New Jersey Turnpike Authority v. American Federation of State, County & Municipal Employees

The opinion of the Court was delivered by

This appeal concerns whether certain New Jersey Turnpike Authority (Authority) employees can join collective negotiating units. The New Jersey Employer-Employee Relations Act (Act), N.J.S.A 34:13A-1 to -29, provides public employees with broad *335 powers to “form, join and assist” employee organizations. N.J.S.A 34:13A-5.3. Two important exceptions to that right involve “managerial executives” and “confidential employees.” See ibid. Managerial executives are those who “formulate management policies and practices, and persons who are charged with the responsibility of directing the effectuation of such management policies and practices____” N.J.S.A 34:13A-3(f). Confidential employees possess “functional responsibilities or knowledge in connection with the issues involved in the collective negotiations process [that] would make their membership in any appropriate negotiating unit incompatible with their official duties.” N.J.S.A 34:13A-3(g).

Those statutory definitions have been interpreted by the Public Employment Relations Commission (PERC), the body charged with enforcing and implementing the Act. See N.J.S.A 34:13A-5.2. Relying in part on its own interpretations of the managerial executive and confidential employee exceptions, PERC certified Authority employees for membership in three separate negotiating units. The Authority appealed all three certifications, claiming that the certified employees should have been excluded because they were either managerial executives or confidential employees or because public policy required their exclusion. The Appellate Division reversed and remanded, construing both the managerial executive and confidential employee exceptions more broadly than did PERC, and noting that “[t]he practical effect of PERC’s decision is to leave the Authority with only twenty members of its management team from whom it can expect full loyalty uncompromised by union membership.” 289 N.J.Super. 23, 26, 672 A.2d 1244 (1996). PERC and the American Federation of State, County and Municipal Employees, Council 73 (AFSCME) petitioned for certification. We granted both petitions. 147 N.J. 261, 686 A.2d 763 (1996).

I

The New Jersey Turnpike Authority was created by the Legislature in 1948 to design, construct, operate and maintain a high *336 speed, limited access roadway. See L. 1948, c. 454, § 1 (codified as amended at N.J.S.A 27:23-1). The Turnpike is now 148 miles long; an average of approximately 550,000 vehicles per day traveled the Turnpike in 1995. Manual of the Legislature of New Jersey 168 (1997). Approximately 2365 employees work for the Authority. Ibid,

Testimony before PERC’s hearing officer revealed that the Authority’s Commissioners ultimately are responsible for all policies, budget approval, personnel actions, negotiations, and contract administration approval, subject to the Governor’s veto power. Below the Commissioners in the Authority’s management structure is an Executive Director, who is responsible for the day-today management of the Authority. See N.J.A.C. 19:9-7.2. At the time of the PERC decisions, the Authority was divided into nine departments, each run by a department director: engineering; maintenance; tolls; operations; finance and budget; law; public affairs; human resources; and administrative services and technology.

In June 1991, AFSCME petitioned PERC to represent eighty-eight Authority employees in a supervisory unit. The petitioned-for employees occupied positions subordinate to that of department director. The Authority opposed the petition, claiming that all of the petitioned-for titles were inappropriate for inclusion in a collective negotiating unit because they were managerial executives or confidential employees, because supervisory conflicts existed between the titles, and also because the titles subject to the petition included nonsupervisory personnel who should not be represented in a supervisory unit. PERC referred the contested matter to a hearing officer for factfinding and recommendation. The hearing officer heard fourteen days of testimony, after which she produced a 163-page report recommending that all but fourteen of the petitioned-for titles be certified. H.O. No. 93-2, 19 N.J.P.E.R. ¶ 24154 (1993).

The Authority filed exceptions to the hearing officer’s report. PERC transferred the case to itself pursuant to N.J.A.C. 19:11-8.8 *337 (subsequently recodified at N.J.A.C. 19:11-9.1) and issued a decision that modified the hearing officer’s recommendations slightly. P.E.R.C. No. 94-24, 19 N.J.P.E.R. ¶ 24218 (1993). PERC accepted the hearing officer’s recommendation to exclude fourteen employees from the negotiating unit. Additionally, PERC, in order to prevent intra-unit conflicts, excluded five nonsupervisors from the unit, as well as twenty employees who supervised lower-level supervisors in the unit. Although PERC’s decision excluded more employees from unit membership than the hearing officer’s report, PERC generally rejected the Authority’s claim that many of the affected employees were either managerial executives or confidential employees. Ibid. When considering the Authority’s claims concerning managerial executive status, PERC relied largely on its decision in Borough of Montvale, P.E.R.C. No. 81-52, 6 N.J.P.E.R. ¶ 11259 (1980). That opinion reads in pertinent part:

