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New Jersey Ass'n of School Administrators v. Schundler
Citations: 414 N.J. Super. 530; 999 A.2d 535; 2010 N.J. Super. LEXIS 150
Court: New Jersey Superior Court Appellate Division; August 3, 2010; New Jersey; State Appellate Court
The court, represented by WEFING, P.J.A.D., addresses a challenge by the New Jersey Association of School Administrators and individual plaintiffs, including school superintendents and an assistant superintendent, against regulations set by the Commissioner of Education. These regulations, established in 2008 under the title 'Fiscal Accountability, Efficiency and Budgeting Procedures,' aim to enhance financial accountability within school boards in New Jersey, ensuring that budgets meet constitutional requirements for public education. They were implemented following statutory changes that introduced a new funding formula and established the role of executive county superintendent of schools, responsible for overseeing school district efficiencies and educational effectiveness. The plaintiffs contest nine specific regulations that empower the executive county superintendent to review employment contracts for superintendents and assistant superintendents. These regulations require that contract approval be based on comparable salaries and benefits in similar districts and prohibit certain reimbursement provisions for mandatory employee contributions such as taxes and retirement contributions. The court incorporates relevant historical context from prior case law to inform its analysis of the plaintiffs' arguments and the defendants' responses. No contract may include a payment for separation from service that is deemed prohibited or excessive by the Executive County Superintendent, with a cap of either three months' pay for each remaining year on the contract (prorated for partial years, not exceeding 12 months) or the remaining salary due. Contracts must not offer benefits that duplicate those legally available or provided through existing group plans, although an annuity can be included if already part of the current contract. Provisions for sick leave accumulation and supplemental compensation must align with N.J.S.A. 18A:30-3.5, with payments for accumulated sick leave made only at retirement and not transferable to the estate if the individual dies before retirement. New contracts may credit unused sick leave days based on the new board of education's sick leave policy. Provisions for unused vacation leave must comply with N.J.S.A. 18A:30-9, allowing for pre-separation payments only for leave accrued before June 8, 2007, while any accrued leave after that date is payable upon separation and can be transferred to the estate if the individual dies beforehand. Calculations for per diem for 12-month employees are based on a 260-day work year. Bonuses are permitted only if tied to measurable performance objectives in the contract, which must be reasonable and documented. A reasonable car allowance is allowed, limited to the average monthly business travel cost, with no reimbursements for mileage or provision of a dedicated driver or chauffeur, and must comply with relevant regulations. Plaintiffs challenge specific provisions of N.J.A.C. 6A:23A-5.2(a), which require school districts to establish policies for the prudent use of legal services, including maintaining a log of legal counsel contacts and conducting professional services contracts through competitive processes. The plaintiffs argue these regulations are invalid, claiming they violate constitutional protections against takings and vagueness, contravene existing statutes, and exceed the Commissioner’s authority. Agency regulations typically enjoy a presumption of validity, with courts deferring to administrative agencies in rulemaking. However, this presumption does not apply if the regulations explicitly exceed the delegated legislative authority. The plaintiffs must prove the regulations are arbitrary or capricious to challenge them successfully. The plaintiffs also assert that these regulations improperly reduce compensation for school administrators, violating due process protections under both the U.S. and New Jersey constitutions. State law determines property interests, requiring plaintiffs to demonstrate entitlement to such interests through state statutes or regulations. Notably, assistant superintendents receive tenure protections after a probationary period, while superintendents do not enjoy such protections, as they serve under fixed-term contracts ranging from three to five years. Thus, the legal standing of the plaintiffs varies significantly based on their employment status. N.J.S.A. 18A:17-20.2 ensures that superintendents cannot have their compensation reduced during their employment