On March 9, In the Matter of County of Atlantic and PBA Local 243, et al, the Appellate Division overturned a Public Employment Relations Commission (PERC) decision that found that public employers are never required to pay step increases after the expiration of a collective negotiations agreement.

PERC’s original decision in this case had repudiated the long standing dynamic status quo concept which, in part, required employers to pay step increases automatically even though the collective negotiations agreement had expired.  For reasons described below, the impact on local boards is uncertain.  NJSBA filed an amicus curiae brief in support of Atlantic County and to alert the Appellate Division to special board of education circumstances.

Case Facts Atlantic County and various public safety unions were parties to collective negotiations agreements that expired December 31, 2010. Shortly before expiration, the county notified the PBA that due to severe financial constraints and contrary to the historic practice, it was suspending salary guide movement and not paying step increases after contract expiration and prior to new agreements being ratified. In the past, once an employee reached his or her anniversary date, the employee was given a step increase.

The unions filed unfair practice charges against the county claiming that the employer unilaterally changed a term and condition of employment in violation of the New Jersey Employer – Employee Relations Act (the Act).  The hearing officer found that the county’s actions violated the dynamic statusquo and therefore were an illegal unilateral change in terms and conditions of employment.  PERC reversed the hearing officer, finding that under then-current circumstances the dynamic status quo concept was no longer consistent with the underlying goals of the PERC Act to promote the prompt resolution of labor disputes and therefore it was not an unfair practice to not pay out the step increase.  The unions appealed.  In reversing PERC, the Appellate Division found that PERC’s “abandonment of the dynamic status quo doctrine [and its compulsion of post-expiration step increases and reliance on the 2 percent tax levy cap] was action outside the scope of its legislative mandate.”

May Not Affect School Districts The Appellate Court, however, provided indications that the ruling may not apply as written to teacher contracts, and thus, automatic increments for school employees may not be compelled. First, the court recognized that local boards would be unable to recoup post-expiration step increase payments for tenured staff, like teachers. And, the court made a point of the fact that contracts with public safety unions have been negotiated in reliance on the dynamicstatus quoconcept in that post-expiration step increases have traditionally been part of the status quo for these contracts. This is not true for teacher contracts. For at least 20 years, there has been no step increase after expiration and before ratification of the successor contract for the vast majority of school union contracts.

In a companion case, In the Matter of Township of Bridgewater and PBA Local 174, also released on March 9, 2016, the court found that whether post-expiration step movement was automatic was a negotiable term and condition of employment.

Local boards of education have long been largely exempt from the consequences of the dynamic statusquo, as a result of theNeptune Supreme Court decision. In that 1996 decision the court found that the maximum length of a teacher’s collective negotiations agreement was three years and that compelling step movement at the expiration of a three-year contract violated the law. Subsequent case law extended the salary adjustment prohibition to all forms of contractual salary payments and to school employees in the same bargaining units as teachers.

In January 2014, the school law was amended to allow negotiations of four- and five-year salary policies in collective negotiations agreements.

It is reasonable to assume that post-expiration step movement would be prohibited at the expiration of three-year contracts reached prior to the January 2014 amendment of the law. (Given that the Appellate Division reasoning referenced above concerning recoupment it is less clear what would happen for contracts reached after January 2014.) Moreover, since automatic, post-expiration increments payments have not been permissible in the school context for the last 20 years, very few school collective negotiations agreements have language directly addressing this issue.

In any event, rather than leaving this matter to further judicial interpretation, boards should consider including language in any negotiated agreement providing that no increments or other salary increases will be provided to employees between the time a contract expires and when a new one is ratified. Boards should contact the NJSBA labor relations staff to discuss specific circumstances and for sample contract language that would address this issue.

Compelling post-expiration step movement deprives government employers of their ability to react to changing economic circumstances and/or educational challenges.  Given the 2 percent tax-levy cap, compelling a sizable pay raise prior to negotiations, would force boards of education to explore other options to stay within its budgetary limits such as increased class size, layoffs or program cuts. It would be detrimental to school districts to be locked into an inflexible dynamic status quoas it would prevent boards from reacting to changes in the tax base, reductions in state aid, other economic factors, or changes in educational priorities.

A decision whether to appeal is pending.