A person formulates policies when he develops a particular set of objectives designed to further the mission of the governmental unit and when he selects a course of action from among available alternatives. A person directs the effectuation of policy when he is charged with developing the methods, means, and extent of reaching a policy objective and thus oversees or coordinates policy implementation by line supervisors. Simply put, a managerial executive must possess and exercise a level of authority and independent judgment sufficient to affect broadly the organization’s purposes or its means of effectuation of these purposes. Whether or not an employee possesses this level of authority may generally be determined by focusing on the interplay of three factors: (1) the relative position of that employee in his employer’s hierarchy; (2) his functions and responsibilities; and (3) the extent of discretion he exercises.

PERC determined that “[n]one of [the petitioned-for employees] exercises a level of authority and independent judgment sufficient to broadly affect the Authority’s purposes or means of effecting these purposes.” 19 N.J.P.E.R. ¶ 24218. After considering, among other things, “the Act’s policy favoring organization of all employees desiring it,” PERC determined that, with the exception of one employee, “the petitioned-for employees do not meet the narrow definition of managerial executive.” Ibid.

Concerning confidential employees, PERC reiterated its holding in State of New Jersey, P.E.R.C. No. 86-18, 11 N.J.P.E.R. ¶ 16179 (1985):

*338 The Commission’s approach to confidential employee disputes has thus been consistent since 1970. We scrutinize the facts of each case to find for whom each employee works, what he does, and what he knows about collective negotiations issues. Finally, we determine whether the responsibilities or knowledge of each employee would compromise the employer’s right to confidentiality concerning the collective negotiations process if the employee was included in a negotiating unit.

After engaging in an individualized analysis of the employees claimed by the Authority to be confidential, PERC excluded one employee who had been promoted since the hearing officer’s report to a position involving the analysis and formulation of collective negotiations strategies relating to possible changes in employee medical insurance benefits. 19 N.J.P.E.R. ¶ 24218.

The balance of PERC’s opinion addressed intra-unit conflicts of interest among supervisors. Such conflicts were addressed by this Court in Board of Education v. Wilton, which held that where “substantial actual or potential conflict of interest exists among supervisors with respect to their duties and obligations to the employer in relation to each other, the requisite community of interest among them is lacking,” thereby making a single unit impermissible. 57 N.J. 404, 427, 273 A.2d 44 (1971). Relying on Wilton, PERC concluded that “it would be inappropriate for the proposed unit to include supervisors who supervise and evaluate other supervisors” and excluded twenty employees. 19 N.J.P.E.R. ¶ 24218.

PERC’s decision concluded by listing both those employees excluded from joining the proposed unit and those eligible for unit membership. PERC ordered an election among the eligible employees to determine if a majority of those employees wished to be represented by AFSCME for the purpose of collective negotiations. Ibid.

AFSCME won that election. On October 21, 1993, PERC certified AFSCME Local 3914 as the majority representative for a supervisory unit. On September 15, 1993, AFSCME Local 3913 had filed a petition seeking to represent a negotiating unit consisting primarily of the non-supervisor professionals excluded from the Local 3914 unit. That same day, AFSCME Local 3912 had *339 filed a petition seeking to represent a negotiating unit composed predominantly of the supervisors excluded from the Local 3914 unit because of supervisory conflicts. On June 28, 1994, PERC’s Director of Representation directed elections for those two negotiating units. D.R. No. 94-29, 20 N.J.P.E.R. ¶ 25149 (1994). Local 3912 and Local 3913 won the respective elections. On August 25, 1994, AFSCME Local 3913 was certified as the majority representative for a unit of professional employees. On August 29, 1994, AFSCME Local 3912 was certified as the majority representative for a second supervisory unit.

The Authority appealed those certifications to the Appellate Division, which consolidated the three appeals. 289 N.J.Super. at 25, 672 A.2d 1244. The State of New Jersey was granted leave to participate as amicus curiae.

While acknowledging that courts ordinarily defer to an agency’s interpretation of a statute enforced by that agency, the Appellate Division noted that no deference is required when the agency interpretation “ ‘flout[s] the statutory language and undermine[s] the intent of the Legislature.’ ” Id. at 26, 672 A.2d 1244 (quoting GE Solid State, Inc. v. Director, Div. of Taxation, 132 N.J. 298, 306-07, 625 A.2d 468 (1993)). The court asserted that PERC misconstrued and misapplied the “managerial executive” and “confidential employee” definitions promulgated by the Legislature. Ibid.

