                     NOT FOR PUBLICATION WITHOUT THE
                    APPROVAL OF THE APPELLATE DIVISION

                                           SUPERIOR COURT OF NEW JERSEY
                                           APPELLATE DIVISION
                                           DOCKET NO. A-4636-14T3
                                              APPROVED FOR PUBLICATION

IN RE N.J.A.C. 12:17-2.1.                                  May 1, 2017

________________________________                 APPELLATE DIVISION


            Argued March 6, 2017 – Decided May 1, 2017

            Before Judges Sabatino, Nugent and Haas.

            On appeal from a regulation promulgated by
            the New Jersey Department of Labor and
            Workforce Development.

            Alan   H.  Schorr   argued   the  cause for
            appellants Schorr & Associates, P.C. and
            National Employment Lawyers Association –
            New Jersey (Schorr & Associates, P.C.,
            attorneys; Mr. Schorr, on the briefs).

            Alan C. Stephens, Deputy Attorney General,
            argued the cause for respondent New Jersey
            Department    of    Labor    and    Workforce
            Development    (Christopher    S.    Porrino,
            Attorney General, attorney; Melissa Dutton
            Schaffer, Assistant Attorney General, of
            counsel; Mr. Stephens, on the brief).

      The opinion of the court was delivered by

SABATINO, P.J.A.D.

      The   heart    of    this   appeal   involves    a     challenge    to   the

validity of a regulation, N.J.A.C. 12:17-2.1, adopted in 2015 by

the   Department      of    Labor    and   Workforce        Development    ("the

Department").       In that regulation, the Department defines, for
the    first     time   in    codified      form,     the    concept       of     "simple

misconduct" by an employee that can limit his or her eligibility

for unemployment benefits under the Unemployment Compensation

Act ("the Act"), N.J.S.A. 43:21-1 to -56.                          The Department's

adoption of the regulation attempted to respond to concerns this

court expressed in Silver v. Board of Review, 430 N.J. Super. 44

(App. Div. 2013), regarding the need for a codified rule that

distinguishes       "simple     misconduct"         from     the    more        stringent

intermediate concept of "severe misconduct" as defined by the

Legislature in a 2010 amendment to N.J.S.A. 43:21-5(b), or the

most   extreme     category     of    "gross      misconduct"      defined        in    the

statute.

       For the reasons that follow, we invalidate the portion of

the challenged regulation defining simple misconduct.                           We do so

because    the    definition     illogically        and     confusingly         mixes    in

concepts   of     "negligence"       with       intent-based    concepts         such    as

"willful       disregard,"    "evil      design,"      "wrongful       intent,"         and

similar states of mind.          The regulation is also flawed because,

as explained in this opinion, it defines "simple misconduct" in

certain respects as encompassing employee conduct that is at

least as extreme or venal – or perhaps more so – than "severe

misconduct."




                                            2                                    A-4636-14T3
     Consequently, the Department's final agency action adopting

the definition of simple misconduct within N.J.A.C. 12:17-2.1

must be set aside as arbitrary and capricious.1             We do so without

prejudice      to   the   Department       pursuing   the   adoption      of    a

substitute regulation that cures these defects and conforms with

the overall statutory scheme.

                                       I.

                                       A.

     The framework and history of the statute and related case

law dating back to 1936 is eloquently set forth in Judge Lisa's

opinion   in    Silver,   supra,   430      N.J.   Super.   at   48-56.        We

incorporate by reference that background here.              Some highlights

from Silver bear repeating.

     To begin with, we detailed in Silver:

                 From its inception in 1936 until 2010,
            New Jersey's Unemployment Compensation Law
            has   provided   for   disqualification   for
            benefits   for   employees   discharged   for
            "misconduct" or "gross misconduct" connected
            with the work.   N.J.S.A. 43:21-5(b); see L.
            1936, c. 270, § 5.       The statute defines
            "gross misconduct" as "an act punishable as
            a crime of the first, second, third or
            fourth degree," but it does not define the
            term "misconduct."    Ibid.    Appropriately,



1 Appellants   also challenge the adoption of N.J.A.C. 12:17-9.1, -
9.2, -10.1,    -10.3 through -10.9, and -21.2. We see no reason to
invalidate     those   regulations,  which   do  not  include   the
problematic    definition of "simple misconduct" discussed in this
opinion.


                                       3                               A-4636-14T3
         the sanctions for gross misconduct are
         greater than for simple misconduct. Ibid.

              In 2010, the Legislature added a third
         category     in     section    5(b),    "severe
         misconduct." L. 2010, c. 37, § 2, eff. July
         1, 2010.      As we will explain, this was
         intended    as   an    intermediate   form   of
         misconduct, requiring greater culpability
         than simple misconduct, but less than gross
         misconduct, and with an intermediate level
         of     disqualification      from    collecting
         unemployment    benefits.       The  amendatory
         provision does not define severe misconduct,
         but   contains    a   non-exclusive   list   of
         examples. See N.J.S.A. 43:21-5(b).2

         [Silver, supra, 430 N.J. Super. at 48-49.]

