NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5460-15T3
MARIAN RAGUSA,
Petitioner-Appellant,
v.
BOARD OF TRUSTEES, PUBLIC
EMPLOYEES' RETIREMENT SYSTEM,
Respondent-Respondent.
__________________________________
Argued January 22, 2018 – Decided September 7, 2018
Before Judges Ostrer and Whipple.
On appeal from the Board of Trustees of the
Public Employees' Retirement System,
Department of Treasury, Docket No. 1182077.
Marian Ragusa, appellant, argued the cause pro
se.
Jeff S. Ignatowitz, Deputy Attorney General,
argued the cause for respondent (Gurbir S.
Grewal, Attorney General, attorney; Melissa H.
Raksa, Assistant Attorney General, of counsel;
Jeff S. Ignatowitz, on the brief).
PER CURIAM
Marian Ragusa appeals from a final agency decision of the
Board of Trustees (the Board) of the Public Employees' Retirement
System (PERS) denying her pension service credit retroactive to
April 1, 2010, for her service as municipal prosecutor for the
Township of Middle. The Board relied on N.J.S.A. 43:15A-7.2(a),
enacted in 2007, see L. 2007, c. 92, § 20, which prospectively
denies pension service credit to a person who performs professional
services for a political subdivision pursuant to a professional
services contract awarded in accordance with N.J.S.A. 40A:11-5, a
provision of the Local Public Contracts Law (LPCL). Having
considered the parties' arguments in light of the record and
applicable principles of law, we reverse as to years 2010 through
2012, and affirm for 2013 and subsequent years. In short, until
2013, Ragusa did not perform her duties as a municipal prosecutor
pursuant to a professional services contract awarded under the
LPCL.
I.
The principal issue before us is whether the Board correctly
applied N.J.S.A. 43:15A-7.2(a) to the facts. The statute was
adopted to address perceived abuses of the pension system by
independent contractors and professional service contractors, who
often "tacked" service for multiple municipalities to accumulate
substantial pensions. See A. Boxer, State of New Jersey Office
of the State Comptroller, Improper Participation by Professional
2 A-5460-15T3
Service Providers in the State Pension System (2012) (Comptroller
Report).
Subsection (a) states, in relevant part: "A person who
performs professional services for a political subdivision of this
State . . . under a professional services contract awarded in
accordance with section 5 of P.L.1971, c.198 (C.40A:11-5) . . .
on the basis of performance of the contract, shall not be eligible
for membership in the Public Employees' Retirement System."
N.J.S.A. 43:15A-7.2(a).1
The section incorporates the definition of "professional
services" found in N.J.S.A. 40A:11-2. Ibid. It is undisputed
that Ragusa performed "professional services" as the municipal
prosecutor. See N.J.S.A. 40A:11-2(6).
The question is whether she did so "under a professional
services contract awarded in accordance with section 5 of P.L.1971,
c.198 (C.40A:11-5)" and whether she seeks pension credit "on the
basis of performance of the contract." See N.J.S.A. 43:15A-7.2(a).
N.J.S.A. 40A:11-5 authorizes local governments to award
contracts for professional services without bidding, provided it
1
The Board concedes that it did not rely on subsection (b) of the
provision, which bars pension credit "on the basis of performance
of . . . professional services, if the person meets the definition
of independent contractor as set forth in regulation or policy of
the federal Internal Revenue Service for the purposes of the
Internal Revenue Code." N.J.S.A. 43:15A-7.2(b).
3 A-5460-15T3
(1) awards the contract by a resolution justifying the government's
decision; (2) publicizes the essential terms of the contract in a
newspaper; and (3) maintains on file for public inspection the
resolution awarding the contract and the contract itself. The
LPCL also defines a "contract" to mean "any agreement, including
but not limited to a purchase order or a formal agreement, which
is a legally binding relationship enforceable by law, between a
vendor who agrees to provide or perform goods or services and a
contracting unit which agrees to compensate a vendor, as defined
by and subject to the terms and conditions of the agreement."
N.J.S.A. 40A:11-2(21).
