California Supreme Court opens door for state reimbursing local agencies for unfunded mandates

California Supreme Court opens door for state reimbursing local agencies for unfunded mandates

Department of Finance v Commission on State Mandates, California Supreme Court, S214855

Source: Meyers Nave Legal Alert

A Meyers Nave Internet Newsletter reports that on August 29, 2016 the California Supreme Court handed a victory to local agencies that are seeking to enforce their constitutional right to reimbursement for unfunded mandates imposed by the State. In Department of Finance v Commission on State Mandates,* the Court ruled in favor of public agencies subject to storm water discharge permits, holding that State-mandated storm water permit provisions exceeding federal law requirements may be reimbursable State mandates under Article XIII B, Section 6, of the California Constitution.

While this case arose in the context of storm water regulation, Meyer Nave suggested that the Court's analysis will apply to many unfunded mandate situations going forward and summarized the genesis of the case and the Court's decision as follows: 

“In California, CaliforniaRegional Water Quality Control Boards issue permits under state and federal law for discharges from municipal separate storm sewer systems (MS4s).  Under the federal Clean Water Act, MS4 permits must require controls to "reduce the discharge of pollutants to the maximum extent practicable."  (33 U.S.C. § 1342(p)(3)(B)(iii).)  States may also impose their own requirements so long as they are not less stringent than required under federal law.  (33 U.S.C. § 1370.) 

“In 2001, the Los Angeles Regional Water Quality Control Board (Regional Board) issued an MS4 permit that, among many other things, required local agencies to inspect commercial and industrial facilities, implement programs to inspect and control runoff from construction sites, and place trash receptacles at all transit stops.  The County of Los Angeles and several cities filed test claims with the Commission on State Mandates (Commission) seeking State reimbursement for these permit provisions because they exceeded the federal "maximum extent practicable" standard.  The Commission found all the provisions were unfunded mandates, but the inspection requirements were not reimbursable because local agencies could levy fees or assessments to pay for them.  However, the trial court overturned the Commission's decision, finding that all the permit provisions were mandates imposed by federal law and were not reimbursable state law mandates.  The court of appeal affirmed, and the Supreme Court granted review.

“The Supreme Court held that the California Constitution "establishes a general rule requiring reimbursement of all state-mandated costs," and if the State argues an exception to that rule, such as the federal mandate exception at issue in this case, it "bears the burden of demonstrating that it applies."  The Court found that the State did not carry this burden, and that "[i]t is clear federal law did not compel the Regional Board to impose these particular requirements."  In doing so, the Court also found that in proceedings before the Commission, the Regional Board was not entitled to deference in its conclusion that the permit requirements at issue were federally mandated.  The Supreme Court reversed the Court of Appeal's judgment and remanded the case to the trial court for further proceedings on additional issues raised by the State and on the permittees' cross-appeal that the inspection requirements are reimbursable state mandates.

“In anticipation of the Supreme Court's decision, the Commission has signaled that it intends to clear its backlog of storm water test claims, with hearings beginning in early 2017.  It is also anticipated that another storm water test claim arising out of San Diego County, which is currently fully briefed and pending before the Third Appellate District Court of Appeal, Case No. C070357, may soon be scheduled for supplemental briefing and oral argument.

“In future Commission proceedings, test claimants may argue that once they establish that a statute or executive order (including permits) impose a new program or higher level of service, the State will bear the burden of proving that an exception applies, including exceptions for mandates allegedly imposed by the courts and federal mandates.  Public agencies should now be more vigilant than ever in pursuing their constitutional right to reimbursement of state mandates.”

For additional information e-mail Gregory Newmark, Esq. at gnewmark@meyersnave.com or John Bakker, Esq., at jbakker@meyersnave.com who appeared as Amici Curiae on behalf of Real Parties in Interest and Appellants.

* The text of decision is posted on the Internet at http://www.courts.ca.gov/opinions/documents/S214855.PDF

Disability not a defense to charges of excessive absence from work

Disability not a defense to charges of excessive absence from work

New York City Office of Administrative Tribunals and Hearings Index No. 1410/16

New York City’s Department of Environmental Protection filed disciplinary charges against one of its employees, A.M., alleging that A.M. had been excessively absent since 2014. A.M., who had an absenteeism rate of over 50%, contended that as an individual “hired under the Civil Service Law §55-a Program” due to her diabetes,* §55-a “protected” her from such disciplinary charges and, in addition, presented numerous doctors’ notes to support her absences.

