IN THE MATTER OF STATE OF NEW JERSEY (DIVISION OF STATE POLICE) VS. STATE TROOPERS FRATERNAL ASSOCIATION OF NEW JERSEY (PUBLIC EMPLOYMENT RELATIONS COMMISSION)

NOT FOR PUBLICATION WITHOUT THE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-0526-16T4

IN THE MATTER OF STATE OF
NEW JERSEY (DIVISION OF
STATE POLICE),

Respondent,

v.

STATE TROOPERS FRATERNAL
ASSOCIATION OF NEW JERSEY,

Appellant.
________________________________

Argued April 18, 2018 – Decided July 9, 2018

Before Judges Alvarez, Nugent and Geiger.

On appeal from the Public Employment Relations
Commission, Docket No. IA-2016-003.

Michael A. Bukosky argued the cause for
appellant (Loccke, Correia & Bukosky,
attorneys; Richard D. Loccke and Michael A.
Bukosky, of counsel and on the brief).

Steven W. Suflas argued the cause for
respondent State of New Jersey, Division of
State Police (Ballard Spahr, LLP, attorneys;
Steven W. Suflas and Emily J. Daher, on the
brief).

Frank C. Kanther, Deputy General Counsel,
argued the cause for respondent New Jersey
 Public Employment Relations Commission
(Christine Lucarelli, Acting General Counsel,
attorney; David N. Gambert, Deputy General
Counsel, on the statement in lieu of brief).

PER CURIAM

Appellant State Troopers Fraternal Association of New Jersey

(STFA) appeals from a September 22, 2016 final agency decision of

the Public Employment Relations Commission (PERC) modifying a

remanded interest arbitration award. The STFA argues PERC erred

by modifying the award to eliminate "step increments" (salary

increases regularly paid to Troopers pursuant to a salary guide),

which were to be paid on the final day of the new collective

negotiations agreement (CNA).

The State of New Jersey, Division of State Police (Division)

and PERC claim the modification was appropriate because the effect

of the arbitrator's award was to circumvent the statutory two

percent cap on interest arbitration awards, N.J.S.A. 34:13A-16.7,

by granting a salary increase that was not fully accounted for

during the term of the CNA but, nonetheless, established a new

"base salary" for the next CNA that exceeded the two percent cap.

We remand for PERC to reconsider its decision in light of the

Supreme Court's subsequent ruling in In re Cty. of Atl., 230 N.J.

237 (2017).

2 A-0526-16T4
 The STFA represents 1633 rank and file State Troopers, holding

the ranks of Trooper, Trooper 1, and Trooper 2. The STFA and the

Division were parties to a four-year CNA that extended between

July 1, 2008 and June 30, 2012, which the parties finalized in

September 2011 through interest arbitration.

Pursuant to Article XXIX of the 2008-2012 CNA, the terms of

the agreement continued in effect during negotiations for a

successor CNA, as follows:

A. This Agreement shall continue in full
force and effect until June 30, 2012, and
shall be automatically renewed from year to
year thereafter unless either party shall
notify the other in writing by certified mail
prior to October 1 in the year preceding the
contract expiration that it desires to amend
the terms of this Agreement. Either party may
submit to the other a written list of changes
desired in the terms of a successor Agreement.

B. Should either party notify the other
of its desire to amend this Agreement through
the procedure in A. above, the terms of this
Agreement shall remain in force until the
effective date of a successor Agreement,
unless one party notifies the other party of
its discontinuation within ninety (90) days.

The 2008-2012 CNA also contains a salary advancement

schedule, pursuant to which Troopers received step increments

until they reached the top step of the top salary range. The

salary guide contained nine steps in each of three salary ranges,

with salary range seventeen applicable to Troopers, salary range

3 A-0526-16T4
eighteen applicable to Trooper 2s, and salary range nineteen

applicable to Trooper 1s, the highest of the three ranks. The

salary guide provided for a twelve-year salary progression, over

which time Troopers' salaries would increase by approximately

sixty percent.

Upon achieving the top of the salary guide, Troopers would

no longer be eligible to receive step increments. However, all

Troopers, including those no longer eligible for step increments,

were eligible to receive across-the-board (ATB) increases. Under

the 2008-2012 CNA, ATB increases were paid, effective July 1 of

each contract year, in the following amounts: 2.75% in 2008; 2.5%

in 2009; 2.25% in 2010; and 0% in 2011.

