Transcript Select Cases and Current Legal Issues

MACRS Spring Conference
June 5, 2012
Thomas F. Gibson, Esq.
James Salvie, Esq., General Counsel, MTRS
Katherine A. Hesse, Esq., Murphy, Hesse, Toomey & Lehane, LLP
James H. Quirk, Jr., Esq.,
Derek M. Moitoso, Esq., Compliance Counsel, PERAC
Nicholas Poser, Esq.
Michael Sacco, Esq.
James H. Salvie, Esq.
Mass. Teacher’s Retirement System
Form over Substance and the
Working After Retirement Problem
Section 91(a) prohibits any retiree from “be[ing] paid for
any service rendered” to a public entity (with exceptions).
Section 91(b) is the biggest exception: allows employment
in the service of a public entity within certain annual limits
(960 hours and income limitations).
The prohibition is on service, not employment.
Flanagan v. CRAB (2001): in not addressing independent contractor
argument, Appeals Court casts doubt on that argument.
Points out that 91(a) seems to cover service as a non-employee.
The “Independent Contractor”
Retiree receives a 1099, not a W-2, and is paid out of the vendor
warrant. Files estimated taxes.
The Corporation
Four retirees form corporation. “Supply” workers to public school.
Money flows from school to corporation (which takes 5% cut) to
retiree.
The “Personnel Locator” Firm
Similar to corporation, but provides some training, performance
reviews. Some indicators of control of employment.
“Employee” vs. “Being Paid for Service”
Pellegrino v. Springfield Parking Authority (2007)
Bristol Co. Retirement Bd. v. CRAB (2006)
“The statute reflects a clear policy that an employee of
a governmental unit . . . generally may not retire,
receive a pension, accept employment elsewhere in the
government, and, by combining her pension and her
new compensation, make more money than if she had
not retired.”
If rendering service to government, no flow of money,
or technical employment relationship, will prevent
problems if this is the case.
“Would you apply to my client if he was working for
a landscaping company and mowing the school’s
lawn?”
960 hours, and must earn the difference between
pension and salary being paid from the school’s lawns
(that’s a lot of lawn!).
There may not be another limiting principle.
The “de facto” employee
Controlled by public entity, regardless of formalities.
No other “clients”.
Particularly, but not exclusively, where performing same
function, for same entity as before retirement.
The “bait and switch”
Worked for public entity up until retirement. Now work
for “private entity” but perform same or similar
function. Pellegrino v. Springfield Parking Authority
Chief executive officer retires and “switches” to
employment by related corporation. Paid only by
corporation, but still manages public entity.
The Wimpy Scheme
“I will gladly pay you next year for your services this
year.”
A Better Approach
Devote some time to figuring out what the earnings
limitation is before starting work.
If you’re eligible, consider having school get a critical
shortage.
Contact retirement system and verify your calculations.
Watch hours as well as earnings: PERAC believes
earnings from hours in excess of 960 are excess
earnings.
Katherine A. Hesse, Esq.
Murphy, Hesse, Toomey & Lehane, LLP
Derek M. Moitoso, Esq.
PERAC Compliance Counsel
A person who became a member on or
before April 2, 2012 and seeks a Group 2 or
Group 4 classification and is an inactive
public employee at the time of the
member’s retirement shall be classified
based on the position from which the
member was last employed.
C. 176, Section 14
A member entering service prior to
April 2, 2012 must be actively employed in a
Group 2 or Group 4 position for not less than
12 consecutive months in order to qualify for
the retirement allowance calculation of the
desired group.
C. 176, Section 8
Those who were members prior to April 2, 2012
may also voluntarily choose to have their
retirement allowance which is calculated under
Section 5 based on their service in different
groups pro-rated “in a manner prescribed by the
commission.”
PERAC Memorandum #29 of 2012 explains the
methodology.
For those becoming members on April 2, 2012
and thereafter, such proration is mandatory.
C. 176, Section 14
If a member seeks to retire under Section 5 and
was a member prior to April 2, 2012, his or her
allowance will still be based upon the three-year
average, except:
It shall be based on a five-year average if the difference
in the rate of regular compensation between any two of
the last five consecutive years immediately preceding
retirement exceeds 100 percent.
C. 176, Section 14
By its terms, applicable only to members retiring on or after
April 2, 2012.
Calculations shall not include regular compensation that
exceeds the average of the two preceding years’ regular
compensation by more than 10 %.
Members prior to April 2, 2012 still have their retirement
allowance based upon a three year average, but the retirement
board must now look at the last five years to conduct this
analysis.
Some exceptions, particularly “from a modification in the
salary or salary schedule negotiated for bargaining unit
members under Chapter 150E” and “bona fide change in
position” apply to this.