OATH Administrative Law Judge Kara J. Miller found that participation in a §55-a** program position was not a defense to excessive absenteeism and A.M.’s medical notes illustrated her habit of visiting different urgent care clinics every few days in order obtain doctor’s notes and avoid returning to work.

Judge Miller recommended termination of A.M. employment.

Excessive absenteeism as a basis for termination was an issue in Cicero v Triborough Bridge and Tunnel Authority, 264 AD2d 334.

The Authority terminated a toll collector, after finding him guilty of a number of charges including excessive absences. The Appellate Division rejected the toll collector’s argument that his absences were approved and medically justified and therefore excused for the purposes of maintaining any disciplinary action against him.

In Dickinson v New York State Unified Ct. Sys, 99 AD3d 569, the Appellate Division unanimously confirmed the termination of an employee found guilty of “certain disciplinary charges” that alleged both misconduct and incompetency due to excessive absenteeism and lateness. As to the penalty imposed, termination, the court said that it did not shock its sense of fairness as “[b]eing present at work is an essential job function” and an employee’s "disability ... may not be used to shield him [or her] from the adverse consequences of inadequate job performance."

* The Americans with Disabilities Act provides that the determination of whether impairment is a disability is to be made without regard to the ameliorative effects of mitigating measures; diabetes is deemed a disability even if insulin, medication, or diet controls a person's blood glucose levels. 

** §55-a of the Civil Service Law provides for the employment of persons with disabilities by municipalities in position in the competitive class having duties which can be performed by physically or mentally disabled persons who are found qualified to perform satisfactorily such duties. Upon such a determination, the position is jurisdictionally reclassified to non-competitive class.

The A.M. decision is posted on the Internet at:

http://archive.citylaw.org/wp-content/uploads/sites/17/oath/16_cases/16-1410.pdf

Public Citizen, Inc. has filed an amicus brief in support of the U.S. Dept. of Labor’s Fiduciary Rule

Public Citizen, Inc. has filed an amicus brief in support of the U.S. Dept. of Labor’s Fiduciary Rule

Chamber of Commerce of the United States of America, et al. v Thomas E. Perez, Secretary of Labor and United States Department of  Labor, USDC, Northern District of Texas, Dallas Division, Civil Action No. 3:16-cv–1476– M; consolidated with 3:16-cv-1530-C and 3:16-cv-1537-N

The U.S. Department of Labor (DOL) issued a new rule – generally referred to as the fiduciary rule*– which seeks to protect workers’ saving and investments for retirement by mandating that their financial advisers act in a fiduciary capacity when providing financial advice for retirement purposes.

The U.S. Chamber of Commerce, the American Council of Life Insurers and a number of other corporate bodies have challenged DOL’s promulgation of its fiduciary rule, and have filed a lawsuit against the DOL in U.S. District Court for the Northern District of Texas. Among their claims is that the DOJ rule constitutes a content-based restriction on the commercial speech of their members and violates the First Amendment.**

On August 26, 2016, Public Citizen*** filed an amicus brief in support of the DOL’s fiduciary rule.

The Public Citizen’s brief argues that Chamber of Commerce’s First Amendment argument should be rejected because the fiduciary rule does not regulate speech; rather, it regulates the terms of a commercial or professional relationship and duties that attach to it.

DOL has indicated that:

1. The rule describes the kinds of communications that would constitute investment advice and then describes the types of relationships in which those communications would give rise to fiduciary investment advice responsibilities.

2. Covered investment advice is defined as a recommendation to a plan, plan fiduciary, plan participant and beneficiary or IRA owner for a fee or other compensation, direct or indirect, as to the advisability of buying, holding, selling or exchanging securities or other investment property, including recommendations as to the investment of securities or other property after the securities or other property are rolled over, transferred or distributed from a plan or IRA.

3. Covered investment advice also includes recommendations as to the management of securities or other investment property, including, among other things, recommendations on investment policies or strategies, portfolio composition, selection of other persons to provide investment advice or investment management services, selection of investment account arrangements (e.g., brokerage versus advisory); or recommendations with respect to rollovers, transfers, or distributions from a plan or IRA, including whether, in what amount, in what form, and to what destination such a rollover, transfer, or distribution should be made.

