Pension "double-dipping" stopped

Pension "double-dipping" stopped

Source: Office of the State Comptroller

On June 1, 2014, New York State Comptroller Thomas P. DiNapoli and Nassau County District Attorney Kathleen Rice announced the guilty plea of a retired police officer charged with receiving pension payments from the New York State and Local Police and Fire Retirement System in violation of law.

The investigation was made possible by a 2012 law, proposed by DiNapoli, which gave the State Comptroller access to the Sate Department of Taxation and Finance's wage reporting system to identify state retirement system retirees working for local governments whose earnings exceed post-retirement earnings limitations.

The retired officer pleaded guilty to permitting falsification of records of the retirement system, a Class D felony. As part of his guilty plea, he must repay the almost half-a-million dollars that he acquired illegally. 

Although the officer was repeatedly notified of the earnings limitations on post-retirement public employment and the requirement to report his public employment income, he chose not to do so, pocketing $465,647 in unlawful pension payments while earning a final full-time salary of $112,000 in pubic employment following his retirement from his police officer position.

The Comptroller noted that following his retirement the officer took a job at a SUNY community college without notifying his office of his return to public employment, failed to comply with the earnings limitations that apply to public retirees collecting a public pension, didn’t obtain a waiver allowing him to earn above the legal limit; and joined the State University’s Optional Retirement Program, all while continuing to receive his full retirement allowance.*

Essentially, except with respect to post-retirement payments for service while on jury duty or serving in the office of inspector of election, or as poll clerk or ballot clerk under the election law, or as a notary public or commissioner of deeds, or as a retiree elected to public office, §150 of the Civil Service Law requires the suspension of a retired public employee’s pension or annuity payments during any post-retirement public employment by a New York State agency or a political subdivision of the State. 

However, relevant provisions of the Retirement and Social Security Law, the Education Law and local law or charter permits limited earnings by a retired employee returning to public service, including such employment as a consultant, without forfeiting his or her pension payments during such employment. §211 of the Retirement and Social Security Law sets out the earning limitations with respect to the employment of retired persons without diminution of his or her pension payments while §212 of the Retirement and Social Security Law provides that there are no limitations on the amount a retired public employee returning to public service may earn on or after the calendar year in which he or she attains age sixty-five.

The case was investigated by Comptroller DiNapoli’s Division of Investigations and Division of Retirement Services jointly with Nassau District Attorney personnel.

Reports of allegations of fraud involving taxpayer money may be submitted to the State Comptroller by calling the toll-free Fraud Hotline at 1-888-672-4555, by filing a complaint online at investigations@osc.state.ny.usor by mailing a complaint to: Office of the State Comptroller, Division of Investigations, 14th Floor, 110 State St., Albany, NY 12236.

* The Comptroller said that State law, the so-called Axelrod amendment, bars a retiree's collecting a public pension from a public retirement of this State from enrolling in SUNY's Optional Retirement Program upon his or her returning to public employment..

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The First Amendment prohibits a State’s collecting an agency shop fee from an individual on behalf of an employee organization that the individual does not wish to join or support

The First Amendment prohibits a State’s collecting an agency shop fee from an individual on behalf of an employee organization that the individual does not wish to join or support

Harris v Quinn, USSC #11-681, decided June 30, 2014

The U.S. Supreme Court held that the First Amendment prohibits the collection of an agency shop fee that is used subsidize speech on matters of public concern by an employee organization that the employee does not wish to join or support.

Illinois' Home Services Program allows Medicaid recipients who would normally need institutional care to hire a "personal assistant" (PA)* to provide home-care services. Although the recipient or his or her representative [Customer] exercise predominant control over the employment relationship with the PA, Illinois, subsidized by the federal Medicaid program, pays the PA’s salary.

The Supreme Court’s decision sets out the following events leading to this litigation:

[1] The Illinois State Labor Relations Board, in 1985, stated that “[t]here is no typical employment arrangement here, public or otherwise; rather, there simply exists an arrangement whereby the State of Illinois pays [RAs] . . . to work under the direction and control of private third parties."

[2] The Board, responding to a petition submitted by Service Employees International Union (SEIU) seeking to represent PAs, held that “it is clear . . . that [Illinois] does not exercise the type of control over the petitioned-for employees necessary to be considered in the collective bargaining context envisioned by  [Section 6 of the Illinois Public Labor Relations Act], their 'employer' or, at least, their sole employer."

