On July 14, the New Jersey Supreme Court issued its long-awaited decision in the case of Borough of Keyport v. Local 68. The court’s decision, which addressed whether three municipalities were required to negotiate with unions before temporary layoffs, may have far-reaching implications for boards of education struggling with financial crisis and uncertainty.

These three consolidated cases originated from the temporary Civil Service Commission regulation enacted by former Gov. Jon Corzine’s administration. That regulation, which has since been repealed, allowed Civil Service jurisdictions to implement temporary layoffs or furloughs on an intermittent basis.

After the furloughs were instituted by the municipalities, the respective unions filed unfair labor practice charges with the Public Employees Relations Commission (PERC) alleging a violation of the obligation to bargain in good faith.  PERC determined the municipalities violated their obligation to negotiate over the employees’ work hours, despite the fact the Civil Service Commission had authorized the layoff plan.  The Appellate Division reversed PERC, finding the matter was not subject to negotiations.  The unions then appealed to the state Supreme Court. The New Jersey School Boards Association was granted permission to appear as amicus curie in support of the municipalities.

Although the Supreme Court agreed with the Appellate Division’s determinationthat the matter was not subject to negotiations, it did so on a different legal basis. In coming to its conclusion the three municipalities were not required to negotiate, the court looked to the three-prong negotiability test.  That test provides that for a matter to be subject to negotiations, it must intimately and directly affect the work and welfare of the public employees; must not be preempted by statute or regulation; and must not significantly interfere with the determination of public policy.  All parts of this test must be met for a matter to be deemed mandatorily negotiable.

The court held the first two parts of the negotiability test were met, and it turned its analysis to the third prong, namely whether requiring negotiations would interfere with public policy. Ultimately, the court found that requiring negotiations over the furloughs would interfere with determination of public policy, since a layoff (including an authorized temporary furlough pursuant to a valid commission regulation authorizing such action, or a demotion in positions 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.”

Interestingly, although the court was addressing three civil service jurisdictions it found “whether the municipalities actively relied on the existing regulation is not controlling in the review of this appeal.”  Further, while the court found the regulation itself did not preempt negotiations, the court spent much time addressing how the three municipality plans were approved.  This reasoning by the court could be an avenue for unions to question the applicability of the Keyport decision to non-civil service jurisdictions.

Although districts should be cautious in reading Keyport expansively, it does provide some guidance for boards of education.  Indeed, the court reiterates the long-standing maxim that layoffs in the typical sense are not negotiable. Most notably for boards of education, the court further holds that “[w]hen 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.”

In short, this New Jersey Supreme Court decision, taken in conjunction with PERC’s recent 2014 Robbinsville Board of Education decision and the earlier Appellate Division Klinger decision, provide sufficient argument to support a decision by a board of education to reduce the hours of employees to meet a “fiscal emergency.”

Keep in mind the full impact and applicability of this case to any particular school district will be based upon the specific facts and circumstances involved.  Boards of education considering furloughs, temporary layoffs, or reduction in hours of its employees should consult their labor attorney to ensure adherence to the Keyport decision.