In Re

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4636-14T3
APPROVED FOR PUBLICATION
IN RE N.J.A.C. 12:17-2.1. May 1, 2017
________________________________ APPELLATE DIVISION
Argued March 6, 2017 – Decided May 1, 2017
Before Judges Sabatino, Nugent and Haas.
On appeal from a regulation promulgated by
the New Jersey Department of Labor and
Workforce Development.
Alan H. Schorr argued the cause for
appellants Schorr & Associates, P.C. and
National Employment Lawyers Association –
New Jersey (Schorr & Associates, P.C.,
attorneys; Mr. Schorr, on the briefs).
Alan C. Stephens, Deputy Attorney General,
argued the cause for respondent New Jersey
Department of Labor and Workforce
Development (Christopher S. Porrino,
Attorney General, attorney; Melissa Dutton
Schaffer, Assistant Attorney General, of
counsel; Mr. Stephens, on the brief).
The opinion of the court was delivered by
SABATINO, P.J.A.D.
The heart of this appeal involves a challenge to the
validity of a regulation, N.J.A.C. 12:17-2.1, adopted in 2015 by
the Department of Labor and Workforce Development ("the
Department"). In that regulation, the Department defines, for
the first time in codified form, the concept of "simple
misconduct" by an employee that can limit his or her eligibility
for unemployment benefits under the Unemployment Compensation
Act ("the Act"), N.J.S.A. 43:21-1 to -56. The Department's
adoption of the regulation attempted to respond to concerns this
court expressed in Silver v. Board of Review, 430 N.J. Super. 44
(App. Div. 2013), regarding the need for a codified rule that
distinguishes "simple misconduct" from the more stringent
intermediate concept of "severe misconduct" as defined by the
Legislature in a 2010 amendment to N.J.S.A. 43:21-5(b), or the
most extreme category of "gross misconduct" defined in the
statute.
For the reasons that follow, we invalidate the portion of
the challenged regulation defining simple misconduct. We do so
because the definition illogically and confusingly mixes in
concepts of "negligence" with intent-based concepts such as
"willful disregard," "evil design," "wrongful intent," and
similar states of mind. The regulation is also flawed because,
as explained in this opinion, it defines "simple misconduct" in
certain respects as encompassing employee conduct that is at
least as extreme or venal – or perhaps more so – than "severe
misconduct."
2 A-4636-14T3
Consequently, the Department's final agency action adopting
the definition of simple misconduct within N.J.A.C. 12:17-2.1
must be set aside as arbitrary and capricious.1 We do so without
prejudice to the Department pursuing the adoption of a
substitute regulation that cures these defects and conforms with
the overall statutory scheme.
I.
A.
The framework and history of the statute and related case
law dating back to 1936 is eloquently set forth in Judge Lisa's
opinion in Silver, supra, 430 N.J. Super. at 48-56. We
incorporate by reference that background here. Some highlights
from Silver bear repeating.
To begin with, we detailed in Silver:
From its inception in 1936 until 2010,
New Jersey's Unemployment Compensation Law
has provided for disqualification for
benefits for employees discharged for
"misconduct" or "gross misconduct" connected
with the work. N.J.S.A. 43:21-5(b); see L.
1936, c. 270, § 5. The statute defines
"gross misconduct" as "an act punishable as
a crime of the first, second, third or
fourth degree," but it does not define the
term "misconduct." Ibid. Appropriately,
1 Appellants also challenge the adoption of N.J.A.C. 12:17-9.1, -
9.2, -10.1, -10.3 through -10.9, and -21.2. We see no reason to
invalidate those regulations, which do not include the
problematic definition of "simple misconduct" discussed in this
opinion.
3 A-4636-14T3
the sanctions for gross misconduct are
greater than for simple misconduct. Ibid.
In 2010, the Legislature added a third
category in section 5(b), "severe
misconduct." L. 2010, c. 37, § 2, eff. July
1, 2010. As we will explain, this was
intended as an intermediate form of
misconduct, requiring greater culpability
than simple misconduct, but less than gross
misconduct, and with an intermediate level
of disqualification from collecting
unemployment benefits. The amendatory
provision does not define severe misconduct,
but contains a non-exclusive list of
examples. See N.J.S.A. 43:21-5(b).2
[Silver, supra, 430 N.J. Super. at 48-49.]
As we then explained in Silver, case law has attempted to
fill in the gap left by the omission from the Act of an express
definition of "simple misconduct":
In 1956, our Supreme Court held that
employees were guilty of misconduct for
engaging in a work stoppage, in violation of
2 As Silver explained, under the statute, proven "misconduct" by
an employee "results in disqualification for the week that the
employee was discharged and seven additional weeks." Supra, 430
N.J. Super. at 49 n.4 (citing N.J.S.A. 43:21-5(b)). By
comparison, to be eligible for unemployment benefits after being
discharged for "severe misconduct," an employee "must first
become reemployed for a period of at least four weeks and earn
at least six times the employee's weekly unemployment benefit
rate." Ibid. (citing N.J.S.A. 43:21-5(b)). Lastly, the most
severe degree of employee behavior under the statute, termed
"gross misconduct," results in "no benefits from the account of
the employer against whom the gross misconduct occurred and
requires at least eight weeks of new employment and wages
totaling at least ten times the weekly benefit rate before the
claimant can collect unemployment compensation." Ibid. (citing
N.J.S.A. 43:21-5(b)).
