Case Title: James v. Board of Trustees of the Public Employees' Retirement System

Citation: 

Docket Number: a-21-99

State: new-jersey

Court: New Jersey Supreme Court

Date: 2000-06-20T00:00:00Z

Document:
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). LaVECCHIA, J., writing for a Unanimous Court. The question in this appeal is whether an employer is obligated under N.J.S.A. 43:15A-25.1 to make pension contributions on behalf of an employee who is awarded permanent partial disability benefits. In addition, the Court addresses the circumstances under which an employer's obligation to make pension contributions terminates. Annie James was injured on May 4, 1994 while on the job at the Woodbridge Development Center. After her authorized sick leave benefits terminated on June 30, 1994 and after being cleared by her physician to return to work, James took an unauthorized leave through July 13, 1994. On July 14, 1994 she was granted an unpaid leave of absence and at that time she filed her workers' compensation claim. James' unpaid leave expired on November 30, 1994 but she did not return to work. After being provided with notice of disciplinary proceedings for failure to return to work and failure to provide justification for her absence, James' employment was terminated on December 8, 1994. James' termination was affirmed by the Merit System Board on August 6, 1996. No pension contributions were made on her behalf after December 31, 1994. As a result of her workers' compensation claim, which was not resolved until May 20, 1997, James was awarded temporary disability benefits based on full salary for the period May 4, 1994 through June 30, 1994. She was also awarded permanent partial disability benefits pursuant to N.J.S.A. 34:15-12(c), for the period June 30, 1994 through August 23, 1995. James filed for an accidental disability retirement pension on February 21, 1997. However, because her employer's contributions to the Public Employees Retirement System (PERS) ceased in December 1994, James' membership in PERS was terminated on December 31, 1996 pursuant to N.J.S.A. 43:15A-7(e), and her application was deemed untimely by the PERS Board. The PERS Board further held that N.J.S.A. 43:15A-25.1 did not require an employer to make pension contributions for any weeks factored into the calculation of a permanent partial disability benefits award and that such contributions are only required in the case of temporary disability benefits because only then are such payments deemed payments in lieu of compensation. The Appellate Division affirmed the PERS Board in a published opinion,, 323 N.J. Super 100 (App. Div. 1999). The Supreme Court granted James' petition for certification. HELD: N.J.S.A. 43:15A-25.1 obligates an employer to make pension contributions on behalf of an employee who is awarded either temporary or permanent disability benefits. An employee's discharge for unauthorized absence from work shall not operate to excuse continuation of employer pension contributions under the unique circumstances of this case. 1. It was not the intent of the legislature to limit employers' pension contributions to payments strictly characterized as payments in lieu of . . . normal compensation. There is no longstanding and consistent agency interpretation of N.J.S.A. A study of similar provisions in the Teachers' Pension and Annuity Fund and the Police and Firemen's Retirement System, reveals an intent to prevent double recovery of both pension and compensation benefits for an injury, allowing an injured employee to pursue the most advantageous course without first having to resort to one form of benefit or the other. The injured public employee's choice is not conditioned on the workers' compensation award being for temporary or permanent disability benefits. (Pp. 7-16) 2. While an employee receives workers' compensation benefits, the employee must be retained on the payroll, N.J.S.A. 34:15-44, and the employer must pay both the employer and the employee pension contributions. The Court's interpretation of N.J.S.A. 43:15A-25.1 has consistently been that paying into the pension system never depended on whether the compensation award replaced the worker's salary or compensated the worker for a physical injury. The language in lieu of . . . normal compensation only clarifies the process by which pension contributions are to be made for an employee and is not meant to limit the obligation of the employer in respect of contributions to the pension system. (Pp. 16-20) 3. A public employer's interest in maintaining an efficient and able-bodied workforce is protected by the involuntary retirement provisions of N.J.S.A. 43:15A-42 and 43. These provisions allow an employer to remove an incapacitated employee from the workplace if that employee has 10 years of service to his or her credit, while permitting the employer to pursue involuntary retirement in the case of a permanently and totally disabled employee who meets the requirements for an accidental disability retirement. By operation of these involuntary retirement provisions, an employee who is qualified