Supreme Court Rejects PERC Decision on Salary Increments

In the Appellate Division’s decision in the consolidated cases involving Atlantic County and PBA Local 243, FOP Lodge 34 and PBA Local 77 and Bridgewater and PBA Local 174, the Appellate Division addressed a public employer’s duty to pay salary step increments after a contract has expired and before a new contract has been negotiated. The Appellate Division reversed PERC in a very strong decision and concluded that a public employer must maintain the status quo, including salary step increases, until a new Agreement is reached. This unanimous decision was appealed by Atlantic County and Bridgewater Township, and the Supreme Court agreed to hear this case.

Not surprisingly, this case drew attention from a number of public sector unions and employer organizations. The New Jersey State PBA, represented by our office, appeared in the case as an amicus and argued for the Supreme Court to affirm the Appellate Division’s decision. The New Jersey State PBA was joined by a number of public sector unions, including the NJEA, FMBA, IFTPE, PFANJ, CWA and the FOP. On the employers’ side, the Governor’s Office of Employee Relations, the New Jersey School Boards Association, the League of Municipalities, New Jersey Council of County Colleges, Morris County and the New Jersey Association of Counties joined the appeal and argued to reverse the Appellate Division’s decision.

In another unanimous decision, In re Cty. of Atlantic, A-98/99/100 September Term 2015, 077447, 2017 N.J. LEXIS 821 (August 2, 2017), the Supreme Court again rejected PERC’s decision. The Supreme Court affirmed the Appellate Division’s decision and held that PBAs were entitled to rely upon and enforce clear and explicit language that terms and conditions of employment, including payment of salary steps, would continue until a new agreement was reached. In other words, the payment of salary step increments remained in full force and effect after the contract expired under basic principles of contract law.

By way of background, this case began when Atlantic County informed the PBA and FOP that officers’ movement in the salary guide would cease upon expiration of the then current contract. Although Atlantic County acknowledged it was customary practice to continue with the salary guide, it claimed that it was “no longer efficacious or reasonable” to follow it. In support of its argument, the County argued that the property tax levy cap and the interest arbitration salary cap “preempt the previous standards of practice and render continued salary guide movement impractical and unduly burdensome.” In short, Atlantic County refused to pay salary steps after the contract expired.

Thereafter, the PBAs and FOP filed unfair practice charges with PERC and sought injunctive relief. The then new PERC Chair refused to follow over 35 years of precedent and denied the unions’ request. Eventually, the case went before a PERC Hearing Examiner who followed this precedent and determined that the public employer must follow the agreement, and continue payment of the salary steps after the agreements’ expiration. It was not surprising that PERC rejected the Hearing Examiner’s decision and dismissed the unfair practice charges.

After PERC issued its decision, Bridgewater Township notified PBA Local 174 that it would also refuse to pay the salary step increments once the agreement expired. The PBA filed for grievance arbitration. An arbitrator agreed with the PBA’s position and the award was confirmed in Superior Court. While the issue was in arbitration, the Township filed a scope of negotiations petition to block arbitration. PERC, again not surprisingly, found that the issue of payment of salary steps after expiration of a contract was not even a negotiable subject based on its Atlantic County decision. Local 174 filed an appeal and the Appellate Division consolidated all three appeals and reversed PERC’s decision.

In its decision, the Supreme Court had no trouble affirming the Appellate Division. It relied upon the clear language in the contracts of each Local. As it pertained to PBA Local 174 and PBA Local 77, the Supreme Court stated that the expired CNAs “contain[ed] clear and explicit language that the respective salary guides – and all other terms and conditions set forth in those agreements – will continue until a successor agreement is reached.” The contract language in PBA Local 174 explicitly stated: “[t]his agreement shall remain in full force and effect during collective negotiations between the parties beyond the date of expiration set forth herein until the parties have mutually agreed on a new agreement.” Similarly, the contract language in PBA Local 77 stated “[a]ll provisions of this Agreement will continue in effect until a successor Agreement is negotiated.” The language in the contracts is clear, and as such, the Supreme Court found that “the salary increments systems remained in effect after the agreements’ expiration dates.”

The Supreme Court reached the same result for FOP Lodge 34. The agreement for FOP Lodge 34 provided “[a]ll terms and conditions of employment, including any past or present benefits, practices of privileges which are enjoyed by the employees covered by this Agreement that have not been included in this Agreement shall not be reduced or eliminated and shall be continued in full force and effect.”

In short, the Supreme Court very easily rejected the actions of the public employers and emphasized that the positions taken by Atlantic County and Bridgewater Township “directly contradicted the parties’ binding written agreement” and, therefore, violated the agreements and the law when they refused to pay salary step increases after the expiration of the contracts. The Supreme Court noted that both Atlantic County and Bridgewater could have negotiated different contract terms but did not.

The Court’s decision is a very welcome development when good news is sometimes scarce. It should be a lesson to PERC that the agency is supposed to protect, not reject, the public policy favoring negotiations over terms and conditions of employment. The key takeaway from the Supreme Court’s decision is that public employee unions should review their collective negotiations agreements to determine if there is language similar to the language in the PBA and FOP agreements in this case. If the language is the same or similar, the public employer will generally have to continue with salary step increases until the execution of a new agreement. Public unions should also check for any other language which may affect whether salary steps are paid after contract expiration. If there is no similar contractual language or if the language is unclear or ambiguous, the public employer may still be required to pay salary step increases after the agreement’s expiration if there has been a consistent past practice. Each situation will depend on the language in the agreement and, perhaps, the extent of any past practices. Public unions should discuss the impact of this decision with their attorneys if there is any question about the provisions of their contracts.

©2017 Zazzali, Fagella, Nowak, Kleinbaum & Friedman. Blog is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between the Zazzali Law Firm and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. Reproduction in whole or in part is prohibited without the express written consent of the Zazzali Law Firm.