(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued January 6, 1997 -- Decided April 24, 1997
HANDLER, J., writing for a unanimous Court.
In this appeal, the Court considers the applicability and enforceability of a retroactive pay
adjustment under a collective-negotiations agreement that was reached with the State after certain troopers
resigned in good standing.
A group of former state troopers sought to recover a retroactive pay adjustment under a collective-negotiations agreement that was reached with the State after the troopers had resigned in good standing.
The collective-negotiations agreement (“the agreement”) under which New Jersey State Troopers worked
expired on July 1, 1987. By that point, the State Troopers Fraternal Association (“STFA”), which represents
the troopers in employment matters, and the New Jersey Division of State Police (“State Police”) had not
yet reached an accord on a successor agreement. While the parties negotiated, the troopers continued to
work under the old pay scale. Three years later, in April 1990, the parties finally arrived at an understanding
and executed an agreement to cover the period from July 1, 1987 to June 30, 1990. The parties predated the
agreement as having taken effect on July 1, 1987.
During the course of negotiations, the issue of retroactive pay adjustments for the three-year period
arose. Article X of the agreement provided for all salary adjustments to be made consistent with the
provisions, practices and policies of the State and in accordance with the State Compensation Plan effective
“at the time.” The unwritten practice of the State Police since 1970 had been to provide retroactive pay
adjustments to troopers who had resigned in good standing during the adjustment period. Implementation of
that unwritten practice, however, was complicated by the promulgation of a statewide regulation on
September 6, l988 (during collective negotiations) that rendered employees who had resigned during the
adjustment period ineligible to receive retroactive pay adjustments.
A total of nineteen troopers had resigned from the force in good standing between July 3, l987 and
October 20, l989. After the agreement was executed, the former troopers requested the retroactive pay
adjustment for the covered period during which they had worked. The State, citing the regulation, refused
the request. The troopers, through the STFA, brought suit in the Law Division against the State, the State
Police and several other defendants (collectively referred to as “the State”), alleging that the State had
breached the agreement and that the regulation violated the equal protection guarantees of the U.S. and the
N.J. Constitutions.
Thereafter, the State moved to dismiss both counts, arguing that the Law Division lacked
jurisdiction. The Law Division granted the State's motion and dismissed the contract claim. It also
transferred the constitutional claim to the Appellate Division. The Appellate Division subsequently granted
the troopers' motion to file a Notice of Appeal nunc pro tunc regarding the dismissal of the contract claim
and then consolidated that claim with the transferred constitutional claim. After a remand to the trial court
for findings concerning the prior practice of the State Police in awarding retroactive pay adjustments, the
Appellate Division ordered that the State provide the troopers with back pay, finding that the contractual
term constituted a “vested right,” which could not be abrogated retroactively by invoking the regulation.
The Supreme Court granted the State's petition for certification.
HELD: Although the State Police's prior practice of awarding retroactive pay adjustments to troopers who
had resigned in good standing was incorporated into the collective-negotiations agreement as an implied
term, the regulation denying the pay adjustment to those troopers was intended to apply retroactively, does
not constitute an impermissible unilateral change or unfair practice, and preempts the contractual term with
respect to those troopers who resigned after the promulgation of the regulation.
1. Fundamental canons of contract construction require examination of the plain language of the contract
and the parties' intent, as evidenced by the contract's purpose and surrounding circumstances. (pp. 6-7)
2. The determination of which date controls the application of the contract must be derived from the intent
of the parties, and if no subjective intent is apparent or ascertainable, that intent must be based on the
objective language of the contract. (pp. 7-10)
3. A practice need not be formalized to become an implied term of a contract. Rather, the actual conduct
and practical understanding of the parties exhibited in the performance of a contract may color its
interpretation. (p. 10)
4. If a statute or regulation speaks in the imperative regarding a particular term of employment, it effectively
preempts negotiation over that term, and is itself deemed to be incorporated into the employment
agreement, unless the regulation is promulgated by an agency that itself is a party to the collective
negotiations. (pp. 11-12)
5. The exception to the generally preemptive effect of regulations is predicated on the paramount statutory
policy that prohibits unfair labor practices, including unilateral changes in the terms and conditions of
employment. (pp. 12-13)
6. When a negotiating agency itself issues a regulation that otherwise would override negotiations, the
agency is entitled to a presumption of preemption, which can be overcome by a showing that the regulation
was not designed to fulfill the agency's statutory mandate, but rather was arbitrary, adopted in bad faith, or
passed primarily to avoid negotiation on terms and conditions of employment. (pp. 13-15)
7. In analyzing whether a statute or regulation may apply retroactively, a court must determine whether the
Legislature or agency intended that the statute or regulation apply retroactively and whether retroactive
application would work either a manifest injustice or an unconstitutional interference with a vested right.
