West Orange Among Towns Cited In Scathing NJ ‘Sick Leave’ Report

WEST ORANGE, NJ — There’s a black hole when it comes to sick and vacation leave policies in towns and cities across New Jersey, and it’s sucking money out of the pockets of property owners – including those in West Orange, a state watchdog agency says.

In recent years, many advocates and workers in New Jersey have pushed for better sick leave policies in their workplaces. And according to the Office of the State Comptroller (OSC), they’re barking up the right tree.

“Sick leave is an important benefit for employees to use when they're ill,” the comptroller’s office says. “Employees can stay home, get better and still get paid.”

But according to the OSC, many New Jersey towns pay public employees for unused sick days at the end of the year or agree to pay them at the end of their career – and that’s where the problem comes in.

“This can be costly to taxpayers, and it is often against the law,” the comptroller’s office says.

In an attempt to see if towns and cities are complying with state regulations regarding municipal workers and unused sick leave, the comptroller's office recently took a look at policies, ordinances and contracts for 60 municipalities with a population greater than 10,000, including West Orange.

The results of that study were released last week. It’s likely that the policies of hundreds of other local governments in New Jersey are in violation of sick leave laws – not just the 60 that were examined by the OSC, researchers said.

See the full report and learn about its methodology here. See the list of towns and cities that were surveyed here.

See local information for West Orange at the bottom of this article.

UNUSED SICK DAYS

Here’s the problem when it comes to unused sick days, according to the OSC:

“Many towns allow public employees to cash out their unused sick days for what are essentially yearly bonuses. In some instances, towns unlawfully promise to make large payments years into the future. Such policies can increase a single employee’s pay by potentially hundreds of thousands of dollars. Municipalities who promise all their employees sick leave payouts create a financial liability of many millions of dollars for taxpayers.”

In 2007 and 2010, the New Jersey Legislature passed laws limiting when sick leave payments may be made, how much can be paid, and to which employees. Their goal was to lower property taxes by prohibiting extra payments of hundreds of thousands of dollars to a single public employee.

The laws apply to New Jersey’s 565 municipalities, 600 school districts and 21 counties, as well as hundreds of other local entities like water, sewer and parking authorities. However, they don’t apply to most employees hired prior to May 21, 2010, and many municipalities are still making substantial – but lawful – payments to those workers.

Under the current rules:

• All employees hired after May 2010 can’t receive more than $15,000 for their unused sick leave
• Employees can only receive that $15,000 at retirement – not when they resign, change jobs, or as an annual payout
• In addition, after 2007, certain senior local government employees cannot receive more than $15,000 for their unused sick leave

According to the comptroller’s office, the problem with sick leave is widespread:

“The OSC’s review found that, to a startling degree, the laws have been ignored, sidestepped, and undermined in almost all of the municipalities reviewed. 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. A majority of municipalities have already wasted public funds on payments that violate the 2007 and 2010 laws. In addition, 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 non-compliance, many municipalities will have to expend public resources to undo the costly damage they have done.”

The comptroller’s office didn’t give an exact figure, but estimated that millions of dollars were wasted that could have gone to property tax relief.

“Year after year, towns spend taxpayer money to fund costly, wasteful year-end bonuses for public employees that are hidden from taxpayers,” Acting State Comptroller Kevin Walsh said.

“The laws on sick leave payments are being ignored by a lot of towns, and this is putting a financial strain on taxpayers,” Walsh added. “Mayors and council members who want to lower property taxes are missing an opportunity to do so.”

The comptroller’s office recommended that the New Jersey Legislature consider amending and supplementing the 2007 and 2010 laws to ensure that local governments comply with them.

At least one state lawmaker has since taken up the cry for reform – Assemblywoman Nancy Munoz (R-Union) – who has reintroduced bills that would bar payouts to public employees for accumulated unused sick time (A220) and ensure that sick-leave payouts don't count toward compensation when public employee pension benefits are calculated (A221).

Neither bill has moved out of committee since it was reintroduced at the start of the session in January, the New Jersey Monitor reported. Read More: Lawmaker Renews Push For 10-Year-Old Bill After Millions Paid Out On Unused Sick Leave

ACCRUED VACATION DAYS

It isn’t just sick days that are costing towns cash, the comptroller’s office said. State lawmakers have also tried to limit how much vacation leave municipal employees can accumulate.

According to the OSC:

“The 2007 and 2010 laws limit the accrual of sick leave to senior employees and to all employees who commenced service with a municipality after May 21, 2010. For civil service municipalities, the same law governing vacation accrual has been in force since 2001. These laws generally limit the accrual of vacation leave to the succeeding year only. Thus, at the most, an employee is usually permitted to accrue two years’ worth of vacation. Vacation earned in 2021 must be used in 2022 or it will be lost.”

However, the Public Employment Relations Commission (PERC), the primary entity that has interpreted the vacation leave provisions of the 2010 law, has concluded that “the vacation leave statutes do not bar the conversion of vacation leave into other forms of leave and do not bar financial compensation for unused vacation” – leaving it up to municipalities and labor unions to hammer out the details.