    As we then explained in Silver, case law has attempted to

fill in the gap left by the omission from the Act of an express

definition of "simple misconduct":

              In 1956, our Supreme Court held that
         employees were guilty of misconduct for
         engaging in a work stoppage, in violation of


2 As Silver explained, under the statute, proven "misconduct" by
an employee "results in disqualification for the week that the
employee was discharged and seven additional weeks." Supra, 430
N.J. Super. at 49 n.4 (citing N.J.S.A. 43:21-5(b)).           By
comparison, to be eligible for unemployment benefits after being
discharged for "severe misconduct," an employee "must first
become reemployed for a period of at least four weeks and earn
at least six times the employee's weekly unemployment benefit
rate."   Ibid. (citing N.J.S.A. 43:21-5(b)). Lastly, the most
severe degree of employee behavior under the statute, termed
"gross misconduct," results in "no benefits from the account of
the employer against whom the gross misconduct occurred and
requires at least eight weeks of new employment and wages
totaling at least ten times the weekly benefit rate before the
claimant can collect unemployment compensation." Ibid. (citing
N.J.S.A. 43:21-5(b)).



                               4                           A-4636-14T3
         a no-strike clause in their collective
         bargaining agreement, which provided that
         the employer shall immediately discharge any
         employee in violation of the clause.   Bogue
         Elect. Co. v. Bd. of Review, 21 N.J. 431,
         433-34 (1956). Without attempting to define
         "misconduct" broadly, the Court held that a
         deliberate   breach   of    the   collective
         bargaining agreement could not be deemed a
         circumstance       causing       involuntary
         unemployment, the hazard intended by the
         Legislature to be protected against, and
         thus, within the spirit and policy of the
         unemployment law, it constituted misconduct.
         Id. at 436.

              A few months later, a panel of this
         court   was   confronted    with   a   similar
         situation, in which employees were fired as
         a result of a work stoppage, but in which
         the collective bargaining agreement did not
         contain a no-strike provision.         Beaunit
         Mills, Inc. v. Bd. of Review, 43 N.J. Super.
         172,   176-80  (App.   Div.   1956),   certif.
         denied,    23 N.J. 579 (1957).     Because of
         that material factual distinction, the panel
         was required to define "misconduct" within
         the meaning of the unemployment law. It did
         so thusly:

         [Silver, supra, 430 N.J. Super. at 49.]

We then quoted in Silver from the following instructive passages

found in Beaunit Mills:

              What    does   the    statutory    [term]
         misconduct signify? Obviously it cannot mean
         "mere mistakes, errors in judgment or in the
         exercise of discretion, or minor but casual
         or unintentional carelessness or negligence,
         and similar minor peccadilloes."     It cannot
         mean   mere    inefficiency,    unsatisfactory
         conduct, failure of performance as the
         result    of    inability    or    incapacity,
         inadvertence in isolated instances, or good



                               5                          A-4636-14T3
         faith errors of judgment.    Boynton Cab Co.
         v. Neubeck, 237 Wis. 249, 296 N.W. 636
         (1941);   Kempfer,   Disqualifications   for
         Voluntary Leaving & Misconduct, 55 Yale Law
         J. 147, 162-166 (1945). In our opinion, the
         statement in 48 Am. Jur., Social Security,
         Unemployment Compensation, etc., § 38 at 541
         (1943), suggests the fair intendment of the
         statute:

         [Silver, supra, 430 N.J.     Super.    at 49-50
         (quoting Beaunit Mills,      supra,    43 N.J.
         Super. at 182).]

    At this point, as we further noted in Silver, Beaunit Mills

quoted this portion of the Am. Jur. treatise:

              Misconduct within the meaning of an
         unemployment compensation act excluding from
         its benefits an employee discharged for
         misconduct must be an act of wanton or
         willful   disregard    of    the   employer's
         interest, a deliberate violation of the
         employer's rules, a disregard of standards
         of behavior which the employer has the right
         to expect of his employee, or negligence in
         such degree or reoccurrence as to manifest
         culpability,   wrongful   intent,   or   evil
         design,   or   show    an   intentional   and
         substantial disregard of the employer's
         interest or of the employee's duties and
         obligations to the employer.

         [Id. at 50 (quoting Beaunit Mills, supra, 43
         N.J. Super. at 183 (quoting 48 Am. Jur. §38
         at 541)).]

    Silver then explained:

              Applying those principles, we held [in
         Beaunit Mills] that, because the employees
         "were engaged in a concerted activity in
         good   faith  for  their   mutual  aid  and
         protection," and with an "absence of evil
         intent or willful desire to injure the



                               6                           A-4636-14T3
            employer," under all of the circumstances,
            the employees were not guilty of misconduct
            connected with the work within the meaning
            of section 5(b). Id. at 183, 185.

                 Subsequent case law, although sparse,
            has made clear that the Beaunit Mills
            standard for defining misconduct is not
            limited to a literal and isolated reading of
            the Am. Jur. passage quoted above.       The
            definition also includes the discussion in
            Beaunit Mills preceding the Am. Jur. passage
            we have also quoted.

            [Silver, supra, 430          N.J.      Super.    at    48-50
            (emphasis added).]

      Our opinion in Silver went on to distill guiding principles

from several reported New Jersey cases that have applied Beaunit

Mills.     In particular, Silver noted, id. at 50, that in Demech

v. Board of Review, 167 N.J. Super. 35 (App. Div. 1979), we

reversed the Department's denial of benefits to a supermarket

employee     who    had   thrown     a   roast      at   a   co-worker     out    of

frustration and anger caused by the co-worker's inappropriate

conduct    towards     her.        "Because   the    employee's      conduct     was

provoked by the co-employee, was unthinking and spontaneous, and

was not intended to and did not cause injury to the co-employee,

it   did   not     qualify    as    misconduct     under     the   Beaunit     Mills

standard."       Silver, supra, 430 N.J. Super. at 51 (citing Demech,

supra, 167 N.J. Super. at 38-39).             In this regard, Silver quoted

this key passage from our opinion in Demech:                       "All that the

statute    undertakes        to    penalize   is     deliberate      and   willful



                                         7                                 A-4636-14T3
disregard of standards of conduct an employer has a right to

expect."      Ibid. (emphasis added) (quoting Demech, supra, 167

N.J. Super. at 41).

