ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This matter is before me upon the request of Larry C. Ross (“Petitioner”) for a contested case hearing. Petitioner appeals the final determination of the South Carolina Budget and Control Board and the South Carolina Retirement Systems (“Retirement Systems”), which excluded from his Average Final Compensation payment for compensatory leave which he received from his employer, the Department of Natural Resources, in the last quarter prior to his retirement in June 2003. The Administrative Law Court (“Court”) has jurisdiction to conduct this hearing de novo and issue a final decision pursuant to S.C. Code Ann. § 9-21-60 (Supp. 2003) of the South Carolina Retirement Systems Claims Procedures Act (“Act”).
A hearing was held before me in Columbia, South Carolina on July 22, 2004. Both the Petitioner and the Retirement Systems were present and were represented by counsel. After considering all the evidence and testimony, I conclude that the final decision by the Retirement Systems should be affirmed and that Petitioner has received all retirement benefits to which he is entitled by law.
FINDINGS OF FACT
Having carefully listened to the testimony and observed the demeanor of the witnesses during the hearing, having carefully reviewed the entire record, and having weighed the credibility of all the evidence and the witnesses, taking into account the burden of proof imposed on the parties, I make the following findings of fact:
1. The Court has personal and subject matter jurisdiction;
2. Notice of the date, time place and nature of the hearing was timely given to the parties.
3. The Department of Natural Resources is a State agency which participates in the South Carolina Retirement Systems.
4. Petitioner was employed with the Department of Natural Resources (formerly South Carolina Wildlife and Marine Resources Department) from December 1976 until August 1, 2003.
5. At all times relevant to this action, Petitioner served in a law enforcement capacity which entitled him to membership in the Police Officers Retirement System (“PORS”).
6. While serving in a law enforcement capacity, Petitioner accrued “compensatory time” for hours worked beyond his normal work schedule. The parties stipulated that the Petitioner accrued 450.1 hours of compensatory time prior to January 1, 1999; he did not accrue any compensatory time after January 1, 1999.
7. On or about May 28, 2003, Petitioner obtained a “PORS Monthly Benefit Estimate” which included an estimated salary for the June 2003 quarter in the amount of $23,602.46, compared to a salary of $12,656.46 for the previous reported quarter. This estimate projected an average final compensation of $56,576.48 and a maximum monthly benefit of $2,720.10. The benefit estimates provided to the Petitioner included the following “IMPORTANT NOTICE”:
This retirement benefit estimate and any supporting documents are only projections based on information you provided or non-certified system information. This benefit estimate does not qualify you for retirement, does not change the beneficiaries you previously designated, and does not certify your date of retirement, service credit, tax computation, or average final compensation. Please do not leave employment based on this information.
8. By letter dated June 17, 2003, the Department of Natural Resources approved the Petitioner for a lump sum separation payment of $25,313, based upon retirement effective August 1, 2003. This payment was made pursuant to an early retirement program offered by DNR.
9. Prior to the effective date of Petitioner’s retirement, the Retirement Systems learned that his June quarter 2003 estimated salary included payment for accrued compensatory time earned before January 1, 1999. In keeping with its practice, the Retirement Systems determined that only compensatory time earned during the twelve consecutive quarters used to calculate average final compensation (AFC) would be included in calculating retirement benefits.
10. A recalculation of Petitioner’s retirement benefits utilizing his highest twelve consecutive quarters of pay and applying 45 days of unused annual leave produced an AFC of $52,925.76, resulting in a monthly benefit of $2,554.63.
11. Petitioner objected to the exclusion of the payment for accrued compensatory time in the calculation of his AFC. By letter dated December 29, 2003, Peggy G. Boykin, CPA, as Director of the South Carolina Retirement Systems, issued a Final Agency Determination which excluded the compensatory time payments and affirmed the Petitioner’s AFC as $52,925.76. This timely appeal followed.
LEGAL ANALYSIS
In Kennedy v. South Carolina Retirement Systems, 345 S.C. 339, 549 S.E.2d 243 (S.C. 2001), the Supreme Court was presented with the issue of whether a change in the Average Final Compensation definition adopted in 1986 [S.C. Code Ann. § 9-1-10(17)] was intended by the General Assembly to increase the value of unused annual leave in the benefits formula. Following an examination of legislative history and potential impact on the fiscal integrity of the Retirement Systems by increasing the AFC, the Supreme Court rejected the plaintiffs’ attempt to expand annual leave compensation in the benefits formula.