(pp. 15-17)
8. The manifest-injustice doctrine is a nonconstitutional, equitable doctrine that allows courts to avoid an
unfair result even where a constitutional vested right may not be at stake. (pp. 17-19)
9. Contractual interests may qualify as vested rights. (pp. 19-20)
10. In determining the permissible extent of intrusion on an otherwise-protected right or interest, courts must
balance the public interest in the legislation or regulation against the individual interest. (pp. 20-22)
Judgment of the Appellate Division is AFFIRMED in part and REVERSED in part.
CHIEF JUSTICE PORITZ and JUSTICES POLLOCK, O'HERN, GARIBALDI, STEIN and
COLEMAN join in JUSTICE HANDLER's opinion.
SUPREME COURT OF NEW JERSEY
A-
59 September Term 1996
STATE TROOPERS FRATERNAL
ASSOCIATION OF NEW JERSEY, INC. A
CORPORATION OF THE STATE OF NEW
JERSEY, WILLIAM M. SMITH, SCOTT D.
FINA, MICHAEL D. COFIELD, DAVID D.
MATTEI, DAVID S. GIORDANO, BLANE K.
ELMER, STEPHEN M. MAYO, MICHAEL W.
FEDERICO, MICHAEL J. DAVIS, DONALD
E. MERKER, THERESA M. FOSTER,
MICHAEL J. GORE and DENNIS C.
HILBERT, MICHAEL L. FREY, JEFFREY
T. LUKAWSKI, BARRY HODGE, RAYMOND
LOPEZ, FRANK GARCIA AND WESLEY
ROBINSON,
Plaintiffs-Respondents,
v.
THE STATE OF NEW JERSEY; ROBERT J.
DEL TUFO, ATTORNEY GENERAL OF NEW
JERSEY, NEW JERSEY DIVISION OF
STATE POLICE and JUSTIN J. DINTINO,
SUPERINTENDENT OF STATE POLICE,
Defendants-Appellants.
Argued January 6, 1997 -- Decided April 24, 1997
On certification to the Superior Court,
Appellate Division.
Jaynee LaVecchia, Director, Division of Law,
argued the cause for appellants (Peter G.
Verniero, Attorney General of New Jersey,
attorney; Mary C. Jacobson, Assistant
Attorney General, of counsel; Carol Johnston,
Deputy Attorney General, on the brief).
Joseph Licata argued the cause for
respondents (Loccke & Correia, attorneys).
The opinion of the Court was delivered by
HANDLER, J.
In this case, a group of former state troopers seeks to
recover a retroactive pay adjustment under a collective-negotiations agreement that was reached with the State after the
troopers had resigned in good standing. The agreement covered a
period during which the troopers still had been employed. The
former troopers claim that, because of an unwritten past practice
of the State Police, the agreement provided for the retroactive
pay adjustment, even to troopers who had resigned prior to the
actual execution of the agreement. The State, however, asserts
that such a pay adjustment is prohibited under a regulation
promulgated during the course of the collective negotiations.
The regulation generally prohibits retroactive pay increases to
all state employees who resign from state employment before the
execution of a collective-negotiations agreement.
The major issues posed by this appeal are (1) whether the
collective-negotiations agreement incorporated the prior practice
of the State Police that authorized retroactive pay adjustments
to troopers who had resigned in good standing; (2) whether the
regulation denying retroactive pay adjustments constitutes an
unfair practice because it effects an impermissible unilateral
change of a negotiable term and condition of employment; and (3)
if the regulation is otherwise enforceable, whether it can be
applied retroactively.
