NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2477-13T4 A-0107-14T1

IN THE MATTER OF COUNTY OF ATLANTIC,

Respondent-Respondent, APPROVED FOR PUBLICATION

and March 9, 2016

APPELLATE DIVISION PBA LOCAL 243,

Charging Party,

and

FOP LODGE 34 and PBA LOCAL 77,

Charging Parties-Appellants. _____________________________________

IN THE MATTER OF TOWNSHIP OF BRIDGEWATER,

Petitioner-Respondent,

and

PBA LOCAL 174,

Respondent-Appellant. ______________________________________

Argued October 28, 2015 – Decided March 9, 2016

Before Judges Alvarez, Haas, and Manahan.

On appeal from the State of New Jersey Public Employment Relations Commission, P.E.R.C. Nos. 2014-40 and 2015-11. Ira W. Mintz and Steven R. Cohen argued the cause for appellants FOP Lodge 34, and PBA Local 77 in A-2477-13, and amici curiae Lodge 34, PBA Local 77, and Communications Workers of America AFL-CIO in A-0107-14 (Weissman & Mintz, LLC, and Selikoff & Cohen, P.A., attorneys; Mr. Mintz and Mr. Cohen, on the briefs).

James M. Mets and David M. Bander argued the cause for appellant PBA Local 174 in A-0107- 14 and amicus curiae Professional Firefighters Association of New Jersey in A- 2477-13 (Mets Schiro & McGovern, LLP, attorneys; Mr. Mets, of counsel and on the briefs; Mr. Bander and Brian J. Manetta, on the briefs).

James F. Ferguson, Atlantic County Counsel, argued the cause for respondent County of Atlantic in A-2477-13.

Don Horowitz, Acting General Counsel, argued the cause for respondent New Jersey Public Employment Relations Commission (Mr. Horowitz, attorney; Martin R. Pachman, formerly General Counsel, and Mr. Horowitz, on the briefs).

Eric M. Bernstein argued the cause for Township of Bridgewater respondent in A- 0107-14 and amicus curiae in A-2477-13 (Eric M. Bernstein & Associates, LLC, attorneys; Mr. Bernstein, of counsel and on the brief; Philip G. George, on the brief).

John J. Hoffman, Acting Attorney General, attorney for amicus curiae Governor's Office of Employee Relations in A-2477-13 (Michelle Lyn Miller, Assistant Attorney General, of counsel; Todd A. Wigder, Deputy Attorney General, on the brief).

Oxfeld Cohen, P.C., attorneys for amicus curiae International Federation of Professional and Technical Engineers, Local

2 A-2477-13T4 195 in A-2477-13 (Arnold S. Cohen, of counsel and on the brief; Samuel Wenocur, on the brief).

Bucceri & Pincus, attorneys for amicus curiae New Jersey Education Association in A-2477-13 (Louis P. Bucceri, of counsel and on the brief; Albert J. Leonardo, on the brief).

Cynthia J. Jahn, General Counsel, attorney for amicus curiae New Jersey School Boards Association in A-2477-13 (Patrick Duncan, on the brief).

Law Offices of Craig S. Gumpel LLC, attorneys for amicus curiae New Jersey State Firefighters Mutual Benevolent Association (Craig S. Gumpel, of counsel and on the brief).

Genova Burns LLC, attorneys for amici curiae New Jersey State League of Municipalities, New Jersey Association of Counties, and New Jersey Council of County Colleges (Joseph M. Hannon, of counsel and on the brief; Allison B. Gotfried, on the brief).

Markowitz and Richman, attorneys for amicus curiae New Jersey State Lodge of the Fraternal Order of Police (Matthew D. Areman, on the brief).

Zazzali, Fagella, Nowak, Kleinbaum & Friedman, attorneys for amicus curiae New Jersey State PBA in A-2477-13 (Paul L. Kleinbaum, of counsel and on the brief; Marissa A. McAleer, on the brief).

The opinion of the court was delivered by

ALVAREZ, P.J.A.D.

3 A-2477-13T4 Oral argument was conducted on these two matters back-to-

back, and they are consolidated for purposes of this opinion.

We reverse both Public Employment Relations Commission (PERC)

final agency decisions because PERC's abandonment of the dynamic

status quo doctrine was action outside the scope of its

legislative mandate, which is the implementation of the New

Jersey Employer-Employee Relations Act (Act), N.J.S.A. 34:13A-1

to -39.

