describing unusual salary increases or arrangements in the final years of employment as "the local board['s] . . . grand gesture of farewell at little expense" because the local board is not itself responsible for the pension payments that must follow over many years
How later courts described this case
- describing unusual salary increases or arrangements in the final years of employment as "the local board['s] . . . grand gesture of farewell at little expense" because the local board is not itself responsible for the pension payments that must follow over many years
Written by the judges who cited it.
The opinion
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3130-22
CHERYL KRESS,
Petitioner-Appellant,
v.
BOARD OF TRUSTEES OF
THE TEACHERS' PENSION
AND ANNUITY FUND,
Respondent-Respondent.
__________________________
Argued December 12, 2024 – Decided December 27, 2024
Before Judges Natali and Vinci.
On appeal from the Board of Trustees of the Teachers'
Pension and Annuity Fund, Department of the
Treasury, Agency Docket No. TPAF No. xx7465.
Darren M. Gelber argued the cause for appellant
(Wilentz, Goldman & Spitzer PA, attorneys; Darren M.
Gelber, of counsel; Samuel J. Halpern, on the briefs).
Joseph Palumbo, Deputy Attorney General, argued the
cause for respondent (Matthew J. Platkin, Attorney
General, attorney; Janet Greenberg Cohen, Assistant
Attorney General, of counsel; Porter R. Strickler, on the
brief).
PER CURIAM
Petitioner Cheryl Kress appeals from the May 5, 2023 final administrative
decision of the Board of Trustees (Board) of the Teachers' Pension and Annuity
Fund (TPAF) rejecting her retroactive salary increases as creditable
compensation for pension calculation purposes. Based on our review of the
record and applicable legal principles, we affirm.
Effective September 1, 1991, Kress was enrolled in TPAF as a teacher.
On September 1, 1997, she transferred to the Kenilworth Board of Education
(BOE), where she continued to work as a teacher until her resignation on April
30, 2021. On September 20, 2019, she filed a wage discrimination lawsuit
against the BOE asserting causes of action based on the Diane B. Allen Equal
Pay Act, N.J.S.A. 10:5-12(t) (Equal Pay Act), and the New Jersey Law Against
Discrimination, N.J.S.A. 10:5-1 to -42 (NJLAD). Kress alleged since her hiring
in 1997, unlike her male colleagues, she did not receive full credit for her prior
work experience and did not receive the same annual pay increases received by
her male colleagues.
On March 8, 2021, she submitted a letter of resignation with an effective
resignation date of May 1, 2021. On April 12, 2021, Kress, the BOE, and the
A-3130-22
2
Kenilworth Education Association (KEA) entered into a settlement agreement
under which the BOE and KEA agreed to pay $100,000 in exchange for a general
release and dismissal of the lawsuit. 1 The settlement agreement allocated the
entire settlement amount to her final three years of employment and provided
for retroactive salary increases from $103,682 to $135,765 for 2018-2019;
$105,359 to $137,442 for 2019-2020; and $106,934 to $147,038 for 2020-2021.
The settlement agreement required that Kress resign effective May 1, 2021. The
settlement was contingent on her resignation. On April 16, 2021, she applied
for retirement effective May 1.
On June 3, 2021, the Board approved her retirement application based on
a final salary of $105,003.66. On August 5, 2022, in response to Kress's inquiry
regarding her benefits, the Division of Pensions and Benefits (Division) advised
her the retroactive salary increases pursuant to the settlement agreement would
"not be used in the recalculation of [her] benefits since it is considered extra
compensation that is not pensionable per N.J.A.C. 17:3-4.1." The Division
determined the "settlement was processed based on [her] anticipated retirement
and to only increase the salary for the period that would be used in calculating
[her] retirement benefit." In addition, "there is no justification for the
1
After attorneys' fees were deducted, Kress received $96,250.
A-3130-22
3
calculation of the retroactive salary portion or the justification for the new
annual salary."
