delivered the opinion of the Court.
We are called upon to determine whether the parties to the specific collective negotiations agreements (CNAs) at issue in this case were required to continue scheduled salary increases during the period between the expiration of those contracts and the formation of their successor agreements.
This appeal involves the CNAs between (1) Atlantic County and the Fraternal Order of Police, Atlantic Lodge # 34 (FOP
Atlantic County informed FOP Lodge 34 and PBA Local 77 that when their respective CNAs expired the County would no longer implement the incremental salary scheme provided for in those contracts. Both unions filed charges with the Public Employment Relations Commission (PERC or the Commission), claiming that Atlantic County had engaged in an unfair labor practice, contrary to the Employer-Employee Relations Act (EERA), N.J.S.A. 34:13A-1 to -43.
The hearing examiner agreed with the unions and found that Atlantic County’s “departure from the dynamic status quo — in this case, the refusal to pay automatic increments — constitute^] a unilateral change in a mandatory subject of negotiations in violation of the [EERA].” Atlantic County petitioned PERC for review, and the Commission came to the opposite conclusion. It found that in light of economic conditions and legislative changes since the recession, the dynamic status quo doctrine, which would have required the continuance of the step increment system, was impractical and burdensome. Accordingly, PERC abandoned the dynamic status quo doctrine and found that Atlantic County was within its authority to stop applying the salary increment systems in the expired CNAs.
Subsequently, Bridgewater Township informed PBA Local 174 that it too would cease the salary step increments once the current CNA expired. PBA Local 174 filed for grievance arbitration. The Commission, citing its Atlantic County decision, found for Bridge-water Township. Because the dynamic status quo doctrine had been abandoned, PERC found that salary step increases beyond the contract’s expiration were not a term and condition of employment that mandated negotiation or arbitration.
All three unions appealed.
1
The Appellate Division consolidated the cases and reversed the Commission.
In re County of Atlantic and PBA Local 243 and FOP Lodge 34 and PBA Local 77; In re Township of Bridgewater and PBA Local 174,
445
N.J.Super.
1,
We need not determine whether, as a general rule, an employer must maintain the status quo while negotiating a successor agreement. In these eases, the governing contract language requires that the terms and conditions of the respective agreements, including the salary step increases, remain in place until a new CNA is reached. Therefore, the judgment of the Appellate Division is affirmed on other grounds.
I.
A.
We glean the following facts from the record. We begin with the dispute between Atlantic County and the two unions with which it contracted.
POP Lodge 34 represents all full-time, Atlantic County employees who are classified as “Corrections Officers”; it excludes Captains, Lieutenants, Sergeants, and temporary employees. PBA Local 77 represents the “Sergeants, Detective I, and Detectives” working for the Atlantic County Prosecutor’s Office. Both of those unions had CNAs with Atlantic County that expired on December 31, 2010.
While the contracts were in effect, covered individuals would receive annual salary increases in accordance with an increment system. Each contract contained a grid that set forth this payment scheme. 2 The columns in the grid represented a year of the contract, and the rows (steps) represented an employee’s year(s) of service. An individual’s salary could be found at the intersection of the column and row that matched the year in question and the total number of years the specific employee had served up to that point, Under both grid systems, an officer was advanced horizontally by one column at the end of each contract year and vertically by one step on the anniversary of his or her hire date. The employee’s new, increased salaxy would match the amount provided at that intersecting point.
Each contract contained language that touched on the continuation of benefits. PBA Local 77’s most recent contract, and the three that preceded it, stated that “[a]ll provisions of this Agreement will continue in effect until a successor Agreement is negotiated.” PBA Local 34’s CNA provided that “[a]ll terms and conditions of employment, including any past or present benefits, practices or privileges which are enjoyed by the employees eov- ered by this Agreement that have not been included in this Agreement shall not be reduced or eliminated and shall be continued in full force and effect.”
