A state appellate court panel on Sept. 30 let stand a Public Employment Relations Commission (PERC) ruling that preempts negotiations over employee contributions toward health benefits for contracts that begin before the sunset date of “Chapter 78,” the 2011 pension and health benefit reform act.

The PERC decision, issued last August, is consistent with NJSBA’s long-standing position.

In last month’s ruling, the Appellate Division dismissed the union’s appeal In The Matter Of Clementon Board Of Education and Clementon Education Association. The union had appealed PERC’s decision (PERC No. 2016-10) which precludes negotiations of reductions in employees’ Chapter 78 contributions prior to the sunset date provided in the law. The Court dismissed the union appeal as moot because the parties, subsequent to PERC’s decision, settled their dispute by agreeing to a successor agreement.

In August of 2015, In the Matter of Clementon Board of Education and Clementon Education Association, PERC held the following:

  • The maximum Chapter 78 contribution levels remain in effect for the duration of any collective bargaining agreement which begins prior to the sunset of Chapter 78 — that is, reduced contributions cannot be negotiated for the second, the third, or subsequent years of a contract that begins prior to sunset, and
  • In the negotiation of future contracts (those that begin after Chapter 78’s sunset), the fully phased-in Chapter 78 health benefit contributions are the status quo —that is, the full Chapter 78 contribution levels remain in effect indefinitely unless the board of education agrees to a change. The contributions do not automatically revert to the pre-Chapter 78 levels (1.5 percent of salary).

The timing and scope of negotiations surrounding the sunset of the Chapter 78 contributions has been a contentious issue.

Chapter 78 Recap A short recap of Chapter 78 may be helpful. In 2011, Chapter 78 was signed into law. It requires school employees to pay a portion of employer-provided health insurance premiums. The exact amount of the employee share is a function of the employee’s salary and the plan that they choose.  Unionized employees did not have to start the new contributions until the collective negotiation agreement that was in force when the law was enacted expired. The employee contribution has a four year phase-in period.

Here, the Clementon Board of Education and the Clementon Education Association were parties to a collective negotiations agreement with a term of July 1, 2011 through June 30, 2014. During the 2013-2014 school year, the bargaining unit was in Tier 3 of Chapter 78’s four year phase-in.  Thus, the 2014-2015 school year would have been the first year of the parties’ new contract and final year of the Chapter 78 phase-in.

The pre-existing insurance article of the parties’ contract provided that “all staff members will contribute 1.5 percent of their base salary towards health and prescription coverage…..” The board filed a scope petition with PERC arguing the contract’s insurance language was preempted by Chapter 78 for this round of bargaining.

Given the dismissal, PERC’s decision, which affirmed NJSBA’s longstanding position that parties are legally prohibited from reducing the employee contributions in the middle of a multi-year collective negotiations agreement in these circumstances, stands.

In its decision, PERC also reiterated that Chapter 78 “expressly, specifically and comprehensively sets out that Tier 4 levels of employee contributions shall constitute the status quo once employee contribution levels become negotiable….”   Thus, Clementon’s legacy contract language providing for contribution levels that are inconsistent with Chapter 78 is “preempted” and therefore unenforceable. If you have language in your district’s contract that is inconsistent with Chapter 78, contact your labor attorney or NJSBA’s labor relations staff.

Health insurance is a significant piece of employee compensation and negotiations concerning them can be challenging and emotional. As it relates to Chapter 78, boards need to remember three important points.

  • The fully phased-in employee contributions are the status quo for negotiations purposes – in order for the employee contributions to be reduced, the board must agree to do so;
  • A reduction in employee health care contributions is not negotiable until the next contract to be executed after Chapter 78 is fully implemented;
  • The parties cannot pre-negotiate a change in Chapter 78 which would take place in the middle of a contract if the start date of that contract is pre-sunset; and,
  • Once employee contributions become negotiable, boards need to carefully consider the long term implications of moving away from the cost structure dictated by Chapter 78.

It is possible that this decision will be appealed by the Clementon Education Association to the New Jersey Supreme Court. Stay tuned to School Board Notes for updates.

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