Petitioner seeks to include in his AFC calculation a lump sum payment for compensatory time in the amount of $10,950.44, which he received more than three years after he last worked overtime. In support of this claim, Petitioner contends that AFC should be determined by the time when compensation is paid, rather than earned, which is contrary to express statutory language. Petitioner further asserts that an “estimate” provided by an employee of the Retirement Systems and statements by employees of the Department of Natural Resources obligated the State to make payments which are not otherwise required by law.
It is established in this State that retirement benefits, including the calculation of AFC, are controlled by the plain language of the Retirement Act. See generally, Duvall v. South Carolina Budget and Control Board, South Carolina Retirement Systems (Docket No. 03-ALJ-30-0448-CC, Final Order and Decision filed May 5, 2004) Here, as in Duvall, the Petitioner argues that an entitlement to receive payment from an employer translates into a requirement that the payment be included in calculating the AFC. As Judge Kittrell found in Duvall, however, lump sum payments from an employer included in the AFC are limited by statute to forty-five days of annual leave at retirement.
In its definition section, the Police Officers Retirement Act limits “compensation” for purposes of determining retirement benefits to the “total remuneration paid to a police officer for service rendered to an employer for his full normal working time” S.C. Code Ann. § 9-11-10 (12) (Emphasis added). In accordance with this definition, the Retirement Systems provides to participating employers instructional manuals prescribing the manner in which compensation applies to retirement benefits. The instructional manuals provide that overtime pay, like all other forms of compensation, is considered only during the period in which the time is worked. These manuals further inform employers that compensation is a rate of pay and is not determined on a cash basis.
Petitioner did not render service to support his compensatory pay during the twelve quarters which produced his highest retirement benefit. Rather, Petitioner rendered this service and earned the right to be paid (in time off or overtime) more than three years before his retirement. In effect, Petitioner seeks to use compensation for the normal work time during his twelve highest quarters of pay, which occurred immediately prior to retirement, and to import compensatory pay which was earned outside that period. The legal precedents do not support this position.
The cardinal rule of statutory construction is to ascertain and effectuate the intent of the Legislature. Charleston County School District v. State Budget and Control Board, 313 S.C. 1, 437 S.E.2d 6 (1993). Under the plain meaning rule, it is not the court’s place to change the meaning of a clear and unambiguous statute. In re: Vincent J., 333 S.C. 233, 509 S.E.2d 261 (1998). In the present case, the General Assembly has specifically restricted to forty-five days the amount of annual leave available for use in calculating AFC. S.C. Code Ann. § 9-11-10(7). This statute does not include compensatory time in AFC.
The canon of construction expressio unius est exclusio alterius or inclusio unius est exclusio alterius holds that “to express or include one thing implies the exclusion of another, or of the alternative” Hodges v. Rainey, 341 S.C. 79, 533 S.E.2d 578, 582 (2000)(quoting Black’s Law Dictionary, 602 (7th ed. 1999)). By including annual leave and excluding all other forms of lump sum payments in AFC calculations, the General Assembly clearly intended to limit the impact of accrued pay on retirement computation to forty-five days of unused annual leave.
A review of the federal law which provides for compensatory time further supports the State’s position. As determined by the United States Supreme Court in Christensen v. Harris County, 529 U.S. 576 (2000), an employee has the right to take compensatory time within a reasonable period of its accrual. More importantly, an employer “is free at any time to reduce the number of [compensatory] hours accrued by exchanging them for cash payment, or by halting the accrual of compensatory time by paying cash compensation for overtime work”. 529 U.S. at 584. Accordingly, an employer can require an employee to take time off or cash out accumulated time prior to separation from employment. 529 U.S. at 585. In this case, rather than requiring Petitioner to take time off or paying him for compensatory hours within a “reasonable time”, the Department of Natural Resources carried his compensatory hours forward for more than three years. However, the deferral of Petitioner’s pay for those compensatory hours does not affect the period in which he rendered service, thereby earning the right to be paid.
Petitioner’s argument that he relied upon an estimate from the Retirement Systems is without merit. The document allegedly relied upon by Petitioner is one of several benefits estimates he received from the Retirement Systems. This document, like all the others, clearly provides that it is an estimate only and that it does not represent a final calculation of his AFC.