The controversy focuses on Ragusa's service in 2010 through
2012. Ragusa began work as the Township's municipal prosecutor
on March 20, 2010. But, until 2013, the Township did not insist
that Ragusa execute a written professional services contract.
Although she signed the 2013 contract under protest, we discern
no genuine dispute that subsection (a) applied to her in 2013 and
thereafter. N.J.S.A. 2B:25-4(b) states that a municipal
prosecutor shall serve a one-year term (except in certain classes
of municipalities that do not include the Township). The Township
was free to approach 2013 differently from previous years. R.
2:11-3(e)(1)(E).
4 A-5460-15T3
II.
With our review of the statute as background, we consider the
essentially undisputed facts. In November of 2009 and 2010, the
Township adopted resolutions soliciting proposals for various
professional positions, including municipal prosecutor. Those
request-for-proposal (RFP) resolutions declared that the Township
had opted to submit "all professional services contracts to the
Fair and Open Process" under "N.J.S.A. 19:44A-20.4, et seq."2 They
set a December 1 deadline, and required that proposals cover eight
categories of information: qualifications and experience; scope
of services; contact information; fee proposal; office staffing
plan and resources; location of office from which services shall
be provided; references; and potential conflict. The resolutions
stated that the Township Committee "may award a contract by
approving a resolution . . . ."
In January 2010 and 2011, the Township adopted resolutions
awarding contracts to listed individuals for listed positions, at
specified fees. These contract-award resolutions referred to the
"Fair and Open Process for the award of contract pursuant to
2
N.J.S.A. 19:44A-20.7, a provision of the New Jersey Campaign
Contributions and Reporting Act, not the LPCL, mandates a
municipality use a "fair and open process" to award a contract,
if the value exceeds $17,500, to a business entity that made a
reportable campaign contribution.
5 A-5460-15T3
N.J.S.A. 19:44A-20.4," and authorized the mayor to "execute
contracts with each of the above-mentioned individuals as
necessary, to be followed with a resolution of award and
certification as attached hereto."
The January 2010 contract-award resolution selected Ragusa's
predecessor, Mary Bittner, as municipal prosecutor. In late 2009,
Bittner had asked Ragusa if she would be interested in succeeding
her as municipal prosecutor. Ragusa had been an assistant county
prosecutor in Cape May since 2003. "Burnt out" trying sexual
assault cases, Ragusa said she would be interested in the municipal
post, provided she could remain in PERS.
Ragusa applied to succeed Bittner on December 20, 2009,
proposing a March 15, 2010 start date. She stated she intended
the position to be her "primary employment." Her "Application for
Position of Prosecutor for Township of Middle," conformed to the
eight categories delineated in the RFP. The submission also
referred to her "proposal for the position." Nonetheless, she
said she was unaware of the RFP, and instead had simply followed
Bittner's suggestion. After an interview, the mayor recommended
her appointment. The Township's human resources manager, Vera
Kalish, assured Ragusa she could remain in PERS if she had no
break in service. Kalish relied on a conversation with an unnamed
6 A-5460-15T3
staff-person with the Division of Pensions and Benefits in making
the assurance.
On March 15, 2010, the Township adopted a resolution specific
to Ragusa, appointing her to the position. Unlike the contract-
award resolutions adopted in January 2010 and January 2011, this
resolution made no reference to contracts or the Fair and Open
Process. The Township Committee simply "resolved . . . that the
following individual is hereby appointed to the position opposite
their name at the following salary," and then listed Ragusa; the
title, Municipal Prosecutor; her salary of $26,500; and an
effective date of March 20, 2010.
Ragusa was then placed on the Township payroll. She received
regular bi-weekly paychecks. The Township deducted tax and pension
contributions. At year's end, it issued her a W-2 form. Ragusa
considered herself a full-time municipal prosecutor. She worked
out of the Township's offices. She had no separate office or
private clients. Her practice was limited to prosecuting cases
in Middle Township Municipal Court.3 The Division sent paperwork
confirming Ragusa's continuing participation and payroll
deductions.
