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New Jersey Association of School Administrators, Dr. Terry Van Zoeren v. Bret Schundler

May 3, 2012

NEW JERSEY ASSOCIATION OF SCHOOL ADMINISTRATORS, DR. TERRY VAN ZOEREN, DR. SIMON BOSCO, AND JOSEPH ABATE, PLAINTIFFS-RESPONDENTS,
v.
BRET SCHUNDLER, COMMISSIONER OF EDUCATION OF THE STATE OF NEW JERSEY, AND PAULA T. DOW, ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, DEFENDANTS-APPELLANTS.



On appeal from and certification to the Superior Court, Appellate Division, whose opinion is reported at The opinion of the court was delivered by: Chief Justice Rabner

SYLLABUS

(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).

N.J. Ass'n of Sch. Adm'rs v. Bret Schundler (A-98) (066789)

Argued January 18, 2012 -- Decided May 3, 2012

RABNER, C.J., writing for a unanimous Court.

In this appeal, the Court considers the validity of N.J.A.C. 6A:23A-3.1(e)(3) - (6) and whether N.J.S.A. 18A:30-3.6 superseded N.J.S.A. 18A:30-3.5.

In 2007, the Legislature passed reform measures to address the problem of excessive benefits for high-level school administrators. The Legislature enacted a $15,000 cap on accumulated unused sick leave payments to certain school board officials at the time of retirement, and protected employees who had already accumulated a greater amount or would do so under an unexpired contract. N.J.S.A. 18A:30-3.5. The Legislature also created executive county superintendents and required them to review and approve, according to standards adopted by the commissioner, all employment contracts for superintendents, assistant superintendents, and school business administrators, prior to the execution of those contracts. N.J.S.A. 18A:7-8(j). The Commissioner of Education issued regulations to implement the new laws, including N.J.A.C. 6A:23A-3.1(e)(3) - (5), which limited certain benefits in new contracts for high level administrators, and N.J.A.C. 6A:23A-3.1(e)(6), which required that compensation for accumulated sick leave "be consistent with N.J.S.A. 18A:30-3.5," be "payable only at the time of retirement," and "not be paid to the individual's estate or beneficiaries" in the event of death before retirement.

Plaintiffs-respondents challenged the regulations by filing an appeal from a final agency decision in the Appellate Division. The appellate majority invalidated N.J.A.C. 6A:23A-3.1(e)(3) - (6) in part, finding that the regulations impermissibly reduced the compensation of tenured assistant superintendents, in violation of the tenure statutes, and improperly deprived certain administrators of vested rights by denying them payment for already-accumulated unused sick leave valued at more than $15,000. 414 N.J. Super. 530 (App. Div. 2010). Judge Grall concurred in part and dissented in part. She disagreed with the majority's view of the effect of the tenure statutes. She also would not have addressed the sick leave cap because, in her view, the newer N.J.S.A. 18A:30-3.6 superseded the statute and regulation that imposed the cap. The majority agreed that the issue was "partially" moot but addressed section (e)(6) in the event an employee with unused sick leave worth more than $15,000 had died after the section went into effect but before N.J.S.A. 18A:30-3.6 was enacted. The State filed an appeal of right as to the validity of N.J.A.C. 6A:23A-3.1(e)(3) - (6), and the Court granted the State's petition for certification as to whether section (e)(6) was invalid because N.J.S.A. 18A:30-3.6 superseded N.J.S.A. 18A:30-3.5. 205 N.J. 519 (2011).

HELD: N.J.A.C. 6A:23A-3.1(e)(3) - (6) are valid, and N.J.S.A. 18A:30-3.6 did not supersede N.J.S.A. 18A:30-3.5. The Legislature had the authority to modify terms and conditions for future contracts for public employment in a manner that did not raise constitutional concerns; the laws that protect tenure rights did not prevent the Legislature's later actions; the Legislature properly exercised its power when it directed the Commissioner to issue the regulations; and the regulations were consistent with their respective enabling statutes, advanced the Legislature's goals, and protected benefits that employees had already accumulated. The statute capping sick leave payments has not been superseded and covers high-level employees, including superintendents and assistant superintendents; the more recent enactment expands the sick leave cap to cover all newly hired school employees.

