In a move that could have far-reaching implications on the collective bargaining process, Gov. Chris Christie, in January 2013, signed S-1127, which permits boards of education to adopt salary policies of up to five years in duration. Specifically, this new law allows a local board of education to adopt a salary policy of “one, two, three, four or five years.” The old law limited the maximum duration of such a policy to “one, two, or three” years.

Could Impact Future Boards

While acknowledging the need for stability in labor relations, the New Jersey School Boards Association (NJSBA) believes that contracts of longer duration would tie the hands of future boards, which may need to respond to changing circumstances within the district. The NJSBA has long believed that labor contracts should be no longer than three years in length prospectively.

As originally proposed, S-1127 would have allowed contracts of any duration.

The NJSBA actively pursued an amendment to S-1127 that would have allowed boards of education to adopt salary policies up to three years prospectively, while also permitting such policies to apply retroactively and include any years that have already elapsed without counting against the three-year limitation.

In part because of NJSBA’s lobbying, the compromise measure was approved that permits salary policies to cover a period of up to five years, which may include any combination of years that may have already elapsed since the expiration of a previous agreement, as well as future years.

Law Permits; Doesn’t Require

It is important to highlight the fact that the law’s provisions are permissive, so individual boards of education may continue to adopt salary policies lasting less than five years.

NJSBA also successfully worked with the bill’s sponsors to remove a provision that would have obligated boards of education to pay salary increments to employees under expired contracts. While removal of that provision mitigated the NJSBA’s most serious concerns with the legislation, the question of whether boards will be obligated to pay increments under the provisions of the new law following the expiration of a contract remains an unresolved issue.

Increment Payments and the Neptune Decision

Previous judicial interpretations had long prohibited a board from paying increments under an expired three-year agreement. In its Neptune decision, the New Jersey Supreme Court reasoned that such increments were prohibited by explicit statutory language (NJASA 18A:29-4.1) limiting salary policies to “one, two, or three” years. The amended law’s provision allowing salary policies that cover “four, or five” years potentially muddied the waters in terms of whether the increment would have to be paid out after the expiration of a three-year contract. Currently, most school agreements are three years long.

In a recent decision that applies to all New Jersey public employers, the Public Employment Relations Commission (PERC) held public employers are not required to pay the increment or step increase after expiration of collective negotiations agreements. In so ruling, PERC overturned the long standing “dynamic status quo” concept which, in part, required employers to pay step increases automatically even though the collective negotiations agreement had expired. The case, County of Atlantic and FOP Lodge No. 34 and PBA Local No. 77, is on appeal to the New Jersey Supreme Court. NJSBA is participating as amicus curiae in this matter.

Given the appeal, rather than leaving this matter to further judicial interpretation, boards should seriously consider including language in any negotiated agreement providing that no increments or other salary increases will be provided to employees between the time a contract expires and when a new one is ratified.

The Pros – and Cons – of Longer Contracts

The most obvious advantage of longer contracts is that schools boards and unions are less likely to find themselves in a perpetual state of negotiations. This is a particularly acute concern when the parties have worked under an expired contract for an extended period of time. For instance, if a board’s contract expired in July of 2011 and the parties reached an agreement for a successor contract in the spring of 2014, the new three-year contract would expire immediately following implementation. It may be far better for both parties to reach a five-year contract that covers three years retroactively and two years prospectively. In such situations, breathing space may prove essential in repairing any damage to the labor relationship caused by extended negotiations. However, in considering contracts longer than three years prospectively, boards must balance the understandable desire to negotiate less frequently with the reality that those longer prospective contracts impose conditions on a future board of education.

Longer contracts offer the potential to “lock in” contractual provisions such as a more favorable employee salary guide, health care contributions and employee concessions. The opposite could be true, as well. If there are changing economic circumstances or educational goals in a district, boards may be locked in to provisions they can no longer afford or want. In such cases, a board may be forced to explore other options, such as layoffs or program cuts.

NJSBA urges its members to exercise caution when considering the adoption of a salary policy that extends more than three years prospectively.  Taxpayer money should not be committed to an agreement that would extend for too long, as this would lead to inflexibility and prevent boards from reacting to changes in the tax base, reductions in state aid, other economic factors, or changes in educational priorities. The desire for stability in labor relations needs to be balanced against a board of education’s responsibility to manage district operations, personnel, and finances.

It is useful for boards to know that the employee unions, particularly the New Jersey Education Association, asked for this change in the law. If a board negotiating committee is confronted with a union demand for a contract that is longer than three years prospectively, the board should determine what benefit it receives in exchange for a longer contract.

NJSBA staff will continue to analyze the potential impact that this new law will have on the negotiations process, as well as school district finances and operations.  In the coming months, the NJSBA will provide additional information to members that they should take into consideration before adopting a salary policy of more than three years in length.  In the meantime, board members should consult with their board attorney or contact the NJSBA Labor Relations department for assistance.