Kress appealed to the Board. On January 5, 2023, the Board voted to deny
her request for salary credit based on the settlement agreement. Kress objected
to the Board's decision and requested a hearing in the Office of Administrative
Law (OAL). On April 13, 2023, the Board denied her request for a hearing. On
May 5, 2023, the Board issued its final administrative decision. The Board
found "structuring the agreement to place all of the back pay into only the final
three years of employment, the years upon which her pension is calculated[,]
rather than during all of the years . . . Kress maintained she was denied equal
pay, increases her pension benefit in violation of TPAF statutes and
regulations," specifically, N.J.S.A. 18A:66-2(d)(1) and N.J.A.C. 17:3-4.1.
The Board noted the "civil lawsuit was not adjudicated" and "there was
no court order or legal judgment that concluded she was entitled to an increase
in salary as a matter of law." It further found, "because there is no clear
connection between the settled salary increase and rendered service or across
the board salary increases, nor is it required as a matter of law, the payment of
additional salary is extra compensation offered as an inducement to drop her
lawsuit and leave employment with" the BOE. "The $32,083 per year increase
A-3130-22
4
in compensation was determined to be extra compensation that was made
primarily in anticipation of her retirement, contrary to N.J.A.C. 17:3 -4.1, and is
not creditable for pension calculation purposes." The Board denied the request
for an OAL hearing "because this matter does not entail any disputed questions
of fact."
On appeal, Kress argues the Board's "failure to give full force and effect
to the . . . settlement agreement . . . violated express legislative policies."
Specifically, that "the retroactive salary payments were made in order to
equalize Kress'[s] salary with that of her male colleagues . . . in compliance with
the Equal Pay Act and NJLAD mandates." She also contends the Board
improperly rejected her request for a hearing because "there exist disputed
facts . . . concern[ing] how and when Kress acquired knowledge of the salary
disparities as well as the [BOE's] efforts to obfuscate the facts." "[H]ad the facts
been made known earlier . . . in [her] tenure . . . she might well have litigated
her claims earlier, clearly dispelling any presumption that her salary increases
were in anticipation of retirement."
Our scope of review of an administrative agency's final determination is
limited. In re Carter, 191 N.J. 474, 482 (2007). We accord a "strong
presumption of reasonableness" to the agency's exercise of its statutorily
A-3130-22
5
delegated responsibilities. City of Newark v. Nat. Res. Council, Dep't of Env't
Prot., 82 N.J. 530, 539 (1980). The burden of showing the agency's action was
arbitrary, unreasonable, or capricious rests upon the appellant. Barone v. Dep't
of Hum. Servs., Div. of Med. Assistance & Health Servs., 210 N.J. Super. 276,
285 (App. Div. 1986), aff'd, 107 N.J. 355 (1987).
The reviewing court "should not disturb an administrative agency's
determinations or findings unless there is a clear showing that (1) the agency
did not follow the law; (2) the decision was arbitrary, capricious, or
unreasonable; or (3) the decision was not supported by substantial evidence." In
re Application of Virtua–West Jersey Hosp. Voorhees for a Certif. of Need, 194
N.J. 413, 422 (2008); see also Circus Liquors, Inc. v. Governing Body of
Middletown Twp., 199 N.J. 1, 9-10 (2009). Nevertheless, an appellate court is
"in no way bound by the agency's interpretation of a statute or its determination
of a strictly legal issue." Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93
(1973).
Absent arbitrary, unreasonable, or capricious action, or a lack of support
in the record, "[a]n administrative agency's final quasi-judicial decision will be
sustained." In re Herrmann, 192 N.J. 19, 27-28 (2007) (citing Campbell v. Dep't
of Civil Serv., 39 N.J. 556, 562 (1963)). The court "may not vacate an agency
A-3130-22
6
determination because of doubts as to its wisdom or because the record may
support more than one result," but is "obliged to give due deference to the view
of those charged with the responsibility of implementing legislative programs. "
In re N.J. Pinelands Comm'n Resol. PC4-00-89, 356 N.J. Super. 363, 372 (App.
