NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3675-15T1 APPROVED FOR PUBLICATION IN THE MATTER OF WILLIAM R. HENDRICKSON, JR., DEPARTMENT July 19, 2017 OF COMMUNITY AFFAIRS. APPELLATE DIVISION

Argued December 21, 2016 – Decided July 19, 2017

Before Judges Alvarez, Manahan, and Lisa.1

On appeal from the Civil Service Commission, Docket No. 2015-859.

Melanie R. Walter, Deputy Attorney General, argued the cause for appellant New Jersey Department of Community Affairs (Christopher S. Porrino, Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Ms. Walter, on the briefs).

Arnold Shep Cohen argued the cause for respondent William Hendrickson (Oxfeld Cohen, P.C., attorneys; Mr. Cohen, of counsel and on the brief).

1 This appeal was argued before Judges Carmen H. Alvarez and Carol E. Higbee. The opinion was not approved for filing prior to Judge Higbee's death on January 3, 2017. Pursuant to Rule 2:13-2(b), "Appeals shall be decided by panels of 2 judges designated by the presiding judge of the part except when the presiding judge determines that an appeal should be determined by a panel of 3 judges." That rule further provides that if a judge is added after argument who did not participate in the argument, the appeal shall be reargued "unless reargument is waived." The presiding judge has determined that this appeal shall be decided by a panel of three judges, and the parties have consented to the addition to the panel of Judges Thomas V. Manahan and Joseph F. Lisa and have waived reargument. Christopher S. Porrino, Attorney General, attorney for respondent Civil Service Commission (Pamela N. Ullman, Deputy Attorney General, on the statement in lieu of brief).

The opinion of the court was delivered by

ALVAREZ, P.J.A.D.

The Department of Community Affairs (DCA) appeals from a

December 21, 2015 administrative law judge's (ALJ) decision

reducing the Bureau of Fire Code Enforcement's2 (Bureau)

disciplinary action terminating William Hendrickson, a fire

safety inspector, to a six-month suspension. Because the Civil

Service Commission (CSC or Commission) did not have a full

roster of three members constituting a quorum, N.J.S.A. 11A:2-3,

it could not adopt or reject the ALJ's decision until months

after the mandatory forty-five-day time frame elapsed. See

N.J.S.A. 52:14B-10(c). Thus the ALJ's initial decision was

"deemed-adopted" as the Commission's final decision.3 Ibid.

2 The Bureau of Fire Code Enforcement operates within the Division of Fire Safety. The Division of Fire Safety "is established in the Department of Community Affairs[.]" N.J.S.A. 52:27D-25b. 3 Hendrickson does not challenge the DCA's right to pursue an appeal of the Commission's final decision when it results from application of the deemed-adopted statute. That question remains for another day. See Mastro v. Bd. of Trs., Pub. Emps.' Ret. Sys.,

(App. Div. 1993). Had the Commission rendered a decision in the normal course, the DCA (continued)

2 A-3675-15T1 For the reasons that follow, we conclude that when the lack

of a quorum attributable to vacancies caused the agency

inaction, the current version of the deemed-adopted statute does

not require traditional deferential appellate review of the

ALJ's decision. Applying the standard of review applicable to

bench trials, we vacate the six-month suspension and reinstate

the DCA's decision ending Hendrickson's employment.

After the departmental hearing, the DCA issued a final

notice of disciplinary action (FNDA) imposing the sanction of

removal. Hendrickson appealed and the matter was transmitted to

the Office of Administrative Law (OAL) for a hearing as a

contested case under the Administrative Procedure Act (APA),

N.J.S.A. 52:14B-1 to -15, and the Uniform Administrative

Procedure Rules, N.J.A.C. 1:1-1.1 to -21.6.

The preliminary notice of disciplinary action (PNDA) that

followed the incident charged Hendrickson with conduct

unbecoming an employee, N.J.A.C. 4A:2-2.3(a)(6); discrimination

that affects equal employment opportunity, including sexual

harassment, N.J.A.C. 4A:2-2.3(a)(9); and other sufficient cause,

(continued) would have the right of appeal. See In re Stallworth,

(2011) (agency appealed Commission's final decision modifying employee's removal to a suspension).