PERC is charged with safeguarding the rights of public

employees. Galloway Twp. Bd. of Educ. v. Galloway Twp. Ass'n

(NJ Galloway),

(1978). It "bear[s] the dual

responsibilities of adjudicating violations of the unfair

practice provisions and the Act and taking all steps necessary

to enforce that which the Legislature has declared to be the

public policy of this State in public employment labor

relations."

In the first appeal, the Atlantic County matters, FOP Lodge

34 and PBA Local 771 filed separate unfair practice charges with

PERC.2 The unions alleged that Atlantic County violated the Act

by, after the expiration of collective negotiation

1 The organizations are the designated collective bargaining units for officers below the rank of sergeant. 2 A third union, PBA Local 243, is not involved in the appeal.

4 A-2477-13T4 agreements3 (CNAs), failing to pay salary/step increments to unit

members while negotiations were ongoing and the employment

contract disputes were in interest arbitration. PERC dismissed

the charges, disavowing the dynamic status quo doctrine, which

would have required payment of the salary increments. Had PERC

adhered to the longstanding doctrine, it would have held

Atlantic County's decision not to pay salary/step increments an

unfair labor practice. See N.J.S.A. 34:13A-5.4.

In the second appeal, the Bridgewater Township case, PERC

restrained binding arbitration of Local 174's grievance, relying

on its decision in the Atlantic County cases.4 The grievance was

filed to challenge the Township's failure to pay automatic

salary increments to unit members after the expiration of their

CNA. PERC held that, since it had abandoned the dynamic status

quo doctrine, the issue of automatic salary increments after the

expiration of a negotiated agreement was no longer mandatorily

negotiable nor legally arbitrable. Had PERC adhered to the

3 New Jersey typically employs the terms "collective negotiation" and "collective negotiation agreements," not "collective bargaining" or "collective bargaining agreements." Twp. of Franklin v. Franklin Twp. PBA Local 154,

, 373 n.1 (App. Div. 2012). 4 Local 174 is a collective bargaining unit for officers below the rank of sergeant.

5 A-2477-13T4 doctrine, since salary is a mandatory subject of negotiation, it

would have held Local 174's grievance to be arbitrable.

I.

PERC has had exclusive jurisdiction over unfair labor

practice charges since 1974. See L. 1974, c. 123 (1974),

codified at N.J.S.A. 34:13A-5.4; See In re Galloway Twp. Bd. of

Educ. (PERC Galloway), P.E.R.C. No. 76-32, 2 N.J.P.E.R. ¶ 122B,

1976 N.J. PERC LEXIS 23 (1976), rev'd,

(App.

Div. 1977), rev'd, NJ Galloway, supra,

. The

following year, PERC adopted the dynamic status quo doctrine.

See In re Piscataway Twp. Bd. of Educ., PERC No. 91, 1

N.J.P.E.R. 49, 50 (1975).

In Piscataway, PERC found that the employer had engaged in

an unfair labor practice by unilaterally dropping employee

hospitalization and medical coverage, a condition of employment,

after the expiration of a CNA while negotiations were ongoing.

PERC stated: "It is the generally accepted view in both the

public and private sectors that an employer is normally

precluded from altering the status quo while engaged in

collective negotiations . . . ." Ibid. PERC defined the term

"status quo" to include scheduled pay increments. Moreover,

such dynamic status quo was within the scope of mandatory fair

labor practices even where no CNA was in effect.

6 A-2477-13T4 Two years later, in 1976, PERC again held that refusal to

pay salary increments in accordance with an expired agreement,

pending the negotiation of a successor agreement, was an unfair

labor practice in violation of N.J.S.A. 34:13A-5.4(a)(1) and

(5). PERC Galloway, supra, 2 N.J.P.E.R. at 8-9. In PERC

Galloway, PERC observed that a level playing field for labor

negotiations between a government employer and the employee

bargaining unit requires that "the status quo is predictable and

constitutes the terms and conditions under which the parties

have been operating[.]" PERC Galloway, supra, 2 N.J.P.E.R. at

7.

Our Supreme Court affirmed the PERC Galloway decision in

part based on the application of N.J.S.A. 18A:29-14. The

statute bound school boards to salary schedules "for a period of

two years from the effective date of such policy[,]" and in that

case the second year fell in the school term in which the Board

was refusing to pay salary increments. Because the Board did

not pay salary increments for the second year, it violated the

"statutory compulsion." Id. at 52. NJ Galloway, supra,

. The Court, by way of dictum, also endorsed PERC's

reliance on the doctrine of dynamic status quo in its decision.