for a form of disability retirement can be removed, but without prejudice to the employee's right pursuant to N.J.S.A. 43:15A-25.1 to seek to maximize receipt of compensation and retirement disability benefits. (Pp. 20-26) 4. Due to the unique circumstances of this case and the lack of regulations to guide employees and employers alike, and notwithstanding that judicial decisions normally are not retroactive, the Court concludes that James should benefit from her prevailing argument that a public employer must continue pension contributions on behalf of a work-disabled employee throughout the duration of a permanent partial disability award. (Pp. 27-28) Judgement of the Appellate Division is REVERSED and the matter is REMANDED to the PERS Board for further proceedings consistent with this opinion. CHIEF JUSTICE PORITZ and JUSTICES O'HERN, STEIN, COLEMAN, LONG, and VENIERO join in JUSTICE LaVECCHIA'S opinion. ANNIE JAMES, Petitioner-Appellant, v. BOARD OF TRUSTEES OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM, Respondent-Respondent. ________________________________ Argued February 15, 2000 -- Decided June 20, 2000 On certification to the Superior Court, Appellate Division, whose opinion is reported at 323 N.J. Super. 100 (1999). Samuel J. Halpern argued the cause for appellant. David Dembe, Deputy Attorney General, argued the cause for respondent (John J. Farmer, Jr., Attorney General of New Jersey, attorney; Mary C. Jacobson, of counsel, Sherrie L. Gibble, on the brief). The opinion of the Court was delivered by LaVECCHIA, J. On February 21, 1997, petitioner, Annie James, filed for accidental disability retirement under the Public Employees' Retirement System (PERS). The Board of Trustees of the Public Employees Retirement System (PERS Board) rejected her application, finding it to be untimely. In so concluding, the PERS Board rejected petitioner's contention that her employer had a statutory obligation to make pension payments on her behalf during that period of time when she was entitled to receive permanent partial disability benefits under the New Jersey Workers' Compensation Act for a work related injury. The PERS Board conceded that N.J.S.A. 43:15A-25.1 requires an employer to make contributions on behalf of an employee who is awarded temporary disability benefits, but found no equivalent employer obligation in the case of permanent partial disability benefits, because it did not view those payments as payments made in lieu of [her] normal compensation. The Appellate Division affirmed the PERS Board. James v. Board of Trustees, PERS, 323 N.J. Super. 100 (App. Div. 1999). We granted certification, 162 N.J. 133 (1999), and now reverse. We hold that N.J.S.A. 43:15A-25.1 obligates an employer to make pension contributions on behalf of an employee who is awarded either temporary or permanent disability benefits. We also accept the principle that an employer's obligation to make contributions pursuant to N.J.S.A. 43:15A-25.1 ordinarily will terminate when an employee is validly terminated or if the employee is physically or mentally incapacitated for the performance of duty, meets the requirements for ordinary disability or accidental disability retirement, and is involuntarily retired by his or her employer pursuant to N.J.S.A. 43:15A-42 or -43. We decline, however, to apply that principle in the unique circumstances of this case. The fact that petitioner was discharged for unauthorized absence from work shall not operate to excuse continuation of employer pension contributions on her behalf for the duration of her permanent partial disability award. Respondent should therefore direct petitioner's employer to make pension contributions for that period and petitioner's application for accidental disability retirement benefits should be accepted as timely filed. The PERS Board found that the employer's obligation to make pension contributions on petitioner's behalf was not triggered by the award of permanent partial disability benefits because those benefits, in contradistinction to temporary disability benefits, were not viewed as payments in lieu of [her] normal compensation. The PERS Board reasoned that the statute's reach was limited to payments that fit that description and the Appellate Division agreed. N.J.S.A. 43:15A-25.1 does indeed speak to periodic benefits payable under Workers' Compensation law to an employee member in lieu of his normal compensation. However, in order to determine whether the Legislature intended that phrase to have the limiting effect urged by respondent, it is necessary to examine the language of the statute in the context of the statute's history. In Smith, the Court gave effect to the legislative desire to bar double recovery of both pension and compensation benefits for an injury. The Court also accommodated the legislative policy that workers' compensation benefits, if sought, be paid in full without prejudicing the employee due to the length or nature of the payments. The Court, however, allowed the claimant to retain his disability pension award, notwithstanding that he was already receiving