PERC Cannot Unilaterally Abandon the “Dynamic Status Quo Doctrine”

In re County of Atlantic, 445 N.J. Super. 1 (App. Div. 2016).  The Public Employment Relations Commission (“PERC”) is a state agency that is charged by the Legislature with implementing the New Jersey Employer-Employee Relations Act, N.J.S.A. 34:13A-1 to -39 (“the Act”).  In 1975, PERC adopted the “dynamic status quo doctrine.”  That doctrine holds that “an employer is normally precluded from altering the status quo while engaged in collective negotiations.”  In that case, and in a number of cases thereafter, PERC ruled that a public employer that alters employee pay or benefits after an existing contract has expired and while a new contract is being negotiated commits an unfair labor practice.  In dictum in a 1978 decision, the Supreme Court endorsed the dynamic status quo doctrine.

In these two consolidated appeals, public employers declined to pay automatic salary increments to employees after contracts expired.  The employees went to PERC, charging unfair labor practices.  PERC disavowed the dynamic status quo doctrine, observing that the Legislature had passed a two percent tax levy cap, along with a two percent interest arbitration salary cap, and that requiring public employers to pay the automatic salary increments would mean that those caps would have to be breached.

The employees appealed.  Judge Alvarez, writing for the Appellate Division, recognized the deferential standard of review that applies to administrative agency actions in general and those of PERC in particular.  Despite that, however, the panel reversed PERC’s rejection of the dynamic status quo doctrine.

Judge Alvarez found “meaningful” the Legislature’s decision not to “limit salary growth in other areas not affected by the interest arbitration cap.”  Had the Legislature wanted to limit or abrogate the dynamic status quo doctrine, it could have done so by imposing other or broader caps.  But the Legislature did not do so.

Moreover, PERC’s decision to abandon the dynamic status quo doctrine “was driven by the tax levy cap, concerns regarding government budgets, and not the Act.  The two percent tax levy cap is beyond PERC’s agency mandate.  Concerns regarding budgets are not a primary consideration when the agency safeguards the rights of public employees.”  PERC’s purported implementation of laws outside the Act, its delegated area of responsibility, was not entitled  to deference, and “PERC filled in a gap it did not have the authority to fill.”

In any event, there was no inconsistency between the tax levy cap statute and the dynamic status quo doctrine “because the employer is free to adjust and balance its budget, if necessary, from other expenditures.”  Judge Alvarez concluded that PERC had found a conflict between the two “and on the balance gave greater weight to the tax cap statute.  By doing so, it undermined its legislative mandate as embodied in the Act.”  Judge Alvarez cited cases holding that “[w]hen two status may stand together, there is no inconsistency from which an intent to repeal may be inferred.”

PERC contended that it had authority to discard the dynamic status quo doctrine “as an act of pure policymaking.”  But Judge Alvarez held that the doctrine “is neither a regulation nor a policy statement,” but an interpretation of the Act itself.  The Supreme Court’s 1978 approval of the doctrine, though dictum, was binding on the Appellate Division.  Moreover, the parties had relied on the doctrine in negotiating the contracts that had expired, and PERC’s action wrongly undermined the parties’ legitimate expectations that the doctrine would apply when the contracts ended.

 

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