Report shows noncompliance of sick leave laws in NJ towns, including East Orange

EAST ORANGE, NJ — Are New Jersey municipalities following state laws regarding sick and vacation leave? According to a recent report from the Office of the State Comptroller, the answer is an overwhelming no.

In the report, “A Review of Sick and Vacation Leave Policies in New Jersey Municipalities,” which was released July 7, the OSC reviewed the sick and vacation leave policies of 60 municipalities in the state and found that the majority were not in compliance with current laws. East Orange was among the municipalities reviewed and was found to be noncompliant.

“OSC’s review found that, to a startling degree, the laws have been ignored, sidestepped and undermined in almost all of the municipalities reviewed,” the report reads. “OSC determined that 57 of the 60 municipalities failed to fully comply with the laws, leading to both actual waste and abuse of public funds, as well as substantial future liabilities for these municipalities.”

According to state laws enacted in 2007 and 2010, public employees may not receive more than $15,000 for accrued sick leave and may receive that payment only at retirement, not annually and not if they switch jobs; as for vacation, employees who do not take vacation “in a given year because of business demands shall be granted that accrued leave only during the next succeeding year,” except during a declared state emergency, meaning that, at most, an employee can accrue only up to two years of vacation time. The 2007 law applied to senior employees, while the 2010 law extended the limitations imposed to any employee hired after May 21, 2010. Employees hired prior to the laws being enacted are grandfathered through and may still receive money exceeding $15,000 for accrued sick leave collected before the laws went into effect.

“Almost all municipalities have, through their policies and contracts, agreed to make payments in the future that will violate the 2007 and 2010 laws. And, as a result of their noncompliance, many municipalities will have to expend public resources to undo the costly damage they have done,” the report reads. “The findings identified in this report lead OSC to the conclusion that municipal officials are either unaware of the 2007 and 2010 reforms or are consciously disregarding them.”

These laws apply to the state’s 565 municipalities, 600 school districts and 21 counties, as well as other local entities, such as water, sewer and parking authorities. The OSC concluded that, based on the high number of reviewed municipalities not following the laws, it is probable that many other government entities in the state may also be violating these laws.

The report does note, however, that a contributing factor could be a lack of direction from the state. While the state’s Local Finance Board issued guidance interpreting the 2007 law for local governments, no such guidance was issued for the 2010 law.

To conduct this review, the OSC requested that municipalities provide information concerning sick leave policies and contracts that were in effect from 2017 through 2021. The OSC examined hundreds of collective bargaining agreements, individual employment contracts, employment policy handbooks and municipal ordinances. The office also obtained documents available from other public sources, such as the online database of employment contracts maintained by the Public Employment Relations Commission.

According to the report, at least 41 of 60 municipalities permit sick leave payments to senior employees that are unlawful under the 2007 law; 36 municipalities permit payments that exceed the 2010 law’s $15,000 sick leave cap; 48 municipalities allow payments for sick leave at times other than retirement; 14 municipalities have sick leave caps that took effect after the May 21, 2010, deadline; 29 municipalities improperly allow for annual sick leave payments; and 17 municipalities allow for terminal or early leave, providing unlawful supplemental compensation for retiring employees.

“OSC’s report and analysis make clear that municipalities are wasting, and committing to waste, public funds on sick leave payments that either currently violate or will violate the 2007 and 2010 laws,” the report read. “In enacting the 2007 and 2010 laws, the Legislature sought to protect taxpayers from wasteful and abusive sick leave payments that municipalities and taxpayers struggled to pay. That goal has not been achieved in the large majority of municipalities OSC reviewed.”

Based on East Orange’s response to the OSC’s survey, and the town’s ordinance and union contracts, the report concluded that the terms of two of East Orange’s contracts are not in compliance with the 2010 law with regard to payment of accrued sick leave. The contracts allow the payment of accrued sick leave at a time other than retirement for employees hired after May 21, 2010.

The next step: The OSC has directed the municipalities found to be in noncompliance to “develop a corrective action plan that details the steps the municipality has taken and will take to comply with the following recommendations.” The plan must be sent to the OSC for review by Sept. 30 and should be approved through a vote of the town’s governing body.

“I am committed to the city of East Orange being transparent, a good steward of public spending and in compliance with all state laws,” Mayor Ted R. Green told the Record-Transcript on July 18. “Our corporation counsel team is currently reviewing our existing sick leave policies and will share their findings with our bargaining units prior to completion of our corrective action plan for the New Jersey Office of the State Comptroller.”

In going about this process, the OSC recommends that municipalities request a legal review and amend contracts, personnel policies and ordinances, as well as calculate improperly paid or accrued leave balances, and determine whether recoupment of any lost funds is possible. The office also recommends that government entities not studied in the report conduct an initial assessment to determine whether their policies are in compliance with sick and vacation leave laws.

The OSC also recommends changes to be made on the state level, such as the Legislature possibly amending and supplementing the 2007 and 2010 laws to ensure compliance. The office noted that there are currently no accountability measures in place to ensure compliance and recommends that be changed. The report also recommends enhanced transparency.