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NJ’s Top Court Rules Pay Increases May Stay in Effect After Contracts Expire

NJ high court says contracts can specify annual increases to be paid beyond the term of the contract itself

supreme court 3-2
New Jersey Supreme Court at the Richard J. Hughes Justice Complex in Trenton

Public employers in New Jersey must continue to give workers the annual increases entitled them under an established salary guide even after a union contract has expired — as long as the contract specifies that they continue — the state Supreme Court ruled Wednesday.

The unanimous decision was a victory for public unions. But at the same time, the Supreme Court did not rule on a broad doctrine known as “dynamic status quo” that has guaranteed employees continue to receive negotiated incremental increases based on longevity in a job after a contract’s expiration for most of the past 42 years.

Justice Lee Solomon wrote in the case pitting local police unions against Atlantic County and Bridgewater that the court “need not look beyond the contracts themselves to conclude that the step increases continued beyond the expiration of the contracts” because both contracts in dispute said that they would. As a result, Solomon continued, the court “need not” make a ruling about the dynamic status quo doctrine and so the court’s conclusion in this case might not apply to others.

“Our decision today does not govern future negotiations, other than to suggest that parties would be wise to include explicit language indicating whether a salary guide will continue beyond the contract’s expiration date,” the decision states.

“The impact of the Court’s decision is limited,” said Mike Cerra, assistant executive director of the New Jersey State League of Municipalities. He noted that the court “relied on contract language” in its decision and “avoided taking up the issue” of the dynamic status quo doctrine the state Public Employment Relations Commission had used for decades in deciding disputes over expired contracts.

Abandoning dynamic status quo

What public employers and the unions had hoped to settle, each for their own benefit, is whether PERC was right in abandoning dynamic status quo in 2013. From 1975 until then, PERC’s position was that an employer was still obligated to pay incremental increases along the salary guides of expired contracts, so that union members still had to receive a small bump in pay as they achieved a new milestone on the guide — for instance, on an employee’s hire date he was eligible to move up one step on the guide, earning a small increase. Those at the top of a guide were ineligible for any incremental increase because they could no longer move up.

Still, Patrick Cooligan, president of the New Jersey State Police Benevolent Association, called the decision “huge” and a “rebuke” of the state.

In this case, when the contracts between Atlantic County and two of its unions — the Fraternal Order of Police and Prosecutor’s Office PBA — expired at the end of 2010, the county informed the unions it would not continue to pay annual salary increases under an automatic increment system. It gave as a reason that it was “no longer efficacious or reasonable” to continue to pay increases because the enactment of a 2 percent cap on property tax increases and a 2 percent cap on salary increase in contracts created through arbitration had changed the negotiations landscape significantly.

Two years later, when its contract with its PBA union expired, Bridgewater Township took the same action.

Unfair labor practices

The unions filed charges of unfair labor practices with PERC. While hearing officers agreed with the unions, the full commission disagreed and dismissed the cases.

In its 2013 ruling on the Atlantic County matter, PERC stated that the tax levy and arbitration caps had not been contemplated when the commission adopted the dynamic status quo doctrine, an effort to create a level playing field in negotiations by allowing workers to continue to receive incremental increases agreed to in an expired contract. The commission ruled that the “public policy underlying labor negotiations in New Jersey” had changed and stated that “the dynamic status quo no longer fulfills the needs of the parties in that it serves as a disincentive to the prompt settlement of labor disputes, and disserves rather than promotes, the prompt resolution of labor disputes.”

The unions appealed to the Appellate Division of Superior Court, which reversed PERC’s decision. It found the commission “went beyond the permissible scope of its authority” in interpreting the Legislature’s intent in passing the tax and arbitration caps and that “neither statute preempted the viability of the dynamic status quo doctrine.” The judges ruled that “the fiscal health of municipalities and tax rates are not within PERC’s charge” and that the commission could not “abandon” its 42-year old doctrine.

Friend of the court

With potentially a lot of money riding on the outcome, other unions and municipal and county organizations filed friend of the court briefs when the state’s highest court agreed to hear the matter.

But the court did not weigh in on the dynamic status quo doctrine, saying it not need to address that issue because the contracts between the unions and Atlantic County and Bridgewater specifically stated that their provisions would remain in force until a new contract was negotiated.

“We’re disappointed that the Supreme Court did not reinstate PERC’s decision to vacate the Dynamic State Quo Doctrine,” said John Donnadio, executive director of the New Jersey Association of Counties, which had filed one of the amicus briefs. “The Court’s ruling does not appear to take into consideration the Doctrine’s impact on property taxpayer dollars, and how counties and municipalities are struggling to make ends meet. Moreover, the ruling will make it more difficult for local governing bodies to negotiate successor contracts with collective bargaining units as the Doctrine provides a disincentive for settling disputes in a timely manner.”

As a result, it’s unclear whether the decision may affect other instances of incremental increase withholdings. The largest group affected are the thousands of state workers who have not received a pay increase since 2015, when Gov. Chris Christie denied their incremental pay increases on the expiration of their contracts. The Communications Workers of America contends that Christie used PERC’s decision in the Atlantic County and Bridgewater cases as precedents to justify withholding the increases. Had the state followed past practice, it would have given at least small pay hikes to those who had not reached the tops of their pay scales. Among those affected are state office workers, college professors, and corrections officers.

“With today’s decision, we hope that the Administration and all New Jersey public employers will restore the increments and follow a law that has existed for more than forty years,” said Hetty Rosenstein, New Jersey State Director of the Communications Workers of America, which represents 35,000 state workers, thousands of whom have gone without the increments since the contract expired. “However, if they do not, then today’s decision makes clear we have the legal tools to restore the increments.”

At the moment, the Appellate Division’s conclusion that PERC cannot “simply discard” the dynamic status quo doctrine remains in force.

There is nothing stopping the drafting of contracts that specify that any salary increments or other provisions will not be honored once the agreement expires. Both sides would have to agree to such terms, and some have in the past, as Solomon cited a three-year pact between the Ho-Ho-Kus Board of Education and its teachers union as specifying that increments would not be automatically continued in the year after the contract expired.

The Supreme Court decision states that contracts should make that clear if both sides want to remove any doubt about their intentions and did not give an indication of how it might rule.

“Had the Atlantic County and Bridgewater Township agreements been silent about whether the terms of the salary increment system were to continue, the issue in this appeal would be more complicated,” Solomon wrote. “It might well have required careful consideration of past practices, custom, and the viability of the dynamic status quo doctrine.”

That language gave Cerra hope. “This case likely would have gone very differently had the contracts not contained such language and the Court would have likely agreed with PERC’s decision to abandon its outdated doctrine,” Cerra said. “Thus, that issue may again be addressed by the Courts at a future date.”

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