concurring in part and dissenting in part.
I.
' I agree with the majority’s statement of the applicable principles: a subject is negotiable between public employers and employees when (1) the item intimately and directly affects the work and welfare of public employees; (2) the subject has not been fully or partially preempted by statute or regulation; and (3) a negotiated agreement would not significantly interfere with the determination of governmental policy.1
While federal cases are not of significant value in determining the scope of negotiations in the public sector, their reasoning as to what has an economic impact upon a worker is relevant. The Supreme Court noted in First National Maintenance Corp. v. N. L. R. B., 452 U.S. 666, 101 S.Ct. 2573, 69 L.Ed.2d 318, 325 *426(1981), “[tjhat the discharge of a man is a change in his conditions of employment hardly needs comment.” Accord, Fibreboard Corp. v. N. L. R. B., 379 U.S. 203, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964).
There is no question that subcontracting resulting in layoff or job displacement, otherwise known as substitutional subcontracting, intimately and directly affects the work and welfare of public employees, and no statute or regulation preempts the subject. Thus, the only question to be resolved is whether mandatory negotiation of the incidences of subcontracting would significantly interfere with the public employer’s exercise of inherent managerial prerogative in determining governmental policy.
As the late Judge Morgan noted in her thoughtful dissent in the Appellate Division below, this case presents the classic conflict as described in Board of Education of Woodstown-Pilesgrove Regional School District v. Woodstown-Pilesgrove Regional Education Association, 81 N.J. 582 (1980). Woodstown directs that when a conflict arises a weighing or balancing must be made. Id. at 591.
To strike the balance between what is and is not significant interference, that Court said that when the dominant issue is a managerial prerogative, there is no obligation to negotiate. However, when the dominant issue is the legislative policy favoring a viable bargaining process to produce stability and efficiency in public employment, then bargaining is appropriate. Woodstown, supra at 591.
At oral argument, public employees’ counsel conceded that the language of the clauses had to be modified to limit negotiation or discussion to situations in which public employee displacement by a private work force would occur solely for economic reasons. If the State were to make a decision to discontinue providing a service, if State employees lacked requisite skills to perform a *427desired function, or if the decision to subcontract were entrepreneurial in nature, the subcontracting decision or its incidences would not be negotiable. Only when the subcontracting is motivated solely by economic considerations do the public employees seek to negotiate the incidences of the subcontracting.
While it may be true that the ultimate substantive question of whether to subcontract is predominantly an inherent managerial prerogative implicating an important policy decision, it is equally true that negotiating the incidences of that decision does not significantly interfere with the exercise of that prerogative.
The Appellate Division treated the contract provisions as requiring negotiation of the ultimate, substantive issue of subcontracting. While the language of the clauses is susceptible of that interpretation, the public employees actually sought the opportunity to negotiate what may be called the effects of a decision to subcontract. .Such incidences may include, but are not limited to, procedural issues such as the amount of notice to be given prior to subcontracting, the timing of transfers or layoffs, and, in addition, the issue of give-backs, i.e., whether public employees are willing to perform the same job at a price competitive with the private replacements.2 Thus, the public employees sought a procedural right to present to the public employer the representative’s position on the economic issue in the hopes of persuading the employer not to subcontract. The *428situation that has arisen is the inevitable result of deciding negotiability in a vacuum.3
Taken in that context, the Woodstown balance should be struck favoring negotiability of the incidences of the decision to subcontract. Negotiation of the effects of the decision would not significantly interfere with the exercise of the inherent managerial prerogative. That prerogative is exercised in the making of the substantive decision itself. Conversely, the preeminent legislative policy favoring labor stability and efficiency would be served by allowing negotiation of the procedural effects of the decision on employees. It would also be served by allowing public employees to try to demonstrate that they could more efficiently and economically perform their tasks than could subcontractors.
Moreover, the subjects sought to be negotiated were well within the traditional guidelines for negotiability that we have suggested in the past. Negotiation on matters that intimately affect the work and welfare of public employees without significantly interfering with policy determinations is allowed. Thus, the Court has held that a contract interpretation as to whether or not a school board may unilaterally extend special education teachers’ working hours without additional compensation was arbitrable, Bd. of Ed. Englewood v. Englewood Teachers, 64 N.J. 1 (1973), while on a broader scale school hours and school calendar were not negotiable, as the determination of the calendar is a major educational policy traditionally an exclusive responsibility of the college administration. Burlington Cty. Col. Fac. Assoc. v. Bd. of Trustees, 64 N.J. 10 (1973). Thus, the *429Court has mandated negotiation on the effects of a non-negotiable policy determination. The majority opinion itself points out, ante at 417, that
Nonetheless, we have distinguished between substantive policy making powers of employers and procedural rights of employees. We have held that promotional procedures are negotiable terms and conditions of employment even though promotional criteria are not. State v. State Supervisory Employees Assn., 78 N.J. at 90-91.
The private sector analogy, again, while not controlling, is instructive. In First National Maintenance Corp., supra, the interest of employees, the goals of the National Labor Relations Act, and the right of an employer to run his business are carefully balanced. The Supreme Court found that although the union was not permitted to participate in an employer’s decision to shut down part of its business solely for economic reasons, it was, nonetheless, guaranteed a significant opportunity to bargain about the effects of the decision on job security. That Court reasoned that the union would be impelled to offer concessions, information, and alternatives that might be helpful to management or forestall or prevent the termination of jobs. 452 U.S. 666, 101 S.Ct. 2573, 69 L.Ed.2d at 332.