3
When Woodbine Borough consolidated its municipal court with the
Township's in 2012, Ragusa prosecuted cases arising out of both
municipalities. In 2012, she took on some part-time work from
Cape May City.
7 A-5460-15T3
On November 26, 2010, Ragusa applied to retain her position.
Her submission essentially mirrored the one she sent a year
earlier, except she listed the Township's address for the office
where she would perform her services, as opposed to addresses
elsewhere. She testified that she was unaware of the RFP
resolution that the Township Committee adopted eleven days
earlier.
Also unbeknownst to Ragusa, on January 5, 2011, the Township
Committee adopted the contract-award resolution governing multiple
positions, this time naming Ragusa. A week later, the township
clerk sent Ragusa a draft "contract for services" "as approved at
a Township Committee Meeting." The draft identified Ragusa as a
contractor, and stated she was awarded the contract "in connection
with the Local Public Contract Law under the Fair and Open
Process." It set a term of January 1 through December 31, 2011;
set her compensation as "not to exceed $26,500." The Township
reserved the right to cancel the contract for breach. It required
Ragusa to work with the mayor and Township Committee. It also
required Ragusa to comply with anti-discrimination law, and to
indemnify the Township under certain circumstances.
Ragusa objected to the contract. Considering herself a
municipal employee, and not a contractor, she confronted the
township administrator. Ragusa testified she told him, "This is
8 A-5460-15T3
not me." He said, "Okay." He accepted the unsigned contract from
Ragusa, and did not pursue it further. Ragusa remained on the
payroll at her prior salary.
In November 2011, Ragusa submitted another application for
the position, essentially like those in 2009 and 2010. The record
does not include a resolution authorizing and establishing an RFP
for municipal prosecutor for 2012. In January 2012, the Township
adopted a resolution that states, "Subject: Award Contract and
Ratify Agreement Through Non-Fair and Open Process – Marian Ragusa
– Municipal Prosecutor." Acknowledging that Ragusa's term as
municipal prosecutor had expired in 2011, it declared that the
"township . . . wishes to carry-over said term, until a successor
is appointed." The resolution stated, "The Agreement between
Marian Ragusa and the Township of Middle for Municipal Prosecutor,
be and is hereby ratified and the contract is hereby awarded
through the Non-Fair and Open Process as described in Pay-To-Play
Statutes."
Ragusa testified she was unaware of the resolution. Notably,
there was no written agreement between Ragusa and the Township.
Furthermore, the resolution set Ragusa's salary at "not to exceed
$17,500," although she continued to be paid at a higher rate. The
Township again submitted a draft professional services contract
to Ragusa for her execution, referring back to the January 2012
9 A-5460-15T3
resolution, including the lower pay-rate. Ragusa refused to sign
it, the Township did not press the matter, and she completed the
year as municipal prosecutor at her prior salary.
As noted above, in 2013, the Township insisted that Ragusa
execute a professional services contract. The Township Committee
adopted an RFP resolution in November 2012 including the municipal
prosecutor's position, as it did in 2009 and 2010. The record
does not include Ragusa's application for 2013. In January 2013,
the Township Committee adopted a contract award resolution
mirroring the resolutions it adopted in 2010 and 2011, naming
Ragusa for the municipal prosecutor's position.
In May 2013, the Township informed Ragusa that she was not
considered an employee. It refused to pay Ragusa unless she signed
the form of contract she refused to sign in 2011 and 2012. With
minor revisions, she did so, under protest. The Township never
signed the revised contract. She subsequently was required to
submit vouchers for payment and was removed from the payroll.
The Township's action was apparently prompted by a January
18, 2013 letter from the Division to local governmental certifying
officers, and others, instructing them to review the employment
status of individuals performing professional services, to
ascertain compliance with N.J.S.A. 43:15A-7.2. In 2012, the State
Comptroller had reported widespread non-compliance with N.J.S.A.
