VIRGINIA BUSH v. BOARD OF EDUCATION OF THE WARREN COUNTY TECHNICAL SCHOOL DISTRICTAnnotate this Case
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
DOCKET NO. A-0
BOARD OF EDUCATION OF THE WARREN
COUNTY TECHNICAL SCHOOL DISTRICT,
January 28, 2015
Argued December 4, 2013 - Decided
Before Judges Fuentes, Simonelli, and Haas.
On appeal from the New Jersey Commissioner of Education, Department of Education, Docket Nos. 209-8/09.
Allan P. Dzwilewski argued the cause for appellant/cross-respondent (Schwartz, Simon, Edelstein & Celso, L.L.C., attorneys; Mr. Dzwilewski, of counsel and on the briefs; Christopher A. Dzwilewski, on the brief).
Ty Hyderally argued the cause for respondent/cross-appellant (Hyderally & Associates, P.C., attorneys; Mr. Hyderally and Jennifer Vorih, on the briefs).
John J. Hoffman, Acting Attorney General, attorney for respondent Commissioner of Education (Lauren A. Jensen, Deputy Attorney General, on the statement in lieu of brief).
The opinion of the court was delivered by
The Board of Education of the Warren County Vocational School District (Board) appeals the September 27, 2012 Final Decision of the Commissioner of Education, awarding back-pay and prejudgment interest to petitioner Virginia Bush and holding that petitioner was not obligated to mitigate her damages claim. Petitioner has filed a cross-appeal contesting the amount of prejudgment interest awarded by the Commissioner. We affirm the Commissioner's decision awarding petitioner prejudgment interest. However, we reverse the Commissioner's determination that petitioner was not obligated to mitigate her claim for back-pay damages, and remand for the Commissioner to recalculate the award of back-pay accordingly.
In November 2007, petitioner Virginia Bush was employed as a tenured secretary in the office of the Board's Business Administrator. The controversy that led to this appeal originated on November 8, 2007, when the Board demanded petitioner sign an employment contract that would have vitiated petitioner's tenure rights. When petitioner refused to sign this contract, the Board terminated her employment effective December 10, 2007.
Petitioner sought vindication of her tenure rights by seeking a declaratory ruling from the Commissioner, reinstatement to her prior position, and an award of back-pay and emoluments. The Commissioner referred the matter to the Office of Administrative Law (OAL) for an evidentiary hearing before an Administrative Law Judge (ALJ). On April 23, 2009, the ALJ issued an initial decision in petitioner's favor on the central issues raised. The ALJ concluded the Board had terminated her employment as secretary without cause and in violation of her tenure rights. However, the ALJ also found petitioner had not mitigated her claim for back-pay by failing to find or actively seek alternative comparable employment or apply for unemployment compensation benefits.
On May 27, 2009, the Commissioner issued a final decision upholding the ALJ's findings concerning the Board's violation of petitioner's tenure rights. The Commissioner rejected, however, the ALJ's recommendation to deny petitioner an award of back-pay and emoluments covering the time period she had been unlawfully terminated from her employment. Although petitioner had mistakenly filed a petition seeking only a declaratory ruling, the Commissioner determined she was nevertheless entitled to reinstatement to a secretarial position with back-pay and emoluments. Because petitioner's back-pay was subject to mitigation, and in light of the parties' inability to agree on an appropriate mitigation figure, the Commissioner found petitioner needed to file a new petition addressing these particular issues.
Adhering to the Commissioner's findings, petitioner filed a new petition on August 10, 2009, alleging the Board had refused to award her back-pay or emoluments. The Board denied this allegation. As reflected in a letter dated June 22, 2009, sent to petitioner by the Board's counsel, in April 2009 the Board offered petitioner a position as a secretary for the district's Child Study Team (CST secretary), effective July 1, 2009, which petitioner refused to accept.
Despite petitioner's refusal, the Board offered her the CST secretary position two more times: once on June 3, 2009, and again on July 27, 2009. The CST secretary position's salary was equal to the salary petitioner earned as secretary to the Business Administrator. The Board's counsel's letter also noted that "it is the District's position that no back pay or other benefits are due as, on the record, [petitioner] testified that she made no efforts of whatever nature to mitigate the claimed damages."
In its September 15, 2009 answer to petitioner's claims, the Board raised its offer to reinstate petitioner as a CST secretary as an affirmative defense. The Board also emphasized that petitioner did not attempt to mitigate damages in any fashion. The Board argued that these factors were sufficient to constitute a waiver by petitioner of any claims she may have had against her employer, and showed the Board's compliance with the Commissioner's prior ruling.