      Silver next addressed our opinion in                   Smith v. Board of

Review, 281 N.J. Super. 426 (App. Div. 1995), a case in which a

hospital orderly was discharged for misconduct because he had

brought food to a pre-surgery patient, contrary to a nurse's

instructions.        Silver, supra, 430 N.J. Super. at 51 (citing

Smith, supra, 281 N.J. Super. at 428).                 The majority of this

court's panel in Smith upheld the denial of benefits because the

orderly's    behavior       amounted   to    "a   'willful    disregard       of   the

employer's best interest,' thus constituting misconduct."                      Ibid.

(emphasis added) (quoting Smith, supra, 281 N.J. Super. at 430).

The third member of the panel dissented in Smith, because he

regarded     the    evidence   as    insufficient     to    support    a    "willful

disregard"     of    the    hospital   employer's     policies,       and    instead

signified "only negligent" conduct.               Ibid. (citing Smith, supra,

281   N.J.   Super.    at    438    (Brochin,     J.A.D.,    dissenting)).         We

explained     in    Silver   that    this    split   within    the    Smith    panel

illustrates "[t]he critical distinction between intentional and

deliberate conduct on the one hand and negligent or inadvertent

conduct on the other[.]"           Ibid. (emphasis added).




                                         8                                  A-4636-14T3
    As   a    further   example   of       "the   need   for   deliberate   or

intentional conduct" to be proven to disqualify an employee for

benefits, Silver also discussed Parks v. Board of Review, 405

N.J. Super. 252 (App. Div. 2009).            Id. at 51-52.     In Parks, the

claimant was terminated from his job because of what was deemed

to be "excessive absenteeism" after four absences from work.

Id. at 52.    The record in Parks reflected that all four absences

had been occasioned by family illnesses or emergencies.                 Ibid.

(citing Parks, supra, 405 N.J. Super. at 255).                   Given these

circumstances, this court reversed the Department's denial of

benefits to Parks, applying the Beaunit Mills standard.                 Ibid.

(citing Parks, supra, 405 N.J. Super. at 254).

    As we highlighted in Silver, the panel in Parks observed

that disqualification for benefits under the Act "is warranted

only when the employee's conduct that resulted in his or her

discharge had the ingredients of willfulness, deliberateness and

intention."    Ibid. (internal citations omitted).             "[B]ecause the

employee's absences were the result of excusable circumstances,

they could not meet the Beaunit Mills standard of deliberate or

intentional    violations   of    the       employer's     rules."      Ibid.

(emphasis added) (citing Parks, supra, 405 N.J. Super. at 256).

    We also briefly noted in Silver two other reported opinions

illustrating the concept of "misconduct."                Both of those cases




                                       9                             A-4636-14T3
factually involved "intentional acts of insubordination."                            Ibid.

(emphasis added) (citing Borowinski v. Bd. of Review, 346 N.J.

Super.     242,       246   (App.   Div.    2001),   and   Broderick       v.       Bd.    of

Review, 133 N.J. Super. 30, 31 (App. Div. 1975)).

     Continuing to trace the relevant history, Silver then noted

that the Department in 2003 promulgated a rule – a predecessor

to   the       2015    regulation     now     challenged    before     us       –    which

attempted to define "misconduct" under the Act.                     That 2003 rule

provided:

               For an act to constitute misconduct, it must
               be improper, intentional, connected with
               one's   work,   malicious,   and   within the
               individual's   control,   and   is  either  a
               deliberate violation of the employer's rules
               or a disregard of standards of behavior
               which the employer has the right to expect
               of an employee.

               [Id. at 52-53            (quoting     N.J.A.C.   12:17-
               10.2(a)).]

     As we explained in Silver, "[b]y its plain terms," the 2003

regulation        "prescribe[d]       a     two-prong    standard     to    establish

misconduct."          Id. at 53.     "First, the conduct must be improper,

intentional, connected with the work, malicious, and within the

employee's control."            Ibid.       "Second, the conduct must also be

either     a    deliberate     violation      of   the   employer's    rules          or   a

disregard of the standards of behavior which the employer has

the right to expect."           Ibid.




                                             10                                 A-4636-14T3
    Silver        observed    that    the    test       articulated        in    the    2003

version of the rule "is more stringent than the Am. Jur. passage

quoted in Beaunit Mills."                 Ibid.     The test "incorporates the

other   features      of     the    Beaunit       Mills      analysis,      as     further

elucidated and reiterated in subsequent case law."                              Ibid.     We

stressed     in    this    regard     that       Beaunit     Mills    "built       upon    a

foundation laid by the Supreme Court in Bogue, the rationale of

which hinged upon the incongruity of allowing benefits to 'a

group   of    employees       [who]       deliberately        violate       a     [clearly

important]        basic      provision       of     a      collective           bargaining

agreement.'"       Ibid. (quoting Bogue, supra, 21 N.J. at 436).

    The      Legislature,          with     the     input      of     an    intervening

conditional veto by the Governor, expanded the Act in 2010,

inserting    the     intermediate         category      of    "severe      misconduct."