10 A-5460-15T3
43:15A-7.2. See Comptroller Report. The 2013 letter noted that
certifying officers were required to confirm eligibility annually,
pursuant to N.J.S.A. 43:3C-15. To assist making those
determinations, the Division enclosed an Employee/Independent
Contractor Checklist, and required their completion by February
15, 2013.4
The Township concluded in May 2013 that Ragusa was an
independent contractor. In December 2013, following an
investigation using information the Township provided, the
Division informed Ragusa she was ineligible to receive pension
credit. The Division's notification letter did not state whether
it relied upon N.J.S.A. 43:15A-7.2(a) or (b).
Ragusa appealed to the Board by letter on February 3, 2014.
In her appeal, Ragusa included her own application of the twenty
IRS factors and claimed she was an employee. On March 12, the
Division requested additional information from the Township. Six
months later, Division staff again concluded that Ragusa was
ineligible, noting that the contracts for services drawn up in
2011 through 2014 indicated that "the position of Municipal
Prosecutor is that of an independent contractor."
4
The checklist was attached to a Division fact sheet. See N.J.
Div. of Pensions and Benefits, Fact Sheet #84, Professional
Services Contracts, Independent Contractors, and Pension
Enrollment (2013) (Fact Sheet #84).
11 A-5460-15T3
The Board adopted the Division's determination. The Board
found the Township "solicited [petitioner's] professional services
through 'requests for proposals and qualifications'" and
petitioner "submitted proposals to the Township for her services,
which were accepted." Referring to the language of the service
contracts that petitioner initially refused to sign, the Board
found the "[c]ontracts for her services ha[d] been awarded 'in
connection' with [the LPCL] and identify the contracting parties
as 'Township' and 'Contractor.'" The Board also noted "strong
indicators of her status as an independent contractor, which also
disqualify her" under N.J.S.A. 43:15A-7.2(b). Referring to the
IRS factors that must be evaluated under this subsection, the
Board noted that the Township identified "no behavioral or
financial control" over petitioner.
After Ragusa filed an administrative appeal, an ALJ conducted
a hearing at which Ragusa, Kalish, a former mayor, and the Division
investigator testified. The ALJ determined petitioner was
ineligible for pension benefits under N.J.S.A. 43:15A-7.2(a),
because she was "performing professional services as a part-time
municipal prosecutor . . . pursuant to a professional services
contract, and the contract was authorized in accordance with the
[LPCL]." The ALJ found the Township's hiring procedures for the
municipal prosecutor position comported with N.J.S.A. 40A:11-5,
12 A-5460-15T3
in that the Township "solicited proposals" and "accepted informal
'bids'" for the position. The ALJ also considered that the
resolutions and contracts contained the term "professional
services contract," which indicated petitioner was "hired as an
independent contractor." The ALJ did not directly evaluate the
IRS factors for independent contractor status. See N.J.S.A.
43:15A-7.2(b); Fact Sheet #84. However, he noted several aspects
of her independence on the job, and concluded that Ragusa was not
a "pensionable employee."
The Board adopted the ALJ's decision on June 23, 2016 without
further explanation.
III.
Petitioner raises the following points on appeal:
I. UNDER THE FACTS OF THIS CASE, MARIAN RAGUSA
IS AN EMPLOYEE OF MIDDLE TOWNSHIP AND SHOULD
HAVE HER MEMBERSHIP IN PERS REINSTATED,
RETROACTIVE TO MARCH 20, 2010.
A. Marian Ragusa did not provide
professional services to Middle Township
pursuant to a professional services
contract.
B. Marian Ragusa does not meet the
definition of an independent contractor
as set forth in regulation or policy of
the federal Internal Revenue Service for
the purposes of the Internal Revenue
Code.
II. THE DIVISION OF PENSIONS SHOULD BE
ESTOPPED FROM DENYING MARIAN RAGUSA CREDIT FOR
13 A-5460-15T3
THE YEARS IN WHICH PENSION CONTRIBUTIONS WERE
MADE WHILE SHE HAS BEEN EMPLOYED BY MIDDLE
TOWNSHIP AS THE MUNICIPAL PROSECUTOR.
IV.
As the facts surrounding Ragusa's hiring are essentially
undisputed, the issue is a legal one: whether Ragusa performed her
professional services "under a professional services contract
awarded in accordance with . . . N.J.S.A. 4A:11-5," of the LPCL.