Finally, under the 2008-2012 CNA, all members of the State

Police, from Troopers up to the Superintendent, also received a

unique form of compensation known as "maintenance." No other

State government employees receive a maintenance payment.

Maintenance payments are phased in over the first three years of

a Trooper's employment, with full payment in their third year and

each year thereafter. Maintenance payments were increased over

the course of the 2008-2012 CNA, congruent with the ATB increases,

such that, effective July 1, 2011, the maintenance payment was

$13,649.03.

4 A-0526-16T4
 On several occasions in 2013 and 2014, the parties negotiated

in an attempt to reach a successor agreement to the 2008-2012 CNA,

after which they agreed to engage in factfinding pursuant to

N.J.S.A. 34:13A-16(b)(1). On September 23, 2015, after a

factfinder had been appointed but before he had issued a

factfinding report, the Division filed a petition to initiate

compulsory interest arbitration.

PERC appointed Ira Cure as arbitrator, who held hearings

between November 30, 2015 and January 4, 2016, hearing testimony

from: Sergeant James Kiernan; accountant Michelle LaBruno; Michael

Dee, Director of the Governor's Office of Employee Relations;

Major Mark A. Wondrack; David Ridolfino, Acting Director of the

State Office of Management and Budget; Detective Sergeant Stephen

Urbanski; Trooper Michael Zanyor; Trooper Christopher J. Burgos;

and Sergeant Frank Serratore. The parties also provided written
1
submissions.

As it relates to this appeal, the hearing record included the

previously discussed information regarding Trooper compensation.

The record also reflected the Division made a unilateral decision

1
Much of the hearing evidence is not relevant to the limited
issue presented on appeal, that is, the payment of step increments
to Troopers not at the maximum of the pay scale.

5 A-0526-16T4
to stop paying step increments to Troopers, which became effective

in pay period 20 in 2015. At the remand hearing, Dee testified

the Division stopped the increments "based on the decision out of

PERC [that] dealt with increments."2 This decision was a break

with past practice and contrary to the terms of Article XXIX of

the 2008-2012 CNA. According to counsel, this issue was also the

subject of litigation in the Superior Court and before PERC.

In addition, Kiernan and Burgos testified Troopers had

experienced a reduction in their take-home pay due to

implementation of the "Chapter 78" contributions to healthcare and

pension costs, with Kiernan testifying to a personal loss of more

than $9000 per year.3 Kiernan stated he was retiring early due to

his static wages and the increases in benefit costs, and he knew

many others who had made the same decision. On behalf of the

Division, Dee conceded the number of Troopers had decreased from

2010, but he also stated that number has increased in recent years.

At the same time, the two percent hard cap, applicable to

interest arbitrations, limited the increases that could be awarded

2
See In re Cty. of Atl., PERC No. 2014-40, 40 N.J.P.E.R. 285 (¶
109 2013), rev'd, 445 N.J. Super. 1 (App. Div. 2016), aff'd on
other grounds, 230 N.J. 237 (2017).
3
L. 2011, c. 78.

6 A-0526-16T4
to unit members.4 Specifically, under N.J.S.A. 34:13A-16.7,

increases could not exceed two percent per year compounded over

the term of the contract. By way of example, when compounded, an

annual two percent increase yields an aggregate 10.4% increase for

a five-year CNA. However, payment of step increments to Troopers

through pay period 20 of 2015 already consumed a large percentage

of the funds available under the two percent cap.

The Division proposed halting step increments for Troopers,

notwithstanding that step increments would continue for Sergeants5

and "even though there is more room under the cap" because of the

"pretty significant compression issue" within the State Police.

Salary compression means there is little difference in the salaries

paid between ranks. It results, in part, because the salary of

the highest ranking officer is limited to $141,000.

Finally, Ridolfino testified regarding general economic

conditions, the State budget, and the State's unemployment rate,

which was slightly higher than the national average. He also

4
L. 2010, c. 105, codified at N.J.S.A. 34:13A-16.7, which was
extended to 2017 by L. 2014, c. 11.
5
On January 31, 2016, the same arbitrator who heard the interest
arbitration for the STFA issued an interest arbitration award for
the State Troopers NCO Association of New Jersey, Inc. (NCOA),
pursuant to which step increments were restored and paid.