If a member has had deductions withheld
which are excluded from regular
compensation under this provision, the
money “shall be returned to the member
with interest at the assumed actuarial
rate.” (Emphasis supplied.)
C. 176, Section 18
Tim Garrison was a member of the State
Retirement System from 1986 to 2007.
Withdrew his funds upon terminating service.
Re-employed with Essex effective April 9, 2012.
Must pay back refunded amounts by April 9, 2013
or enter into an installment agreement, not to
exceed five years, by April 9, 2013 to buy back
such funds in order to pay buyback interest on the
purchase.
C. 176, Section 9
If he doesn’t meet this deadline, he must pay
actuarial assumed interest.
Tim will also have all the rights of a member who
joined the system on or after April 2, 2012.
See PERAC Memo #23 of 2012.
C. 176, Section 9
Jake Samson had prior non-membership service as a
lifeguard in Dukes when she joins the Essex Retirement
System on April 9, 2012.
She has until April 2, 2013 to purchase this time using
buyback interest.
People buying back non-membership time between April 2,
2012 and April 2, 2013, or entering into a contract to buy it
back in that time frame, may use buyback interest, but after
April 2, 2013 all prior non-membership purchases will be at
the actuarial assumed interest rate.
See PERAC Memo #23 of 2012.
C. 176, Section 9
Kim Henne had prior non-membership service as a leaf
blower operator in Montague when she joins the Essex
Retirement System on March 29, 2013.
She has only until April 2, 2013 to either buy back the
time or enter into an installment agreement to purchase
this time using buyback interest.
See PERAC Memo #23 of 2012.
C. 176, Section 9
Jerry Quinn has prior non-membership service in
the town of Montague when she becomes a
member of the Essex Retirement System on May
14, 2013.
Whenever he buys this time back, he must pay
actuarial assumed interest.
People purchasing non-membership time under
Section 3 after April 2, 2013 will be charged the
actuarial assumed interest rate.
C. 176, Section 9
For many years, Section 5(1)(g) offered an enviable noninterest repayment regarding certain post-retirement
employment.
Limited by its terms to those retirees elected to public office
or appointed to a position for a term of years by certain
officials, including the governor, a mayor or a board of
selectmen.
As of April 2, 2012, purchases under Section 5(1)(g) will be
purchased with buyback interest, “and shall satisfy the
requirements for reinstatement under subsection (a) of
Section 105.”
C. 176, Section 12
Applicable to current members, new members, in
short anyone retiring “on or after April 2, 2012.”
If a member is subject to a forfeiture under
Section 15, the forfeiture will be effective as of the
date of the offense.
The system will have to recoup all benefits paid
after that date.
C. 176, Section 31
Elected officials may not return to an elected office
after retirement and avoid the earnings limitations of
Section 91 if:
1) They retired from an elected office, and
2) Less than a year has passed since they last held elective office.
The statute refers to “said” public elected office,
meaning that this prohibition on returning to an
elected office goes only to the elected office from
which a person actually retired.
C. 176, Section 49
A retiree working in the public sector post-retirement may now
earn $15,000 a year in addition to the difference between the
salary from which he retired and the pension being paid.
Exception: This extra $15,000 may not be earned in the first
12 months following retirement.
Exception: Disability retirees will be able to earn only an
additional $5,000 per year in accord with G.L. c. 32, Section 91A
when they work in the public sector post-retirement, the same
amount that they may earn in the private sector.
A superannuation retiree’s earnings in the private sector, or in the
public sector of a state other than Massachusetts are not subject
to any restrictions.
C. 176, Section 50
Nancy Pippen’s spouse was a member of the Essex Retirement
System. He died three years ago, way before April 2, 2012. She
receives the minimum allowance pursuant to G.L. c. 32, Section
12(2)(d). Will her allowance be raised to $500?
If the local option is accepted by Essex, yes.
Once the local option is accepted, all minimum
allowance recipients in a system are raised
to $500 per month.
After the local option is accepted, all individuals
who are eligible for the minimum allowance
going forward will get $500 per month.
C. 176, Sections 29 & 30
Only those eligible for the minimum
allowance receive this increase.
Those ineligible to receive the minimum
allowance, including those who
remarried prior to the removal of the
remarriage penalty in 2000, remain
ineligible.
C. 176, Sections 29 & 30
Nicholas Poser, Esq.
Effect of Amendments or Repeal --
“The provisions of sections one to twenty-eight, inclusive, and
of corresponding provisions of earlier laws shall be deemed to
establish and to have established membership in the retirement
system as a contractual relationship under which members who
are or may be retired for superannuation are entitled to
contractual rights and benefits, and no amendments or
alterations shall be made that will deprive any such member or
any group of such members of their pension rights or benefits
provided for thereunder, if such member or members have paid
the stipulated contributions specified in said sections or
corresponding provisions of earlier laws.”
