On certification to the Department of Labor and Industry.
For affirmance -- Justices Sullivan, Clifford, Schreiber and Handler. For reversal -- Justices Pashman and Pollock. The opinion of the Court was delivered by Handler, J. Pashman and Pollock, JJ., dissenting.
The Office of Administrative Law, created pursuant to L. 1978, c. 67, N.J.S.A. 52:14F-1 et seq., is given general jurisdiction to conduct the hearings in contested cases for all state agencies through independent administrative law judges. A few state agencies and certain kinds of contested matters, however, are excluded by express statutory provision from the coverage of the Office of Administrative Law. This appeal addresses the question of whether the hearing of contested claims for unemployment compensation, as presently conducted by the appeal tribunals and board of review in the Division of Unemployment and Temporary Disability in the Department of Labor and Industry, comes within the statutory exemption.
The issues in this appeal originated with an inquiry from Legal Services of New Jersey, on behalf of appellant Unemployed-Employed Council of New Jersey to the Commissioner of the Department of Labor and Industry. The Commissioner took the position that the appeal tribunals and board of review, which adjudicate contested unemployment compensation claims in the Division of Unemployment and Temporary Disability Insurance (formerly the Division of Employment Security, referred to herein simply as "Division") under the unemployment compensation law, N.J.S.A. 43:21-1 et seq., are excluded from the jurisdiction of the Office of Administrative Law (OAL) by the terms of N.J.S.A. 52:14F-8(b). A similar inquiry was directed to the Director of the Office of Administrative Law and Chief Administrative
Law Judge, who acquiesced in the result reached by the Commissioner on the alternate ground that the Commissioner had the authority to determine under N.J.S.A. 52:14F-7(a) that such cases were not to be considered "contested" and for that reason did not come under the jurisdiction of the OAL.*fn1 Pursuant to N.J.S.A. 52:14B-8 appellant then formerly requested a declaratory ruling from the Commissioner, who complied by confirming his prior position, supported by an accompanying legal memorandum from the Attorney General. Appellant appealed this ruling to the Appellate Division and the case was directly certified by the Court pursuant to R. 2:12-1. For the reasons herein presented, we now affirm the position of the Commissioner and Attorney General.
The Office of Administrative Law (OAL) was established by L. 1978, c. 67, N.J.S.A. 52:14F-1 et seq., to be effective on January 6, 1979. This new governmental body constitutes the culmination of years of effort to achieve fundamental reforms affecting the administrative agencies of state government. The signal improvement encompassed by the new program is the establishment of a corps of independent hearing officers, referred to as "administrative law judges," directly responsible to the Director of the Office of Administrative Law. N.J.S.A. 52:14F-3, 4, 5. The Office of Administrative Law itself is not functionally a part of any other state administrative agency. N.J.S.A. 52:14F-1. Its Director, who is also the Chief Administrative
Law Judge, is appointed by the Governor with the advice and consent of the Senate. N.J.S.A. 52:14F-3. The foremost responsibility of the administrative law judges under the new law is to conduct the hearings in contested cases that arise in the various administrative agencies of the State. N.J.S.A. 52:14F-5.
The major purpose of this legislation is to bring impartiality and objectivity to agency hearings and ultimately to achieve higher levels of fairness in administrative adjudications. Committee Statement to Senate No. 766- L. 1978, c. 67 ("Committee Statement"). While the law establishing the OAL deals with other important aspects of administrative practice and procedure, such as the promulgation and publication of agency rules and regulations (N.J.S.A. 52:14B-7, N.J.S.A. 52:14F-5(e), (f)), the salient reform of the law is directed most particularly to the hearing function of agencies engaged in quasi-judicial proceedings.
The act recognizes that in the administrative adjudication of contested cases, the hearing, as distinguished from the ultimate decision, is usually handled separately from the decision itself. Typically, such hearings were delegated to agency employees acting as hearing examiners. In the Administrative Procedure Act, to which the enactment creating the OAL was a supplement and amendment, these examiners were referred to as "presiding officers," N.J.S.A. 52:14B-10(a), and were usually employees of the agency with diverse duties in addition to their hearing responsibilities. They were often used only part-time in the hearing of cases and were generally subordinate and accountable to the decisional head of the agency with respect to the performance of their duties. It was widely perceived that this format for administrative agency adjudication greatly diminished the impartiality and objectivity of agency decisions. The use of such employees as hearing officers fostered an institutional bias or propensity in favor of the agency with respect to factfinding and recommended decisions that was felt to be unfair to the parties whose rights were being adjudicated.