Petitioner’s argument that he relied upon advice from employees of the Department of Natural Resources in “saving” his compensatory time is similarly without merit. Petitioner Ross testified that Jean Cowell, Human Resources Manager at DNR, told him that his compensatory time payment would be computed into his AFC. Ms. Cowell did not testify at the hearing. Petitioner introduced Exhibit #6, a letter from Ms. Cowell to Ms. Boykin, Director of the S. C. Retirement Sytems dated June 6, 2003. That letter states:
Our normal practice was to pay out any compensatory leave balances at the time an employee terminated from employment with DNR. The payout was always part of the employees final check and was applied to the employee’s last quarter of earnings for retirement purposes; however, with the recent payout, DNR staff are being advised that the compensatory time must be applied to the quarter in which it was earned. Some employees who are considering retirement have been told by counselors from the Retirement System that their compensatory leave payout would be included in their final quarter earnings calculation. (Emphasis added.)
Petitioner testified that based on this fact, and with the projected calculations of his monthly benefits, he decided to retire.
On cross-examination, Ross acknowledged that prior to his actual retirement date, Ms. Cowell informed him that the compensatory time would not be included in computing his AFC. He further testified that DNR offered him the choice of retaining his current position, but he nonetheless chose to retire.
Lieutenant Chip Sharpe, who retired from DNR in 1999, testified that Ross earned compensatory time during the time Sharpe was his supervisor. Sharpe further testified that he understood that compensatory time could be “banked”; that employees could wait to be paid for their compensatory time until immediately prior to retirement; and that the compensatory time payout would be computed into their AFC, thus raising their AFC.
Petitioner’s witness Ben Moïse testified that he retired from DNR in 2001. He was paid $10,122.98 for earned compensatory time, and state retirement in the amount of $657.99 was deducted from that check. In February, 2004, he received a letter from the State Budget and Control Board, which stated that based on an audit of his account, he had been overcompensated because the compensatory time was erroneously added into the AFC. Mr. Moïse further testified that he was required to refund to the Budget and Control Board $2,000. Further, his monthly retirement payment was reduced by $80.00.
As a preliminary matter, Petitioner has suffered no recognizable loss because he has been paid fully for his compensatory time. Moreover, the compensatory time was paid at a higher rate than he would have received if he had been paid for that time when it was accrued prior to January 1, 1999. See, Grant v. City of Folly Beach, 346 S.C. 74, 551 S.E.2d 229 (2001) (prejudicial change of position an essential element of estoppel.) Additionally, it is established that estoppel will “not lie against the government to prevent the due exercise of its police power or to thwart the application of public policy. The acts of government agents acting within the scope of their authority can give rise to estoppel against the government, but unauthorized conduct or statements do not.” Town of Sullivan’s Island v. Byrum, 306 S.C. 539, 413 S.E.2d 325 (Ct. App. 1992) (citations omitted). No public employee has the authority to bind the State to make payments in excess of that available under law. Service Management, Inc. v. State Health
and Human Services Finance Commission, 298 S.C. 234, 379 S.E.2d 442 (Ct. App. 1989); Goodwine v. Dorchester Department of Social Services, 336 S.C. 413, 519 S.E.2d 116 (Ct. App. 1999).
Recently, the Court of Appeals has dealt with the issue of estoppel against a governmental body. In McCrowey, v. The Zoning Board of Adjustment of the City of Rock Hill, South Carolina, 360 S.C. 301, 599 S.E. 2d 617 (Ct. App. 2004) the Court held
Typically, equitable estoppel is found to exist when the following elements are present:
(1) [C]onduct by the party estopped which amounts to a false representation or concealment of material facts or which is calculated to convey the impression that the facts are otherwise than and inconsistent with those which the party subsequently attempts to assert; (2) the intention or at least expectation that such conduct shall be acted upon by the other party; (3) knowledge, actual or constructive, of the true facts; (4) lack of knowledge or the means of knowledge of the facts by the other party; (5) reliance upon the conduct by the other party; and (6) a detrimental change of position by the other party because of his reliance. Oswald v. Aiken County, 281 S.C. 298, 305, 315 S.E.2d 146, 151 (Ct. App. 1984) (citing Frady v. Smith, 247 S.C. 353, 147 S.E.2d 412 (1966)).