4 A-4636-14T3
a no-strike clause in their collective
bargaining agreement, which provided that
the employer shall immediately discharge any
employee in violation of the clause. Bogue
Elect. Co. v. Bd. of Review, 21 N.J. 431,
433-34 (1956). Without attempting to define
"misconduct" broadly, the Court held that a
deliberate breach of the collective
bargaining agreement could not be deemed a
circumstance causing involuntary
unemployment, the hazard intended by the
Legislature to be protected against, and
thus, within the spirit and policy of the
unemployment law, it constituted misconduct.
Id. at 436.
A few months later, a panel of this
court was confronted with a similar
situation, in which employees were fired as
a result of a work stoppage, but in which
the collective bargaining agreement did not
contain a no-strike provision. Beaunit
Mills, Inc. v. Bd. of Review, 43 N.J. Super.
172, 176-80 (App. Div. 1956), certif.
denied, 23 N.J. 579 (1957). Because of
that material factual distinction, the panel
was required to define "misconduct" within
the meaning of the unemployment law. It did
so thusly:
[Silver, supra, 430 N.J. Super. at 49.]
We then quoted in Silver from the following instructive passages
found in Beaunit Mills:
What does the statutory [term]
misconduct signify? Obviously it cannot mean
"mere mistakes, errors in judgment or in the
exercise of discretion, or minor but casual
or unintentional carelessness or negligence,
and similar minor peccadilloes." It cannot
mean mere inefficiency, unsatisfactory
conduct, failure of performance as the
result of inability or incapacity,
inadvertence in isolated instances, or good
5 A-4636-14T3
faith errors of judgment. Boynton Cab Co.
v. Neubeck, 237 Wis. 249, 296 N.W. 636
(1941); Kempfer, Disqualifications for
Voluntary Leaving & Misconduct, 55 Yale Law
J. 147, 162-166 (1945). In our opinion, the
statement in 48 Am. Jur., Social Security,
Unemployment Compensation, etc., § 38 at 541
(1943), suggests the fair intendment of the
statute:
[Silver, supra, 430 N.J. Super. at 49-50
(quoting Beaunit Mills, supra, 43 N.J.
Super. at 182).]
At this point, as we further noted in Silver, Beaunit Mills
quoted this portion of the Am. Jur. treatise:
Misconduct within the meaning of an
unemployment compensation act excluding from
its benefits an employee discharged for
misconduct must be an act of wanton or
willful disregard of the employer's
interest, a deliberate violation of the
employer's rules, a disregard of standards
of behavior which the employer has the right
to expect of his employee, or negligence in
such degree or reoccurrence as to manifest
culpability, wrongful intent, or evil
design, or show an intentional and
substantial disregard of the employer's
interest or of the employee's duties and
obligations to the employer.
[Id. at 50 (quoting Beaunit Mills, supra, 43
N.J. Super. at 183 (quoting 48 Am. Jur. §38
at 541)).]
Silver then explained:
Applying those principles, we held [in
Beaunit Mills] that, because the employees
"were engaged in a concerted activity in
good faith for their mutual aid and
protection," and with an "absence of evil
intent or willful desire to injure the
6 A-4636-14T3
employer," under all of the circumstances,
the employees were not guilty of misconduct
connected with the work within the meaning
of section 5(b). Id. at 183, 185.
Subsequent case law, although sparse,
has made clear that the Beaunit Mills
standard for defining misconduct is not
limited to a literal and isolated reading of
the Am. Jur. passage quoted above. The
definition also includes the discussion in
Beaunit Mills preceding the Am. Jur. passage
we have also quoted.
[Silver, supra, 430 N.J. Super. at 48-50
(emphasis added).]
Our opinion in Silver went on to distill guiding principles
from several reported New Jersey cases that have applied Beaunit
Mills. In particular, Silver noted, id. at 50, that in Demech
v. Board of Review, 167 N.J. Super. 35 (App. Div. 1979), we
reversed the Department's denial of benefits to a supermarket
employee who had thrown a roast at a co-worker out of
frustration and anger caused by the co-worker's inappropriate
conduct towards her. "Because the employee's conduct was
provoked by the co-employee, was unthinking and spontaneous, and
was not intended to and did not cause injury to the co-employee,
it did not qualify as misconduct under the Beaunit Mills
standard." Silver, supra, 430 N.J. Super. at 51 (citing Demech,
supra, 167 N.J. Super. at 38-39). In this regard, Silver quoted
this key passage from our opinion in Demech: "All that the
statute undertakes to penalize is deliberate and willful
7 A-4636-14T3
disregard of standards of conduct an employer has a right to
expect." Ibid. (emphasis added) (quoting Demech, supra, 167
N.J. Super. at 41).
