On certification to the Superior Court, Appellate Division.
The opinion of the Court was delivered by Handler, J. Chief Justice Poritz and Justices Pollock, O'hern, Garibaldi, Stein and Coleman join in Justice HANDLER's opinion.
The opinion of the court was delivered by: Handler
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
State Troopers Fraternal Association of New Jersey, Inc., et al. v. State of New Jersey, et al. (A-59-96)
Argued January 6, 1997 -- Decided April 24, 1997
HANDLER, J., writing for a unanimous Court.
In this appeal, the Court considers the applicability and enforceability of a retroactive pay adjustment under a collective-negotiations agreement that was reached with the State after certain troopers resigned in good standing.
A group of former state troopers sought to recover a retroactive pay adjustment under a collective-negotiations agreement that was reached with the State after the troopers had resigned in good standing. The collective-negotiations agreement ("the agreement") under which New Jersey State Troopers worked expired on July 1, 1987. By that point, the State Troopers Fraternal Association ("STFA"), which represents the troopers in employment matters, and the New Jersey Division of State Police ("State Police") had not yet reached an accord on a successor agreement. While the parties negotiated, the troopers continued to work under the old pay scale. Three years later, in April 1990, the parties finally arrived at an understanding and executed an agreement to cover the period from July 1, 1987 to June 30, 1990. The parties predated the agreement as having taken effect on July 1, 1987.
During the course of negotiations, the issue of retroactive pay adjustments for the three-year period arose. Article X of the agreement provided for all salary adjustments to be made consistent with the provisions, practices and policies of the State and in accordance with the State Compensation Plan effective "at the time." The unwritten practice of the State Police since 1970 had been to provide retroactive pay adjustments to troopers who had resigned in good standing during the adjustment period. Implementation of that unwritten practice, however, was complicated by the promulgation of a statewide regulation on September 6, 1988 (during collective negotiations) that rendered employees who had resigned during the adjustment period ineligible to receive retroactive pay adjustments.
A total of nineteen troopers had resigned from the force in good standing between July 3, 1987 and October 20, 1989. After the agreement was executed, the former troopers requested the retroactive pay adjustment for the covered period during which they had worked. The State, citing the regulation, refused the request. The troopers, through the STFA, brought suit in the Law Division against the State, the State Police and several other defendants (collectively referred to as "the State"), alleging that the State had breached the agreement and that the regulation violated the equal protection guarantees of the U.S. and the N.J. Constitutions.
Thereafter, the State moved to dismiss both counts, arguing that the Law Division lacked jurisdiction. The Law Division granted the State's motion and dismissed the contract claim. It also transferred the constitutional claim to the Appellate Division. The Appellate Division subsequently granted the troopers' motion to file a Notice of Appeal nunc pro tunc regarding the dismissal of the contract claim and then consolidated that claim with the transferred constitutional claim. After a remand to the trial court for findings concerning the prior practice of the State Police in awarding retroactive pay adjustments, the Appellate Division ordered that the State provide the troopers with back pay, finding that the contractual term constituted a "vested right," which could not be abrogated retroactively by invoking the regulation.
The Supreme Court granted the State's petition for certification.
HELD: Although the State Police's prior practice of awarding retroactive pay adjustments to troopers who had resigned in good standing was incorporated into the collective-negotiations agreement as an implied term, the regulation denying the pay adjustment to those troopers was intended to apply retroactively, does not constitute an impermissible unilateral change or unfair practice, and preempts the contractual term with respect to those troopers who resigned after the promulgation of the regulation.
1. Fundamental canons of contract construction require examination of the plain language of the contract and the parties' intent, as evidenced by the contract's purpose and surrounding circumstances. (pp. 6-7)
2. The determination of which date controls the application of the contract must be derived from the intent of the parties, and if no subjective intent is apparent or ascertainable, that intent must be based on the objective language of the contract. (pp. 7-10)
3. A practice need not be formalized to become an implied term of a contract. Rather, the actual conduct and practical understanding of the parties exhibited in the performance of a contract may color its interpretation. (p. 10)
4. If a statute or regulation speaks in the imperative regarding a particular term of employment, it effectively preempts negotiation over that term, and is itself deemed to be incorporated into the employment agreement, unless the regulation is promulgated by an agency that itself is a party to the collective negotiations. (pp. 11-12)
5. The exception to the generally preemptive effect of regulations is predicated on the paramount statutory policy that prohibits unfair labor practices, including unilateral changes in the terms and conditions of employment. (pp. 12-13)
6. When a negotiating agency itself issues a regulation that otherwise would override negotiations, the agency is entitled to a presumption of preemption, which can be overcome by a showing that the regulation was not designed to fulfill the agency's statutory mandate, but rather was arbitrary, adopted in bad faith, or passed primarily to avoid negotiation on terms and conditions of employment. (pp. 13-15)
7. In analyzing whether a statute or regulation may apply retroactively, a court must determine whether the Legislature or agency intended that the statute or regulation apply retroactively and whether retroactive application would work either a manifest inJustice or an unconstitutional interference with a vested right. (pp. 15-17)
8. The manifest-inJustice doctrine is a nonconstitutional, equitable doctrine that allows courts to avoid an unfair result even where a constitutional vested right may not be at stake. (pp. 17-19)
9. Contractual interests may qualify as vested rights. (pp. 19-20)
10. In determining the permissible extent of intrusion on an otherwise-protected right or interest, courts must balance the public interest in the legislation or regulation ...