1. Agency regulations are presumed valid and reasonable. The challenging party has the burden of proving that the agency's action was arbitrary, capricious or unreasonable. That inquiry focuses on whether the agency's action violates the enabling act's express or implied legislative policies, whether there is substantial evidence in the record to support the findings on which the agency based its action, and whether the agency clearly erred by reaching an unreasonable conclusion. Courts afford an agency great deference in reviewing its adoption of rules implementing the laws for which it is responsible, but must invalidate a regulation that is inconsistent with the statute it purports to interpret. When interpreting an enabling statute, a court's obligation is to determine and give effect to the Legislature's intent. Courts look first to the plain language of the statute. If it is clear, the court's task is complete. If the statutory language is ambiguous, courts may look to extrinsic evidence, including legislative history, for guidance. (pp. 15-17)

2. N.J.S.A. 18A:30-3.5 sets a $15,000 cap for payout of unused sick leave, but allows payment for unused sick leave that had already been accumulated, or would be accumulated under an existing contract, that exceeds the cap. Therefore, the statute does not deprive officials of any property already earned, and it protects existing contract rights. Beyond any contractual agreements, respondents cannot claim a protected property right under state law to unlimited payment for sick leave time that has not yet accrued. As a result, the prospective sick leave cap is a valid exercise of legislative authority. The sick leave regulation, N.J.A.C. 6A:23A-3.1(e)(6), tracks the enabling statute, is also prospective, and does not interfere with any contract or property rights. (pp. 18-20)

3. The sick leave regulation properly bars payment to an estate or beneficiary if an employee dies before retirement. The enabling statute provides that compensation for unused sick leave "shall be payable only at the time of retirement." The plain language focuses on "retirement" and not "death" or any other type of separation from employment. By contrast, a statute adopted at the same time, as part of the same legislation, contained no comparable limitation as it addressed payment to school officials for accrued vacation leave. The Court presumes that the Legislature intended that distinction, and the Legislature's decision to limit payment to "the time of retirement" is entitled to meaning. The sick leave regulation adheres to the express policy set forth in the enabling statute and is not arbitrary or capricious. Because the enabling statute is unambiguous, it is not necessary to consider the legislative history. That history, however, supports the Court's conclusion. (pp. 20-24)

4. N.J.S.A. 18A:30-3.6, which provides, "[n]otwithstanding any law, rule or regulation to the contrary, a board of education . . . shall not pay supplemental compensation to any officer or employee for accumulated unused sick leave in an amount in excess of $15,000," did not supersede N.J.S.A. 18A:30-3.5. Whenever statutory analysis involves the interplay of two or more statutes, the Court seeks to harmonize them, under the assumption that the Legislature was aware of its actions and intended for related laws to work together. The newer statute, N.J.S.A. 18A:30-3.6, does not expressly repeal N.J.S.A. 18A:30-3.5. It also does not repeal N.J.S.A. 18A:30-3.5 by implication, which requires clear and compelling evidence of legislative intent that is free from reasonable doubt. N.J.S.A. 18A:30-3.6's legislative history reveals that the Legislature meant to expand the sick leave cap to a greater number of employees beyond the high-level school officials already covered. There is no indication that the Legislature instead sought to relieve high-level administrators of the existing sick leave cap. Reading the original statute alongside the new one, and attempting to give effect to both, N.J.S.A. 18A:30-3.6 is an expansion of the sick leave cap imposed in N.J.S.A. 18A:30-3.5, which covers high-level administrators, including superintendents and assistant superintendents, and is not an express or implied repeal of prior law. (pp. 25-32)

5. The tenure statutes do not bar N.J.A.C. 6A:23A-3.1(e)(3) - (6). When the Legislature enacted the tenure statutes, it made a policy judgment that tenured school employees may not be "dismissed or reduced in compensation" except for cause. N.J.S.A. 18A:28-5. Unless the State Constitution says otherwise, the Legislature can modify the terms and conditions of public service by enacting new laws that reflect new policies. Tenured assistant superintendents cannot claim a constitutionally protected property right under state law to future contract terms. The statute and regulations here set future terms and conditions of public employment but do not impair existing contracts. To the extent certain benefits had already accumulated, the regulations protected them. Therefore, the Legislature had the authority to modify the terms of public service in the manner it did. (pp. 32-36)

The judgment of the Appellate Division is REVERSED.

