SYLLABUS

(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 

interest of brevity, portions of any opinion may not have been summarized.)

IMO Borough of Keyport v. Local 68 (A-43/44-13) (072361)

Argued October 20, 2014 -- Decided July 14, 2015

LaVECCHIA, J., writing for a majority of the Court.

The issue in this appeal is whether three municipalities were required to negotiate with union 

representatives before taking layoff actions that negatively impacted the hours and wages of affected employees.

In 2009, the municipalities of Belmar, Mount Laurel, and Keyport (collectively the municipalities), were 

experiencing financial strain in light of a pervading and lingering economic downturn. All three municipalities were 

operating under collective negotiation agreements (CNAs) with unions representing municipal employees: For 

Keyport the International Union of Operating Engineers, Local 68 (Local 68); for Belmar the Communications 

Workers of America, AFL-CIO (CWA); and, for Mount Laurel the American Federation of State, County and 

Municipal Employees, Council 71, South Jersey Public Employers (AFSCME). Following various efforts to 

confront their individual budget crises, each municipality obtained approval from the Civil Service Commission 

(Commission) for a layoff plan. Keyport’s plan called for the conversion of three full-time clerical positions into 

part-time positions; as a result, the affected employees lost their eligibility for health benefits. The plan stated that 

Keyport’s preliminary 2009 budget exceeded the levy cap by $135,000 and that “the Borough must reduce its 

appropriations so that it may lawfully adopt a budget for 2009.” Belmar’s temporary layoff plan provided for ten 

involuntary unpaid furlough days for all Department of Public Works employees. Belmar described the furloughs as 

necessary to achieve a budget that would comply with the State-mandated tax levy cap. Mount Laurel’s plan called

for the imposition of eight involuntary furlough days on all township employees except police and emergency 

medical personnel. Mount Laurel represented that the layoffs were necessary to help offset the township’s budget 

crisis and to address restoration of the township’s budgetary surplus. None of the municipal layoff actions were 

negotiated with union representatives. 

The unions in each municipality brought scope-of-negotiations challenges to the municipal actions. The 

Public Employment Relations Commission (PERC), in separate decisions, held that the municipalities violated the 

New Jersey Employer-Employee Relations Act (EERA), N.J.S.A. 34:13A-1 to -39, and required each municipality 

to negotiate the changes in terms and conditions of employment. PERC applied the three-part test set forth in Local 

195, IFPTE v. State, 88 N.J. 393, 404-05 (1982) , for resolving questions about the scope of public sector 

employment negotiations. In Local 195, the Court established that a subject is negotiable 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.” Id. at 404. PERC determined that the layoffs in each municipality 

directly affected employee work and welfare, that the subject of negotiation was not preempted by statute or 

regulation, and that the municipalities did not have the managerial prerogative to unilaterally implement the layoffs 

because negotiations would not significantly interfere with governmental policy. 

The three municipalities appealed their PERC administrative determinations. The Appellate Division 

observed that the Commission had approved all three layoff plans during the time when the Commission’s 

emergency regulation permitting “temporary layoffs,” N.J.A.C. 4A:8-1.1A, was in effect. Applying the three-part 

test from Local 195, the Appellate Division determined that the unions met the first prong because all of the actions 

at issue directly affected the work and welfare of public employees. However, aside from Keyport’s action 

eliminating health benefits, the panel concluded that “the unions did not satisfy the second and third prongs of the 

[Local 195] test because the municipalities’ actions complied with the Civil Service Act and its regulations, and the 

decisions to furlough and demote employees were non-negotiable policy determinations.” The panel affirmed the 

order in Keyport that required arbitration of the health benefits issue but reversed PERC in respect of the reduction 

in hours in Keyport and in all respects in the Mount Laurel and Belmar cases. 
2

The Supreme Court granted Local 68’s petition for certification and CWA’s and AFSCME’s joint petition 

for certification. 

HELD: The three municipalities in this case acted for reasons of economy based on municipal fiscal distress 

existing at the time, rendering the management choice to use a temporary or permanent layoff solution one that 

constituted a managerial prerogative not subject to negotiation. The layoff actions at issue in this consolidated 

appeal constituted non-negotiable subjects under prong three of the Local 195 test for negotiability. Local 195, 

IFPTE v. State, 88 N.J. 393 (1982). 

1. In Local 195, the Court explained that public policy properly is determined through the political process, by 

which citizens hold government accountable, and not through collective negotiation. The Court articulated the 

three-part test applied by PERC to the three municipalities in this case. In respect of the first factor, “rates of pay 

and working hours” are noted models for the type of subjects that “‘intimately and directly affect[] the work and 

welfare of public employees.’” Local 195, supra, 88 N.J. at 403. A subject is preempted, and therefore nonnegotiable under the second factor, when a statute or regulation “‘speak[s] in the imperative and leave[s] nothing to 

the discretion of the public employer.’” Id. at 403-04. The third factor requires that interference with the 

determination of government policy be significant in order to defeat negotiability. Id. at 404. A matter’s 

negotiability turns not “on the talismanic application of labels such as ‘terms and conditions of employment’ or 

‘managerial prerogatives[]’ [but r]ather, the inquiry focuses on the extent to which collective negotiations will 

interfere with the establishment and effectuation of governmental policy.” Id. at 420 (Handler, J., concurring and 

dissenting). (pp. 23-28)

2. Prong one of the Local 195 test is not in issue in this matter. In all three disputes, the layoff actions resulted in 

reduced hours of work, with resultant reductions in pay, for the affected employees. Prongs two and three of the test 

are the factors in issue. The preemption standard for prong two is clear in its limits and rigid within its parameters. 

When legislation or a regulation “establishes a specific term or condition of employment that leaves no room for 

discretionary action, then negotiation on that term is fully preempted.” Local 195, supra, 88 N.J. at 403. The statute 

and implementing regulations that authorize a layoff of public sector employees lack an imperative nature. Thus, 

they do not satisfy the essential requirement for preemption to pertain and preclude negotiation based on the second 

prong of Local 195. Likewise, emergency regulation N.J.A.C. 4A:8-1.1A did not mandate an action by public 

sector employers affecting terms and conditions of employment for public employees. Neither N.J.A.C. 4A:8-1.1A 

nor civil service statutes and regulations governing traditional layoff actions preempt negotiation on the basis of 

prong two of the Local 195 test. (pp. 28-35)

3. Based on a well-established analysis performed under prong three of the Local 195 test, layoffs consistently have 

been held to be outside of the scope of negotiations: “[N]egotiation will be allowed on a subject that intimately and 

directly affects the work and welfare of public employees unless such negotiated agreement would significantly 

interfere with the determination of governmental policy.” Local 195, supra, 88 N.J. at 404. Application of that 

balancing of interests under prong three has deep roots when it comes to the decision to lay off and thereby adjust a 

public workforce involved in the delivery of public services. There is no room for mandatory negotiation in the 

determination to reduce a workforce. Public managers must be the ones accountable to the people for such 

substantive policy decisions. The Local 195 Court was unanimous in deciding to keep matters involving 

predominantly managerial prerogative out of the negotiations process. (pp. 35-38)

4. Economic reasons are indisputably a legitimate basis for a layoff of any type. The three municipal governments 

in this case took action while the Commission’s emergency regulation authorizing temporary, as well as permanent, 

layoff plans was in effect. These civil service municipalities, when faced with fiscal exigency, had the right to lay 

off employees under prior case law and as buttressed by the emergency regulation then in effect authorizing 

temporary layoff actions. All three municipalities acted for reasons of economy based on municipal fiscal distress 

existing at the time, rendering the management choice to use a temporary or permanent layoff solution one that 

constituted a managerial prerogative not subject to negotiation. The layoff actions at issue in this consolidated 

appeal constituted non-negotiable subjects under prong three of the Local 195 test for negotiability. (pp. 38-46)

The judgment of the Appellate Division is AFFIRMED as MODIFIED. 
3

JUSTICE ALBIN, DISSENTING, expresses the view that the majority opinion sweeps away nearly fifty 

years of this Court’ public-sector labor jurisprudence, giving municipal employers the unilateral power to reduce the 

wages and hours of public employees promised in collective negotiations agreements. 

JUSTICES PATTERSON and SOLOMON, and JUDGE CUFF (temporarily assigned) join in 

JUSTICE LaVECCHIA’s opinion. JUSTICE ALBIN filed a separate, dissenting opinion. CHIEF JUSTICE 

RABNER and JUSTICE FERNANDEZ-VINA did not participate. 
1

SUPREME COURT OF NEW JERSEY

A-43/44 September Term 2013

072361

IN THE MATTER OF BOROUGH OF 

KEYPORT,

Respondent-Respondent,

v.

INTERNATIONAL UNION OF 

OPERATING ENGINEERS, LOCAL 

68,

Petitioner-Appellant.

IN THE MATTER OF BOROUGH OF 

BELMAR,

Respondent-Respondent,

v.

COMMUNICATIONS WORKERS OF

AMERICA, AFL-CIO,

Petitioner-Appellant.

TOWNSHIP OF MOUNT LAUREL,

Respondent-Respondent,

v.

COMMUNICATIONS WORKERS OF

AMERICA,

Petitioner,

and

AFSCME, COUNCIL 71, SOUTH

JERSEY PUBLIC EMPLOYEES,
2

Petitioner-Appellant.

Argued October 20, 2014 – Decided July 14, 2015

On certification to the Superior Court, 

Appellate Division.

Steven P. Weissman argued the cause for 

appellants Communications Workers of 

America, AFL-CIO and AFSCME, Council 71, 

South Jersey Public Employees (Weissman & 

Mintz, attorneys; Mr. Weissman and Ira W. 

Mintz, on the briefs).

Raymond G. Heineman argued the cause for 

appellant International Union of Operating 

Engineers, Local 68 (Kroll Heineman Carton, 

attorneys).

Jonathan F. Cohen argued the cause for 

respondent Borough of Belmar (Apruzzese, 

McDermott, Mastro & Murphy, attorneys).

Joseph F. Betley argued the cause for 

respondent Township of Mount Laurel 

(Capehart Scatchard, attorneys; Mr. Betley

and Kelly E. Adler, on the letters in lieu 

of brief).

Gordon N. Litwin argued the cause for 

respondent Borough of Keyport (Litwin & 

Provence, attorneys).

Martin R. Pachman, General Counsel, argued 

the cause for respondent New Jersey Public 

Employment Relations Commission.

Richard A. Friedman argued the cause for 

amicus curiae New Jersey Education 

Association (Zazzali, Fagella, Nowak, 

Kleinbaum & Friedman, attorneys; Mr. 

Friedman and Edward M. Suarez, Jr., on the 

brief).

Edward W. Purcell, Associate Counsel, argued 

the cause for amici curiae New Jersey State 

League of Municipalities and New Jersey 

Institute of Local Government Attorneys 
3

(William J. Kearns, Jr., General Counsel, 

attorney).

Albert G. Kroll submitted a brief on behalf 

of amicus curiae New Jersey State AFL-CIO 

(Kroll Heineman Carton, attorneys).

Cynthia J. Jahn, General Counsel, and Robert 

A. Greitz submitted a brief on behalf of 

amicus curiae New Jersey School Boards 

Association. 

