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In re County of Atlantic

Supreme Court of New Jersey

August 2, 2017

IN THE MATTER OF COUNTY OF ATLANTIC, Respondent-Appellant, and PBA LOCAL 243, Charging Party, and PBA LODGE 34 and PBA LOCAL 77, Charging Parties-Respondents. IN THE MATTER OF TOWNSHIP OF BRIDGEWATER, Petitioner-Appellant, and PBA LOCAL 174, Respondent-Respondent.

          Argued March 13, 2017

         On certification to the Superior Court, Appellate Division, whose opinion is reported at 445 N.J.Super. 1 (App. Div. 2016).

          Eric M. Bernstein argued the cause for appellant Township of Bridgewater (Eric M. Bernstein & Associates, attorneys; Eric M. Bernstein, of counsel and on the brief, and Philip G. George, on the briefs).

          Robin T. McMahon argued the cause for appellant New Jersey Public Employment Relations Commission (Robin T. McMahon, General Counsel, attorney; Robin T. McMahon and Don Horowitz, Senior Deputy General Counsel, on the briefs).

          David A. Rapuano argued the cause for appellant County of Atlantic (Archer & Greiner, attorneys; David A. Rapuano, of counsel and on the briefs, and Ashley M. Lebrun, on the brief).

          James M. Mets argued the cause for respondent PBA Local 174 (Mets Schiro McGovern & Paris, attorneys; James M. Mets, of counsel and on the briefs, and David M. Bander, on the briefs).

          Ira W. Mintz argued the cause for respondents FOP Lodge 34 and PBA Local 77 (Weissman & Mintz and Selikoff & Cohen, attorneys; Ira W. Mintz and Steven R. Cohen, on the briefs).

          Todd A. Wigder, Assistant Attorney General, submitted a brief on behalf of amicus curiae Governor's Office of Employee Relations (Christopher S. Porrino, Attorney General, attorney; Melissa Dutton Schaffer, Assistant Attorney General, of counsel, and Todd A. Wigder, on the brief).

          Arnold Shep Cohen submitted a letter brief on behalf of amicus curiae International Federation of Professional and Technical Engineers Local 195 (Oxfeld Cohen, attorneys).

          Louis P. Bucceri submitted a brief on behalf of amicus curiae New Jersey Education Association (Bucceri & Pincus, attorneys; Louis P. Bucceri, of counsel and on the brief, and Albert J. Leonardo, on the brief).

          Cynthia J. Jahn submitted a letter brief on behalf of amicus curiae New Jersey School Boards Association (Cynthia J. Jahn, General Counsel, attorney).

          Craig S. Gumpel submitted a letter brief on behalf of amicus curiae New Jersey State Firefighters' Mutual Benevolent Association (Law Offices of Craig S. Gumpel, attorneys).

          Joseph M. Hannon submitted a brief on behalf of amicus curiae New Jersey State League of Municipalities, New Jersey Association of Counties, and New Jersey Council of County Colleges (Genova Burns, attorneys; Joseph M. Hannon, of counsel and on the brief, Joseph V. Manney, on the brief).

          Matthew D. Areman submitted a letter brief on behalf of amicus curiae New Jersey State Lodge of the Fraternal Order of Police (Markowitz and Richman, attorneys).

          Paul L. Kleinbaum submitted a letter brief on behalf of amicus curiae New Jersey State PBA (Zazzali, Fagella, Nowak, Kleinbaum & Friedman, attorneys).

          Stephen E. Trimboli submitted a brief on behalf of amicus curiae County of Morris (Trimboli & Prusinowski, attorneys; Stephen E. Trimboli, of counsel and on the brief, and Lauren Kavanagh, on the brief).

          David M. Bander submitted a letter brief on behalf of amicus curiae Professional Firefighters Association of New Jersey (Mets Schiro McGovern & Paris, attorneys).

          Steven P. Weissman submitted a letter brief on behalf of amicus curiae Communications Workers of America, AFL-CIO (Weissman & Mintz, attorneys).

         SOLOMON, J., writing for the Court.

         In this appeal the Court considers whether the parties to the specific collective negotiations agreements (CNAs) at issue in this case were required to continue scheduled salary increases during the period between the expiration of those contracts and the formation of their successor agreements.

         The Fraternal Order of Police, Atlantic Lodge #34 (FOP Lodge 34), and the Atlantic County Prosecutor's Office, P.B.A. Local #77 (PBA Local 77), are two unions that represent certain public employees in Atlantic County. The Policeman's Benevolent Association, Local #174 (PBA Local 174), is a collective bargaining unit for police officers in Bridgewater Township. The two Atlantic County unions entered CNAs with the County that expired on December 31. 2010; the CNA between PBA Local 174 and Bridgewater Township expired on December 31, 2012. All three CNAs provided that, while the contracts were in effect, covered individuals would receive annual salary increases under an automatic increment system. The CNAs further provided that, when they expire, the provisions of the agreement will continue in effect until a successor agreement is negotiated. Since 1996, when the CNAs expired before a successor agreement was executed, the County adhered to the terms and conditions of the most recently expired CNA, including the step-increment process. A similar practice existed in the Township.