Ibid. (citing revised N.J.S.A. 43:21-5(b)).                         We pointed out in

Silver that the statutory amendment provided no definition for

severe misconduct, but it did give some illustrative examples.

Ibid.   Those examples included the following:

             Examples of severe misconduct include, but
             are   not   necessarily limited    to,   the
             following:   repeated   violations   of   an
             employer's rule or policy, repeated lateness
             or absences after a written warning by an
             employer, falsification of records, physical
             assault or threats that do not constitute
             gross misconduct as defined in this section,
             misuse of benefits, misuse of sick time,
             abuse of leave, theft of company property,



                                            11                                    A-4636-14T3
            excessive use of intoxicants or drugs on
            work premises, theft of time, or where the
            behavior is malicious and deliberate but is
            not considered gross misconduct as defined
            in this section.

            [Id. at 54 (quoting N.J.S.A. 43:21-5(b), as
            amended by L. 2010, c. 37, § 2, eff. July 1,
            2010).]

       As of the time of our opinion in Silver, the Department had

not yet adopted new regulations to distinguish simple misconduct

from severe misconduct.              Ibid.        A proposed regulation had been

attempted    in     2010,     but    expired        without      action.         A    second

attempt,    which       was   then      underway        when    Silver    was       decided,

eventually       culminated      with      the    2015    regulation       that      is    now

before us.

       Pending    the    final      adoption       of    such   new   regulations,          we

reasoned    in    Silver      that    it     is    "fundamental"         that    the      term

"misconduct" should have "the same meaning throughout N.J.S.A.

43:21-5(b)       and    its   implementing          regulation."           Id.       at    55.

Following that principle, Silver looked to two of the examples

of     "severe    misconduct"        set      forth       in    the    2010      statutory

amendment, i.e., "repeated violations of an employer's rule or

policy"    and    "repeated      lateness         or    absences      after     a    written

warning," which, "if read literally," would describe "conduct

that    would     not    necessarily         be    deliberate,        intentional,          or




                                             12                                      A-4636-14T3
malicious."         Ibid.       However,     we    eschewed   such    a    rigid    and

literal interpretation of those examples.

    We noted "it is obvious that the Governor and Legislature

intended to create severe misconduct as a gap-filler between

simple       misconduct     and    gross    misconduct."          Ibid.    (emphasis

added).       We added that "[i]t would make no sense to allow for

conduct      with   a     lower    level    of     culpability     (such     as    mere

inadvertence or negligence) to qualify as severe misconduct and

carry with it a harsher sanction than simple misconduct."                         Ibid.

"Such    a    result    would     be   absurd     and   clearly   contrary    to   the

legislative intent, as expressly set forth in the Governor's

Conditional Veto Message, S1813, L. 2010, c. 37."                    Ibid.

    Summarizing           these        principles,       Silver    expressed        the

following guidance to both the Department and to litigants:

                   Therefore, we must construe these two
              examples of severe misconduct as requiring
              acts done intentionally, deliberately, and
              with malice.   Because these two examples of
              severe     misconduct    require    repeated
              violations, such a construction would render
              the conduct more egregious than simple
              misconduct, which could result from a single
              such violation committed intentionally and
              with malice.     We understand "intentional"
              and "malicious" as used in the regulation to
              include   deliberate    disregard   of   the
              employer's rules or policies, or deliberate
              disregard of the standards of behavior that
              the employer has the right to expect of an
              employee. This interpretation comports with
              the amended statutory scheme, which lists
              three levels of misconduct, each dependent



                                           13                                A-4636-14T3
             upon the employee's                    relative    degree        of
             culpability.

             [Id. at 55-56 (emphasis added).]

       Silver applied these principles to the facts in that case.

The claimant, a teacher at a vocational school, had violated her

employer's     policy      by   failing        to    collect    back     pens      from   her

students at the end of class.                       Id. at 47.         The teacher had

failed to do so six times.                   Ibid.      After being warned by her

employer     that    another          such     infraction       would     lead      to    her

termination, she violated the policy a seventh time and was

fired.       Ibid.    The Department disqualified the teacher from

collecting benefits, concluding that she had been discharged for

severe misconduct.         Ibid.

       We reversed the agency determination in Silver, concluding

that   not    only   did    the       record    fail    to     support    a    finding     of

"severe"     misconduct,        but    also    failed     to    demonstrate        "simple"

misconduct.      Id. at 58.             As we wrote in Silver, the hearing

examiner made no finding that the teacher had "intentionally or

deliberately disregarded the employer's rule for collecting pens

after a class[,]" and, indeed, "the record would not support

such a finding."        Id. at 57.             Instead, the claimant adequately

explained the circumstances of her failure to account for all

of the pens in the classroom environment.                        Ibid.        Her employer

"did not refute her assertion that she was trying to comply with



                                              14                                    A-4636-14T3
the rule."        Ibid.       "She was simply unable to do so."                      Ibid.

Consequently, it was "clear" to us in Silver that the claimant's

conduct    "was       a    result      of    negligence      or     inadvertence,       not

intentional      or       deliberate    disregard       of   the     employer's    rule."

Ibid.

    We     then       criticized       the    Department       for    its    "fragmented

approach" in how it applied to Silver the portion of the Beaunit

Mills standard contained in the Am. Jur. passage:

                    To find misconduct, the agency relied
               on the portion of the Beaunit Mills standard
               contained in the Am. Jur. passage.       In our
               view, that fragmented approach has never
               been what was intended by Beaunit Mills, as
               described in our subsequent opinions, and
               reliance on it constituted legal error.
               Under the correct Beaunit Mills analysis,
               appellant's   conduct   did   not    constitute
               misconduct because it lacked the requisite
               elements of wil[l]fulness, deliberateness,
               intention, and malice.    More important, her
               conduct did not satisfy the agency's own
               definition    of    misconduct,     which    is
               controlling, and which, in our view, appears
               to have been designed to          express the
               entire Beaunit Mills standard.

