EAST WINDSOR REGIONAL SCHOOL DISTRICT v. BOARD OF TRUSTEES TEACHERS PENSION AND ANNUITY FUND -

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3655-09T4

EAST WINDSOR REGIONAL SCHOOL

DISTRICT, ACTIVE MEMBERS and

EAST WINDSOR EDUCATION

ASSOCIATION,

Petitioners-Appellants,

v.

BOARD OF TRUSTEES, TEACHERS'

PENSION AND ANNUITY FUND,

Respondent-Respondent.

____________________________________

August 8, 2011

Argued March 8, 2011 - Decided

Before Judges Carchman and Waugh.

On appeal from the Teachers' Pension and Annuity Fund, Docket No. LOC#1-00121.

Kathleen Naprstek Cerisano argued the cause for appellants (Zazzali, Fagella, Nowak, Kleinbaum & Friedman, P.C., attorneys; Richard A. Friedman, of counsel and on the briefs).

Danielle P. Schimmel, Deputy Attorney General, argued the cause for respondent (Paula T. Dow, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Schimmel, on the brief).

PER CURIAM

Petitioners East Windsor Education Association (Association) and members of the Association who were actively employed as "content specialists and program coordinators" in 2006 (Members) appeal the final administrative decision of the Board of Trustees of the Teachers' Pension and Annuity Fund (Board) determining that the Members were not entitled to pension credit for compensation they received for serving as content specialists and program coordinators. We reverse.

I.

This matter had its origin in a dispute between Nick Chomicki, a teacher of industrial arts and technology, and the East Windsor School District (District) concerning Chomicki's right to receive pension credit for compensation he received for acting as "computer coordinator" for the District's high school. During the course of that dispute, Chomicki argued that his coordinator position was similar to the content specialist and program coordinator positions held by the Members, who were receiving pension credit for those services. As a result, the Attorney General requested the Division of Pensions and Benefits (Division) to consider whether individuals in those positions were entitled to pension credit.

In July 2006, the Division issued an administrative decision determining that teachers performing specialist and coordinator duties were not entitled to pension credit for that portion of their compensation. The Association and the Members appealed that decision to the Board. In July 2007, the Board upheld the Division's determination. The Association and the Members then requested that the matter be referred to the Office of Administrative Law (OAL) as a contested case, N.J.S.A. 52:14B-1 to -15 and N.J.S.A. 52:14F-1 to -13. The Board made the requested referral.

Both sides moved for summary disposition on stipulated facts. However, the administrative law judge (ALJ) determined that a hearing was required to determine more specifically the job duties of the content specialists and program coordinators. The hearing was held on May 12, 2009.

The ALJ issued her initial decision on December 22, 2009. After stating her factual findings and discussing the law, the ALJ recommended that the Members receive pension credit for acting as content specialists and program coordinators. The Board filed exceptions to the initial decision, and petitioners filed responses to them.

On March 5, 2010, the Board adopted the ALJ's findings of fact, but rejected her conclusions of law. The Board determined that the Members were not entitled to pension credit. This appeal followed.

Because the Board adopted the ALJ's findings of fact, which are not challenged by petitioners, we set forth portions of those findings to provide a factual background for the legal issues presented on appeal.

The parties have stipulated to the following facts and evidence:

. . . .

9. There is no dispute that the duties of Program Coordinators and Content Specialists are integral to the effective functioning of the school curriculum.

10. Program Coordinators and Content Specialists are required to have an instructional certificate, as are all teachers.

11. Program Coordinators and Content Specialists completed the duties of these positions both during the regular school day and after school.

12. Program Coordinators and Content Specialists teach the same number of classes as other teachers.

13. Program Coordinators and Content Specialists are paid in accordance with the collective bargaining agreement and individual contracts. . . . It is stipulated that all other collective bargaining agreements are substantially similar. . . . It is stipulated that all other individual contracts are substantially similar.

14. The pay for the Program Coordinator and Content Specialist position is received bi-weekly, as part of the regular paycheck, with all appropriate deductions.

Raymond Britton and John Dunn, respectively, testified on behalf of petitioners.