7 A-0526-16T4
stated the State's recovery from the economic slump was "sluggish"

and trailing behind other states in the region.

Ridolfino further testified the State's liquidity ratio was

low, its credit rating had been downgraded numerous times, and

expenditures on employee pension and health benefits were an

increasingly large portion of the State budget, as well as the

budget for the Department of Law and Public Safety, of which the

State Police were a part.

Ridolfino stated the State Police budget for fiscal year 2016

showed a 2.24% increase from the prior year. He conceded, however,

the State budget was not subject to a two percent tax levy cap.

He also conceded State Police salaries were a "negligible"

component of the State budget, constituting less than one percent.

Moreover, he indicated the State's general fund financed only

sixty-five percent of the State Police budget with other sources

funding the remaining thirty-five percent.

On January 31, 2016, the arbitrator issued an interest

arbitration decision and award (Initial Award). As it relates to

this appeal, the initial award provided for a five-year CNA,

between July 1, 2012 and June 30, 2017. In terms of compensation,

the arbitrator accepted the Division's data and provided for a

1.25% across-the-board increase for all ranks and steps, effective

the first full pay period after July 1, 2016. The arbitrator also

8 A-0526-16T4
allowed for step increments already paid and continued the freeze

on further step increments that the Division had imposed as of pay

period 20 in 2015. The arbitrator also froze the maintenance

allowance at $13,819.64.

Regarding the freeze on step increments, the arbitrator

acknowledged he departed "from the historical pattern where the

NCOA unit and the STFA unit have traditionally received the same

wage increases." He also acknowledged the effect of the increased

pension and healthcare contributions under Chapter 78, which had

caused declines in take-home pay, and found the award did "little

to compensate members of the STFA unit for their reduction in

earnings." However, he found, "[b]ecause of the statutory

limitations under the 2% Hard Cap, members of the STFA are

precluded from receiving a general wage increase."

The arbitrator also expressed concern the freeze on step

increments could affect employee morale and stability of the

workforce, particularly for more junior Troopers, stating: "While

members at the top steps of the salary scale are well compensated,

under the terms of the award, more junior Troopers will have to

wait quite some time for a salary increase, and this may encourage

some Troopers to seek employment elsewhere." He further stated:

I am concerned that this award will have a
deleterious impact upon the continuity and
stability of the STFA bargaining unit. The

9 A-0526-16T4
 record evidence shows that since 2010, there
has been a decline in the total number of
Troopers on the Division's payroll, and an
increase in retirements. However, as noted
throughout this document the 2% Hard Cap has
left me no choice but to limit the amount of
any salary increase.

The STFA appealed to PERC, claiming the Initial Award failed

to properly consider and analyze the N.J.S.A. 34:13A-16(g)

statutory factors. The Division cross-appealed, claiming the

five-year term resulted in an award that exceeded the two percent

cap on interest arbitration awards.

On April 14, 2016, PERC issued its decision. As it relates

to this appeal, PERC found the arbitrator had not properly "costed

out" the award to show compliance with the two percent statutory

cap, because he did not include: the total base salary for the

last year of the expired contract and how it was calculated; a

calculation of the costs of the award, looking at the salary guide

level or "scattergram"6 placement of unit members on the last day

before the end of new award; and a final calculation to ensure

that the total economic award did not increase the employer's base

salary costs in excess of the compounded value of a two percent

increase per year over the length of the contract. Instead, the

6
PERC defines "scattergram" as "a chart showing where employees
are currently situated on the salary guide, thus providing a
snapshot of the current total cost of the unit."

10 A-0526-16T4
arbitrator simply relied upon the Division's calculations.

However, the Division based its calculations upon a proposed six-

year contract term, whereas the arbitrator awarded a five-year

contract. Accordingly, PERC remanded the matter to the arbitrator

to undertake the necessary calculations. PERC. No. 2016-69, 42

NJPER 505 (¶ 141 2016). PERC also ordered the arbitrator to

supplement his analysis of the statutory factors set forth in

N.J.S.A. 34:13A-16(g), particularly factor nine (statutory

restrictions on the employer), N.J.S.A. 34:13A-16(g)(9). Ibid.

The arbitrator conducted a remand hearing on June 14, 2016,

hearing testimony from Dee, Zanyor, and LaBruno. The parties

submitted new proposals along with new calculations.

