SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0526-16T4

IN THE MATTER OF STATE OF

NEW JERSEY (DIVISION OF

STATE POLICE),

Respondent,

v.

STATE TROOPERS FRATERNAL

ASSOCIATION OF NEW JERSEY,

Appellant.

________________________________ 

Argued April 18, 2018 – Decided July 9, 2018

Before Judges Alvarez, Nugent and Geiger.

On appeal from the Public Employment Relations 

Commission, Docket No. IA-2016-003.

Michael A. Bukosky argued the cause for 

appellant (Loccke, Correia & Bukosky,

attorneys; Richard D. Loccke and Michael A. 

Bukosky, of counsel and on the brief).

Steven W. Suflas argued the cause for 

respondent State of New Jersey, Division of 

State Police (Ballard Spahr, LLP, attorneys; 

Steven W. Suflas and Emily J. Daher, on the 

brief).

Frank C. Kanther, Deputy General Counsel,

argued the cause for respondent New Jersey 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." 

Although it is posted on the internet, this opinion is binding only on the 

parties in the case and its use in other cases is limited. R. 1:36-3.
2 A-0526-16T4

Public Employment Relations Commission 

(Christine Lucarelli, Acting General Counsel, 

attorney; David N. Gambert, Deputy General 

Counsel, on the statement in lieu of brief).

PER CURIAM

Appellant State Troopers Fraternal Association of New Jersey 

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

the Public Employment Relations Commission (PERC) modifying a 

remanded interest arbitration award. The STFA argues PERC erred 

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

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

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

negotiations agreement (CNA). 

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

and PERC claim the modification was appropriate because the effect 

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

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

by granting a salary increase that was not fully accounted for 

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

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

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

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

237 (2017).
3 A-0526-16T4

The STFA represents 1633 rank and file State Troopers, holding 

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

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

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

September 2011 through interest arbitration.

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

the agreement continued in effect during negotiations for a 

successor CNA, as follows:

A. This Agreement shall continue in full 

force and effect until June 30, 2012, and 

shall be automatically renewed from year to 

year thereafter unless either party shall 

notify the other in writing by certified mail 

prior to October 1 in the year preceding the 

contract expiration that it desires to amend 

the terms of this Agreement. Either party may 

submit to the other a written list of changes 

desired in the terms of a successor Agreement. 

B. Should either party notify the other 

of its desire to amend this Agreement through 

the procedure in A. above, the terms of this 

Agreement shall remain in force until the 

effective date of a successor Agreement, 

unless one party notifies the other party of 

its discontinuation within ninety (90) days. 

The 2008-2012 CNA also contains a salary advancement 

schedule, pursuant to which Troopers received step increments 

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

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

with salary range seventeen applicable to Troopers, salary range 
4 A-0526-16T4

eighteen applicable to Trooper 2s, and salary range nineteen 

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

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

which time Troopers' salaries would increase by approximately 

sixty percent.

Upon achieving the top of the salary guide, Troopers would 

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

Troopers, including those no longer eligible for step increments, 

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

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

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

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

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

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

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

State government employees receive a maintenance payment. 

Maintenance payments are phased in over the first three years of 

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

each year thereafter. Maintenance payments were increased over 

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

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

$13,649.03.
5 A-0526-16T4

On several occasions in 2013 and 2014, the parties negotiated 

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

after which they agreed to engage in factfinding pursuant to 

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

factfinder had been appointed but before he had issued a 

factfinding report, the Division filed a petition to initiate 

compulsory interest arbitration. 

PERC appointed Ira Cure as arbitrator, who held hearings 

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

from: Sergeant James Kiernan; accountant Michelle LaBruno; Michael 

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

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

State Office of Management and Budget; Detective Sergeant Stephen 

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

and Sergeant Frank Serratore. The parties also provided written 

submissions. 1

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

previously discussed information regarding Trooper compensation. 