The collective-negotiations agreement ("the agreement") under which New Jersey state troopers worked expired on July 1, 1987. When the agreement expired, the State Troopers Fraternal Association ("STFA"), which represents the troopers in employment matters, and the New Jersey Division of State Police ("State Police") had not yet reached an accord on a successor agreement. While the parties negotiated, the troopers continued to work under the old pay scale. Nearly three years later, on April 26, 1990, the parties arrived at an understanding and duly executed an agreement to cover the period from July 1, 1987 to June 30, 1990. Significantly, the parties predated the agreement as having taken effect on July 1, 1987.
Because of the retroactive effect of the agreement and the fact that the troopers had continued to work under the prior pay scale, the issue of retroactive pay adjustments for the three-year period arose. Article X of the agreement stated that "[a]ll salary adjustments will be made consistent with the provisions, practices and policies of the State and in accordance with the State Compensation Plan effective at the time." The unwritten practice of the State Police as of July 1, 1987 (actually, since 1970) had been to provide retroactive pay adjustments not only to current troopers, but to troopers who had died, retired, or resigned in good standing during the adjustment period.
Implementation of the unwritten State Police practice of allowing retroactive pay under Article X of the agreement was
complicated by the promulgation of a statewide regulation on
September 6, 1988 (during collective negotiations), N.J.A.C.
4A:3-4.20, that governed retroactive pay adjustments. That
regulation, issued by the Department of Personnel ("DOP"),
authorized retroactive pay adjustments only for current employees
and employees who had retired during the adjustment period, and,
by a subsequent amendment,
25 N.J.R. 4064(a) (Sept. 7, 1993);
25 N.J.R. 1916(a) (May 17, 1993), for employees who had died during
the adjustment period. Thus, state employees who resigned, even
in good standing, would no longer be eligible for retroactive pay
adjustments under the regulation.
Between July 3, 1987 and October 20, 1989, nineteen troopers
resigned from the force in good standing. After the agreement
was executed in 1990, these former troopers requested the
retroactive pay adjustment for the covered period during which
they had worked. They did so because troopers who had retired or
died during the period, as well as those still on the force, had
received the pay adjustment. The State, citing the regulation,
refused the request. On July 1, 1993, the troopers, through the
STFA, brought suit in the Law Division against the State, the
Attorney General, the State Police, and the State Police
Superintendent (referred to collectively as "the State"). They
alleged that, by enacting the regulation, the State had breached
the agreementSee footnote 1 and that the regulation violated the equal-protection guarantees of the United States and New Jersey
Constitutions.
The State moved to dismiss both counts. It argued that the
agreement's provision for binding arbitration deprived the Law
Division of subject-matter jurisdiction over the breach-of-contract claim. Regarding the constitutional claim, it asserted
that plaintiffs had not exhausted their administrative remedies,
because they had failed to appeal the denial of their requests to
the Administrative Section of the State Police. Moreover, the
State argued that even if plaintiffs had exhausted their
administrative remedies, jurisdiction to review the
administrative determination reposed in the Appellate Division,
not the Law Division.
The Law Division agreed with the State and consequently
dismissed the contract claim. It also transferred the
constitutional claim to the Appellate Division, reasoning that to
transfer the claim to the DOP for administrative resolution would
result in dismissal for lateness in filing, thus undermining the
interests of justice.
The Appellate Division subsequently granted plaintiffs'
motion to file a Notice of Appeal nunc pro tunc regarding the
dismissal of the contract claim and then consolidated that claim
with the transferred constitutional claim. After a remand to the
trial court for findings concerning the prior practice of the
State Police in awarding retroactive pay adjustments, the
Appellate Division, in an unpublished opinion, concluded that the
State Police had followed a practice of providing such payments
and that the practice had been incorporated into the agreement.
It then reasoned that the resulting contractual term was a
"vested right" that the State could not abrogate retroactively by
invoking the regulation prohibiting retroactive pay adjustments.
Accordingly, it ordered that the State provide the troopers with
backpay. The court did not reach the equal-protection claim and,
because all factual issues had been resolved, declined to require
the parties to resort to binding arbitration.
We granted the State's petition for certification.