Britton taught at the high school level from 1981 until his retirement last year. He holds teaching certificates in health and physical education, and driver's education. He was initially a content specialist from 1997-2007 and then a content coordinator. He testified that it was basically the same position except that when he became the content coordinator, he could not work eight days during the summer. He testified that the job description and duties as admitted into evidence accurately describe the duties he performed, with the exception that overseeing the department resource center was eliminated. He also assigned health classes to the students but this was not included in the job description. He was responsible for purchasing materials. He coordinated the driver education program by making sure that the testing was done properly and that files were in order. He prepared reports on purchasing and drafted proposed budgets. He continued to teach a "full load" of classes while performing these duties while the teachers that had that position prior to him only taught part-time. Over the course of a nine period day, he testified that he taught five periods, ate lunch one period, completed preparation over two periods and as program coordinator, and completed his assignments during his free period. He testified that on occasion, he completed his duties outside of the school day. During the summer, he had to prepare the schedule for the new school year and was not paid for this work. He testified that he was essentially a department head but had no supervisory capacity. However, he was not required to hold a supervisor's certificate.

Dunn testified that he holds a certificate as a teacher of social studies. He has taught at East Windsor since 1984. In addition to teaching social studies, he was a content specialist for 12 years through June 2008, after which the position was eliminated. His job description was as indicated . . . and he performed all those duties while in that position. He ordered all the supplies; recommended a budget to the principal, and after its approval, spoke with the teachers and decided how to implement it; he acted as the liaison between administration and the teachers; and he also provided "input" with the schedule by recommending what courses teachers would teach and how many sections of a course were necessary. He held departmental meetings. He worked over the course of eight days during the summer and was paid but received no pension deduction for this work. He testified that he performed his content specialist work throughout the day including during free periods. He also performed these duties after school while still at school and rarely, at home. He did not observe or evaluate teachers as part of his duties. As a content specialist, he was not required to perform cafeteria or hall duty like the other teachers.

Ronald Bolandi testified on behalf of the respondent. He has been a superintendent of schools for the past 18 years at five different districts and presently holds that position at East Windsor. He testified that department chairpersons are required, at a minimum, to hold a supervisory certificate. Some teach and in other districts, they do not hold teaching responsibilities. They are in a separate bargaining unit from teachers. He testified that program coordinators were responsible for coordinating a program, and a content specialist was responsible for the content in that particular area. The teachers accepting these positions were given "duty-free" schedules in order to complete the responsibilities of the assignments in their respective positions. Teachers ordinarily are assigned to study hall, hall duty and lunch duty, respectively, but content specialists and program coordinators were not. Although no formal agreement in this regard existed, Bolandi testified teachers holding these positions were guaranteed a minimum of one duty-free period to complete their responsibilities in that position. They usually received two duty-free periods. While the contract admitted into evidence . . . was negotiated immediately prior to his employment with the East Windsor Regional School District in April 2004, he was involved in enforcing this contract, he testified. Content specialists and program coordinators were given the same schedules as teachers but the only difference was that they were given duty-free periods. They were still paid for that and in addition, provided a stipend. The district did not dictate when content specialists and program coordinators had to complete their duties but only dictated that department meetings had to take place after school. The positions were abolished approximately three years ago when he requested the Board abolish these positions, because they carried no supervisory weight, in favor of content supervisors. These new positions are full-time supervisory positions.

As noted by the ALJ, the positions at issue have been abolished, so the appeal concerns the Members' right to receive credit for services already performed and compensated by the District.

II.

On appeal, the Association and Members argue that the Board misapplied N.J.S.A. 18A:66-(2)(d), the statute that governs the issue of whether their additional compensation is subject to pension credit. The Board argues that we should defer to its administrative expertise, and maintains that it correctly applied the applicable law including its implementing regulations.

A.

Before addressing the merits of the appeal, we outline our standard of review. "The judicial capacity to review administrative agency decisions is limited." Brady v. Bd. of Review, 152 N.J. 197, 210 (1997). Generally speaking, we will "intervene only in those rare circumstances in which an agency action is clearly inconsistent with its statutory mission or with other State policy." George Harms Constr. Co. v. N.J. Tpk. Auth., 137 N.J. 8, 27 (1994). Only if the agency's action was arbitrary, capricious, or unreasonable should it be disturbed. Brady, supra, 152 N.J. at 210.