[3] In 2003 then Governor Rod Blagojevich “circumvented” the Board’s rulings when he issued an Executive Order, which Order was later codified by the Legislature,** solely, in the words of the court, to permit PAs to join a labor union and engage in collective bargaining under Illinois' Public Labor Relations Act (PLRA).

Also, noted the Supreme Court, employee organizations had entered into collective-bargaining agreements with the State that contain an agency-fee provision. This provision requires all bargaining unit members who do not wish to join the union to pay the union a fee for the cost of certain activities, including those tied to the collective-bargaining process.

The Supreme Court distinguished PAs from “State employees” as follows:

In the case of full-fledged public employees, the State establishes all of the duties imposed on each employee, as well as all of the qualifications needed for each position, vets applicants and chooses the employees to be hired, provides or arranges for whatever training is needed, and it supervises and evaluates the employees' job performance and imposes corrective measures if appropriate. 

In contrast, said the court, insofar as the PAs involved in this case are concerned, their job duties as personal assistants are specified in their individualized Service Plans, which plans must be approved by the Customer and the Customer's physician and “Customers have complete discretion to hire any personal assistant who meets the meager basic qualifications that the State prescribes” and the Customer "is responsible for controlling all aspects of the employment relationship between the Customer and PA without limitation. Further, noted the Supreme Court,  PAs  “also appear to be ineligible for a host of benefits under a variety of other state laws” that are available to employees of the State as the employer.

As to the relationship of the PA’s to the employee organization is concerned, the court said that where the employee organization is recognized or certified as the exclusive representative for Rehabilitation Program employees for the purposes of collective bargaining, the First Amendment prohibits the collection of an agency fee from Rehabilitation Program PAs who do not wish to [1] join or [2] support the employee organization because the First Amendment does not permit a State to compel personal care providers to subsidize speech on matters of public concern by an employee organization that they do not wish to join or support. In particular, the court said “[The PAs bring this action do not “challenge the authority of the SEIU-HII to serve as the exclusive representative of all the personal assistants in bargaining with the State. All they seek is the right not to be forced to contribute to the union, with which they broadly disagree.”

The bottom line: The Supreme Court said “If we accepted Illinois' argument, we would approve an unprecedented violation of the bedrock principle that, except perhaps in the rarest of circumstances, no person in this country may be compelled to subsidize speech by a third party that he or she does not wish to support. The First Amendment prohibits the collection of an agency fee from personal assistants in the Rehabilitation Program who do not want to join or support the union.”

Insofar as “speech” is concerned, this decision would not appear to impact on the State as the employer or political subdivisions of the State as the employer of individuals in the Classified Service or the Unclassified Service in contrast to the type of "employer-employee relationship" between Illinois’ PAs and the State of Illinois.

New York State's Civil Service Law  §208.3(a), with respect to the State as the employer, and §208.3(b), with respect to political subdivisions of the State as the employer, provide that an employee organization that is the exclusive representative of employees for the purposes of the Article 14 of the Civil Service Law, the Taylor Law, shall be entitled to have   deducted from the wage or salary of the employees in such negotiating   units who are not  members  of  said  employee  organization  the  amount   equivalent  to  the  dues  levied by such employee organization, and the   state comptroller shall make such deductions and  transmit  the  sum  so   deducted  to  such  employee  organization proved that the employee organization has established and maintained  a   procedure  providing for the refund to any employee demanding the return   any part of an agency shop fee deduction which represents the employee's   pro rata share of expenditures by the organization in aid of  activities   or causes of a political or ideological nature only incidentally related   to terms and conditions of employment. As to the “joining an employee organization” aspect of the Supreme Court’s ruling addressing “freedom of association,” the Taylor Law provides that an employee is not required to become a member of the employee organization and those electing not to become a member of the employee organization pays an agency shop fee in lieu of dues, typically a lesser amount.

*Illinois law establishes an employer-employee relationship between the person receiving the care and the person providing it, providing that that the person receiving home care--the "customer"--"shall be the employer of the [personal assistant]." 89 Ill. Admin. Code §676.30(b). The decision notes that “Many of these personal assistants are relatives of the person receiving care, and some of them provide care in their own homes.”

** Ill. Comp. Stat., Chapter 20, §2405/3(f ), declaring personal assistants to be "public employees" of the State of Illinois--but "[s]olely for the purposes of coverage under the Illinois Public Labor Relations Act."