3 A-3675-15T1 in violation of New Jersey's state policy prohibiting

discrimination in the workplace, N.J.A.C. 4A:2-2.3(a)(12).

The incident that triggered disciplinary proceedings was

described by the eyewitnesses, two of Hendrickson's co-workers,

at the administrative law hearing. Briefly, on December 1,

2013, when Hendrickson and the others began their shifts in the

parking lot of a sports stadium, a supervisor modified

Hendrickson's work assignment. Hendrickson was overheard by his

co-workers calling his supervisor, a woman, a "f---ing c--t."

Hendrickson testified that he did not remember using that

language, but admitted saying that he wished "she [would get] a

disease."

The ALJ's written decision found the outburst occurred as

Hendrickson's co-workers had described, and further found

Hendrickson's failure of memory to be incredible. Since the

language he used was "akin to a racial slur[,]" the ALJ

therefore concluded that DCA had met its burden of proof by a

preponderance of the credible evidence.

The ALJ also observed that Hendrickson's use of obscenities

in the presence of other employees hurt the morale of both the

supervisor as well as the co-workers who heard "the gender

slur." Furthermore, because the incident occurred in a parking

lot, she took "into consideration the possibility that members

4 A-3675-15T1 of the public also heard the gender slur and inappropriate

comments." The ALJ held that Hendrickson had violated the New

Jersey state policy prohibiting discrimination in the workplace,

defined in the handbook he was provided when he commenced

employment with the Bureau fifteen or sixteen months prior.

In weighing the appropriate discipline for the misconduct,

the ALJ took into account that this was the first blemish in

Hendrickson's disciplinary record, and that he incurred no other

charges for the months he worked with the Bureau thereafter.

Although troubled by his denial of having made the statement by

virtue of lack of memory, and refusal to acknowledge his

wrongdoing, she opined that removal was unwarranted.

Considering "the nature of the offense, the concept of

progressive discipline, and the employee's prior work record

[]," the ALJ determined that "removal was excessive []" and that

a six-month term of suspension sufficed. The OAL transmitted

the initial decision to the CSC and the parties filed

exceptions.

On the first date the initial decision was scheduled for

review by the Commission, it consisted of only one member, the

other seats being vacant.4 Accordingly, the CSC obtained a

4 When CSC members, Thomas Perna's and Richard Williams's, terms ended in December 2015, the CSC was left with only one member, (continued)

5 A-3675-15T1 forty-five-day extension to March 20, 2016, pursuant to statute.

See N.J.S.A. 52:14B-10(c). Because on that date it still did

not have a sufficient number of appointed members to constitute

a quorum, the agency requested a second forty-five-day extension

from the parties. Hendrickson did not consent. See id.;

N.J.A.C. 1:1-18.8(f) ("Extensions for filing initial or final

decisions may not exceed [forty-five] days from the original

decision due date. Additional extensions of not more than

[forty-five] days each may be granted only for good cause shown.

For final decisions, the order must additionally state that

unanimous consent to extend the due date was obtained from the

parties.").

Under the deemed-adopted statute, no further extensions

could be granted to the Commission. Thus, the ALJ's initial

decision was deemed to be the final pronouncement on the matter.

See In re Restrepo,

(App. Div. 2017);

N.J. Election Law Enf't Comm'n v. DiVincenzo,

(App. Div. 2016).

(continued) Chairperson Robert Czech. The CSC met regularly during 2015 with Czech, Perna, and Williams. However, beginning in January 2016, the CSC cancelled all of its meetings through October 2016 due to Czech being the only member remaining on the CSC. On October 19, 2016, the CSC began holding regular meetings with its now current members, Czech, Dolores Gorczyca, and Daniel O'Mullan. See Meetings of the Civil Service Commission, available at http://www.state.nj.us/csc/about/meetings/schedule.