JUSTICE LaVECCHIA delivered the opinion of the Court.

In this appeal we review whether three municipalities were 

required to negotiate with union representatives before taking 

layoff actions that negatively impacted the hours and wages of 

affected employees. Two of the municipalities imposed on 

certain units of public employees mandatory, but temporary, 

layoffs, in the form of a reduced number of work days over a 

specified period of time, without negotiating those actions with 

union representatives. The third municipality eliminated as 

part of an overall layoff plan three full-time clerical

positions and replaced them with part-time positions; as a 

result, the affected employees lost their eligibility for health 

benefits. That layoff action also was not negotiated with union 

representatives. However, all three layoff plans had been 

submitted and approved by the Civil Service Commission 

(Commission) as compliant with all civil service requirements 

for a layoff action.
4

After unions for public employees in each municipality 

brought scope-of-negotiations challenges to the municipal 

actions, the Public Employment Relations Commission (PERC), in 

separate decisions, held that the municipalities violated the 

New Jersey Employer-Employee Relations Act (EERA), N.J.S.A.

34:13A-1 to -39, and required each municipality to negotiate the 

changes in terms and conditions of employment. 

The Appellate Division consolidated these appeals and

reversed PERC’s determinations, finding the municipal actions 

non-negotiable in all but one respect not pertinent to this 

appeal.

Employee rights in these three circumstances are determined 

by application of the three-part test set forth in Local 195, 

IFPTE v. State, 88 N.J. 393, 404-05 (1982), for resolving 

questions about the scope of public sector employment 

negotiations. Based on that test, we conclude that the 

negotiability of these three layoff plans hinges on application 

of the third prong of the Local 195 analysis that takes into 

account whether negotiation would significantly interfere with a 

management determination of governmental policy. Ibid. 

Municipalities governed by the civil service system have 

the right to lay off employees when facing exigent financial 

circumstances. A regulation authorizing temporary layoffs, 

which enabled municipalities to address fiscal distress in such 
5

a manner, was in effect when these layoff plans were developed 

and approved by the Commission, although the municipalities 

claim that they did not act pursuant to its authority when 

seeking Commission approval. Although the regulation since has 

been repealed, its validity is not challenged in this matter. 

The fact that it authorized temporary periods of layoffs during 

times of exigent fiscal circumstances is significant in our

review. Whether the municipalities actively relied on that 

existing regulation is not controlling of our analysis. 

In reviewing each of these disputes under the third prong 

of Local 195, PERC initially took the position that the civil 

service employer had to show that it had no other option but to 

engage in the layoff in order for managerial policy interests to 

predominate over the interests of employees in maintaining the 

terms and conditions of their employment. According to PERC, 

only upon making such a showing could a public entity employer 

demonstrate the necessary fiscal urgency to support a finding 

that the layoff action was non-negotiable based on Local 195’s 

third, or managerial-prerogative, prong. PERC has retreated

from that position in this appeal and in a subsequent agency 

quasi-judicial determination that it has brought to our 

attention. In our view, PERC’s former position mistakenly set

the bar too high when assessing managerial prerogative exercised
6

by local governments confronting fiscal distress, as was the 

case in these matters. 

For the reasons expressed herein, we hold that at the time

that they occurred, the layoff actions at issue were nonnegotiable under the third prong of the Local 195 test. We 

therefore affirm the Appellate Division judgment, as modified by 

this opinion. 

I.

In 2009, the New Jersey municipalities of Belmar, Mount 

Laurel, and Keyport (collectively the municipalities or 

respondents), were experiencing financial strain. All three 

municipalities were operating under collective negotiation 

agreements (CNAs) with unions representing municipal employees. 

Following various efforts to confront their individual budget 

crises, each municipality obtained approval from the Commission 

for a layoff plan, described in detail hereinafter. Generally 

stated and as pertinent to this appeal, the layoff plans, in 

varying ways, reduced workers’ hours and therefore impacted 

wages. The following facts and procedural history are culled 

from the record created before PERC. 

A.

The Borough of Keyport (Keyport) and the International 

Union of Operating Engineers, Local 68 (Local 68), representing 

Keyport’s clerical employees, entered into a CNA effective 
7

January 1, 2008, through December 31, 2010. Among other terms, 

Article 33 granted Keyport the management right to assign 

employees’ schedules, and Article 5 provided that in the event 

of a layoff, Keyport would respect employees’ seniority rights. 

Article 8 specified that the “work week for all bargaining unit 

employees shall be from Monday through Friday, and shall consist 

of five (5) consecutive seven and one-half (71⁄2) hour work days 

for a thirty-seven and one-half (371⁄2) hour work week.”

In 2009, Keyport was experiencing significant financial 

difficulties in light of a pervading and lingering economic 

downturn. Keyport faced increased healthcare, pension, and 

labor costs without an increase in tax revenues; in 2008, it had

a budget surplus of less than $6,000. After efforts to control 

expenses did not alleviate the strain, Keyport submitted a

traditional layoff plan to the Commission on May 20, 2009. In 

order to reduce personnel expenses, the plan, in pertinent part,

converted three full-time clerical positions -- two in the 

Construction Department and one in the Office of the Registrar -

- into part-time positions.1 Those layoffs did not have an 

 

1 The plan also demoted one police sergeant to a police officer 

and permanently laid off one police officer; however, those 

decisions are not at issue in this appeal. Also, by virtue of 

the change to part-time positions, the three clerical employees 

would lose health insurance coverage. That issue too is not on 

appeal, as a result of the Appellate Division’s unchallenged

affirmance of PERC’s remand for arbitration on that benefits

issue.
8

identified end date; the proposed layoff therefore permanently

eliminated the full-time positions and converted them to parttime positions. The layoff plan represented that the reductions 

“[we]re necessary for reasons of economy and efficiency.” In 

particular, the plan stated that Keyport’s preliminary 2009 

budget exceeded the levy cap by $135,000 and that “the Borough 

must reduce its appropriations so that it may lawfully adopt a 

budget for 2009.” The Commission approved the plan on May 22, 

2009.

In August 2009, Local 68 filed an unfair-practice charge 

with PERC, alleging that Keyport violated the parties’ CNA by 

reducing the three employees’ hours without first negotiating 

with union representatives. Prior to that, Keyport had filed a 

scope-of-negotiations petition with PERC, seeking to restrain 

binding arbitration of a grievance filed by the union. That 

grievance had claimed a violation of the CNA as a result of the 

reduction in the workweek of the employees in the Building 

Department and Registrar’s Office. Thus, both the grievance and 

the unfair-practice charge related to the claim of work hour 

reduction. The parties filed cross-motions for summary judgment

on the unfair-practice charge. On September 23, 2010, PERC 

granted Local 68’s motion, concluding that EERA required Keyport 

to negotiate with Local 68 before reducing the employees’ hours 
9

from full-time to part-time and ordering that Keyport commence 

negotiations immediately. 

In determining that the reduction in hours was mandatorily 

negotiable, PERC applied the three-part negotiability test from 

Local 195, supra, 88 N.J. at 404-05. After determining that the 

hour and benefits decision “intimately and directly affects the 

work and welfare” of the clerical workers (the first Local 195

factor), see id. at 404, PERC, in analyzing Local 195’s third 

factor, determined that Keyport did not have the managerial 

prerogative to unilaterally implement the position reductions to 

part-time because negotiations in the present case would not 

significantly interfere with governmental policy. In support,

PERC cited “the long line of judicial and Commission precedents” 

determining that workweek reductions are mandatorily negotiable, 

and reasoned that even significant budgetary concerns “must be 

presented and protected through the negotiations process.”

PERC also concluded that Keyport’s compliance with the 

Civil Service Act, N.J.S.A. 11A:1-1 to 12-6, and regulations did 

not preempt negotiation over the employees’ hours (Local 195’s 

second factor). PERC reasoned that the Civil Service Act and 

regulations “do not mandate a reduction in work hours or 

otherwise restrict the Borough’s discretion to decide whether or 

not to reduce work hours,” and, moreover, that “the Civil 

Service Act and [EERA] provide employees with separate and 
10

distinct rights,” such that compliance with the Civil Service 

Act does not negate employees’ right to negotiate under EERA. 

In so holding, PERC distinguished the present case from State of 

New Jersey (Department of Environmental Protection) v. 

Communications Workers of America, AFL-CIO, 285 N.J. Super. 541,

544, 546, 553 (App. Div. 1995), certif. denied, 143 N.J. 519 

(1996) [hereinafter DEP], in which the Appellate Division 

affirmed a prior PERC determination that the New Jersey

Department of Environmental Protection’s decision to reduce 

employee workweeks from forty to thirty-five hours was preempted 

and non-negotiable. PERC’s reasoning emphasized that DEP

represented a “‘narrow exception to the normal preemption 

analysis, because of the nature and amount of pertinent 

regulations regarding State employees,’” (quoting id. at 550). 

B.

The Borough of Belmar (Belmar) and the Communications 

Workers of America, AFL-CIO (CWA), the union representing all 

employees of the Department of Public Works (DPW), entered into 

a CNA effective January 1, 2005, through December 31, 2009. 

Article 7 of the CNA provided that “working hours shall be forty 

(40) hours per week for all employees in the bargaining unit,” 

and Article 11 provided that each of the covered employees would 

receive a 3.9% wage increase in 2005 and a four percent increase 

each year from 2006 through 2009. In addition, Article 18 
11

provided that Belmar would “discuss any proposed layoff with the 

union, in order to explore all avenues and methods.” 

Like Keyport, Belmar was experiencing financial 

difficulties in 2009 as a result of the economic downturn. To 

combat its fiscal trouble, borough administrators agreed to wage 

cuts; in addition, Belmar met with unions representing municipal 

employees to ask them to accept a wage freeze. Some unions 

acquiesced to a freeze, but Belmar and CWA could not reach an 

agreement. In August 2009, Belmar submitted a “temporary layoff 

plan” to the Commission for approval, which provided for ten 

involuntary unpaid furlough days for all DPW employees during 

the period of October 6, 2009, through December 15, 2009. In 

its plan, Belmar described the furloughs as necessary to achieve 

a budget that would comply with the State-mandated tax levy cap. 

The Commission approved the plan. 

CWA filed an unfair-practice charge with PERC in October 

2009, alleging that Belmar’s imposition of the unpaid furlough 

days violated the parties’ CNA and that Belmar was required to 

negotiate that change in terms and conditions of employment. 

The parties filed cross-motions for summary judgment and, on 

October 28, 2010, PERC granted CWA’s motion. As in the Keyport

decision, PERC determined that the furloughs met the first prong 

of the Local 195 test given that the furloughs reduced working 

hours. PERC largely relied on its analysis in Keyport to
12

determine that the Civil Service Act did not preempt EERA under 

the second Local 195 factor. 

Finally, in respect of the third Local 195 prong, PERC 

determined that Belmar “did not have a managerial prerogative to 

unilaterally reduce the employees’ compensation and workweek.” 