               [Id. at 58.]

    In    reaching          this   result     in     Silver,   we    acknowledged       the

considerate deference that an administrative agency such as the

Department deserves in applying legislative standards within its

sphere    of    responsibility.              Ibid.      Even   so,     and   giving     due

respect to an agency's expertise, "ultimately the interpretation




                                              15                                  A-4636-14T3
of statutes and regulations is a judicial, not administrative,

function and we are not bound by the agency's interpretation."

Ibid. (citing Mayflower Secs. Co. v. Bureau of Sec., 64 N.J. 85,

96 (1973)).

                                        B.

    Following       Silver,     the     Department       promulgated        the    new

regulations that are now before us.                The relevant history is as

follows.

    On     August    18,    2014,     the    Department        published    proposed

amendments related to "Claims Adjudication – Voluntarily Leaving

Work and Misconduct[.]"         See 46 N.J.R. 1796(a) (Aug. 18, 2014).

Appellants, Schorr Associates, P.C. and the National Employment

Lawyers    Association,       submitted       written      objections       to     the

proposals in a letter dated September 17, 2014.                    Legal Services

of New Jersey also submitted written objections in a letter

dated October 17, 2014.

    A public hearing on the proposed amendments was held on

September 5, 2014.         At that hearing, an attorney presented oral

objections    to    the    proposals.        No   one   else    testified    at    the

hearing.

    The proposed amendments were adopted "with non-substantial

changes" on April 16, 2015, codified at N.J.A.C. 12:17-2.1, -

9.1, -9.2, -10.1, -10.3 through -10.9, and -21.2, and N.J.A.C.




                                        16                                   A-4636-14T3
12:17-10.2 was repealed.         See 47 N.J.R. 1009(a) (May 18, 2015).

The   amendments    at   the    core   of   the   present   appeal   read    as

follows:

           12:17-2.1         Definitions

           The following words and terms, when used in
           this chapter, shall have the following
           meanings,   unless   the   context  clearly
           indicates otherwise.

                   . . . .

           "Gross misconduct" means an act punishable
           as a crime of the first, second, third, or
           fourth degree under the New Jersey Code of
           Criminal Justice, N.J.S.A. 2C:1-1 et seq.

                   . . . .

           "Malicious" means when an act is done with
           the intent to cause injury or harm to
           another or others or when an act is
           substantially certain to cause injury or
           harm to another or others.

                   . . . .

           "Misconduct" means simple misconduct, severe
           misconduct, or gross misconduct.

                   . . . .

           "Severe misconduct" means an act which (1)
           constitutes "simple misconduct," as that
           term is defined in this section; (2) is both
           deliberate and malicious; and (3) is not
           "gross misconduct."

                   1.   Pursuant to N.J.S.A. 43:21-5, as
                   amended by P.L. 2010, c. 37, such acts
                   of "severe misconduct" shall include,
                   but not necessarily be limited to, the
                   following: repeated violations of an



                                       17                            A-4636-14T3
                 employer's rule or policy, repeated
                 lateness or absences after a written
                 warning by an employer, falsification
                 of records, physical assault or threats
                 that    do   not    constitute    "gross
                 misconduct," misuse of benefits, misuse
                 of sick time, abuse of leave, theft of
                 company property, excessive use of
                 intoxicants or drugs on work premises,
                 or theft of time; except that in order
                 for any such act to constitute "severe
                 misconduct,"    it   must    also    (1)
                 constitute "simple misconduct"; and (2)
                 be both deliberate and malicious.

           "Simple misconduct" means an act which is
           neither   "severe   misconduct"   nor    "gross
           misconduct" and which is an act of wanton or
           willful    disregard    of    the    employer's
           interest, a deliberate violation of the
           employer's rules, a disregard of standards
           of behavior that the employer has the right
           to expect of his or her employee, or
           negligence in such degree or recurrence as
           to manifest culpability, wrongful intent, or
           evil design, or show an intentional and
           substantial disregard of the employer's
           interest or of the employee's duties and
           obligations    to   the    employer.    Nothing
           contained within this definition should be
           construed to interfere with the exercise of
           rights protected under the National Labor
           Relations Act or the New Jersey Employer-
           Employee Relations Act.

           [N.J.A.C. 12:17-2.1 (emphasis added).]

       Appellants timely appealed the Department's final agency

decision   promulgating       these   new   regulations.    Fundamentally,

they   contend   that   the    regulations    are   inconsistent   with   the

policies of the Act in many respects, and are arbitrary and

capricious.



                                       18                           A-4636-14T3
       Most centrally, appellants contend that the inclusion of

"negligence" concepts within the definition of simple misconduct

in N.J.A.C. 12:17-2.1 is contrary to case law, including Silver,

Beaunit Mills, and the overall statutory scheme.                        They assert

that the concept of what amounts to "intentional negligence"

encompassed      within    the    new     regulation      is     an   oxymoron,     and

incapable of sensible or fair application.                       They further urge

that    the    regulatory        definition       of     misconduct     should      not

eliminate a predicate ingredient of malice.                       To support these

various       arguments,    appellants          point      to     several      recent

unemployment cases in which, in the their view, agency personnel

inappropriately        denied,      at     least       initially,      benefits      to

claimants      whose   conduct      was    no     more    culpable     than    simple

negligence.