workers' compensation payments for a partial permanent disability at the time the Board of Trustees of PFRS awarded his disability pension. It did so because Smith had applied for the pension first, with the workers' compensation application following later, and because the pension benefits were greater. The Court effected a deduction of the workers' compensation benefits from the monthly disability pension benefits to fulfill the public policy against double recovery. But the 1966 law had placed public employees in an untenable position, forcing work-disabled employees to choose whether to apply first for workers' compensation or a disability pension, without knowing which would provide greater benefits. Any employee who chose workers' compensation first would be forced to wait until the exhaustion of all workers' compensation benefits before he or she could apply for a disability pension, even if the disability pension would pay significantly more. Conklin v. City of East Orange, 73 N.J. 198, 203 (1977). The Legislature's cure for that problem occurred in 1971 when it amended N.J.S.A. 43:15A-25.1 and its parallel versions in the TPAF and PFRS statutes. L. 1971, c. 213, 46. The amendment was the precursor to the current language of subsection b, which permits an employee to choose to pursue workers' compensation benefits or a disability pension at any time. An offset must occur if both are awarded simultaneously to avoid double recovery for the same disability, but the 1971 amendment to N.J.S.A. 43:15A-25.1 allows the employee the more advantageous of the respective benefits. See Conklin, supra, 73 N.J. at 202 205 (1977); Mercer County, supra, 193 N.J. Super. at 234-235. The purpose behind the 1971 amendment was acknowledged and implemented by this Court in Conklin, supra. Conklin, like Smith, involved an injured employee who was determined to be eligible for partial permanent disability benefits under workers' compensation and for a disability retirement pension. In Smith, an accidental disability retirement pension was involved; in Conklin, it was an ordinary disability retirement pension. Importantly for the present inquiry, in giving effect to the legislative will underlying the 1971 amendment to N.J.S.A. 43:15A-25.1, this Court did not view the statute's operation as turning on whether the nature of the workers' compensation award was for temporary disability or permanent disability. Conklin, supra, 73 N.J. at 201. The 1971 amendment continued the original 1966 mandate that an employer pay the required employer and employee pension contributions, but conditioned that requirement on either completion of the workers' compensation payments or retirement of the employee. Thus, the statute continued to enable an employee in receipt of workers' compensation periodic benefits to enjoy the receipt of those benefits, and simultaneously to have creditable service extended for pension purposes because of the employer's obligation to keep that employee in active status and maintain his or her pension contributions. There was no indication of legislative intent to condition the injured public employee's choice, namely whether to pursue first the workers' compensation benefits or the disability pension, based on whether the workers' compensation award was for temporary or permanent disability benefits. We therefore conclude that the textual focus [in N.J.S.A. 43:15-25.1] on the employee's option relates only to the disability retirement/workers' compensation problem by making clear that the employee need not make a binding election. Those textual references never purported to address the voluntary/involuntary alternatives provided for by N.J.S.A. 43:15A-42 and never intended in any way to affect the continued viability of the public employer's option to initiate an involuntary disability retirement. We therefore hold that N.J.S.A. 43:15A-25.1 does not constitute an implied repeal of part of N.J.S.A. 43:15A-42. In Szczepanik, supra, 232 N.J. Super. at 491, in a different setting, the Appellate Division considered whether a public employer was compelled pursuant to N.J.S.A. 43:15A-25.1 to make pension contributions on behalf of a work-disabled employee receiving periodic workers' compensation payments for temporary disability and permanent partial disability, but who was not eligible for an ordinary disability retirement due to her length of service. She had not yet achieved 10 years of service. Without inclusion of the employer contributions for workers' compensation benefits for the weeks of temporary disability and permanent partial disability, Ms. Szczepanik would not have had the requisite 10 years of creditable service to entitle her to an ordinary disability retirement pension. See N.J.S.A. 43:15A-42. In holding that the employer must make the pension contributions during the weeks Ms. Szczepanik received workers' compensation payments, the court referred to the plain language of N.J.S.A. 43:15A-25.1, which requires continuation of employer contributions until the periodic benefits payable under the Workmen's Compensation Law are terminated or when the