PERC reasoned that case law has “consistently distinguished the 

non-negotiability of permanent staffing reductions from the 

negotiable issues of reductions in employees’ work years, 

workweeks, and work hours. . . . That is so even when the 

latter reductions could be labeled layoffs under education or 

Civil Service Laws.” In addition, in applying the balancing of 

interests called for under this third factor of Local 195, PERC 

concluded that “the interest in a viable negotiations process is 

preeminent because the budgetary considerations are dominant and 

there is no particularly significant governmental policy purpose 

at stake.” PERC noted that the hour cuts allowed Belmar to 

avoid laying off just one employee and criticized Belmar for not 

proving “that reducing the workweek rather than laying off a 

single employee was needed to keep any programs running or to 

achieve any governmental policy purpose.”

Accordingly, PERC concluded that negotiation was required

before Belmar could impose the furloughs. 

C.
13

The Township of Mount Laurel (Mount Laurel) and the 

American Federation of State, County and Municipal Employees, 

Council 71, South Jersey Public Employers (AFSCME), entered into 

a CNA effective January 1, 2005, through December 31, 2008. The 

CNA provided for yearly salary increases from 2005 through 2008. 

Article 2, entitled “Management Rights,” stated that Mount 

Laurel had the right to institute layoffs “in the event of lack 

of work or funds or under conditions where continuation of work 

would be inefficient and non-productive.” Additionally, Article 

7 stated that “the regularly scheduled workweek shall consist of 

five (5) consecutive days, Monday through Friday,” and that an 

employee’s regular hours of work were not subject to change, 

“except as required under emergency conditions or agreed upon by 

both parties.” 

Like Keyport and Belmar, Mount Laurel faced serious

financial problems in 2009. In June 2009, Mount Laurel 

representatives met with union representatives to request 

temporary salary and wage concessions to alleviate the financial 

strain, but the parties could not reach an agreement. In August 

2009, Mount Laurel submitted a temporary layoff plan to the 

Commission, which called for the imposition of eight involuntary 

furlough days between November 20, 2009, and June 18, 2010, on 

all township employees except police and emergency medical 

personnel. In its proposal, Mount Laurel stated that the 
14

purpose of the temporary layoffs was to help offset the 

township’s budget crisis and to address restoration of the 

township’s budgetary surplus, which had decreased by half in 

2009. The Commission approved the plan in October 2009. 

Shortly thereafter, AFSCME filed an unfair-practice charge 

with PERC, alleging that Mount Laurel’s unilateral imposition of 

the furlough days without negotiation violated the employees’

rights under the parties’ CNA and EERA. The parties filed 

cross-motions for summary judgment. On October 28, 2010 --

coincident with PERC’s issuance of its negotiability 

determination in the Belmar case -- PERC issued a decision on 

the cross-motions for summary judgment, holding that Mount 

Laurel’s decision to impose furloughs was a mandatory subject of 

negotiation. PERC’s decision relied on its analysis in the 

Belmar case in respect of the first two prongs of the Local 195

test, thus concluding that the furloughs directly affected

employee work and welfare and that the subject of negotiation 

was not preempted by statute or regulation. 

On the third Local 195 factor, PERC engaged in the factspecific balancing of interests test to conclude that this 

factor also weighed in favor of negotiability. See Local 195, 

supra, 88 N.J. at 404-05. Weighing the interests of the 

parties, PERC noted that decisions affecting compensation and 

hours of work are traditionally negotiable. PERC concluded that 
15

Mount Laurel’s objective was to increase the size of its 

budgetary surplus, finding that Mount Laurel had failed to 

“produce[] any evidence to establish that it [wa]s without 

alternatives to achieve the same savings without furloughing its 

employees.” Accordingly, PERC determined that Belmar did not 

have the managerial prerogative to reduce employees’ workweek,

stating that, on balance, “the interest in a viable negotiations 

process is preeminent because the budgetary considerations are 

dominant and there is no particularly significant governmental 

policy purpose at stake.” Having concluded that the furlough 

decision required negotiations, PERC ordered the parties to 

commence negotiations. 

D.

The three municipalities appealed their PERC administrative 

determinations to the Appellate Division, see R. 2:2-3(a)(2),

which consolidated the cases on appeal. The panel reversed 

PERC’s decisions as to Belmar and Mount Laurel and as to 

Keyport’s hour reduction, holding that the towns were not 

obligated to negotiate the imposition of unpaid furloughs or the 

reduction from full-time to part-time status. The Appellate 

Division observed that the Commission had approved all three 

municipalities’ layoff plans during the time when the 

Commission’s emergency regulation permitting “temporary 

layoffs,” N.J.A.C. 4A:8-1.1A, was in effect. The panel further 
16

noted that the emergency temporary layoff regulation previously

had been challenged and upheld in the Appellate Division. It 

thus framed the present issue as “whether the public employers’

actions, which were effectuated in compliance with the Civil 

Service Act, were nevertheless subject to negotiation under the 

EERA.”

Applying the three-part test from Local 195 for determining 

the scope of public sector employment negotiations, the panel 

determined that the unions met the first prong because all of 

the actions at issue directly affected the work and welfare of 

public employees. However, aside from Keyport’s action 

eliminating health benefits, the panel concluded that “the 

unions did not satisfy the second and third prongs of the [Local 

195] test because the municipalities’ actions complied with the 

Civil Service Act and its regulations, and the decisions to 

furlough and demote employees were non-negotiable policy 

determinations.” The panel affirmed the order in Keyport that 

required arbitration of the health benefits issue but reversed 

PERC in respect of the reduction in hours in Keyport and in all 

respects in the Mount Laurel and Belmar cases.

Local 68 filed a petition for certification, and CWA and 

AFSCME filed a joint petition for certification, collectively 

raising the issue of whether the municipalities’ reduction in 

hours -- via furloughs in Belmar and Mount Laurel, and via 
17

permanent reduction from full-time to part-time status in 

Keyport –- were mandatorily negotiable decisions under EERA. 

The Court granted both petitions. 216 N.J. 366 (2013). 

II.

A.

Petitioners CWA, AFSCME, and Local 68 (collectively 

petitioners) argue that the Appellate Division erred in holding 

that the respondents’ decisions to implement layoff plans by 

imposing unpaid furlough days and by demoting full-time 

employees to part-time positions were non-negotiable. Each 

petitioner contends that the Appellate Division failed to 

properly apply the three-prong negotiability balancing test set 

forth in Local 195, supra, 88 N.J. at 404-05.

First, petitioners argue that, under the second prong of 

the Local 195 test, the Appellate Division should have held that 

temporary layoff plans are negotiable because EERA imposes a 

negotiation requirement on public employers and that obligation 

is not preempted by the Civil Service Act and accompanying 

regulations (Civil Service law). Petitioners point out that,

although the Civil Service law grants civil service employers 

the discretion to reduce labor costs by unilaterally imposing 

layoffs, the Civil Service law does not compel them to do so. 

Therefore, petitioners argue, civil service employers are not 

precluded from complying with the provisions of EERA as well as 
18

Civil Service law. CWA and AFSCME cite the Appellate Division’s 

holding in Piscataway Township Board of Education v. Piscataway 

Township Principals Ass’n, 164 N.J. Super. 98 (App. Div. 1978), 

as support for that proposition. 

Second, petitioners argue that, under the third prong of 

the Local 195 test, mandatory negotiations in these cases would 

not significantly interfere with any managerial prerogatives or 

governmental policies of the civil service employers. 

Addressing the arguments of Mount Laurel and Belmar in 

particular, CWA and AFSCME argue that the employees’ interest in 

negotiating work hours and compensation outweighs Mount Laurel’s 

interest in increasing its budget surplus, as well as Belmar’s 

interest in avoiding the need to lay off a single employee. CWA 

and AFSCME add that neither Mount Laurel nor Belmar produced 

evidence to prove that the inability to increase a budget 

surplus or the loss of one employee would adversely affect any 

public operations or programs. All petitioners argue that 

although workforce reductions are non-negotiable managerial 

prerogatives, work-hour and compensation reductions of the type 

at issue here are not. Petitioners contend that if these 

temporary layoff plans are deemed managerial prerogatives, civil 

service employers would be permitted to disguise unilateral cuts 

in hours and compensation as “layoffs” in order to avoid their 

obligation to negotiate those changes under EERA. Petitioners 
19

also argue that the temporary layoff plans are not managerial 

prerogatives because the purely fiscal or budgetary 

considerations that petitioners assert were at issue in all 

three cases do not involve governmental policy. 

Finally, all petitioners express concern that if civil 

service employers are permitted to reduce hours and compensation 

without negotiating and without demonstrating exigency, the 

provisions of CNAs may be violated with impunity, undermining 

the salutary public policy of promoting labor-relations 

stability through the collective negotiations process.

B.

Respondents Keyport, Belmar, and Mount Laurel maintain that 

the Appellate Division properly applied the Local 195

negotiability test in determining that the layoff plans were 

non-negotiable.

First, respondents argue that their layoff actions are nonnegotiable under prong two of the Local 195 test because the 

Civil Service law preempts the negotiation requirement imposed 

by EERA. All respondents argue that the Legislature must have 

intended the Civil Service law governing layoffs to fully occupy 

that field because it provides specific, comprehensive 

procedures by which civil service employers may implement layoff 

plans, which require consultation rather than negotiation. 

Belmar asserts that both Civil Service law and EERA contain 
20

references indicating that the Civil Service law should prevail

in case of a conflict. N.J.S.A. 11A:11-2(j); N.J.S.A. 34:13A8.1. Keyport and Mount Laurel cite to DEP, supra, 285 N.J. 

Super. at 551-52, where the Appellate Division referred to Civil 

Service law as providing a comprehensive layoff scheme that 

preempts the EERA negotiation requirement. 

Relatedly, respondents contend that requiring civil service 

employers to negotiate before implementing temporary layoff 

plans in compliance with Civil Service law would negate

Commission regulations designed to help civil service employers 

pass legally compliant budgets in times of fiscal exigency

without permanently cutting employee positions. Respondents 

maintain that mandated negotiations would likely derail and 

certainly delay implementation of temporary layoff plans, 

undermining the feasibility of using temporary layoff plans to 

address the immediate effects of present fiscal distress.

Further, respondents argue that even if the Civil Service 

law does not preempt EERA’s negotiation requirement, the

decision to implement a temporary layoff plan must be nonnegotiable under the third prong of the Local 195 analysis

because it involves managerial prerogatives pertaining to the 

determination of governmental policy. All respondents argue 

that case law generally has established that a civil service 

employer’s decision to reduce employees’ work weeks or work year 
21

for economic reasons is a non-negotiable matter of governmental 

policy. Belmar argues that its temporary layoff plan was nonnegotiable, relying on Council of New Jersey State College 

Locals v. State Board of Higher Education, 91 N.J. 18, 32

(1982), which supports that the determination of whether layoffs

are necessary involves a matter of managerial prerogative. 

Keyport and Mount Laurel again point to DEP, supra, 285 N.J. 

Super. at 551-52, in arguing that the Appellate Division has 

recognized that work week reductions stemming from good-faith 

economic, efficiency, or budgetary concerns are matters of nonnegotiable managerial prerogative. 

All respondents argue that temporary layoff plans involve 

non-negotiable governmental policy determinations because civil 

service employers must make delicate decisions concerning the 

allocation of funds in order to provide services to taxpayers 

and residents in times of financial exigency. Specifically, 

Mount Laurel emphasizes that mandatory negotiation would 

interfere with civil service employers’ ability to use temporary 

layoff actions to adjust in a timely manner to exigent changes 

in economic conditions. 

