By Lisa Fleisher

New Jersey and the Newark Teachers Union are negotiating a form of merit pay in the state-run district that would block poorly rated teachers from receiving automatic annual salary bumps that are now based solely on years of experience, union officials said.

Only teachers evaluated as “effective” or “highly effective” on a new four-tier scale would be eligible for pay increases that are now tied to how many years they have worked, union President Joe Del Grosso said. Teachers rated “partially effective” and “ineffective” would still receive raises unrelated to their rating or experience level.

If approved, the new pay scale would be groundbreaking in New Jersey, where teachers unions are among the strongest in the country. The state’s largest teachers union, the New Jersey Education Association, is opposed to merit pay.

Republican Gov. Chris Christie has battled with public-employee unions in the state, but he has something of a willing partner in Mr. Del Grosso, who said he is open to merit pay and other changes to seniority rules.

“It’s been used in the private sector effectively, and it’s something that we should try to use effectively here,” Mr. Del Grosso said of merit pay. “I see no reason for a union to not want pay for their members.”

Mr. Del Grosso, however, said his approval hinged on the district’s agreement to include peer review—allowing teachers to observe and mentor each other—in a new evaluation system. “We would have a safeguard,” he said.

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