.

7 A-2477-13T4 In its discussion, the Court cited NLRB v. Katz,

,

,

(1962), for the

proposition that unilateral change in the status quo

"frustrate[s] the 'statutory objective of establishing working

conditions through bargaining.'"

at 48 (citing

, 84 S. Ct. at 1112,

). The

Court drew a parallel between that principle and N.J.S.A.

34:13A-5.3. The statute stated then as it does now, that "new

rules or modifications of existing rules governing working

conditions" should only be implemented when they are the product

of negotiations:

Our Legislature has also recognized that the unilateral imposition of working conditions is the antithesis of its goal that the terms and conditions of public employment be established through bilateral negotiation and, to the extent possible, agreement between the public employer and the majority representative of its employees. It has incorporated a rule similar to that of Katz in . . . N.J.S.A. 34:13A-5.3.

[NJ Galloway, supra,

.]

Since compensation is an important condition of employment,

the unilateral denial of that increment would constitute a modification thereof without the negotiation mandated by N.J.S.A. 34:13A-5.3 and would thus violate N.J.S.A. 34:13A-5.4(a)(5). Such conduct by a public employer would also have the effect of coercing its employees in their exercise of the organizational rights guaranteed them by the Act because of its inherent repudiation

8 A-2477-13T4 of and chilling effect on the exercise of their statutory right to have such issues negotiated on their behalf by their majority representative.

[Id. at 49.]

Eighteen years later, in Board of Education Township of

Neptune v. Neptune Township Educational Association,

(1996), the Court acknowledged PERC's longstanding adherence to

the dynamic status quo doctrine, and the adherence to the

doctrine in "most jurisdictions[.]"

.

The Court observed, however, that "there is less unanimity

in applying that rule to the public sector."

When

Galloway was written, N.J.S.A. 18A:29-4.1 authorized school

boards to adopt salary schedules for full-time teaching staff

for a maximum of two years. At the time Neptune was written,

the statute had been amended to allow increments in "one, two or

three year" steps. Supra,

. The Court found the

statute effectively preempted labor law.

.

In Neptune, the Court clarified that salary increments

could not be paid to teachers after the expiration of the salary

schedule negotiated between the school board and the union

because it was prohibited by statute,

, and because

no recoupment could be obtained from a tenured public employee,

. The latter point was important because recoupment

could be obtained from other non-tenured public employees, thus

9 A-2477-13T4 limiting the potential impact of payments of increments during

periods in which a CNA was not in effect on a governmental

entity's budget. Should the parties ultimately negotiate a

different schedule of payments that resulted in an overpayment

during the time the CNA was expired but increments paid, the

overpayments could be "recouped."

In the context of the newly decided Abbott v. Burke,

(1994), which mandated the equalization of school

funding across the state, the Neptune Court concluded that

N.J.S.A. 18A:29-4.1 was enacted "to allow schools to properly

manage their budgets in conformance with the New Jersey

Constitution and current economic realities." Supra,

. The Court disavowed a reading of NJ Galloway that

relied on the dynamic status quo doctrine.

.

Despite the disavowal, the Court also specified that the

salary schedule limit found in N.J.S.A. 18A:29-4.1 did not apply

to non-teaching staff members.

.

In other words, despite the weighty school funding concerns

addressed in Abbott, and the potential negative effect of

automatic increases on a school budget, the Neptune Court

allowed non-teaching employees to benefit from the dynamic

status quo doctrine and collect increments in salaries at the

expiration of their CNAs. See

10 A-2477-13T4 PERC thereafter decided that because of the potential

negotiating difficulties resulting from mixed bargaining units,

in which members would be subject to different rules depending

on whether they were teachers or non-teachers, Neptune's holding

would be extended to non-teaching members included in a

bargaining unit with teachers. In re East Hanover Bd. of Educ.,

PERC No. 99-71, 25 N.J.P.E.R. ¶ 30052 1999 N.J. PERC LEXIS 12

(1999), aff'd, No. A-4226-98 (App. Div. Apr. 10, 2000), certif.

denied,

(2000).