C.

Amici New Jersey State AFL-CIO (NJ AFL-CIO) and New Jersey 

Education Association (NJEA) reinforce petitioners’ arguments

that temporary layoffs in the form of unpaid furlough days and 
22

demotions must be negotiated pursuant to EERA. NJ AFL-CIO adds

that the PERC decisions below were entitled to a high degree of 

deference and asserts that the Appellate Division decision 

conflicts with decades of legal precedent and the public 

interest in maintaining stable labor relations. NJEA similarly 

advances many of petitioners’ arguments, emphasizing that Civil 

Service law does not contain preemptive language and that, 

regardless of whether labeled a “layoff,” a public employer’s 

decision to reduce work hours or compensation is mandatorily 

negotiable. 

New Jersey School Boards Association (NJSBA) and New Jersey 

State League of Municipalities (NJSLM) support the arguments 

advanced by the municipal respondents. They argue that layoff 

plans implemented in compliance with the Civil Service Act and 

regulations are non-negotiable. NJSBA analogizes the 

municipalities’ authority to implement layoff plans pursuant to 

the Civil Service law to its authority to reduce teaching staff 

pursuant to N.J.S.A. 18A:28-9.2 NJSLM adds that an appellate 

court does not owe deference to PERC interpretations of Civil 

Service regulations or of the doctrine of preemption.

D.

 

2 NJSBA maintains that Piscataway Township Board of Education,

supra, 164 N.J. Super. 98 -- relied upon by petitioners -- has 

been impliedly rejected by courts because it incorrectly 

interprets and applies N.J.S.A. 18A:28-9.
23

PERC filed a statement in lieu of brief, asserting that 

PERC’s “expert judgment should be accepted” in these cases. 

However, at oral argument, PERC’s general counsel indicated that 

PERC had changed its position and informed the Court that PERC 

now asserts that sufficient information in the record 

established that the municipalities’ decisions in these three 

cases were non-negotiable managerial prerogatives under prong 

three of the Local 195 test. Underscoring that point, PERC’s 

counsel brought to the Court’s attention a November 2013 PERC 

decision in which PERC determined that the Robbinsville Township 

Board of Education’s decision to implement furlough days was a 

proper exercise of managerial prerogative.

III.

The analytic framework for this matter is derived from this 

Court’s seminal case Local 195, supra, 88 N.J. 393, in which the 

scope of collective negotiations for public employers and 

employees was addressed. 

In that case, the State and several unions representing 

public employees disagreed as to the negotiability of 

contractual provisions concerning limitations on contracting and 

subcontracting, establishment of a workweek, and transfer and 

reassignment determinations. Id. at 398-400. The Court’s 

decision focused on establishing a test for determining whether 

those types of decisions came within the proper scope of 
24

collective negotiations for the public sector. See id. at 403-

05. The Court stated that although “public employees have a 

legitimate interest in . . . collective negotiations” in respect 

of issues affecting the terms and conditions of their 

employment, “the scope of [collective] negotiation[] in the 

public sector is more limited than in the private sector.” Id.

at 401. Unlike a private employer, a public employer, as 

government, has “the unique responsibility to make and implement 

public policy.” Id. at 401-02 (citing Paterson Police PBA Local 

No. 1 v. City of Paterson, 87 N.J. 78, 86 (1981); State v. State 

Supervisory Emps. Ass’n, 78 N.J. 54, 67 (1978)). Public policy, 

the Court explained, properly is determined through the 

political process, by which citizens hold government 

accountable, and not through collective negotiation. Id. at 402 

(citing Ridgefield Park Educ. Ass’n v. Ridgefield Park Bd. of 

Educ., 78 N.J. 144, 163 (1978)). Thus, public employment 

negotiation has been divided into two categories: “‘mandatorily 

negotiable terms and conditions of employment and non-negotiable 

matters of governmental policy.’” Ibid. (quoting Ridgefield 

Park Educ. Ass’n, supra, 78 N.J. at 162). 

In light of the competing interests of a public employer 

and public employees, the Court stated in Local 195 that “[t]he 

role of the courts in a scope of negotiations case is to 

determine . . . whether an issue is appropriately decided by the 
25

political process or by collective negotiations.” Ibid. Thus, 

in Local 195, the Court articulated a three-part test for 

weighing those interests, establishing that a subject is 

negotiable 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.” Id. at 404.

In respect of the first factor, “rates of pay and working 

hours” are noted models for the type of subjects that 

“‘intimately and directly affect[] the work and welfare of 

public employees.’” Id. at 403 (quoting Paterson Police PBA,

supra, 87 N.J. at 86). A subject is preempted, and therefore 

non-negotiable under the second factor, when a statute or 

regulation “‘speak[s] in the imperative and leave[s] nothing to 

the discretion of the public employer.’” Id. at 403-04 (quoting 

State Supervisory Emps. Ass’n, supra, 78 N.J. at 80). However,

under this prong of the analysis, the Court explained that a 

subject remains negotiable when a statute or regulation related 

to that subject preserves employer discretion; similarly, when 

statutes or regulations set minimum or maximum standards in 

respect of a subject, the subject is negotiable within the 

limits of those standards. Id. at 403. 
26

The third factor requires that interference with the 

determination of government policy be significant in order to 

defeat negotiability. Id. at 404. The Court explained that

consideration of the third factor arises out of recognition 

“that most decisions of the public employer affect the work and 

welfare of public employees to some extent and that negotiation 

will always impinge to some extent on the determination of 

governmental policy.” Ibid. (citing Paterson Police PBA, supra,

87 N.J. at 91-92). Thus, in order to determine whether 

negotiation on a particular subject would significantly 

interfere with the formulation of government policy,

it is necessary to balance the interests of 

the public employees and the public employer. 

When the dominant concern is the government’s 

managerial prerogative to determine policy, a 

subject may not be included in collective 

negotiations even though it may intimately 

affect employees’ working conditions.

 

[Id. at 405.] 

Neatly summed up, a matter’s negotiability turns not “on the 

talismanic application of labels such as ‘terms and conditions 

of employment’ or ‘managerial prerogatives[]’ [but r]ather, the 

inquiry focuses on the extent to which collective negotiations 

will interfere with the establishment and effectuation of 

governmental policy.” Id. at 420 (Handler, J., concurring and 

dissenting). 
27

Applying those factors to the facts at hand, the Local 195

Court concluded that the contractual provisions under review

relating to the subjects of contracting and subcontracting were 

non-negotiable because negotiation would interfere significantly 

with the determination of government policy. Id. at 408

(majority opinion). The Court analogized the dominant policy 

concerns in respect of decisions about contracting and 

subcontracting to the policy determinations present in decisions 

to reduce the work force for economy and efficiency, which this 

Court has recognized as non-negotiable.3 Ibid. (citing State 

Supervisory Emps. Ass’n, supra, 78 N.J. at 88). The Court 

further held that the provisions regarding workweek hours by 

individual employees were negotiable –- the balance of interests 

on the third prong favored negotiation because negotiation would 

not impede the State’s ability “to determine the number or 

classification of employees on duty at any time.” Id. at 411. 

Finally, the Court held that provisions relating to the 

substantive decision to transfer or reassign an employee were 

non-negotiable policy determinations, but that provisions 

 

3 The Court noted that a CNA “could contain a provision requiring 

[a public employer] to discuss . . . economic aspects of 

subcontracting” when it is being considered “for purely fiscal 

reasons,” but discussion was not equated to negotiation; that 

said, the procedural aspects to subcontracting were held to be a 

proper subject of collective negotiations. Id. at 420. 
28

relating to procedures for transfer and reassignment were 

negotiable. Id. at 417.

With the Local 195 test as the indisputable test guiding 

our analysis in scope of negotiations matters, we apply it to 

the public employer actions in issue here.

IV.

A.

Prong one of the Local 195 test is not in issue in this 

matter. In all three disputes, the layoff actions resulted in 

reduced hours of work, with resultant reductions in pay, for the 

affected employees. Those actions by each municipality impacted 

terms and conditions of work for their employees. See, e.g., 

Bd. of Educ. of the Woodstown-Pilesgrove Reg’l Sch. Dist. v. 

Woodstown-Pilesgrove Reg’l Educ. Ass’n, 81 N.J. 582, 589 (1980)

(noting “[r]ates of pay and working hours . . . appear to be 

items most clearly falling within th[e]” terms-and-conditions 

“category” (citation omitted)). PERC and the Appellate Division

properly so found, and all respondents recognize as much. There 

is no need to dwell further on Local 195’s first prong.

Prongs two and three of the Local 195 test are the factors

in issue in these matters. The Appellate Division concluded 

that the preemption prong precluded negotiation of the layoff 

actions in all three matters and reversed PERC on that basis. 

The panel also found that PERC erred in concluding that 
29

negotiation was not barred under prong three, basing that 

determination upon assessment of the predominant managerial 

prerogative interest in pursuing the layoffs in these three

civil service communities facing financial distress. We 

therefore turn to prongs two and three.

 B.

 1.

The preemption standard for prong two of the Local 195 test 

is clear in its limits and rigid within its parameters. When 

legislation or a regulation “establishes a specific term or 

condition of employment that leaves no room for discretionary 

action, then negotiation on that term is fully preempted.” 

Local 195, supra, 88 N.J. at 403; see State Supervisory Emps. 

Ass’n, supra, 78 N.J. at 80-82 (establishing that preemption 

doctrine applies to validly promulgated regulations, such as 

civil service regulations). 

That principle was reinforced in Bethlehem Township Board 

of Education v. Bethlehem Township Education Ass’n, 91 N.J. 38, 

44 (1982): “Negotiation is preempted only if the regulation 

fixes a term and condition of employment expressly, specifically 

and comprehensively.” (Citation and internal quotation marks 

omitted); see also Council of N.J. State Coll. Locals, supra, 91 

N.J. at 26 (reiterating that preemption applies unqualifiedly to 

regulations affecting terms or conditions of employment when 
30

adopted by regulatory agency having no direct employer interest 

over employees affected). For preemption to apply, there must 

be no room for debate on the matter of discretion: “The 

legislative provision must ‘speak in the imperative and leave 

nothing to the discretion of the public employer.’” Bethlehem 

Twp., supra, 91 N.J. at 44 (quoting Local 195, supra, 88 N.J. at 

403-04). Thus, it is beyond dispute that specific terms and 

conditions for public employment set by civil service statutes 

or regulations may not permissibly be negotiated. See State

Supervisory Emps. Ass’n, supra, 78 N.J. at 80-82.

2.

Here the Appellate Division determined preemption to apply 

based on the promulgation of a civil service regulation that had 

permitted temporary layoffs of employees in State or local 

service, and that thereby benefitted civil service

municipalities such as the three here claiming fiscal distress. 

See N.J.A.C. 4A:8-1.1A (temporarily adopted as emergency 

regulation on March 25, 2009; repealed effective December 21, 

2009). Specifically and in pertinent part, the regulation had 

provided:

An appointing authority in State or local 

service may institute a temporary layoff for 

economy, efficiency or other related reasons. 