Silver next addressed our opinion in Smith v. Board of
Review, 281 N.J. Super. 426 (App. Div. 1995), a case in which a
hospital orderly was discharged for misconduct because he had
brought food to a pre-surgery patient, contrary to a nurse's
instructions. Silver, supra, 430 N.J. Super. at 51 (citing
Smith, supra, 281 N.J. Super. at 428). The majority of this
court's panel in Smith upheld the denial of benefits because the
orderly's behavior amounted to "a 'willful disregard of the
employer's best interest,' thus constituting misconduct." Ibid.
(emphasis added) (quoting Smith, supra, 281 N.J. Super. at 430).
The third member of the panel dissented in Smith, because he
regarded the evidence as insufficient to support a "willful
disregard" of the hospital employer's policies, and instead
signified "only negligent" conduct. Ibid. (citing Smith, supra,
281 N.J. Super. at 438 (Brochin, J.A.D., dissenting)). We
explained in Silver that this split within the Smith panel
illustrates "[t]he critical distinction between intentional and
deliberate conduct on the one hand and negligent or inadvertent
conduct on the other[.]" Ibid. (emphasis added).
8 A-4636-14T3
As a further example of "the need for deliberate or
intentional conduct" to be proven to disqualify an employee for
benefits, Silver also discussed Parks v. Board of Review, 405
N.J. Super. 252 (App. Div. 2009). Id. at 51-52. In Parks, the
claimant was terminated from his job because of what was deemed
to be "excessive absenteeism" after four absences from work.
Id. at 52. The record in Parks reflected that all four absences
had been occasioned by family illnesses or emergencies. Ibid.
(citing Parks, supra, 405 N.J. Super. at 255). Given these
circumstances, this court reversed the Department's denial of
benefits to Parks, applying the Beaunit Mills standard. Ibid.
(citing Parks, supra, 405 N.J. Super. at 254).
As we highlighted in Silver, the panel in Parks observed
that disqualification for benefits under the Act "is warranted
only when the employee's conduct that resulted in his or her
discharge had the ingredients of willfulness, deliberateness and
intention." Ibid. (internal citations omitted). "[B]ecause the
employee's absences were the result of excusable circumstances,
they could not meet the Beaunit Mills standard of deliberate or
intentional violations of the employer's rules." Ibid.
(emphasis added) (citing Parks, supra, 405 N.J. Super. at 256).
We also briefly noted in Silver two other reported opinions
illustrating the concept of "misconduct." Both of those cases
9 A-4636-14T3
factually involved "intentional acts of insubordination." Ibid.
(emphasis added) (citing Borowinski v. Bd. of Review, 346 N.J.
Super. 242, 246 (App. Div. 2001), and Broderick v. Bd. of
Review, 133 N.J. Super. 30, 31 (App. Div. 1975)).
Continuing to trace the relevant history, Silver then noted
that the Department in 2003 promulgated a rule – a predecessor
to the 2015 regulation now challenged before us – which
attempted to define "misconduct" under the Act. That 2003 rule
provided:
For an act to constitute misconduct, it must
be improper, intentional, connected with
one's work, malicious, and within the
individual's control, and is either a
deliberate violation of the employer's rules
or a disregard of standards of behavior
which the employer has the right to expect
of an employee.
[Id. at 52-53 (quoting N.J.A.C. 12:17-
10.2(a)).]
As we explained in Silver, "[b]y its plain terms," the 2003
regulation "prescribe[d] a two-prong standard to establish
misconduct." Id. at 53. "First, the conduct must be improper,
intentional, connected with the work, malicious, and within the
employee's control." Ibid. "Second, the conduct must also be
either a deliberate violation of the employer's rules or a
disregard of the standards of behavior which the employer has
the right to expect." Ibid.
10 A-4636-14T3
Silver observed that the test articulated in the 2003
version of the rule "is more stringent than the Am. Jur. passage
quoted in Beaunit Mills." Ibid. The test "incorporates the
other features of the Beaunit Mills analysis, as further
elucidated and reiterated in subsequent case law." Ibid. We
stressed in this regard that Beaunit Mills "built upon a
foundation laid by the Supreme Court in Bogue, the rationale of
which hinged upon the incongruity of allowing benefits to 'a
group of employees [who] deliberately violate a [clearly
important] basic provision of a collective bargaining
agreement.'" Ibid. (quoting Bogue, supra, 21 N.J. at 436).
The Legislature, with the input of an intervening
conditional veto by the Governor, expanded the Act in 2010,
inserting the intermediate category of "severe misconduct."
Ibid. (citing revised N.J.S.A. 43:21-5(b)). We pointed out in
Silver that the statutory amendment provided no definition for
severe misconduct, but it did give some illustrative examples.