The record also reflected the Division made a unilateral decision 

 

1 Much of the hearing evidence is not relevant to the limited 

issue presented on appeal, that is, the payment of step increments 

to Troopers not at the maximum of the pay scale.
6 A-0526-16T4

to stop paying step increments to Troopers, which became effective 

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

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

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

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

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

subject of litigation in the Superior Court and before PERC.

In addition, Kiernan and Burgos testified Troopers had 

experienced a reduction in their take-home pay due to 

implementation of the "Chapter 78" contributions to healthcare and 

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

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

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

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

Division, Dee conceded the number of Troopers had decreased from 

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

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

interest arbitrations, limited the increases that could be awarded 

 

2 See In re Cty. of Atl., PERC No. 2014-40, 40 N.J.P.E.R. 285 (¶ 

109 2013), rev'd, 445 N.J. Super. 1 (App. Div. 2016), aff'd on 

other grounds, 230 N.J. 237 (2017).

3 L. 2011, c. 78.
7 A-0526-16T4

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

increases could not exceed two percent per year compounded over 

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

annual two percent increase yields an aggregate 10.4% increase for 

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

through pay period 20 of 2015 already consumed a large percentage 

of the funds available under the two percent cap. 

The Division proposed halting step increments for Troopers, 

notwithstanding that step increments would continue for Sergeants5

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

"pretty significant compression issue" within the State Police. 

Salary compression means there is little difference in the salaries 

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

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

Finally, Ridolfino testified regarding general economic 

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

which was slightly higher than the national average. He also 

 

4 L. 2010, c. 105, codified at N.J.S.A. 34:13A-16.7, which was 

extended to 2017 by L. 2014, c. 11.

5 On January 31, 2016, the same arbitrator who heard the interest 

arbitration for the STFA issued an interest arbitration award for 

the State Troopers NCO Association of New Jersey, Inc. (NCOA), 

pursuant to which step increments were restored and paid.
8 A-0526-16T4

stated the State's recovery from the economic slump was "sluggish" 

and trailing behind other states in the region. 

Ridolfino further testified the State's liquidity ratio was 

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

expenditures on employee pension and health benefits were an 

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

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

State Police were a part. 

Ridolfino stated the State Police budget for fiscal year 2016 

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

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

He also conceded State Police salaries were a "negligible" 

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

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

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

funding the remaining thirty-five percent. 

On January 31, 2016, the arbitrator issued an interest 

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

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

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

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

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

the first full pay period after July 1, 2016. The arbitrator also 
9 A-0526-16T4

allowed for step increments already paid and continued the freeze 

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

period 20 in 2015. The arbitrator also froze the maintenance 

allowance at $13,819.64.

Regarding the freeze on step increments, the arbitrator 

acknowledged he departed "from the historical pattern where the 

NCOA unit and the STFA unit have traditionally received the same 

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

pension and healthcare contributions under Chapter 78, which had 

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

to compensate members of the STFA unit for their reduction in 

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

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

precluded from receiving a general wage increase." 

The arbitrator also expressed concern the freeze on step 

increments could affect employee morale and stability of the 

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

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

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

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

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

I am concerned that this award will have a 

deleterious impact upon the continuity and 

stability of the STFA bargaining unit. The 
10 A-0526-16T4

record evidence shows that since 2010, there 

has been a decline in the total number of 

Troopers on the Division's payroll, and an 

increase in retirements. However, as noted 

throughout this document the 2% Hard Cap has 

left me no choice but to limit the amount of 

any salary increase. 

The STFA appealed to PERC, claiming the Initial Award failed 

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

statutory factors. The Division cross-appealed, claiming the 

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

cap on interest arbitration awards. 

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

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

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

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

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

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

level or "scattergram"

6 placement of unit members on the last day 

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

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

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

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

 

6 PERC defines "scattergram" as "a chart showing where employees 

are currently situated on the salary guide, thus providing a 

snapshot of the current total cost of the unit."
11 A-0526-16T4

arbitrator simply relied upon the Division's calculations. 