On July 11, 2016, the arbitrator issued his revised award

(Remand Award). As it relates to this appeal, the arbitrator

accepted the Division's proposal and provided for a five-year CNA

extending between July 1, 2012 and June 30, 2017, because it was

"consistent with the historic pattern in which all three units –

the STFA, NCOA and the STSOA[7] - negotiated their contracts at the

same time." The STFA had proposed a five-and-one-half-year

contract.

7
The State Troopers Superior Officers Association.

11 A-0526-16T4
 With respect to maintenance compensation, the arbitrator also

accepted the Division's proposal and provided for a 1.25% increase

in maintenance payments, effective the first full pay period after

July 1, 2016, in order to be consistent with the NCOA and STSOA

units. Addressing statutory factor nine, the arbitrator found the

Division used the correct data in making its calculations and the

award complied with the two percent hard cap (increasing base

salary by 10.24%), whereas the STFA's proposal did not. The

arbitrator further stated: "This limited change in the maintenance

calculation is all that is available as a wage increase because

the CNA's provision for incremental increases subsumed any

possible salary increase as of the 20th pay period in September

2015."

The arbitrator rejected the STFA's demand for a 1.25% increase

to Troopers at step nine of range nineteen, for the last six months

of the CNA. However, the arbitrator partially granted STFA's

proposal to reinstate step increases, which the Division opposed.

More specifically, the arbitrator reinstated step increases

beginning on June 29, 2017, the day before the new CNA expired.

At that time, Troopers would be placed at the step and range they

would have been eligible for, as if there had been no suspension

of step increments after pay period 20 in 2015, and they would

resume their normal progression on the step and range chart pending

12 A-0526-16T4
negotiation of a successor CNA. However, the Troopers would not

receive any back pay for the period during which step increases

were suspended. Regarding this provision, the arbitrator stated:

The STFA has argued that the effect of my
Initial Award, were it to be implemented,
would be to permanently freeze all step
movement indefinitely. While the STFA notes
that it could possibly negotiate the
resumption of step movement going forward, at
the present time there is no clear "career
path for compensation." This would be an
unjust result. In addition, especially as a
result of the Appellate Division's decision
in In re Cty. of Atl., 445 N.J. Super. 1 (App.
Div. 2016), pet. for certif. pending, which
restored the concept of the dynamic status quo
to collective negotiations, the freeze in step
movement may persist well after this five year
CNA expires.8 Accordingly, it would be unjust
to permit such an indefinite freeze. In
addition, because the suspension will end the
day before the last day of the contract's
expiration the cost to the Division if any
will be de minimis. Any additional costs will
not occur during the term of this CNA. The
parties will be free to negotiate changes to
the compensation package especially step
movement at the conclusion of this agreement.

[(citation to the record omitted).]

The Division appealed from the remand award, arguing the

arbitrator's award of step movements on June 30, 2017, the last

day of the successor contract, did not comply with the two percent

cap, was not calculated to comply with the two percent cap, and

8
The Court subsequently granted certification and affirmed the
panel's decision on other grounds. Cty. of Atl., 230 N.J. 237.

13 A-0526-16T4
attempted to avoid the statutory limitations of the compulsory

interest arbitration law. The STFA responded the resumption of

step movement did not violate the statute. The STFA also cross-

appealed, arguing the arbitrator did not consider all of the

N.J.S.A. 34:13A-16(g) statutory factors when analyzing the

transportation allowance and education incentive proposals.

On September 22, 2016, PERC issued its final agency decision,

affirming the remand award except as modified to exclude the step

increments awarded on the last day of the CNA. Explaining this

modification, PERC stated:

Here, . . . the State is charged with a sizable
double increment for a contract term that was
not part of the interest arbitration, was not
negotiated, and is not charged to either
contract term.