Ibid. Those examples included the following:
Examples of severe misconduct include, but
are not necessarily limited to, the
following: repeated violations of an
employer's rule or policy, repeated lateness
or absences after a written warning by an
employer, falsification of records, physical
assault or threats that do not constitute
gross misconduct as defined in this section,
misuse of benefits, misuse of sick time,
abuse of leave, theft of company property,
11 A-4636-14T3
excessive use of intoxicants or drugs on
work premises, theft of time, or where the
behavior is malicious and deliberate but is
not considered gross misconduct as defined
in this section.
[Id. at 54 (quoting N.J.S.A. 43:21-5(b), as
amended by L. 2010, c. 37, § 2, eff. July 1,
2010).]
As of the time of our opinion in Silver, the Department had
not yet adopted new regulations to distinguish simple misconduct
from severe misconduct. Ibid. A proposed regulation had been
attempted in 2010, but expired without action. A second
attempt, which was then underway when Silver was decided,
eventually culminated with the 2015 regulation that is now
before us.
Pending the final adoption of such new regulations, we
reasoned in Silver that it is "fundamental" that the term
"misconduct" should have "the same meaning throughout N.J.S.A.
43:21-5(b) and its implementing regulation." Id. at 55.
Following that principle, Silver looked to two of the examples
of "severe misconduct" set forth in the 2010 statutory
amendment, i.e., "repeated violations of an employer's rule or
policy" and "repeated lateness or absences after a written
warning," which, "if read literally," would describe "conduct
that would not necessarily be deliberate, intentional, or
12 A-4636-14T3
malicious." Ibid. However, we eschewed such a rigid and
literal interpretation of those examples.
We noted "it is obvious that the Governor and Legislature
intended to create severe misconduct as a gap-filler between
simple misconduct and gross misconduct." Ibid. (emphasis
added). We added that "[i]t would make no sense to allow for
conduct with a lower level of culpability (such as mere
inadvertence or negligence) to qualify as severe misconduct and
carry with it a harsher sanction than simple misconduct." Ibid.
"Such a result would be absurd and clearly contrary to the
legislative intent, as expressly set forth in the Governor's
Conditional Veto Message, S1813, L. 2010, c. 37." Ibid.
Summarizing these principles, Silver expressed the
following guidance to both the Department and to litigants:
Therefore, we must construe these two
examples of severe misconduct as requiring
acts done intentionally, deliberately, and
with malice. Because these two examples of
severe misconduct require repeated
violations, such a construction would render
the conduct more egregious than simple
misconduct, which could result from a single
such violation committed intentionally and
with malice. We understand "intentional"
and "malicious" as used in the regulation to
include deliberate disregard of the
employer's rules or policies, or deliberate
disregard of the standards of behavior that
the employer has the right to expect of an
employee. This interpretation comports with
the amended statutory scheme, which lists
three levels of misconduct, each dependent
13 A-4636-14T3
upon the employee's relative degree of
culpability.
[Id. at 55-56 (emphasis added).]
Silver applied these principles to the facts in that case.
The claimant, a teacher at a vocational school, had violated her
employer's policy by failing to collect back pens from her
students at the end of class. Id. at 47. The teacher had
failed to do so six times. Ibid. After being warned by her
employer that another such infraction would lead to her
termination, she violated the policy a seventh time and was
fired. Ibid. The Department disqualified the teacher from
collecting benefits, concluding that she had been discharged for
severe misconduct. Ibid.
We reversed the agency determination in Silver, concluding
that not only did the record fail to support a finding of
"severe" misconduct, but also failed to demonstrate "simple"
misconduct. Id. at 58. As we wrote in Silver, the hearing
examiner made no finding that the teacher had "intentionally or
deliberately disregarded the employer's rule for collecting pens
after a class[,]" and, indeed, "the record would not support
such a finding." Id. at 57. Instead, the claimant adequately
explained the circumstances of her failure to account for all
of the pens in the classroom environment. Ibid. Her employer
"did not refute her assertion that she was trying to comply with
14 A-4636-14T3
the rule." Ibid. "She was simply unable to do so." Ibid.
Consequently, it was "clear" to us in Silver that the claimant's
conduct "was a result of negligence or inadvertence, not
intentional or deliberate disregard of the employer's rule."
Ibid.
We then criticized the Department for its "fragmented
approach" in how it applied to Silver the portion of the Beaunit
Mills standard contained in the Am. Jur. passage:
To find misconduct, the agency relied
on the portion of the Beaunit Mills standard
contained in the Am. Jur. passage. In our
view, that fragmented approach has never
been what was intended by Beaunit Mills, as
described in our subsequent opinions, and
reliance on it constituted legal error.
Under the correct Beaunit Mills analysis,
appellant's conduct did not constitute
misconduct because it lacked the requisite
elements of wil[l]fulness, deliberateness,
intention, and malice. More important, her
conduct did not satisfy the agency's own
definition of misconduct, which is
controlling, and which, in our view, appears
to have been designed to express the
entire Beaunit Mills standard.
[Id. at 58.]
