On appeal from the Final Administrative Decision of the Public Employment Relations Commission.
Petrella, Conley and Villanueva. The opinion of the court was delivered by Villanueva, J.A.D.
The State of New Jersey, Office of Employee Relations ("State") appeals from the final decision of Public Employment Relations Commission ("PERC") determining that the adoption of a revised code of ethics by the Department of Treasury ("Treasury") so far as it prohibited its employees from preparing non-New Jersey tax returns, as being a conflict of interest, is mandatorily negotiable. Communications Workers of America ("CWA") cross-appeals from PERC's decision that so far as the revised code prohibited Treasury's employees from preparing New Jersey tax returns is not mandatorily negotiable. We reverse that part of the decision regarding the preparation of tax returns other than New Jersey, but affirm the decision regarding the preparation of New Jersey tax returns.
Treasury promulgated its first code of ethics in January 1972, which covered all subdivisions of Treasury including the Division of Taxation ("Division"). The 1972 code of ethics closely followed the general guidelines for ethical conduct set forth in N.J.S.A. 52:13D-23. Prohibited conduct included outside employment which would impair objectivity or independent judgment, or create an impression of conduct violative of the public trust. Further, the original code required employees to obtain approval from the
appropriate authority to engage in outside employment, but did not contain any outright ban against outside employment.
In subsequent years, the Division undertook a reevaluation process as to the appropriateness of employees of the Division engaging in outside employment involving the preparation of tax returns and other related tax matters. This concern was especially directed at auditors within the Division whose responsibilities included auditing tax returns, investigating civil and criminal tax violations and collecting funds from delinquent tax accounts. Of the 400 auditors in the Division, approximately forty percent were engaged in outside employment involving tax preparation, accounting or bookkeeping. As a result, Treasury determined that its code of ethics needed revision and updating to keep pace with changing ethical standards.
Therefore, Treasury developed a new code of ethics which applied to all of its divisions, including the Division of Taxation. The revised code of ethics placed certain restrictions on the outside employment of Division employees on the basis that the restricted employment constituted a conflict of interest or an appearance thereof in violation of the Conflicts of Interests Law, N.J.S.A. 52:13D-12 to -27. This revised code of ethics was developed without input from CWA, the employees' collective bargaining agent. In December 1990 and January 1991, the Treasurer and the Acting Director of the Division communicated with all employees of the Division concerning the employment restrictions set forth in the proposed Treasury code of ethics.
In accordance with the Conflicts of Interest Law, the proposed revised Treasury code of ethics was submitted to the Executive Commission on Ethical Standards ("ECES") for its consideration and approval. N.J.S.A. 52:13D-23(b). Upon review of the proposed code of ethics by the Attorney General, as required by statute, the ECES approved the revised Treasury code of ethics on January 17, 1991, with an effective date of February 15, 1991.
On February 8, 1991, CWA filed before PERC an unfair practice charge against the State alleging that Treasury refused to
negotiate on certain revisions to the Treasury code of ethics, specifically, those portions of the revised code of ethics which prohibit employees of the Division from engaging in outside employment involving the preparation of tax returns. CWA sought interim relief to stay the implementation of the Treasury's revised code of ethics. PERC's designee partially granted CWA's requested relief and enjoined Treasury from implementation of its code of ethics to the extent that it barred Division employees from working on tax problems or returns or determining tax liabilities regarding federal and foreign state taxes, but determined that the code of ethics could be implemented to the extent that it prohibited private employment by Division employees on tax matters processed or reviewed by the Division. We denied the State's motion for leave to appeal.
PERC determined that the provision*fn1 as it prohibited outside employment including the preparation of federal and other states' tax returns was not preempted and was mandatorily negotiable. PERC further determined that the provision as it prohibited outside employment with regard to ...