       The    Department    counters       that    the     new    regulations       are

presumptively valid, consistent with the terms of the statute

and case law, and neither arbitrary nor capricious.                         It urges

that we uphold the regulations without any modification.

                                          II.

       We start our consideration of the merits with a recognition

of the principles of appellate judicial review of administrative

agency decisions we previously applied in Silver, and likewise

apply here.       It is well-established that, when reviewing an




                                          19                                  A-4636-14T3
agency's adoption of a regulation on appeal, the scope of review

is "both narrow and deferential."                      In re Adoption of N.J.A.C.

5:96, 215 N.J. 578, 629 (2013) (internal citations omitted).

Because    an    agency       has    been    delegated       certain     powers   by    the

Legislature, "[t]he grant of authority . . . should be liberally

construed to enable the agency to accomplish the Legislature's

goals."    Ibid. (quoting Van Dalen v. Washington Twp., 120 N.J.

234, 245 (1990)).             An agency action within that delegation of

power is therefore "accorded a strong presumption of validity

and reasonableness."             Ibid. (quoting Van Dalen, supra, 120 N.J.

at 244-45).

    That        said,    an     agency      may      not   adopt   a   regulation      that

"extend[s]      a     statute       to   give     it   a   greater     effect   than    its

language permits."            GE Solid State v. Dir., Div. of Taxation,

132 N.J. 298, 306 (1993) (citing Kingsley v. Hawthorne Fabrics,

Inc., 41 N.J. 521, 528 (1964) and Serv. Armament Co. v. Hyland,

70 N.J. 550, 563 (1976)).                   An appellate court's review of a

regulation       is     therefore        essentially        limited     to   determining

whether:

            (1) the action offends the State or Federal
            Constitution;   (2)  the   action   violates
            express or implied legislative policies; (3)
            the record contains substantial evidence to
            support the agency's findings; and (4) in
            applying the legislative policy to the
            facts, the agency erred in reaching a
            conclusion that could not reasonably have



                                                20                                A-4636-14T3
            been made       on    a    showing   of    the    relevant
            factors.

            [In re N.J.A.C. 12:17-9.6 ex. rel. State
            Dep't of Labor, 395 N.J. Super. 394, 407
            (App.   Div.  2007)  (internal  citations
            omitted).]

    Another core principle that guides our review here is the

notion that codified provisions, whether they be enacted within

a statute, an administrative regulation, or an ordinance, must

be interpreted sensibly in a manner that avoids reaching absurd

results.    See US Bank, N.A. v. Hough, 210 N.J. 187, 202 (2012).

Although duly-enacted regulations start off with a presumption

of validity, courts are empowered to set them aside where they

are shown to be "unreasonable or irrational[.]"                      Bergen Pines

Cty. Hosp. v. N.J. Dep't of Human Servs., 96 N.J. 456, 477

(1984).     Such    flaws   may       be   evident    where   the   wording   of    a

provision is internally inconsistent, impermissibly vague, or

plainly in conflict with overarching law, which, in the case of

a regulation, could be a Constitution or an enabling statute.

See, e.g., In re N.J.A.C. 7:1B-1.1 Et Seq., 431 N.J. Super. 100,

117 (App. Div. 2013); N.J. Ass'n of Health Care Facilities v.

Finley, 83 N.J. 67, 82 (1980).

    The public is entitled to be guided by regulations that are

clear,    understandable,        and   reasonably      predictable    in   uniform

application.       That objective is particularly essential in the




                                           21                              A-4636-14T3
sphere of unemployment compensation cases, which, as appellants

emphasize,      are    most     commonly         pursued    by     self-represented

laypersons     who    have    been    denied     benefits    by    an   unemployment

claims Deputy or Tribunal.

       Substantively, we also must be cognizant of the fundamental

conceptual difference between conduct that is "intentional" or

"deliberate"     in    nature        from    behavior      that    is   "negligent."

"Negligence" has been defined in our law as "the failure to

exercise 'that degree of care for the safety of others, which a

person    of    ordinary      prudence       would    exercise      under    similar

circumstances.'"       Steinberg v. Sahara Sam's Oasis, LLC, 226 N.J.

344, 363-64 (2016) (quoting Model Jury Charge (Civil), 5.10A,

"Negligence and Ordinary Care – General" (2009)).                       By contrast,

an "intentional" or "deliberate" act connotes "conduct decidedly

more culpable[.]"        Mahoney v. Carus Chem. Co., Inc., 102 N.J.

564, 577 (1986).

       As this court repeatedly pointed out in Silver, supra, 430

N.J.   Super.    at    51,    57,     58,    negligence      and    intentional    or

deliberate wrongdoing are qualitatively different states of mind

and degrees of behavior.              Within our State's statutory scheme

for unemployment compensation and decades of case law applying

it, the basic notion of "simple misconduct" requires "elements

of wil[l]fulness, deliberateness, intention, and malice."                         Id.




                                            22                              A-4636-14T3
at 58.        An employee's mere "negligence" or "inadvertence" does

not suffice to comprise misconduct under the Act.                Id. at 57.

       That said, the regulations the Department adopted in 2015

fail     to        make    this   critical     distinction     between       simple

negligence, on the one hand, and intentional, deliberate, or

malicious conduct, on the other hand, at least not consistently.