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Whether a timely demand for arbitration has been made is for the court to determine

Whether a timely demand for arbitration has been made is for the court to determine

Village of Chester v Local 445, Intl. Bhd. of Teamsters, 2014 NY Slip Op 04775, Appellate Division, Second Department

In this CPLR Article 75 proceeding the Village of Chester asked Supreme Court to permanently stay the arbitration of a disciplinary grievance. Supreme Court denied the Village’s petition, which ruling was affirmed by the Appellate Division.

The Village and the Village of Chester Police Benevolent Association (PBA) entered into a collective bargaining agreement (CBA). Article 12 of the CBA provided for a “contract disciplinary procedure” in lieu of any statutory disciplinary procedure. In the event disciplinary charges were filed against a member in the collective bargaining unit, Article 12 required the PBA or the individual charged to file a grievance with the Chief of Police within 15 days of the receipt of the notice of charges.

Citing Matter of County of Rockland, 51 NY2d 1, the Appellate Division explained that in this instance the threshold determinations to be made concerned [1] was there a condition precedent to arbitration, and if so, [2] had it been timely met is for the court to determine.

Supreme Court found that a letter sent to the Chief of Police constituted the filing of the grievance and that it was timely filed. Accordingly, said the Appellate Division, Supreme Court “properly denied the petition to permanently stay arbitration” and correctly granted PBA’s the cross petition to compel arbitration.

Arbitration, said the Appellate Division, “is essentially a creature of contract in which the parties themselves charter a private tribunal for the resolution of their disputes and are free to enlarge, restrict, modify, amend or terminate their agreement to arbitrate."

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The Discipline Book, - A concise guide to disciplinary actions involving public employees in New York State set out in a 2100+ page e-book. For more information click on http://booklocker.com/books/5215.html

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NYC not required to make “increased-take-home-pay" retirement contributions for police officers and firefighters appointed after June 30, 2009

NYC not required to make “increased-take-home-pay" retirement contributions for police officers and firefighters appointed after June 30, 2009

Lynch v City of New York, 2014 NY Slip Op 04873, Court of Appeals

The bottom line of a very comprehensive opinion in which the Court of Appeals addressed whether Retirement and Social Security Law §480 (b) requires the City of New York (the City) to make "Increased-Take-Home-Pay" (ITHP) pension contributions on behalf of New York City police officers and firefighters appointed on or after July 1, 2009 -- the City is not required to make such contributions.

The Court of Appeals ruled that “For the reasons that follow, we conclude that section 480 (b) only encompasses temporary programs in place as of 1974 for tier 1 and 2 members of a public employee retirement system. Stated another way, section 480 (b) does not obligate a public employer to pay any portion of a tier 3 public employee's statutorily required pension contribution. Accordingly, the City has properly deducted 3% from the gross annual wages of its tier 3 police officers and firefighters as mandatory employee pension contributions.”

The text of the decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2014/2014_04873.htm

2014 End-of-Session Legislative Review.

2014 End-of-Session Legislative Review.  

NYMUNIBLOG has posted an article by Jillian D. Kasow, Esq. – 2014 End-of-Session Legislative Review.  

Ms. Kasow notes that on June 20th, the New York State Legislature concluded the second year of its 2013-14 legislative session and lists some key legislation passed during the Session.

You may view the latest post at
http://nymuniblog.com/2014-end-of-session-legislative-review/

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Internal Revenue Service severance pay advisory update

Internal Revenue Service severance pay advisory update

Source: Office of Federal, State and Local Governments

In its July 2013 newsletter,*the Internal Revenue Service’s Office of Federal, State and Local Governments [FSLG] addressed the tax treatment of severance payments made by government entities to terminated employees by the Internal Revenue Service [IRS]. The article, Severance pay and FICA, noted that under Internal Revenue Code §61 severance pay is included [1] in the gross income of the recipient and normal income tax withholding rules apply and [2] severance pay is generally wages for purposes of FICA taxes.

In its decision in United States v. Quality Stores, 134 S.Ct. 1395 [2014], the United States Supreme Court held that severance payments made to involuntarily terminated employees were wages subject to Social Security and Medicare (FICA) taxes. Accordingly, IRS advises it will disallow all claims for refunds of FICA taxes on severance pay.

