Borough of Keyport v. Int'l Union of Operating Eng'rs

• Decision Date: 14 July 2015
• Docket Number: A-43/44 September Term 2013, 072361
• Parties: In the Matter of BOROUGH OF KEYPORT, Respondent–Respondent, v. INTERNATIONAL UNION OF OPERATING ENGINEERS, Local 68, Petitioner–Appellant. In the Matter of Borough of Belmar, Respondent–Respondent, v. Communications Workers of America, AFL–CIO, Petitioner–Appellant. Township of Mount Laurel, Respondent–Respondent, v. Communications Workers of America, Petitioner, and AFSCME, Council 71, South Jersey Public Employees, Petitioner–Appellant.
• Court: New Jersey Supreme Court

222 N.J. 314

118 A.3d 1041

In the Matter of BOROUGH OF KEYPORT, Respondent–Respondent

v.INTERNATIONAL UNION OF OPERATING ENGINEERS, Local 68, Petitioner–Appellant.

In the Matter of Borough of Belmar, Respondent–Respondent

v.Communications Workers of America, AFL–CIO, Petitioner–Appellant.

Township of Mount Laurel, Respondent–Respondent

v.Communications Workers of America, PetitionerandAFSCME, Council 71, South Jersey Public Employees, Petitioner–Appellant.

A-43/44 September Term 2013, 072361

Supreme Court of New Jersey.

Argued Oct. 20, 2014.

Decided July 14, 2015.

Steven P. Weissman argued the cause for appellants Communications Workers of America, AFL–CIO and AFSCME, Council 71, South Jersey Public Employees (Weissman & Mintz, attorneys; Mr. Weissman and Ira W. Mintz, Trenton, on the briefs).

Raymond G. Heineman argued the cause for appellant International Union of Operating Engineers, Local 68 (Kroll Heineman Carton, attorneys).

Jonathan F. Cohen, Liberty Corner, argued the cause for respondent Borough of Belmar (Apruzzese, McDermott, Mastro & Murphy, attorneys).

Joseph F. Betley, Mt. Laurel, argued the cause for respondent Township of Mount Laurel (Capehart Scatchard, attorneys; Mr. Betley and Kelly E. Adler, Cherry Hill, on the letters in lieu of brief).

Gordon N. Litwin, Newark, argued the cause for respondent Borough of Keyport (Litwin & Provence, attorneys).

Martin R. Pachman, General Counsel, argued the cause for respondent New Jersey Public Employment Relations Commission.

Richard A. Friedman argued the cause for amicus curiae New Jersey Education Association (Zazzali, Fagella, Nowak, Kleinbaum & Friedman, attorneys; Mr. Friedman and Edward M. Suarez, Jr., Newark, on the brief).

Edward W. Purcell, Associate Counsel, argued the cause for amici curiae New Jersey State League of Municipalities and New Jersey Institute of Local Government Attorneys (William J. Kearns, Jr., General Counsel, attorney).

Albert G. Kroll submitted a brief on behalf of amicus curiae New Jersey State AFL–CIO (Kroll Heineman Carton, attorneys).

Cynthia J. Jahn, General Counsel, and Robert A. Greitz submitted a brief on behalf of amicus curiae New Jersey School Boards Association.

Opinion

Justice LaVECCHIA delivered the opinion of the Court.

In this appeal we review whether three municipalities were required to negotiate with union representatives before taking layoff actions that negatively impacted the hours and wages of affected employees. Two of the municipalities imposed on certain units of public employees mandatory, but temporary, layoffs, in the form of a reduced number of work days over a specified period of time, without negotiating those actions with union representatives. The third municipality eliminated as part of an overall layoff plan three full-time clerical positions and replaced them with part-time positions; as a result, the affected employees lost their eligibility for health benefits. That layoff action also was not negotiated with union representatives. However, all three layoff plans had been submitted and approved by the Civil Service Commission (Commission) as compliant with all civil service requirements for a layoff action.

After unions for public employees in each municipality brought scope-of-negotiations challenges to the municipal actions, the Public Employment Relations Commission (PERC), in separate decisions, held that the municipalities violated the New Jersey Employer–Employee Relations Act (EERA), N.J.S.A. 34:13A–1 to –39, and required each municipality to negotiate the changes in terms and conditions of employment.

The Appellate Division consolidated these appeals and reversed PERC's determinations, finding the municipal actions non-negotiable in all but one respect not pertinent to this appeal.

Employee rights in these three circumstances are determined by application of the three-part test set forth in Local 195, IFPTE v. State, 88 N.J. 393, 404–05, 443 A. 2d 187 (1982), for resolving questions about the scope of public sector employment negotiations. Based on that test, we conclude that the negotiability of these three layoff plans hinges on application of the third prong of the Local 195 analysis that takes into account whether negotiation would significantly interfere with a management determination of governmental policy. Ibid.