Unfortunately,            the   literal   wording     of   N.J.A.C.        12:17-2.1

defining and utilizing the term "simple misconduct" confusingly

blends concepts of negligence with intentional wrongdoing that

cannot be sensibly understood or harmonized.                 Several aspects of

the new rule illustrate this problem.

       As     we    have    already   noted,    the   definition      of    "simple

misconduct," as adopted in the new regulation, encompasses the

following:

               [A]n act of wanton or willful disregard of
               the   employer's   interest,   a   deliberate
               violation   of   the  employer's   rules,   a
               disregard of standards of behavior that the
               employer has the right to expect of his or
               her employee, or negligence in such degree
               or recurrence as to manifest culpability,
               wrongful intent, or evil design, or show an
               intentional and substantial disregard of the
               employer's interest or of the employee's
               duties and obligations to the employer.

               [N.J.A.C. 12:17-2.1 (emphasis added).]

       Unpacking this prose, even the most careful reader could be

readily confused on how the term "negligence" can be sensibly




                                          23                                A-4636-14T3
equated    with    "intentional"            conduct.       Or    with      "a    wanton        or

willful disregard" of an employer's interest.                         Or "evil design."

Or "an intentional and substantial disregard" of an employer's

interest or of the employee's duties.                      Such 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.

     We are mindful that the regulation includes this qualifying

phrase     after    the        word    "negligence":            "in    such      degree        or

recurrence as to manifest[,]" and then enumerates various forms

of intentionally-based wrongdoing.                     It is not clear from this

wording what is meant to "manifest" such a more extreme revision

of   negligence,          by     an     unspecified        level      of        "degree        or

recurrence."

     We suspect that what the drafters may have had in mind, but

do not say so precisely in the words of the regulation, was to

embrace    negligence          that    is   so    severe   in    extent         that     it   is

tantamount in culpability to what our case law in other contexts

sometimes    refers       to     as    "gross     negligence."             In    fact,        the

Department's       brief       expressly      likens    the      negligence          language

within the new regulation to gross negligence.




                                             24                                        A-4636-14T3
       Black's Law Dictionary defines "gross negligence" as "[a]

conscious, voluntary act or omission in reckless disregard of a

legal duty and of the consequences to another party[.]"                               Black's

Law     Dictionary,          1197    (10th      ed.    2014).         The     term     "gross

negligence" has also at times been treated as synonymous with

"reckless       negligence,         wanton      negligence,         willful    negligence,

willful     and       wanton        negligence,        [and]     willful       and    wanton

misconduct[.]"          Ibid.

       Although        rigid        classifications         of       the      "degrees      of

negligence have been abandoned" in our case law, the term "gross

negligence" is nonetheless still used when referring to "the

upper    reaches       of     negligent        conduct."        Stelluti      v.     Casapenn

Enters., LLC, 408 N.J. Super. 435, 457 n.6 (App. Div. 2009)

(quoting Parks v. Pep Boys, 282 N.J. Super. 1, 17 n.6 (App. Div.

1995)),    aff’d,       203     N.J.     286    (2010).        As    the    Supreme     Court

recently noted, under the applicable New Jersey Civil Model Jury

Charges,       the    concept       of   gross       negligence      "does    not    require

willful    or        wanton    misconduct        or    recklessness."           Steinberg,

supra, 226 N.J. at 364 (citing Model Jury Charge (Civil), 5.12,

"Gross Negligence" (2009)).

       Perhaps these problems of clarity and interpretation could

be    solved    if     the    regulation        were    revised      to    eliminate     this

confusing and internally contradictory language, and instead set




                                                25                                   A-4636-14T3
forth a clearer definition of "misconduct" that incorporated the

concept of "gross negligence."             Alternatively, the regulation

also    might    provide       that   either     "gross     negligence"         or

"intentional misconduct" can suffice.            Of course, such revised

wording is not before us, and we will not render an advisory

opinion here on the subject.          See De Vesa v. Dorsey, 134 N.J.

420, 428 (1993) (noting that our courts refrain from rendering

advisory opinions or exercising jurisdiction "in the abstract");

see also G.H. v. Twp. of Galloway, 199 N.J. 135, 136 (2009)

(instructing that courts should not "answer abstract questions

or   give   advisory   opinions");    Crescent    Park    Tenants   Ass'n       v.

Realty Equities Corp. of N.Y., 58 N.J. 98, 108 (1971) (same).

       In   particular,    a    challenger     might     argue   that      gross

negligence falls short of the levels of culpability delineated

in our prior case law construing the Act, although no prior case

has squarely addressed the question.           What we can and must say

is that Silver, which remains binding precedent and which we

reaffirm here, clearly requires that the Act be construed and

applied so as to not deprive claimants of unemployment benefits

based on actions or inactions that amount to nothing more than

simple negligence.        The statute is designed to, and must be,

"liberally construed in favor of the allowance of benefits."

Meaney v. Bd. of Review & Atlas Floral Decorators, 151 N.J.




                                      26                                A-4636-14T3
Super. 295, 298 (App. Div. 1977) (internal citations omitted).

Although    ineligible   claimants    who   have   engaged     in    deliberate

misconduct must be turned away, see Yardville Supply Co. v. Bd.

of Review, Dep't of Labor, 114 N.J. 371, 375 (1989), deserving

claimants who have only been merely negligent should not be

deprived of compensation.

