Despite the constant influx of novel legal issues caused by the COVID-19 crisis, the New Jersey Appellate Division is still busy at work rendering decisions on all aspects of the law, including those related to labor and employment. Case in point: M.R. v. Board. of Trustees (PERS), No. A-6015-17T4, 2020 N.J. Super. Unpub. LEXIS 615, an unpublished decision where the Court was again asked to determine whether a settlement agreement in a disciplinary action providing for resignation precluded the subject employee from subsequent eligibility for disability retirement benefits. The Appellate Division previously addressed this issue by way of a published opinion in Cardinale v. Bd. of Trustees, 458 N.J. Super. 260 (App. Div. 2019). You can find our summary of that particular opinion here.

This new case, M.R. v. Board. of Trustees, involved a Judiciary employee who agreed to resign in connection with pending disciplinary charges alleging inappropriate conduct and violation of Judiciary policy. Prior to entering into that agreement, however, the employee filed an application for disability retirement with the Public Employment Retirement System (“PERS”) for a health condition that purportedly arose prior to the disciplinary action. The settlement agreement in the disciplinary action provided that the parties took no position on the impact of the settlement upon the employee’s pending disability retirement matter. In the subsequent disability retirement proceeding, the threshold issue was whether the settlement and resignation disallowed the processing of his disability claim. PERS ultimately entered a final decision holding that the settlement agreement and resignation precluded the employee from obtaining disability retirement benefits, leading to the appeal with the Appellate Division. Ultimately, the Appellate Division affirmed the decision of PERS and based its determination on the earlier Cardinale case.

In Cardinale, the court considered an application for disability benefits under the Police & Firemen’s Retirement System (“PFRS”). 458 N.J. Super at 262. The plaintiff in that matter, a former police officer, had voluntarily and irrevocably retired from his position under a settlement agreement after he was suspended for a positive drug test. Id. at 264-65. The Court held “that when a PFRS member—here a police officer—voluntarily irrevocably resigns from active service, such a separation from employment automatically renders the individual ineligible for ordinary disability benefits.” Id. at 263 (emphasis added). The Court found the plaintiff’s claimed disability “irrelevant to its holding that his irrevocable resignation made him ineligible for benefits in the first place.” Id. at 268.

The Court in Cardinale found that N.J.S.A. 43:16A-8(2) dictates that the process whereby a recipient recovers from his or her disability and returns to work is the only way the Board can cut off disability benefits. Id. at 271. If, on the other hand, a worker “irrevocably resigned” from his or her former position, that creates, “a practical problem that strains the workability of the system . . . . the Board cannot statutorily cease paying any approved disability benefits, once they have begun, for an individual who voluntarily resigns from duty to settle disciplinary charges and agrees never to return. [Id. at 270-73.] Consequently, the Court ruled that allowing an employee to seek disability benefits in a situation where he or she had irrevocably retired would prevent the State from ever cutting off disability benefits, even upon recovery, because the employee could never “return” to his or her former employment and that “such an outcome “would violate public policy, contravene the rehabilitation statute, and encourage abuse of the disability retirement system.” Id. at 273.

In the more recent matter, M.R. v. Board. of Trustees, the Court acknowledged that Cardinale involved a different pension scheme, namely, PFRS, rather than PERS. It determined, however, that a comparison of the statutes demonstrated that Cardinale’s logic applied with equal force to PERS given that the various pension schemes were designed to be “part of a harmonious whole.”

The employee in M.R. v. Board. of Trustees presented a novel argument and contended that he was eligible for the disability pension because the disciplinary settlement only barred him from reemployment with the Judiciary. He claimed he can return to employment in a different (non-judicial) branch of State government, and that there is nothing in the settlement agreement “to say that he couldn’t return to his former duties with a different employer.” He argued this possible return to service as a PERS member is consistent with N.J.S.A. 43:15A-44.

The Appellate Division was not persuaded, holding that the employee did not suggest what jobs, if any, outside the Judiciary would be akin to his former “duty” or would require similar responsibilities to his position. The Court held that he cited no cases to support the argument that N.J.S.A. 43:15A-44 envisions allowing an employee to return to “his former duty, just not his former employer” and concluded that the case law supports the contrary proposition, that an employee who retires due to disability and subsequently recovers must be rehired by his former employer in the same or similar position. Because the disciplinary settlement agreement barred that possibility, the Court affirmed the decision of PERS, thereby reaffirming its earlier ruling in Cardinale.