In reaching this result in Silver, we acknowledged the
considerate deference that an administrative agency such as the
Department deserves in applying legislative standards within its
sphere of responsibility. Ibid. Even so, and giving due
respect to an agency's expertise, "ultimately the interpretation
15 A-4636-14T3
of statutes and regulations is a judicial, not administrative,
function and we are not bound by the agency's interpretation."
Ibid. (citing Mayflower Secs. Co. v. Bureau of Sec., 64 N.J. 85,
96 (1973)).
B.
Following Silver, the Department promulgated the new
regulations that are now before us. The relevant history is as
follows.
On August 18, 2014, the Department published proposed
amendments related to "Claims Adjudication – Voluntarily Leaving
Work and Misconduct[.]" See 46 N.J.R. 1796(a) (Aug. 18, 2014).
Appellants, Schorr Associates, P.C. and the National Employment
Lawyers Association, submitted written objections to the
proposals in a letter dated September 17, 2014. Legal Services
of New Jersey also submitted written objections in a letter
dated October 17, 2014.
A public hearing on the proposed amendments was held on
September 5, 2014. At that hearing, an attorney presented oral
objections to the proposals. No one else testified at the
hearing.
The proposed amendments were adopted "with non-substantial
changes" on April 16, 2015, codified at N.J.A.C. 12:17-2.1, -
9.1, -9.2, -10.1, -10.3 through -10.9, and -21.2, and N.J.A.C.
16 A-4636-14T3
12:17-10.2 was repealed. See 47 N.J.R. 1009(a) (May 18, 2015).
The amendments at the core of the present appeal read as
follows:
12:17-2.1 Definitions
The following words and terms, when used in
this chapter, shall have the following
meanings, unless the context clearly
indicates otherwise.
. . . .
"Gross misconduct" means an act punishable
as a crime of the first, second, third, or
fourth degree under the New Jersey Code of
Criminal Justice, N.J.S.A. 2C:1-1 et seq.
. . . .
"Malicious" means when an act is done with
the intent to cause injury or harm to
another or others or when an act is
substantially certain to cause injury or
harm to another or others.
. . . .
"Misconduct" means simple misconduct, severe
misconduct, or gross misconduct.
. . . .
"Severe misconduct" means an act which (1)
constitutes "simple misconduct," as that
term is defined in this section; (2) is both
deliberate and malicious; and (3) is not
"gross misconduct."
1. Pursuant to N.J.S.A. 43:21-5, as
amended by P.L. 2010, c. 37, such acts
of "severe misconduct" shall include,
but not necessarily be limited to, the
following: repeated violations of an
17 A-4636-14T3
employer's rule or policy, repeated
lateness or absences after a written
warning by an employer, falsification
of records, physical assault or threats
that do not constitute "gross
misconduct," misuse of benefits, misuse
of sick time, abuse of leave, theft of
company property, excessive use of
intoxicants or drugs on work premises,
or theft of time; except that in order
for any such act to constitute "severe
misconduct," it must also (1)
constitute "simple misconduct"; and (2)
be both deliberate and malicious.
"Simple misconduct" means an act which is
neither "severe misconduct" nor "gross
misconduct" and which is an act of wanton or
willful disregard of the employer's
interest, a deliberate violation of the
employer's rules, a disregard of standards
of behavior that the employer has the right
to expect of his or her employee, or
negligence in such degree or recurrence as
to manifest culpability, wrongful intent, or
evil design, or show an intentional and
substantial disregard of the employer's
interest or of the employee's duties and
obligations to the employer. Nothing
contained within this definition should be
construed to interfere with the exercise of
rights protected under the National Labor
Relations Act or the New Jersey Employer-
Employee Relations Act.
[N.J.A.C. 12:17-2.1 (emphasis added).]
Appellants timely appealed the Department's final agency
decision promulgating these new regulations. Fundamentally,
they contend that the regulations are inconsistent with the
policies of the Act in many respects, and are arbitrary and
capricious.
18 A-4636-14T3
Most centrally, appellants contend that the inclusion of
"negligence" concepts within the definition of simple misconduct
in N.J.A.C. 12:17-2.1 is contrary to case law, including Silver,
Beaunit Mills, and the overall statutory scheme. They assert
that the concept of what amounts to "intentional negligence"
encompassed within the new regulation is an oxymoron, and
incapable of sensible or fair application. They further urge
that the regulatory definition of misconduct should not
eliminate a predicate ingredient of malice. To support these
various arguments, appellants point to several recent
unemployment cases in which, in the their view, agency personnel
inappropriately denied, at least initially, benefits to
claimants whose conduct was no more culpable than simple
negligence.
The Department counters that the new regulations are
presumptively valid, consistent with the terms of the statute
and case law, and neither arbitrary nor capricious. It urges
that we uphold the regulations without any modification.
II.
We start our consideration of the merits with a recognition
of the principles of appellate judicial review of administrative
agency decisions we previously applied in Silver, and likewise
apply here. It is well-established that, when reviewing an
19 A-4636-14T3
agency's adoption of a regulation on appeal, the scope of review
is "both narrow and deferential." In re Adoption of N.J.A.C.
