Cap on Sick Leave Payments to School Administrators Upheld

New Jersey Ass’n of School Adminstrators v. Schundler, 211 N.J. 535 (2012).  This case required the Supreme Court to parse and reconcile an unusually complex scheme of statutes and regulations that dealt with benefits available by contract to high-level school administrators.  In 2007, the Legislature passed measures designed to hold down property taxes and to address the level of benefits for high school administrators.  The Commissioner of Education then promulgated regulations to implement the new law, including provisions to limit benefits in new contracts for high-level administrators and to cap payment, prospectively only, for unused sick leave days at $15,000.

Plaintiff and some of its members sued to invalidate the regulations.  The Appellate Division invalidated those regulations in part, finding that they deprived certain administrators of vested rights and improperly reduced the compensation of tenured assistant superintendents, while upholding the regulations as to other administrators (depending on their position and tenure status).  414 N.J. Super. 530 (App. Div. 2010).  Judge Grall dissented in part.  The State appealed to the Supreme Court as of right on the issues raised by the dissent and also filed a petition for certification, which was granted.

In a unanimous opinion by Chief Justice Rabner, the Supreme Court reversed and upheld all the regulations.  The Court began by recognizing “a presumption that the regulations are both valid and reasonable,” as a result of which the parties challenging these regulations had to show that the Commissioner of Education was arbitrary and capricious in adopting them.  Plaintiffs here failed to carry that burden.  Though the Court upheld all the regulations, the opinion’s primary focus was on the regulation prospectively capping sick leave payments.

The regulation capping sick leave did not “deprive officials of any property already earned, and it protects existing contract rights….  [Plaintiffs] cannot claim a protected property right under state law to unlimited payment for sick leave time that has not yet accrued.”  The regulation also limited payment of accrued sick leave to the administrator’s date of retirement, precluding payment if the administrator died before retirement.  Chief Justice Rabner found that this was not improper.  Sick leave is not “compensation that has been earned.”  And, because the regulation tracked the statute in these respects, the regulation was not invalid as contrary to or beyond the authority of the enabling statute.

Plaintiffs also argued that a 2010 statute repealed the 2007 enactments to the extent that the earlier laws went against plaintiffs.  The Court disagreed.  Chief Justice Rabner cited the general rule that implied repeals of prior statutes are disfavored.  Moreover, after a detailed look at the allegedly conflicting statutes, the Court concluded that the later law did not repeal the earlier one.