contract, while assistant superintendents with tenure also cannot have their compensation reduced. However, assistant superintendents without tenure do not have protected interests in their future compensation. The Commissioner recognizes that existing contracts for superintendents do not need modification to comply with regulations, and future contracts do not grant superintendents a property interest, as they only hold contingent expectations without constitutional protection, as established in Valdes v. N.J. State Bd. of Med. Exam’rs. For assistant superintendents lacking tenure, they similarly hold no vested rights in compensation or benefits, meaning regulations like N.J.A.C. 6A:23A-3.1(e)(3), which prevents reimbursement for certain payments, do not infringe upon their rights. Conversely, tenured assistant superintendents' compensation is safeguarded by tenure statutes, which broadly protect their overall employment benefits, not just salary. The term "compensation" encompasses various benefits beyond salary, including bonuses, medical benefits, and expense reimbursements, indicating that regulations affecting these aspects may violate their rights under the tenure statute. Each regulation must be analyzed individually concerning its impact on protected property interests. In Owens v. Press Publ’g Co., the court acknowledged that compensation includes severance pay, while Botany Mills, Inc. v. Textile Workers Union of Am. recognized both vacation pay and severance pay as forms of deferred compensation. New Jersey statute N.J.S.A. 18A:17-20.2a defines "compensation" broadly to include salary, bonuses, sick or vacation leave payments, insurance contributions, and other forms of remuneration. Although the statute specifically refers to superintendents, it illustrates that compensation can extend beyond just wages. The discussion highlights that a tenured assistant superintendent would face a reduction in overall compensation if regulations requiring reimbursement for FICA or disability insurance premiums were enforced. The recommended solution is to amend the tenure statute to achieve regulatory goals without conflicting with existing statutory limitations. The regulation N.J.A.C. 6A:23A-3.1(e)(4) limits separation pay for administrators leaving before their contract’s end, capping it at the lesser of remaining salary or three months' pay per year left on the contract. Superintendents and untenured assistant superintendents lack vested rights to specific contractual terms, meaning this regulation does not constitute a taking of property rights. The impact of N.J.A.C. 6A:23A-3.1(e)(5), which prohibits supplemental benefits that duplicate existing group plan benefits, is analyzed similarly; superintendents and untenured assistant superintendents do not have vested rights to these benefits. However, the regulation's effect on tenured assistant superintendents is less clear, and the court refrains from further discussion on this group due to insufficient factual context. It notes that both regulations may adversely affect the overall compensation for tenured assistant superintendents, contrary to N.J.S.A. 18A:28-5. N.J.A.C. 6A:23A-3.1(e)(6) was adopted to enforce N.J.S.A. 18A:30-3.5, limiting school district payments for accumulated unused sick leave to a maximum of $15,000 and allowing payment only upon retirement, explicitly excluding payments to an employee's estate if they die before retirement. The State argues that superintendents do not have a property interest in existing contractual terms, but this fails to consider the regulation's impact on superintendents with accumulated sick leave exceeding $15,000 at the time of promulgation. While the regulation can restrict future accumulation beyond the $15,000 cap, it cannot deprive those with existing benefits accrued prior to its enactment. This principle also applies to assistant superintendents. The limitation on future accumulation is distinct from reducing compensation, as it does not affect accrued benefits. The potential impact of N.J.S.A. 18A:30-3.6, effective May 21, 2010, is acknowledged but does not fully resolve the issue, particularly for any superintendents who may have died with benefits exceeding the cap during the interim. Furthermore, N.J.A.C. 6A:23A-3.1(e)(8) changes the calculation of certain contractual benefits from a 240-day to a 260-day work year, effectively lowering payments but applying only prospectively and not infringing on existing contractual rights. The court upheld the application of a standard based on a five-day work week for twelve-month employees, deeming it rational and not requiring specific statutory support. It rejected the plaintiffs' challenge to N.J.A.C. 6A:23A-3.1(e)(9), which mandates that bonuses be reasonable and tied to measurable performance