However, the Division based its calculations upon a proposed sixyear contract term, whereas the arbitrator awarded a five-year 

contract. Accordingly, PERC remanded the matter to the arbitrator 

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

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

supplement his analysis of the statutory factors set forth in 

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

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

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

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

submitted new proposals along with new calculations.

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

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

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

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

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

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

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

contract. 

 

7 The State Troopers Superior Officers Association.
12 A-0526-16T4

With respect to maintenance compensation, the arbitrator also 

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

in maintenance payments, effective the first full pay period after 

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

units. Addressing statutory factor nine, the arbitrator found the 

Division used the correct data in making its calculations and the 

award complied with the two percent hard cap (increasing base 

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

arbitrator further stated: "This limited change in the maintenance 

calculation is all that is available as a wage increase because 

the CNA's provision for incremental increases subsumed any 

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

2015."

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

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

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

proposal to reinstate step increases, which the Division opposed. 

More specifically, the arbitrator reinstated step increases 

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

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

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

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

resume their normal progression on the step and range chart pending 
13 A-0526-16T4

negotiation of a successor CNA. However, the Troopers would not 

receive any back pay for the period during which step increases 

were suspended. Regarding this provision, the arbitrator stated:

The STFA has argued that the effect of my 

Initial Award, were it to be implemented, 

would be to permanently freeze all step 

movement indefinitely. While the STFA notes 

that it could possibly negotiate the 

resumption of step movement going forward, at 

the present time there is no clear "career 

path for compensation." This would be an 

unjust result. In addition, especially as a 

result of the Appellate Division's decision 

in In re Cty. of Atl., 445 N.J. Super. 1 (App. 

Div. 2016), pet. for certif. pending, which 

restored the concept of the dynamic status quo 

to collective negotiations, the freeze in step 

movement may persist well after this five year 

CNA expires.8 Accordingly, it would be unjust 

to permit such an indefinite freeze. In 

addition, because the suspension will end the 

day before the last day of the contract's 

expiration the cost to the Division if any 

will be de minimis. Any additional costs will 

not occur during the term of this CNA. The 

parties will be free to negotiate changes to 

the compensation package especially step 

movement at the conclusion of this agreement.

[(citation to the record omitted).]

The Division appealed from the remand award, arguing the 

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

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

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

 

8 The Court subsequently granted certification and affirmed the 

panel's decision on other grounds. Cty. of Atl., 230 N.J. 237.
14 A-0526-16T4

attempted to avoid the statutory limitations of the compulsory 

interest arbitration law. The STFA responded the resumption of 

step movement did not violate the statute. The STFA also crossappealed, arguing the arbitrator did not consider all of the 

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

transportation allowance and education incentive proposals. 

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

affirming the remand award except as modified to exclude the step 

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

modification, PERC stated:

Here, . . . the State is charged with a sizable 

double increment for a contract term that was 

not part of the interest arbitration, was not 

negotiated, and is not charged to either 

contract term. 

The last day of this contract will be 

critical for determining how the Troopers 

advance through the salary guide in their next 

contract. Essentially, due to the award's 

double increment bump on the last day, the 

next contract's raises would be applied using 

that higher salary guide level as a starting 

point but the significant cost of that double 

increment would not be accounted for. For 

those 84 Troopers highlighted in the State's 

brief who were at Range T-17, Step 4 in 2015, 

their double increment up to Step 6 on the 

last day of the contract would result in a 

salary increase of $5,792.04 as they jump from 

$66,438.00 to $72,334.02. That $5,792.04 

represents a salary increase of 8.72%. 

However, only 1 day of that increase is 

charged to this contract because the double 

increment was awarded for the last day. Thus, 
15 A-0526-16T4

only $15.87 of the significant 8.75% increase 

was charged to this contract, while the 

remaining $5,776.17, or a rise of 8.69%, 

carries over into the next contract term that 

was not part of this interest arbitration and 

the opportunity to negotiate the salary for 

the next contract has been extinguished. 

