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Craffey v. Bergen County Utilities Authority

315 N.J. Super. 345, 718 A.2d 701 (App. Div. 1998)

EMPLOYER-EMPLOYEE; CONTRACTS—The presumption of annual employment is no longer the law in New Jersey; now, the presumption is at-will employment.

By written contract, a public utilities authority hired an employee for a period “commencing January 1, 1983, and terminating December 31, 1987… .” The contract provided for an initial annual salary and, on January 1st of each year, annual increases in accordance with a formula. After the December 31, 1987 expiration date of the contract the employee continued in the same capacity and with the same duties without a new contract.

The employee remained in the same position through 1993. For the year 1988, he received the same salary increase to which he would have been entitled if his employment were still governed by the contract. He did not get an increase in 1989. In subsequent years, his pattern of salary increases did not track the contract language. The employee argued that it was legally significant that whenever his salary was changed, the change was effected by action of the authority taken after the beginning of the year.

After the employee retired at the end of 1993, he sued for the difference between what he had been paid and the higher salary he would have been entitled to if the salary terms, including the escalation clause, of the original contract had remained in effect through 1993. He also claimed he was entitled to a higher pension, annuity, and other fringe benefits and additional sick days at the higher salary. The basis of the employee’s claim was his theory that a contract for a fixed term implies a contract from year to year after completion of the fixed term. The Appellate Division rejected this contention, saying that the old case law relied upon by the employee was either inapplicable or no longer valid. Specifically, the Court held that the most that prior case law stood for was the proposition that there is a rebuttable presumption of a year-to-year renewal. Even at that, according to the Court, modern society (as contrasted with a feudal, agrarian society) presumes that employment-at-will is the prevailing doctrine. “Both employers and employees commonly and reasonably expect employment to be at-will, unless [the contrary is] specifically stated in the explicit, contractual terms.” Consequently, the presumption of annual employment is no longer the law of New Jersey.

The authority’s failure to adopt a resolution granting a pay increase in 1989 was sufficient indication to the Court that the authority had not intended a year-to-year renewal of the original contract. Moreover, the employee’s waiting until after retirement to pursue his claim estopped him from doing so because, among other things, it lulled the authority into a false sense of security.

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