Fiscal Emergencies Alone Do Not Permit Public Employers to Adversely Affect Employee Compensation in Violation of Collective Bargaining Agreements

In re Robbinsville Tp. Bd. of Educ. v. Washington Tp. Educ. Ass’n, 227 N.J. 192 (2016).  In Borough of Keyport v. International Union of Operating Engineers, 222 N.J. 314 (2015), the Supreme Court approved temporary layoffs of public workers where those layoffs were motivated by an economic crisis.  Importantly, as a backdrop those layoffs, “an emergency regulation was promulgated that temporarily authorized municipalities governed by the civil service system … to [temporarily] lay off employees when facing exigent financial circumstances.”

In this Robbinsville case, facing “significant funding reductions and citing managerial prerogative,” the Robbinsville Board of Education imposed involuntary furlough days on teachers knowing that the furlough days would adversely affect teachers’ pay.  An unfair labor practice complaint was filed by the local teachers’ union with the Public Employment Relations Commission (“PERC”).  That complaint asserted that the furlough violated a collective bargaining agreement and a state statute that governs employer-employee relations.

PERC granted summary judgment to the Board, relying solely on Keyport.  The union appealed, but the Appellate Division affirmed.  The Supreme Court granted the union’s petition for certification.  Yesterday, the Court reversed the rulings below in a unanimous opinion by Justice LaVecchia.

The issue was whether the right to impose furloughs “is appropriately decided by the political process or by collective negotiations.”  In In re Local 195, IFPTE v. State, 88 N.J. 393 (1982), the Court had stated a three-part test for answering that question.  Applying that test in Keyport, the Court found all three prongs pointed toward the municipalities’ (there were several, not just Keyport) right to lay off the workers.

As to the third prong, which asks whether making an issue negotiable in collective bargaining would “significantly interfere with the determination of governmental policy,” the Court found that the layoffs would not do so.  Critical to that ruling, however, was the finding that the emergency regulation had been enacted so as to authorize temporary layoffs.  “The regulation’s existence made all the difference in Keyport.  It was mentioned by the Court repeatedly throughout the opinion.”

Here, in contrast, there was no such regulation.  For that reason, PERC and the Appellate Division misapplied Keyport.  “Keyport does not stand for the proposition that anytime a municipal public employer can claim an economic crisis, managerial prerogative allows the public employer to throw a collectively negotiated agreement out the window.”  Justice LaVecchia emphasized that the Legislature and the Supreme Court have, “time and again, emphasized the value of collective negotiated agreements in our society.” Given that policy, the Appellate Division’s application of Keyport rendered that case “unrecognizable.”

The Board also argued that even if Keyport did not support PERC’s decision, the collective bargaining agreement did.  Justice LaVecchia was unpersuaded.  Neither PERC nor the Appellate Division cited the agreement, relying instead exclusively on Keyport.  Moreover, the Board had not filed a cross-petition for certification, which would have allowed it to argue a ground different than that relied upon by the tribunals below.  This points up the importance of Supreme Court respondents filing protective cross-petitions in order to preserve arguments that the lower courts did not rely on.