Forfeiture of employee retirement contributions made to a New York State public retirement system

Forfeiture of employee's retirement contributions made to a New York State public retirement system

United States v. Stevenson, USCA, 2^ndCircuit, Docket 14-1862

Article V, §7 of the New York State Constitution, sometimes referred to as the “Nonimpairment Clause,” provides, in relevant part, that: “membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired.” Such systems are "defined benefit" retirement plans.

One of the issues in the Stevenson case was whether Article V, §7 barred a federal district court from directing the forfeiture of an employee's contributions to a New York State public retirement system* as a "substitute asset."

Eric Stevenson, a former Member of the New York State Assembly, was convicted of accepted three bribes in 2012 and 2013 in the total amount of $22,000 in return for various actions to promote certain adult daycare centers including proposing legislation to the New York State Legislature that would have imposed a moratorium on new adult daycare centers, thus favoring certain interested parties.

The jury found Stevenson guilty on all counts and the Federal District Court judge hearing the case, among other things, entered a preliminary order of forfeiture of Stevenson's assets in the amount of $22,000, representing the amount of the bribes. A final judgment, entered on May 23, 2014, including an order of forfeiture that provided, as a substitute asset for forfeiture purposes, “[a]ny and all contributions, funds, benefits, rights to disbursements, or other property held on behalf of, or distributed to, Eric Stevenson, by the New York State and Local Retirement System, … and all property traceable thereto”** up to $22,000.

Stevenson appealed and with respect to the court's “order of forfeiture,” he contended that identifying his pension plan employee contributions as a substitute asset and permitting seizure up to the amount of $22,000 by the Government was error as those contributions were protected by Article V, Section 7 of the New York State Constitution, which, in pertinent part, provides that such a plan’s benefits “shall not be diminished or impaired.”

The Circuit Court of Appeals disagreed and affirmed the lower court’s ruling with respect to the forfeiture of assets and its designating Stevenson's contributions to the Retirement System a substitute asset for purposes of paying the $22,000 penalty imposed by the court.

The court explained that to the extent that there is "a conflict between New York law providing that the employee's pension  is not to be 'diminished or impaired,' and federal law, which authorizes forfeiture 'irrespective of any provision of State law,' of any property derived from the crime of conviction, [see 21 U.S.C. §853(a)], and, where such property cannot be located or has been transferred, of ‘any other property of the defendant’ in the same amount,” Article V, §7 of the New York State Constitution “is preempted to the extent that it would prevent forfeiture of Stevenson’s contributions to or benefits from a state pension or retirement system up to $22,000, the amount ordered forfeited.”

The Circuit Court then affirmed the lower court’s decision, including the sentence imposed, the forfeiture order, and the order identifying substitute assets by the district court.”

In Matter of D'Agostino v DiNapoli, 24 Misc 3d 1090, one of the relatively few State court decisions that consider the extent of the protections provided by Article V, §7 of New York State Constitution's, the court said that Article V, §7 “merely provides that retirement system benefits are contractual in nature and may not be impaired or diminished by state action. Further, said the court, “Such guarantee does not render an individual retirement system member's benefits inviolate.” Rather, the court, citing Matter of Village of Fairport v Newman, 90 AD2d 293, leave to appeal denied 58 NY2d 1112, said "[t]he purpose of the constitutional provision is 'to insure that pension and retirement benefits [are not] subject to the whim of the Legislature or the caprice of the employer.”

Further, explained the D’Agostino court, “[t]here is no constitutional violation unless the contractual benefits are unilaterally diminished,” presumably as a result of an action by the State Legislature, the State or a political subdivision of the State to truncate a retirement allowance otherwise payable, citing Rosen v New York City Teachers' Retirement Bd., 282 App Div 216,  affd 306 NY 625, and Delaney v Regan, 183 AD2d 981.

* The State University’s Optional Retirement Plan, established pursuant to Article 8-B of the Education Law [and similar defined contribution retirement plans established by law] is not a public retirement systems of the State and, as indicated in §396 of the Education Law, the “Employer [is] not liable for [the] payment of benefits.”

** Stevenson did not have sufficient “years of member service” in the Retirement System to have become a “vested” member of the System but the Federal District Court said that he was entitled to a refund of the “member contributions” that he had made as a member of the System.