Appellate review of agency decisions is deferential. In re

Hunterdon Cnty. Bd. of Chosen Freeholders,

(1989). Our inquiries are limited to: (1) whether the agency

followed the law; (2) whether the agency's decision is supported

by substantial evidence in the record; and (3) whether in

applying the law to the facts, the agency reached a supportable

conclusion. City of Jersey City v. Jersey City Police Officers

Benev. Ass'n,

(1998); Morris Cnty. Sheriff's

Office v. Morris Cnty. Policeman's Benev. Ass'n, Local 298,

(App. Div. 2011).

As to the review of PERC decisions, we have said:

PERC is charged with administering the New Jersey Employer-Employee Relations Act (Act), N.J.S.A. 34:13A-1 to -29, and its interpretation of the Act is entitled to substantial deference. Appellate courts "'will not upset a State agency's

11 A-2477-13T4 determination in the absence of a showing that it was arbitrary, capricious or unreasonable, or that it lacked fair support in the evidence, or that it violated a legislative policy expressed or implicit in the governing statute.'" "Although an agency's 'interpretation of the statute it is charged with administering . . . is entitled to great weight,' . . . [appellate courts] will not yield to PERC if its interpretation is 'plainly unreasonable, contrary to the language of the Act, or subversive of the Legislature's intent.'"

PERC's interpretation of the law outside of its charge is entitled to "no special deference." Moreover, deference is not afforded when PERC's interpretation gives a provision of the Act greater reach than the Legislature intended, and PERC must follow judicial precedents interpreting the Act.

[Commc'ns Workers of Am., Local 1034 v. State Policemen's Benev. Ass'n, Local 203,

(App. Div. 2010) (alteration in original) (citations omitted).]

The issue presented in these appeals is one of law:

whether PERC can summarily reverse the dynamic status quo

doctrine in order to advance the legislative goal embodied in

the two percent tax levy cap, N.J.S.A. 40A:4-45.44 to -45.47.

Our review is de novo. Maeker v. Ross,

(2014); Manalapan Realty, L.P. v. Twp. Comm. of Manalapan,

(1995).

12 A-2477-13T4 II.

In the Atlantic County matters, PERC adopted and

incorporated the hearing examiner's findings of fact. However,

because it abandoned the dynamic status quo doctrine, it

rejected the examiner's decision in favor of both bargaining

units.

It was undisputed that the County's practice for many years

had been to pay salary increments while a new agreement was

negotiated, pursuant to the schedule contained in the expired

CNA. It is common for contracts between public employers and

employees to expire long before new ones are negotiated. Local

77's CNA explicitly provided for this eventuality by stating:

"All provisions of this Agreement will continue in effect until

a successor Agreement is negotiated." Article XIX, "Duration

and Termination."

During the course of the hearing, County employees

testified that law enforcement salary increments were between

approximately five and six percent per year. If paid, in order

to meet the two percent tax levy cap, some adjustment would have

to be made to other budget items.

Despite adopting the hearing examiner's findings of fact,

PERC disagreed with his conclusion that the parties' CNAs

compelled salary step increments beyond the expiration of the

13 A-2477-13T4 agreements. PERC found instead that "there is not one word in

any of the agreements by which the parties agreed to continue to

provide incremental increases beyond the termination date of the

agreements." PERC made no mention that both CNAs were

negotiated assuming the dynamic status quo doctrine applied.

PERC began the analysis in its decision by discussing the

2010 tax levy cap. It observed that the County had demonstrated

a decrease in its ratable base, as a result of which it had been

compelled to cut expenditures by reducing public services and

projects, by employee furloughs, and similar measures.

PERC further observed that the County's efforts had enjoyed

great success, and that it carried actual budget surpluses in

2010 and 2011, maintained its good bond rating, and limited its

overall budget growth to under two percent. After this

discussion, PERC proceeded to consider the "continuing propriety

of what is known as the dynamic status quo doctrine."

PERC's analysis also referenced Piscataway, PERC Galloway,

and Neptune, acknowledging adherence to the doctrine since 1975.