The last day of this contract will be
critical for determining how the Troopers
advance through the salary guide in their next
contract. Essentially, due to the award's
double increment bump on the last day, the
next contract's raises would be applied using
that higher salary guide level as a starting
point but the significant cost of that double
increment would not be accounted for. For
those 84 Troopers highlighted in the State's
brief who were at Range T-17, Step 4 in 2015,
their double increment up to Step 6 on the
last day of the contract would result in a
salary increase of $5,792.04 as they jump from
$66,438.00 to $72,334.02. That $5,792.04
represents a salary increase of 8.72%.
However, only 1 day of that increase is
charged to this contract because the double
increment was awarded for the last day. Thus,

14 A-0526-16T4
only $15.87 of the significant 8.75% increase
was charged to this contract, while the
remaining $5,776.17, or a rise of 8.69%,
carries over into the next contract term that
was not part of this interest arbitration and
the opportunity to negotiate the salary for
the next contract has been extinguished.
Because those Troopers would already be at the
higher salary guide level when negotiations
and/or interest arbitration are being
conducted for the next contract, that 8.69%
of the double increment bump will not be
accounted for as a new salary increase in the
next contract. Thus, the bulk of the
significant salary increment is not charged
to either this contract or the next,
effectively escaping the 2% Hard Cap. While
the parties may mutually agree to salary
increases in excess of the 2% Hard Cap if their
negotiations are successful and interest
arbitration is avoided for the next contract,
the arbitrator's award of the double bump on
the last day of this contract hamstrings the
employer and union by baking in a carried over
8.69% raise, effectively taking those salary
negotiations out of the parties' hands. Such
an accounting maneuver in the interest
arbitration process circumvents the
legislative purpose of the 2% Hard Cap by
permitting extreme, unaccountable raises in
the transition between contracts.
Accordingly, we find that the arbitrator's
grant of double increments on the last day of
the award handicaps the next round of
negotiations, undermines the legislative
intent to control costs, and disregards the
financial impact of the step movement on the
taxpayer. See N.J.S.A. 34:13A-16(g)(1) and –
(6) and N.J.S.A. 34:13A-16. We therefore
modify the arbitrator's remand award to remove
the granting of increments on the last day of
the CNA.

[(footnotes omitted).]

15 A-0526-16T4
 PERC rejected the STFA's argument that the award of increments

on the last day of the CNA must be upheld pursuant to statutory

provisions that mandate the payment of salary increments to State

Troopers, stating: "The Legislature was well aware of these

statutes when L. 2014, c. 11 was enacted. The Legislature could

have chosen to exempt STFA members and other State Police

personnel, but it did not."

PERC also rejected the STFA's argument that PERC precedent,

specifically, In re Borough of Bogota, PERC No. 99-20, 24

N.J.P.E.R. 453 (¶ 29210 1998), prohibited modification of the

award as to salary increases but, instead, required a remand for

reconsideration. As to this issue, PERC stated: "Bogota involved

the potential modification of a remand award regarding across the

board salary increases. The instant matter only concerns the

arbitrator's award of automatic increments on the last day of the

CNA and our rationale for modifying the remand award is set forth

above."

Finally, aside from the step increment issue, PERC found the

arbitrator otherwise complied with its directions. He adequately

showed the methodology he employed to calculate base salary and

also costed out the award, which, aside from the step increments,

amounted to an increase of 10.24% over five years, in compliance

with the two percent statutory cap.

16 A-0526-16T4
 The STFA appealed from the final agency decision. It raises

the following points on appeal:

POINT I

THE COMMISSION IMPROPERLY EXCEEDED THE SCOPE
OF ITS REVIEW WHEN IT DETERMINED IT WOULD
ALTER THE ARBITRATOR'S DECISION.

POINT II

THE COMMISSION IS NOT FREE TO CONDUCT A DE
NOVO REVIEW AND THEREAFTER FASHION ITS OWN
AWARD.

POINT III

THE ARBITRATOR AND THE COMMISSION ARE
STATUTORILY REQUIRED TO PROVIDE STEP MOVEMENT
TO STATE TROOPERS PURSUANT TO TITLE 53.

POINT IV

THE COMMISSION DEPARTED FROM JUDICIAL AND
AGENCY PRECEDENT WHICH FORBADE IT FROM
MODIFYING AN AWARD BASED UPON FUTURE BUDGETARY
RESTRICTIONS.

POINT V

THE STFA WAS DEPRIVED OF FUNDAMENTAL FAIRNESS
AND DUE PROCESS WHEN IT WAS SURPRISED WITH A
NEW REGULATORY RULE.

POINT VI

PERC'S NEW RULE IS PLAINLY UNREASONABLE,
CONTRARY TO THE ACT AND UNDERMINES THE
LEGISLATURE'S INTENT.