    Despite the contrary assertion of appellants, we do not

ascribe     any   improper   policy   motives      to   the   Department      in

adopting    the   present    regulation     as   part   of    some    concerted

"scheme" to deprive worthy unemployment claimants of their just

benefits.     In fact, we appreciate that the self-contradictory

and confusing terminology that mixes "negligence" concepts with

"intentional wrong" concepts originates with the 1943 Am. Jur.

treatise passage itself, which was quoted in Beaunit Mills.

    But, importantly, as our opinion in Silver recognized, the

court in Beaunit Mills prefaced its citation to the Am. Jur.

treatise with an important gloss.           "The test [of compensability

used under our statute] is more stringent than the Am. Jur.

passage quoted in Beaunit Mills.             It incorporates the other

features of the Beaunit Mills analysis, as further elucidated

and reiterated in subsequent case law."            Silver, supra, 430 N.J.

Super. at 53.      The test "buil[ds] upon a foundation laid down by

the Supreme Court in Bogue, the rationale of which hinged upon




                                      27                               A-4636-14T3
the incongruity of allowing benefits to 'a group of employees

[who]   deliberately         violate   a    .    .   .    basic     provision       of   a

collective bargaining agreement.'"               Ibid. (emphasis in original)

(quoting Bogue, supra, 21 N.J. at 436).                   In quoting the Am. Jur.

passage without the important gloss, the Department's regulation

fails to include this key concept.

    The present edition of the Am. Jur. treatise, issued in

2005,   continues       to   read   substantially         the    same    as   the    1943

version, repeating the same ambiguous phrase "negligence of such

degree or recurrence as to manifest wrongful intent or evil

design," and so on.             76 Am. Jur., Unemployment Comp., § 68 at

807 (2005).        We are also aware that the unemployment laws of

several   other     states      continue    to   make      use    of    the   Am.    Jur.

phraseology,       or    comparable    language.     3      Yet,    as    far   as    our

research has revealed, none of those states have the kind of

three-tiered            gross       misconduct/severe              misconduct/simple

misconduct structure that our New Jersey statute has utilized

since the 2010 legislative amendment.                    Now that we have in our

state   such   a    three-tiered       statutory         gradation,      it   does    not

appear logical to "snap in" the Am. Jur. definition into the


3 See, e.g., Rossini v. Dir., Ark. Empl. Sec. Dep't, 101 S.W.3d
266 (Ark. Ct. App. 2003); Young v. Miss. Empl. Sec. Comm'n, 754
So. 2d 464 (Miss. 1999); Stalcup v. Job Serv. N.D., 592 N.W.2d
549 (N.D. 1999); Kelly v. Unemployment Comp. Bd. of Review, 747
A.2d 436 (Pa. Commw. Ct. 2000); Dailey v. Bd. of Review, W. Va.
Bureau of Empl. Programs, 589 S.E.2d 797 (W. Va. 2003).


                                           28                                   A-4636-14T3
regulation indiscriminately. 4              Instead, doing so appears to have

caused confusion, and allegedly uneven and unfair application.

     As an independent basis for concern, the present regulatory

definitions seem 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 regulatory definition of severe misconduct attempts to

address    this   overlap       by    requiring    proof   that   the    employee's

conduct    not     only    be        "simple     misconduct"    but     also      "both

deliberate and malicious."             The term "deliberate" is not defined

in the regulations.         However, the term "malicious" is defined as

follows:

            "Malicious" means when an act is done with
            the intent to cause injury or harm to
            another or others or when an act is
            substantially certain to cause injury or
            harm to another or others.

            [N.J.A.C. 12:17-2.1.]




4 We recognize that a regulation containing both the Am. Jur.
passage and the Beaunit Mills prefatory gloss would be unwieldy.
Hence, we offer our suggestion that the Department create from
scratch a new regulation that clearly and concisely expresses
the appropriate concepts.


                                            29                                 A-4636-14T3
This definition does not resolve the overlap and definitional

problem.      In fact, the solution appears to be circular.                                In

order to comprise the higher-grade of "severe misconduct," the

employee's       behavior      must      be   "deliberate"          and    "intended,"     or

"substantially certain" to cause injury or harm to others.                                That

sounds very much like simple misconduct committed with "wrongful

intent" or "evil design."                 If the harm (or expectancy of harm)

ingredient is what makes the difference between "simple" and

"severe" misconduct, the regulation surely could express that

line of demarcation more clearly and explicitly.

    In     sum,        with        all    due        deference       to     (and,   indeed,

appreciation for) the Department's efforts to enact a clarifying

regulation       defining      "simple        misconduct,"          the    result   of    that

process    has    led   to     a    linguistic            morass,   one    that   cannot    be

readily or sensibly understood and applied.                               Although we have

pondered whether to perform "judicial surgery" on the wording of

the regulation ourselves to solve these problems, we consider it

more appropriate for the Department to go back to the proverbial

drawing board and develop a clearer and more cogent alternative

itself,    considering         the       input       of    appellants      and    any    other

commentators.

    The      portion          of     N.J.A.C.          12:17-2.1      defining      "simple

misconduct"       is     accordingly             set       aside     as     arbitrary      and




                                                30                                  A-4636-14T3
capricious,   without   prejudice    to    the    Department   adopting      a

substitute provision within no later than 180 days.                  In the

meantime, to avoid disruption in the statewide administration of

the unemployment benefits program, we stay our decision, sua

sponte, for that same 180-day period to enable the Department to

take   appropriate   corrective   action    or,    alternatively,    pursue

further review in the Supreme Court.         The remainder of the new

regulations that do not concern the definition remain unaltered.

       Reversed.   We do not retain jurisdiction.




                                    31                              A-4636-14T3