However, IRS Revenue Ruling 90-72 provides a limited administrative exception for certain payments that supplement state unemployment compensation, sometimes referred to as “SUB-pay.” The Ruling provides for an exception for a stream of payments coordinated with the receipt of unemployment compensation and specifically points out that a lump-sum payment would not qualify for the exception. IRS said that as the Supreme Court decision did not address the provisions of Revenue Ruling 90-72, payments that meeting Ruling 90-72 requirements stated in that ruling continue to be excluded from wages for FICA purposes.

Questions about severance pay should be directed to one of the following Federal, State and Local Government [FSLG] Specialists for New York State: Dave Coulon [(315) 233-7305]; Jean Redman [(607-378-0069] or Granville Shannon [(212) 436 -1492].

* The July 2013 is posted on the Internet at: http://www.irs.gov/pub/irs-tege/p4090_0713.pdf. The FSLG Newsletter is asemiannual newsletter published by the Internal Revenue Service’s office of Federal, State and Local Governments (FSLG) to assist in FSLG’s mission to ensure compliance by Federal, state, and local governmental entities with Federal employment and other tax laws through educational and compliance review activities.

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Suspension without pay

Suspension without pay
2014 NY Slip Op 04860, Appellate Division, First Department

The employee [Plaintiff] was suspended without pay indefinitely pursuant to Article III(9) of the collective bargaining agreement (CBA) based on his failure to provide a proper accounting of funds allocated to him in connection with his employment. He remained suspended without pay until he retired on November 30, 2004. 

The disciplinary arbitration panel found that Plaintiff had been improperly suspended without pay for more than 30 days, in violation of the CBA, and awarded him wages and benefit contributions for the period from 30 days after his suspension through the date of the first arbitration hearing, which was held September 29, 2005. The employer filed a CPLR Article 75 petition challenging the arbitration award.

Noting that Civil Service Law §75(3) was incorporated into the CBA under Article XVII(4)(B), the Appellate Division agreed with the employer that since the CBA and Civil Service Law §75(3) both permit back-pay awards only for periods of improper suspension, even if the grievant was suspended improperly and held that the arbitrators exceeded their power by awarding Plaintiff back pay for a period of time following his voluntary retirement.

Accordingly, the Appellate Division unanimously modified the arbitration award, on the law, to define the period for the purposes of awarding Plaintiff back pay and benefits ran from 30 days after Plaintiff’s suspension without pay through the date of the Plaintiff's retirement rather than for period running from 30 days after his suspension without pay through the date of the first arbitration hearing,

In effect the court ruled that an individual improperly suspended without pay was entitled to back pay for any suspension without pay in excess of the 30-day period authorized by §75(3) only through the effective date of his or her separation from service such as the result of his or her retirement, resignation or death. Presumably the same limitation would apply in situations where the individual services would otherwise terminate by operation of law, rule or regulation while he or she was improperly suspended without pay.

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The Discipline Book, - A concise guide to disciplinary actions involving public employees in New York State set out in a 2100+ page e-book. For more information click on http://booklocker.com/books/5215.html

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Attaining tenure by estoppel or acquisition

Attaining tenure by estoppel or acquisition

Files v Department of Educ. of the City of New York, 2014 NY Slip Op 04713, Appellate Division, First Department

Typically a probationary teacher or administrator will attain tenure by estoppel or acquisition when a school board accepts the continued services of the teacher or administrator, but fails to take the action required by law to either grant or deny tenure prior to the expiration of the teacher’s or administrator’s probationary term.

The Appellate Division sustained a State Supreme Court decision rejecting a probationary teacher’s [Teacher] petition by which she sought a court order annulling her employer’s decision to deny her tenure and to terminate her employment, contending that she had attained tenure by estoppel.

As to Teacher’s claim that she had attained tenure by estoppel, the Appellate Division said the she had failed to demonstrate that she acquired tenure by estoppel or acquisition as the record demonstrated that she did not perform the duties of a teacher beyond her probationary term. The decision notes that Teacher’s employer made it clear to her that she would not be given tenure and, at most, would be offered an extension of her probationary period. Teacher, however, declined the offer to extend her probationary period.

Significantly Teacher was not placed in a classroom nor did she perform any traditional teaching functions immediately prior to the expiration of her probationary period. Rather, said the Appellate Division, the record demonstrates that she performed administrative tasks instead of traditional teaching duties.