6 A-3675-15T1 On appeal, the DCA contends that Hendrickson's conduct

warranted the termination originally imposed, not merely a six-

month suspension. The DCA also contends that Hendrickson's

egregious conduct violated not only the State's anti-

discrimination policy, but basic behavioral norms that the

agency has a right to expect from its employees.

Finally, the DCA asserts that the ALJ's analysis of

Hendrickson's work history, if anything, supported termination.

The agency argues that if a new employee engages in significant

misconduct directed at a supervisor in response to a routine

work change, he patently lacks the good judgment and self-

control necessary for a fire code inspector. Persons employed

in that capacity must interact with the public regularly. In

the DCA's view, Hendrickson's nine subsequent incident-free

months do not offset the egregious conduct. The DCA also urges

us to consider the level of trust reposed in a fire inspector,

who conducts essential safety inspections and monitors the

implementation of fire safety standards.

Hendrickson responds that the ALJ's decision is "deemed

adopted" under the statute, is the final agency decision, and

therefore entitled to deferential review as a matter of law. He

further claims that termination is an unwarranted overreaction

7 A-3675-15T1 by the DCA, and not in line with other cases regarding employee

misconduct.

The process by which an ALJ's initial decision in a

contested case becomes the final agency decision is spelled out

in the statute:

The head of the agency, upon a review of the record submitted by the [ALJ], shall adopt, reject or modify the recommended report and decision no later than [forty-five] days after receipt of such recommendations . . . . Unless the head of the agency modifies or rejects the report within such period, the decision of the [ALJ] shall be deemed adopted as the final decision of the head of the agency.

[N.J.S.A. 52:14B-10(c).]

In prior years, the statute allowed the time limits to be

extended for "good cause shown." N.J.S.A. 52:14B-10(c) (2001),

amended by N.J.S.A. 52:14B-10(c) (2013). The prior version of

the statute read: "For good cause shown, upon certification by

the director and the agency head, the time limits established

herein may be subject to extension."

Now, however, that

possibility no longer exists.

The 2014 amendment to the statute requires "unanimous

agreement of the parties" as the only means for an extension of

time beyond an initial forty-five days. N.J.S.A. 52:14B-10(c).

In most cases in which the agency seeks an extension,

unanimous agreement is unattainable. A prevailing party has no

8 A-3675-15T1 reason to agree. Effectively then, the current statute makes no

distinction between agency failures to act that are unavoidable,

such as the lack of a quorum, and those to which some "fault"

can be attributed. The implementing regulation, N.J.A.C. 1:1-

18.8(f), is similarly worded.

Our caselaw has historically disfavored automatic approval

statutes such as the deemed-adopted law. King v. N.J. Racing

Comm'n,

(1986). While recognizing the need

for the provision in the statute "to encourage prompt

consideration and disposition of contested cases[,]" the Court

was also mindful of "agency jurisdiction and regulatory

responsibility."

.

In discussing the necessary balance between the two

competing interests, the Court explained the creation of the OAL

thusly:

While the statute creating the OAL focuses on the integrity of the hearing function, it also seeks to foster, enhance, and preserve agency jurisdiction and regulatory responsibility. See Unemployed-Employed Council v. Horn,

(1981). The Court in [In re Uniform Administrative Procedure Rules,

(1982)] stressed that while the OAL is possessed of significant authority in the actual conduct of administrative hearings in contested cases on behalf of administrative agencies, the agency itself retains the exclusive right ultimately to decide these cases. [Id. at 96.] In In re Kallen,

(1983), the Court emphasized that the agency itself

9 A-3675-15T1 in the exercise of its essential jurisdiction has the exclusive right to decide contested cases in administrative hearings.

. The Court further observed the agency's jurisdiction in the final analysis is nondelegable and that the agency head remains accountable for the efficient and effective use of public resources in carrying out the agency's delegated statutory responsibilities.

.

[King, supra,

.]

