The Appellate Division recently dealt the Christie
administration another blow to its efforts to undermine members’ pension rights. The court put the brakes on an attempt by the acting director of the Division of Pensions & Benefits to undercut the authority of the PFRS Board of Trustees. In a decision that we litigated on behalf of Woodbridge Local 38 and SOA, Harrison Local 22 and SOA and Ramsey Local 155 and the NJ State PBA, the court held that the acting director did not have the authority to refuse to implement a decision by the PFRS Board of Trustees. A number of other PBAs and municipalities took part in this consolidated appeal. The issue in the appeal was whether certain longevity and senior officer pay provisions of agreements constituted creditable, or pensionable, compensation under New Jersey’s pension laws.
The issues involved in this appeal have been pending for some time. We have discussed them at Board of Delegates meetings, at the Collective Bargaining Seminars and at the Mini-Convention. In each of the cases before the Appellate Division, the provisions at issue involved senior officer pay clauses which become effective after an officer had more than 20 years of service. They also involved longevity clauses which did not follow a consistent progression with the same percentage increases at regular intervals during an officer’s career. Instead, each of the longevity provisions at issue included some type of increase late in an officer’s career, either an extra increase in the percentages or a shortening of the eligibility years. By way of example, in Woodbridge, the senior officer pay differential of 5.5 percent was available to officers who completed 22 years of service. In the longevity benefit in Woodbridge, the guide provided for 2.5-percent increases at the start of the 5th, 11th, 15th and 21st year of service, then, there was another 2.5-percent increase at the start of the 23rd year of service. The last increase came two years after the previous one.
The Division of Pensions & Benefits staff initially concluded that these provisions, and similar provisions for PBAs in other municipalities, were not creditable compensation because they were increases in anticipation of an officer’s retirement. We appealed these determinations on behalf of the PBAs we represented. The PFRS Board of Trustees disagreed with the Division staff and concluded that these provisions did constitute creditable salary. That should have been the end of the case. However, after the Board of Trustees issued its decisions in each of the cases, the Acting Director of the Division of Pensions & Benefits notified the PBAs that she would not implement the Board of Trustees’ decisions in each case because she believed they were contrary to law.
Although we won before the Board of Trustees, we were in the unusual position of having to appeal to the Appellate Division. In effect, we appealed a decision which we won. However, we had no choice because the acting director refused to enforce the PFRS Board’s decisions.
In an April 15 decision, the Appellate Division resoundingly agreed with our position and concluded that the acting director did not have the authority to refuse to implement a decision of the Board of Trustees. The Court noted that the acting director did not cite any authority to support taking the unprecedented action of reviewing and reversing a decision by the Board of Trustees. The Court agreed with us that only the Board of Trustees had the authority under the pension laws to decide issues of creditable compensation. The Court emphasized in no uncertain terms that the acting director’s lack of authority to implement the final decision of the Board of Trustees “is untethered to any statutory or regulatory authority.” The court also called the acting director’s actions “unprecedented” and concluded that it undermined what was the Division’s role to provide only staffing support to enable the Board of Trustees to carry out its role.
Finally, the Court was critical of the role that the New Jersey Attorney General played in these appeals. The Attorney General not only served as the legal advisor to the Board of Trustees, but also represented the acting director in these appeals. The Court noted that the Attorney General decided to represent and defend the “legally untenable actions” of the acting director. By law, the Attorney General advises the Board of Trustees, and is present at every Board of Trustees meeting. In addition to this role, the Attorney General represented the acting director and her position that she had the authority to refuse to implement the Board’s decision.
The Court did suggest a procedure for any future disputes which arise. The Court suggested that the Attorney General has the authority to advise the PFRS Board of Trustees on what it believes to be the proper legal interpretation of creditable compensation under the pension laws, or on other issues as well. If the Board of Trustees acts in “defiant refusal” of this opinion, the Attorney General can petition the Court to compel the PFRS Board to abide by the Attorney General’s legal opinion. The Board would, in these circumstances, probably have to hire outside counsel. Because the Attorney General did not do so in these cases, the Court concluded that the acting director had no authority to refuse to implement the Board of Trustees’ decisions. Because the Court decided the case on these “jurisdictional” grounds, i.e., whether the acting director had the authority to refuse to implement the Board’s decisions, the Court did not address the merits of the issue: whether the senior officer’s pay and longevity provisions at issue are creditable compensation. As we have discussed at many meetings, these cases do not involve the typical types of longevity provisions which increase at regular intervals and by consistent percentages. They also should not affect any senior officer’s pay provisions which become effective before an officer reaches 20 years of service, as long as they otherwise meet the definition of creditable compensation.
Local PBAs would be well-advised to review any longevity and senior officer pay clauses in their respective contracts with their attorneys or the State PBA to determine whether there may be an issue in the future. They should consult with their attorneys in discussing what steps, if any, are necessary to insure that any longevity or senior officer pay provisions continue to be creditable compensation if they already are, and have been, part of pensionable compensation.