JUSTICES LaVECCHIA, ALBIN, HOENS, and PATTERSON join in CHIEF JUSTICE RABNER's opinion. JUDGE WEFING (temporarily assigned) did not participate.

Argued January 18, 2012

CHIEF JUSTICE RABNER delivered the opinion of the Court.

In 2007, the Legislature passed a series of reform measures designed to lower property taxes. Among other issues, the reforms attempted to address the problem of excessive benefits for high-level school administrators. The following year, the Commissioner of Education issued various regulations to implement the new laws. The regulations limited certain benefits in new contracts for high-level administrators, and also capped payments for accumulated unused sick leave at $15,000.

The Appellate Division held that the challenged regulations impermissibly reduced the compensation of tenured assistant superintendents, in violation of the tenure statute, and improperly deprived certain administrators of vested rights. The Appellate Division also concluded that the challenge to the sick leave cap was partially mooted by a newly enacted law.

We conclude that the Legislature had the authority to modify terms and conditions for future contracts for public employment in a manner that did not raise constitutional concerns. The laws that protect tenure rights did not prevent the Legislature's later actions. In this case, the Legislature properly exercised its power when it directed the Commissioner to issue regulations for new contracts for superintendents and assistant superintendents. The regulations that followed were consistent with their respective enabling statutes and advanced the Legislature's goals. They also protected benefits that employees had already accumulated.

We also conclude that the statute capping sick leave payments has not been superseded and covers high-level employees, including superintendents and assistant superintendents. We read the original statute alongside a newer law on the subject, to try to give effect to both, and conclude that the more recent enactment expands the sick leave cap to cover all newly hired school employees.

Accordingly, we reverse the judgment of the Appellate Division.

I.

The statutes and regulations in question date back to executive and legislative efforts in 2006. In July of that year, the Legislature adopted a concurrent resolution that declared "[t]his State's high property taxes are a matter of great concern to the people of New Jersey." See Assemb. Con. Res. 3, 212th Leg. (N.J. 2006), available at http://www.njleg.state.nj.us/2006/bills/acr/3_I1.pdf. The resolution also recognized the need "to bring about property tax reform based upon a fairer distribution of tax burdens and the adoption of efficiencies." Ibid.

The resolution created four legislative committees on school funding, government consolidation and shared services, public employee benefits, and constitutional reform. Ibid. The committees were charged with developing proposals to reduce property taxes, and on December 1, 2006, each committee issued a final report containing a series of recommendations. See Special Session on Property Tax Reform, available at http://www.njleg.state.nj.us/propertytaxsession/specialsessionpt _reports.asp.

Two problems identified in the committee reports are particularly relevant to this appeal. First, the Committee on Government Consolidation and Shared Services found that "inflated salaries and lucrative benefits" for superintendents, assistant superintendents, and business administrators "have cost New Jersey taxpayers millions of dollars." See J. Legis. Comm. on Gov't Consolidation and Shared Servs., Final Report, 212th Leg. 55 (N.J. Dec. 1, 2006). The committee relied on a report from the New Jersey State Commission of Investigation, which documented that from 1997 to 2004 the average salary for public school administrators rose thirty-one percent -- more than double the average increase for teacher salaries. Ibid. (relying on State of New Jersey Commission of Investigation, Taxpayers Beware: What You Don't Know Can Cost You -- An Inquiry Into Questionable and Hidden Compensation for Public School Administrators 2 (2006) (SCI Report)). The report also noted that school administrators received "a host of unconventional perks, including allowances for personal chauffeurs and reimbursements for moving and housing expenses." Ibid. (relying on SCI Report, supra, at 14).

Second, the committee found that New Jersey's county superintendents had "no real power to identify inefficiencies and eliminate waste in school administration[,]" which "'produced a vacuum in which questionable or patently abusive compensation practices have been allowed to flourish.'" Ibid. (quoting SCI Report, supra, at 5).

To remedy those inefficiencies and provide enhanced oversight of local administrative spending, the committee proposed to replace the existing position with "super" county superintendents. Id. at 55-56. The new post -- to be known as "executive county superintendent of schools" -- would have the authority to "[a]pprove or disapprove the hiring, compensation, and benefit plans of local school superintendents," among other things. Id. at 56.