Typically, as the Atlantic County Department of Law explained, after a CNA expires, “the officers who remain on the salary guide continue to move through the guide of the expired contracts and then salaries are adjusted retroactively when a successor agreement is reached.” Indeed, every CNA entered into between Atlantic County and PBA Local 77 since 1996 expired before a successor agreement was executed. During the interim periods between CNAs, Atlantic County adhered to the terms and conditions of the most recently expired CNA, including the step-increment system. Similarly, Atlantic County continued to pay step increments to employees on their anniversary dates from 2007 through 2010 in accordance with their CNA, which expired on December 31, 2006. The successor agreement, which covered the period from January 1, 2007 through December 31, 2010, was not executed until October 2011.
On December 22, 2010, however, Atlantic County informed FOP Lodge 34 and PBA Local 77 that the officers’ movement through the salary guides would cease nine days later, when their respective CNAs expired on December 31. The County acknowledged that customary practice was to continue the previously negotiated payment scheme, but it maintained that it was “no longer efficacious or reasonable” to follow that practice, given that “the entire negotiations landscape has undergone major changes.” The County asserted that the Property Tax Levy Cap,
N.J.S.A.
40A:4-45.44 to -45.47, and the Interest Arbitration Award Cap,
N.J.S.A.
34:13A-16.7, “preempt[] the previous standards of practice and render continued salary guide movement impractical and unduly burdensome.”
3
According to the County, “[b]oth of these legisla
tive enactments w[ould]
FOP Lodge 34 and PBA Local 77 each filed unfair practice charges with PERC, and shortly thereafter, Atlantic County stopped paying step increments. The unions alleged that Atlantic County had violated the EERA, N.J.S.A. 34:13A-5.4(a)(1), (2), (3), (5), and (7), by refusing to pay the salary increments after each CNA expired, thereby unilaterally altering the status quo. The unions also filed applications for interim relief seeking an order directing the County to pay the increments.
The PERC chair denied the applications for interim relief and referred the cases to the Director of Unfair Practices. The Director reviewed the charges and issued a Complaint, ordering a hearing on the alleged violations of Sections 5.4(a)(1) and (5) of the EERA, which prohibit a public employer from “interfering with, restraining or coercing employees in the exercise of’ their rights under the EERA and “refusing to negotiate in good faith” the terms and conditions of employment. The Director dismissed the claims relating to Sections 5.4(a)(2), (3), and (7) 4 and issued an Order consolidating the cases.
The PERC hearing examiner conducted a hearing and issued a report and recommended decision. The hearing examiner found that “[f]or non-education employees, the case law requires the application of the dynamic status quo” doctrine, which was first adopted by PERC in 1975, when it upheld “the generally accepted view ... that an employer is normally precluded from altering the status quo while engaged in collective negotiations.” In re Piscataway Twp. Bd. of Educ., P.E.R.C. No. 91, 1975 N.J. PERC LEXIS 23 at 6 (1975).
Given the contract language, which indicated an intention to continue the increment payments into the future, and Atlantic County’s history of continuing the payments even after previous CNAs had expired, the hearing examiner concluded that “the payment of annual automatic increments constituted a practice” that was “an existing term and condition of employment.” In other words, the hearing examiner found that the County’s “refusal to pay automatic increments” was a “departure from the dynamic status quo” and therefore “constitute[d] a unilateral change in a mandatory subject of negotiations in violation of the [EERA].”
In rendering this decision, the hearing examiner rejected the County’s argument that the two-percent Property Tax Levy Cap conflicted with the EERA. Contrary to the County’s understanding, he clarified that “the tax levy cap statute does not mandate that the County limit any particular salary increase to a maximum of 2%.” In the hearing examiner’s view, paying the salary increments was still possible because
PERC adopted the hearing examiner’s findings of fact, but then clarified that it was “asked to review ... the continuing propriety of what is known as the dynamic status quo doctrine.” Looking to the doctrine’s inception and evolution, the Commission found that the doctrine had not yet been applied in a situation such as this, where there is “a post expiration increase in remuneration.” PERC found that the dynamic status quo doctrine was intended to establish a predictable environment that favors neither party during negotiations, and that in this case “a post expiration requirement that employers continue to pay and fund a prior increment system creates myriad instabilities in the negotiations process.”