For that reason, i.e. the need to offset an agency's expertise,

jurisdiction, and authority against the benefit of prompt

disposition of contested cases through transmission to the OAL,

the Court held that the deemed-adopted statute would not be

applied unless the agency acted in "bad faith," with

"inexcusable negligence, or with gross indifference."

. In King, because the agency decision was unavoidable——the

lack of a quorum——the deemed-adopted statute was not applied.

. Instead, the matter was remanded for the agency

"to take remedial steps to cure the deficiency and to issue a

decision."

.

The Court in Matturri v. Board of Trustees of the Judicial

Retirement System,

(2002) reaffirmed the need to

balance deference to an agency's expertise against the need to

promptly dispose of contested cases.

. In that

case, the State House Commission, "a most unusual agency head,"

10 A-3675-15T1 failed to timely respond to an ALJ decision in the area of

judicial pensions.

. Because the agency head was

required to meet only every three months, and rarely met more

frequently, it missed the deadline by two and one-half weeks.

. The Court said: "[i]t would make little sense

to apply the automatic approval provision of N.J.S.A. 52:14B-

10(c) on these facts simply for the sake of agency

efficiency[,]" and declined to do so.

.

In sum, the pre-2014 amendment precedent limited

application of the deemed-adopted provision to "reserve [the]

decisional authority in administrative agencies . . . while

still promoting efficiency and protecting against agency bad

faith or inexcusable negligence." N.J. Election, supra,

(alteration in original) (internal

citation and quotation marks omitted).

Pre-amendment examples of the gross indifference,

inexcusable neglect, or bad faith that made imposition of the

deemed-adopted statute appropriate can be found in Capone v. New

Jersey Racing Commission,

(App. Div.

2003). In Capone, the Racing Commission delayed seven months as

to one matter, and over a year on another.

In both

instances, "the records were small and the issues simple

. . . ."

. The Racing Commission historically had

11 A-3675-15T1 difficulties meeting its review responsibilities, and other

published cases had addressed the problem, to little effect.

Because we found the Racing Commission's failure to issue

decisions to be inexcusable neglect or gross indifference to

agency and regulatory responsibilities, the deemed-adopted

statute was applied.

.

The circumstances here are entirely different from those

described in Capone, and are more like the scenarios in King and

in Matturri. The Commission's inability to act was entirely

beyond its control. Under the prior iteration of the deemed-

adopted statute, when good cause excused agency inaction, as in

King, the Court remanded the matter to allow the agency to apply

its expertise, implement its legislative mandate, and render the

final decision. In Matturri, the agency requested and received

an extension granted out of time, and that decision was

affirmed. Absent that "good cause" escape clause, as in the case

with the current version of the law, remand is not possible.

Because automatic approval statutes are held in disfavor,

and we have historically deferred to an agency's expertise on

appellate review, some accommodation should be made when an

agency's inability to act on a timely basis is entirely

involuntary. Certainly it was not the Legislature's intent when

it enacted the 2014 version of the statute, which seemingly has

12 A-3675-15T1 no escape clause, to "up-end the allocation of [regulatory]

responsibilities." See N.J. Election, supra,

.

We only play a limited role on the appeal of administrative

agency decisions.

. To

reverse an agency's decision, it must be demonstrated to be

arbitrary, capricious, or unreasonable.

In making that

determination, the following factors are taken into account:

(1) whether the agency's action violates express or implied legislative policies, that is, did the agency follow the law; (2) whether the record contains substantial evidence to support the findings on which the agency based its action; and (3) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.

[Ibid. (quoting In re Carter,

(2007)).]

This highly deferential review of agency decisions is animated

by our acknowledgment of an agency's particular and superior

expertise in the legislative arena in which it functions. Id.

at 195.

The deferential standard of review applies to disciplinary

actions. Ibid. With regard to such sanctions, we ordinarily do

not substitute our judgment for that of the agency, even though

we might have reached a different result. Id. at 194-95. We

13 A-3675-15T1 only do so when the "punishment is so disproportionate to the

offense, in the light of all the circumstances, as to be

shocking to one's sense of fairness." Id. at 195 (quoting

).