145 N.J. 373 (1996).
We initially must determine whether the agreement provides the former troopers with a retroactive pay adjustment. As noted, the agreement states that "[a]ll salary adjustments will be made consistent with the provisions, practices and policies of the State and in accordance with the State Compensation Plan effective at the time." Understanding the content and effect of that provision turns on the meaning of the phrases "provisions, practices and policies" and "at the time." In our undertaking of this interpretive task, fundamental canons of contract construction require that we examine the plain language of the
contract and the parties' intent, as evidenced by the contract's
purpose and surrounding circumstances. Marchak v. Claridge
Commons, Inc.,
134 N.J. 275, 282 (1993); Atlantic Northern
Airlines, Inc. v. Schwimmer,
12 N.J. 293, 303 (1953).
In considering the intended meaning of the term "provisions,
practices and policies," the trial court, after a remand hearing
ordered by the Appellate Division, found as a matter of fact that
the State Police, since 1970, had provided the retroactive pay
adjustments to state troopers who had resigned in good standing
prior to the formal adoption of salary increases. Because of our
traditional deference to trial-level factual findings, we
perceive no reason to disturb the trial court's determination in
this regard, as confirmed by the Appellate Division. See Rova
Farms Resort, Inc. v. Investors Ins. Co.,
65 N.J. 474, 483-84
(1974).
Interpretation of the phrase, "at the time" presents a more
difficult task, because its definition is not revealed by the
history or circumstances surrounding the negotiations. If we
interpret the agreement from the perspective of its effective
date, July 1, 1987, then the contract incorporates the prior
practice of the State Police of awarding backpay to former
troopers who resigned in good standing. If, however, we view the
contract from the date of execution, April 26, 1990, then the
contract incorporates the statewide regulation that denies
backpay under these circumstances.
An examination of the terms of the agreement persuades us
that the relevant "provisions, practices and policies" are those
that were in existence on the effective date of the agreement,
namely, July 1, 1987, despite the fact that the agreement was not
actually executed until 1990. The express application of the
contract terms to the period beginning July 1, 1987 and the
express inclusion of that date as the contracting date, implies a
mutual intent that the agreement be deemed as having been signed
on that date.
This construction is in accord with interpretations by other
courts that have considered the issue of the effective date of a
contract when that date differs from the date of execution. In
Springer v. Powder Power Tool Corp.,
348 P.2d 1112 (Or. 1960),
the parties executed a collective-bargaining agreement on August
24, 1953 with an effective date of April 1, 1953. Employees
still on payroll as of August 24 received retroactive pay
increases under the agreement, but the employer refused to
provide the adjustment to three employees who had resigned during
the period between April 1 and August 24. Id. at 1113. The
Supreme Court of Oregon held that the three employees were
entitled to the adjustment:
[The language of the agreement] is clear and
free from ambiguity. Since the parties have
agreed that the contract should be effective
as of April 1, 1953, we are bound to construe
it as if it were made on that date. If it
had been entered into on April 1, 1953 [the
employees] without question would have been
entitled to pay at the new rate for they were
then employees of the company. By providing
that the contract should be retroactive to
that date, the same result was accomplished
and employees for whose benefit this action
is brought are entitled to the retroactive
pay.
See also Barclay v. City of Spokane, 521 P.2d 937, 938-39 (Wash. 1974) (en banc) (citing Springer and reaching same conclusion).
Despite our determination that the date specified in the contract itself is the better indicator of the parties' intent, we decline to formulate a general rule, as did the Supreme Courts of Oregon and Washington, that, in cases of predated contracts, the specified contract date invariably governs. The determination of which date controls the application of the contract must be derived from the intent of the parties, and if no subjective intent is apparent or ascertainable, that intent must be based on the objective language of the contract.
In this case, the evidence of the parties' subjective intent is tenuous. A July 14, 1989 letter from the STFA President to the State Police suggests that the parties were aware of the change in the award of backpay under the regulation well before the execution of the agreement in 1990. It is readily inferable that the parties' apparent knowledge of the new regulation informed their understanding when they agreed to make an express reference in the contract to the existing "provisions, practices and policies." Those "practices" related to the identical subject matter of the regulation. Consequently, the limitation of "provisions, practices and policies" to those existing "at the time" created a genuine ambiguity about whether the parties
shared a subjective intent concerning the effect of the
regulation. Because it is difficult to extrapolate from the
background and surrounding circumstances a mutual subjective
understanding regarding the intended meaning of the phrase "at
the time," the language of the agreement itself must control. We
thus look to the date on the agreement, July 1, 1987, and
conclude that the relevant salary-adjustment practice must be
governed by that date.