A temporary layoff shall be defined as the 

closure of an entire layoff unit for one or 

more work days over a defined period or a 

staggered layoff of each employee in a layoff 

unit for one or more work days over a defined 
31

period. A temporary layoff shall be 

considered a single layoff action even though 

the layoff of individual employees takes place 

on different days during the defined period. 

The defined period shall be set forth by the 

appointing authority in its temporary layoff 

plan; however, in a staggered layoff, the 

maximum period to stagger one day off shall 

not exceed 45 days.

[41 N.J.R. 1537 (Apr. 6, 2009); N.J.A.C.

4A:8-1.1A(a).]

There is important background to that emergency regulation. 

The Commission adopted the emergency regulation at a time when 

New Jersey law had long recognized a public sector employer’s

right to take a layoff action impacting employees working in 

civil service jurisdictions of this State. The authorization 

for such layoff actions is set forth in the Civil Service Act, 

which provides that any “permanent employee may be laid off for 

economy, efficiency or other related reason.” N.J.S.A. 11A:8-

1(a). Civil service regulations fleshing out that authority

were in place at all times relevant to these matters. 

First, the regulations identify the reasons that would 

support a layoff action, and a “layoff action” is defined to 

include a demotion as well as loss of position:

(a) An appointing authority may institute layoff 

actions for economy, efficiency, or other 

related reasons.

1. Demotions for economy, efficiency, or other 

related reasons shall be considered layoff 

actions and shall be subject to the 

requirements of this chapter.
32

[N.J.A.C. 4A:8-1.1.]

Second, the mechanics of a layoff action are detailed in

the civil service regulations. Public entity employers governed 

by Civil Service law are required first to consider alternatives 

to layoffs and to take a number of pre-layoff actions. See

N.J.A.C. 4A:8-1.2, 1.3. The regulations suggest alternatives to 

layoffs, such as “[g]ranting voluntary furloughs,” “[a]llowing 

voluntary reduction of work hours by employees,” “[p]roviding 

employees with optional temporary demotional title changes,” and 

other actions. N.J.A.C. 4A:8-1.2. The regulations require that 

the public entity employer take certain actions pre-layoff, 

“which may include, but are not limited to: 1. Initiating a 

temporary hiring and/or promotion freeze; 2. Separating nonpermanent employees; 3. Returning provisional employees to their 

permanent titles; 4. Reassigning employees; and 5. Assisting 

potentially affected employees in securing transfer or other 

employment.” N.J.A.C. 4A:8-1.3(a). Importantly, the public 

employer is required to “consult with” the union representatives 

of affected employees before “initiating measures under th[at]

section.” N.J.A.C. 4A:8-1.3(c). 

Third, the regulations require Commission approval of a 

proposed layoff; therefore, when a public employer determines to 

proceed with a layoff action, civil service regulations detail 

what information must be submitted. See N.J.A.C. 4A:8-1.4(a). 
33

That list of required information includes “[a] detailed 

explanation of all alternative and pre-layoff actions . . .

taken, or . . . considered and determined [to be] inapplicable,”

and “[a] summary of consultations with” union representatives. 

N.J.A.C. 4A:8-1.4(a)(6), (7). If approved, final notice of 

layoff is provided to affected employees, N.J.A.C. 4A:8-1.6, and 

employees have appeal rights under the civil service system, 

N.J.A.C. 4A:8-2.6, including the right to challenge the good 

faith of the layoff, see N.J.A.C. 4A:8-2.6(a)(1) (permitting 

challenge based on assertion that employer acted “for reasons 

other than economy, efficiency or other related reasons”).

The upshot to that detailed scheme is that the decision to 

proceed with a layoff is a heavily imbued management decision, 

but a discretionary one, subject to approval by the Commission 

for implementation. 

3.

A layoff is an action that may be taken by a public sector 

employer, provided the employer follows and satisfies civil 

service regulatory requirements. The statute and implementing 

regulations that authorize a layoff of public sector employees 

do not require that such action affecting terms and conditions 

of employment be taken. They lack an imperative nature. Thus, 

the layoff statute and implementing regulations do not satisfy 

the essential requirement for preemption to pertain and preclude 
34

negotiation based on the second prong of Local 195, supra, 88 

N.J. at 403-04.

Indeed, we are unaware of any case, and have been directed 

to none, that has declared the determination to embark on a 

traditional layoff action to be non-negotiable based on the 

preemption prong of the test for determining the scope of 

negotiations. But see State Supervisory Emps. Ass’n, supra, 78 

N.J. at 86-87 (explaining how civil service regulations 

comprehensively regulate and control mandatory scheme for 

determining seniority and reemployment rights in layoff, 

preempting mandatory negotiation of collateral layoff rights 

involving seniority, reemployment, and reinstatement). 

When the new regulation governing temporary layoff actions 

was adopted as an emergency rule, its premise operated on the 

same discretionary basis. N.J.A.C. 4A:8-1.1A did not mandate an 

action by public sector employers affecting terms and conditions 

of employment for public employees. Adopted as an emergency 

measure, the regulation quickly offered public entity employers 

in civil service jurisdictions new discretionary forms of

temporary layoff actions for use in addressing situations of 

fiscal distress.4 Like the statute and regulations governing 

traditional layoff actions, see N.J.S.A. 11A:8-1(a); N.J.A.C.

 

4 For history of the regulation’s repeal, see 41 N.J.R. 3139(a)

(Sept. 8, 2009) (proposal of regulation’s repeal) and 41 N.J.R.

4701(a) (adoption of regulation’s repeal) (Dec. 21, 2009). 
35

4A:8-1.1(a), we do not view N.J.A.C. 4A:8-1.1A as meeting the 

clear standard of an imperative required for preemption to 

apply. Providing authority for a public sector employer to take 

temporary layoff action that has an impact on public employees’

hours and wages -- paradigmatic examples of terms and conditions 

of employment -- does not impose a mandate as called for under 

Local 195’s second prong for preemption.

The Appellate Division misperceived the import of that

regulation and mistakenly found preemption to be applicable. We 

conclude neither N.J.A.C. 4A:8-1.1A nor civil service statutes 

and regulations governing traditional layoff actions preempt 

negotiation on the basis of prong two of the Local 195 test of a

decision to proceed with a layoff because that law does not set, 

as an imperative, a term and condition of employment for public 

employees governed by Civil Service law. We turn therefore to 

the final and critical factor in the Local 195 test. 

V.

1. 

Prong three of the Local 195 test holds that a subject may 

affect “the work and welfare of public employees” and 

nevertheless not be subject to negotiation. Supra, 88 N.J. at 

404. Based on a well-established analysis performed under that 

prong, layoffs consistently have been held to be outside of the 
36

scope of negotiations. The reasoning is based on the balancing 

of interests required by prong three.

In explaining prong three, the Local 195 Court reaffirmed 

that most decisions by a public employer affect to some extent 

the work and welfare of public employees and that requiring 

negotiation in all such instances would impinge on the 

determination of public policy. Ibid. (citing Paterson Police 

PBA, supra, 87 N.J. at 91-92). When assessing the scope of 

required negotiations under prong three, those interests must be 

balanced: “[N]egotiation will be allowed on a subject that 

intimately and directly affects the work and welfare of public 

employees unless such negotiated agreement would significantly 

interfere with the determination of governmental policy.” 

Ibid.; see also Woodstown-Pilesgrove, supra, 81 N.J. at 591

(“When the dominant issue is [a governmental] goal, there is no 

obligation to negotiate and subject the matter, including its 

impact, to binding arbitration.”). 

Application of that balancing of interests under prong 

three has deep roots when it comes to the decision to lay off 

and thereby adjust a public workforce involved in the delivery 

of public services. In State Supervisory Employees Ass’n, 

supra, our Court declared that the decision to “cut” a work 

force is “unquestionably . . . a predominantly managerial 

function.” 78 N.J. at 88. There is no room for mandatory 
37

negotiation in the determination to reduce a workforce. See

ibid.; cf. Council of N.J. State Coll. Locals, supra, 91 N.J. at

32 (stating same and citing examples of forms of workforce 

reduction); DEP, supra, 285 N.J. Super. at 551-52; DiMattia v. 

N.J. Merit Sys. Bd., 325 N.J. Super. 368, 374-75 (App. Div. 

1999). That is so because such decisions go to the heart of 

governmental policy determinations about what services are to be 

provided and how they will be provided to the public. Public 

managers must be the ones accountable to the people for such 

substantive policy decisions. See Local 195, supra, 88 N.J. at 

408; DEP, supra, 285 N.J. Super. at 553.

Scope-of-negotiations law addressing subcontracting follows

that same reasoning. In Local 195, supra, our Court rejected 

the argument that a public employer’s civil service right to lay

off employees preempted subcontracting as a negotiable subject. 

88 N.J. at 406. However, in concluding that the topic did not 

belong among those subject to negotiation, the Court found that

the substantive decision to contract or subcontract 

significantly interfered with a determination of public policy. 

Id. at 407-08. The Local 195 Court was unanimous in stating its 

test for assessing the scope of required negotiations and the 

reason for keeping matters involving predominantly managerial 

prerogative out of the negotiations process. That explanation 

bears repeating in full.
38

The choice of how policies are 

implemented, and by whom, can be as important 

a feature of governmental choice as the 

selection of ultimate goals. It is a matter 

of general public concern whether governmental 

services are provided by government employees 

or by contractual arrangements with private 

organizations. This type of policy 

determination does not necessarily concern

solely fiscal considerations. It requires 

basic judgments about how the work or services 

should be provided to best satisfy the 

concerns and responsibilities of government. 

Deciding whether or not to contract out a 

given government service may implicate 

important tradeoffs.

Allowing such decisions to be subject to 

mandatory negotiation would significantly 

impair the ability of public employers to 

resort to subcontracting. We have previously 

held that decisions to reduce the work force 

for economy or efficiency are non-negotiable 

subjects. The decision to contact out work or 

to subcontract is similarly an area where

managerial interests are dominant. This is 

highlighted by the fact that allowing 

subcontracting to be negotiable may open the 

road to grievance arbitration. Imposing a 

legal duty on the state to negotiate all 

proposed instances of subcontracting would 

transfer the locus of the decision from the 

political process to the negotiating table, to 

arbitrators, and ultimately to the courts. 

The result of such a course would 

significantly interfere with the 

determination of governmental policy and would 

be inimical to the democratic process.

[Ibid. (citations omitted).]

2. 

The Local 195 rationale informs our consideration of the 

expression of public policy contained in the Commission’s 

temporary layoff rule. The Commission promulgated an emergency 
39

regulation authorizing temporary layoffs while the extant 

financially distressing conditions, pervading the State and

local communities, supported expansion of the layoff techniques 

available to State and local governmental appointing authorities

governed by civil service requirements. The Commission’s 

regulation authorized a layoff mechanism that offered local 

governmental appointing authorities a tool through which swift 

action may be taken to address pressing fiscal distress, as the 

municipalities in this appeal emphasize. In recognition of that 

clear expression of legitimate public policy authorizing such 

actions to be taken, it appears to us that a decision to reduce 

the workforce of employees within an identified layoff unit, 

even on a temporary basis in accordance with a duly authorized 

temporary layoff plan, is as much a managerial prerogative as 

the decision to layoff permanently, or to subcontract a function 

permanently or on a temporary basis. 