The Stevenson decision is posted on the Internet at:

http://www.ca2.uscourts.gov/decisions/isysquery/0227062b-c942-4ce4-8bb4-82668b8dddf0/1/doc/14-1862_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/0227062b-c942-4ce4-8bb4-82668b8dddf0/1/hilite/

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Determining if an employee is a joint employee of two or more employers for the purposes of State and City human rights laws

Determining if an employee is a joint employee of two or more employers for the purposes of State and City human rights laws
Brankov v Hazzard, 2016 NY Slip Op 05778, Appellate Division, First Department

The decision of the Appellate Division in Brankov, which involved an employment in the private sector, concerned whether “an ostensible non-employer is actually a "joint employer" for purposes of employment discrimination claims under the State and City Human Rights Laws (HRL).” Thus the ruling may be instructive in determining the employer-employee relationship for the purposes of HRLs in situations where a public officer or employee, alleging unlawful discrimination, initiates an administrative or judicial complaint under state, local and, or federal laws claimng two or more public sector employers are liable for the alleged acts of unlawful discrimination.

Although the majority of employments in the public service involve the appointment of an individual to a position under the jurisdiction of a single appointing authority, there are a number of other types of employments that may be made depending of the circumstances, the most common being a “dual employment” and a “joint employment.”*

Dual employments typically involves a single individual serving in two different positions, each under the jurisdiction of different appointing authorities and generally require the knowledge and approval of the appointing authorities involved.**

In contrast, a joint employment is effected when two [or more] appointing authorities jointly authorize the employment of an individual in a single position and the two [or more] appointing authorities typically share the personnel service costs involved.

Other types of employments in the public service include, but are not limited to:  

1. A “special employee” in the service of two or more employers pursuant to a shared services agreement,

2. A “shared employment” in which two or more individuals are employed part-time by a single appointing authority and “share” a single position and

3. An “extra service employee” where an individual, typically working full time for one appointing authority, is simultaneously employed by the same or another appointing authority in a different position with the approval of the appointing authority or both appointing authorities, as the case may be.

The Appellate Division described Dragica Branko’s employee status as follows:

“In this action "Company A" hired Brankov, paid her salary and bonuses, controlled where she was assigned to work, and placed her at "Company B" and later transferred her to other locations. A "Company A" employee supervised Branko on a day-to-day basis. "Company B" had no say in the end of Branko's employment with "Company A" years after she had been transferred to another location. The record plainly indicates that "Company A", and not "Company B," ultimately controlled Branko's employment.”

Explaining that Federal District Courts have typically applied the "immediate control" test in determining the appropriate “defendant-employer” in such situations, the Appellate Division said that under the "immediate control" formulation, a "joint employer relationship may be found to exist where there is sufficient evidence that the defendant had immediate control over the other company's employees," and particularly the defendant's control "over the employee in setting the terms and conditions of the employee's work."

"Relevant factors" in this analysis "include commonality of hiring, firing, discipline, pay, insurance, records, and supervision." Of these factors, "the extent of the employer's right to control the means and manner of the worker's performance is the most important factor."

In Brankov, the Appellate Division held that “[v]iewed in the light most favorable to [Brankov], the record fails to demonstrate that ["Company B"] had the requisite "immediate control" over the terms and conditions of her employment to be subject to liability under the New York State and New York City Human Rights Law as a "joint employer."

Accordingly, said the court, Supreme Court correctly held that "Company B" was not Brankov’s joint employer, and correctly dismissed her claims against "Company B" and Hazzard as those claims rested on her theory of joint employment.

* These designations involve the "nature of the individual's performance of duties obligations" rather than the “nature of a public officer’s or employee’s status" in the position such as a permanent, temporary, contingent permanent, full-time, part-time, seasonal, trainee, per diem or substitute appointee or as an individual elected to a position in the public service. An independent contractor serving with a State, a political subdivision of the State, a public authority or other governmental entity is not a “public employee."  