4. The fundamental threshold element in establishing the existence of fiduciary investment advice is whether a "recommendation" occurred. A "recommendation" is a communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular course of action. The more individually tailored the communication is to a specific advice recipient or recipients, the more likely the communication will be viewed as a recommendation. 

DOL states that it "has taken an approach to defining 'recommendation' that is consistent with and based upon the approach taken by the Financial Industry Regulatory Authority (FINRA), the independent regulatory authority of the broker-dealer industry, [which is] subject to the oversight of the Securities and Exchange Commission (SEC)."

DOL’s “fact sheet” describing its fiduciary rule is posted on the Internet at:

https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/dol-final-rule-to-address-conflicts-of-interest

* The Fiduciary Rule requires retirement advisors to act as fiduciaries, putting their clients' retirement needs and interests before their own by acting in the best interest of the party whose assets they are managing. 

** In addition to Chamber of Commerce [its complaint is posted on the Internet at http://www.chamberlitigation.com/sites/default/files/cases/files/16161616/DOL%20Fiduciary%20Rule%20Complaint.pdf, two lawsuits also challenging the Fiduciary Rule have been filed, one in federal district court, Washington D.C. [The National Association for Fixed Annuities, et al, v. Thomas E. Perez et al. Case No. 16-cv-1035 RDM [the National Association of Fixed Annuities  complaint is posted on the Internet at: http://www.investmentnews.com/assets/docs/CI10555363.PDF] and the other by Market Synergy Group [Market Synergy Group v Perez, et al, USDC District of Kansas, Case 5:16-cv-04083]. The Market Synergly complaint is posted on the Internet at: https://www.bloomberglaw.com/public/desktop/document/Market_Synergy_Group_Inc_v_United_States_Department_of_Labor_et_a/1?1472484084]. 

*** Public Citizen, Inc. is a non-profit, consumer rights advocacy group. Founded by Ralph Nader in 1971, its website is at http://www.citizen.org/Page.aspx?pid=183.

Public Citizen’s amicus brief is posted on the Internet at:

http://www.citizen.org/documents/Chamber-of-Commerce-Perez-Amicus-Brief.PDF

  

Selected reports issued by the Office of the State Comptroller during the week ending August 28, 2016

Selected reports issued by the Office of the State Comptroller during the week ending August 28, 2016

Source: Office of the State Comptroller

New York State Comptroller Thomas P. DiNapoli announced the following audits have been issued:

[Internet links highlighted in color]

City University of New York - Administration of Fellowship Leaves

http://osc.state.ny.us/audits/allaudits/093016/15f5.pdf?utm_source=weekly+news&utm_medium=email&utm_term=state+audit&utm_content=20160828&utm_campaign=fiscal+oversight

Borough of Manhattan Community College - Controls over bank accounts

http://osc.state.ny.us/audits/allaudits/093016/15s93.pdf?utm_source=weekly+news&utm_medium=email&utm_term=state+audit&utm_content=20160828&utm_campaign=fiscal+oversight

New York StateInsurance Fund – Examination of outstanding premiums owed to the New York State Insurance Fund

http://osc.state.ny.us/audits/allaudits/bseaudits/bse20160819.pdf?utm_source=weekly+news&utm_medium=email&utm_term=state+audit&utm_content=20160828&utm_campaign=fiscal+oversight

Office of Information Technology Services - Effectiveness of the Information Technology Transformation

http://osc.state.ny.us/audits/allaudits/093016/15s2.pdf?utm_source=weekly+news&utm_medium=email&utm_term=state+audit&utm_content=20160828&utm_campaign=fiscal+oversight

State Education Department - Oversight of School Fire Safety Compliance

http://osc.state.ny.us/audits/allaudits/093016/15s86.pdf?utm_source=weekly+news&utm_medium=email&utm_term=state+audit&utm_content=20160828&utm_campaign=fiscal+oversight; and the

State Education and Health Departments – Oversight of Student Immunization in Schools

http://www.osc.state.ny.us/audits/allaudits/093016/15s85.pdf?utm_source=weekly+news&utm_medium=email&utm_term=state+audit&utm_content=20160828&utm_campaign=fiscal+oversight

$2.95 Million Settlement With Hospital Group For Improperly Delaying Repayment of Medicaid Funds