However, it is generally held that “[n]o estoppel can grow out of dealings with public officers of limited authority, and the doctrine of equitable estoppel cannot ordinarily be invoked to defeat a municipality in the prosecution of its public affairs because of an error or mistake of . . . one of its officers or agents . . . .” DeStefano v. City of Charleston, 304 S.C. 250, 257-258, 403 S.E.2d 648, 653 (1991) (quoting Farrow v. City Council of Charleston, 169 S.C. 373, 382, 168 S.E. 852, 855 (1933)) (further citations omitted).
Because of the general prohibition of estoppel against a government agency, any reliance by Petitioner on statements by other employees of DNR that compensatory hours would be included in calculation of his AFC is unenforceable. Assuming, arguendo, however that an action for estoppel would lie in this case, the matter would still fail on the merits when the above factors are applied to the facts here. Specifically, the Petitioner cannot show a detrimental change in his position due to his reliance on a false statement. The Petitioner stated that even though he found out prior to his retirement that the compensatory hours would not be included in his AFC, he continued with his plans to retire.
CONCLUSIONS OF LAW
1. The South Carolina General Assembly has established procedures which members of the State Retirement Systems must follow to seek resolution of disputes and claims with the Retirement Systems. A member may ask the Director to review an initial unfavorable decision by the Retirement Systems. The claimant has the opportunity to present that claim in writing. The Director, or a person designated by the Director, may conduct a conference concerning the claim prior to the issuance of a final agency determination by the Director. The Director must make a final written agency determination concerning the claimant’s appeal. The written decision by the Director is the final decision of the Retirement Systems and the State Budget and Control Board concerning the claimant’s appeal. If the final agency determination is unfavorable to a member, he or she may request a hearing by an Administrative Law Judge. See, S.C. Code Ann. § 9-21-10 et seq. (Supp. 2004).
2. The Administrative Law Court assigns each case as filed to an Administrative Law Judge who hears the case de novo in accordance with the rules of procedure of the Court. S.C. Code Ann. § 9-21-60 (Supp. 2004).
3. The Administrative Law Court is an agency as defined in S.C. Code Ann. § 1-23-310(2) (Supp. 2004).
4. After conducting a hearing, the Administrative Law Judge issues a final decision in a written order containing separate findings of fact and conclusions of law as defined in S.C. Code Ann. § 1-23-350 (1976) and ALC Rule 29(C).
5. The standard of proof in weighing the evidence and making a decision on the merits of a contested case hearing is by a preponderance of the evidence. Anonymous v. State Board of Medical Examiners, 329 S.C. 371, 796 S.E.2d 17 (1998); National Health Corp. v. South Carolina Department of Health and Environmental Control, 298 S.C. 373, 380 S.E.2d 841 (Ct. App. 1989).
6. An agency decision must be reached utilizing reasoned judgment and must be based upon adequate determining principles and a rational basis. City of Columbia v. Bd. of Health and Environmental Control, 292 S.C. 199, 355 S.E.2d 536 (1987).
7. The trier of fact must weigh and pass upon the credibility of the evidence presented. S.C. Cable Television Ass’n. v. Southern Bell Telephone And Telegraph Co., 308 S.C. 216, 417 S.E.2d 586 (1992). The trial judge who observes a witness is in the best position to judge the witness’ demeanor and veracity and evaluate his testimony. McAlister v. Patterson, 278 S.C. 481, 299 S.E.2d 322 (1982).
Retirement Systems Provisions
8. An “active member” of the Retirement Systems is an employee who is compensated by an employer participating in the Systems and who makes regular retirement contributions to the Systems. The Department of Natural Resources is a participating employer and the Petitioner has made regular retirement contributions to the Retirement Systems. S.C. Code Ann. § 9-11-10(3), (17) (Supp. 2003).
9. “Average final compensation,” with respect to those members retiring on or after July 1, 1986, means “the average annual earnable compensation of a member during the twelve consecutive quarters of the member’s creditable service on which regular contributions as a member were made to the system producing the highest average...” S.C. Code Ann. § 9-11-10(7) (Supp. 2003).