“[W]hen the characterization "contract" is used, it is best understood
as meaning that the retirement scheme has generated material
expectations on the part of employees and those expectations should
in substance be respected. Such is the content of "contract." 364 Mass
at 861.
The term “ contract” in s. 25(5) “was to be viewed in a special,
somewhat relaxed sense”.
“[T]hat "contract" protects the member of a retirement plan in the
core of his reasonable expectations, but not against subtractions
which, although possibly exceeding the trivial, can claim certain
practical justifications. Attention should then center on the nature of
these justifications in the light of the problems of financing and
administering these massive plans under changing conditions.”
Michael Sacco, Esq.
Disability as the result of exposure to trauma.
Disability as the result of inappropriate treatment or
conduct.
Standard is the same – disability must be the result of an
incident or series of incidents, or if the product of gradual
deterioration, the result of an identifiable condition not
common or necessary to all or a great many occupations
Plymouth County Retirement Board v. Contributory
Retirement Appeal Board, 60 Mass. App. Ct. 114, 118
(2003); Blanchette V. Contributory Retirement Appeal
Board, 20 Mass. App. Ct. 479, 485 (1985).
Mental disorder which occurs as the result of a traumatic or
terrifying incident.
Most often seen in public safety positions, but not confined
to those positions.
By definition – individual not aware of the effects of the
trauma until some point in the future.
M.G.L. c. 32, § 7(1) – No such retirement shall be allowed
unless such injury was sustained or such hazard was
undergone within two years prior to the filing of such
application or, if occurring earlier unless written notice thereof
was filed with the board by such member or his behalf within
ninety days after its occurrence.
M.G.L. c. 32, § 7(3) – Lapse of time will not prevent the award
of benefits if the member has received either worker’s
compensation or injured on duty benefits Mary Jo Daley v.
Middlesex County Retirement Board, CR-98-272 (October 7,
1999) – Underscored traumatic exposure not enough – must
occur within 2 years of filing of the application if no injury
report and no worker’s compensation or injured on duty pay.
Randolph Boothby v. Hull Retirement Board, CR-06-460
(August 24, 2007).
Incident report not enough – in Boothby DALA ruled that
there must be some contemporaneous complaint or
treatment regarding stress or anxiety to satisfy the notice
requirement.
Difficult standard – by its very nature, employee may not
always realize the adverse impact of the traumatic event –
hence “post traumatic”.
Personal injury defined same as worker’s compensation.
M.G.L. c. 152, § 1(7a) – no mental or emotional disability arising
principally out of a bona fide, personnel action including a
transfer, promotion, demotion, or termination except such
action which is the intentional infliction of emotional harm shall
be deemed to be a personal injury.
Sugrue v. Contributory Retirement Appeal Board, 45 Mass. App.
Ct. 1 (1998) – job conflicts and arguments with superiors and
subordinates, including a series of incidents over several years
creating feelings of “persecution” and unfair treatment and
ultimately a diagnosed mental illness, do not “distinguish [the
applicant’s] occupation from a wide variety of other occupations
where employees face similar pressures and demands”.
Intentional infliction of emotional distress – Agis v. Howard
Johnson Co., 371 Mass 140, 144-145 (1976) – must prove
four factors:
1)the actor intended to inflict emotional distress or that he knew or
should have known that emotional distress was the likely result of
his conduct;
2) that the conduct was “extreme and outrageous,” was “beyond all
possible bounds of decency” and was “utterly intolerable in a
civilized community;”
3)that the actions of the defendant were the cause of the plaintiff’s
distress; and
4)that the emotional distress sustained by the plaintiff was “severe”
and of a nature “that no reasonable man could be expected to
endure it.”
Evidentiary hearing.
Causation legal question for board, not just medical
question for the medical panel.
PTSD cases – employee must document the claim and if no
injury report, must have sought some treatment or
demonstrated change in behavior or demeanor.
Must examine other issues – self medicating, alcohol,
family issues – which came first?
Workplace conflict cases – board must determine if actions
rise to the level of a personal injury or hazard undergone,
or if there was an intentional infliction of emotional
distress.
How? All parties, including those accused of the
wrongdoing, must be allowed to testify.
Board should make threshold determination on causation if
only option is accidental disability before going to medical
panel.
James H. Quirk, Jr., Esq.
Stephen Worton v. CRAB and Brookline Retirement Board,
Plymouth Superior Court C.A. No.: 10-1097B (September
2011)
Barbara Nolan v. CRAB and State Board of Retirement,
Middlesex Superior Court, C.A. No. 12-1959-L2
Shirley Regas and Barnstable County Retirement Board v.
CRAB, Barnstable Superior Court, C.A. No.:09-0047
Peter Calnan v. Cambridge Retirement Board, DALA , CR-08589