We hold that the practice in effect on July 1, 1987 of
making retroactive pay adjustments to troopers who had resigned
in good standing was incorporated into the agreement as an
implied term. A practice need not be formalized to become an
implied term of a contract. Instead, "[t]he actual conduct and
practical understanding of the parties exhibited in the
performance of a contract may color its interpretation." Medivox
Productions, Inc. v. Hoffman-LaRoche, Inc.,
107 N.J. Super. 47,
60-61 (Law Div. 1969) (citing Michaels v. Brookchester, Inc.,
26 N.J. 379 (1958)). The practice of the State Police since 1970 of
making this type of retroactive pay adjustment certainly
qualifies as sufficiently longstanding and consistent to be
incorporated into the agreement. The agreement, as of its
effective date of July 1, 1987, thus required retroactive salary
payments to troopers who had resigned in good standing.
The major issue that remains is the effect of the
regulation, which was promulgated on September 6, 1988, on the
implied provision of the agreement that entitles troopers who had
resigned in good standing to retroactive pay adjustments. That
issue requires that we determine whether the regulation may be
enforced under the Employer-Employee Relations Act and, if so,
whether it may be applied retroactively.
Under the Employer-Employee Relations Act ("the Act"), N.J.S.A. 34:13A-1 to -29, collective negotiations with public employees over terms and conditions of employment encompass a broad variety of subjects, N.J.S.A. 34:13A-5.3, including compensation. In re Local 195, 88 N.J. 393, 403 (1982). However, the Act generally precludes negotiation about matters that are dictated by statute or regulation. As we have stated,
specific statutes or regulations which expressly set particular terms and conditions of employment . . . for public employees may not be contravened by negotiated agreement. For that reason, negotiation over matters so set by statutes or regulations is not permissible. We use the word "set" to refer to statutory or regulatory provisions which speak in the imperative and leave nothing to the discretion of the public employer. All such statutes and regulations which are applicable to the employees who compromise a particular unit are effectively incorporated by reference as terms of any collective agreement covering that unit.
[State v. State Supervisory
Employees Ass'n,
78 N.J. 54, 80
(1978).]
See also Township of West Windsor v. Public Employment Relations
Comm'n,
78 N.J. 98, 116 (1978) (same). Thus, if a statute or
regulation "speak[s] in the imperative" regarding a particular
term of employment, it effectively preempts negotiation over that
term, and is itself deemed to be incorporated into the employment
agreement.
An important exception to this general rule of preemption is
that a regulation does not necessarily preempt negotiation when
the regulation is promulgated by an agency that itself is a party
to the collective negotiations. Council of State College Locals
v. State Bd. of Higher Educ.,
91 N.J. 18, 28-29 (1982). This
exception is rooted in the Act, which states that "[p]roposed new
rules or modifications of existing rules governing working
conditions shall be negotiated with the majority representative
before they are established." N.J.S.A. 34:13A-5.3. This
statutory prescription "prohibit[s] an employer from unilaterally
altering the status quo concerning mandatory bargaining topics,
whether established by [an] expired contract or by past practice,
without first bargaining to an impasse." Board of Educ. v.
Neptune Twp. Educ. Ass'n,
144 N.J. 16, 22 (1996) (quoting Stephen
F. Befort, Public Sector Bargaining: Fiscal Crisis and
Unilateral Change,
69 Minn. L. Rev. 1221, 1268 (1985)). The
prohibition against unilateral changes encompasses a variety of
terms and conditions of employment, including compensation, Board
of Educ. v. Galloway Twp. Ass'n of Educ. Secretaries,
78 N.J. 1,
47-52 (1978), length of work day, In re Maywood Bd. of Educ.,
168 N.J. Super. 45, 58-59 (App. Div.), certif. denied,
81 N.J. 292
(1979), and length of work year. Board of Educ. v. Piscataway
Twp. Principals Assoc.,
164 N.J. Super. 98, 100-01 (App. Div.
1978).
The exception to the generally preemptive effect of
regulations is predicated on the paramount statutory policy that
prohibits unfair labor practices, including unilateral changes in
the terms and conditions of employment. We have noted that
"[w]hen an agency performs dual roles as both regulator and
employer, the possibility exists that the agency could use its
preemptive regulatory power in an abusive or arbitrary manner to
insulate itself from negotiations with its employees." Council
of State College Locals, supra, 91 N.J. at 27.