Generically, all of the above-referenced actions go 

directly to a substantive policy determination about whether and

how to deliver public services when delivery is affected by 

serious and pressing economic considerations. Economic reasons 

are indisputably a legitimate basis for a layoff of any type. 

See N.J.S.A. 11A:8-1(a) (authorizing layoff action based on 

reason of economy); N.J.A.C. 4A:8-1.1(a) (same); see also

N.J.A.C. 4A:8-1.1(a)(1) (authorizing demotions for economy); 
40

DiMattia, supra, 325 N.J. Super. at 374 (noting that civil 

service statutory and regulatory amendments had authorized 

public employer to take demotional layoff actions for budgetary 

reasons). Thus, a layoff -- including an authorized temporary 

layoff pursuant to a valid Commission regulation authorizing 

such action, or demotion in position from full to part-time 

status also pursuant to an approved layoff plan -- remains a 

management policy determination of considerable heft so long as 

economic or other recognized rationales support its use.

The temporary layoff actions at issue here were undertaken 

by municipalities at a time when the Commission’s emergency 

regulation made available an additional management tool to 

address a pervading financial downturn that was affecting 

municipal budgets generally and, in particular, those of the 

municipalities involved here. Municipal budgets, structured on 

a cash basis, must be balanced annually, see N.J.S.A. 40A:4-2, -

3, and regulations address proper municipal budgeting practices

to promote healthy and responsible municipal governance, see

N.J.A.C. 5:30-3.2 to -7.7. In each of these municipalities, 

the municipal government endeavored to maintain services in a 

responsible way in light of an economic downturn with no relief

in sight. In each, the municipal appointing authorities took 

action while the emergency Commission regulation authorizing 

temporary, as well as permanent, layoff plans was in effect. 
41

They acted based on extant Commission public policy that made 

those options available for use if other Commission layoff 

requirements were satisfied, including the consultative 

obligation with union representatives and the duty to pursue 

prior pre-layoff alternatives. 

For those reasons, in the context of the cases consolidated 

before us, we cannot conclude that these matters required 

compelled negotiation. These civil service municipalities, when 

faced with fiscal exigency, had the right to lay off employees 

under prior case law and as buttressed by the emergency 

regulation then in effect authorizing temporary layoff actions. 

See N.J.A.C. 4A:8-1.1A. Although the emergency regulation since 

has been repealed, the regulation’s validity is not challenged 

in this matter and it authorized temporary periods of layoffs 

during times of exigent fiscal circumstances when these 

municipal actions were taken. Whether the municipalities 

actively relied on that existing regulation is not controlling

in our review of this appeal.

Even PERC, in its initial decisions in these matters,

recognized that a management policy determination was involved 

in the decision to impose a temporary layoff and did not 

question the ability of management to take such policy action. 

Instead, it evaluated only the negotiability of the management 

decision and performed a balancing-of-interests analysis under 
42

prong three of the Local 195 test. PERC found the decision to 

be negotiable. It based its determination on its own assessment 

of the fiscal need faced by each municipality and its own 

perception that other management policy choices could possibly 

address the financial distress the municipalities faced within 

the particular fiscal year in progress. Under PERC’s initial 

analysis, each municipality was required to demonstrate that no 

other option was available in order for these layoffs to 

constitute a managerial prerogative that a municipal governing 

body could exercise in the face of the present circumstances of 

fiscal distress. 

As noted, PERC now takes the position that, under the 

circumstances, these layoff actions were legitimate management 

prerogatives that ought not to have been ruled subject to 

negotiation. That second thought demonstrated the better 

judgment.

PERC erred in initially requiring each municipality to

demonstrate that no other option was available before it could 

take the layoff measures of restricting workdays through a 

temporary layoff or eliminating full-time positions while 

covering tasks through part-time positions so services to the 

public continued. Those were management policy determinations 

that constituted prerogatives. They should not have been 

subjected to PERC’s non-deferential “last option” standard. In
43

subjecting them to that standard, PERC’s judgment failed to 

adhere to the teachings of Local 195 and related case law

addressing workforce reductions; as a result, PERC mistakenly 

declared these layoff actions subject to negotiations. Adding 

negotiations as PERC would have required would have injected a 

whole new dimension, rendering policy determinations subject to 

the decisions of arbitrators and ultimately the courts. And, 

that review for negotiability -- over actions that needed to be 

accomplished swiftly in order to effectuate their intended

prompt economic relief from the financial distress -- would come 

months, if not years, later. More fundamentally, the wrong 

decision makers would be setting policy for the municipalities. 

Local 195, supra, 88 N.J. at 407-08.

Certainly, under prong three of Local 195, an artificial 

“fiscal crisis” cannot outweigh important employee work and 

welfare interests. Some evaluation is necessary, and does occur 

during the Commission’s approval process, which requires 

consideration of the asserted reason for the layoff’s necessity. 

We note too that a good faith challenge is available under civil 

service regulations, see N.J.A.C. 4A:8-2.6(a)(1), and provides a 

more appropriate solution than invoking mandatory negotiation to 

zero in on any improper basis for a reduction in workforce 

action. See Local 195, supra, 88 N.J. at 425 (Handler, J.,

concurring and dissenting) (noting that mandatory negotiation 
44

can be inapt solution to invoke, when other solutions for review 

of management action exist, because negotiation “route is 

cumbersome, inappropriate and potentially disruptive of 

governmental management”). 

Finally, we reject the argument that past decisions

addressing and requiring negotiation of unilaterally imposed

reductions to hours of work are at odds with the outcome reached 

here. The decisions cited have not arisen in the context of a 

bona fide layoff plan. See, e.g., Galloway Twp. Bd. of Educ. v. 

Galloway Twp. Ass’n of Educ. Sec’ys, 78 N.J. 1, 5-6 (1978) 

(addressing individual actions taken unilaterally against 

certain secretaries during collective negotiations with 

representative). When a layoff plan has been prepared to 

accommodate policy determinations about the efficient delivery 

of services when economy is a factor, the public management’s

right to reduce its workforce -- by a layoff or restructuring of

the number and type of positions, full or part-time -- must be 

treated as a management prerogative. Several past appellate 

decisions properly have recognized the management prerogative 

present when a decision to proceed with a layoff is involved. 

See, e.g., DEP, supra, 285 N.J. Super. at 551-53; DiMattia, 

supra, 325 N.J. Super. at 374-75; see also Klinger v. Bd. of 

Educ. of Cranbury, 190 N.J. Super. 354, 357-58 (App. Div. 1982) 

(recognizing that reduction in force eliminating full-time 
45

physical education teacher and creating instead two 7/10ths 

part-time teachers is within management’s authority),5 certif. 

denied, 93 N.J. 277 (1983). 

All of the layoff actions challenged herein were reviewed 

by the Commission and approved for implementation as legitimate 

layoffs. There was an opportunity to appeal the “good faith” of 

each layoff under civil service regulations but that avenue was 

not pursued. Nor is there any challenge in any of these matters

to the validity of the temporary layoff regulation that was in 

place at the time these actions were taken. At this late date, 

based on our review of the records presented, we are satisfied 

that all three municipalities acted for reasons of economy based 

on municipal fiscal distress existing at the time, rendering the 

management choice to use a temporary or permanent layoff 

solution one that constituted a managerial prerogative not 

subject to negotiation. We therefore hold that the layoff 

actions at issue in this consolidated appeal constituted nonnegotiable subjects under prong three of the Local 195 test for 

negotiability. 

VI.

 

5 We note but ascribe little weight to the earlier-in-time 

decision in Piscataway Township Board of Education, supra, 164 

N.J. Super. 98. The facts in Klinger are more closely aligned 

to the present matter and its reasoning is more persuasive.
46

The judgment of the Appellate Division is affirmed, as 

modified by the reasoning expressed herein.

JUSTICES PATTERSON and SOLOMON, and JUDGE CUFF (temporarily 

assigned) join in JUSTICE LaVECCHIA’s opinion. JUSTICE ALBIN 

filed a separate, dissenting opinion. CHIEF JUSTICE RABNER and 

JUSTICE FERNANDEZ-VINA did not participate.
1

SUPREME COURT OF NEW JERSEY

A-43/44 September Term 2013

072361

IN THE MATTER OF BOROUGH OF 

KEYPORT,

Respondent-Respondent,

v.

INTERNATIONAL UNION OF 

OPERATING ENGINEERS, LOCAL 

68,

Petitioner-Appellant.

IN THE MATTER OF BOROUGH OF 

BELMAR,

Respondent-Respondent,

v.

COMMUNICATIONS WORKERS OF

AMERICA, AFL-CIO,

Petitioner-Appellant.

TOWNSHIP OF MOUNT LAUREL,

Respondent-Respondent,

v.

COMMUNICATIONS WORKERS OF

AMERICA,

Petitioner,

and

AFSCME, COUNCIL 71, SOUTH

JERSEY PUBLIC EMPLOYEES,
2

Petitioner-Appellant.

JUSTICE ALBIN, dissenting.

The majority opinion sweeps away nearly fifty years of this 

Court’s public-sector labor jurisprudence, giving municipal

employers the unilateral power to reduce the wages and hours of 

public employees promised in collective negotiations agreements. 

Before today, the cardinal principle guiding public-sector labor 

negotiations had been that the wages and hours of public workers 

are subject to negotiation -- not to a public employer’s fiat. 

The simple precept that wages and hours are mandatorily 

negotiable is a common refrain not only in this Court’s 

opinions, but also in the decisions of the Appellate Division, 

and the Public Employment Relations Commission (PERC). 

In the name of a furlough, two municipalities reduced the 

wages and standard of living of an entire public-employee 

workforce unit in violation of the Employer-Employee Relations 

Act (EERA). Another municipality cut in half the hours and 

salaries of three workers, thus depriving them of health 

insurance. Each municipality could have laid off one to three 

workers to achieve its budgetary goal, which was to increase the 

municipal surplus. Instead, the municipalities chose to breach 

their collective negotiations agreements with their employees’ 

unions. In all three cases, PERC -- the public body empowered 
3

to enforce the EERA -- ruled that the unilateral actions of the 

municipalities contravened the EERA and the principle that wages 

and hours are mandatorily negotiable. The majority affirms the 

overthrow of all three PERC decisions. 

The majority’s endorsement of furloughs by fiat in nonemergent circumstances is a dismal sign for the future of 

public-sector collective negotiations. The temporary regulation 

promulgated by the Civil Service Commission on which the 

majority relies does not change the equation. When public 

employers can unilaterally reduce wages and hours of employees, 

there is not much left to negotiate. Because the majority’s 

decision undermines the very foundation of collective 

negotiations, which is at the heart of the EERA, I respectfully 

dissent. 

I.

A.

The Borough of Belmar and a local affiliate of the 

Communication Workers of America (CWA), which represents 

employees in Belmar’s public-works department, signed a 

collective negotiations agreement (CNA) effective January 1, 

2005 through December 31, 2009. That agreement provided that 

the workweek for each employee would be forty hours and that 

every employee would receive a 3.9% salary increase in 2005 and 

a 4.0% increase each year from 2006 through 2009. In 2008, 
4

Belmar’s budget surplus declined from $1,630,802 to $1,284,563. 