After reviewing this record, the ALJ issued an initial decision finding petitioner was entitled to back-pay commencing on December 15, 2007, the date the Board terminated her as secretary to the Business Administrator, and continuing to April 27, 2009, the date the Board first offered petitioner employment as a CST secretary. The ALJ further concluded that enforcement of the Commissioner's May 27, 2009 order regarding petitioner's reinstatement should be adjudicated in the Superior Court pursuant to N.J.A.C. 6A:3-3.1(b)1 and Rule 4:67-6(a)(2).2
With respect to mitigation, the ALJ found it "undisputed that [petitioner] made no efforts to mitigate her damages . . . . In fact, [petitioner] conceded at the hearing that since her termination she had neither looked for another position nor applied for unemployment benefits." However, the ALJ also found the Board "failed to present prima facie evidence that comparable employment existed between December 15, 2007, and April 27, 2009." Because the record did not have sufficient facts to accurately calculate the amount of back-pay petitioner was entitled to receive, the ALJ ordered the parties to provide this information directly to the Commissioner, who would then be in the position to decide the back-pay award.
The Commissioner issued a final decision on February 9, 2011, concurring with the ALJ's findings that petitioner had the opportunity to mitigate her damages as of April 27, 2009, when she declined the Board's offer to hire her as a CST secretary. The Commissioner also found the Board did not meet its burden to prove petitioner failed to mitigate damages between December 15, 2007, and April 27, 2009, and additional information was needed to determine the amount of back-pay to award.
The Commissioner directed the OAL to hold a fact-finding hearing to evaluate the gross amount of back-pay petitioner was entitled to receive and address the Board's argument in favor of subtracting from that gross amount of back-pay a figure attributable to mitigation. Although petitioner had not made an initial claim for prejudgment interest, the Commissioner noted the ALJ had discretion to allow her to argue in favor of an award of four percent prejudgment interest. Finally, the Commissioner determined that petitioner's decision to decline the Board's offer of employment as a CST secretary terminated her tenure rights in the position of secretary.3
On June 18, 2012, the parties agreed to file a stipulation of facts before the Commissioner. We quote here the pertinent sections of these stipulated facts
1. The issue on Remand before the Court is the amount of back pay for salary and benefits due Petitioner for the period between December 15, 2007 and April 27, 2009, less any applicable mitigation[.]
2. Salary for the above relevant period would have been $67,840.89, assuming a 2% increment for the 2008-2009 year, or $69,860.27, assuming an 8% increment for the 2008-2009 year.
3. Alternative medical premiums were $2,703.24.
4. Out of pocket medical expenses were $54.38.
5. Petitioner had earned and accumulated 29 vacation days. Payment for said days would be $5,546.00, assuming a 2% increment for the 2008-2009 year, or $5,872.23, assuming an 8% increment for the 2008-2009 year.
. . . .
7. The legal issue before the Court is [defendant]'s claim for an offset in mitigation totaling $40,120,
. . . .
Petitioner disputes the claim that unemployment compensation, even if received by Petitioner, would be in mitigation of the amounts set forth in paragraphs 2 through 6 above. Petitioner further disputes that Petitioner would have received the maximum amount of benefits, for the full period listed above.
. . . .
8. The Court will also include in its determination whether or not to award pre-judgment interest in the amount of 4%.
The ALJ issued an initial decision on August 13, 2012 based upon these stipulated facts and determined petitioner "was not required to seek unemployment benefits for the purpose of mitigating [the Board]'s damages[.]" The ALJ reasoned that even if petitioner had actually received these benefits, the Board would have been legally required to reimburse the State Department of Labor's unemployment compensation fund based upon petitioner's wrongful termination.
The ALJ also found petitioner was entitled to receive prejudgment interest at a rate of four percent4 because the Board's conduct constituted a deliberate violation of N.J.S.A. 18A:6-10,5 or at least an act of bad faith.
As to the question of mitigation, the ALJ relied on the "collateral source" rule, which prohibits an employer who wrongfully terminates an employee from offsetting the damages it owes the employee based upon compensation the employee receives from a collateral source. Relying on Sporn v. Celebrity, Inc., 129 N.J. Super. 449, 453 (Law Div. 1974), the ALJ concluded that unemployment compensation benefits qualify as a collateral source of income. Although the ALJ acknowledged that as a general proposition an employee is not entitled to a windfall by receiving back-pay and unemployment benefits, the ALJ, citing our opinion in Willis v. Dyer, 163 N.J. Super. 152, 165 (App. Div. 1978), held "[a] public employer must either pay damages directly to the employee, or reimburse the unemployment compensation fund if the employee has received such benefits."
