$100K in Severance Pay: Court Says Town Manager's 'Golden Parachute' Violates State Law

A New Jersey appeals court ruled that a contract provision giving a municipal administrator more than $100,000 in severance pay goes against a declaration by the Legislature.

A statute limiting severance for departing municipal administrators to three months of pay supersedes an employment contract giving a former Caldwell official one month of salary for every year of service, the appeals court said.

Paul Carelli, the former administrator for Caldwell, drafted an employment contract in 2018 that included one month of severance for each year of service.

Later that year, the mayor was defeated at the polls, and in January 2019 the town council voted to remove Carelli. The town paid the three months’ severance allowed in the statute, which came to roughly $34,000.

But Carelli filed suit to enforce his contract, seeking an additional $101,606 for more than eight years on the job.

After the trial judge denied cross-motions for summary judgment, Caldwell appealed.

Severance Excluded?

Appellate Division Judge Clarkson Fisher Jr. Photo: Carmen Natale/ALM

Carelli claimed on appeal that the statute did not apply to severance packages, since it did not use the term “severance.”

But Appellate Division Judges Clarkson Fisher Jr., Patrick DeAlmeida and Morris Smith, finding “no ambiguity” in the statute, N.J.S.A. 40A:9-138, rejected that assertion.

Fisher, writing for the court, said Carelli’s claim was “disingenuous at best,” and an attempt “to skirt the statute’s plain meaning.”

Fisher added that in 1996, about 25 years after the statute was adopted, lawmakers introduced a revision that allows municipal administrators to receive more than three months’ severance.

In a legislative hearing, the bill’s sponsors said the revision would allow severance for administrators at “a level greater than the three months’ pay currently permitted.”

The revision bill was never enacted, but the attempt at an amendment “suggests the legislature had not previously intended the statute to be a mere suggestion about what a municipality could pay a dismissed administrator,” Fisher found.

‘Makes It Crystal Clear’

Brian Block of Mandelbaum Barrett in Roseland, representing Caldwell, said “it was clear to the borough as it was clear to the Appellate Division in the decision that the claim was without merit.”

The issue of separation pay for municipal administrators often comes up amid turnover among elected officials, and the new leaders seek to install their own administrators, Block said.

Brian Block. Courtesy photo

“This being published makes it crystal clear across the state that administrators can no longer be entitling themselves or even asking the council to approve severance—a golden parachute, if you will—for public employees just because they’re removed or terminated,” Block said. “The state statute sets what they get, gives them some sort of protection, but they can’t be pigs about it. They can’t give themselves more, or ask the council to give them a golden parachute at the expense of taxpayers.”

Last year, the Office of the State Comptroller issued a report on Palisades Park, which found that its administrator had a severance provision in his contract that violated state law, Block said.

That report said Palisades Park’s administrator has a contract that would entitle him to $360,000 in severance and other types of payouts when he retired.

Block said, “I get the sense that such things are being slipped in administrator contracts before there was some sort of crystal clear ruling that they couldn’t be.”