Preet Bharara, the United States Attorney for the Southern District of New York, Scott J. Lampert, Special Agent in Charge of the New York Field Office of the U.S. Department of Health and Human Services, Office of Inspector General, Eric Schneiderman, New York State Attorney General, and Thomas P. DiNapoli, the New York State Comptroller, announced a $2,950,000 settlement of a civil fraud lawsuit against Beth Israel Medical Center d/b/a Mount Sinai Beth Israel, St. Luke’s-Roosevelt Hospital Center d/b/a Mount Sinai St. Luke’s and Mount Sinai Roosevelt, and Continuum Health Partners, Inc. for willfully delaying repayment of over $ 800,000 in Medicaid overpayments. The settlement resolves claims under the federal False Claims Act and the New York State False Claims Act. The report is posted on the Internet at:

http://www.osc.state.ny.us/press/releases/aug16/082416a.htm?utm_source=weekly+news&utm_medium=email&utm_term=corruption&utm_content=20160828&utm_campaign=fiscal+oversight

State Contract and Payment Actions for July 2016 

State Comptroller Thomas P. DiNapoli announced his office approved 1,462 contracts valued at $1.72 billion and approved more than 1.7 million payments worth nearly $6.3 billion in July. His office also rejected 167 contracts and related transactions valued at $370 million and 1,183 payments valued at more than $5.1 million due to fraud, waste or other improprieties. The report is posted on the Internet at:

http://www.osc.state.ny.us/press/releases/aug16/082316.htm?utm_source=weekly+news&utm_medium=email&utm_term=state+operations&utm_content=20160828&utm_campaign=fiscal+oversight

Since taking office in 2007, DiNapoli has committed to fighting public corruption and encourages the public to help fight fraud and abuse.  Individuals can report allegations of fraud involving public funds by calling the toll-free Fraud Hotline at 1-888-672-4555, by transmitting an e-mail to investigations@osc.state.ny.us, by filing a complaint online athttp://osc.state.ny.us/investigations/complaintform2.htm or by mailing a complaint to Office of the State Comptroller, Division of Investigations, 14th Floor, 110 State St., Albany, NY 12236.

Selected case summaries concerning public employee retirement benefit posted on the Internet by Justia

Selected case summaries concerning public employee retirement benefit posted on the Internet by Justia

Click on text highlighted in color to access full decision

New retirement options offered eligible retirees benefit actuarially equivalent in value to the previous pension 
Lenander v. Dep't of Retirement Sys.,Washington Supreme Court, Docket 92671-9

In 2000, the Department of Retirement Systems (DRS) created a new option for eligible retirees in which the retiree could opt for a pension that would allow a surviving spouse to continue to receive monthly pension benefits at the same amount after the retiree's death. To make this pension actuarially equivalent in value to the previous pension, the DRS provided for a greater reduction in the retiree's monthly benefits.

In 2010, the DRS adopted rules that modified the degree of the actuarial reduction. Appellant Tim Lenander challenged the changes to the reduction, arguing that the changes violated the statutory scheme and impaired his contract right to a lower reduction in his pension payment.

The Supreme Court found Lenander's arguments unavailing, holding that the DRS acted within its authority in amending the survivor benefit actuarial reduction regulations as set forth under former WACs 415-02-380 (2010) and 415-103-215 (2010).

In amending these regulations, the DRS did not violate the contract clause of article I, section 23 of the Washington Constitution. Consequently, the Court held that the DRS did not infringe on Lenander's right to an "actuarial equivalent" survivor benefit, and that Lenander did not suffer substantial impairment to his pension contract rights.

Excluding specified items from the calculation of retirement income to avoid inflating income to increase the employee’s retirement allowance 
Marin Ass'n of Pub. Employees v. Marin Cnty. Employees Retirement Ass'n., CaliforniaCourt of Appeals, Docket A139610

To combat the practice known as “pension spiking,” by which public employees use various stratagems to inflate their income and retirement benefits, the County Employees Retirement Law, was amended, effective 2013, to exclude specified items from the calculation of retirement income. The trial court concluded application of the new formula to current employees did not amount to an unconstitutional impairment of the employees’ contracts. The court of appeal affirmed, holding that the Legislature did not act impermissibly by amending Government Code section 31461.

While a public employee does have a “vested right” to a pension, that right is only to a “reasonable” pension; it is not an immutable entitlement to the most optimal formula of calculating the pension.

The Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension, as long as the modifications do not deprive the employee of a “reasonable” pension. The Legislature did not forbid the employer from providing the specified items to an employee as compensation, only the purely prospective inclusion of those items in the computation of the employee’s pension.