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Township: Violations Of State Sick Leave, Vacation Policies Were On Paper Only; No Prohibited Payments Made

Township Manager Robert Vornlocker wrote a letter in February concerning the state Comptroller’s Office report on abuse in municipal sick leave policies. (File photo.)

The Township has made no payments under sick leave and vacation accrual policies found by a state agency to be in violation of state law, according to a Township official.

In a report issued on July 7, Acting State Comptroller Kevin D. Walsh wrote that 57 of 60 communities his office surveyed were “wasting taxpayer funds by making and agreeing to make excessive sick leave payments to public employees.”

Franklin was one of three Somerset County towns whose sick leave payment policies were analyzed. The other two were Bridgewater and Montgomery. The towns were picked by population and size of their budgets.

The state Legislature in 2007 and 2010 passed reforms of sick leave payment policies in an effort to cure abuse of the system and help to reduce property taxes.

The Township in February was provided with a draft copy of the report, which stated that Franklin’s policies violated several of those reforms.

In a February 18 letter to a state Comptroller’s Office attorney, Township Manager Robert Vornlocker acknowledged that certain Township policies were in violation of those laws, but said that no payments had been made to any employees, and that changes to ordinances and union contracts would be made to bring the Township’s ordinances and union contracts in compliance.

The Comptroller’s report made four findings about Franklin’s policies, ordinances and union contracts:

  1. The terms of Franklin’s ordinances do not comply with the 2007 law (N.J.S.A. 40A:9-10.2) with regard to sick leave. Ordinance 46-13 allows payment for accrued sick leave at a time other than retirement and greater than the 2007 cap for covered employees.
  2. The terms of Franklin’s ordinances do not comply with the 2007 law (N.J.S.A. 40A:9-10.3) with regard to vacation leave. Ordinance 46-11 allows the accrual of more than three years of vacation leave for covered employees.
  3. The terms of Franklin Township’s union contracts do not comply with 2010 law (N.J.S.A. 40A:9-10.4) with respect to payment of accrued sick leave. Two of its contracts exceed the maximum sick leave payment of $15,000 for employees hired after May 21, 2010. Two other contracts only cap the payment at 640 hours which has the potential to exceed the $15,000 cap for employees hired after May 21, 2010. Another contract only caps payment at 100 days which also could also exceed the $15,000 cap.
  4. The terms of Franklin Township’s union contracts also do not comply with 2010 law (N.J.S.A. 40A:9-10.4) with respect to sick leave because they provide an annual sick leave payment in either cash or in deposits to the deferred compensation plan to employees hired after May 21, 2010.

The reforms cap sick leave payments at $15,000.

In his letter, Vornlocker said the Township has made no payments in violation of state law, and will work to bring its ordinances and union contracts in compliance with the 2007 and 2010 state regulations.

“The Township has always sought to adhere to the restrictions in the law and has taken a number of steps in the intervening years to eliminate or greatly reduce the amount of sick leave that is payable upon retirement as per the intent of the statutes at issue,” he wrote. “… (T)he Township shall make every effort to notify the unions of this new guidance and work to amend or eliminate those
portions of the contracts and ordinances that your office believes may cause issues in the future.”

“First and foremost, please know that we intend to inform the unions of the unenforceability of these provisions within their contracts based on the guidance that your office has provided,” Vornlocker wrote. “While we await their response, the Township will immediately be taking all necessary steps to ensure that we continue to comply with the law.”

Regarding the Township’s vacation policy, Vornlocker wrote, “the ordinance in question has not been amended since 2008 and is a minor subsection of a much longer provision in the code. It also refers to ‘exempt’ managerial employees, many of which are covered by the exclusionary language specifically enumerated in the 2007 laws.

“Nevertheless, now that this has been brought to our attention, the Township shall be amending the
provisions of this section for clarity and to ensure compliance with the guidance that your office has
now provided,” he wrote.