The court’s analysis began by recognizing that Article I, Paragraph 19 of the New Jersey Constitution grants public employees the right to organize and present their grievances through representatives of their own choosing, a right codified in the Act. Id. at 27, 672 A.2d 1244. The court noted, however, that the right of public sector employees to collectively negotiate is narrower than that afforded private sector employees. Ibid. The court further noted that an overriding concern of labor law “ ‘[has been] to assure the employer of a loyal and efficient cadre of supervisors and managers independent from the rank and file,’ ” id. at 27-28, *340 672 A.2d 1244 (quoting State Management Ass’n of Connecticut, Inc. v. O’Neill, 204 Conn. 746, 529 A.2d 1276, 1280 (1987)).

Turning to the managerial executive exception, the court traced the history of the Act. Id. at 29-31, 672 A.2d 1244. The 1968 Act, commonly known as Chapter 303, prohibited “any managerial executive” from joining a collective negotiating unit. Id. at 29, 672 A.2d 1244. The term “managerial executive” was undefined by Chapter 303. Ibid. Chapter 303 did, however, provide “supervisors” with the right to collectively negotiate. Ibid. The statute referred to supervisors as those “having the power to hire, discharge, discipline, or to effectively recommend the same.” Ibid. The Appellate Division concluded that “[s]uch supervisors, we think, refer to those persons commonly understood as on-line supervisors.” Ibid.

The court noted that, in 1972, the Legislature enacted Assembly Bill 520 in an attempt to amend Chapter 303 to include provisions for unfair labor practice. Ibid. Governor Cahill vetoed the bill. Ibid. In his veto statement, the Governor recommended that the term “supervisors” be broadly defined, and that supervisors be denied collective negotiation rights. Id. at 29-30, 672 A.2d 1244. In 1974, the Legislature succeeded in amending Chapter 303. Id. at 31, 672 A.2d 1244. It did not, however, accept the Governor’s recommendation that supervisors be excluded. Ibid. Nor did the Legislature more broadly define the term “supervisor,” leading the panel to conclude that “supervisor” still means “on-line supervisor.” Ibid,

The court considered extrajurisdictional caselaw defining “managerial employees,” the term used in both private sector labor law and in other states’ public sector labor laws. Id at 31-32 & n. 3, 672 A.2d 1244. Those cases indicated that courts in Illinois, Pennsylvania, and Massachusetts do not restrict “managerial employees” to those in the highest management echelon. Id. at 31-32, 672 A.2d 1244. The court contrasted those judicial interpretations with those of PERC, which had developed a body of administrative caselaw indicating that managerial executives are those *341 “who have the final responsibility to formulate, determine, and effectuate policy that is essential.” Id. at 32-33, 672 A.2d 1244. The court also contrasted PERC’s interpretation with the actual language of N.J.S.A 23:13A-3(f) and decided that the statutory definition did not limit “managerial executive” to high level managers. Id. at 33-34, 672 A.2d 1244.

The court observed that the definition proposed by Governor Cahill in his 1973 veto message was broader than that employed by PERC. Id. at 33, 672 A.2d 1244. The Governor’s definition encompassed those “who formulate management policies and practices, and those who are charged with the responsibility of effectuating and making operative such management policies and practices.” Ibid, (quoting Governor’s Veto Statement to Assembly Bill No. 520, at 6 (Feb. 22, 1973) (Governor’s Veto Statement)). The court noted that final responsibility was not crucial. Ibid. Furthermore, the Governor’s definition, unlike PERC’s interpretation, was disjunctive: managerial executives were those who either formulate policies and practices or were responsible for effectuating and making operative policies and practices. Ibid. An employee need not do both to be considered a managerial executive. Ibid,

Although recognizing that the 1974 amendments to Chapter 303 did not adopt verbatim Governor Cahill’s proposed definition, the court determined that the Legislature, for all practical purposes, accepted the Governor’s proposal. Id. at 34, 672 A.2d 1244. Referring to those responsible for management policies and procedures, the Governor’s proposal used the phrase “effectuating and making operative” instead of the Legislature’s phrase “directing the effectuation of,” but the court saw “no discemable difference” between the two. Ibid. The court found that “[d]irecting the effectuation of a policy or practice is, to us, the same as making the policy or practice operative.” Ibid, Because Governor Cahill did not intend to narrow the definition of managerial executive, and because the Legislature had functionally adopted the Governor’s proposed definition, the Appellate Division inferred that the *342 Legislature adopted a stance similar to Governor Cahill’s concerning managerial executives. Ibid.