5:96, 215 N.J. 578, 629 (2013) (internal citations omitted).
Because an agency has been delegated certain powers by the
Legislature, "[t]he grant of authority . . . should be liberally
construed to enable the agency to accomplish the Legislature's
goals." Ibid. (quoting Van Dalen v. Washington Twp., 120 N.J.
234, 245 (1990)). An agency action within that delegation of
power is therefore "accorded a strong presumption of validity
and reasonableness." Ibid. (quoting Van Dalen, supra, 120 N.J.
at 244-45).
That said, an agency may not adopt a regulation that
"extend[s] a statute to give it a greater effect than its
language permits." GE Solid State v. Dir., Div. of Taxation,
132 N.J. 298, 306 (1993) (citing Kingsley v. Hawthorne Fabrics,
Inc., 41 N.J. 521, 528 (1964) and Serv. Armament Co. v. Hyland,
70 N.J. 550, 563 (1976)). An appellate court's review of a
regulation is therefore essentially limited to determining
whether:
(1) the action offends the State or Federal
Constitution; (2) the action violates
express or implied legislative policies; (3)
the record contains substantial evidence to
support the agency's findings; and (4) in
applying the legislative policy to the
facts, the agency erred in reaching a
conclusion that could not reasonably have
20 A-4636-14T3
been made on a showing of the relevant
factors.
[In re N.J.A.C. 12:17-9.6 ex. rel. State
Dep't of Labor, 395 N.J. Super. 394, 407
(App. Div. 2007) (internal citations
omitted).]
Another core principle that guides our review here is the
notion that codified provisions, whether they be enacted within
a statute, an administrative regulation, or an ordinance, must
be interpreted sensibly in a manner that avoids reaching absurd
results. See US Bank, N.A. v. Hough, 210 N.J. 187, 202 (2012).
Although duly-enacted regulations start off with a presumption
of validity, courts are empowered to set them aside where they
are shown to be "unreasonable or irrational[.]" Bergen Pines
Cty. Hosp. v. N.J. Dep't of Human Servs., 96 N.J. 456, 477
(1984). Such flaws may be evident where the wording of a
provision is internally inconsistent, impermissibly vague, or
plainly in conflict with overarching law, which, in the case of
a regulation, could be a Constitution or an enabling statute.
See, e.g., In re N.J.A.C. 7:1B-1.1 Et Seq., 431 N.J. Super. 100,
117 (App. Div. 2013); N.J. Ass'n of Health Care Facilities v.
Finley, 83 N.J. 67, 82 (1980).
The public is entitled to be guided by regulations that are
clear, understandable, and reasonably predictable in uniform
application. That objective is particularly essential in the
21 A-4636-14T3
sphere of unemployment compensation cases, which, as appellants
emphasize, are most commonly pursued by self-represented
laypersons who have been denied benefits by an unemployment
claims Deputy or Tribunal.
Substantively, we also must be cognizant of the fundamental
conceptual difference between conduct that is "intentional" or
"deliberate" in nature from behavior that is "negligent."
"Negligence" has been defined in our law as "the failure to
exercise 'that degree of care for the safety of others, which a
person of ordinary prudence would exercise under similar
circumstances.'" Steinberg v. Sahara Sam's Oasis, LLC, 226 N.J.
344, 363-64 (2016) (quoting Model Jury Charge (Civil), 5.10A,
"Negligence and Ordinary Care – General" (2009)). By contrast,
an "intentional" or "deliberate" act connotes "conduct decidedly
more culpable[.]" Mahoney v. Carus Chem. Co., Inc., 102 N.J.
564, 577 (1986).
As this court repeatedly pointed out in Silver, supra, 430
N.J. Super. at 51, 57, 58, negligence and intentional or
deliberate wrongdoing are qualitatively different states of mind
and degrees of behavior. Within our State's statutory scheme
for unemployment compensation and decades of case law applying
it, the basic notion of "simple misconduct" requires "elements
of wil[l]fulness, deliberateness, intention, and malice." Id.
22 A-4636-14T3
at 58. An employee's mere "negligence" or "inadvertence" does
not suffice to comprise misconduct under the Act. Id. at 57.
That said, the regulations the Department adopted in 2015
fail to make this critical distinction between simple
negligence, on the one hand, and intentional, deliberate, or
malicious conduct, on the other hand, at least not consistently.
Unfortunately, the literal wording of N.J.A.C. 12:17-2.1
defining and utilizing the term "simple misconduct" confusingly
blends concepts of negligence with intentional wrongdoing that
cannot be sensibly understood or harmonized. Several aspects of
the new rule illustrate this problem.
As we have already noted, the definition of "simple
misconduct," as adopted in the new regulation, encompasses the
following:
[A]n act of wanton or willful disregard of
the employer's interest, a deliberate
violation of the employer's rules, a
disregard of standards of behavior that the
employer has the right to expect of his or
her employee, or negligence in such degree
or recurrence as to manifest culpability,
wrongful intent, or evil design, or show an
intentional and substantial disregard of the
employer's interest or of the employee's
duties and obligations to the employer.
