New Jersey Court Orders Former Borough Administrator to Repay More Than $240K After Illegal Leave Payouts
A New Jersey court has ordered a former municipal administrator to repay more than $240,000 after ruling that he received compensation that violated state law governing sick leave and vacation payouts for public employees.
The decision marks a significant victory for the Borough of Palisades Park, which filed a civil lawsuit seeking to recover taxpayer money it says was improperly paid over several years. Local officials argue the ruling reinforces the importance of financial accountability in municipal government and sends a clear message that public funds must be managed according to state law.
According to court records, former Palisades Park Business Administrator David Lorenzo received repeated payments for unused sick leave and vacation time while serving in his role. The borough claimed those payments continued for years and exceeded the limits established under New Jersey law.
Last month, Superior Court Judge David Nasta ruled that Lorenzo must return $240,335 to the borough after determining that the payments were not permitted under the state’s regulations. The court found that the payouts violated a 2007 New Jersey law that limits how and when certain public officials may receive compensation for accumulated leave.
The legal dispute centres on payments made between 2015 and 2024, during Lorenzo’s tenure as the borough’s administrator. During that period, his annual salary reportedly exceeded $227,000 before he was dismissed from his position in early 2024 following disagreements with local leadership.
In addition to his salary, Lorenzo received yearly payments for unused vacation days and sick leave, significantly increasing his overall compensation. Borough officials argued those payments should never have been authorised because state law restricts such benefits for municipal employees.
Mayor Chong “Paul” Kim said the borough pursued the lawsuit to protect taxpayers and ensure accountability in local government. Borough leaders have maintained that recovering improperly distributed public funds has remained one of their top priorities throughout the legal process.
Officials also stated that they intend to continue using every lawful option available to recover taxpayer money while remaining transparent with residents regarding the outcome of the case.
The lawsuit follows concerns that had already been raised several years earlier by New Jersey’s fiscal oversight authorities.
In 2021, the Office of the State Comptroller released an extensive report examining financial practices within Palisades Park. The report described widespread financial management problems and questioned how the borough handled employee compensation, particularly payments related to accumulated leave.
The comptroller’s review found that numerous employees had received payouts that appeared inconsistent with state requirements. However, the report placed particular attention on Lorenzo because of the size and frequency of the payments he received during his years as business administrator.
According to the findings, Lorenzo’s employment agreement provided unusually generous benefits, including dozens of vacation days, personal leave, holidays, sick days, and even a paid day off for his birthday. Investigators also noted that he regularly converted unused leave into cash payments during his employment.
Under New Jersey law enacted in 2007, most public employees covered by the restrictions may receive no more than $15,000 for unused sick leave, and generally only upon retirement. The law was designed to reduce excessive payouts that had become common in local governments across the state.
For years, large retirement cheques for accumulated leave—sometimes referred to as “boat cheques” in New Jersey—have drawn criticism from taxpayer advocates and government watchdog organisations. Some payouts in other municipalities have reached hundreds of thousands or even more than $1 million, prompting lawmakers to tighten the rules governing these benefits.
Despite the court’s decision, Lorenzo continues to dispute the borough’s claims.
His attorneys argue that every payment he received was authorised under employment contracts approved by the Borough Council. They also contend that borough attorneys and financial officials reviewed the payments before they were issued, making it unfair to require repayment years later.
Lorenzo’s legal team further argues that other current and former municipal employees received similar compensation but have not been sued, raising concerns about whether he has been treated differently for political reasons.
His attorneys have indicated they plan to challenge the ruling through the appeals process.
The repayment case is separate from another lawsuit Lorenzo has already filed against Palisades Park regarding his termination in February 2024.
In that federal lawsuit, Lorenzo alleges he was fired because of political disagreements following a contentious local election involving divisions within the borough’s Democratic leadership. He claims the dismissal violated his civil rights and was motivated by politics rather than job performance.
Borough officials have denied those allegations, maintaining that political issues played no role in the decision to remove him from his position.
The repayment order does not resolve that separate employment dispute, which remains pending in federal court.
The latest court ruling nevertheless represents an important development in the borough’s broader effort to address financial practices that have faced scrutiny in recent years. It also highlights the legal responsibilities public officials have when handling taxpayer-funded compensation and reinforces New Jersey’s restrictions on leave payouts for government employees.
As the appeal process moves forward, the case is likely to remain closely watched by municipalities across New Jersey because it could influence how local governments enforce state compensation laws and recover public funds when questionable payments are identified.
Sources
- New Jersey Office of the State Comptroller
- New Jersey Courts
- Borough of Palisades Park, New Jersey
- New Jersey Legislature (Public Employee Sick Leave Compensation Law)