Municipalities governed by the civil service system have the right to lay off employees when facing exigent financial circumstances. A regulation authorizing temporary layoffs, which enabled municipalities to address fiscal distress in such a manner, was in effect when these layoff plans were developed and approved by the Commission, although the municipalities claim that they did not act pursuant to its authority when seeking Commission approval. Although the regulation since has been repealed, its validity is not challenged in this matter. The fact that it authorized temporary periods of layoffs during times of exigent fiscal circumstances is significant in our review. Whether the municipalities actively relied on that existing regulation is not controlling of our analysis.

In reviewing each of these disputes under the third prong of Local 195, PERC initially took the position that the civil service employer had to show that it had no other option but to engage in the layoff in order for managerial policy interests to predominate over the interests of employees in maintaining the terms and conditions of their employment. According to PERC, only upon making such a showing could a public entity employer demonstrate the necessary fiscal urgency to support a finding that the layoff action was non-negotiable based on Local 195 's third, or managerial-prerogative, prong. PERC has retreated from that position in this appeal and in a subsequent agency quasi-judicial determination that it has brought to our attention. In our view, PERC's former position mistakenly set the bar too high when assessing managerial prerogative exercised by local governments confronting fiscal distress, as was the case in these matters.

For the reasons expressed herein, we hold that at the time that they occurred, the layoff actions at issue were non-negotiable under the third prong of the Local 195 test. We therefore affirm the Appellate Division judgment, as modified by this opinion.

I.

In 2009, the New Jersey municipalities of Belmar, Mount Laurel, and Keyport (collectively the municipalities or respondents), were experiencing financial strain. All three municipalities were operating under collective negotiation agreements (CNAs) with unions representing municipal employees. Following various efforts to confront their individual budget crises, each municipality obtained approval from the Commission for a layoff plan, described in detail hereinafter. Generally stated and as pertinent to this appeal, the layoff plans, in varying ways, reduced workers' hours and therefore impacted wages. The following facts and procedural history are culled from the record created before PERC.

A.

The Borough of Keyport (Keyport) and the International Union of Operating Engineers, Local 68 (Local 68), representing Keyport's clerical employees, entered into a CNA effective January 1, 2008, through December 31, 2010. Among other terms, Article 33 granted Keyport the management right to assign employees' schedules, and Article 5 provided that in the event of a layoff, Keyport would respect employees' seniority rights. Article 8 specified that the “work week for all bargaining unit employees shall be from Monday through Friday, and shall consist of five (5) consecutive seven and one-half (7 ½) hour work days for a thirty-seven and one-half (37 ½) hour work week.”

In 2009, Keyport was experiencing significant financial difficulties in light of a pervading and lingering economic downturn. Keyport faced increased healthcare, pension, and labor costs without an increase in tax revenues; in 2008, it had a budget surplus of less than $6,000. After efforts to control expenses did not alleviate the strain, Keyport submitted a traditional layoff plan to the Commission on May 20, 2009. In order to reduce personnel expenses, the plan, in pertinent part, converted three full-time clerical positions—two in the Construction Department and one in the Office of the Registrar—into part-time positions.¹ Those layoffs did not have an identified end date; the proposed layoff therefore permanently eliminated the full-time positions and converted them to part-time positions. The layoff plan represented that the reductions “[we]re necessary for reasons of economy and efficiency.” In particular, the plan stated that Keyport's preliminary 2009 budget exceeded the levy cap by $135,000 and that “the Borough must reduce its appropriations so that it may lawfully adopt a budget for 2009.” The Commission approved the plan on May 22, 2009.

In August 2009, Local 68 filed an unfair-practice charge with PERC, alleging that Keyport violated the parties' CNA by reducing the three employees' hours without first negotiating with union representatives. Prior to that, Keyport had filed a scope-of-negotiations petition with PERC, seeking to restrain binding arbitration of a grievance filed by the union. That grievance had claimed a violation of the CNA as a result of the reduction in the workweek of the employees in the Building Department and Registrar's Office. Thus, both the grievance and the unfair-practice charge related to the claim of work hour reduction. The parties filed cross-motions for summary judgment on the unfair-practice charge. On September 23, 2010, PERC granted Local 68's motion, concluding that EERA required Keyport to negotiate with Local 68 before reducing the employees' hours from full-time to part-time and ordering that Keyport commence negotiations immediately.

In determining that the reduction in hours was mandatorily negotiable, PERC applied the three-part negotiability test from Local 195, supra, 88 N.J. at 404–05, 443 A. 2d 187. After determining that the...