objectives, affirming the regulation's validity as it does not interfere with existing contract terms. The regulation N.J.A.C. 6A:23A-3.1(e)(11), which lowers mileage reimbursement from $0.485 to $0.31 per mile, was also upheld, stating that existing contractual agreements cannot be overridden by the regulation and that employees do not have a vested right to future mileage rates. The court found no constitutional issues with these regulations and dismissed claims of vagueness; it emphasized that laws must provide clear prohibitions for due process. For a successful vagueness challenge, the complainant must show the law is vague in all applications. The court reiterated the necessity for regulations to be definite yet flexible. Specifically, the plaintiffs contested N.J.A.C. 6A:23A-3.1(e)(1) due to undefined terms like "comparable" and "region," arguing it was facially vague and unconstitutional. The term "comparable" is deemed a commonsense concept that does not require regulatory definition, as established in A.M.S. ex rel. A.D.S. v. Bd. of Educ. of Margate. The term "region" is clarified as encompassing the county where the executive county superintendent holds authority, acknowledging demographic and resource differences within the county. This is supported by N.J.A.C. 6A:23A-3.1, which grants the superintendent authority over contracts in various school districts within the county, excluding charter schools. Challenges to the vagueness of N.J.A.C. 6A:23A-3.1(e)(9) concerning "reasonable" bonus payments are countered by the argument that "reasonably" is understood in common terms, as established in Sheeran v. Progressive Life Ins. Co. Similarly, the regulation prohibiting "excessive" separation payments is defended by referencing specific criteria for judging such payments, countering claims of vagueness. Plaintiffs also allege equal protection violations under the Fourteenth Amendment due to distinctions made between administrative contracts and collective bargaining units like teachers. However, the court asserts that not all classifications are prohibited, and if a classification does not involve fundamental rights or suspect classes, it only needs to be rationally related to a legitimate state interest. The regulations are rationally related to controlling school spending. Additionally, plaintiffs lack standing to argue that the regulations hinder poorer regions from attracting administrators, resulting in no equal protection violation found. Plaintiffs challenge the validity of certain regulations on the grounds that they violate existing New Jersey statutes, specifically the Tenure Employees Hearing Law and provisions related to compensation for accumulated sick and vacation leave (N.J.S.A. 18A:30-3.5 and N.J.S.A. 18A:30-9). They argue that superintendents and assistant superintendents, appointed through standard procedures, should not be classified as 'officers or employees' under these statutes, thereby limiting the Commissioner’s authority to regulate them. This argument parallels one made in a previous case involving school business administrators, which was rejected after determining that such appointments are not made in a routine manner. Although the statute for assistant superintendents lacks similar limitations, the ruling concludes that they cannot be excluded from the regulatory scope without undermining legislative intent. Additionally, plaintiffs’ assertion that prior federal court comments establish a binding legal principle is found to be misguided. Finally, plaintiffs lack standing to contest regulations regarding legal counsel selection, as they pertain to school districts rather than the plaintiffs themselves. Plaintiffs argue that the regulations are ultra vires and void due to the Commissioner lacking authority to issue them. The court disagrees, affirming that the Commissioner of Education has primary jurisdiction over school law controversies, as established in Bower v. Bd. of Educ. of City of E. Orange and supported by N.J.S.A. 18A:6-9. Legislative authorization allows the Commissioner, via the executive county superintendent, to review school law contracts (N.J.S.A. 18A:7-8(j)). The regulations were enacted in response to this authority. The court finds no merit in the plaintiffs' claim that the regulations violate New Jersey's tradition of 'home rule.' Ultimately, the court upholds the Commissioner’s authority to adopt the regulations but identifies that specific provisions (N.J.A.C. 6A:23A-3.1(e)(3), 4, 5, and 6) improperly deprive certain administrators of vested rights and reduce the compensation of tenured assistant superintendents. The regulations were revised after the appeal was filed, and the court does not comment on these revisions, focusing solely on the language in effect at the time of the challenge.