A. APPLICATION OF THE CAP IS OUTSIDE OF
PERC'S MANDATE

17 A-0526-16T4
 B. PERC'S DECISION WAS ARBITRARY AND
CAPRICIOUS

1. VAGUENESS

2. VOID IN APPLICATION IN THE
ABSENCE OF GUIDING STANDARDS

C. THE NEW "RULE" IS BASED UPON AN
ERRONEOUS CALUCATION

D. VIOLATION OF THE LEGISLATIVE INTENT

The New Jersey Employer-Employee Relations Act (Act),

N.J.S.A. 34:13A-1 to -43, includes a compulsory interest

arbitration procedure for police departments and police officer

representatives who reach an impasse in collective negotiations.

N.J.S.A. 34:13A-16(b)(2). Either party may petition to initiate

this process with PERC. Ibid. The parties may appeal the

arbitrator's award to PERC and may, in turn, appeal PERC's final

decisions to this court. N.J.S.A. 34:13A-16(f)(5)(a).

Our review of "PERC decisions reviewing arbitration is

sensitive, circumspect and circumscribed." Twp. of Teaneck v.

Teaneck Firemen's Mut. Benevolent Ass'n Local No. 42, 353 N.J.

Super. 289, 300 (App. Div. 2002) (citing In re Hunterdon, 116 N.J.

322, 328 (1989)), aff'd o.b., 177 N.J. 560 (2003). We will uphold

these decisions unless they are "clearly arbitrary or capricious."

Ibid. (citation omitted). However, we provide heightened scrutiny

of statutorily mandated public interest arbitration where public

18 A-0526-16T4
funds are at stake. Hillsdale PBA Local 207 v. Borough of

Hillsdale, 137 N.J. 71, 82 (1994).

PERC's role is to consider whether the arbitrator properly

applied the factors articulated in N.J.S.A. 34:13A-16(g) and

issued a reasonable determination. Teaneck, 353 N.J. Super. at

306. PERC is statutorily authorized to "affirm, modify, correct

or vacate" an interest arbitration award or it "may, at its

discretion, remand the award to the same arbitrator or to another

arbitrator . . . for reconsideration." N.J.S.A. 34:13A-

16(f)(5)(a).

The arbitrator's role, in turn, is to choose between the

parties' final offers after considering these factors. Hillsdale,

137 N.J. at 82. PERC will not vacate an award unless: (1) the

arbitrator failed to give due weight to the N.J.S.A. 34:13A-16(g)

factors he or she determined were relevant, "(2) the arbitrator

violated the standards in N.J.S.A. 2A:24-8 and -9[,] or (3) the

award is not supported by substantial credible evidence in the

record as a whole." In re State, 443 N.J. Super. 380, 385, (App.

Div.) (citing Hillsdale, 137 N.J. at 82), certif. denied, 225 N.J.

221 (2016). We will similarly uphold an award if it is supported

by "substantial credible evidence in the record." Hillsdale, 137

N.J. at 82 (citation omitted).

19 A-0526-16T4
 Primarily, the STFA argues PERC erred in modifying the

arbitrator's remand decision to eliminate the ordered step

increments. We remand this matter to PERC for reconsideration of

its final decision in light of the Supreme Court's subsequent

decision in Cty. of Atl.

In Cty. of Atl., we reversed PERC's 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 [Act]." 445 N.J. Super. 1, 6 (App. Div.

2016). We concluded "PERC wrongly assumed that government

employers cannot negotiate to avoid paying increments after the

lapse of CNAs" and also determined the employer "has the option,

when engaged in new negotiations, to recoup salary increments in

a new contract." Id. at 18.

In Cty. of Atl., the Court concluded it "need not determine

whether, as a general rule, an employer must maintain the status

quo while negotiating a successor agreement." 230 N.J. at 243.

Instead, the Court held "the governing contract language requires

that the terms and conditions of the respective agreements,

including the salary step increases, remain in place until a new

CNA is reached." Ibid.

The Court found "salary step increments is a mandatorily

negotiable term and condition of employment because it is part and

20 A-0526-16T4
parcel to an employee's compensation for any particular year."

Id. at 253. Accordingly, the Court faced the issue "whether the

salary increment systems provided for in the expired CNAs still

governed working conditions during the hiatus period between

agreements." Id. at 253-54 (citing N.J.S.A. 34:13A-5.3, -

5.4(a)(1), and -5.4(a)(5)).