Similarly, in International Ladies’ Garment Workers U. v. N.L.R.B., 463 F.2d 907 (D.C.Cir.1972), the Court of Appeals decided that an employer was obliged to afford its employees an opportunity to meet legitimate complaints about labor costs before ousting them from their jobs and relocating the plant. And, finally, in Van Buren Pub. Sch. Dist. v. Wayne Cty. Cir. J., 61 Mich.App. 6, 232 N.W.2d 278 (App.Ct.1975), the court considered the beneficial impact of collective negotiations on the government’s proposal to contract out public work, saying:
We are not convinced that bargaining would have served no purpose. The merits of Van Buren’s decision to subcontract are not so clear as to eliminate the need for discussion. Union input might reveal aspects of the problem previously ignored or inadequately studied by Van Burén. The union may well be able to offer an alternative to the one chosen by Van Burén which would fairly protect the interests and meet the objectives of both. Surely discussion of the subject would have done much to “promote industrial peace” . . . [Explanation at the bargaining table will sooner quell anger than receipt of a tersely worded termination slip. [232 N.W.2d at 288].
*430Provided that bargaining over the substantive issue itself is not mandated, negotiation of the incidences of subcontracting, as defined above, would not significantly interfere with an inherent managerial prerogative. Situations may arise in which the State may have a great need for speed, flexibility and confidentiality in meeting exigencies. Such would seem an inherent managerial decision and would not be subject to discussion or review. The refinement of the negotiable issues related to a decision to subcontract is more appropriately begun at the bargaining table than in a courtroom.
II.
In addition to these analytical considerations of the application of the stated principles to the facts of this case, limiting public employee involvement in subcontracting decisions runs counter to the fundamental goals of our development of the law of public employment bargaining. I agree that democratic processes and accountability must be protected. Ante at 408. I suggest that in the long run this end will be better served by fostering discussions between the public employer and public employee.
Regardless of how the decision to subcontract is made, it is clear that substitutional subcontracting conflicts with the goal of maintaining democratic accountability in state government. That such accountability is vital to a functioning democracy is the fundamental premise of our decisions in public sector scope of negotiations cases. Ridgefield Park Ed. Ass’n v. Ridgefield Park Bd. of Ed., 78 N.J. 144 (1978).
Most would agree that accountability is best ensured where elected or appointed officials exercise direct control over those who carry out state functions. It stands to reason that private workers are inherently less accountable than public employees. Their allegiance runs to their private employer. The “merit and *431fitness” provisions of our Constitution and Civil Service Act4 have no application to outside employees, even though they may work for a firm under contract with the State. Private employees may retain the right to strike. Further measures designed to encourage honorable service do not apply.
Moreover, the concern that negotiation on the issue of subcontracting would be “inimical to the democratic process,” ante at 408, is not compelling when the interest at stake is the ability of an administrator unilaterally to substitute private employees for public ones in the absence of legislative authorization or agency rulemaking.
Although it is true that the troublesome efforts to comply with the rules and regulations of the Civil Service Commission may encourage some to seek alternative means to deliver state services,5 our Constitution and laws do not contemplate the subcontracting of state services as a normal event. Art. VII, § I, par. 2 of our Constitution and N.J.S.A. 11:4-2 of the Civil Service Act mandate a system of public employment in which appointments and promotions are governed by a standard of “merit and fitness.” Substitutional subcontracting conflicts to a substantial degree with these statutory and constitutional mandates.
The majority addresses this issue by citing two cases that upheld the legality of a legislative decision to exclude certain public employees from the civil service law. Ante at 406-407. These cases are of limited relevance here, however, where the issue is whether the negotiations would impair democratic processes by burdening an administrative decision to subcontract public employment.
*432I believe that negotiations on the incidences of fiscally motivated substitutional subcontracting would not significantly interfere with the exercise of an inherent managerial prerogative, but rather would promote labor harmony. I would reverse the Appellate Division judgments and direct the parties to negotiate the clauses within these guidelines.
For affirmance in part and reversal in part — Chief Justice WILENTZ and Justices PASHMAN, CLIFFORD, SCHREIBER and POLLOCK — 5.
Concurring in part and dissenting in part — Justices HANDLER and O’HERN — 2.
Labor negotiations involving police or firefighters are governed by principles that differ in some respects from those generally applicable to public sector collective bargaining. See, e.g., In the Matter of Paterson Police PBA Local No. 1. v. Paterson, 87 N.J. 78 (1981); N.J.S.A. 34:13A-16(b), N.J.S.A. 34:13A-16(f)(4).
“Give-backs,” employee concessions of wages and benefits, have rapidly become the mechanism through which employees try to cooperate with their industrial employers to prevent layoffs. With depressed economic circumstances causing workers to join the jobless ranks, news items recounting labor concessions appear daily. See, for example, G.M. and Its Union Agree to Link Cut in Wages to Lower Car Prices, N.Y. Times, January 13, 1982, at 1, col. 4; Teamsters, Truckers Begin Talks Early; Some Assistance Seen for Ailing Industry, Wall St.J., December 2, 1981, at 3, col. 3; Teamsters Agree to Tentative Pack with Concessions, N.Y. Times, January 16, 1982, at 1, col. 5; Ford Lost $1.06 Billion Last Year but Union Pact Raises ’82 Hopes, N.Y. Times, January 19, 1982, at 1, col. 4.
The contractual clauses requiring negotiation or discussion of the incidences of subcontracting have been included in the employment contracts for many years without notice of the disruption of state business. As noted by the majority, the State sought to remove the language from successor agreements on its own initiative. Failing to resolve the dispute, the parties filed a petition with PERC for a scope of negotiations determination. Thus, PERC and we are faced with deciding the case without the benefit of a developed factual record before us.
N.J.Const. (1947), Art. VII, § I, par. 2; N.J.S.A. 11:4-2.
Reform of these laws has been urged. In the last session of the Legislature A-1859 passed the Assembly but expired in the Senate. It contains the first major substantive amendments to the Civil Service Act since the original Act of 1908.