Transfer of personnel
Hill v City of New York
The Hill case concerns the survival of benefits enjoyed by individuals who are employed by another employer following the "transfer of function" from their former employer to a new employer. Here the right in question involved a "non-resident's exemption" from having to pay the equivalent of New York City
The issued arose following the transfer of Emergency Medical Service operations from the New York Health and Hospitals Corporation, a public benefit corporation independent of the City of New York New York
The City requires that every person seeking employment with it sign a "§1127" agreement. This agreement provided that if an individual is or becomes a nonresident during his or her employment by the City, he or she would pay an amount equal to the personal income tax otherwise payable by City residents. Although there were certain exceptions, HHC had essentially declined to follow this policy insofar as its employees were concerned.
Following the transfer of the EMS function to FDNY, the City decided that the 3,250 individuals transferred from HHC to FDNY were required to sign a §1127 agreement as a condition of their continued employment by the City.
District Council 37 [DC-37], the EMS personnel's collective bargaining agent, on the other hand, disagreed and filed an improper practice complaint with the City's Office of Collective Bargaining charging that the City's had improperly and unilaterally imposed a new term or condition of employment upon EMS personnel without the Union's agreement.
DC-37 simultaneously commenced an Article 78 proceeding seeking a judgment declaring that the City acted arbitrarily and capriciously in violation of §70(2) of the Civil Service Law and City Charter §1143. It addition, it contended that the City's action was an unconstitutional impairment of contract and a deprivation of property rights in violation of the due process clauses of the New York State and United States Constitutions. DC-37 sought a Court order compelling the City to repay any moneys deducted from the employees' paychecks under color of §1127 and to cease making any further "§1127" deductions.
The Court, citing Legum v Goldin, 55 NY2d 104. commented that the Court of Appeals has ruled that §1127 is not a tax, but an enforceable term and condition of employment with the City acting in its capacity as an employer. The Court of Appeals had decided that "... the [§1127] payments due to the City of New York are owed as a result of the contract entered into by the [employees] with the City and not as a result of an exercise by the City of its taxing authority," .
As to impact of Civil Service Law §70(2), it provides, in pertinent part, that "[u]pon the transfer of a function ... officers and employees so transferred shall be transferred without further examination or qualification and shall retain their respective civil service classifications and status ... [including] full seniority credit for all purposes for service rendered prior to such transfer in the governmental jurisdiction from which transfer is made."
N.B. Longevity increments were determined by the Court of Appeals to be protected seniority rights [Town of Mamaroneck PBA, Inc. v New York State Public Employment Relations Board, 66 NY2d 722] while in Nickels v New York City Housing Authority, 208 AD2d 203, the Appellate Division held that the phrase "full seniority credit for all purposes" in §70(2) protected involuntarily transferred police officers against any diminution of pension rights.
Here the Court decided that although no additional qualifications were placed on EMS personnel by §1127, the City disregarded their seniority benefits when applying this Charter provision to them. Noting that these individuals had previously been exempted from the requirements of §1127 by HHC, the Court concluded that this exemption constituted a "substantial pecuniary benefit" based on a combination of their status as HHC employees and their many years of service with that agency.
The Court ruled that the individuals transferred to FDNY enjoyed a "protected benefit" and thus the City was arbitrary and capricious when it deprived them of "pecuniary benefit enjoyed for years" merely because of an administrative transfer of functions.
In addition, the Court said that although its ruling will result in non-uniformity in the income taxation of EMS employees based on residence, that has been true in the past and, even if a contrary ruling were issued, non-uniformity would exist as employees hired prior to the enactment of §1127 remain exempt from its provisions.
The full opinion follows:
The central issue in this Article 78 proceeding is whether the City of New York (the "City") acted arbitrarily and capriciously in applying New York City Charter (the "Charter") §1127 to certain previously exempt Emergency Medical Service ("EMS") personnel who were transferred from the New York Health and Hospitals Corporation ("HHC") to the Fire Department of the City of New York ("FDNY").