Nevertheless, the exception applicable to agency regulations
that purport to effect unilateral changes in terms and conditions
of employment where the agency is also a negotiating party does
not invariably preclude preemption. Instead, a qualification
exists that derives from the regulatory responsibilities of a
government agency in carrying out its public mandate, a
responsibility that is nondelegable and that may not be
subordinated to the agency's role in negotiating terms and
conditions of employment. See id. at 28. In other words, an
agency may not be precluded from fulfilling its statutory mission
in good faith simply because the agency happens to be in the
course of collective negotiations. Consequently, when a
negotiating agency itself issues a regulation that otherwise
would override negotiations, the agency's good faith -- and hence
preemption -- is still presumed. However, the preemptive effect
on negotiations can be overcome by a showing that the regulation
was not designed to fulfill the agency's statutory mandate, but
rather was "arbitrary, adopted in bad faith, or passed primarily
to avoid negotiation on terms and conditions of employment."
Ibid.
In this case, the regulation clearly encompasses the
negotiated term, as incorporated through the existing State
Police practice, concerning retroactive pay to employees who have
resigned in good standing. The regulation denies retroactive pay
adjustments except for specifically enumerated former employees,
a category that does not include those whose termination occurred
through resignation. However, the agreement incorporating the
practice of the State Police authorizes such payments. Hence,
unless the regulation constitutes an impermissible unilateral
change or unfair practice, it preempts the prior practice of the
State Police, as embodied in the agreement.
We conclude that because the regulation was not issued by
the State Police (the negotiating agency), it is not an
impermissible unilateral change or an unfair practice. The
regulation was issued by the DOP, which intended to prescribe a
rule governing retroactive pay to all state employees. The DOP,
unlike the State Police, was not involved in the collective
negotiations with this specific group of employees. See id. at
23 (noting distinction between promulgation of a regulation by an
agency with jurisdiction over all state employees and by an
agency with jurisdiction over a specific group of employees with
which it must negotiate). We note that even if the DOP were
deemed to have been involved in the negotiations, the exception
still would not apply because there is no indication of bad faith
in the adoption of the regulation. Id. at 28. The DOP was
simply fulfilling its statutory role and was apparently unaware
of the State Police's prior practice, an unawareness evidenced by
its statement that "[t]he provisions of this rule reflect long-standing current practice."
20 N.J.R. 2259 (Sept. 6, 1988).
Because of the mandatory language of the regulation and the
absence of evidence of bad faith or arbitrary conduct on the part
of the DOP, the regulation under the Act preempts the implied
contract term if it can be applied retroactively.
The applicability of the regulation's preemptive power to the salary adjustments of the former troopers entails a determination of the DOP's intent to apply the regulation retroactively and, if such an intent exists, an evaluation of whether the DOP has the power to apply the regulation retroactively in this case. The Appellate Division held that the inclusion of the prior practice in the agreement constituted a "vested right" that the State could not abrogate retroactively through its regulation, despite its statutory authority to
preempt collective negotiations under its general rulemaking
powers.
In analyzing whether a statute or regulation may apply
retroactively, a court must determine, first, whether the
Legislature or agency intended that the statute or regulation
apply retroactively, and, if so, whether retroactive application
would work either a manifest injustice or an unconstitutional
interference with a vested right. Twiss v. State,
124 N.J. 461,
467 (1991). Whereas interference with a vested right implicates
due-process concerns, id. at 469-70, manifest-injustice analysis
is a nonconstitutional, equitable doctrine designed to prevent
unfair results that do not necessarily violate any constitutional
provision. Phillips v. Curiale,
128 N.J. 608, 625 (1992).
In this case, we believe that the DOP intended that the
regulation apply retroactively. Although the agency never
explicitly stated such an intent, it issued the regulation with
the understanding that "[t]he provisions of this rule reflect
long-standing current practice" and that "[t]hey also address the
administrative and record-keeping problems with retroactive pay
transactions involving separated employees."
