On certification to the Superior Court, Appellate Division, whose opinion is reported at 178 N.J. Super. 221 (1981).
For affirmance -- Chief Justice Wilentz and Justices Schreiber, Pollock and O'Hern. For reversal and remandment -- Justices Pashman, Clifford and Handler. The opinion of the Court was delivered by Schreiber, J. Pashman, J., dissenting. Justice Clifford and Justice Handler join in this opinion.
This case involves the retroactivity of a school teacher's claim for employment credit for military service rendered long before the teacher's employment began.
Petitioner, Marjorie A. Lavin, served in the Armed Forces between January 2, 1943 and October 20, 1945. Twenty-three years later she was hired as a teacher by the Hackensack Board of Education. Because of her military service, she was at that
time entitled to employment credit pursuant to N.J.S.A. 18A:29-11, which reads in pertinent part:
Every [teacher] who after July 1, 1940, has served . . . in the active military or naval service of the United States . . . in time of war . . . shall be entitled to receive equivalent years of employment credit for such service as if he had been employed for the same period of time in some publicly owned and operated . . . school or institution of learning . . . except that the period of such service shall not be credited toward more than four employment or adjustment increments.
When translated into wage increments, these service credits would affect a teacher's salary. See N.J.S.A. 18A:29-8. A teacher is entitled annually to an employment increment until the maximum salary is reached. For example, a teacher with one year's military service would be treated as if he or she had completed one year of teaching.
Petitioner did not claim credit for the military service when her employment began. It was not until October 14, 1977, nine years later, that she wrote to the Superintendent of Schools of the Hackensack Board of Education. Receiving no relief, she filed a petition with the Commissioner of Education. The Commissioner found in her favor and awarded her $20,575 based on three years' military credit for salary claims retroactive to her initial employment in 1968.
Upon appeal, the State Board of Education held that the retroactive claim was limited by the six year statute of limitations and was barred in its entirety for the period of time prior to September 1978 on the basis of laches and estoppel. However, the State Board awarded petitioner two years' military service credit to be applied beginning with the 1978-79 school year. The Appellate Division affirmed, except that it held that petitioner was entitled to three years' credit, 178 N.J. Super. 221 (1981). We granted Lavin's petition for certification, 87 N.J. 402 (1981), in which she sought review of the applicability of the doctrine of laches and the statute of limitations. We granted the New Jersey School Boards Association leave to file a brief as amicus curiae. The Board of Education did not seek review of the Appellate Division's determination of the number of years of
service credit to which she is entitled and that issue is not before us.
The statute of limitations applicable to a "recovery upon a contractual claim or liability" is six years. N.J.S.A. 2A:14-1 (emphasis added). The core of the issue is whether the credit for military service, N.J.S.A. 18A:29-11, is an essential term of the petitioner's employment contract or whether it represents a statutory entitlement granted by the State in return for military service in time of war.
The legal relationship between petitioner and the Board of Education was that of employer and employee and the terms of her employment were embodied in her contract of employment. Miller v. Board of Chosen Freeholders, Hudson County, 10 N.J. 398 (1952). Petitioner claims that the statute awarding her service credit for time spent in the military was incorporated as a matter of law as a provision in the employment agreement. This would undoubtedly be so if the additional compensation for military service was for work rendered or to be rendered in her position as a teacher.
An example illustrative of that situation may be found in Miller v. Board of Chosen Freeholders, Hudson County, supra. A statute enacted in 1938 provided that the minimum salary for prison guards was $2,000 per annum. Miller, who had been a guard since 1931, was being paid a salary of $1,750 per annum at the time the new law became effective. The County continued to pay him at that rate until his death in May 1939. The administratrix of his estate sued in 1949 to recover the shortfall. The Court held that the six-year statute of limitations applied because of the contractual nature of the claim. The statutory provision, requiring that guards were to receive $2,000 minimum annual salary for their work, was deemed to be incorporated in the employment contract and the Court observed that the claim was one for the reasonable value of the services rendered as a guard. Justice Brennan, joined by Justice Heher, dissented. He contended that the salary increase did not result from an
agreement between the parties, but was mandatorily established by the Legislature. Thus the statutory entitlement was something apart from the employment agreement.
Whether the benefit flowing from a statute is to be considered a statutory entitlement or a term of the public employee's contract of employment depends upon the nature of the benefit and its relationship to the employment. Stating the problem in terms of incorporation in the employment contract or as a statutory benefit begs the question. Rather, attention should be directed to the purpose of the statute and its relevance and materiality to the employment.
When tested by this approach the Miller result is sound. There the dollars fixed in the statute were directly related to the services to be rendered. The implicit incorporation of such a provision in the employment contract was appropriate, since it went to the essence of the contract, namely, rate of pay for services to be performed. The only purpose of the statute was to fix the pay for prison guards.
This situation is to be differentiated from those in which there is no such nexus. Where the benefit is not directly related to the employment service, but is being awarded for a totally unrelated reason, the recipient is truly the beneficiary of a statutory entitlement quite apart from the employment as such. One could articulate the legal theory that every statutory provision having some effect on the employee has been impliedly incorporated into the contract, so that failure to comply with that provision constitutes a breach of the employment agreement. Yet, ...