The HHC "is a public benefit corporation independent of the City of New York New York
§1127 (previously numbered §§820 and 822) adopted on January 4, 1973 provides as follows:
"a. Notwithstanding the provisions of any local law, rule or regulation to the contrary, every person seeking employment with the City of New York or any of its agencies regardless of civil service classification or status shall sign an agreement as a condition precedent to such employment to the effect that if such person is or becomes a nonresident individual as that term is defined in §11-1706 of the administrative code of the city of New York or any similar provision of such code, during employment by the city, such person will pay to the city an amount by which a city personal income tax on residents computed and determined as if such person were a resident individual, as defined in such section, during such employment, exceeds the amount of any city earnings tax and city personal income tax imposed on such person for the same taxable period."
Although the City corporation counsel opined in a 1973 letter that the §was applicable to HHC employees in that HHC was an "agency" of the City, HHC did not then concur with this position and thus did not then apply its provisions to any of its employees.
In a change of policy, on October 26, 1982 HHC issued a memorandum declaring that the §would be applied to any HHC employee hired on or after November 1, 1982 and to all then current employees who moved out of the City after that date. However, in February 1985 HHC reversed that position with respect to its EMS employees who were hired prior to November 1, 1982 and who subsequently moved outside of the City and it directed a refund of any deductions already imposed on such employees. On April 4, 1989, the HHC issued a further memorandum specifically limiting §1127's impact on Group 12 EMS non-managerial employees and applied the Charter provision only to such employees hired on or after November 1, 1982 who were non-residents on their date of hire or who later moved out of the City. Petitioners, Group 12 nonmanagerial EMS employees hired prior to November 1, 1982 , were therefore exempted from §1127 via the April 4, 1989 memorandum and continued to have such exemption until the transfers discussed herein.
In October 1995 a bill was introduced to amend the Charter to authorize the FDNY to operate an emergency and pre-hospital ambulance system. An October 26, 1995 HHC board of directors resolution authorized its president to effectuate a transfer of the EMS employees to the FDNY. HHC and the City then negotiated the terms and conditions of the change and on January 19, 1996 the parties signed a Memorandum of Understanding to transfer the EMS functions pursuant to Civil Service Law ("CSL") 70(2). Finally, on February 15, 1996 the bill authorizing the transfer was passed by the City Council, and on February 26, 1996 Mayor Guiliani signed the bill as Local Law No. 20 and issued an Executive Order directing the FDNY to assume ambulance and pre-hospital emergency medical service functions on March 17, 1996 . On that day the transfer took place and the EMS became the Bureau of Emergency Medical Service of the FDNY and approximately 3,250 HHC employees became FDNY employees.
On July 15, 1996, District Council 37 filed an improper practice petition with the New York City Office of Collective Bargaining charging that by applying §1127 to petitioners, respondents improperly unilaterally imposed a new condition of employment upon their employ without the Union's agreement. Petitioners simultaneously commenced this proceeding in which they seek a judgment: (1) declaring that the City acted arbitrarily and capriciously and in contravention of law by enforcing §1127 in violation of CSL 70(2) and Charter 1143; (2) declaring that the City's action is an unconstitutional impairment of contract and deprivation of property in violation of the due process clauses of the New York State and United States Constitutions; (3) directing reimbursement of all moneys deducted via enforcement of §1127; and (4) directing the City to cease any further deductions thereunder.
Petitioners contend that a further qualification was added as a result of the transfer via the imposition of an employment condition under §1127. They also contend that a loss of seniority benefit occurred because they were treated as new employees and thus lost their §1127 exemption in violation of CSL 70(2). Respondents contend that petitioners were not subject to new qualifications as a result of the enforcement of §1127 upon transfer, but were instead only subject to new terms and conditions of City employment which is not protected by §70(2), and that the EMS employees commenced employment with the FDNY without any change in civil service status or seniority and without further qualification.
The standard of review in this proceeding is whether the determination to enforce §1127 upon petitioners was "made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion" [CPLR 7803(3)]. The "judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body." [Ostrer v. Schenck, 41 N.Y.2d 782, 786 (1977)]. See also, Pell v. Board of Education, 34 N.Y.2d 222, 231 (1974).
The Court of Appeals has ruled that §1127 is not a tax, but an enforceable term and condition of employment with the City acting in its capacity as an employer, stating that it "is clear beyond cavil that the payments due to the City of New York are owed as a result of the contract entered into by the petitioner with the city and not as a result of an exercise by the city of its taxing authority" [Legum v. Goldin, 55 N.Y.2d 104, 108 (1982)].