It’s a stance the comptroller’s office questioned in last week’s report:

“The OSC nevertheless highlights that the practice of converting unused vacation time or allowing payment for unused time may contravene the intent of the Legislature in enacting the vacation leave reforms. The OSC’s recent audit of a municipality that awarded 55 days of vacation to a police chief, and then paid him annual compensation for unused vacation, shows the danger of allowing annual vacation leave payments. Permitting these practices undermines the Legislature’s goal of standardizing vacation leave benefits at different levels of government. Clarification by the Legislature regarding these issues may be appropriate. The risks to taxpayers may be substantial because it is possible that local governments will be responsible for large supplemental payments by allowing vacation leave conversion and payments.”

A majority of the municipalities reviewed “comply fully” with the vacation leave requirements of the 2007 and 2010 laws, the OSC noted – but “many still do not.”

And for towns that don’t, the costs can add up.

In its 2021 report on Palisades Park, the comptroller’s office found that the borough’s business administrator was collecting annual sick leave payouts and was entitled to a $360,000 payout when he retired, $160,000 of which was for unlawful sick and vacation leave. Enforcing the law would have resulted in a 30 percent reduction in his retirement payout.

ENFORCING THE LAW

Currently, there are no enforcement mechanisms in place to make sure towns are following the law regarding municipal sick and vacation payouts, the comptroller’s office said.

In its report, the agency made several key recommendations to tackle the problem:

• Designate a specific person within local government to ensure sick and vacation leave abuse laws are followed
• Require that all payouts to employees beyond their standard pay are posted publicly and approved by the [municipal] council so that taxpayers are aware of any additional compensation
• Task a specific state agency to interpret and enforce the laws
• Evaluate whether exemptions for some senior employees in local governments remain appropriate
• Individual towns should retain an attorney to review existing policies and procedures that appear to be against the law

WEST ORANGE

West Orange was among the municipalities cited in the report. According to the comptroller’s office:

“West Orange’s Employee Manual states that all non-union employees are entitled to payment of accrued sick leave at retirement or death at half their rate of pay, limited to $12,000. Three of its employee union contracts limit payment of accrued sick leave to be paid at retirement only, for a maximum of $7,500. However, in two of those unions, the $7,500 cap applies to employees hired after January 1, 2013 and in one union it applies to personnel hired after January 31, 2014. Four employee union contracts do not cap the payment for accrued sick leave. Two of those contracts allow for the payment for accrued sick leave of 50 percent for the first $12,000, then 15 percent value for any sick leave accrued beyond that amount. The payment can be made at either separation or retirement. The other two contracts have the same allowed payment structure but have no explicit reference to payment limits and instead only state that “[p]resent practice concerning sick leave entitlement shall be maintained as per the 1972 revised General Ordinances of the Township of West Orange as amended and supplemented.” West Orange’s response to OSC’s 2021 Municipal Survey provides that the payment for accrued sick leave is “limited to 50% value of the first $24,000 ($12,000) and 15% of the remainder” value for any sick leave accrued beyond that amount.”

In addition:

“With respect to vacation time, three of West Orange’s union contracts have similar language: all new employees — those hired after January 1, 2013 for two of the unions, and January 1, 2014 for another — “must use their vacation time during the year it is received or it shall be forfeited.” Four other union contracts allow accrual to the following year only.”

Based on West Orange's response to OSC’s survey, its employee manual and union contracts, the comptroller’s office found that:

• "The terms of West Orange’s Employee Manual do not comply with the 2007 law (N.J.S.A. 11A:6-19.1). Its Employee Manual allows payment for accrued sick leave at a time other than at retirement for covered employees."
• "The terms of West Orange’s Employee Manual do not comply with the 2010 law (N.J.S.A. 11A:6-19.2). Its Employee Manual allows payment for accrued sick leave at a time other than at retirement for non-union employees hired after May 21, 2010."
• "The terms of West Orange’s union contracts are not in compliance with the 2010 law (N.J.S.A. 11A:6-19.2) with regard to payment of accrued sick leave because they allow for payments at a time other than at retirement and do not cap the payment at $15,000 for employees hired after May 21, 2010 in four of its contracts."

Patch has reached out to municipal officials in West Orange about the comptroller report. We’ll update this article with any reply we receive.

Other towns in Essex County that were cited in the comptroller's report included Belleville, East Orange and Verona.

In Belleville, town manager Anthony Iacono pointed out that the comptroller's office only examined 60 out of 564 municipalities, a "small sampling" of the state.

It's not so much the employees getting hired today who are compounding the issues mentioned in the comptroller's report – it's the handful who were hired 20 and 30 years ago that are bucking the trend, Iacono told Patch.

A few decades ago, $80,000 and $90,000 payouts were almost unheard of, he told Patch. But that's been changing – big time. And now, all but a handful of Belleville town workers are in compliance, he said.

"What took place 30 years ago is, unfortunately, very common," Iacono said. "And I think everybody is trying to put their foot down."

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