N.J.S.A. 43:15A-7.2(a).5
We may defer to an agency's interpretation of a statute it
enforces, Richardson v. Bd. of Trs., Police & Firemen's Ret. Sys.,
192 N.J. 189, 196 (2007), especially when the interpretation
involves an ambiguous provision or the exercise of expertise.
Bowser v. Bd. of Trs., Police & Firemen's Ret. Sys., ___ N.J.
Super. ___, ___ (App. Div. 2018) (slip op. at 6). However,
principal responsibility for enforcement of the LPCL lies with the
Department of Community Affairs (DCA). See CFG Health Sys., LLC
v. Cnty. of Essex, 411 N.J. Super. 378, 388 (App. Div. 2010)
(recognizing DCA's regulatory authority under the LPCL, citing
5
As noted, the Board relies solely on subsection (a) in denying
Ragusa pension credit. It submits that "whether [Ragusa] was an
independent contractor or a bona fide employee under [subsection
(b)] is irrelevant to the disposition of this case." In sum, the
Board waives reliance on subsection (b). Therefore, we need not
address it. Subsection (a) may provide an independent basis for
denying pension credit.
14 A-5460-15T3
N.J.S.A. 40A:11-37); see also N.J.S.A. 40A:11-37.1 (referring to
the role under the LPCL of the Division of Local Government
Services in DCA). Therefore, less deference is due the Board.
Furthermore, "when an agency's decision is based on the
'agency's interpretation of a statute or its determination of a
strictly legal issue,' we are not bound by the agency's
interpretation." Saccone v. Bd. of Trs. of Police & Firemen's
Ret. Sys., 219 N.J. 369, 380 (2014) (quoting Russo v. Bd. of Trs.,
Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011)). We may
reverse an agency's decision if it "violate[s] express or implied
legislative policies . . . ." In re Eastwick Coll. LPN-to-RN
Bridge Program, 225 N.J. 533, 541 (2016) (alteration in original)
(quoting University Cottage Club of Princeton New Jersey Corp. v.
N.J. Dept. of Env'l Prot., 191 N.J. 38, 48 (2007)). We also review
de novo issues of contract formation. See NAACP of Camden Cnty.
E. v. Foulke Mgmt. Corp., 421 N.J. Super. 404, 430 (App. Div.
2011).
We turn first to the plain language of the statute. If it
is clear, our task is done. In re Kollman, 210 N.J. 557, 568
(2012). If not, we may consider extrinsic materials. Ibid. We
do not interpret the statute liberally or strictly. "[W]hile a
person 'eligible for benefits' is entitled to a liberal
interpretation of the pension statute, 'eligibility [itself] is
15 A-5460-15T3
not to be liberally permitted.'" Francois v. Bd. of Trs., 415
N.J. Super. 335, 350 (App. Div. 2010) (quoting Krayniak v. Bd. of
Trs., 412 N.J. Super. 232, 242 (App. Div. 2010)).
The statute requires that there be a professional services
contract, and that it be awarded in accordance with section five
of the LPCL, N.J.S.A. 40A:11-5. Neither requirement is satisfied
by the facts of this case.
As noted above, a contract is a legally enforceable agreement
between a "vendor who agrees to provide or perform goods or
services and a contracting unit that agrees to compensate a
vendor." N.J.S.A. 40A:11-2(21). Applying the definition of
"professional services," a "contract for professional services"
is a contract for "services performed by a person authorized by
law to practice a recognized profession," such as a lawyer.
N.J.S.A. 40A:11-2(6). However, a "professional services contract"
does not encompass every employer-employee relationship between a
local government and a professional — notwithstanding that the
professional agrees to provide his or her services in return for
compensation. A "contract" under the LPCL is between a "vendor"
and the local government. N.J.S.A. 40A:11-2(21). "Vendor" is not
defined. However, throughout the definitional provision, it
refers to persons engaged in the provision of goods or services
in response to public procurement. See N.J.S.A. 40A:11-2.
