Gauer v. Essex County Div. of Welfare

• Decision Date: 27 July 1987
• Citation: 528 A.2d 1,108 N.J. 140
• Parties: Frank GAUER, Individually and as Class Representative of the Essex County Welfare Board and Division Retirees, Plaintiff-Appellant, v. ESSEX COUNTY DIVISION OF WELFARE, Defendant-Respondent.
• Court: New Jersey Supreme Court

Page 140

108 N.J. 140

528 A.2d 1

Frank GAUER, Individually and as Class Representative of the Essex County Welfare Board and Division Retirees Plaintiff-Appellant, v. ESSEX COUNTY DIVISION OF WELFARE, Defendant-Respondent.

Supreme Court of New Jersey.

Argued March 30, 1987.

Decided July 27, 1987.

Ronald Reichstein, Montclair, for appellant (Beck, Reichstein & Guidone, attorneys).

Norman Schulaner, Asst. Co. Counsel, Newark, for respondent (David H. Ben-Asher, Essex County Counsel, attorney).

The opinion of the Court was delivered by

HANDLER, J.

The Division of Welfare of the County of Essex discontinued certain benefits that it had been paying to certain retired employees. As a result, plaintiff, a retired employee aggrieved by this decision, brought suit on behalf of other similarly situated retired employees challenging its validity. The narrow issue raised by this litigation is the statutory authority of Essex County to terminate the retirement benefits previously granted to the subject employees on the basis that N.J.S.A. 40A:10-23 mandates that all retirees of the county receive uniform treatment.

I.

The benefits that are the subject of this litigation were provided for more than ten years prior to the decision to discontinue them. On December 3, 1974, the Essex County Welfare Board, the predecessor of the defendant, Division of Welfare, adopted Resolution No. 74-12-3, pursuant to regulations promulgated by the State Health Benefits Commission under N.J.S.A. 52:14-17.38. This Resolution authorized the Board, which was at the time an autonomous agency expressly designated as a corporate entity by N.J.S.A. 44:7-7, to reimburse those employees who retire with twenty-five or more years of service for their health insurance and Medicare Part B premiums upon retirement. The Board notified its employees of the Resolution. Plaintiff Gauer was an employee of the Board when these benefits were authorized.

On May 1, 1979, pursuant to the Optional County Charter Law, N.J.S.A. 40:41A-1 to -147, Essex County reorganized its form of government. The Welfare Board was abolished as an autonomous body and its functions were assumed by the Essex County Division of Welfare. Pursuant to its reorganization, the County promulgated an Administrative Code that spelled out the abolition of various autonomous boards and specified which county agencies would assume the functions of the abolished boards. The Administrative Code also delineated the rights of employees of the boards who were transferred to county employment. Section 14.6 provided specifically that "Pension Fund membership and rights of any officer or employee shall not ... be adversely affected by any transfer pursuant to the Code." The County, through the Division of Welfare, continued to reimburse health insurance costs for retirees of the Welfare Board who had been receiving such retirement benefits from the Board. It also began to reimburse such health insurance and Medicare premium costs to Division of Welfare employees who retired from County employment with twenty-five years or more service in a state or locally administered retirement system in accordance with the earlier Resolution.

In 1981, plaintiff, then a County employee in the Division of Welfare, retired from County employment. He received reimbursed premium costs for health insurance and Part B Medicare as part of his retirement benefits. In 1984, specifically by a letter dated December 3, 1984, the County decided to discontinue its reimbursement of health insurance and medicare costs of retired welfare employees effective January 1, 1985. Its decision was in reliance upon legal opinion of the Essex County counsel stating the County could not, under N.J.S.A. 40A:10-23, discriminate among retired County employees in the provision of health insurance benefits.

Plaintiff brought suit against the County, and the County moved for summary judgment, which was granted. Gauer v. Essex County Div. of Welfare, 205 N.J.Super. 592, 501 A.2d 601 (Law Div.1985). ¹ Plaintiff then moved for relief from the adverse summary judgment in order to have the court consider the impact of Woolley v. Hoffman-La Roche, Inc., 99 N.J. 284, 491 A.2d 1257, modified, 101 N.J. 10, 499 A. 2d 515 (1985). The court denied the motion.

Plaintiff appealed to the Appellate Division. In a per curiam decision, the Appellate Division affirmed the summary judgment for defendant and the denial of plaintiff's post-judgment motion. Gauer v. Essex County Div. of Welfare, 211 N.J.Super 706, 512 A.2d 587 (App.Div.1986). Plaintiff filed a petition for certification, which was granted. 105 N.J. 545, 523 A.2d 183 (1986). We now reverse.

II.