Because those Troopers would already be at the 

higher salary guide level when negotiations 

and/or interest arbitration are being 

conducted for the next contract, that 8.69% 

of the double increment bump will not be 

accounted for as a new salary increase in the 

next contract. Thus, the bulk of the 

significant salary increment is not charged 

to either this contract or the next, 

effectively escaping the 2% Hard Cap. While 

the parties may mutually agree to salary 

increases in excess of the 2% Hard Cap if their 

negotiations are successful and interest 

arbitration is avoided for the next contract, 

the arbitrator's award of the double bump on 

the last day of this contract hamstrings the 

employer and union by baking in a carried over 

8.69% raise, effectively taking those salary 

negotiations out of the parties' hands. Such 

an accounting maneuver in the interest 

arbitration process circumvents the 

legislative purpose of the 2% Hard Cap by 

permitting extreme, unaccountable raises in 

the transition between contracts. 

Accordingly, we find that the arbitrator's 

grant of double increments on the last day of 

the award handicaps the next round of 

negotiations, undermines the legislative 

intent to control costs, and disregards the 

financial impact of the step movement on the 

taxpayer. See N.J.S.A. 34:13A-16(g)(1) and –

(6) and N.J.S.A. 34:13A-16. We therefore 

modify the arbitrator's remand award to remove 

the granting of increments on the last day of 

the CNA. 

[(footnotes omitted).]
16 A-0526-16T4

PERC rejected the STFA's argument that the award of increments 

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

provisions that mandate the payment of salary increments to State 

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

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

have chosen to exempt STFA members and other State Police 

personnel, but it did not." 

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

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

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

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

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

the potential modification of a remand award regarding across the 

board salary increases. The instant matter only concerns the 

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

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

above." 

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

arbitrator otherwise complied with its directions. He adequately 

showed the methodology he employed to calculate base salary and 

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

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

with the two percent statutory cap.
17 A-0526-16T4

The STFA appealed from the final agency decision. It raises 

the following points on appeal:

POINT I

THE COMMISSION IMPROPERLY EXCEEDED THE SCOPE 

OF ITS REVIEW WHEN IT DETERMINED IT WOULD 

ALTER THE ARBITRATOR'S DECISION. 

POINT II

THE COMMISSION IS NOT FREE TO CONDUCT A DE 

NOVO REVIEW AND THEREAFTER FASHION ITS OWN 

AWARD. 

POINT III

THE ARBITRATOR AND THE COMMISSION ARE 

STATUTORILY REQUIRED TO PROVIDE STEP MOVEMENT 

TO STATE TROOPERS PURSUANT TO TITLE 53. 

POINT IV

THE COMMISSION DEPARTED FROM JUDICIAL AND 

AGENCY PRECEDENT WHICH FORBADE IT FROM 

MODIFYING AN AWARD BASED UPON FUTURE BUDGETARY 

RESTRICTIONS. 

POINT V

THE STFA WAS DEPRIVED OF FUNDAMENTAL FAIRNESS 

AND DUE PROCESS WHEN IT WAS SURPRISED WITH A 

NEW REGULATORY RULE. 

POINT VI

PERC'S NEW RULE IS PLAINLY UNREASONABLE, 

CONTRARY TO THE ACT AND UNDERMINES THE 

LEGISLATURE'S INTENT. 

A. APPLICATION OF THE CAP IS OUTSIDE OF 

PERC'S MANDATE
18 A-0526-16T4

B. PERC'S DECISION WAS ARBITRARY AND 

CAPRICIOUS

1. VAGUENESS

2. VOID IN APPLICATION IN THE 

ABSENCE OF GUIDING STANDARDS

C. THE NEW "RULE" IS BASED UPON AN 

ERRONEOUS CALUCATION

D. VIOLATION OF THE LEGISLATIVE INTENT

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

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

arbitration procedure for police departments and police officer 

representatives who reach an impasse in collective negotiations. 