16 A-5460-15T3
Although Ragusa agreed to provide legal services to the
Township in return for compensation, she did not do so as a vendor.
Notably, no written agreement was executed before 2013. Ragusa
was not initially hired pursuant to the RFP process. She submitted
her initial application for employment in December 2009. She was
unaware of the RFP Resolution and submitted her application after
the deadline for proposals had passed. She was not selected in
the Award Resolution adopted in January 2010. Rather, she was
appointed to the position of municipal prosecutor pursuant to a
freestanding March 15, 2010 resolution that made no reference to
public contracting.
Nor was Ragusa a "vendor" in 2011. She submitted her
application after — but not in response to — the November 2010 RFP
Resolution. Although she was awarded a contract under the January
2011 Award Resolution, and the mayor was authorized to negotiate
a contract with her, she refused to execute a proposed written
contract as a vendor. We recognize that "contracts do not need
to be in writing to be enforceable." Leodori v. Cigna Corp., 175
N.J. 293, 304-05 (2003). However, there was no oral agreement as
to the terms set forth in the writing. Rather, believing she was
a full-time employee, she protested to the township administrator,
who declined to pursue the matter.
17 A-5460-15T3
Later that year, Ragusa applied to be municipal prosecutor
for 2012. However, there apparently was no RFP Resolution
soliciting proposals. In early 2012, the Township adopted a
resolution to "carry over" Ragusa's term. The resolution purported
to ratify the agreement between Ragusa and the Township. But, as
noted, a professional services contract between Ragusa and the
Township had never been executed. The only extant agreement
between Ragusa and the Township pertained to her initial agreement
to accept the position of municipal prosecutor in 2010 as a full-
time employee. Also, the 2012 resolution purported to award her
a contract to provide services in return for no more than $17,500,
although the Township continued to pay Ragusa her prior salary.
Thus, the 2012 resolution did not accurately convey either side's
position.
Secondly, regardless of how one characterizes the contract
between Ragusa and the Township, it was not "awarded in accordance
with section 5 of P.L. 1971, c. 198 [the LPCL] ([N.J.S.A.] 40A:11-
5) . . . ." N.J.S.A. 43:15A-7.2(a). As noted, the Township did
not award a contract in 2010. Also, the 2010 resolution that
initially appointed Ragusa did not "state supporting reasons for
its action in the resolution," as required by N.J.S.A. 40A:11-
5(a)(i). The resolution simply appointed Ragusa to the municipal
prosecutor's position at the specified salary. Nor could the
18 A-5460-15T3
Township have placed the "contract . . . on file and available for
public inspection" in the Township clerk's office as required.
See N.J.S.A. 40A:11-5(a)(i). No contract was executed until 2013.
We recognize that N.J.S.A. 43:15A-7.2 was enacted to curb
abuses of the pension system by independent contractors and
professional services providers. See Comptroller's Report. The
Board argues that a professional service provider and municipality
should not be permitted to frustrate the Legislature's intent by
simply failing to execute an awarded contract. We agree. However,
Ragusa did not reach an agreement with the Township to provide
services as a vendor, and then simply refuse to execute an awarded
contract. As noted, no contract was awarded in 2010. The Township
simply appointed Ragusa to the position at a set salary, and placed
her on the payroll. In 2011, there was no meeting of the minds
that Ragusa would serve as an independent contractor, as set forth
in the proposed contract. She rejected it, and the Township
relented. Ragusa's situation bears no resemblance to the
professionals who "tacked" service with multiple municipalities,
to accumulate substantial pension credits that the Comptroller
viewed as abusive. See Comptroller Report at 9. Ragusa accepted
what she perceived to be a full-time employment with the Township,
which entitled her to pension credits. As noted, the Board has
19 A-5460-15T3
waived any argument that Ragusa was an independent contractor
under N.J.S.A. 43:15A-7.2(b).
In sum, we reverse the Board's order, to the extent it denied
Ragusa pension credit for the period March 20, 2010 through
December 31, 2012, and affirm as to the period beginning January
1, 2013.
20 A-5460-15T3