The opinion then stated that PERC had the authority to modify,

or even abandon doctrines it created. It identified two earlier

14 A-2477-13T4 cases, one decided in 2011 and other in 2012, in which it

deviated from the dynamic status quo doctrine.5

Without reference to the record, and contrary to the

rationale it had employed since Piscataway in 1974 that the

dynamic status quo doctrine maintained a level playing field for

labor negotiations, PERC continued: "a post expiration

requirement that employers continue to pay and fund a prior

increment system creates myriad instabilities in the

negotiations process." PERC next referred to changing economic

conditions, and asserted that governmental budgetary constraints

trump labor considerations. PERC's opinion closed with this

statement:

[W]e find that the dynamic status quo no longer fulfills the needs of the parties in that it serves as a disincentive to the prompt settlement of labor disputes, and disserves rather than promotes the prompt resolution of labor disputes. While public employers will continue to be bound by the

5 Bloomfield Bd. of Educ., P.E.R.C. No. 2011-055, 37 N.J.P.E.R. ¶ 2 2011 N.J. PERC LEXIS 79 (2011); State Operated School Dist. of Paterson, P.E.R.C. No. 2012-3, 38 N.J.P.E.R. ¶ 33 2011 N.J. PERC LEXIS 118 (2011). Both opinions relate to interim relief. In the first, PERC declined to compel salary increments during negotiations because the payments could not be recouped. In the second case, PERC declined to apply the dynamic status quo doctrine to a dispute in a financially struggling school district because "after weighing the relative hardship to the parties and the harm to the public interest, interim relief is not appropriate and the dynamic status quo should not be applied in this case." State Operated School Dist. of Paterson, 2011 N.J. PERC LEXIS at 9.

15 A-2477-13T4 strictures of maintenance of the status quo, that will be defined as a "static" rather than a dynamic status quo.

Therefore, PERC rejected the hearing examiner's decision because

he applied the dynamic status quo doctrine and "for the reasons

set forth above[,]" and dismissed the unfair practice charges.

This appeal followed.

We begin our analysis with N.J.S.A. 34:13A-16.7 [and

related statutes], enacted in 2010, which cap interest

arbitration salary growth at two percent. The effective life of

N.J.S.A. 34:13A-16.7 was recently extended to 2017. This cap,

limited to interest arbitration, is the Legislature's link

between the Act and the two percent tax levy cap or efforts at

controlling the size of municipal budgets.6 It is significant

because in New Jersey, interest arbitration is compulsory. See

N.J.S.A. 34:13A-16. It hardly needs to be said that had the

Legislature intended to limit salary growth in other areas not

affected by the interest arbitration cap, it clearly could have

done so. And its silence is meaningful:

6 In N.J.S.A. 34:13A-16(g)(6), an element, among many, arbitrators must take into account in resolving salary negotiations is the effect of an award on the employers' budget. Similarly, in N.J.S.A. 34:13A-16.8(e)(1), the Interest Arbitration Task Force is directed to, as part of its charge, "study the effect and impact of the arbitration award cap on local property taxes."

16 A-2477-13T4 [T]he fact that the Legislature has not acted in response to an agency's interpretation or practice is "granted great weight as evidence of its conformity with the legislative intent." Malone v. Fender,

,

(1979) (citing Lavitz v. Civil Serv. Comm'n,

,

(App. Div. 1967)); see also Cedar Cove, Inc. v. Stanzione,

,

(1991) ("The meaning ascribed to legislation by the administrative agency responsible for its implementation, including the agency's contemporaneous construction, long usage, and practical interpretation, is persuasive evidence of the Legislature's understanding of its enactment." (citing

,

)).

[Klumb v. Bd. of Educ. of Manalapan- Englishtown Reg'l High Sch. Dist., Monmouth Cnty.,

(2009).]

The Legislature could have enacted additional limits by

further amendments. It did not. See, e.g., Bd. of Educ. of

Borough of Alpha, Warren Cnty. v. Alpha Educ. Ass'n,

(2006) (noting that Legislature overruled Supreme

Court's ruling in Camden Bd. of Educ. v. Alexander,

(2004), in part, by amending N.J.S.A. 34:13A-5.3,

effective Jan. 12, 2006, to set forth a presumption in favor of

arbitration).

PERC's decision, undertaken in an area in which the

Legislature did not act, was driven by the tax levy cap,

concerns regarding government budgets, and not the Act. The two

percent tax levy cap is beyond PERC's agency mandate. Concerns

17 A-2477-13T4 regarding budgets are not a primary consideration when the

agency safeguards the rights of public employees. "PERC's

interpretation of the law outside of its charge is entitled to

'no special deference.'" Local 1034, supra,

.

PERC is charged with administering the Act and its

interpretation of the Act is entitled to substantial deference.

Its interpretation and implementation of laws, and primary

consideration of goals outside its charge, however, is not.

Local 1034, supra,

. In these cases, PERC

filled in a gap it did not have the authority to fill.