In a final decision dated September 27, 2012, the Commissioner declined to address petitioner's argument challenging the ALJ's award of four percent prejudgment interest, noting that the parties had earlier stipulated to this precise rate of interest. The Commissioner concurred with the findings of the ALJ and adopted that decision as the final disposition in the matter, and ordered the Board to pay petitioner $79,190.29 for the period between December 15, 2007 and April 27, 2009. The decision does not address the Board's argument concerning petitioner's obligation to mitigate damages.
Generally, an appellate court will not upset an agency's ultimate determination unless the challenging party can establish the decision was arbitrary, capricious, or unreasonable, or that it violated legislative policies expressed or implied in the act governing the agency. Campbell v. Dep't of Civil Serv., 39 N.J. 556, 562 (1963). However, the issues presented by the parties for appellate review here concern only questions of law. In this context, we are "in no way bound by the agency's interpretation of a statute or its determination of a strictly legal issue." US Bank, N.A. v. Hough, 210 N.J. 187, 200 (2012) (quoting Univ. Cottage Club of Princeton N.J. Corp. v. N.J. Dep't of Envtl. Prot., 191 N.J. 38, 48 (2007)).
We first address the question of prejudgment interest on petitioner's claim for back-pay damages. Both parties have challenged the Commissioner's determination of this issue for different reasons. Petitioner argues the Commissioner erred in awarding a one-time amount of four percent interest. According to petitioner, interest should be calculated on an annual basis for the two years she was awarded back-pay. She also argues that her decision to stipulate to a four percent rate of interest should not preclude her from making this challenge on appeal. The Board argues the Commissioner erred in awarding prejudgment interest altogether. Alternatively, the Board urges us to preclude petitioner from arguing against the previously stipulated rate of prejudgment interest.
The parties' arguments challenging this aspect of the Commissioner's decision are unpersuasive.
N.J.A.C. 6A:3-1.17 provides
(a) The Commissioner may, pursuant to the criteria of this section, award prejudgment and/or postjudgment interest in any circumstance in which a petitioner has sought such relief and has successfully established a claim to a monetary award.
1. Any petitioner seeking award of prejudgment interest shall so specify in the petition's request for relief and shall propose, before the Commissioner or the ALJ, whoever is hearing the case, an interest calculation consistent with (d) below.
. . . .
(c) . . .
1. The Commissioner shall award prejudgment interest when he or she has concluded that the denial of the monetary claim was an action taken in bad faith and/or has been determined to have been taken in deliberate violation of statute or rule.
The Commissioner accepted the ALJ's calculations and application of this regulation in awarding petitioner prejudgment interest. The regulation applies here because the Board terminated petitioner's employment from a tenured position without cause, in violation of N.J.S.A. 18A:6-10. We discern no rational or legal basis to disturb the Commissioner's decision in this respect.
With respect to the specific rate of four percent interest awarded by the Commissioner in this case, Rule 4:42-11(a) provides for specific rates to be applied to judgments "[e]xcept as otherwise ordered by the court or provided by law, judgments, awards and orders[.]" The Commissioner's authority to award prejudgment and post-judgment interest is well-settled. SeeBd. of Educ. of Newark v. Levitt, 197 N.J. Super.239, 246 (App. Div. 1984). In determining the rate of interest, however, the Commissioner is not necessarily bound by the standards applicable to judgments and orders entered by a judge in a judicial proceeding. Id.at 249 n.4.
Here, the parties stipulated four percent as the rate of prejudgment interest. Although petitioner filed an exception objecting to the ALJ's reliance on this stipulation in setting the rate of prejudgment interest, the Commissioner declined to address the argument, finding it "disingenuous." We agree with the Commissioner's characterization and discern no reason to disturb his ruling in this respect.
We will now address the Board's challenge to the Commissioner's decision concerning the petitioner's obligation to mitigate damages. Our jurisdiction empowers us to review final decisions or actions of State administrative agents. R. 2:2-3(a)(1). Obviously, the initial decision of an ALJ is not subject to appellate review because it is merely a penultimate step subject to final review, modification, or outright adoption by the head of the administrative agency in this case, the Commissioner of Education.
