On April 20, 2020, in a 4-3 decision, the New Jersey Supreme Court ruled that a teacher’s right to be paid for unused sick leave at retirement did not vest until the teacher retired, in accordance with the negotiated agreement between the board and the local union.

The New Jersey School Boards Association participated as amicus curiae before the N.J. Supreme Court. The New Jersey State League of Municipalities joined in NJSBA’s brief.

The state’s highest court overturned an earlier Appellate Division decision and held that in this case, due to the carefully crafted language in the collective negotiations agreement, “[A] given teacher’s right to sick leave compensation did not vest until that teacher, having served the length of time required by the agreement, retired or otherwise separated from employment with his or her sick leave still unused.”

By way of background, the matter involved sick leave compensation language changes between the 2012 and 2015 agreements negotiated by the district’s board of education and the local education association.

The 2012 agreement contained language capping sick leave compensation for unused sick leave at retirement at $25,000. The agreement further added “the Board and Association agreed that the 2012 agreement was done with the parties’ “full and complete understanding…and that it could not be amended or modified in any way except by written agreement ratified and executed by both parties.”  In the 2015 agreement, the parties negotiated and ratified a savings clause which lowered the cap to $15,000.

Four individual members of the local education association were the plaintiffs in a suit against the board for retention of the “vested contractual benefit of unpaid sick leave at a higher amount than the subsequently negotiated contract,” that is, the original $25,000 cap. Lower decisions before the Superior Court, Law Division and Appellate Division, both rejected the board’s argument that teacher’s rights to compensation for accumulated sick leave “vests when he or she fulfills the service conditions of the Agreement.”  However, the state Supreme Court disagreed and found that the board and the association had the authority to negotiate the amount of the cap insofar as the rights did not vest until the plaintiffs fulfilled the obligation of separating from service, which in the instant case was after the ratification of the 2015 agreement.

The case illustrates the importance of carefully crafted language in negotiated successor agreements as it will affect employees upon retirement.  Boards should carefully review claims of vested contractual rights in light this case.  Any questions should be directed to the board or labor counsel, or to the NJSBA Department of Legal and Labor Relations Services at (609) 278-5254.