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Matter of New Jersey Transit Bus Operations

Decided: July 22, 1991.


On certification to the Superior Court, Appellate Division, whose opinion is reported at 233 N.J. Super. 173 (1989).

For remandment -- Chief Justice Wilentz, and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi, and Stein. Opposed -- None. The opinion of the Court was delivered by Wilentz, C.J.


[125 NJ Page 43] In 1979 the Legislature passed the Public Transportation Act (the Act), L. 1979, c. 150, N.J.S.A. 27:25-1 to -24, creating New Jersey Transit (NJT), a public corporation, for the purpose of converting New Jersey's mass-transit system from one of private enterprise to one owned and operated by the State. NJT, through use of federal funds, either directly or through subsidiaries

acquired mass-transit companies and their assets, mainly buses and trains, and became the employer of the existing mass-transit work force. This case involves the rights of that work force, formerly protected by private sector collective bargaining agreements.

The question presented is whether NJT employees' labor rights are identical (except for explicit statutory differences) and limited to those granted to all other public employees in New Jersey under the Employer/Employee Relations Act (EERA), N.J.S.A. 34:13A-1 to -21, or whether the Act intended different standards to apply to these employees in recognition of their former status as unionized workers for a private enterprise. Specifically, the question is whether the scope of negotiations, that is to say the matters about which the employees and the employer are required to negotiate, is subject to the restrictions imposed by this Court in interpreting the EERA, see State v. State Supervisory Employees Association, 78 N.J. 54, 67, 80-82, 393 A.2d 233 (1978) (State Supervisory), or whether the Act allows, as held by the Public Employment Relations Commission (PERC) in its decision below, a substantially broader ambit of negotiations.

In State Supervisory, we ruled that three considerations determine whether a subject is negotiable under the EERA. First, it must "intimately and directly affect the work and welfare of public employees." Id. at 67, 393 A.2d 233. Second, it must "not significantly interfere with the exercise of inherent management prerogatives pertaining to the determination of governmental policy." Ibid. Third, the subject must not have been preempted by statute or regulation. Id. at 67, 80-82, 393 A.2d 233. See In re IFPTE Local 195 v. State, 88 N.J. 393, 404-05, 443 A.2d 187 (1982) (setting forth the three-part test). PERC concluded that the Legislature did not intend those tests to apply to the relationship between NJT and its employees, but rather that the scope of negotiations, except for explicit statutory provisions, both in the Act and elsewhere, is limited only so

far as is necessary to assure the accomplishment of NJT's "statutory mission." The Appellate Division reversed PERC's decision, concluding that NJT employees are to be treated the same as all other public employees, except as explicitly provided in the Act.

We reverse. We hold that the Legislature intended to confer such rights on these employees as would place them in the same position they had in the private sector, subject only to the overriding responsibility and power of government to accomplish the goals of the Act. In particular, we are in accord with PERC's "statutory mission" standard, subject to modification by PERC or by this Court in the event its application in the future falls short of that goal.


Pursuant to the provisions of the Act, in 1980 NJT acquired Transport of New Jersey, a private bus company, and its subsidiary Maplewood Equipment Company, and in 1984 NJT acquired Mercer County Improvement Authority, which operated bus services in Mercer County. The acquired companies had millions of dollars of equipment and thousands of employees, who were largely unionized members of the New Jersey Council of Amalgamated Transit Union, United Transportation Union Local 33, Transport Workers Union of America Local No. 225, and Division 540 of Amalgamated Transit Union. (We refer to them throughout as the unions.) Collective bargaining agreements were in place covering the union members at the time of the acquisition. The Act explicitly preserved the rights of the employees under those agreements until the expiration date of the agreements. The issue before us arises from the attempt of NJT and the unions to negotiate new contracts. The dispute between NJT and the unions concerns what matters are properly the subject of negotiations and what matters are committed

to the exclusive determination of the employer, NJT.*fn1 The dispute regarding the scope of negotiations goes to the heart of the employer/employee relationship, for it determines which matters employees may negotiate about and thereby assure protection of their interests, and which matters may be unilaterally determined by the employer. "Scope of negotiations" determinations are important in all public employee cases, but especially here, for although there is no right to strike, there is a provision in the Act allowing interest arbitration when the employer and employee fail to agree concerning a matter. N.J.S.A. 27:25-14c (making applicable N.J.S.A. 34:13A-16(d)(2) to -21, providing interest arbitration for police and fire departments). Therefore, if a matter is within the scope of negotiations, the Act entitles the employees not only to negotiate but if unsuccessful at the negotiating table, assures them, if impasse results, of a determination by a neutral arbitrator.