Accordingly, we conclude that, in applying the deemed-

adopted statute, we must attempt to balance the Legislature's

commitment to the timely disposition of contested cases in the

OAL with the ability of regulatory agencies to act within their

own statutorily defined responsibilities. See

;

. In

maintaining that balance, it follows that, at a minimum, an

ALJ's deemed-adopted decision should not be reviewed

deferentially. The rationale behind that deferential review

provides additional support for our conclusion.

We will therefore apply the equally familiar standard of

review for bench trials. The ALJ's factual findings will be

affirmed to the extent they are supported by substantial

credible evidence in the record. Zaman v. Felton,

(2014). No deference will be accorded to her legal

conclusions; they will be reviewed de novo.

.

Initially, we note that the ALJ credited the eyewitness

testimony that Hendrickson used the particular gender-specific

foul language towards his supervisor while in a public place.

14 A-3675-15T1 The ALJ did not accept his lapse in memory as truthful.

Additionally, she was troubled by his "failure to acknowledge

his wrongdoing" even though he admitted saying he wished his

supervisor would get a disease. Despite finding Hendrickson

engaged in the conduct, and holding that it violated the State's

policy against discrimination and was unacceptable both towards

other employees and the public, she considered the doctrine of

progressive discipline required a lesser penalty than

termination. The ALJ's factual findings are supported by the

record; the propriety of the disciplinary sanction, however, is

a question of law which we will review de novo.

It was clear from her decision that the ALJ was at least

uncomfortable with Hendrickson's lack of candor and remorse,

while concerned that his clean disciplinary record before and

after the event mandated a lesser sanction. Hendrickson's job,

which involves enforcement of safety standards while interacting

with the public, bears similarity to the role played by law

enforcement officials. The record does not allow for a more

detailed comparison, but it cannot be disputed that Hendrickson

is required to interact with members of the public in performing

enforcement duties that impact public safety.

The concept of progressive discipline has been employed to

impose severe disciplinary sanction when a public employee's

15 A-3675-15T1 misconduct is habitual, or to mitigate a penalty. In re

Herrmann,

(2007). When employed to mitigate,

it results in incremental punishment.

. But, the

doctrine has been bypassed "when the misconduct is severe, when

it is unbecoming to the employee's position or renders the

employee unsuitable for continuation in the position, or when

application of the principle would be contrary to the public

interest." Ibid.; see State v. Saavedra,

(2016)

(noting New Jersey's "long-expressed [] strong public policy

against discrimination" in the workplace); Lehmann v. Toys 'R'

Us, Inc.,

(1993) ("Freedom

from discrimination is one of the fundamental principles of our

society. Discrimination based on gender is 'peculiarly repugnant

in a society which prides itself on judging each individual by

his or her merits.'" (quoting Grigoletti v. Ortho Pharm. Corp.,

(1990))). Additionally, the doctrine will not

be applied if an employee "engages in severe misconduct,

especially when the employee's position involves public safety

and the misconduct causes risk of harm to persons or property."

In re

. Termination has been

affirmed where the employee's conduct was unbecoming his or her

position regardless of a blameless work history.

.

16 A-3675-15T1 In this case, in addition to the fact Hendrickson's

position involves public safety and requires interaction with

the public, his lack of truthfulness during the hearing, and

lack of remorse for his loss of control, make him a poor choice

for incremental discipline. As a result, we find as a matter of

law that the conduct of this fire inspector warranted

termination. Incremental sanctions in light of his job

responsibilities, which require interaction with the public, are

too much of a risk. And his lack of candor and remorse do not

inspire confidence in his ability to conduct himself in a

measured fashion in an undoubtedly demanding position. This

incident, at the very beginning of Hendrickson's career, augured

ill for his future.

The incident violated the State's anti-discrimination

policy and societal norms. As a matter of law, the doctrine of

progressive discipline should be bypassed.

Reversed; the original sanction of termination is

reinstated.

17 A-3675-15T1