10. The Retirement Systems are a creature of statute and, as such, can only exercise that authority expressly delegated to it or delegated by necessary implication. Fowler v. Beasley, 322 S.C. 463, 472 S.E.2d 630(1996). In construing statutes, the cardinal rule of statutory construction is that the courts must seek to ascertain the legislative intent which, once determined must prevail. Gardner v. Biggart, 308 S.C. 331, 417 S.E.2d 858 (1992). In ascertaining the legislative intent of a statute, courts look to the clear and unambiguous language of the statute. Defender Properties, Inc. v. Doby, 307 S.C. 336, 415, S.E.2d 383 (1992). When such terms are clear and unambiguous, there is no room for construction and courts are required to apply them according to their literal meaning. Citizens for Lee County, Inc. v. Lee County, 308 S.C. 23, 416 S.E.2d 641, 644 (1992).
11. In construing statutes it is understood that statutory provisions do not stand alone but must be read in the context of the statutory scheme as a whole. Consequently, each part or section should be construed in connection with every other part or section so as to produce a harmonious whole. Koenig v. South Carolina Department of Public Safety, 325 S.C. 400, 480 S.E.2d 98 (Ct. App. 1996).
A court should reject an interpretation of a statute when to accept the interpretation would lead to a result so plainly absurd that it could not have been intended by the legislature. Kiriakides v. United Artists Communication, Inc., 312 S.C. 271, 440 S.E.2d 364 (1994). Further, when the terms of a statute are clear and unambiguous, there is no room for construction, and the courts must apply the terms of the statute according to their literal meaning. Ex parte Polk, 354 S.C. 8, 579 S.E.2d 329 (Ct. App. 2003). Pursuant to the clear and unambiguous language of S.C. Code Ann. § 9-11-10(7), the Retirement Systems are authorized to compute the “average final compensation” of a member of the Systems, including in that computation unused annual leave up to forty-five days if payment for the annual leave is paid to the member by his employer at retirement. In this case, the Retirement Systems included in the computation of Petitioner’s average final compensation all amounts which Petitioner earned during his twelve highest consecutive quarters and the payment for forty-five days of unused annual leave. The operative consideration in determining an employee’s retirement benefits is compensation for work performed during the twelve highest consecutive quarters. It is inappropriate to include in a quarter payment for work performed outside that period.
When construing a statute which was found to be ambiguous [S.C. Code Ann. § 9-1-10 (17), governing the treatment of accrued annual leave in computing AFC], the Supreme Court in Kennedy v. S.C. Retirement Systems, supra, held that in the context of the entire statutory scheme of the State Retirement System, it was illogical that the calculation method proposed by the retiree was correct. The Court rejected Kennedy’s argument that 45 days of annual leave should be included after the 12 quarters of salary were averaged, because that would result in benefits calculated on a higher salary than Kennedy had received when he was working.
Accordingly, this Court concludes that the lump sum payment of $10,950.44 for time which was worked outside of the Petitioner’s twelve highest consecutive quarters was properly excluded in calculating his average final compensation. In reaching this decision, the Court construes the Retirement Act in keeping with its plain meaning and its consistent application by the Retirement Systems.
ORDER
For the foregoing reasons, it is hereby
ORDERED that the determination of the Retirement Systems excluding the lump sum payment of $10,950.44 for compensatory time which was worked outside of the Petitioner’s twelve highest consecutive quarters is hereby affirmed.
AND IT IS SO ORDERED.
________________________________
Carolyn C. Matthews
Administrative Law Judge
Columbia, South Carolina
September 2, 2005
Public employers have the option of paying overtime as it is earned or substituting compensatory time, which may be taken as leave or paid at a later date. 29 C.F.R. §§553.25; 553.26.
This decision is on appeal to the Court of Common Pleas for Richland County.
Using Petitioner’s final twelve quarters and adding forty-five days of unused annual leave to calculate his AFC produced a retirement basis equivalent to an annual salary of $52,925.76, even though Petitioner’s highest annual salary at retirement was $50,626.00.
Effective July 1, 2002, the Department of Natural Resources required employees to exhaust compensatory time before using annual leave. Employees are “encouraged” to use compensatory time earned before July 1, 2002, prior to taking annual leave. Nevertheless, Petitioner chose to “save” his 450.1 hours of compensatory time earned before January 1, 1999 while using 626 hours of annual leave during his final three years of employment.
The Retirement Systems allocated the Petitioner’s compensatory pay to the quarters leading up to January 1, 1999, his last accrual of compensatory time. This calculation did not increase Petitioner’s average final compensation for purposes of determining his retirement benefits.
|
