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Select Cases and Current Legal Issues

Select Cases and Current Legal Issues. MACRS Spring Conference June 5, 2012. Moderator Thomas F. Gibson, Esq. Panel James Salvie , Esq. , General Counsel, MTRS Katherine A. Hesse , Esq. , Murphy, Hesse , Toomey & Lehane , LLP James H. Quirk, Jr., Esq. ,

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Select Cases and Current Legal Issues

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  1. Select Cases and Current Legal Issues MACRS Spring Conference June 5, 2012

  2. Moderator Thomas F. Gibson, Esq. Panel 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.

  3. Post Retirement Earnings James H. Salvie, Esq. Mass. Teacher’s Retirement System

  4. Don’t Look Behind the CurtainForm over Substance and the Working After Retirement Problem

  5. The Framework • 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.

  6. The Mistaken Mechanistic Approach • 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”

  7. When to be careful • 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.

  8. “There Must Be Limits” • “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.

  9. But Even If There Is . . . • 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.

  10. The Elusive “Silver Bullet” • 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.

  11. Selecting and Monitoring Service Providers Katherine A. Hesse, Esq. Murphy, Hesse, Toomey & Lehane, LLP

  12. Impact of Chapter 176 Upon Existing Members Derek M. Moitoso, Esq. PERAC Compliance Counsel

  13. C. 176, Section 14 Group Classification • 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.

  14. C. 176, Section 8 Group Classification for Present Members • 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.

  15. C. 176, Section 14 Group Classification • 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. 

  16. C. 176, Section 14 Anti-Spiking: The First Provision • 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 differencein the rate of regular compensation between any two of the last five consecutive years immediately preceding retirement exceeds 100 percent.

  17. Anti-Spiking: The Second Provision • 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.

  18. C. 176, Section 18 Anti-Spiking: The Second Provision • 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.)

  19. C. 176, Section 9 Buybacks of Refunded Time UponRe-entry or Reinstatement • 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.

  20. Buybacks of Refunded Time Upon Re-entry or Reinstatement • 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

  21. C. 176, Section 9 Buybacks of Section 3 Time Upon Becoming a Member • 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.

  22. C. 176, Section 9 Buybacks of Section 3 Time Upon Becoming a Member • 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.

  23. C. 176, Section 9 Buybacks of Section 3 Time After April 2, 2013 • 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.

  24. Subsection 5(1)(g)The No Longer Forgotten Subsection • For many years, Section 5(1)(g) offered an enviable non-interest 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

  25. C. 176, Section 31 Forfeiture of Pension • 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.

  26. C. 176, Section 49 Members Retiring On or After April 2, 2012 • Elected officials may not return to an elected office after retirement and avoid the earnings limitations of Section 91 if: • They retired from an elected office, and • 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.

  27. C. 176, Section 50 Increase in Retiree’s Ability to Earn in the Public Sector Post-Retirement • 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.

  28. C. 176, Sections 29 & 30 Those Already Receiving the Minimum Allowance • 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.

  29. C. 176, Sections 29 & 30 Eligibility for the Minimum Allowance • 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.

  30. Guarantees Under Section 25(5) and Chapter 176 Nicholas Poser, Esq.

  31. G.L. c. 32, s. 25(5) • 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.”

  32. Opinion of the Justices, 364 Mass. 847 (1973) • “[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.”

  33. Emotional Disability: Evidence Requirements Michael Sacco, Esq.

  34. Generally Two Types Of Cases • 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).

  35. Post Traumatic Stress Disorder (“PTSD”) • 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.

  36. Timeliness • 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.

  37. Notice – Injury Report vs. Incident Report • 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”.

  38. Bona Fide Personnel Action Or Personal Injury • 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”.

  39. Bona Fide Personnel Action Or Personal Injury • Intentional infliction of emotional distress – Agis v. Howard Johnson Co., 371 Mass 140, 144-145 (1976) – must prove four factors: • 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; • that the conduct was “extreme and outrageous,” was “beyond all possible bounds of decency” and was “utterly intolerable in a civilized community;” • that the actions of the defendant were the cause of the plaintiff’s distress; and • that the emotional distress sustained by the plaintiff was “severe” and of a nature “that no reasonable man could be expected to endure it.”

  40. How Do You Reconcile: Is The Claim Compensable Or Not? • 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?

  41. How Do You Reconcile: Is The Claim Compensable Or Not? • 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.

  42. Recent Cases of Note James H. Quirk, Jr., Esq.

  43. 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-08-589 Recent Cases

  44. Thank You for Your Time and Attention

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