"It is well-settled that '[a]dministrative regulations cannot alter the terms of a legislative enactment nor can they frustrate the policy embodied in [a] statute.'" N.J. Ass'n of Realtors v. N.J. Dep't of Envtl. Prot., 367 N.J. Super. 154, 159-60 (App. Div. 2004) (quoting In re Freshwater Wetlands Prot. Act Rules, N.J.A.C. 7:7A-1.1 et seq., 238 N.J. Super. 516, 526, (App. Div. 1989)). However, when an appellate court reviews an "agency's interpretation of statutes within its scope of authority and its adoption of rules implementing its enabling statutes, [it] afford[s] the agency great deference." N.J. Soc'y for the Prevention of Cruelty to Animals v. N.J. Dep't of Agric., 196 N.J. 366, 385 (2008); In re Agric., Aquacultural & Horticultural Water Usage Certification Rules, N.J.A.C. 7:20A-1.1 et seq., 410 N.J. Super. 209, 222-23 (App. Div. 2009); see also TAC Assocs. v. N.J. Dep't of Envtl. Prot., 202 N.J. 533, 541 (2010) ("[I]nterpretations of the statute and cognate enactments by agencies empowered to enforce them are given substantial deference in the context of statutory interpretation.").

Finally, we recognize that "the public pension systems are bound up in the public interest and provide public employees significant rights which are deserving of conscientious protection." Zigmont v. Bd. of Trs., 91 N.J. 580, 583 (1983). "[P]ension statutes are 'remedial in character' and 'should be liberally construed and administered in favor of the persons intended to be benefited thereby.'" Klumb v. Bd. of Educ., 199 N.J. 14, 34 (2009) (quoting Geller v. Dep't of Treasury, Div. of Pensions & Annuity Fund, 53 N.J. 591, 597-98 (1969)). Pension statutes must also be liberally construed in favor of public employees because they represent deferred compensation for a government employee's service. Widdis v. Pub. Emp. Ret. Sys., 238 N.J. Super. 70, 78 (App. Div. 1990). And, of course, a pension board must deal fairly with its members. See Fiola v. N.J. Dep't of Treasury, Div. of Pensions, Police & Firemen's Ret. Sys., 193 N.J. Super. 340, 351 (App. Div. 1984).

The Supreme Court has found that "[s]uch deference is appropriate because it recognizes that agencies have the specialized expertise necessary to enact regulations dealing with technical matters and are particularly well equipped to read . . . and to evaluate the factual and technical issues that . . . rulemaking would invite." In re Freshwater Wetlands Prot. Act Rules, 180 N.J. 478, 489 (2004) (citations and internal quotation marks omitted).

B.

The parties agree that the definition of "compensation" in N.J.S.A. 18A:66-2(d) is the appropriate starting point for our analysis. For the purpose of determining whether it is creditable for pension purposes, Subsection (1)1 of that provision defines "compensation" as

the contractual salary, for services as a teacher as defined in this article, which is in accordance with established salary policies of the member's employer for all employees in the same position but shall not include individual salary adjustments which are granted primarily in anticipation of the member's retirement or additional remuneration for performing temporary or extracurricular duties beyond the regular school day or the regular school year.

[N.J.S.A. 18A:66-2(d)(1).]

The Board based its decision on its conclusion that the "stipend" received by the Members for their role as content specialists or program coordinators is not "contractual salary." It made that determination on the basis of N.J.A.C. 17:3-4.1(a), which provides that compensation "shall be limited to base salary, and shall not include extra compensation." The Board asserts that the stipend received by the Members is actually "[p]ay for extra work, duty or service beyond the normal work day, work year for the position, or normal duty assignment," which is excluded from the regulation's definition of "contractual salary," as stated in N.J.A.C. 17:3-4.1(a)(1)(ii). In addition, the Board argues that the extra stipend is a "form of compensation which is not included in the base salary of all employees in the same position or covered by the same collective bargaining agreement or employment," which is also excluded from the regulation's definition of "contractual salary." N.J.A.C. 17:3-4.1(a)(1)(x).

In making its determination with respect to the issue of "base salary" and compensation not received by others in the same position, the Board pointed to the fact that the applicable agreement between the District and the Association provided that the salaries to be paid to content specialists and program coordinators would include the scheduled salary for their teaching position "plus an additional stipend for [their] added responsibilities." In making its determination that the stipend was "[p]ay for extra work, duty or service beyond the normal work day, work year for the position, or normal duty assignment," the Board relied upon its finding that the Members performed duties related to their content specialist and program coordinator positions prior to and after the regular school day and at times during the school day when other teachers would be performing non-teaching duties, such as hall duty, lunch duty, and study, from which they were excused because of their additional duties.