First, PERC found that the Property Tax Levy Cap and the Interest Arbitration Award Cap are legislative initiatives that “were unanticipated thirty years ago” when it adopted the dynamic status quo doctrine. Those restrictions, in the Commission’s view, were “designed to control the rate of growth in government spending” and, therefore, “[i]t is in both sides’ interest to have the ability to negotiate over adjustments in the number” and dollar amounts attributed to incremental salary steps in successor agreements. Second, PERC suggested that the “public policy underlying labor negotiations in New Jersey” has changed. The Commission found
that the dynamic status quo no longer fulfills the needs of the parties in that it selves as a disincentive to the prompt settlement of labor disputes, and disserves rather than promotes the prompt resolution of labor disputes. While public employers will continue to be bound by the strictures of the status quo, that will be defined as “static” rather than a dynamic status quo.
PERC also disagreed with the hearing examiner’s finding that the contracts’ language indicated “an express agreement ... to continue to provide incremental increases beyond the termination date of the agreements.” Because it repudiated the dynamic status quo doctrine, and because it found no other basis to require the incremental payments beyond contract expiration, the Commission dismissed the unions’ unfair labor charges.
B.
Also relevant to this appeal is a CNA between Bridgewater Township and PBA Local 174, a collective bargaining unit for police officers below the rank of sergeant, which expired on December 31, 2012. That agreement provided for a salary increment system that mirrored the systems set forth in the CNAs between Atlantic County and FOP Lodge 34 and PBA Local 77. Although the contract expired on December 31, 2012, Article XIX, Section 2 of the CNA stated that “[t]his agreement shall remain in full force and effect during collective negotiations between the parties beyond the date of expiration set forth herein until the parties have mutually agreed on a new agreement.”
After PERC’s decision in the Atlantic County matters, Bridge-water Township notified PBA Local 174 that it would not pay annual step increases beyond the expiration date of the current CNA until a successor agreement was reached, relying on the same reasoning as that of Atlantic County for doing so. Soon after the CNA expired, PBA Local 174 filed a grievance against the Township, alleging violations of: Article XV of the parties’ CNA,
5
past
The arbitrator found in PBA Local 174’s favor, concluding that the parties had an “unequivocal past practice show[ing] that they interpreted the contract as requiring that an officer be advanced on the salary guide on his or her anniversary date, both during the term of the agreement and in the hiatus period following expiration.” The arbitrator also emphasized that PERC has “long held that the status quo includes the extension of automatic increments beyond the life of the agreement because the salary guide system calling for such increments is a term and condition of employment.” (internal quotation marks omitted). Accordingly, the grievance was sustained and Bridgewater Township was “ordered to advance all eligible unit members ... one step on the salary guide retroactive to the employee’s 2013 anniversary date of hire.” That award was subsequently affirmed by the Law Division.
While the matter was still in arbitration, Bridgewater Township filed a scope-of-negotiations petition with PERC, alleging that the grievance was outside the scope of negotiations because, “based upon an undue hardship,” the Township is allowed to “freeze step increases pending the outcome of collective bargaining negotiations.” After the Law Division affirmed the grievance arbitration, PERC granted the Township’s request for a restraint of binding arbitration. PERC found that “the issue of automatic movement on a salary guide after a contract has expired is not a term and condition of employment and therefore not mandatorily negotiable and legally arbitrable.” As such, the Commission held that public employers were no longer required, “as a matter of law, to fund automatic advancement on a salary guide after a contract has expired.”
C.