20 N.J.R. 2259
(Sept. 6, 1988). Although the denial of retroactive pay
adjustments to former employees who had resigned in good standing
was not "long-standing current practice" for the State Police,
the DOP apparently was unaware of that fact and clearly believed,
in promulgating a regulation to deny retroactive pay to such
employees, that it simply was codifying existing statewide
practice. That understanding is consistent with an intent to
implement the regulation retroactively. Moreover, the agency's
concern about administrative and record-keeping issues further
supports the inference of a retroactive intent because such
problems would linger for a substantial period of time if the
regulation were only prospective. In any event, although the
record is not entirely clear, we believe that the DOP intended
that the regulation operate retroactively.
Because we have concluded that the regulation was intended
to apply retroactively, we must address whether retroactive
application would work a manifest injustice or interfere with a
vested right. Twiss, supra, 124 N.J. at 467. As we have noted,
the manifest-injustice doctrine is a nonconstitutional, equitable
doctrine that allows courts to avoid an unfair result even where
a constitutional vested right may not be at stake. Phillips,
supra, 128 N.J. at 625; State v. Ventron Corp.,
94 N.J. 473, 498
(1983). In describing manifest-injustice analysis, we have
stated that
[t]he essence of this inquiry is whether the
affected party relied, to his or her
prejudice, on the law that is now to be
changed as a result of the retroactive
application of the statute, and whether the
consequences of this reliance are so
deleterious and irrevocable that it would be
unfair to apply the statute retroactively.
[Gibbons v. Gibbons,
86 N.J. 515,
523-24 (1981).]
Relevant to the inquiry of whether the regulation's
retroactive application would work a manifest injustice in this
case is the potential reliance that the former troopers, in
deciding whether to resign, placed on the past practice of the
State Police. The regulation was promulgated on September 6,
1988, which was during the negotiations over the agreement and
within the period that the agreement was intended to cover.
Between the beginning of the period covered by the agreement
(July 1, 1987) and that date, the troopers who resigned had no
reason to believe that the past practice would not apply to them
should they leave the force before the consummation of a new
agreement. These troopers clearly may have relied on the
continuation of the past practice when they decided to resign
before the new agreement was signed.
Once the regulation was issued, however, the reasonableness
of any reliance on the applicability of the past practice was
greatly diminished. At that point, any troopers contemplating
whether to resign could not reasonably have assumed that the new
agreement, when signed, would contradict the new regulation by
including retroactive pay for troopers who had resigned in good
standing. The regulation certainly should have given them pause.
We note that the STFA was aware of the regulation, as evidenced
by a July 14, 1989 letter from the STFA president threatening
litigation over the issue. Although it may appear unfair to
impute the STFA's knowledge to the individual troopers, the STFA
was their authorized representative, and we must presume that the
troopers were aware of the terms of their employment, or should
be charged with knowledge thereof, especially as those terms
related to the consequences of resignation from the force.
We therefore determine that the twelve troopers who resigned
between July 1, 1987 and September 6, 1988 are entitled to the
retroactive pay adjustment, in spite of the DOP's preemptive
power, because of the reasonable reliance that they may have
placed on the continued existence of the State Police practice.
Because of their reasonable reliance and resulting change in
position, to deny them the adjustment would work a manifest
injustice. Conversely, we conclude that the seven troopers who
resigned after September 6, 1988 are not entitled to the
adjustment under manifest-injustice analysis, because, given the
existence of the regulation, they could not reasonably have
relied on the continuation of the old practice.
Because we conclude that denial of the adjustment to the
seven troopers who resigned after the promulgation of the
regulation would not work a manifest injustice, we must determine
whether the denial would violate a constitutionally protected
vested right of these troopers. Under vested-rights analysis, we
examine whether the asserted interest is "a present fixed
interest which . . . should be protected against arbitrary state
action," Phillips, supra, 128 N.J. at 620 (quoting Pennsylvania
Greyhound Lines, Inc., supra, 14 N.J. at 384), focusing on the
"nature of the altered right." Id. at 622. In this case, we
already have determined that the past practice of the State
Police of providing retroactive pay adjustments is contractual in
nature. Supra at __-__ (slip op. at 6-10). Contractual
interests clearly may qualify as vested rights. United States
Trust Co. v. New Jersey,
431 U.S. 1, 19 n.16,
97 S. Ct. 1505,
1516 n.16,
52 L. Ed.2d 92, 108 n.16 (1977); Perry v. Sinderman,
408 U.S. 593, 601-02,
92 S. Ct. 2694, 2699-2700,
33 L. Ed.2d 570, 580 (1972).
In determining the permissible extent of intrusion on an
otherwise-protected right or interest, we balance the public
interest in the legislation or regulation against the individual
interest. In doing so, we recognize the considerable flexibility
that the State must have in determining how best to govern:
A state may, in the exercise of the police
power, enact a statute to promote the public
health, safety, morals or general welfare.
