 1) "there is a contractual relationship"; 2) the
"change in law impairs that contractual relationship"; and 3)
"the impairment is substantial." Gen. Motors Corp. v. Romein,
503 U.S. 181, 186, 112 S. Ct. 1105, 1109, 117 L. Ed. 2d 328, 337
(1992). If the state law constitutes a substantial impairment,
it may nonetheless "be constitutional if it is reasonable and
necessary to serve an important public purpose." U.S. Trust Co.
v. New Jersey, 431 U.S. 1, 25, 97 S. Ct. 1505, 1519, 52 L. Ed.
2d 92, 112 (1977).
We affirm, substantially for the reasons explained by Judge
Feinberg. We add only the following comments. FMBA and
Teamsters base their arguments primarily on the premise that
40 A-3274-10T3
their CNAs do not expire on their expiration dates, but rather
continue, either under a theory of implied contract or by
statute. The statute FMBA relies on is N.J.S.A. 34:13A-21,
which states in part that "[d]uring the pendency of proceedings
before the [interest] arbitrator, existing wages, hours and
other conditions of employment shall not be changed by action of
either party without the consent of the other[.]" Teamsters
rely on N.J.S.A. 34:13A-5.3, which states in part that
"[p]roposed new rules or modifications of existing rules
governing working conditions shall be negotiated with the
majority representative before they are established." This
statutory rule, "known as the prescription against unilateral
change of the status quo, prohibit[s] an employer from
unilaterally altering the status quo concerning mandatory
bargaining topics, whether established by expired contract or by
past practice, without first bargaining to impasse." Bd. of
Educ. of Neptune v. Neptune Twp. Educ. Ass'n, 144 N.J. 16, 22
(1996) (alteration in original) (internal quotation marks
omitted).
Chapter 2 does not require public employees to make the
1.5% contribution until after existing CNAs expire. Contrary to
plaintiffs' arguments, N.J.S.A. 34:13A-21 and N.J.S.A. 34:13A-
5.3 create statutory, not contractual, prohibitions against a
party changing the terms and conditions of employment during the
41 A-3274-10T3
pendency of interest arbitration proceedings or during the
negotiation of a new CNA. As we have previously explained, the
statutes apply to the parties to the expired CNA, not to the
Legislature. And because the Legislature created the
prohibitions against such changes, the Legislature can modify
them by statute. Further, even if the terms of an expired CNA
are deemed to be implied in fact until new terms are negotiated,
public employees have neither a contractual right nor a
reasonable expectation that terms implied in fact under such
circumstances will survive superseding terms imposed by
preemptory legislation.
D.
We reject plaintiffs' remaining contentions substantially
for the reasons that Judge Feinberg rejected them in her well-
reasoned decision. Those contentions include the following
arguments: the 1.5% contribution is an invalid tax on income
that did not originate in the General Assembly; the sections of
Chapter 2 imposing the 1.5% contribution are void for vagueness;
Chapters 1, 2, and 3 violate plaintiffs' rights to procedural
and substantive due process, and constitute a taking; and
Chapter 2 is a special law that decreases the emoluments of
public employees and also regulates the internal affairs of
municipalities, all in violation of the State Constitution.
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These and plaintiffs' other remaining arguments do not warrant
further discussion in a written opinion. R. 2:11-3(e)(1)(E).
IV.
The Legislative Defendants argue, as an alternative reason
for affirming the trial court’s judgment, that they are immune
from suit because an action against the State Senate and
Assembly challenging the constitutionality of a law violates the
separation of powers and the Speech or Debate Clause of the New
Jersey Constitution; and that Judge Feinberg erred by ruling to
the contrary.
The doctrine of separation of powers is set forth in
Article III, Paragraph 1 of the New Jersey Constitution, which
provides that "[t]he powers of the government shall be divided
among three distinct branches, the legislative, executive, and
judicial. No person or persons belonging to or constituting one
branch shall exercise any of the powers properly belonging to
either of the others, except as expressly provided in this
Constitution." The Speech or Debate Clause, set forth in
Article IV, Section IV, Paragraph 9 of the New Jersey
Constitution, provides that:
Members of the Senate and General Assembly
shall, in all cases except treason and high
misdemeanor, be privileged from arrest
during their attendance at the sitting of
their respective houses, and in going to and
returning from the same; and for any
statement, speech or debate in either house
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or at any meeting of a legislative
committee, they shall not be questioned in
any other place.
Preliminarily, we note that the record on appeal is not
clear as to whether Judge Feinberg dismissed the claims against
the President of the Senate and Speaker of the Assembly. She
thought she had dismissed those claims. The Legislative
Defendants believe that the judge was mistaken and did not
dismiss those claims. Regardless, it does not appear from the
record on appeal that any plaintiff seriously opposed the
Legislative Defendants' application in the trial court to
dismiss the claims against the President of the Senate and
Speaker of the Assembly. Those claims should never have been
filed. There was no basis, in law or in fact, for making them.
Legislative immunity guaranteed by the Speech or Debate
Clause assures that the speech and conduct of legislators acting
within the sphere of legitimate legislative activity will not be
made the basis for a civil judgment. Gilbert v. Gladden, 87
N.J. 275, 292-93 (1981). Moreover, in a case where the sole
relief sought is a judicial declaration that a statute is
unconstitutional, naming individual legislators is a meaningless
exercise. They are unnecessary parties because the relief
sought can be obtained without them, and nothing can be obtained
from them. Naming individual legislators in cases where such
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limited relief is sought accomplishes nothing other than
distraction, wasted time, and perhaps wasted money.
Those and other reasons could arguably lead to the same
conclusion as to the Senate and the Assembly. Interpreting the
Speech or Debate Clause to apply to those institutions would
certainly serve several salient purposes. And as a general
proposition, a plaintiff can obtain a judgment declaring that a
statute is unconstitutional by naming only the State as a
defendant. See DePascale, supra, 211 N.J. at 47. We conclude,
however, that the prudent course is not to decide the issue in
this case.
We have previously noted that "courts should not reach
constitutional questions unless necessary to the disposition of
the litigation." O'Keefe, supra, 132 N.J. at 240. Here,
deciding this constitutional issue is unnecessary. We have
already upheld Chapters 1, 2, and 3. Additionally, the
Legislative Defendants have not filed a cross-appeal, but have
advanced their constitutional argument only as an alternative
reason for affirming the trial court's judgment. This
alternative reason is unnecessary in view of our rejection of
plaintiffs' claims. This action may be, as the Legislative
Defendants say, one in which plaintiffs seek only a declaratory
judgment that Chapters 1, 2, and 3 are unconstitutional, but
plaintiffs initially sought injunctive relief and Judge Feinberg
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issued a comprehensive opinion as to that claim. The parties
have not briefed whether the Legislative Defendants were
indispensable parties to the claim for injunctive relief.
For all those reasons, we decline to address the
Legislative Defendants' alternative constitutional argument.
V.
We end where we began. We recognize that Chapters 1, 2,
and 3 affect the disposable income of the State's active and
retired public employees. But the Legislature enacted these
laws to ensure that the State's pension and health care systems
remain fiscally sound and that the State's taxpayers are not
unduly burdened. The legislation furthers legitimate State
interests and violates neither the New Jersey Constitution nor
the United States Constitution.
Affirmed.
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