In the course of the contract renewal negotiations, numerous disputes developed regarding the appropriate scope of those negotiations. For instance, the parties disputed whether issues such as seniority, bidding of runs, and filing of vacancies are subject to mandatory negotiation. Pursuant to the EERA, NJT filed seven petitions with PERC for scope determinations. The unions contended that their labor rights are governed by the Labor Management Relations Act (LMRA), 29 U.S.C.A. §§ 151-187, and that their rights as employees, except for the right to strike, are precisely the same as those of other employees in the private sector. NJT contended that except for certain explicit provisions in the Act, the rights of these new public employees are governed by the EERA and are no greater than the rights of any other public employees. PERC rejected both contentions and formulated its own standard, a new standard, concerning

scope of negotiations and, inferentially, the extent of the rights of these new public employees. Based on its analysis of the Act, PERC decided that the proper standard to determine scope was whether allowing negotiations on a matter would substantially interfere with the accomplishment of the statutory mission of NJT: if it would, negotiations were barred, if not, negotiations were mandatory. Applying this standard, PERC ruled that practically all the contested matters were subject to mandatory negotiations. NJT appealed to the Appellate Division maintaining its prior position.*fn2 The unions did not cross-appeal but rather accepted, as they do here, PERC's formulation of the appropriate standard.

The Appellate Division, finding evidence in the Act pointing both ways, concluded that the requisite clarity of legislative intent necessary to treat these employees differently from other public employees was lacking; and furthermore, that the Act is devoid of any indication whatsoever that would support the standard adopted by PERC. It found the legislative history unpersuasive and held that the Legislature intended to treat NJT's employees precisely the same as other public employees, except where the statute explicitly provided the contrary. Consequently, the Appellate Division reversed and remanded the matter to PERC for its application of the EERA standards.

On the union's and PERC's petitions, we granted certification. 118 N.J. 196, 570 A.2d 960 (1989). Subsequently, PERC rendered a second opinion. In accordance with the Appellate Division's decision, PERC applied the EERA standards to NJT's scope petitions. Practically all the contested matters that it then decided were not subject to negotiations had previously

been ruled mandatorily negotiable under its prior decision. PERC's second opinion demonstrates the significance of the statutory mission test and highlights the differences between it and the standard applicable to public employees in general.


Mass transit in this country traditionally had been the domain of private enterprise. Its workers generally were subject to the same rules, practices, laws, and regulations as others in private employment. Private-sector labor relationships in modern times have been governed by the LMRA with the full panoply of collective bargaining rights, including the right to strike, unfair labor practices, and administrative rule making.*fn3 As the private sector's inability to operate mass transit efficiently and profitably became apparent, government started to subsidize private operations, and did so quite heavily. The need for mass transit, especially in urban areas, was generally recognized. After some time, however, subsidies were perceived as ineffective, not a sufficient answer to the problem. Whatever the cause -- and both management and labor inefficiencies were identified -- the situation did not improve.

In 1964 Congress responded to the problems of mass transportation by enacting the Urban Mass Transportation Act (UMTA), 49 U.S.C.A. App. §§ 1601-21. UMTA makes substantial federal funds available to the states to enable them to acquire and to operate mass transit systems. This financial aid is the heart of UMTA and reflects Congress' belief that government ownership and operation of mass transit promised greater

results than did subsidies. In effect, Congress concluded not only that subsidies were needed to assure this vital service, but that government could manage mass transportation better than private enterprise could.

Whatever the basis of Congress' conclusion that government could better manage the buses and trains, it was not premised on any notion of increasing the legal power of the employer (government) in its relations with its employees. UMTA explicitly conditions its grants on a State's assurance that the formerly unionized workers would retain protections and rights similar to those they had formerly enjoyed. Pursuant to UMTA, the Secretary of Labor must, as a condition of assistance, certify that "fair and equitable arrangements are made . . . to protect the interests of employees affected by such assistance . . ., [including] the continuation of collective bargaining rights." 49 U.S.C.A. App. § 1609(c). No grant for either capital or operating expenses may be made unless the Secretary of Labor certifies that such protection is assured. UMTA allows for decertification, and presumably the ultimate loss of grants, when that condition is not satisfied.

Without doubt, but for UMTA, New Jersey -- and most States -- would not have acquired these mass-transit facilities when it did. Federal money was critical to the acquisition. And without doubt the Act itself was designed to satisfy the UMTA condition. We do not suggest that the Act must therefore be read so as to conform perfectly to that condition, for as noted later there is considerable doubt about its precise, and perhaps even its general, requirements. The point here, as the Act and its history show, is that from ...

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