We approach this case initially by focusing upon whether the rights and obligations of the respective parties are governed by operative statutory provisions. Plaintiff claims that the County, as the successor of the Essex County Welfare Board, is still liable for the amount of health insurance premiums paid by retired welfare employees and that its liability is unaffected by the reorganization of the County and the abolition of the Board under the Optional County Charter Law, N.J.S.A. 40:41A-1 to -147. Defendant, on the other hand, claims that continuing to pay the benefits in question would run afoul of the statutory requirement of N.J.S.A. 40A:10-23 that benefits be distributed uniformly among retirees. Defendant claims, in effect, that (1) reorganization was authorized under the Optional County Charter Law; (2) the Optional County Charter Law empowered it to abolish the Welfare Board; and (3) once the County had assumed the functions of the Welfare Board, the requirement of N.J.S.A. 40A:10-23 that retirement benefits be distributed uniformly among retirees was necessarily implicated, thus requiring the County either to rescind the benefits adopted by the Welfare Board or to extend them to all County employees.

Counties have been granted broad power under the Optional County Charter Law, State v. County of Hudson, 161 N.J.Super. 29, 43, 390 A.2d 720 (Ch.Div.1978), aff'd, 171 N.J.Super. 453, 409 A.2d 1164 (App.Div.1979). This includes the power to restructure county governments, N.J.S.A. 40:41A-30; Shapiro v. Essex County, 177 N.J.Super. 87, 99, 424 A.2d 1203 (Law Div.1980), aff'd, 183 N.J.Super. 24, 443 A.2d 219 (App.Div.), aff'd, 91 N.J. 430, 453 A.2d 158 (1982); Board of Trustees v. Sypek, 151 N.J.Super. 1, 10, 376 A.2d 240 (Law Div.1977), rev'd on other grounds, 160 N.J.Super. 452, 390 A.2d 629 (App.Div.), certif. den., 78 N.J. 327, 395 A.2d 196 (1978); American Fed'n of State, County and Mun. Employees v. Hudson County Welfare Bd., 141 N.J.Super. 25, 31, 357 A.2d 67 (1976); Union County Park Comm'n v. County of Union, 154 N.J.Super. 213, 224, 381 A.2d 33 (Law Div.1976), aff'd, 154 N.J.Super. 125, 381 A.2d 33 (App.Div.), certif. den., 75 N.J. 531, 384 A.2d 511 (1977). Under the law counties are authorized to abolish welfare boards. State v. County of Hudson, supra, 161 N.J.Super. at 44, 390 A.2d 720.

Plaintiff argues, however, that a reorganized county remains subject to obligations assumed pursuant to state regulations by autonomous predecessor agencies. This argument was made and endorsed by the Chancery Division in State v. County of Hudson, supra, 161 N.J.Super. at 32-33, 390 A.2d 720. In Hudson, the court considered whether Ruling 11, a state employment compensation regulation concerning the salaries of welfare board employees, was binding on the County of Hudson notwithstanding the County's reorganization and the abolition of the welfare board under the Optional County Charter Law. The court determined that Ruling 11 was binding on the County because it was not inconsistent with the Optional County Charter Law and because it was partly on mandate of federal welfare law. Id. at 51-52, 390 A.2d 720.

The Law Division in this case believed that County of Hudson is distinguishable in part because (1) in this case retired employees must be treated in an evenhanded manner; and (2) "Ruling 11 deals with compensation for welfare board employees, not retirees." 205 N.J.Super. at 598, 501 A.2d 601. The Law Division reasoned, in effect, that under the Optional County Charter Law, because the governing body is the County, not the Welfare Board, the requirement of uniform treatment extends to county employees and prevents the County from paying the benefits to some employees and not to others. Relying on this rationale, the County asserts that payments to plaintiff must be terminated because, under N.J.S.A. 40A:10-23, it cannot discriminate in providing benefits to its employees.

N.J.S.A. 40A:10-23 provides that if an employer assumes the cost of health insurance coverage for retired employees, it must provide the coverage "under uniform conditions." There is some language in the legislative history of N.J.S.A. 40A:10-23 indicating that retired employees were to receive uniform treatment; the Senate County and Municipal Government Committee Statement to Assembly Bill 1573 (L.1983, c. 364) states that "[s]hould a governing body determine to pay such insurance premiums, the policy must be applied uniformly to all qualified employees." The problem raised by this case is that once the County had reorganized pursuant to the Optional County Charter Law and subsumed the functions of the Welfare Board, N.J.S.A. 40A:10-23 was implicated, and the number of employees arguably covered by the uniform application requirement was broadened from welfare board employees to county employees generally; while in 1974 the resolution adopted by the Welfare Board as an autonomous employer participating in the State benefits program pursuant to N.J.S.A. 52:14-17.38 applied uniformly to all welfare board employees, it is arguable that once the Board's functions were subsumed, the uniformity requirement extended to all county employees.

The more pointed inquiry, however, is whether all county employees are similarly...