[N.J.A.C. 12:17-2.1 (emphasis added).]
Unpacking this prose, even the most careful reader could be
readily confused on how the term "negligence" can be sensibly
23 A-4636-14T3
equated with "intentional" conduct. Or with "a wanton or
willful disregard" of an employer's interest. Or "evil design."
Or "an intentional and substantial disregard" of an employer's
interest or of the employee's duties. Such terms conveying a
person's conscious and purposeful aim to engage in wrongful
conduct are not linguistically or doctrinally consistent with
the merely careless forms of conduct that the law routinely
defines as negligent.
We are mindful that the regulation includes this qualifying
phrase after the word "negligence": "in such degree or
recurrence as to manifest[,]" and then enumerates various forms
of intentionally-based wrongdoing. It is not clear from this
wording what is meant to "manifest" such a more extreme revision
of negligence, by an unspecified level of "degree or
recurrence."
We suspect that what the drafters may have had in mind, but
do not say so precisely in the words of the regulation, was to
embrace negligence that is so severe in extent that it is
tantamount in culpability to what our case law in other contexts
sometimes refers to as "gross negligence." In fact, the
Department's brief expressly likens the negligence language
within the new regulation to gross negligence.
24 A-4636-14T3
Black's Law Dictionary defines "gross negligence" as "[a]
conscious, voluntary act or omission in reckless disregard of a
legal duty and of the consequences to another party[.]" Black's
Law Dictionary, 1197 (10th ed. 2014). The term "gross
negligence" has also at times been treated as synonymous with
"reckless negligence, wanton negligence, willful negligence,
willful and wanton negligence, [and] willful and wanton
misconduct[.]" Ibid.
Although rigid classifications of the "degrees of
negligence have been abandoned" in our case law, the term "gross
negligence" is nonetheless still used when referring to "the
upper reaches of negligent conduct." Stelluti v. Casapenn
Enters., LLC, 408 N.J. Super. 435, 457 n.6 (App. Div. 2009)
(quoting Parks v. Pep Boys, 282 N.J. Super. 1, 17 n.6 (App. Div.
1995)), aff’d, 203 N.J. 286 (2010). As the Supreme Court
recently noted, under the applicable New Jersey Civil Model Jury
Charges, the concept of gross negligence "does not require
willful or wanton misconduct or recklessness." Steinberg,
supra, 226 N.J. at 364 (citing Model Jury Charge (Civil), 5.12,
"Gross Negligence" (2009)).
Perhaps these problems of clarity and interpretation could
be solved if the regulation were revised to eliminate this
confusing and internally contradictory language, and instead set
25 A-4636-14T3
forth a clearer definition of "misconduct" that incorporated the
concept of "gross negligence." Alternatively, the regulation
also might provide that either "gross negligence" or
"intentional misconduct" can suffice. Of course, such revised
wording is not before us, and we will not render an advisory
opinion here on the subject. See De Vesa v. Dorsey, 134 N.J.
420, 428 (1993) (noting that our courts refrain from rendering
advisory opinions or exercising jurisdiction "in the abstract");
see also G.H. v. Twp. of Galloway, 199 N.J. 135, 136 (2009)
(instructing that courts should not "answer abstract questions
or give advisory opinions"); Crescent Park Tenants Ass'n v.
Realty Equities Corp. of N.Y., 58 N.J. 98, 108 (1971) (same).
In particular, a challenger might argue that gross
negligence falls short of the levels of culpability delineated
in our prior case law construing the Act, although no prior case
has squarely addressed the question. What we can and must say
is that Silver, which remains binding precedent and which we
reaffirm here, clearly requires that the Act be construed and
applied so as to not deprive claimants of unemployment benefits
based on actions or inactions that amount to nothing more than
simple negligence. The statute is designed to, and must be,
"liberally construed in favor of the allowance of benefits."
Meaney v. Bd. of Review & Atlas Floral Decorators, 151 N.J.
26 A-4636-14T3
Super. 295, 298 (App. Div. 1977) (internal citations omitted).
Although ineligible claimants who have engaged in deliberate
misconduct must be turned away, see Yardville Supply Co. v. Bd.
of Review, Dep't of Labor, 114 N.J. 371, 375 (1989), deserving
claimants who have only been merely negligent should not be
deprived of compensation.
Despite the contrary assertion of appellants, we do not
ascribe any improper policy motives to the Department in
adopting the present regulation as part of some concerted
"scheme" to deprive worthy unemployment claimants of their just
benefits. In fact, we appreciate that the self-contradictory
and confusing terminology that mixes "negligence" concepts with
"intentional wrong" concepts originates with the 1943 Am. Jur.
treatise passage itself, which was quoted in Beaunit Mills.
