Appellate Division Says DOE Accountability Regs Limiting Superintendent Compensation Constitutional But Says Caps on Sick Leave Must Be Prospective

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The Appellate Division ruled August 4 in New Jersey Association of School Administrators et. al. v. Bret Schundler et. al. (Commissioner of Education) that nine accountability regulations adopted in 2008 granting the executive county superintendent extensive powers with respect to reviewing the employment contracts of school superintendents and assistant superintendents are constitutional except where the regulations violate the tenure statute.

The regulations the “Fiscal Accountability Efficiency and Budgeting Procedures” were adopted in response to statutory enactments intended to provide a new funding formula for state aid for schools and to provide a new funding formula for state aid for schools to promote greater efficiency and stronger budgetary controls and as a result slow the steady increase in real property taxes in New Jersey.

The state moved to limit perks and retirement benefits in 2008 for school administrators after a State Commission of Investigation report found little oversight in the contracts. The new rules gave executive county superintendents the authority to review contracts for top administrators before they are approved. The state lawsuit was filed after a federal suit was dismissed.

While the three-judge panel rejected claims by the association that the 2008 rules were vague and violate equal protection laws the panel also ruled that the regulations cannot affect existing contracts and held that assistant superintendents with tenure can’t have their compensation reduced.

Specifically the court rejected the New Jersey Association of School Administrators’ (NJASA) challenge to nine regulations granting the executive county superintendent extensive powers with respect to reviewing the employment contracts of school superintendents and assistant superintendents. The particular regulations are contained in subsections (1) (3) (4) (5) (6) (7) (8) (9) and (11) of N.J.A.C. 6A:23A-3.1(e). They set forth the particular standards the executive county superintendent must consider in determining whether to approve a proposed contract.

No Property Interest as a Contract Employee

The Association had argued that the regulations impermissibly reduced the compensation for school administrators and were therefore contrary to the federal and state constitutional prohibitions against depriving a person of property without due process of law. To prevail an individual must demonstrate an entitlement to a property interest created by state statute or regulation in order to have a benefit be recognized as property and subject to constitutional protections.

The court differentiated between those individuals with tenure protection (assistant superintendents) and those without tenure (superintendents) serving under individual employment contracts.

The appellate court wrote August 3 that while superintendents and non-tenured assistant superintendents have no rights to a specific level of future compensation or benefits once their contracts expire for tenured assistant superintendents “the overall level of their compensation is protected by their respective tenure statutes.”

Superintendents generally work under three- to five-year contracts while assistant superintendents can earn tenure after meeting certain requirements.

In the decision the court found that superintendents do not have a property interest in the terms and conditions of any contract they execute.

However the panel also found the protections afforded to tenured assistantsuperintendents are significantly broader than those of superintendents. Therefore N.J.A.C. 6A:23A-3.1(e)(3) (4) (5) (6) improperly deprived assistant superintendents of vested rights and the regulations illegally reduce the compensation of tenured assistant superintendents. See N.J.S.A. 18A:28-5.

Upon receipt of tenure assistant superintendents may not be “dismissed or reduced in compensation except for inefficiency incapacity or conduct unbecoming such a teaching staff member or other justcause . . . .” N.J.S.A. 18A:28-5.

Limited Sick Leave Payouts Prospectively

Unfortunately while NJASA had argued that any attempt to modify the employment relationship between tenured assistant superintendents and their employing districts to conform to these regulations violates their rights under the tenure statute the court found that the regulation could validly prohibit an agreement that would permit the future accumulation of unused sick leave in an amount in excess of $15000.

The court said administrators are entitled to collect more than $15000 in unused sick time if they accumulated it by the time the regulations went into effect. however as neither superintendents or assistant superintendents could be deprived of any benefit they had accrued prior to the enactment of N.J.A.C. 6A:23A-3.1(e)(6). Moreover the Court found that the portion of the regulation which forfeited any sick leave accumulated in the event that an individual died prior to the official date of retirement was also unsupportable.

Legislative Attempts to Restrict Sick Leave Payout

Recent legislation introduced as part of the Governor’s ToolkitS-2173 (Kyrillos) could be interpreted as limiting the payout of sick leave for past service. As drafted the legislation explicitly applies to only future collective bargaining agreements but is unclear as to past collective bargaining agreements. NJPSA has been in discussion with the sponsor’s office. The sponsor is aware that the bill requires amendment to address this legal issue and plans to address it. The bill was initally scheduled in July for hearing in the Senate Budget and Appropriations Committee but was held. It may be heard in mid-August.

Next Steps?

A spokesman for Attorney General Paula Dow said the attorney general’s office was considering appealing the ruling to the state Supreme Court.

The Opinion

Judge Jane Grall dissented from fellow Judges Carmen Messano and Dorothea Wefing on the tenure and sick pay issues.