In this case, the Commissioner adopted the ALJ's ruling without modification. After reviewing the ALJ's initial decision with respect to petitioner's duty to mitigate damages, we are bound to reverse. The ALJ's reliance on our decision in Willis, supra, 163 N.J. Super. at 153, for his ruling is misplaced. Our holding in Willis does not preclude the application of the collateral source rule to an employee who has been wrongfully terminated, nor exempt such employee from the obligation to mitigate damages from any source, including unemployment compensation benefits.
We made clear in Willis that unemployment compensation benefits the plaintiff "received are to be deducted by the township from the back pay due him, and in that sense 'mitigates' that award . . . ." Id. at 165. In fact, a wrongfully terminated employee's obligation to mitigate damages from any source was established by our Supreme Court long before our decision in Willis. In Miele v. McGuire, 31 N.J. 339 (1960), Justice Jacobs reaffirmed the Court's requirement that mitigation applies to cases in which public employees are awarded back-pay as a measure of damages for wrongful termination
We are satisfied that the plaintiff's claim for back pay is justly governed by the principles of the Ross case and that the cause must be remanded to the Law Division for the allowance of back pay less any sum which the plaintiff actually earned or could have earned between his dismissal and reinstatement.
[Id. at 352 (emphasis added).]
The Court reaffirmed its prior ruling requiring public employees who have been wrongly terminated to mitigate damages in Mason v. Civil Serv. Comm'n, 51 N.J. 115 (1968), and in Mastrobattista v. Essex Cnty. Park Comm'n, 46 N.J. 138 (1965). In Perrella v. Bd. of Educ. of Jersey City, 51 N.J. 323 (1968), the Court provided the following explanation of its earlier holdings in these two cases
In Mastrobattista it was held that when a public employee with tenure was improperly dismissed, he was entitled to recover his lost back pay less his earnings in outside employment between the date of dismissal and date of restoration to his position. We recognized, however, that such an employee might well have been obliged to incur expenses and attorney's fees in order to vindicate his right to the position. In this event, whenever his back-pay award was to be mitigated by his outside earnings, it seemed just and equitable to give him a credit against the sum to be applied in mitigation of the reasonable counsel fee and expenses which he had paid or obligated himself to pay in the successful prosecution of his action. Thus his interim outside earnings less such fee and expenses would represent the factor to be applied in diminution of his back-pay recovery. This is the purport of Mastrobattista, as well as of Mason v. Civil Service Comm'n, supra.
[Id. at 344.]
Against these clear and well-established principles of law, we are compelled to remand the case to the Commissioner to recalculate the award of back-pay to petitioner by applying the doctrine of mitigation endorsed by the Supreme Court. In going about this analysis, the Commissioner should consider petitioner's decision to decline the Board's offer of employment as a CST secretary, see Goodman v. London Metals Exch., Inc., 86 N.J. 19, 34-36 (1981), and whether she made reasonable efforts to find other, comparable employment during the relevant time period. However, petitioner was not obligated to apply for unemployment compensation benefits because any benefits she was eligible to receive under these circumstances, she was obligated to return to the Department of Labor.7
Affirmed in part, reversed in part, and remanded for further proceedings. We do not retain jurisdiction.
1 N.J.A.C. 6A:3-3.1(b) authorizes parties to contested matters in an administrative proceeding to seek enforcement of judgments of the Commissioner through "an action in the Superior Court as provided in New Jersey Court Rules at [Rule] 4:67-6."
2 Rule 4:67-6(a)(2) authorizes the Superior Court to adjudicate "all such enforcement actions brought by a party to the administrative proceeding in whose favor a written order or determination was entered affording that party specific relief."
3 Petitioner was thus no longer entitled to institute an action in the Superior Court to enforce the Commissioner's May 27, 2009 decision, as recommended by the ALJ in his initial decision.
4 Pursuant to N.J.A.C. 6A:3-1.17, the Commissioner may award prejudgment and/or post-judgment interest following the criteria set forth in the regulation, and "in any circumstance in which a petitioner has sought such relief and has successfully established a claim to a monetary award." N.J.A.C. 6A:3-1.17(a).
5 N.J.S.A. 18A:6-10(a) protects an individual holding a tenured position from being terminated or from receiving a reduction in compensation "during good behavior and efficiency in the public school system of the state."
6 Ross v. Bd. of Chosen Freeholders, 90 N.J.L. 522 (E. & A. 1917).
7 An employee who receives unemployment benefits and subsequently is awarded back-pay must reimburse the Department of Labor any funds received as unemployment benefits. City of Newark v. Copeland, 171 N.J. Super. 571, 575-76 (App. Div. 1980), certif. denied, 85 N.J. 505 (1981).