To offset the decrease in the surplus, Belmar requested that its 

employees forgo their 4% salary increase for 2009. The publicworks department employees demanded that Belmar adhere to its 

agreement.

Taking the my-way-or-the-highway approach, Belmar 

furloughed the workers one day per week from October 6, 2009 

through December 15, 2009, wiping out their 4% salary increase 

for 2009. Belmar could have achieved the same savings by laying 

off just one worker. Instead, it chose to reduce the hours and 

wages of the entire bargaining unit in violation of its 

agreement.

B.

The Township of Mount Laurel and an affiliate of the 

American Federation of State, County and Municipal Employees, 

AFL-CIO (AFSCME), which represents the Township’s blue-collar 

workers, entered into a CNA that ended on December 31, 2008. 

The agreement remained in effect after December 31, while the 

parties negotiated a new contract. The agreement set forth the 

work hours and wages of each employee. 

In 2009, Mount Laurel’s budget surplus declined to 

$600,000. To increase the surplus, the Township asked its bluecollar workers to accept a voluntary furlough of eight days over 

an eight-month period. The workers declined the offer. Mount 
5

Laurel then involuntarily furloughed those employees for eight 

days -- a savings equivalent to laying off three employees.

C.

The Borough of Keyport and a local affiliate of the AFLCIO, which represents the Borough’s clerical employees, entered 

into a CNA effective from January 1, 2008 through December 31, 

2010. The agreement set forth each employee’s work hours and 

wages, including a salary increase. The agreement provided that 

the newest employees would be laid off first, if layoffs were 

necessary. 

Keyport experienced a decline in its budget surplus over a 

six-year period. In 2009, in response to its depleted surplus, 

the Borough took certain steps, which involved cutting in half 

the hours and wages of three clerical employees. Halving the 

salaries of those employees also resulted in the cancellation of 

their health benefits. The unauthorized actions taken by the 

Borough violated the CNA. 

D.

In all three cases, PERC found that the municipalities 

engaged in unfair labor practices by eschewing negotiations and 

peremptorily decreasing the hours and wages of the targeted 

employees. Relying on this Court’s jurisprudence, PERC observed 

that “‘surely working hours and compensation are terms and 

conditions of employment within the contemplation of the 
6

Employer-Employee Relations Act.’” Borough of Belmar, P.E.R.C. 

No. 2011-34, 36 NJPER 405, 407 (2010) (quoting Bd. of Educ. of 

Englewood v. Englewood Teachers Ass’n, 64 N.J. 1, 6-7 (1973)). 

PERC determined that the municipalities could not justify their 

unilateral actions in violating their contractual commitments. 

For example, in the case of Belmar, PERC held that “[t]he 

Borough has not asserted that reducing the workweek rather than 

laying off a single employee was needed to keep any programs 

running or to achieve any governmental policy purpose.” Id. at 

408. In Township of Mount Laurel, P.E.R.C. No. 2011-35, 36 

NJPER 409, 411 (2010), PERC found that the Township did not 

“produce[] any evidence to establish that it is without 

alternatives to achieve the same savings without furloughing its 

employees nor has it shown that any operations or programs would 

be hindered if it had to layoff employees to achieve the same 

budgetary savings instead of implementing temporary layoffs.” 

PERC, in effect, concluded that the furloughing of employees was 

a disguise for driving down the wages of entire work units of 

employees.

PERC is a specialized administrative agency designated by 

statute to interpret, implement, and enforce the EERA. N.J. 

Tpk. Auth. v. AFSCME, Council 73, 150 N.J. 331, 335 (1997) 

(citing N.J.S.A. 34:13A-5.2). PERC brings expertise to the 

resolution of public-body labor disputes, City of Hackensack v. 
7

Winner, 82 N.J. 1, 24 (1980), and its “interpretation of the 

[EERA] is entitled to substantial deference,” N.J. Tpk. Auth., 

supra, 150 N.J. at 352. A PERC ruling should not be overturned 

“‘unless it is clearly demonstrated to be arbitrary or 

capricious.’” In re Hunterdon Cnty. Bd. of Chosen Freeholders, 

116 N.J. 322, 329 (1989) (quoting State v. Prof’l Ass’n of N.J. 

Dep’t of Educ., 64 N.J. 231, 258-59 (1974)).

E.

The Appellate Division turned a blind eye to the deference 

owed to PERC decisions. It reversed, finding that an emergency 

civil service regulation authorized the Civil Service Commission 

to approve the municipalities’ furlough and wage-and-hourreduction plans. Relying on prong two (preemption) and prong 

three (managerial prerogative) of the test set forth in Local 

195, IFPTE v. State, 88 N.J. 393, 404-05 (1982), the panel held 

that “the decisions to furlough and demote employees were nonnegotiable policy determinations.” 

The majority concedes that the Appellate Division erred in 

finding that the civil service regulation preempted PERC. Ante

at __-__ (slip op. at 35). Accordingly, the only remaining 

issue is whether -- as the majority argues -- the municipalities 

were exercising a managerial prerogative that allowed them to 

trump the principle guiding all collective negotiations: wages 

and hours are mandatorily negotiable. If the majority is 
8

correct, then nearly fifty years of our jurisprudence is wrong. 

This Court has never held that the process of collective 

negotiations of wages and hours can be bypassed by a public 

employer unilaterally arrogating to itself the power to reduce 

wages and hours.

II.

“Public employees are given comprehensive rights under the 

Employer-Employee Relations Act.” In re Hunterdon Cnty. Bd. of 

Chosen Freeholders, supra, 116 N.J. at 327; see also N.J.S.A.

34:13A-1 to 34:13A-43. Perhaps foremost among those rights is 

the right to freely negotiate with a public employer over the 

terms and conditions of employment. N.J.S.A. 34:13A-5.4(a)(5). 

The EERA forbids a public employer from “[r]efusing to negotiate 

in good faith with a majority representative of employees in an 

appropriate unit concerning terms and conditions of employment.” 

Ibid. Public-sector labor negotiations break down into two 

categories: “‘mandatorily negotiable terms and conditions of 

employment and non-negotiable matters of governmental policy.’” 

Local 195, supra, 88 N.J. at 402 (quoting Ridgefield Park Educ. 

Ass’n v. Ridgefield Park Bd. of Educ., 78 N.J. 144, 162 (1978)). 

Whatever else terms and conditions of employment may mean, 

it has been universally accepted that wages and hours are terms 

and conditions of employment that public employers must 

negotiate with their employees. See id. at 412; State v. State 
9

Supervisory Emps. Ass’n, 78 N.J. 54, 67 (1978) (noting that 

“working hours” and “compensation” are “the essential components 

of terms and conditions of employment” and must be negotiated); 

Galloway Twp. Bd. of Educ. v. Galloway Twp. Ass’n of Educ. 

Sec’ys, 78 N.J. 1, 6-8 (1978) (concluding that reducing fulltime secretarial positions to part-time violated public 

employer’s obligation to negotiate); Bd. of Educ. of Englewood, 

supra, 64 N.J. at 6-7 (“Surely working hours and compensation 

are terms and conditions of employment within the contemplation 

of the Employer-Employee Relations Act.”); Burlington Cnty. 

Coll. Faculty Ass’n. v. Bd. of Trs., 64 N.J. 10, 12 (1973) 

(noting that “days and hours of work by individual faculty 

members . . . are mandatorily negotiable under the [EmployerEmployee Relations Act]”); Boonton Bd. of Educ., P.E.R.C. No. 

2006-98, 32 NJPER 239, 240 (2006) (“The number of hours an 

employee works and the employee’s compensation and fringe 

benefits are all mandatorily negotiable terms and conditions of 

employment.”); Gloucester Cnty., P.E.R.C. No. 93-96, 19 NJPER

244, 245-46 (1993) (noting that New Jersey “Supreme Court has 

consistently held that work hours are a mandatorily negotiable 

term and condition of employment” and that “short of abolishing 

a position, an employer must negotiate over reductions in the 

work year, work week, and work day of unit positions”); 

Stratford Bd. of Educ., P.E.R.C. No. 90-120, 16 NJPER 429, 430 
10

(1990) (“[W]ork hours and compensation . . . [are] . . . 

mandatorily negotiable”); Bayshore Reg. Sewerage Auth., P.E.R.C. 

No. 88-104, 14 NJPER 332, 333 (1988) (“A public employer, short 

of abolishing a position, must negotiate over reductions in 

hours and compensation.”); Willingboro Bd. of Educ., P.E.R.C. 

No. 86-76, 12 NJPER 32, 33 (1985) (concluding that cutting wages 

and hours by one-third of public employee cafeteria workers 

violated EERA and required mandatory negotiations); State of New 

Jersey (Ramapo State Coll.), P.E.R.C. No. 86-28, 11 NJPER 580, 

581 (1985) (“[A]n employee’s work year is a mandatorily 

negotiable term and condition of employment.”); Cherry Hill Bd. 

of Educ., P.E.R.C. No. 85-68, 11 NJPER 44, 46 (1984) (“It has 

been well established since the first precedents interpreting 

the New Jersey Employer-Employee Relations Act that working 

hours are mandatorily negotiable.”); Sayvreville Bd. of Educ., 

P.E.R.C. No. 83-105, 9 NJPER 138, 140 (1983) (“[A]n employer 

violates its duty to negotiate when it unilaterally alters an 

existing practice or rule governing a term and condition of 

employment, such as the length of the work year or the amount of 

an employee’s salary . . . .”); Hackettstown Educ. Ass’n, 

P.E.R.C. No. 80-139, 6 NJPER 263, 263 (1980) (“[PERC] has 

consistently held that the length of the work year (or the 

abolition of 12 and 11 month positions and the creation of 10 
11

month positions) is a mandatory term and condition of 

employment.” (Footnotes omitted)). 

Not just in New Jersey, but elsewhere, it has been a 

categorical imperative of public-sector collective bargaining 

that wages and hours must be negotiated. See Paul M. Secunda et 

al., Mastering Labor Law 185-87 (2014) (noting that wages and 

hours are mandatorily negotiable in public-sector collective 

bargaining); see also Nat’l Educ. Ass’n v. Bd. of Educ., 512 

P.2d 426, 433 (Kan. 1973) (concluding that “terms and conditions 

of professional service” of public employees included wages and 

hours); Detroit Police Officers Ass’n v. City of Detroit, 233 

N.W.2d 49, 52 (Mich. Ct. App. 1975) (noting that wages and hours

“are mandatory subjects of collective bargaining” in publicemployment setting); Clark Cnty. Sch. Dist. v. Local Gov’t Emp.-

Mgmt. Relations Bd., 530 P.2d 114, 117-18 (Nev. 1974) (noting 

that public employer must negotiate hours and wages with 

employees).