Div. 2003) (citing Brady v. Bd. of Review, 152 N.J. 197, 210 (1997)).
Under the statute that governs TPAF, salary adjustments that are granted
primarily in anticipation of retirement are not included as part of a member's
"compensation" when calculating the member's pension:
"Compensation" means the contractual salary, for
services as a teacher as defined in this article, which is
in accordance with established salary policies of the
member's employer for all employees in the same
position but shall not include individual salary
adjustments which are granted primarily in anticipation
of the member's retirement or additional remuneration
for performing temporary or extracurricular duties
beyond the regular school day or the regular school
year.
[N.J.S.A. 18A:66-2(d)(1).]
In addition, the applicable regulations provide "[e]xtra compensation shall
not be considered creditable for benefits . . ." N.J.A.C. 17:3-4.1(c). Extra
compensation is defined as:
[I]ndividual salary adjustments, which are granted
primarily in anticipation of a member's retirement;
additional remuneration for performing temporary
A-3130-22
7
duties beyond the regular work day or work year or
additional remuneration for performing duties that are
not integral to the effective functioning of the regular
school curriculum.
[N.J.A.C. 17:3-1A.1.]
Forms of extra compensation include:
vii. Individual retroactive salary adjustments where no
sufficient justification is provided that the adjustment
was granted primarily for a reason other than
retirement;
viii. Individual adjustments to place a member at the
maximum of his or her salary range in the final years of
service where no sufficient justification is provided that
the adjustment was granted primarily for a reason other
than retirement;
....
xi. Retroactive increments or adjustments made at or
near the end of a member's service, unless the
adjustment was the result of an across-the-board
adjustment for similarly situated personnel;
....
[N.J.A.C. 17:3-4.1(1)(a)(vii) to (viii), (xi).]
Specifically, with respect to settlements:
If the award or settlement is structured in such a way as
to provide the member with a substantial increase of
creditable salary at or near the end of the member's
service, or a substantial increase in retirement benefits,
or provides service credit that entitles a member to file
A-3130-22
8
for retirement benefits to which they would not
otherwise have qualified, the award or settlement shall
be reviewed by the Division. If the Division determines
that the pension benefit was part of the negotiations for
the award or settlement, or if the award or settlement
includes extra compensation as defined by the various
retirement systems, the Division shall determine the
compensation and/or service credit to be used to
calculate the retirement allowance, and the member
shall have the pension contributions for the salaries
based on the award refunded without interest.
[N.J.A.C. 17:1-2.18(c).]
"An evidentiary hearing is mandated only when the proposed
administrative action is based on disputed adjudicatory facts." Contini v. Bd. of
Educ. of Newark, 286 N.J. Super. 106, 120 (App. Div. 1995) (quoting In re
Farmers' Mut. Fire Assurance Ass'n of N.J., 256 N.J. Super. 607, 618 (App. Div.
1992)). The Board "determine[s] whether to grant an administrative hearing
based upon the standards for a contested case hearing set forth in the
Administrative Procedures Act, N.J.S.A. 52:14B-1 to -31, and the Uniform
Administrative Procedure Rules, N.J.A.C. 1:1-1 to -21." N.J.A.C. 17:4-1.7(b).
"If the . . . appeal involves solely a question of law, the Board may retain the
matter and issue a final administrative determination." N.J.A.C. 17:4-1.7(e).
We are persuaded the Board's decision was not arbitrary, unreasonable, or
capricious, and is supported by substantial evidence in the record. It is
A-3130-22
9
undisputed Kress alleged in her discrimination lawsuit damages beginning in
1997 but allocated the settlement amount only to her final three years of
employment, which would have substantially increased her pension benefits. It
is also undisputed the settlement was contingent on her resignation, and she did,
in fact, resign effective May 1, 2021, as required by the settlement agreement.
Based on the record and timeline, the Board could reasonably conclude the
retroactive salary increases were given primarily in anticipation of retirement.