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

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

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

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

Our review of "PERC decisions reviewing arbitration is 

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

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

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

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

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

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

of statutorily mandated public interest arbitration where public 
19 A-0526-16T4

funds are at stake. Hillsdale PBA Local 207 v. Borough of 

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

PERC's role is to consider whether the arbitrator properly 

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

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

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

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

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

arbitrator . . . for reconsideration." N.J.S.A. 34:13A16(f)(5)(a).

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

parties' final offers after considering these factors. Hillsdale, 

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

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

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

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

award is not supported by substantial credible evidence in the 

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

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

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

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

N.J. at 82 (citation omitted).
20 A-0526-16T4

Primarily, the STFA argues PERC erred in modifying the 

arbitrator's remand decision to eliminate the ordered step 

increments. We remand this matter to PERC for reconsideration of 

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

decision in Cty. of Atl.

In Cty. of Atl., we reversed PERC's final agency decisions 

"because PERC's abandonment of the dynamic status quo doctrine was 

action outside the scope of its legislative mandate, which is the 

implementation of the [Act]." 445 N.J. Super. 1, 6 (App. Div. 

2016). We concluded "PERC wrongly assumed that government 

employers cannot negotiate to avoid paying increments after the 

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

when engaged in new negotiations, to recoup salary increments in 

a new contract." Id. at 18. 

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

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

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

Instead, the Court held "the governing contract language requires 

that the terms and conditions of the respective agreements, 

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

CNA is reached." Ibid. 

The Court found "salary step increments is a mandatorily 

negotiable term and condition of employment because it is part and 
21 A-0526-16T4

parcel to an employee's compensation for any particular year." 

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

salary increment systems provided for in the expired CNAs still 

governed working conditions during the hiatus period between 

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

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

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

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

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

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

conditions of employment, including any past or present benefits, 

practices or privileges which are enjoyed by the employees covered 

by this Agreement that have not been included in this Agreement 

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

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

CNA stated "[t]his agreement shall remain in full force and effect 

during collective negotiations between the parties beyond the date 

of expiration set forth herein until the parties have mutually 

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

The Court found the three expired CNAs "contain clear and 

explicit language that the respective salary guides – and all 

other terms and conditions set forth in those agreements – will 

continue until a successor agreement is reached." Id. at 255. 
22 A-0526-16T4

Accordingly, the Court found the salary increment systems in 

question "remained in effect after the agreements' expiration 

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

noted the public entities "could have simply negotiated different 

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

[T]he unilateral modification at issue here 

directly contradicted the parties' binding 

written agreement. Because the salary 

increment system was a term and condition of 

employment that governed beyond the CNAs' 

expiration date, [the public entity employers] 

committed an unfair labor practice when they 

altered that condition without first 

attempting to negotiate in good faith, in 

violation of N.J.S.A. 34:13A-5.3, -5.4(a)(1), 

and -5.4(a)(5). 

[Id. at 256.]

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

of this Agreement shall remain in force until the effective date 

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

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

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

Supreme Court reversed), the Division unilaterally ceased paying 

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

of a successor agreement. At the arbitration hearings, counsel 

stated the cessation of step increments was the subject of 

litigation both in the Superior Court and before PERC. 
23 A-0526-16T4

The Division maintains Cty. of Atl. is distinguishable 

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

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

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

two percent cap imposed on interest arbitration awards under the 

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

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

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

"the governing contract language requires that the terms and 

conditions of the respective agreements, including the salary step 

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

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

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

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

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

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

including step increments, "shall remain in force until the 

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

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

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

at 255. Notwithstanding that contract language, effective in pay 

period 20 in 2015, the Division unilaterally stopped paying salary 
24 A-0526-16T4

increments. Around the same time, the Division petitioned for 

compulsory interest arbitration. 

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

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

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

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

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

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

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

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

Vacated and remanded for proceedings consistent with this 

opinion. We do not retain jurisdiction.

 

9 We recognize PERC rendered its final decision before the Supreme 

Court issued its opinion in Cty. of Atl.