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November 9, 2010

Re:      League Advisory on Temporary Layoff Plans

Dear Mayor:

The New Jersey Public Employment Relations Commission (the “Commission”) recently issued two written decisions that reflect a shift in policy regarding the practice commonly known as “temporary layoffs” or “furloughs” (“temporary layoff”).  The two cases are Borough of Belmar, P.E.R.C. No. 2011-34 (October 28, 2010) and Township of Mount Laurel, P.E.R.C. No. 2011-35 (October 28, 2010).  A “temporary layoff” is the determination that an employee or group of employees will not work for a specified period, with a resulting reduction in salary.  At the conclusion of the “layoff” period, usually one day over several pay periods, the employee returns to work.  Public employers in New Jersey have used temporary layoff days as a cost-saving measure to reduce budget deficits and avoid permanent layoffs. 

Before the decisions in Belmar and Mount Laurel, public employers relied on several cases to determine whether a public employer had a managerial prerogative to unilaterally implement temporary layoff days.  The most important case was State of New Jersey (Dept. of Personnel), P.E.R.C. No. 92-65, 18 NJPER 50 (¶23021 1991) (“DOP”).  In DOP, a scope of negotiations dispute arose because of a decision by the Department of Personnel to close its facilities for eight days because of a budgetary shortfall.  PERC held that such a decision to cease operations was not mandatorily negotiable.  Stressing that its holding was limited to the particular facts, PERC concluded that the case involved an undisputed financial necessity and a complete departmental shutdown affecting all employees, some of were managerial executives and two-thirds of whom were outside the charging parties’ unit and the Act’s coverage.  PERC stated that a case in which many employees were ordered not to work, but a department remained open might prompt a different analysis.  At the same time, PERC recognized that the employees’ majority representative had a legal and practical role to play in addressing any severable issues that may arise in negotiations or in grievance processing, even though that role could not extend to negotiating over the decision to cease operations itself.  PERC declined to speculate about what other issues might be severable from the decision to cease operations since no dispute had yet arisen over any such issues.

However, after the Belmar and Mt. Laurel, it is clear that the Commission is moving away from the idea that a public employer can unilaterally implement temporary layoff days, despite its attempts at negotiations, of a complete departmental shutdown and/or an approved layoff plan from the New Jersey Civil Service Commission (“CSC”). 

In Belmar, the borough sought to reduce the workweek of Department of Public Works (“DPW”) employees by completely shutting that department for one day a week for ten consecutive weeks.  In Mount Laurel, the township sought to reduce the workweek of its clerical workers by shutting that unit one day a month for eight consecutive months.  Both temporary layoff plans were approved by the CSC.  In response, the Communications Workers of America (“CWA”) filed unfair practice charges alleging that the public employers acted unlawfully and failed to negotiate prior to implementing the temporary layoff days.  The Commission agreed, rejecting the principles as set forth in DOP.  The Commission held,

We find this case to be distinguishable from DOP because here the savings sought by the Borough is approximately equal to the salary of just one full-time employee; the Borough at all times retains the non-negotiable managerial prerogative to reduce the number of employees in the DPW to achieve the same savings; there is no assertion or showing that any operations or programs of the DPW would be affected by the loss of one employee; and nothing in the record establishes that a significant number of employees outside the unit were affected by the shutdown.

We hold that the Borough did not have a managerial prerogative to reduce the employees’ workweek and pay through the means of the temporary layoff plan.  The contract clauses relied upon by CWA are indisputably negotiable as they pertain to fundamental terms and conditions of employment at the heart of the collective negotiations process: compensation and hours of work.  It is clear that the sole objective of that plan was to reduce the labor costs that otherwise would have been paid pursuant to those provisions under the parties’ negotiated salary agreement for 2009.           

Additionally, with respect to the argument that the CSC’s approval of the civil service plan pre-empted the unfair practice charge, the Commission held that,

We accept the Acting Director of State and Local Operations for the CSC’s determination that the temporary layoff plan had an economic rationale and that it did not violate any Civil Service laws, but that determination does not preclude negotiations.  The fact that the employer has complied with a Civil Service requirement protecting employees does not negate the employees’ right to negotiate before their compensation, workweek and work year are reduced. 

Thus, it appears from the cases that the Commission is moving further and further away from the reasoning in the DOP case and making it more difficult for public employers to implement temporary layoff days, even after engaging in negotiations and making a complete departmental shutdown.  The question then becomes what public employers can do to achieve adequate budgetary savings, while continuing to provide a necessary level of services to its citizens?  The unfortunate answer, as explicitly stated in these most recent cases, is to implement permanent layoffs of employees.  While this is not ideal, the Commission is making this the new reality.

To address these issues, the New Jersey legislature has introduced legislation, part of Governor Christie’s toolkit, which allows public employers to implement temporary layoff days.  Senate Bill 2039, which would allow non-civil service jurisdictions to implement temporary layoff days, is currently being considered by the Senate State Government, Wagering, Tourism & Historic Preservation Committee.  Senate Bill 2206, which applies to civil service jurisdictions, is being considered by the Senate Budget and Appropriations Committee.  Please contact your local representatives to lend your support to these measures.

We urge you to discuss this issue with your labor counsel before implementing any layoff plans.

Very truly yours,

William G. Dressel, Jr.
Executive Director




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