The Appellate Division also rejected Teacher’s allegation that her employer had “engaged in bad faith when it terminated her employment” as the record indicated that Teacher had received “two letters of misconduct and an unsatisfactory performance rating.”

One exception to the general rule: In Mendez v Valenti, 101 AD2d 612 the Appellate Division held that as long as the termination of a probationer appointed to a position in the classified service is effected within a reasonable time after the end of his or her maximum period of probation, such as set to coincide with the end of the next payroll period, he or she does not attain tenure by estoppel or acquisition notwithstanding his or her continuation on the payroll. 

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Arbitrator’s imposing a penalty of suspension without pay rather than termination did not violate public policy

Arbitrator’s imposing a penalty of suspension without pay rather than termination did not violate public policy

Roberts v City of New York, 2014 NY Slip Op 04706, Appellate Division, First Department

A twenty-two year employee was involved in a traffic accident while driving a Department vehicle under the influence of alcohol. After a hearing at which both sides presented testimony and documentary evidence, an arbitrator rejected the Department’s preferred penalty of termination, ruling instead that the unpaid suspension, which had lasted nearly two years, imposed on the employee immediately after the accident was a sufficient penalty for an employee who had an otherwise unblemished employment history and who had admitted his addiction to alcohol and had taken full responsibility for his misconduct.

The arbitrator, considering the employee's remorse and completion of his rehabilitation programs, ordered him reinstated as a Department employee to “a position commensurate with his experience,” but ruled that the Department did not have to restore him to a position requiring that he drive department vehicles until it was confident that he had been rehabilitated.

The Department then filed a petition pursuant to Article 75 of the CPLR seeking to vacate the arbitration award, contending that that termination was the only appropriate penalty under the circumstances. Supreme Court dismissed the Department’s petition and the Appellate Division affirmed the lower court’s ruling.

The Appellate Division, considering the record and the findings made by the arbitrator, ruled that the Department had not established that the arbitration award should be vacated, explaining that the arbitrator’s award did not violate public policy and the Department failed to cite to any well-defined constitutional, statutory or common law principle that the award violated.

In the words of the Appellate Division, “as the arbitrator grounded his reasoning in the evidence, including an assessment of the employee as frank and apologetic,” the Department’s contention that termination is the only appropriate penalty “is without merit,” citing United Federation of Teachers, Local 2 v Board of Education, 1 NY3d 72.

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Determining the existence of an employer-employee relationship for the purposes of eligibility of Unemployment Insurance benefits and the payment of required employer contributions

Determining the existence of an employer-employee relationship for the purposes of eligibility of Unemployment Insurance benefits and the payment of required employer contributions

2014 NY Slip Op 04544, Appellate Division, Third Department

The school district [District] challenged two decisions issued by the Unemployment Insurance Appeals Board holding that::

1. The District was the employer of a claimant for Unemployment Insurance benefits; and

2. The District was required to pay additional unemployment insurance contributions based on remuneration paid to the claimant and other individuals similarly situated.

The Appellate Division affirmed the Board’s determination, explaining that “Whether there exists an employee-employer relationship is a factual question to be resolved by the Board and we will not disturb its determination when it is supported by substantial evidence in the record.”

The court pointed out that the Board’s determination regarding an employer-employee relationship “rests not on one single factor, but consideration is given to whether control was exercised over the results or the means used to achieve those results, with the latter factor deemed more important.”

In this instance the claimant testified that, among other things, she was provided with a school district computer for use in coordinating the District's program, maintained a file cabinet and mailbox at the school, was given use of the photocopier and postage machine, and had access to school district transportation. Claimant also testified that she performed most of her work at the school, including some tasks that were required to be performed there.

Claimant further testified the District’s Superintendent had disapproved classes, directed claimant to hire a specific teacher against her wishes, had final approval over her canceling classes; and that claimant was required to seek approval before assigning herself to teach a class and that request had been denied.

In addition, both the claimant and the Superintendent testified that, in addition to claimant’s duties supervising the school district’s adult education program, she also provided office help and performed general records management duties for the school district.

The Appellate Division ruled that that notwithstanding evidence that might support a different conclusion, it found that substantial evidence supported the Board's decision. Accordingly the Board’s rulings were affirmed, requiring the school district to make the appropriate additional Unemployment Insurance contributions based on remuneration paid to the claimant and the remuneration it had paid to others similarly situated and, in addition, sustained the Board’s order requiring payments of Unemployment Insurance benefits to the claimant.

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