Contrary to PERC's conclusion, there is no absolute

inconsistency between the tax levy cap statute and the dynamic

status quo doctrine because the employer is free to adjust and

balance its budget, if necessary, from other expenditures.

Additionally, employers have the capacity, with non-tenured

employees, to recoup increments.

In fact, the interest arbitration statute's legislative

history, L. 2010, c. 105, explicitly states that the Legislature

did not intend to place a cap on negotiated agreements. See

Assembly Law & Public Safety Comm. Statement to Assembly Comm.

Substitute for A. 3393 (Dec. 9, 2010) ("[A]greements arrived at

through independent negotiation between the parties, and

18 A-2477-13T4 agreements reached with the assistance of a mediator or

factfinder are not subject to the contractual cap.").

Essentially, PERC found that the cost-saving impetus behind

the tax levy cap and the dynamic status quo doctrine conflicted,

and on the balance gave greater weight to the tax cap statute.

By doing so, it undermined its legislative mandate as embodied

in the Act.

"When two statutes may stand together, each governing its

own sphere of operation, there is no inconsistency from which an

intent to repeal may be inferred." Jackson Twp. Bd. of Educ. v.

Jackson Educ. Ass'n ex rel. Scelba,

(App. Div.), certif. denied,

(2000). See also

Brown v. City of Jersey City,

(App.

Div. 1996) ("It is well settled that implied repealers are

disfavored by the law and will be avoided if the two enactments

can be read harmoniously and sensibly."). "Evidence of

statutory incompatibility reflecting a legislative intention to

supplant a prior law must be clear and compelling." Grzankowski

v. Heymann,

(App. Div. 1974).

Nor do we agree with PERC that it was free to discard the

doctrine as an act of mere policymaking. PERC has broad

authority to

make policy and establish rules and regulations concerning employer-employee

19 A-2477-13T4 relations in public employment relating to dispute settlement, grievance procedures and administration including enforcement of statutory provisions concerning representative elections and related matters and to implement fully all the provisions of this act.

[N.J.S.A. 34:13A-5.2.]

See also N.J.A.C. 19:10-1.1 to 19:19-5.2 (PERC regulations);

Galloway, supra,

(PERC "is given certain statutory

powers to fulfill its delegated duty as a regulatory body in the

field of public employment labor relations. These include

legislation (i.e., rule making), investigation, prosecution and

adjudication.").

And PERC may amend its regulations "to adapt to changing

circumstances and conditions," Glukowsky v. Equity One, Inc.,

(2004), cert. denied,

,

,

(2005), subject to compliance with the

Administrative Procedure Act, N.J.S.A. 52:14B-1 to -15, and due

process requirements. In re Provision of Basic Generation Serv.

for Period Beginning June 1, 2008,

(2011); In

re N.J.A.C. 7:1B-1.1 et seq.,

(App.

Div.), certif. denied,

(2013).

But the dynamic status quo doctrine is neither a regulation

nor a policy statement. It is an interpretation of N.J.S.A.

34:13A-5.3, which PERC developed when assessing unfair labor

20 A-2477-13T4 practice charges, in fulfilling its adjudicative function

pursuant to N.J.S.A. 34:13A-5.4(c). See

(PERC "has interpreted the Act to require a dynamic

status quo, including the payment of increments.") (emphasis

added); Galloway, supra,

(Legislature has

"recognized that the unilateral imposition of working conditions

is the antithesis of its goal that the terms and conditions of

public employment be established through bilateral negotiation

and, to the extent possible, agreement between the public

employer and the majority representative of its employees"; and

"If a scheduled annual step increment . . . is an 'existing

rul[e] governing working conditions,' the unilateral denial of

that increment would constitute a modification thereof without

the negotiations mandated by N.J.S.A. 34:13A-5.3 and thus would

violate N.J.S.A. 34:13A-5.4(a)(5)") (emphasis added).

Furthermore, the parties relied on the doctrine in

negotiating their CNAs. By altering its course, PERC undermined

the parties' legitimate expectations based on their negotiations

and, as to at least Local 77, the actual employment contract.

See, e.g., Camden Bd. of Educ., supra,

("As a

general matter, legislative and other regulatory enactments are

'a silent factor in every contract[, and p]arties in New Jersey

are likewise presumed to have contracted with reference to the

21 A-2477-13T4 existing law.'" (alteration in original) (quoting Silverstein v.

Keane,

(1955)), superseded by statute on other

grounds as explained in Bd. of Educ. of Alpha, supra,

).

