PERC Decision Lays Groundwork for Negotiations Once Chapter 78 Contributions are Fully Implemented

August 27, 2015  |  By: Joseph M. Hannon, Esq.

New Jersey's Public Employee Relations Commission ("PERC" or the "Commission") has weighed in on the issues of (1) when health insurance contributions become negotiable once the fourth tier of contributions under Chapter 78 is completed and (2) at what level of contributions do negotiations commence once the contributions are negotiable. In Clementon Board of Education v. Clementon Education Association, P.E.R.C. NO. 2016-10, Docket No. SN-2015-041, August 13 2015, PERC agreed with the school board, ruling that the teachers’ union cannot  negotiate premium contributions for the successor agreement until the next collective negotiations agreement after Chapter 78 contributions become fully implemented. To review, in 2011, the legislature passed a pension and health benefit reform act, P.L. 2011, c. 78, commonly referred to as "Chapter 78" which required a four-tiered implementation of health care contributions based on employee salary. Although the law went into effect on June 28, 2011, for unionized employees, Chapter 78's implementation date was tied to the expiration of the collective negotiations agreement. Thus, once an agreement expired after June 28, 2011, the four-year implementation period began.  For many public employers the implementation date for Chapter 78 contributions varied with each bargaining unit. In Clementon, the final year of the four-year phase-in of higher health insurance contributions overlapped with the first year of a new agreement. The teachers union argued that as soon as full implementation of Tier 4 has occurred, health benefit contributions should become immediately negotiable for the successor agreement even if full implementation occurs mid-term in the agreement. The school district disagreed, arguing health benefits should remain as is under Chapter 78 until the next round of negotiations for a new contract. The Commission sided with the school board, deciding negotiations of health benefit contribution should not occur until the next contract is negotiated. PERC found that Chapter 78 expressly, specifically and comprehensively sets forth that health benefit contribution levels become negotiable in the "next collective negotiations agreement after ... full implementation" of the four-tiered level of employee contributions is achieved. In so deciding, PERC laid the groundwork for handling negotiations of health insurance contributions once Chapter 78 is fully implemented. For example, if Tier 4 payments are fully implemented on December 31, 2015 and the collective negotiations agreement does not expire until December 31, 2016, then health insurance contributions do not become negotiable until January 1, 2017.  This is true whether or not the collective negotiations agreement is expired or not.  Negotiations are tied to when Chapter 78 contributions are fully implemented, i.e. the full year of Tier 4 payments are completed, regardless of term. Additionally, PERC determined that health insurance contributions shall be negotiated from the Tier 4 structure once negotiations are permitted.  Therefore, once negotiations begin on this issue pursuant to the timeframe explained above, the parties shall treat contributions as if the Tier 4 payments are part of the collective negotiations agreement. According to the New Jersey Education Association’s (“NJEA”) website, NJEA plans to appeal the Commission’s decision in Clementon. For more information on the Commission's decision and how it will affect a public employer's existing and future contracts, please contact Joseph M. Hannon, Esq. at or Jennifer Roselle, Esq. at  

Tags: Employee BenefitsPublic SectorCollective Negotiations