FOP Lodge 34, PBA Local 77, and PBA Local 174 appealed the PERC decisions. The Appellate Division consolidated the appeals and, in a published decision, reversed the Commission.
In re County of Atlantic, supra,
445
N.J.Super.
at 6,
The panel found that the Property Tax Levy Cap and the Interest Arbitration Award Cap do not govern contracts that are negotiated and that neither statute preempted the viability of the dynamic status quo doctrine.
Id.
at 14-16,
Moreover, the panel concluded that PERC could not discard the dynamic status quo doctrine, which was originally derived from PERC’s interpretation of
N.J.S.A.
34:13A-5.3, “as an act of mere policymaking.”
Id.
at 15-17,
Finally, with regard to PERC’s decision on the scope-of-negotiations petition by Bridgewater Township, the Appellate Division found that “[s]alary is a mandatory subject of negotiation, and the Township’s decision not to pay automatic salary increments in accordance with the earlier CNAs and past practice was indeed arbitrable.”
Id.
at 22-23,
Accordingly, the Appellate Division reversed PERC’s decisions as to both the Atlantic County and Bridgewater Township matters, holding that “the fiscal health of municipalities and tax rates are not within PERC’s charge” and that “PERC cannot abandon the adjudicative doctrine it long ago adopted.” Ibid.
Bridgewater Township, Atlantic County, and PERC each filed petitions for certification, which this Court granted. 227
N.J.
148,
II.
PERC, Bridgewater Township, Atlantic County, and supporting amici seek reversal of the Appellate Division. They argue that the dynamic status quo doctrine was never adopted by this Court and that the Commission appropriately abandoned the principle, after considering relevant factors, under its authority to interpret and administer the EERA.
PBA Local 77, PBA Local 174, FOP Lodge 34, and accompanying amici argue that the Appellate Division properly reversed the Commission because the salary step increases are a term and condition of employment that Atlantic County and Bridgewater Township unilaterally altered without first negotiating, in violation of the EERA. In addition, they assert that PERC impermissibly abandoned the dynamic status quo doctrine, a “bedrock principle of labor relations law.”
III.
The EERA affords public employees a vast array of rights, including the ability to appoint a majority representative to represent their interests and negotiate agreements on their behalf with an employer.
N.J.S.A.
34:13A-5.3. In addition, the EERA provides that “[pjroposed new rules or modifications of existing rules governing working conditions shall be negotiated with the majority representative before they are established.”
Ibid.
Thus, employers are barred from “unilaterally altering ... mandatory bargaining topics, whether established by expired contract or
The test for determining whether a subject is mandatorily negotiable between public employers and employees was established in
In re Local 195, IFPTE,
88
N.J.
393, 403-05,
We find that salary step increments is a mandatorily negotiable term and condition of employment because it is part and parcel to an employee’s compensation for any particular year. This conclusion is supported by precedent that dates back to the inception of
Local
195’s three-part test.
Robbinsville, supra,
227
N.J.
at 199,
Accordingly, we must determine whether the salary increment systems provided for in the expired CNAs still governed working conditions during the hiatus period between agreements. See N.J.S.A. 34:13A-5.3, -5.4(a)(1), and -5.4(a)(5).
IV.
A.
Here, we need not look beyond the contracts themselves to conclude that the step increases continued beyond the expiration of the contracts. Normally “contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.”
Litton Fin. Printing Div. v. NLRB,
501
U.S.
190, 207, 111
S.Ct.
2215, 2226,
It is well-settled that “[c]ourts enforce contracts ‘based on the intent of the parties, the express terns of the contract, surrounding circumstances and the
When as here, there are no material factual disputes, “the interpretation of a contract is subject to de novo review by an appellate court.”
Kieffer v. Best Buy,
205
N.J.
213, 222-23,
B.