Finally, PERC wrongly assumed that government employers

cannot negotiate to avoid paying salary increments after the

lapse of CNAs. The employer also has the option, when engaged

in new negotiations, to recoup salary increments in a new

contract.

An additional consideration is that we are obliged to

follow the discussion in NJ Galloway of the dynamic status quo

doctrine. It is well-established that "an expression of opinion

on a point involved in a case, argued by counsel and

deliberately mentioned by the court, although not essential to

the disposition of a case . . . becomes authoritative[] when it

is expressly declared by the court as a guide for future

conduct." State v. Rose,

(2011). In other

words, even if the Court's analysis in NJ Galloway was no more

than dictum unnecessary to the ultimate ruling applying N.J.S.A.

18A:29-4.1, we must follow it.

"[A]s an intermediate appellate court, we consider

ourselves bound by carefully considered dictum from the Supreme

Court." State v. Breitweiser,

(App.

22 A-2477-13T4 Div. 2004), certif. denied,

(2005). Even in

Neptune, the Court in effect sanctioned the doctrine because it

would be applied to non-teaching staff members in the bargaining

unit.

Here, the hearing examiner concluded in both cases that

nonpayment of the increments would constitute an unfair labor

practice under N.J.S.A. 34:13A-5.4(a)(1) and (5). We agree. We

therefore reverse.

III.

Once informed of PERC's decision in the matter of County of

Atlantic, the Township's administrator notified Local 174 that,

based on that opinion, "no step increases are to be granted to

any Township employee unless a contract agreement is in place."

As a result, Local 174 filed a grievance alleging the Township

violated the parties' CNA, past practice, and the covenant of

good faith and fair dealing. Local 174 submitted a request to

PERC for grievance arbitration and the Township filed a scope of

negotiations petition, seeking restraint of the grievance

arbitration.

Local 174's CNA expired December 31, 2012. It included the

following term: "This agreement shall remain in full force and

effect during collective negotiations between the parties beyond

the date of expiration set forth herein until the parties have

23 A-2477-13T4 mutually agreed on a new agreement." The hearing examiner found

this provision to mean the employer agreed to salary increments

even after the expiration of a CNA.

The grievance arbitration resulted in an award in favor of

Local 174. That award was confirmed by the Law Division,

pursuant to statute, on July 9, 2014. See N.J.S.A. 2A:24-7.

Over a month after the grievance arbitration award was

confirmed, on August 14, 2014, PERC decided the Township's scope

of negotiations petition, belatedly granting the Township's

request for restraint of binding arbitration. PERC held the

issue was "whether the subject matter in dispute is within the

scope of collective negotiations." It noted that the scope of

negotiations for police and fire officials "is broader than for

other public employees because N.J.S.A. 34:13A-16 provides for a

permissive as well as a mandatory category of negotiations."

After discussion of its Atlantic County decision, and the

contentions of each of the parties, PERC stated:

[W]e find that the issue of automatic movement on a salary guide after a contract has expired is not a term and condition of employment and therefore not mandatorily negotiable and legally arbitrable. We acknowledge that the issues of compensation and advancement on a salary guide are generally mandatorily negotiable and legally arbitrable issues. . . . In this case, our inquiry extends beyond those issues. The precise issue herein concerns automatic advancement on a salary guide after the

24 A-2477-13T4 expiration of a contract, and whether such advancement continues to be a term and condition of employment. We find that the answer to this question is no.

Referring to its decision in Atlantic County, PERC added the

following: "Given that the issue herein fails to qualify as a

term and condition of employment it is not mandatorily

negotiable and legally arbitrable and we grant the Township's

request for a restraint of arbitration."

The record does not offer any explanation for the

chronology of events, i.e., that the arbitration award was made

and confirmed before PERC issued its scope of negotiations

ruling. Theoretically, the decision is therefore moot. Caput

Mortuum, L.L.C. v. S&S Crown Servs., Ltd.,

(App. Div. 2004) ("A case is moot if the disputed issue has

been resolved, at least with respect to the parties who

instituted the litigation.").

We nonetheless address the issue because the scope of

negotiations petition may be viewed independently from the

grievance. PERC, by virtue of the Township's inquiry, was

required to rule on whether the subject matter of dispute was

within the scope of collective negotiations. See Ridgfield Park

Educ. Ass'n v. Ridgfield Park Bd. of Educ.,

(1978). PERC has "primary jurisdiction to make a determination

on the merits of the question whether the subject matter of a

25 A-2477-13T4 particular dispute is within the scope of collective

negotiations."