The court did not disagree with PERC’s contention in Borough ofMontvale, supra, that

a person formulates policies when he develops a particular set of objectives designed to further the mission of the government unit and when he selects a course of action from among available alternatives. A person directs the effectuation of policy when he is charged with developing the methods, means, and extent of reaching a policy objective and thus oversees or coordinates policy implementation by line supervisors.

Ubid]

The court, based on the statutory language, “add[ed] a reference to practices as well as policies.” Ibid.

The court also agreed generally with the criteria considered by PERC in determining whether an employee is a managerial executive. Ibid. The court disagreed, however, with PERC’s assertion that a managerial executive “must possess and exercise a level of authority and independent judgment sufficient to affect broadly the organization’s purposes or its means of effectuation of these purposes.” Id. at 34-35, 672 A.2d 1244 (quoting Borough of Montvale, supra). Additionally, the court held that managerial executives need not both formulate policies and practices and be responsible for directing the effectuation thereof. Id. at 36, 672 A.2d 1244. The court further observed that “formulate” was not the equivalent of “adopt” and that, therefore, one could be considered a managerial executive based on responsibility for recommending policies and practices, especially if those recommendations are substantially accepted. Id. at 36, 672 A.2d 1244. The court concluded that PERC’s interpretation of “managerial executive” was both inconsistent with, and narrower than, the statutory definition. Ibid. For illustrative purposes, the court critically analyzed PERC’s determination that four specifically identified employees were not managerial executives. Id. at 36-39, 672 A.2d 1244.

The Appellate Division then turned to PERC’s interpretation of “confidential employee.” Id. at 40, 672 A.2d 1244. The court *343 generally agreed with PERC’s approach as outlined in State of New Jersey, supra:

We scrutinize the facts of each case to find for whom each employee works, what he does, and what he knows about collective negotiations issues. Finally, we determine whether the responsibilities or knowledge of each employee would compromise the employer’s right to confidentiality concerning the collective negotiations process if the employee was included in a negotiating unit.

[Ibid]

However, the court called into question PERC’s determination that “confidential employee” is to be narrowly interpreted, and that mere “access to confidential personnel files or information concerning the administrative operations of a public employer” is insufficient to render a person a confidential employee. Ibid. Of particular concern to the court was PERC’s conclusion that those who assimilate, evaluate, analyze and provide information to superiors for use in the labor negotiations process are not necessarily confidential employees. Id. at 41, 672 A.2d 1244. The court found that such employees could not be excluded from the definition of “confidential employee” merely because they had no knowledge of the ultimate position taken by the Authority in negotiations. Id. at 41-42, 672 A.2d 1244. The court noted that “[a] member of the management team need not know the exact positions to be taken in order to make his or her union membership incompatible with his or her managerial duties.” Id. at 42, 672 A.2d 1244.

Finally, the court reiterated that the statutory language mentions knowledge or responsibility “in connection with the issues involved in the collective negotiations process.” Ibid. The court construed the terms “issues” and “process” to incorporate more than the actual positions taken by the Authority in negotiations. Ibid. Neither the language of the definition nor the legislative history suggested to the court that PERC’s narrow1 interpretation was correct. Ibid.

The court remanded the matter to PERC for further consideration consistent with its opinion. Id. at 43, 672 A.2d 1244. PERC and AFSCME petitioned for certification; this Court granted both petitions. 147 N.J. 261, 686 A.2d 763 (1996). The New Jersey *344 State AFL-CIO, the International Association of Fire Fighters AFL-CIO, the New Jersey Deputy Fire Chiefs, and the New Jersey League of Municipalities were granted leave to participate as amicus curiae.

II

A

Article I, Paragraph 19 of the New Jersey Constitution reads in its entirety:

Persons in private employment shall have the right to organize and bargain collectively. Persons in public employment shall have the right to organize, present to and make known to the State, or any of its political subdivisions or agencies, their grievances and proposals through representatives of their own choosing.