The Local 195 scope-of-negotiations test is not intended to 

resolve an issue about which there can be no dispute -- the 

negotiability of wages and hours in the public-sector setting.1

 

1 In assessing whether a matter is negotiable or non-negotiable, 

the Local 195 test requires a determination whether “(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 
12

The test is intended for matters, unlike wages and hours, that 

fall in the gray area between what is negotiable and nonnegotiable. This point is made clear throughout our 

jurisprudence. If a matter clearly falls within the category of 

wages and hours, the inquiry is over. Thus, “[w]here the 

condition of employment is significantly tied to the 

relationship of the annual rate of pay to the number of days 

worked, then negotiation would be proper.” Bd. of Educ. of 

Woodstown-Pilesgrove Reg’l Sch. Dist. v. Woodstown-Pilesgrove 

Reg’l Educ. Ass’n, 81 N.J. 582, 591 (1980). 

In Woodstown-Pilesgrove, we held that negotiation was 

required when a board of education unilaterally extended a 

single school day by two hours without any additional 

compensation for the school’s teachers. Id. at 593-94. 

Similarly, in Board of Education of Englewood, supra, 64 N.J. at 

3, 6-7, we held that the unilateral extension of teachers’ work 

day by an hour and three quarters without additional pay 

undoubtedly concerned “terms and conditions of employment within 

the contemplation of the Employer-Employee Relations Act” and 

had to be negotiated. Moreover, in Piscataway Township Board of 

Education v. Piscataway Township Principals Ass’n, 164 N.J. 

 

determination of governmental policy.” Local 195, supra, 88 

N.J. at 404.
13

Super. 98, 101 (App. Div. 1978), the Appellate Division 

explained:

[T]here cannot be the slightest doubt 

that cutting the work year, with the 

consequence of reducing annual compensation of 

retained personnel who customarily, and under 

the existing contract, work the full year 

(subject to normal vacations), and without 

prior negotiation with the employees affected, 

is in violation of both the text and the spirit 

of the Employer-Employee Relations Act. 

Conversely, outside of the realm of wages and hours, we 

have held that a public employer is not required to negotiate 

matters that fall squarely within managerial prerogatives. See, 

e.g., Local 195, supra, 88 N.J. at 406-07, 417 (concluding that 

subcontracting as well as transfer or reassignment of employees 

are non-negotiable subjects); Paterson Police PBA Local No. 1 v. 

City of Paterson, 87 N.J. 78, 98 (1981) (holding that municipal 

decisions regarding organization and deployment of police forces 

are not negotiable); State Supervisory Emps. Ass’n, supra, 78 

N.J. at 84 (finding that seniority relating to layoffs, recall, 

bumping and reemployment is preempted by civil service laws and 

therefore not negotiable).

The involuntary furloughing of an entire work unit --

cutting employees hours and wages, as occurred in Belmar and 

Mount Laurel -- is incompatible with this Court’s holdings in 

Woodstown-Pilesgrove and Board of Education of Englewood and the 

Appellate Division’s holding in Piscataway Township Board of 
14

Education. The involuntary halving of hours and wages of 

clerical workers is also incompatible with those cases.

III.

That the EERA and our case law require hours and wages to 

be negotiated does not place municipalities and other public 

entities in a budgetary strait jacket when revenues decline. 

The Civil Service Act provides that “permanent employee[s] may 

be laid off for economy, efficiency or other related reason.” 

N.J.S.A. 11A:8-1(a). In Belmar, the laying off of a single 

employee would have achieved the same savings as the furloughing 

of an entire work unit -- and without violating the collective 

negotiations agreement. In Mount Laurel and Keyport, the 

municipalities had the option of laying off employees to 

accomplish the necessary savings rather than reducing the wages 

of workers. 

In overturning the three PERC decisions, the majority 

relies on the emergency civil service regulation that was 

promulgated in March 2009 and repealed in December 2009, even 

though the municipalities did not rest their arguments on that 

regulation.2 Ante at __-__ (slip op. at 5). In essence, the 

 

2 The emergency regulation provided that:

An appointing authority in State or local 

service may institute a temporary layoff for 

economy, efficiency or other related reasons.

A temporary layoff shall be defined as the 
15

emergency regulation defined a layoff as synonymous with a 

furlough. That regulation allowed a municipality to submit a 

furlough plan for acceptance to the Civil Service Commission. 

Acceptance of the plan, however, did not mean a furlough was not 

negotiable.

A public employer’s compliance with civil service 

regulations is not the end of the process, for the public 

employer must also satisfy the requirements of the EERA. 

Prosecutor’s Detectives & Investigators Ass’n v. Hudson Cnty. 

Bd. of Chosen Freeholders, 130 N.J. Super. 30, 46 (App. Div.) 

(“Our duty is to read the Civil Service Act and the EmployerEmployee Relations Act, as applied to the situations before us, 

so that both are harmonized and each is given its appropriate 

role.”), certif. denied, 66 N.J. 330 (1974). 

 

closure of an entire layoff unit for one or 

more work days over a defined period or a 

staggered layoff of each employee in a layoff 

unit for one or more work days over a defined 

period. A temporary layoff shall be 

considered a single layoff action even though 

the layoff of individual employees takes place 

on different days during the defined period. 

The defined period shall be set forth by the 

appointing authority in its temporary layoff 

plan; however, in a staggered layoff, the 

maximum period to stagger one day off shall 

not exceed 45 days. 

[N.J.A.C. 4A:8-1.1A(a) (repealed December 21, 

2009).]
16

Even the majority acknowledges that the regulation did not 

preempt the obligation of the municipality to negotiate. Ante

at __-__ (slip op. at 35). Instead, the majority submits that -

- based on the emergency regulation -- the municipalities were 

exercising a managerial prerogative and thus had the right to 

unilaterally furlough employees. Ante at __-__ (slip op. at 

45). The majority focuses on prong three of the Local 195, 

supra, test: “a subject is negotiable between public employers 

and employees when . . . a negotiated agreement would not 

significantly interfere with the determination of governmental 

policy.” 88 N.J. at 404. 

However, the majority cannot point to any true emergency 

that compelled the municipalities to choose furloughs over 

traditional layoffs. As noted earlier, the layoff of just one 

employee in Belmar and the layoff of just three employees in 

Mount Laurel would have met the budgetary needs of those 

municipalities. Reducing the wages and hours of an entire unit 

was an exercise of raw political power by the municipalities and 

is incompatible with the EERA’s requirement that the terms and 

conditions of employment be resolved through negotiation. 

The majority’s reliance on the emergency civil service 

regulation appears to be nothing more than preemption in 

disguise. The regulation should have been harmonized with the 

purposes animating the EERA. Here, furloughing is merely a name 
17

invoked to justify the unilateral cutting of wages and hours of 

employees -- an action previously unacceptable under our 

jurisprudence. 

Clearly, we live in difficult economic times in which 

municipalities struggle to balance their budgets. But the 

problems facing Belmar, Mount Laurel, and Keyport were and are 

no different than those facing a multitude of other 

municipalities. None of the municipalities in this case 

confronted an economic state of emergency so severe that it was 

left without other reasonable options than furloughing entire 

units of public employees. 

By sanctioning the path taken by these municipalities, the 

majority has struck a stake in the heart of the collective 

negotiations process. A collective negotiations agreement is of 

little value when a municipality can unilaterally reduce the 

hours and wages of public employees by calling it a furlough. 

The power to furlough, moreover, is a powerful club that can be 

wielded at the negotiations table to coerce concessions.

In the end, there is a right way and a wrong way to achieve 

economy and efficiency consistent with the EERA. Cutting wages 

and hours of an entire work unit in violation of negotiated 

agreements -- by whatever name -- is not in keeping with our 

time-honored jurisprudence and the EERA. 

IV.
18

Before the Appellate Division, PERC filed a thirty-three 

page brief arguing for affirmance of the three PERC decisions. 

In a March 2011 supplemental letter to the Appellate Division, 

PERC wrote: “The Commission’s management, labor, and public 

members applied their knowledge of negotiations practices 

concerning compensation, workweek, and work schedules and agreed 

that the Borough had an obligation to negotiate the reduction in 

workweek, work year and compensation of the CWA unit members. 

That expert judgment should be accepted.” In a letter to the 

Clerk of this Court concerning the present appeals, a Deputy 

Attorney General, on behalf of PERC’s general counsel, wrote: 

“[T]he Commission takes no position on the Petitions for 

Certification” filed by the municipalities. PERC filed its 

Appellate Division brief with this Court. Then, with no prior

notice given to this Court, PERC’s general counsel made a 

complete about-face, announcing at oral argument that PERC had 

changed its mind and no longer stood behind the PERC decisions 

before us. In an exercise of circular reasoning, counsel 

pointed to a 2013 PERC decision, Robinsville Township Board of 

Education, P.E.R.C. No. 2014-30, 40 NJPER 253, 253-54 (2013), 

upholding the involuntary furlough of three teachers, which in 

turn relied on the very Appellate Division opinion in this case, 

whose approach PERC had strenuously opposed.
19

Merely because the composition of PERC has changed 

dramatically during the current administration does not mean 

that our standard of review should change. Counsel cannot be 

faulted for taking his orders from the newly composed PERC. But 

our review is from the PERC decisions before us. Deference 

applies to those decisions, regardless of the change of 

personnel on PERC. The majority is mistaken in accepting PERC’s 

changed position to erode the traditional standard of review of

the cases on appeal.

V.

By overruling the PERC decisions and endorsing the 

furloughs in these cases, even under the emergency civil service 

regulation, the majority has held that a negotiated agreement on 

wages and hours significantly interferes with the determination 

of government policy. That holding is not only contrary to our 

jurisprudence, it is also in conflict with the legislative 

policy enunciated in the EERA. Collective negotiations mean 

nothing if wages and hours are not on the table for discussion. 

One can only hope that the damage the majority inflicts on the 

collective negotiations process will be limited to the period 

the emergency civil service regulation was in effect.

I therefore respectfully dissent. 
SUPREME COURT OF NEW JERSEY

NO. A-43/44 SEPTEMBER TERM 2013

ON CERTIFICATION TO Appellate Division, Superior Court

IN THE MATTER OF BOROUGH OF KEYPORT,

Respondent-Respondent,

v.

INTERNATIONAL UNION OF

OPERATING ENGINEERS, LOCAL 68,

Petitioner-Appellant.

IN THE MATTER OF BOROUGH OF BELMAR,

Respondent-Respondent,

v.

COMMUNICATIONS WORKERS OF

AMERICA, AFL-CIO,

Petitioner-Appellant.

TOWNSHIP OF MOUNT LAUREL,

Respondent-Respondent,

v.

COMMUNICATIONS WORKERS OF AMERICA,

Petitioner,

and

AFSCME, COUNCIL 71, SOUTH

JERSEY PUBLIC EMPLOYEES,

Petitioner-Appellant.

DECIDED July 14, 2015

Justice LaVecchia PRESIDING

OPINION BY Justice LaVecchia

CONCURRING/DISSENTING OPINIONS BY

DISSENTING OPINION BY Justice Albin

CHECKLIST AFFIRMED AS 

MODIFIED DISSENT

CHIEF JUSTICE RABNER -------------------- --------------------

JUSTICE LaVECCHIA X

JUSTICE ALBIN X

JUSTICE PATTERSON X

JUSTICE FERNANDEZ-VINA -------------------- --------------------

JUSTICE SOLOMON X

JUDGE CUFF (t/a) X

TOTALS 4 1