This appeal raises an issue of some

public importance, having the potential to recur. See State v.

State Troopers Fraternal Ass'n,

(1993); Morris

Cnty. Sheriff's Office, supra,

.

We employ the same standard of review as we did in Atlantic

County. Our review is deferential only if PERC's interpretation

of the law relates to its charge to implement the Act. Local

1034, supra,

. We do not reverse unless

the State agency decision is shown to be arbitrary, capricious,

or unreasonable, lacking fair support in the evidence, or

violative of a legislative policy expressed or implicit in the

governing statute.

We ask: (1) whether the agency

followed the law; (2) whether the agency's decision is supported

by substantial evidence in the record; and (3) whether in

applying the law to the facts, the agency reached a supportable

conclusion. City of Jersey City, supra,

; Morris

Cnty. Sheriff's Office, supra,

.

These standards apply to scope of negotiations rulings

which are reviewed for arbitrariness or capriciousness. See,

e.g., City of Jersey City, supra,

; In re

Hunterdon Cnty., supra,

; Twp. of Franklin,

supra,

.

26 A-2477-13T4 Public employees have a constitutional right to engage in

collective negotiations. N.J. Const., art. I, ¶ 19; Council of

N.J. State Coll. Locals v. State Bd. of Higher Educ.,

(1982). Their majority representative is authorized

to negotiate "terms and conditions of employment" on their

behalf. N.J.S.A. 34:13A-5.3. However, "the scope of

negotiations in the public sector is more limited than in the

private sector" due to the government's "special

responsibilities to the public" to "make and implement public

policy." In re IFPTE Local 195 v. State,

(1982) (citations omitted). Salary is a mandatorily negotiable

term and condition of employment. In re Hunterdon Cnty., supra,

; In re IFPTE Local 195, supra,

; Twp. of Franklin, supra,

.

In a 2012 decision, while referring to the two percent tax

levy cap, PERC held "because issues of compensation are

mandatorily negotiable and the joint employers have not shown

that paying the increments would be preempted by any specific

statute or regulation, we deny the request for a restraint of

binding arbitration." In re Cnty. of Morris, PERC No. 2013-19,

39 N.J.P.E.R. 181 (¶ 56 2012). Citing to its Atlantic County

decisions and contrary to its decision in In re County of

Morris, PERC determined in this case that salary increments are

27 A-2477-13T4 not a negotiable term or condition of employment during a period

when no CNA is in effect.

We reiterate that the fiscal health of municipalities and

tax rates are not within PERC's charge. PERC cannot abandon the

adjudicative doctrine it long ago adopted, rooted in parallel

federal law. To the extent the dynamic status quo doctrine must

be changed, it is the Legislature's prerogative to do so.

Absent such a step, it remains an item open to negotiation

between employer and bargaining unit.

The Township argues on appeal that PERC's decision accords

with the legislative adoption of the two percent cap on police

and fire interest arbitration awards. See N.J.S.A. 34:13A-16.7

(extended to 2017 by L. 2014, c. 11). But, as we have said,

that legislation was not extended to other labor disputes. In

this case, the parties were attempting to negotiate a successor

agreement but had not turned to interest arbitration, the only

arena in which the Legislature acted.

Thus, there is no basis to conclude that N.J.S.A.

34:13A-16.7 preempts negotiation over salary increments payable

during a CNA, or in the interim period between expiration of a

CNA and negotiation or arbitration of a successor agreement.

See, e.g., Council of N.J. State Coll. Locals, supra,

(a regulation "must fix a term and condition of employment,

28 A-2477-13T4 and it must so provide expressly, specifically and

comprehensively in order to foreclose otherwise required

employer-employee negotiations on the subject matter"); In re

IFPTE Local 195, supra,

(alteration in

original) (quoting State v. State Supervisory Emps. Ass'n,

(1978)) ("Negotiation is preempted only if the

'statutory or regulatory provisions . . . speak in the

imperative and leave nothing to the discretion of the public

employer.'").

Accordingly, we reverse PERC's decision on the scope of

negotiations petition. Salary is a mandatory subject of

negotiation, and the Township's decision not to pay automatic

salary increments in accordance with the earlier CNAs and past

practice was indeed arbitrable. NJ Galloway, supra, 78 N.J. at

36.

Reversed.

29 A-2477-13T4