The Public Employee Benefits Reform Committee also targeted excessive compensation of school administrators. See J. Legis. Comm. on Pub. Emp. Benefits Reform, Final Report, 212th Leg. 141-43 (N.J. Dec. 1, 2006). The committee observed that although state employees could not receive more than $15,000 for accumulated unused sick leave upon retirement, there was no limit on the amount payable to local government or school board employees. Id. at 141. The committee cited the SCI Report, which "revealed the widespread practice of allowing [school] administrators to cash-in substantial amounts of accumulated sick and vacation leave at retirement or upon departure." Id. at 142.

The committee recommended capping the amount of sick leave payouts to local government and education employees upon retirement at $15,000. Ibid. The proposal was designed to "bring supplemental compensation for accumulated unused sick leave in line with the current law and practice for State employees, thus standardizing this benefit for public employees serving at different levels of government in the State." Id. at 143.

The Legislature adopted both recommendations in 2007 at the same time it addressed various benefits for employees throughout state government. See L. 2007, c. 53, 63, 92 and 260. The Legislature capped payments for accumulated unused sick leave to certain school board officials, at the time of retirement, at $15,000. See N.J.S.A. 18A:30-3.5. The new statute specifically protected employees who had already accumulated a greater amount or would do so under a pending, unexpired contract. Ibid.

The Legislature also created executive county superintendents, see N.J.S.A. 18A:7-1 to -16, and required them to "[r]review and approve, according to standards adopted by the commissioner, all employment contracts for superintendents of schools, assistant superintendents of schools, and school business administrators in school districts within the county, prior to the execution of those contracts." N.J.S.A. 18A:7-8(j) (emphasis added).

To implement those reforms, the Commissioner of Education issued regulations on July 1, 2008, consistent with N.J.S.A. 18A:7-8(j) and -16. The regulations, titled "Fiscal Accountability, Efficiency and Budgeting Procedures," set standards that executive county superintendents must use in their review of new employment contracts for superintendents, assistant superintendents, and school business administrators. See 40 N.J.R. 4610(a) (July 1, 2008). Four of those regulations, at N.J.A.C. 6A:23A-3.1(e), are at issue in this appeal:

3. No contract shall include provisions for the reimbursement or payment of employee contributions that are either required by law or by a contract in effect in the district with other teaching staff members, such as payment of the employee's State or Federal taxes, or of the employee's contributions to FICA, Medicare, State pensions and annuities (TPAF), life insurance, disability insurance (if offered), and health benefit costs.

4. No contract shall contain a payment as a condition of separation from service that is deemed by the Executive County Superintendent to be prohibited or excessive in nature. The payment cannot exceed the lesser of the calculation of three months pay for every year remaining on the contract with proration for partial years, not to exceed 12 months, or the remaining salary amount due under the contract.

5. No contract shall include benefits that supplement or duplicate benefits that are otherwise available to the employee by operation of law, an existing group plan, or other means; for example, an annuity or life insurance plan that supplements or duplicates a plan already made available to the employee. Notwithstanding the provisions of this section, a contract may contain an annuity where those benefits are already contained in the existing contract between that employee and the district.

6. Contractual provisions regarding accumulation of sick leave and supplemental compensation for accumulated sick leave shall be consistent with N.J.S.A. 18A:30-3.5. Supplemental payment for accumulated sick leave shall be payable only at the time of retirement and shall not be paid to the individual's estate or beneficiaries in the event of the individual's death prior to retirement. Pursuant to N.J.S.A. 18A:30-3.2, a new board of education contract may include credit of unused sick leave days in accordance with the new board of education's policy on sick leave credit for all employees. [N.J.A.C. 6A:23A-3.1(e)(3)-(6).*fn1 ]

On August 14, 2008, the New Jersey Association of School Administrators, Dr. Terry Van Zoeren, Dr. Simon Bosco, Joseph Abate, Jr., and John Golden,*fn2 plaintiffs-respondents, filed a complaint in the United States District Court for the District of New Jersey. They sought to enjoin the use of the above four regulations, as well as other provisions in N.J.A.C. 6A:23A-3.1(e), on federal constitutional and state law grounds. The court denied the application for a preliminary injunction and dismissed the lawsuit. The court declined to exercise jurisdiction under the doctrine known as Burford abstention, see Burford ...


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