The Board also could reasonably conclude the retroactive increases were extra
compensation as defined in N.J.A.C. 17:3-4.1(a)(1). Specifically, that the
"[r]etroactive . . . adjustments [were] made at or near the end of [her] service"
and were not "the result of an across-the-board adjustment for all similarly
situated personnel," N.J.A.C. 17:3-4.1(a)(1)(xi), and were not "granted
primarily for a reason other than retirement." N.J.A.C. 17:3-4.1(a)(1)(vii).
In In re Puglisi, a police officer filed a civil rights lawsuit against his
employer, the city, alleging various city administrators and elected officials
engaged in political discrimination. 186 N.J. 529, 531 (2006). The officer
reached a settlement with the city, resulting in his promotion to the rank of
captain, his immediate commencement of a one-year terminal leave period at a
captain's salary, and his agreement to retire at the end of the terminal leave
A-3130-22
10
period. Ibid. The Court concluded the payments made pursuant to the
settlement were in anticipation of his retirement and affirmed the denial of
pension credit for the settlement proceeds. Id. at 534.
The Court explained the statutory definition of compensation that
excludes salary increases at the end of an employee's career "protect[s] the
actuarial soundness of the pension fund by prohibiting the use of 'ad hoc salary
increases intended to increase retirement allowances without adequate
compensation to the [pension] fund' in calculating pensions." Ibid.; see also Bd.
of Trs. of Tchrs.' Pension & Annuity Fund of N.J. v. La Tronica, 81 N.J. Super.
461, 470-71 (App. Div. 1963) (describing unusual salary increases or
arrangements in the final years of employment as "the local board['s] . . . grand
gesture of farewell at little expense" because the local board is not itself
responsible for the pension payments that must follow over many years).
Kress's reliance on In re Snellbaker, 414 N.J. Super. 26 (App. Div. 2010),
is not convincing. Snellbaker was the police chief of Atlantic City, and in that
position, he received no raises between 2002 and 2006, while his subordinate
deputy chiefs received annual raises. Id. at 29-30. He filed a lawsuit against
the city and sought, among other relief, retroactive salary increases for 2002
through 2005 under N.J.S.A. 40A:14-179, which required the police chief to be
A-3130-22
11
paid more than the amount paid to the highest-ranking subordinate officer. Id.
at 30. The lawsuit was settled, and the settlement retroactively increased
Snellbaker's salary for the period 2002 to 2005 to bring the city into compliance
with the statute. Id. at 31. The salary increases were identical to the raises
Snellbaker's subordinates received during the same period and were applied to
every year he alleged he was underpaid. Id. at 32. Snellbaker did not involve
an "individual salary adjustment," but instead involved a settlement intended to
comply with a statutory mandate. Id. at 40-41.
Kress's retroactive salary increases, unlike those in Snellbaker, were not
required by statute and were not applied to all the years in which she claimed
she was underpaid. Rather, the salary increases were allocated only to the final
three years of her employment. This led the Board to reasonably conclude the
increases, which coincided with the years used to calculate her pension benefits,
were granted primarily in anticipation of retirement, and therefore, were not
compensation as defined in N.J.S.A. 18A:66-2(d)(1). The Board also reasonably
concluded the retroactive salary increases were "extra compensation" properly
excluded as creditable for benefits pursuant to N.J.A.C. 17:3-4.1(c). There was
ample evidence in the record to support the Board's decision.
A-3130-22
12
We are satisfied the Board did not err by refusing to grant an OAL hearing.
Kress contends a hearing was required because "there exist disputed facts . . .
concern[ing] how and when Kress acquired knowledge of the salary disparities
as well as the [BOE's] efforts to obfuscate the facts." However, the relevant
facts regarding the settlement and her retroactive salary adjustments were not
disputed. We are persuaded by the Board's argument that neither when Kress
learned of the alleged salary disparities nor the BOE's alleged conduct were
material facts that might have affected its decision. To the extent we have not
specifically addressed any remaining arguments, it is because the Board's
decision is supported by sufficient credible evidence on the record as a whole.
R. 2:11-3(e)(1)(D).
Affirmed.
A-3130-22
13