Early judicial interpretations of the paragraph merely required that public employers meet and discuss labor disputes with employees; there was no clear obligation to permit or engage in collective negotiations. See New Jersey Turnpike Auth. v. AFSCME, 83 NJ.Super. 389, 395-99, 200 A.2d 134 (Ch.Div.1964) (holding that employees could not strike, but management had to meet with all employee representatives to discuss grievances and proposals in good faith). Early decisions also declared strikes by public employees unlawful. Donevero v. Jersey City Incinerator Auth., 75 N.J.Super. 217, 222, 182 A.2d 596 (Law Div.1962), rev’d sub nom. on other grounds, McAleer v. Jersey City Incinerator Auth., 79 N.J.Super. 142, 146, 190 A.2d 891 (App.Div.1963). Public employees were also forbidden from engaging in sickouts, mass resignations, and similar actions. See Board of Educ. v. New Jersey Educ. Ass’n, 96 N.J.Super. 371, 380-82, 233 A.2d 84 (Ch.Div.1967), aff'd, 53 N.J. 29, 37-40, 247 A.2d 867 (1968). Over time, public employees lobbied the Legislature for enhanced collective negotiation rights. See Charles J. Coleman & Nancy Gulick, The New Jersey Courts and the Decline of the Collective Negotiation System, 14 Rutgers L.J. 809, 810 (1983). In 1966, the Legislature established the Public and School Employees’ Grievance Procedure Study Commission “to study the need for a *345 procedure to be established for the presentation of grievances by public and school employees [and] to provide for reports and recommendations by said commission to the Governor and the Legislature____” L. 1966, c. 170.

That commission’s report was submitted in January 1968. See Final Report of the Public and School Employees’ Grievance Procedure Study Commission (1968). In September 1968, the Legislature, relying in large part on that report, enacted the New Jersey Employer-Employee Relations Act, known as “Chapter 303.” See L. 1968, c. 303. Chapter 303 applied to public employees “except elected officials, heads and deputy heads of departi ments and agencies, and members of boards and commis-sions____” L. 1968, c. 303, § 4 (codified as amended at N.J.S.A. 34:13A-3(d)). Chapter 303 also excluded “managerial executives,” a term undefined by the Chapter except in relation to school districts, where “managerial executive” meant “the superintendent of schools or his equivalent.” L. 1968, c. 303, § 7 (codified as amended at N.J.S.A 34:13A-5.3). The statute did not refer to “confidential employees.”

Chapter 303 provided public employees with the right, “freely and without fear of penalty or reprisal, to form, join and assist any employee organization or to refrain from any such activity.” L. 1968, c. 303, § 7 (codified as amended at N.J.S.A 34A:13A-5.3). “Negotiating units” formed pursuant to Chapter 303 were to be defined “with due regard for the community of interest among the employees concerned____” Ibid. Supervisors “having the power to hire, discharge, discipline, or to effectively recommend the same” could generally organize so long as supervisory units did not admit nonsupervisory personnel. Ibid.

Chapter 303 also created PERC. See L. 1968, c. 303, § 6(a) (codified as amended at N.J.S.A 34:13A-5.2(a)). The Legislature charged PERC with making policy and establishing “rules and regulations concerning employer-employee relations in public employment relating to dispute settlement, grievance procedures and administration including enforcement of statutory provisions con- *346 ceming representative elections and related matters.” Ibid. PERC was also authorized to intervene “in matters of recognition and unit definition” in the event of a dispute. L. 1968, c. 303, § 7 (codified as amended at N.J.S.A 34:13A-5.3).

PERC encountered some difficulty in interpreting Chapter 303. In City of Elizabeth, P.E.R.C. No. 36, N.J.P.E.R. Supp. 36 (1970), PERC noted that Chapter 303 did not define “managerial executive.” In the absence of a statutory definition, PERC relied on the “general meaning of the term.” PERC found that “[t]he essential characteristics of the term denote one who determines and executes policy through subordinates in order to achieve the goals of the administrative unit for which he is responsible or for which he shares responsibility.” Relying on that definition, PERC determined that the police chief and deputy chiefs of the Elizabeth Police Department were not managerial executives. The department director, not the chief and deputies, was responsible for hiring and firing. Additionally, although the chief and deputy chiefs assisted in the budgetary and policymaking process of the department, final responsibility rested with the department director. PERC found that “[i]t is this final responsibility to formulate, determine and effectuate policy and not the initial preparation of a budget or of policy proposals that distinguishes the managerial executive from other staff or line positions.”

Later that year, in County of Union, P.E.R.C. No. 48, N.J.P.E.R. Supp. 48 (1970), PERC again attempted to ascertain the definition of “managerial executive” that had been omitted from Chapter 303. After noting that “the indicia of such status have not been exhaustively treated in the available precedents of the Commission,” PERC distilled four characteristics consistently associated by the National Labor Relations