Responding to the Comptroller’s finding that Franklin’s policy on payments to retirees for accumulated sick leave violates state law in that it allows “that after 10 years of service, for those employees hired prior to November 12, 2018, at death or retirement, an employee will receive full payment for any unused accumulated sick leave in an amount not to exceed either $16,500 for ‘confidential staff’ or $30,000 for ‘exempt managerial staff,'” Vornlocker wrote, “please note that this ordinance was enacted in 2018 with the specific goal of reducing retirement payments to newly hired employees. This ordinance not only limits the Township’s exposure for medical benefits for employees older than 65 years, but also completely eliminates sick leave retirement payments for anyone hired after the effective date of November 12, 2018.”

“Within the relatively small class of employees hired between 2010 and the enactment of this ordinance of 2018, no retirement payments have been made that violate the 2010 law,” he wrote. “Nevertheless, the Township shall take the necessary steps to amend the ordinance so that it more closely complies with the state statutes.”

Among the union contracts cited by the Comptroller in his report were those covering the CWA, AFSCME blue collar supervisors, FMBA, PBA and SOA.

Regarding the CWA contract, Vornlocker told the Comptroller that the Township “shall advise the Union that anyone hired after June 30, 2010 will be restricted to the $15,000 cap. It should be noted, however, that to date, no retirement payments have been made to employees that are covered by the 2010 laws.”

Vornlocker wrote that the Township “shall advise (AFSCME) of your guidance and begin the process of enforcing the payment cap of $15,000 for anyone hired after the expiration of the contract ending in December of 2015. Due to the timing of those contract provisions, the Township maintains that it has not paid sick leave at retirement to anyone hired after December of 2015 that would violate the statutes.”

“The FMBA, PBA and SOA contracts all suffer from the same issue of not having defined $15,000 payment caps included in their language,” Vornlocker wrote. “It should be noted, however, that the original contracts in place when the 2010 law was enacted did not expire until December 31, 2013. As a result, no individual hired since the expiration of those contracts has yet fulfilled the ten-year qualifying period that would trigger application of those contract provisions. As with the other provisions, we intend to notify the union of their unenforceability and move forward from there on enforcement of the $15,000 caps.”

“Once again, due to the timing of those contract provisions, the Township has not paid sick leave benefits at retirement to anyone hired after December of 2013 that would violate the statutes,” Vornlocker wrote.

The Comptroller’s report also stated that Franklin was in violation of state law regarding sick leave buy-back and incentive programs. Not so, Vornlocker wrote.

“It was the understanding of the Township that … guidance specifically indicated that
‘this section only limits the amount of payment upon retirement,’ rather than the far more restrictive definition of supplemental payments that your office has recently advised of,” Vornlocker wrote.

“Additionally, the extensive history of litigation with the unions and the more recent legislative proposals to specifically add a prohibition on these payments to the text of the statutes supports the argument that any perceived non-compliance by the Township was based on a good faith understanding of what was permitted under the rules,” he wrote.

“Furthermore, it is the position of the Township that payments into a deferred compensation plan, accessible only upon retirement, if properly capped at $15,000 and charged against any eligible payout at retirement, would not violate the statute and would, in fact, ameliorate some of the concerns expressed by the unions over enforcement of these provisions,” he wrote.

Township attorney Louis Rainone said that the Township received no response from the Comptroller’s Office until the report was released.

According to the report, the Comptroller’s Office found “that there are no enforcement mechanisms in place to make sure towns are following the law. The report makes a number of recommendations to the Legislature, including:  

  • Designating a specific person within local government to ensure sick and vacation leave abuse laws are followed 
  • Requiring that all payouts to employees beyond their standard pay are posted publicly and approved by the council so that taxpayers are aware of any additional compensation 
  • Tasking a specific state agency to interpret and enforce the laws 
  • Evaluating whether exemptions for some senior employees in local governments remain appropriate”

The entire report can be read here.

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