But, importantly, as our opinion in Silver recognized, the
court in Beaunit Mills prefaced its citation to the Am. Jur.
treatise with an important gloss. "The test [of compensability
used under our statute] is more stringent than the Am. Jur.
passage quoted in Beaunit Mills. It incorporates the other
features of the Beaunit Mills analysis, as further elucidated
and reiterated in subsequent case law." Silver, supra, 430 N.J.
Super. at 53. The test "buil[ds] upon a foundation laid down by
the Supreme Court in Bogue, the rationale of which hinged upon
27 A-4636-14T3
the incongruity of allowing benefits to 'a group of employees
[who] deliberately violate a . . . basic provision of a
collective bargaining agreement.'" Ibid. (emphasis in original)
(quoting Bogue, supra, 21 N.J. at 436). In quoting the Am. Jur.
passage without the important gloss, the Department's regulation
fails to include this key concept.
The present edition of the Am. Jur. treatise, issued in
2005, continues to read substantially the same as the 1943
version, repeating the same ambiguous phrase "negligence of such
degree or recurrence as to manifest wrongful intent or evil
design," and so on. 76 Am. Jur., Unemployment Comp., § 68 at
807 (2005). We are also aware that the unemployment laws of
several other states continue to make use of the Am. Jur.
phraseology, or comparable language. 3 Yet, as far as our
research has revealed, none of those states have the kind of
three-tiered gross misconduct/severe misconduct/simple
misconduct structure that our New Jersey statute has utilized
since the 2010 legislative amendment. Now that we have in our
state such a three-tiered statutory gradation, it does not
appear logical to "snap in" the Am. Jur. definition into the
3 See, e.g., Rossini v. Dir., Ark. Empl. Sec. Dep't, 101 S.W.3d
266 (Ark. Ct. App. 2003); Young v. Miss. Empl. Sec. Comm'n, 754
So. 2d 464 (Miss. 1999); Stalcup v. Job Serv. N.D., 592 N.W.2d
549 (N.D. 1999); Kelly v. Unemployment Comp. Bd. of Review, 747
A.2d 436 (Pa. Commw. Ct. 2000); Dailey v. Bd. of Review, W. Va.
Bureau of Empl. Programs, 589 S.E.2d 797 (W. Va. 2003).
28 A-4636-14T3
regulation indiscriminately. 4 Instead, doing so appears to have
caused confusion, and allegedly uneven and unfair application.
As an independent basis for concern, the present regulatory
definitions seem to treat as "simple misconduct" certain kinds
of employee behavior that fall within the statutory definition
of higher-level "severe misconduct," and vice-versa. For
instance, it is difficult to comprehend how an employee who has
acted with "evil design" or with "wrongful intent" is only
guilty of simple misconduct and not severe misconduct.
The regulatory definition of severe misconduct attempts to
address this overlap by requiring proof that the employee's
conduct not only be "simple misconduct" but also "both
deliberate and malicious." The term "deliberate" is not defined
in the regulations. However, the term "malicious" is defined as
follows:
"Malicious" means when an act is done with
the intent to cause injury or harm to
another or others or when an act is
substantially certain to cause injury or
harm to another or others.
[N.J.A.C. 12:17-2.1.]
4 We recognize that a regulation containing both the Am. Jur.
passage and the Beaunit Mills prefatory gloss would be unwieldy.
Hence, we offer our suggestion that the Department create from
scratch a new regulation that clearly and concisely expresses
the appropriate concepts.
29 A-4636-14T3
This definition does not resolve the overlap and definitional
problem. In fact, the solution appears to be circular. In
order to comprise the higher-grade of "severe misconduct," the
employee's behavior must be "deliberate" and "intended," or
"substantially certain" to cause injury or harm to others. That
sounds very much like simple misconduct committed with "wrongful
intent" or "evil design." If the harm (or expectancy of harm)
ingredient is what makes the difference between "simple" and
"severe" misconduct, the regulation surely could express that
line of demarcation more clearly and explicitly.
In sum, with all due deference to (and, indeed,
appreciation for) the Department's efforts to enact a clarifying
regulation defining "simple misconduct," the result of that
process has led to a linguistic morass, one that cannot be
readily or sensibly understood and applied. Although we have
pondered whether to perform "judicial surgery" on the wording of
the regulation ourselves to solve these problems, we consider it
more appropriate for the Department to go back to the proverbial
drawing board and develop a clearer and more cogent alternative
itself, considering the input of appellants and any other
commentators.
The portion of N.J.A.C. 12:17-2.1 defining "simple
misconduct" is accordingly set aside as arbitrary and
30 A-4636-14T3
capricious, without prejudice to the Department adopting a
substitute provision within no later than 180 days. In the
meantime, to avoid disruption in the statewide administration of
the unemployment benefits program, we stay our decision, sua
sponte, for that same 180-day period to enable the Department to
take appropriate corrective action or, alternatively, pursue
further review in the Supreme Court. The remainder of the new
regulations that do not concern the definition remain unaltered.
Reversed. We do not retain jurisdiction.
31 A-4636-14T3