Applying those principles to the contracts at issue here, the expired CNAs involving PBA Local 174 and PBA Local 77 contain clear and explicit language that the respective salary guides — and all other terms and conditions set forth in those agreements — will continue until a successor agreement is reached. Specifically, PBA Local 174’s CNA with Bridgewater Township reads, “[t]his agreement shall remain in full force and effect during collective negotiations between the parties beyond the date of expiration set forth herein until the parties have mutually agreed on a new agreement.” Similarly, the CNA between PBA Local 77 and Atlantic County provides that “[a]ll provisions of this Agreement will continue in effect until a successor Agreement is negotiated.” Accordingly, we find that the salary increment systems remained in effect after the agreements’ expiration dates under basic principles of contract law.
We reach the same result with regard to the agreement between FOP Lodge 34 and Atlantic County. Their CNA states that “[a]ll terms and conditions of employment, including any past or present benefits, practices or privileges which are enjoyed by the employees covered by this Agreement that have not been included in this Agreement shall not be reduced or eliminated and shall be continued in full force and effect.”
Atlantic County and Bridgewater Township could have simply negotiated different contract terms. For example, an agreement between the Board of Education of Ho-Ho-Kus and Ho-Ho-Kus Education Association, for the time period from July 1, 2012 through June 30, 2015, provided that the parties “agree that in the absence of a contractual settlement for a successor agreement prior to June 30, 2015, increments for certified personnel shall not be automatic in the 2015-2016 school year (i.e., increments shall not be paid unless and until the parties agree to a successor contract).” That sample of clear contractual language leaves no room for confusion and could have easily been incorporated into the CNAs at issue here.
Had the Atlantic County and Bridgewater Township agreements been silent about whether the terms of the salary increment system were to continue, the issue in this appeal would be more complicated, It might well have required careful consideration of past practices, custom and the viability of the dynamic status quo doctrine.
See Township of Middletown v. Middletown PBA Local 124,
334
N.J.Super.
512,
We note that the Appellate Division based its conclusion on the dynamic status quo doctrine, finding that it is “neither a regulation nor a policy statement” that PERC can simply discard in
advantageous circumstances.
In re County of Atlantic, supra,
445
N.J.Super.
at 17-18,
Our decision today does not govern future negotiations, other than to suggest that parties would be wise to include explicit language indicating whether a salary guide will continue beyond the contract’s expiration date.
V.
For the foregoing reasons, the judgment of the Appellate Division is affirmed on other grounds.
Salary Guide for FOP Lodge 34:
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Salary Guide for PEA Local 77:
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Salary Quids
A) Foe ©aployoas hirod prior to January 1/ 2011
[[Image here]]
B) For employees hirod on or after January lr 2011
[[Image here]]
Notes
PBA Local 243 was originally a party to the dispute with Atlantic County. However, it withdrew its charges prior to PERC’s decision in this matter and was not involved in the appeal below.
The respondents' Salary Guides are attached in the Appendix for reference.
The Properly Tax Levy Cap prohibits local governments from increasing property tax levies by more than two percent year-over-year. N.J.S.A. 40A:4-45.44(b), The Interest Arbitration Award Cap places a two percent cap on increases to salaries under contracts that are created through interest arbitration. N.J.S.A. 34:13A-16.7(b).
Under those provisions, a public employer is prohibited from: (1) "[d]omi-nating or interfering with the formation, existence or administration of any employee organization"; (2) "[d]iscriminatmg in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage employees in the exercise of the rights guaranteed to them by" the EERA; and (3) "[Violating any of the rules and regulations established by the commission,” N.J.S.A. 34:13A-5.4(a)(2), (3), and (7),
Article XV of the CNA between Bridgewater Township and PBA Local 174 is entitled "COMPENSATION,” Within this Article is a "Salary Guide” provision that states, “Effective January 1, 2009, 2010, 2011, and 2012, the wage rates shall be those set forth in Appendix A and will be paid on the 15th and second to last day of the month or immediately preceding work day.”