In Cty. of Atl., the Atlantic County-PBA Local 77 CNA stated

"[a]ll provisions of this Agreement will continue in effect until

a successor Agreement is negotiated." Id. at 244. Similarly, the

Atlantic County-PBA Local 34 CNA provided "[a]ll terms and

conditions of employment, including any past or present benefits,

practices or privileges which are enjoyed by the employees covered

by this Agreement that have not been included in this Agreement

shall not be reduced or eliminated and shall be continued in full

force and effect." Id. at 244-45. The Bridgewater-PBA Local 174

CNA stated "[t]his 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 mutually

agreed on a new agreement." Id. at 248-49.

The Court found the three expired CNAs "contain clear and

explicit language that the respective salary guides – and all

other terms and conditions set forth in those agreements – will

continue until a successor agreement is reached." Id. at 255.

21 A-0526-16T4
Accordingly, the Court found the salary increment systems in

question "remained in effect after the agreements' expiration

dates under basic principles of contract law." Ibid. The Court

noted the public entities "could have simply negotiated different

contract terms." Id. at 256. The Court held:

[T]he unilateral modification at issue here
directly contradicted the parties' binding
written agreement. Because the salary
increment system was a term and condition of
employment that governed beyond the CNAs'
expiration date, [the public entity employers]
committed an unfair labor practice when they
altered that condition without first
attempting to negotiate in good faith, in
violation of N.J.S.A. 34:13A-5.3, -5.4(a)(1),
and -5.4(a)(5).

[Id. at 256.]

Here, the parties' 2008-2012 CNA explicitly stated "the terms

of this Agreement shall remain in force until the effective date

of a successor Agreement," similar to the three CNAs at issue in

Cty. of Atl. See id. at 244-45, 248-49. However, based upon

PERC's Cty. of Atl. decision (which the Appellate Division and

Supreme Court reversed), the Division unilaterally ceased paying

step increments as of pay period 20 in 2015, pending negotiation

of a successor agreement. At the arbitration hearings, counsel

stated the cessation of step increments was the subject of

litigation both in the Superior Court and before PERC.

22 A-0526-16T4
 The Division maintains Cty. of Atl. is distinguishable

because it was premised upon PERC's consideration of the two

percent property tax levy cap imposed by the Local Budget Law,

N.J.S.A. 40A:4-45.44 to -45.47, whereas this matter involves the

two percent cap imposed on interest arbitration awards under the

Act, N.J.S.A. 34:13A-16.7(b). We are unpersuaded by this argument.

Ultimately, the Court's holding in Cty. of Atl. was premised

upon the terms of the CNAs. 230 N.J. at 254-57. The Court held

"the governing contract language requires that the terms and

conditions of the respective agreements, including the salary step

increases, remain in place until a new CNA is reached." Cty. of

Atl., 230 N.J. at 243. Just as in Cty. of Atl., "we need not look

beyond the [contract itself] to conclude that the step increases

continued beyond the expiration of the contracts." Id. at 254.

Here, like the contracts reviewed in Cty. of Atl., the 2008-2012

CNA between the Division and the SFTA stated the terms of the CNA,

including step increments, "shall remain in force until the

effective date of a successor Agreement." Accordingly, "the salary

increment system[] remained in effect after the agreement['s]

expiration date[] under basic principles of contract law." Id.

at 255. Notwithstanding that contract language, effective in pay

period 20 in 2015, the Division unilaterally stopped paying salary

23 A-0526-16T4
increments. Around the same time, the Division petitioned for

compulsory interest arbitration.

The State's failure to comply with the terms of the CNA was

not addressed by the arbitrator or by PERC.9 Thus, in light of

the Supreme Court's decision in Cty. of Atl., we vacate the

September 22, 2016 final agency decision and remand for PERC to

reconsider the terms of the CNA and the Division's non-compliance

with those terms in the context of the parties' arbitration and

the statutory cap on interest arbitration awards. In light of our

ruling, we do not reach the other issues raised by the SFTA.

Vacated and remanded for proceedings consistent with this

opinion. We do not retain jurisdiction.

9
We recognize PERC rendered its final decision before the Supreme
Court issued its opinion in Cty. of Atl.

24 A-0526-16T4