An Administrative Regulation, “A Linguistic Morass,” is Invalidated as Arbitrary and Capricious

In re N.J.A.C. 12:17-2.1, ___ N.J. Super. ___ (App. Div. 2017). Given the deferential standard of review of the validity of regulations promulgated by administrative agencies, it is relatively rare that a court finds such a regulation to be arbitrary and capricious, and therefore invalid. Today’s opinion by Judge Sabatino, however, does just that, regarding a regulation promulgated by the New Jersey Department of Labor and Workforce Development. The panel recognized that its scope of review was “both narrow and deferential.” But even under that standard, the regulation failed.

The backdrop for today’s decision was “eloquently set forth in Judge Lisa’s opinion” in Silver v. Board of Review, 430 N.J. Super. 44 (App. Div. 2013). Indeed, roughly half of Judge Sabatino’s opinion recapitulates what was said in Silver. There, the Appellate Division addressed the need to distinguish the concept of “simple misconduct” by an employee that can limit his or her eligibility for benefits under the Unemployment Compensation Act, N.J.S.A. 43:21-1 to -56, from the more egregious “severe misconduct” and the most extreme “gross misconduct” defined in the statute. N.J.A.C. 12:17-2.1, promulgated in 2015, was the Department’s response.

The problem with the regulation, as Judge Sabatino explained in detail, was that it went beyond the statute that it was intended to implement and, worse, in defining “simple misconduct,” mixed up concepts of negligence and intentional action to such an extent that it “cannot be sensibly understood or harmonized.” That definition expressly includes the words “wanton or willful disregard,” “deliberate violation,” “negligence in such degree or recurrence as to manifest culpability, wrongful intent, or evil design,” and “intentional and substantial disregard.” Judge Sabatino rightly observed that “[s]uch terms conveying a person’s conscious and purposeful aim to engage in wrongful conduct are not linguistically or doctrinally consistent with the merely careless forms of conduct that the law routinely defines as negligent.” The Department might have been intending to refer to “gross negligence,” but those words were not used, and the panel would not speculate.

The regulation also confusingly, and improperly, appeared to treat as “simple misconduct” “certain kinds of employee behavior that fall within the statutory definition of higher-level ‘severe misconduct,’ and vice-versa. For instance, it is difficult to comprehend how an employee who has acted with ‘evil design’ or with ‘wrongful intent’ is only guilty of simple misconduct and not severe misconduct.”

The result of all this was a “linguistic morass, one that cannot be readily or sensibly understood and applied.” The panel contemplated “judicial surgery” to reconstruct the regulation, but considered it “more appropriate for the Department to go back to the proverbial drawing board” and recraft the regulation. That was the correct choice.