June 12, 2010

In an opinion issued Friday, the New Jersey Superior Court, Appellate Division, invalidated Governor Christie’s Executive Order 7 (“E.O. 7”) extending the application of existing pay-to-play laws to labor unions and labor organizations that enter into contracts with the State and other public entities. The court found the Governor’s action impermissibly infringed on the Legislature’s constitutional powers.

E.O. 7 redefines “business entity” in the pay-to-play laws to include “labor unions and labor organizations.” Further, E.O. 7 would compel Executive Branch departments and agencies to treat collective bargaining agreements a “contract” subject to pay-to-play laws.

The Governor and the amicus asserted that strong public policies supported eradicating either the appearance of or actual improper influence arising from political campaign contributions. Moreover, they argued that the public may be disadvantaged when the contributing labor organization must later negotiate with political candidates who assume office. However, the unions argued that these concerns were mistaken or overstated.

Pay-To-Play Language

The court explained that an executive order issued in the absence of an emergency, “[m]ust be based upon the furtherance of a legislative act or a constitutional mandate.” Further, the court noted that if an executive order “usurps legislative authority by acting contrary to the express or implied will of the Legislature,” the executive order is invalid.

In rejecting E.O. 7 as an impermissible infringement of legislative power by the Executive, the court explained that the terms of E.O. 7 do not fit with existing laws governing public employee relations, and are inconsistent with pay-to-play laws that employ language associated with the public bidding and procurement process.

The language used in the pay-to-play laws refers to terms associated with the public bidding and procurement process, such as “bids,” “specifications,” “awards,” or “purchasing agents or agencies.” The court reasoned that “[t]he widely accepted understanding of the term ‘procurement’ does not encompass collective bargaining agreements between a public employer and a labor union representing public workers.”

Similarly, the court explained that the characteristics of labor unions and organizations do not comport with the existing definition of “business entity” under the pay-to-play laws because unlike those currently classified as a “business entity,” labor organizations are “not organized for the commercial profit of the organization itself,” nor are labor unions “established as profit-seeking ventures.”

Rather, the court explained, “they are created to further their members’ interests in maximizing wages and benefits, while, at the same time, advocating for workplace safety.” The court also noted that Chapter 304 of the pay-to-play laws makes clear that nonprofit organizations are not within the scope of “business entity.”

Legislative Authority

The court also compared the omission of labor organizations in the pay-to-play laws to the inclusion of such organizations in campaign contribution laws. The court noted that “the Legislature clearly knew how to define and include labor organizations where it wanted them encompassed by campaign contribution laws” and noted that those statutes were codified in the statutory provisions just before pay-to-play provisions in Chapters 19 and 52 of the New Jersey Code. Thus, when the Legislature intends to include labor organizations in a statute, the court concluded, “it consciously chose the words to do so.”

For these reasons, the court found that E.O. 7 is a “unilateral attempt to exercise the Legislature’s powers, where the Legislature has not ceded those powers to the Executive.” The court was clear that any expansion of pay-to-play laws to labor unions or labor organizations, as was sought under E.O. 7, must come through action by the Legislature.

Moreover, the court noted that despite the Governor’s argument that E.O. 7 built upon the executive orders issued by previous Governors McGreevey and Corzine, the earlier executive orders were distinguishable as being aimed at traditional procurement, whereas E.O. 7 was aimed at collective negotiations.

The court concluded the opinion by reiterating that paragraph 1 of E.O. 7 “at least in so far as it is intended to treat collective bargaining agreements as ‘contracts’ and labor unions as ‘business entities,’ is so fundamentally incompatible with our existing laws and statutes as to impair the ‘essential integrity’ of the constitutional powers of the Legislature.”

With extensive government experience, the attorneys at Hill Wallack LLP advise businesses, public entities, nonprofit organizations and individuals in many areas in which public and private interests intersect. Whether your issues involve state or federal politics, we can help you assess your options, make the most of your resources, and assure compliance with the law.

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This article provides information of general interest and is not intended, and should not be used, as a substitute for consultation with legal counsel. Any questions regarding the specific issues raised in this article should be directed to the authors or to your contacts at Hill Wallack LLP.