Petitioners argue that the compensation received by the Members fits the statutory definition of "compensation" because (1) it is their "contractual salary" under the Association's contract with the District, (2) all teachers who perform the additional duties of specialist or coordinator receive the stipend pursuant to the Association's contract with the District, and (3) it is not an "individual salary adjustment[] which [is] granted primarily in anticipation of the members' retirement" or "additional remuneration for performing temporary or extracurricular duties . . . beyond the regular school day or work year." They rely on our decision in Siri v. Board of Trustees of the Teachers' Pension & Annuity Fund, 262 N.J. Super. 147 (App. Div. 1993), in arguing that the statutory definition must control over a more narrow regulatory provision. In Siri, we interpreted the same statute and a similar provision of the same regulation. We held:

The statute prevails over the regulation. "[I]n the execution of its rule-making power a state agency may not go beyond declared statutory policy." In re Increase in Fees by N.J. St. Bd. of Dentistry, 166 N.J. Super. 219, 223 (App. Div. 1979) [rev'd on other grounds, 84 N.J. 582 (1980)]. "Administrative regulations, of course, cannot alter the terms of a legislative enactment or frustrate the policy embodied in the statute." N.J. Chamb. Commerce v. N.J. Elec. Law Enforce. Comm., 82 N.J. 57, 82 (1980).

[Id. at 152.]

The statute does not "limit" the term "contractual salary" to "base salary," as does the regulation. The record is clear that under the Association's contract with the District, all teachers who served as content specialists or program coordinators received a contractually mandated salary, i.e., their designated teacher compensation and the "stipend" for the additional duties. Consequently, we hold that the first part of the statutory definition of "compensation" in N.J.S.A. 18A:66-2(d)(1), which is "contractual salary, for services as a teacher as defined in this article, which is in accordance with established salary policies of the member's employer for all employees in the same position," has been satisfied.

We now turn to the two exclusions contained in N.J.S.A. 18A:66-2(d)(1). The Board does not argue that the Members were receiving "individual salary adjustments which [were] granted primarily in anticipation of the members' retirement." Consequently, the issue becomes whether they were receiving "additional remuneration for performing temporary or extracurricular duties . . . beyond the regular school day or work year." At page 26 of its brief, the Board conceded that it "does not claim that the duties are temporary or extracurricular."

Instead, the Board asserts that "the stipends for the position of program coordinator and content specialist are '[p]ay for extra work, duty or service beyond the normal work day, work year for the position, or normal duty assignment.'" That language, however, is not found in the statute, but is found only in N.J.A.C. 17:3-4.1(a)(1)(ii). Because it narrows the statutory definition of "compensation," the regulation runs afoul of our holding in Siri and the Board's duty to deal fairly with its members. Fiola, supra, 193 N.J. Super. at 351. Both require reversal of the denial of pension credit to the Members.

Finally, we note that the Board has stipulated that the duties of the program coordinators and content specialists were "integral to the effective functioning of the school curriculum." We further note that the Board proposed to readopt the applicable regulations with amendments on December 3, 2007. 39 N.J.R. 5058(b). One of the proposed amendments was to add a new subsection (j) to N.J.A.C. 17:3-4.1. The proposed section provided:

(j) A stipend may be considered credible compensation and subject to pension deductions for retirement credit if it:

1. Is included as part of the petitioner's regular payroll check; and

2. Represents duties not addressed in base compensation that are integral to the effective functioning of the school curriculum.

The Board explained its reasons for the proposal as follows:

The Board proposes to add subsection (j) to define compensation that may qualify for credible compensation. Historically, stipends were routinely paid in a lump sum for performing additional duties that were not part of the regular contract. It was generally understood that as a lump sum payment, it was excluded as creditable compensation. This form of payment has evolved into a type of compensation that is often paid in the regular payroll checks for performing duties that are not included in the regular contract.

The Board adopted the new subsection (j) on April 21, 2008. 40 N.J.R. 2122(a).

The stipend at issue here meets both requirements of the new N.J.A.C. 17:3-4.1(j). The stipend is paid through regular payroll checks and the duties are "integral to the effective functioning of the school curriculum." Although the new subsection (j) was not relied upon by either party or the Board during the OAL proceedings, we cite the new language to make the point that our holding with respect to the nature of the stipend is fully consistent with the Board's recent regulation and its recognition that stipends such as those at issue here have "evolved into a type of compensation that is often paid in the regular payroll checks for performing duties that are not included in the regular contract."

We reverse the denial of pension credits and direct the Board to adjust the Members' records accordingly.

Reversed.

1 Subsection (2) contains a different definition for those who joined the pension system after the events that gave rise to the pending dispute.