Committee Statement, supra; see City of Hackensack v. Winner, 82 N.J. 1, 36-37 (1980). The OAL legislation was a response to this concern.
In this case, it is conceded that the hearing of contested unemployment compensation cases arising within the Division of Unemployment and Temporary Disability Insurance would fall within the ambit of the statute and would be required to be conducted by an administrative law judge under the jurisdiction of the OAL,*fn2 unless otherwise excluded. The Commissioner and Attorney General claim that such a statutory exclusion is applicable.
The exclusionary provision is N.J.S.A. 52:14F-8 which states:
Unless a specific request is made by the agency, no administrative law judge shall be assigned by the director to hear contested cases with respect to:
a. The State Board of Parole, the Public Employment Relations Commission, the Division of Workers' Compensation, the Division of Tax Appeals, or to any agency not within section 2(a) of P.L.1968, c. 410 (C. 52:14B-2(a));*fn3
b. Any matter where the head of the agency, a commissioner or several commissioners, are required to conduct or determine to conduct the hearing directly and individually.
The Commissioner contends that the contested cases conducted by the appeal tribunals and the board of review come within the exclusion of subsection b. It is asserted that each of these levels of review constitutes a separate agency and that the members of each of these agencies are decisional officers, thereby qualifying as "[t]he head of the agency."*fn4 Moreover, it is said, the decisional officers of these respective agencies are empowered by the statute governing unemployment compensation cases to hear contested claims "directly and individually." Therefore, it is urged, the hearing of contested employment compensation cases in these agencies is excluded by the language of N.J.S.A. 52:14F-8(b) and is not subject to transfer or assignment to administrative law judges.*fn5
In addressing this argument, we must first examine the statute establishing the structure and responsibility of the appeal tribunals and board of review in the Division of Unemployment and Temporary Disability Insurance. The unemployment compensation law was enacted originally in 1936 (L. 1936, c. 270) in conjunction with the federal Social Security Act, 42 U.S.C.A. § 301 et seq. A fundamental requirement of the federal law is that unemployment compensation matters be adjudicated by an
"impartial tribunal." 42 U.S.C.A. § 503(a)(3). The State law was drafted to comply with this indispensable condition.
Unemployment compensation matters are administered by the Division within the Department of Labor and Industry. N.J.S.A. 43:21-6(a). At the lowest administrative level, a claim for unemployment compensation benefits is referred to a "representative designated by the director," called a "deputy," who is authorized to render an initial determination. N.J.S.A. 43:21-6(b)(1). The determination of the deputy granting or disapproving claims becomes final unless an appeal is taken. Id. Such an appeal may be taken to an intermediate appellate body. N.J.S.A. 43:21-6(c).
This level is constituted by "one or more impartial appeal tribunals consisting in each case of either a salaried examiner or a body, consisting of examiners under the supervision of a Chief Appeals Examiner all of whom shall be appointed [by the Director of the Division, with the approval of the Commissioner] pursuant to the provisions of Title 11 of the Revised Statutes, Civil Service and other applicable statutes." N.J.S.A. 43:21-6(d). These appeal tribunals are vested with the statutory power to ". . . hear and decide disputed benefit claims . . . ." Id. The decision of the appeal tribunal is deemed to be final unless an appeal is taken to the board of review. N.J.S.A. 43:21-6(c).
The board of review consists of three persons appointed by the director "whose duties shall be to act as a final appeals board in cases of benefit disputes . . . and to . . . [supervise] the work of local appeal tribunals . . . ." N.J.S.A. 34:A-19; N.J.S.A. 43:21-10(d). The board of review must "permit such further appeal by any of the parties interested in a decision of an appeal tribunal which is not unanimous and from any determination which had been overruled or modified by any appeal tribunal," and, on its own motion, it can "affirm, modify, or set ...