         On December 22, 2010, Atlantic County informed FOP Lodge 34 and PBA Local 77 that the officers' movement through the salary guides would cease when their respective CNAs expired. The County acknowledged that customary practice was to continue the previously negotiated payment scheme, but it maintained that it was no longer reasonable to follow that practice, given that the entire negotiations landscape has undergone major changes. The County asserted that the Property Tax Levy Cap and the Interest Arbitration Award Cap, preempt the previous standards of practice and render continued salary guide movement impractical and unduly burdensome.

         The two unions filed charges against Atlantic County with the Public Employment Relations Commission (PERC), claiming that the County had engaged in an unfair labor practice in violation of the Employer-Employee Relations Act (EERA) by refusing to pay the salary increments after each CNA expired. The hearing examiner found that case law requires the application of the "dynamic status quo" doctrine, which was first adopted by PERC in 1975, when it upheld the generally accepted view that an employer is normally precluded from altering the status quo while engaged in collective negotiations. Given the contract language and the County's history of continuing the payments after previous CNAs had expired, the examiner found that the refusal to pay was a departure from the dynamic status quo and therefore constituted a unilateral change in a mandatory subject of negotiations, in violation of the EERA. The County petitioned for review. PERC disagreed that the contract language required continuation of incremental salary increases after the contract expiration. Additionally, PERC found that the dynamic status quo doctrine was impractical and burdensome in light of economic conditions and legislative changes since the recession. PERC abandoned the dynamic status quo doctrine and found that the County was within its authority to stop applying the salary increment systems in the expired CNAs. PERC dismissed the charges.

         After PERC's decision in the Atlantic County matters, Bridgewater Township notified PBA Local 174 that it too would cease the salary step increments once the current CNA expired. The union filed a grievance, which the Township denied. The union then submitted the matter to PERC for arbitration. The grievance was sustained and Bridgewater Township was "ordered to advance all eligible unit members . . . one step on the salary guide retroactive to the employee's 2013 anniversary date of hire." That award was subsequently affirmed by the Law Division. While the matter was still in arbitration, the Township filed a scope-of-negotiations petition with PERC, which granted the Township's request for a restraint of binding arbitration and held that public employers were no longer required, as a matter of law, to fund automatic advancement on a salary guide after a contract has expired.

         All three unions appealed the PERC decisions. The Appellate Division consolidated the appeals, and reversed. 445 N.J.Super. 1 (App. Div. 2016). The panel found that the Property Tax Levy Cap and the Interest Arbitration Award Cap do not govern contracts that are negotiated and that neither statute preempted the viability of the dynamic status quo doctrine. The panel ruled that the Commission adopted the dynamic status quo doctrine decades ago, and could not abandon it now as an act of policymaking. Applying that doctrine, the panel found that the salary increment system was a term and condition of employment that could not be unilaterally terminated during negotiations for a successor CNA. The Court granted the petitions for certification filed by Bridgewater Township, Atlantic County, and PERC. 227 NX 148 (2016); 227 NX 152 (2016); 227 NX 153 (2016).

         HELD: In these cases, the governing contract language of the respective agreements required that the salary step increases remain in place after expiration and until the parties reach agreement on a new CNA. Atlantic County and Bridgewater Township committed an unfair labor practice when they altered those terms.

         1. The EERA affords public employees an array of rights, including the ability to appoint a maj ority representative to represent their interests and negotiate agreements with their employer. In addition, the EERA requires that proposed new rules or modifications of existing rules governing working conditions be negotiated with the majority representative before they are established. Employers are barred from unilaterally altering mandatory bargaining topics, whether established by expired contract or past practices, without first bargaining to impasse, (p. 19)

         2. For a subject matter to be mandatorily negotiable between public employers and employees, it must: (1) be one that intimately and directly affects the work and welfare of public employees; (2) be a topic that has not been fully or partially preempted by statute or regulation; and (3) involve a matter where a negotiated agreement would not significantly interfere with the determination of a governmental policy. Salary step increments is a mandatorily negotiable term and condition of employment because it is part and parcel of an employee's compensation for any particular year. (pp. 19-20)

         3. Here, it is not necessary to look beyond the contracts themselves to conclude that the step increases continued beyond the expiration of the contracts. It is well-settled that courts enforce contracts based on the intent of the parties, the express terms of the contract, the surrounding circumstances, and the underlying purpose of the contract. Where an agreement is ambiguous, courts will consider the parties' practical construction of the contract as evidence of their intention and as controlling weight in determining a contract's interpretation, (pp. 21-23)

         4. The expired CNAs contain clear and explicit language that the respective salary guides, and all other terms and conditions set forth in the agreements, will continue until a successor agreement is reached. Atlantic County and Bridgewater Township could have negotiated different terms, (pp. 23-24)

         5. Had the Atlantic County and Bridgewater Township agreements been silent about whether the terms of the salary increment system were to continue, the issue in this appeal would be more complicated. It might well have required careful consideration of past practices, custom and the viability of the dynamic status quo doctrine. But the unilateral modification at issue here directly contradicted the parties' binding written agreement. Because the salary increment system was a term and condition of employment that governed beyond the CNAs' expiration date, Atlantic County and Bridgewater Township committed an unfair labor practice when they altered that condition without first attempting to negotiate in good faith, (pp. 24-25)

         6. The Appellate Division based its conclusion on the dynamic status quo doctrine. Given its reliance on contract principles, the Court did not reach that issue. The Court notes that its decision does not govern future negotiations, other than to suggest that parties would be wise to include explicit language ...


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