CSL 70(2) provides, in pertinent part, as follows:
"Upon the transfer of a function (a) from one department or agency of the state to another department or agency of the state, or (b) from one department or agency of a civil division of the state to another department or agency of such civil division, or (c) from one civil division of the state to another civil division of the state, or (d) from a civil division of the state to the state, or vice versa, provision shall be made for the transfer of necessary officers and employees who are substantially engaged in the performance of the function to be transferred ... Officers and employees so transferred shall be transferred without further examination or qualification and shall retain their respective civil service classifications and status .... Officers and employees transferred to another governmental jurisdiction pursuant to the provisions of this subdivision shall be entitled to full seniority credit for all purposes for service rendered prior to such transfer in the governmental jurisdiction from which transfer is made."
Longevity increments were determined by the Court of Appeals to be protected seniority rights in the interpretation of a town law that was similar to CSL 70(2) because the rights were found to be a "substantial pecuniary benefit related to length of service." [Town of Mamoroneck PBA, Inc. v. New York State
In order to ascertain whether petitioners' exemption is a benefit protected upon transfer, we must look to the legislative intent underlying CSL 70(2). " '[A] primary command to the judiciary in the interpretation of statutes is to ascertain and effectuate the purpose of the Legislature' and in 'finding such purpose, one should look to the entire statute, its legislative history and the statutes of which it is made a part'." [Association of Surrogates and Supreme Court Reporters v. State of New York
In Matter of Ganley v. Guiliani, NYLJ, Jan. 16, 1997, p. 29, c. 2, Justice Sklar of this court held that the imposition of §1127 on employees who became New York City Police Department officers when the police departments of the New York City Transit Authority and the New York City Housing Authority were merged into the City Police Department did not violate §70(2). There, relevant officers had never been subject to §1127 because, as opined by the corporation counsel in 1973, neither of said authorities was an "agency" of the City. In ruling that 70(2) was not violated, Justice Sklar stated that the "nonresident tax employment condition is neither a 'further examination or qualification', nor a change in 'civil service classification and status' as those terms are used in the context of the civil service law."
Although there were no additional qualifications placed on EMS petitioners via the imposition of §1127, this court finds that the City disregarded their seniority benefits when applying this Charter provision to them. Petitioners had previously been granted exempt status by HHC. The exemption is a "substantial pecuniary benefit" based on a combination of petitioners' status as Group 12 HHC employees and their many years of service with that agency. Petitioners' exemption from §1127, as a protected benefit, is supported by the legislature's intention in adopting CSL 70(2) to protect employee rights upon transfer. The guarantee in §70(2) of "full seniority credit for all purposes for service rendered prior to such transfer" includes all financial benefits resulting from years of service. Exemption from §1127 is one of such benefits even though here it only flows to non-residents of the City. It is a pecuniary benefit enjoyed for years by petitioners of which they should not be deprived merely because of an administrative transfer of functions. Thus, while the conclusion herein will result in non-uniformity in the income taxation of EMS employees based on residence, that has been true in the past and, even if a contrary ruling were issued, non-uniformity would exist as employees hired prior to the enactment of §1127 remain exempt from its provisions.
Contrasted with the police officers in Matter of Ganley v. Guiliani, here the original employer agency had specifically granted the relevant employees an exemption from the imposition of §1127 based on their period of service. It was not, therefore, just a case (as with the police officers) of an inapplicable statute, but rather it was a benefit bestowed as a consequence of being declared exempt by their employer due to seniority. The respondents' actions were accordingly in conflict with law as well as arbitrary and capricious as the application of §1127 to these particular employees is in violation of protections provided by CSL 70(2).
In light of the foregoing, the court need not consider petitioners' other arguments. Accordingly, a judgment shall be entered declaring that (1) enforcement of §1127 against the EMS petitioners and other similarly situated employees is in violation of CSL 70(2); (2) directing respondents to reimburse petitioners and other similarly situated previously exempt EMS employees for all money deducted pursuant to the enforcement of §1127 from the date of the transfer; and (3) directing respondents to cease any further deductions pursuant to said §from such employees.
Settle judgment.