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The Negotiability of Temporary Layoffs of Public Employees During Times of Economic Distress

Jul 28, 2015 | Written by: Tara A. St. Angelo, Esq. |

The New Jersey Supreme Court’s recently issued opinion in IMO Borough of Keyport v. Local 68, A-43/4-13 may eliminate the need for municipalities to negotiate temporary layoffs with union representatives in times of economic distress.  However, I stress the word may, as the long-term effect of this decision outside the specific facts of the case remains to be seen.  This case may represent a shift in the way the Court and the Public Employment Relations Commission (PERC) look at temporary layoffs during times of financial distress.

The Keyport case involved layoff actions by three Civil Service municipalities during the 2008 economic downturn.  Two of the municipalities issued mandatory temporary layoffs in the form of reduced work days for a specified period of time.  One municipality replaced three full-time clerical positions with part-time positions.  These layoffs were not negotiated with the associated unions, but were approved by the Civil Service Commission under an emergency layoff rule that is no longer in effect.  The employees appealed to PERC, which found the layoffs violated the New Jersey Employer Employee Relations Act (NJEERA) and were required to be negotiated with the unions.  The Appellate Division overturned PERC’s decision and found that the layoffs were preempted by the Civil Service Commission’s emergency layoff rule.

The issue that the NJ Supreme Court had to decide was whether a municipality was required to negotiate layoff actions that were 1) temporary in nature; and 2) approved by the Civil Service Commission.  The Supreme Court started with the premise that an action affecting a union member’s employment must be negotiated when: 1) the action intimately and directly affects the work and welfare of the employee(s); 2) the action is not preempted by State law or regulation; or 3) a negotiated agreement would not significantly interfere with government policy making.  In re Local 195, IFPTE, 88 N.J. 393, 404-05 (1982). 

The Court ultimately held that a municipality was not required to negotiate temporary layoffs of union employees.  The Court pointed out that municipalities have a unique relationship with unions because government has “the unique responsibility to make and implement public policy…” and that public policy is “properly determined through the political process, and not through collective negotiation.”  Id. slip op at 24 (citing In re Local 195, IFPTE, supra, 88 N.J. at 401-02).  Negotiation of public employment terms is divided into two categories: terms and conditions of employment that must be negotiated, and matters of government policy.  Ibid.  Therefore, the Court employed the Local 195 test to determine into which of these categories the temporary layoffs at issue fell.  However, the Court did not adopt the Appellate Division’s holding regarding preemption by the Civil Service emergency layoff rule.  Rather, the Court focused on the last prong of the test espoused by the Local 195 case regarding whether negotiation would interfere with the management of the municipality.  Id., slip op. at 4.  The Court “declared that the decision to cut a workforce is unquestionably…a predominantly managerial function.” (citing State v. State Supervisory Employees Ass’n, 78 N.J. 54 (1978)).  Determinations to reduce the work force for reasons of “economy and efficiency” are non-negotiable matters of government policy.  Id. at 27.  “[S]uch decisions go to the heart of governmental policy determinations about what services are to be provided and how they will be provided to the public.”  Id. at 37.

During the pendency of the Keyport case, PERC issued a decision in IMO Robbinsville Township Board of Education, 2014-30 (2013) that may also be evidence of a shift of thinking regarding temporary layoffs.  In Robbinsville, PERC upheld a three-day furlough of teachers during the 2010-2011 school year as a “non-negotiable policy determination.”  Id. at 3.  However, this decision relied on the Appellate Division holdings that were appealed in the Keyport matter.  PERC has not yet evaluated temporary layoffs under the framework set forth in the Keyport case.

It is unclear what effect this decision will have on non-Civil Service municipalities (or even on Civil Service municipalities now that the emergency layoff rules are no longer effective).  It is important to recognize that the Court acknowledged that temporary layoffs during times of financial distress are within the managerial purview of the municipality.  It is also important to recognize that the Court found it compelling in evaluating whether the time of the layoffs constituted a time of economic distress that the Civil Service Commission had promulgated the emergency layoff rules.  Id. at 40.  Therefore, the decision is highly fact-sensitive. 

Despite the direction given in the Keyport and Robbinsville cases, municipalities should consult their labor attorneys to assess the risks prior to initiating any temporary layoffs of employees.


Tara St. Angelo's primary areas of concentration are municipal and land use law. Contact Ms. St. Angelo at Gebhardt & Kiefer, PC at 908-735-5161 or via email.