member retires. Szczepanik, 232 N.J. Super. at 495. The court noted that Ms. Szczepanik had been presented with the Hobson's choice of either submitting her resignation or facing termination proceedings, and that choice was offered in response to her request for an extension of sick leave without pay. Id. at 496. The Appellate Division concluded that it did not have to reach the voluntariness of the resignation she reluctantly submitted. Instead, the court pointedly stated that it would be anomalous to interpret [the] unambiguous provision [in N.J.S.A. 43:15A-25.1(a) quoted above] to permit the employer to circumvent it by merely firing the work-disabled employee because he or she is unable to perform the job. The Appellate Division decisions in Mercer County and Szczepanik correctly interpret N.J.S.A. 43:15A-25.1 and further the appropriate balancing of the public interest with the interests of the disabled employee, consistent with this Court's earlier opinions discussing the purpose of the statute. The observation in Szczepanik points out the unfairness of allowing a public employer to terminate, or coerce an involuntary resignation from, a partially disabled employee who is not yet able to return to work and who lacks enough creditable service to be eligible for an ordinary disability retirement. While receiving workers' compensation benefits, a disabled employee unable to return to work is entitled by virtue of N.J.S.A. 43:15A-25.1 to insist that his or her active status continue so that he or she can achieve enough creditable service to be eligible to receive an ordinary disability retirement pension. The public employer's interests are protected by the involuntary retirement provisions of N.J.S.A. 43:15A-42 that permit the employer to remove an incapacitated employee from the workplace if that employee has 10 years of service to his or her credit. Alternatively, if the worker is permanently and totally disabled and meets the requirements for an accidental disability retirement, the public employer may immediately pursue the involuntary retirement of the employee pursuant to N.J.S.A. 43:15A-43, regardless of the employee's years of service credit. In combination, these two statutory involuntary retirement mechanisms appear to provide ample protection for the public employer's interests. In any case, if those protections prove inadequate we expect that the Legislature will reexamine them. But, by operation of these involuntary retirement provisions, an employee who is qualified for a form of disability retirement can be removed without prejudice to the employee's right pursuant to N.J.S.A. 43:15A-25.1 to seek to maximize receipt of compensation and retirement disability benefits. Finally, we also note that nothing in N.J.S.A. 43:15A-25.1 suggests that an employer is prohibited from terminating an employee, or executing a reduction in force eliminating an employee's position, merely because an employee receives a workers' compensation award, so long as the employee has not been discharged simply because he or she has claimed workers' compensation benefits or because he or she remains disabled from returning to service. N.J.S.A. 34:15-39.1; Novak v. Camden Co. Health Services Center Board, 255 N.J. Super. 93 (App. Div. 1992) (holding public employer may execute reduction in force resulting in elimination of position of employee receiving workers' compensation disability benefits). Thus, we view the outcomes in both Mercer County and Szczepanik as consistent with the legislative objective of protecting the disability benefits of work-disabled employees without allowing double recovery of benefits for the same disability. Importantly, neither decision applied N.J.S.A. 43:15A-25.1 in a manner that jeopardized the public interest in facilitating a public employer's ability to maintain an efficient and able-bodied workforce. In our view, petitioner is entitled to receive the benefit of prevailing in her contention that a public employer must continue pension contributions on behalf of a work-disabled employee throughout the duration of a permanent partial disability award. Prospectively, we presume that the PERS Board will promulgate a new regulation, in accordance with this decision, to properly guide public employers and employees in the future. The PERS Board is directed to require that pension contributions on petitioner's behalf be made by her employer for the duration of her permanent partial disability award. Further, the PERS Board is directed to treat as timely filed petitioner's application for an accidental disability retirement pension. That application should therefore be reviewed on its merits. The judgment of the Appellate Division is reversed and the matter remanded to the PERS Board for further proceedings consistent with this opinion. CHIEF JUSTICE PORITZ and JUSTICES O'HERN, STEIN, COLEMAN, LONG, and VERNIERO join in JUSTICE LaVECCHIA's opinion. NO. A-21 ANNIE JAMES, Petitioner-Appellant, v. BOARD OF TRUSTEES OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM, Respondent-Respondent. DECIDED June 20, 2000 Chief Justice Poritz