** Another consideration with respect to dual employments concerns the appearance of, if not an actual, a conflict of interest involved in a particular “dual employment” situation? As the Attorney General advised in an informal opinion: In the absence of a constitutional or statutory prohibition against dual-office holding, one person may hold two offices simultaneously unless they are incompatible [Informal Opinions of the Attorney General 98-17].

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_05778.htm

Determining if an employee is a joint employee of two or more employers for the purposes of State and City human rights laws

Determining if an employee is a joint employee of two or more employers for the purposes of State and City human rights laws
Brankov v Hazzard, 2016 NY Slip Op 05778, Appellate Division, First Department

The decision of the Appellate Division in Brankov, which involved an employment in the private sector, concerned whether “an ostensible non-employer is actually a "joint employer" for purposes of employment discrimination claims under the State and City Human Rights Laws (HRL).” Thus the ruling may be instructive in determining the employer-employee relationship for the purposes of HRLs in situations where a public officer or employee, alleging unlawful discrimination, initiates an administrative or judicial complaint under state, local and, or federal laws claimng two or more public sector employers are liable for the alleged acts of unlawful discrimination.

Although the majority of employments in the public service involve the appointment of an individual to a position under the jurisdiction of a single appointing authority, there are a number of other types of employments that may be made depending of the circumstances, the most common being a “dual employment” and a “joint employment.”*

Dual employments typically involves a single individual serving in two different positions, each under the jurisdiction of different appointing authorities and generally require the knowledge and approval of the appointing authorities involved.**

In contrast, a joint employment is effected when two [or more] appointing authorities jointly authorize the employment of an individual in a single position and the two [or more] appointing authorities typically share the personnel service costs involved.

Other types of employments in the public service include, but are not limited to:  

1. A “special employee” in the service of two or more employers pursuant to a shared services agreement,

2. A “shared employment” in which two or more individuals are employed part-time by a single appointing authority and “share” a single position and

3. An “extra service employee” where an individual, typically working full time for one appointing authority, is simultaneously employed by the same or another appointing authority in a different position with the approval of the appointing authority or both appointing authorities, as the case may be.

The Appellate Division described Dragica Branko’s employee status as follows:

“In this action "Company A" hired Brankov, paid her salary and bonuses, controlled where she was assigned to work, and placed her at "Company B" and later transferred her to other locations. A "Company A" employee supervised Branko on a day-to-day basis. "Company B" had no say in the end of Branko's employment with "Company A" years after she had been transferred to another location. The record plainly indicates that "Company A", and not "Company B," ultimately controlled Branko's employment.”

Explaining that Federal District Courts have typically applied the "immediate control" test in determining the appropriate “defendant-employer” in such situations, the Appellate Division said that under the "immediate control" formulation, a "joint employer relationship may be found to exist where there is sufficient evidence that the defendant had immediate control over the other company's employees," and particularly the defendant's control "over the employee in setting the terms and conditions of the employee's work."

"Relevant factors" in this analysis "include commonality of hiring, firing, discipline, pay, insurance, records, and supervision." Of these factors, "the extent of the employer's right to control the means and manner of the worker's performance is the most important factor."

In Brankov, the Appellate Division held that “[v]iewed in the light most favorable to [Brankov], the record fails to demonstrate that ["Company B"] had the requisite "immediate control" over the terms and conditions of her employment to be subject to liability under the New York State and New York City Human Rights Law as a "joint employer."

Accordingly, said the court, Supreme Court correctly held that "Company B" was not Brankov’s joint employer, and correctly dismissed her claims against "Company B" and Hazzard as those claims rested on her theory of joint employment.

* These designations involve the "nature of the individual's performance of duties obligations" rather than the “nature of a public officer’s or employee’s status" in the position such as a permanent, temporary, contingent permanent, full-time, part-time, seasonal, trainee, per diem or substitute appointee or as an individual elected to a position in the public service. An independent contractor serving with a State, a political subdivision of the State, a public authority or other governmental entity is not a “public employee."  

** Another consideration with respect to dual employments concerns the appearance of, if not an actual, a conflict of interest involved in a particular “dual employment” situation? As the Attorney General advised in an informal opinion: In the absence of a constitutional or statutory prohibition against dual-office holding, one person may hold two offices simultaneously unless they are incompatible [Informal Opinions of the Attorney General 98-17].

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_05778.htm