Such a statute, because of retroactive
application or otherwise, may diminish in
value or totally destroy an individual's
right, whether in property as such or arising
out of contract, provided that the public
interest to be promoted sufficiently
outweighs in importance the private right
which is impaired.
[Rothman v. Rothman,
65 N.J. 219,
225-26 (1974) (citing United States
Supreme Court cases).]
Cf. United States Trust Co., supra, 431 U.S. at 22, 97 S. Ct. at
1517, 52 L. Ed.
2d at 109 ("The States must possess broad power
to adopt general regulatory measures without being concerned that
private contracts will be impaired, or even destroyed, as a
result.").
The private interest here is the receipt of a retroactive
pay adjustment, whereas the public interest is the State's
control over governmental expenditures and its responsibility for the public fisc. Although the troopers have a reasonable interest in receipt of the pay adjustment, the State's important interests in safeguarding revenues, assuring statewide uniformity in compensation practices, and maintaining control of the public budgetary process impel us to conclude that the private interest of the troopers is not vested in the constitutional sense and that the State may impair it retroactively. If the contractual interest at stake here were to be classified as a fixed due-process right, the State potentially could be subject to a flurry of claims by public employees for each employment regulation that it enacted, resulting in a significant reduction in its ability to administer state employment practices uniformly and to conserve the public's scarce resources. We decline to impose such a rigid obligation on the State.See footnote 2 See Ratanasen v. California Dep't of Health Servs., 11 F.3d 1467, 1471 (9th Cir. 1993) ("Public officials are responsible for overseeing the expenditure of our increasingly scarce public resources[,] and we must give them appropriate tools to carry out that charge."). We
thus conclude that the contractual interest at stake is not a
vested right and that the regulation preempts the contractual
term with respect to the seven troopers who resigned after the
issuance of the regulation.
Accordingly, we affirm the judgment of the Appellate Division insofar as it awarded the retroactive salary adjustment to the troopers who resigned in good standing prior to the promulgation of the regulation. However, we reverse that portion of the judgment awarding the adjustment to the troopers who resigned subsequent to that date.
CHIEF JUSTICE PORITZ and JUSTICES POLLOCK, O'HERN, GARIBALDI, STEIN and COLEMAN join in JUSTICE HANDLER's opinion.
NO. A-59 SEPTEMBER TERM 1996
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
STATE TROOPERS FRATERNAL ASSOCIATION
OF NEW JERSEY, INC., etc.,
Plaintiffs-Respondents,
v.
THE STATE OF NEW JERSEY; et al.,
Defendants-Appellants.
DECIDED April 24, 1997
Chief Justice Poritz PRESIDING
OPINION BY Justice Handler
CONCURRING OPINION BY
DISSENTING OPINION BY
Footnote: 1 Originally, the breach-of-contract claim was divided into two counts, one covering 18 troopers and one covering a nineteenth trooper who was erroneously asserted to have
resigned after the agreement had expired in 1990 (i.e., under the agreement covering July 1, 1990 to June 30, 1993). However, in the Appellate Division, the error was corrected, and the court consolidated the two counts. For the sake of simplicity, we will treat the two counts as having been merged from the outset of the lawsuit. Footnote: 2 An additional factor supporting the view that the State's interest outweighs that of the former troopers is that the promulgation of the regulation did not evince a motivation by the State to avoid its own contractual obligations. Cf. Energy Reserves Group, Inc. v. Kansas Power and Light Co., 459 U.S. 400, 412-13 & n.14, 103 S. Ct. 697, 705 & n.14, 74 L. Ed.2d 569, 581 & n.14 (1983) (in the context of the Contract Clause, stating that state action impairing a contract to which the state is a party is subject to heightened scrutiny because of the possibility that the state is motivated by self-interest instead of the public interest). As we noted previously, the DOP enacted the regulation without knowledge of the State Police practice of awarding this type of pay adjustment to troopers who resigned in good standing. Supra at __ (slip op. at 15).