Public employers in New Jersey have long understood the rules regarding connued payment of salary increments aer the expiraon of a collecve bargaining agreement. That is, unl recently, when the state Public Employment Relaons Commission ("PERC") started a firestorm of controversy with its decision in two maers in which PERC, rejecng its long held "dynamic status quo doctrine," held that salary increments could not connue aer the expiraon of a collecve bargaining agreement. Previously, PERC had worked under the "dynamic status quo doctrine," which states that even aer the expiraon of a collecve bargaining agreement, salary increments connue. In March, however, the New Jersey Appellate Division returned the collecve bargaining world to the proverbial "status quo" by overturning PERC.

In The Maer of County of Atlanc, and PBA Local 243, FOP Lodge 34 and PBA Local 77, DOCKET NO. A247713T4; A 010714T1 (App. Div. Mar. 9, 2016), the Appellate Division determined that PERC exceeded its legislave mandate when it aempted to nullify the dynamic status quo doctrine. In reversing PERC, the Appellate Division reinstated the dynamic status quo doctrine and cauoned PERC to stay within its legislave purview, namely, to safeguard the rights of public employees.

Background

Originally, two maers came before PERC by unions alleging unfair labor pracces by their public employers. The unions asserted that each employer had unlawfully failed to provide salary increments aer the expiraon of the prior collecve bargaining agreement, but during the period of me in which negoaons between the union and employer were ongoing.

In the past, PERC had found that, because a public employer may not alter the status quo while negoaons are ongoing, a public employer may not alter scheduled pay or step increments. In other words, even though the contract has expired, the public employer must connue to pay the salary increments during negoaons. The New Jersey Supreme Court has endorsed the socalled "dynamic status quo doctrine," finding that negoaon is required to make any changes to the current set of rules and condions of employment.

Reversing prior precedent, PERC dismissed the unions' claims, in effect relieving the public employers of the need to pay salary or step increments aer the collecve bargaining agreement had expired, and while negoaons were ongoing. In the first maer, it found that salary/step increments were not due by the public employers during negoaons aer the expiraon of a collecve bargaining agreement unless there was a specific provision in the contract providing that the salary increment provision would connue. In the second maer, PERC further said that, given its immediate prior decision, such a grievance was therefore not mandatorily negoable or arbitrable. In reaching its conclusion that salary increments should cease upon expiraon of the contract, PERC relied heavily on the burden imposed on public employers by the two percent property tax levy cap.

The Appellate Division consolidated the two maers for analysis, and reversed both PERC decisions.

The Decision

Although appellate review of agency decisions is deferenal, when the issue presented is legal in nature, the review is de novo, or decided anew, by the Appellate Division. Here, the Appellate Division stated that the issue was "whether PERC can summarily reverse the dynamic status quo doctrine in order to advance the legislave goal embodied in the two percent tax levy cap."

The Appellate Division reversed the two PERC decisions because it found that PERC did not have the authority to abandon the dynamic status quo doctrine. The Appellate Division held that PERC was charged with "safeguarding the rights of public employees" through implementaon of the New Jersey EmployerEmployee Relaons Act, N.J.S.A. 34:13A139. PERC does not have authority with regard to the implementaon and interpretaon of laws outside of the public employment laws.

PERC had attempted to reconcile the tax levy cap denoted in another law with the dynamic status quo doctrine born out of the Public EmployerEmployee Relaons Act. Specifically, the Appellate Division found that such reconciliaon was beyond PERC's mandated purview. Addionally, the Appellate Division disagreed with that determinaon and found that the two may, and thus should, be read harmoniously.

Finally, the Appellate Division did not agree that PERC was permied to deem this change "mere policymaking." It said that the dynamic status quo doctrine was in fact an interpretaon of a statute, and thus PERC was not permied to change it. Furthermore, the pares involved relied on the dynamic status quo doctrine during the course of their negoaons, and thus expectaons had already been set. Finally, the Appellate Division stated that PERC must follow all Supreme Court decisions, which to this point have endorsed the doctrine.

In conclusion, the Appellate Division reminded PERC that it may not make decisions about issues that "are not within PERC's charge," which include the "fiscal health of municipalies and tax rates." This means that the topic of salary, including automac salary/step increments, is mandatorily negoable and therefore is arbitrable.

What Impact Will This Decision Have On School Boards?

The queson remaining is how, if at all, this decision impacts negoaons between a board of educaon and its unions, in light of the statutory restricon on the length of salary schedules. N.J.S.A. 18A:294.1. The preeminent case for school boards on this topic is the Supreme Court decision in Bd. of Ed. Township of Neptune v. Neptune Township Educ. Ass'n, 144 N.J. 16 (1996). In Neptune, the Court acknowledged PERC's longstanding adherence to the dynamic status quo doctrine. However, it noted that the statute authorizing school boards to adopt salary schedules for fullme teaching staff members limited such salary schedules to one, two, or three years. Id. at 30. As a result, the Court found that the statute effecvely preempted labor law. Salary increments could not be paid to teachers aer the expiraon of the salary schedule negoated because of the statute and because a board could not recoup any overpayment from a tenured public employee. Id. at 3034.

It is important to note for school board employers that this salary schedule limitaon does not apply to nonteaching staff members. Therefore, careful consideraon should be paid to the contracts of these employees unless they are included in the same bargaining unit as teaching staff members. Public employers will want to bargain for a clause that limits salary increments to only the length of the contract and not postexpiraon.

It does not appear that the County of Atlanc maer modified the previous decisions with respect to boards of educaon. Instead, the Appellate Division's decision, while not expressly holding that the Neptune rule is not affected by this decision, discussed at length the prior case law in this area as it relates to boards and the statutory restricons on salary schedules. Therefore, it appears that boards connue to be immune from having to pay increments to teaching staff members postexpiraon of their collecve bargaining agreements. However, the Appellate Division did not address the recent statutory change, which now allows school boards to adopt salary schedules for one, two, three, four, or five years. N.J.S.A. 18A:294.1. Therefore, the queson remains whether PERC will apply the dynamic status quo doctrine to school boards whose contracts provide for something less than a fiveyear salary schedule. To be safe, boards should insert language into all of their contracts that no increments or steps will be paid aer the expiraon of the contract.

Recommendaons for All Employers

This case provides important insight into the scope of an agency's authority and the Appellate Division's willingness to rein in an agency when it believes the agency has stepped outside its authority as established by the legislature. This decision may have arisen out of the Public Employee Relaons Commission, but its principles apply equally to any state or federal agency overseeing the relaonship between employers and their employees, such as the Division of Civil Rights, the Equal Employment Opportunity Commission, or the Wage and Hour Division of the Department of Labor and Workforce Development. If aggrieved by an agency decision, in addion to appealing the agency on the merits, it is oen worthwhile to assess whether the agency has strayed from its proper policymaking role. 

In addion, while of parcular concern for public employers in light of this decision, this case is a good reminder that, when bargaining, careful consideraon must be paid to what terms and condions will apply aer the expiraon of a collecve bargaining agreement (or even an individual agreement) while negoang a successor agreement. Even in private sector bargaining, the general rule is that the status quo remains during the course of negoaons. Therefore, if an employer does not want a term or condion to connue, it will need to make sure that the agreement contains explicit language to that effect.

For public sector employers, the dynamic status quo doctrine is alive and well. Therefore, regardless of the bargaining unit, it is strongly recommended that these employers include language explicitly disavowing the connuaon of any benefits or salary increments that they do not wish to automacally connue aer the expiraon of the agreement.