Opinion
DOCKET NO. A-3244-10T3
07-09-2012
ANTHONY BARCKETT and ENGLEWOOD ON THE PALISADES CHARTER SCHOOL (EPCS), Plaintiffs-Appellants, v. NEW JERSEY DIVISION OF PENSION AND BENEFITS, TEACHERS' PENSION AND ANNUITY FUND, Defendant-Respondent.
Peter E. Mueller argued the cause for appellants (Harwood Lloyd, LLC, attorneys; Mr. Mueller, of counsel and on the brief; Michael B. Oropollo, on the brief). Kellie L. Kiefer-Pushko, Deputy Attorney General, argued the cause for respondent (Jeffrey S. Chiesa, Attorney General, attorney; Melissa Raksa, Assistant Attorney General, of counsel; Chris M. Tattory, Deputy Attorney General, and Ms. Kiefer-Pushko, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges A. A. Rodríguez, Sabatino, and Fasciale.
On appeal from the Board of Trustees of the Teachers' Pension and Annuity Fund, Agency Docket No. TPAF 1-10-079756.
Peter E. Mueller argued the cause for appellants (Harwood Lloyd, LLC, attorneys; Mr. Mueller, of counsel and on the brief; Michael B. Oropollo, on the brief).
Kellie L. Kiefer-Pushko, Deputy Attorney General, argued the cause for respondent (Jeffrey S. Chiesa, Attorney General, attorney; Melissa Raksa, Assistant Attorney General, of counsel; Chris M. Tattory, Deputy Attorney General, and Ms. Kiefer-Pushko, on the brief). PER CURIAM
Appellant Anthony Barckett, a retired public school employee, appeals a February 4, 2011 final agency decision of the Board of Trustees ("the Board") of the Teachers' Pension and Annuity Fund System ("TPAF") within the Division of Pensions and Benefits ("the Division"). In that decision, the agency adopted the post-hearing findings of an Administrative Law Judge ("ALJ"), who concluded that appellant had violated the State's pension laws and regulations by working as the director and business administrator of a private charter school while he was simultaneously receiving a TPAF retirement pension. The agency also required appellant to repay pension benefits he had improperly received since February 2000, and to make additional contributions into the pension system coextensive with his new employment.
In the body of the opinion we refer to Barckett as the sole appellant, unless otherwise indicated.
We affirm the agency's determination, as there is substantial credible evidence in the record to support the mutual and reasonable conclusion of the Board and the ALJ that appellant was serving as an employee of the charter school rather than as an independent contractor, and that he was thereby ineligible to collect his State pension at the same time. We also reject appellant's claim that the agency's decision is barred by principles of equitable estoppel and laches. However, we conclude that the recoupment period may be reduced by up to two years by virtue of a statutory provision, N.J.S.A. 18A:66-53.2(b), which allows certain school administrators to work for up to two years under one-year contracts without forfeiting their pension benefits. Consequently, we remand this matter to the agency to fairly consider a potential reduction of appellant's recoupment period in accordance with N.J.S.A. 18A:66-53.2(b), and, if a basis for relief under the statute is shown, to make a corresponding adjustment in the payback amount.
I.
A.
The record developed at the hearings before the ALJ presents the following pertinent facts.
Appellant was employed by the Garfield Board of Education as a teacher and an administrator for approximately thirty-four to thirty-five years until he retired in 1997. He is certified as a teacher in middle school science, mathematics, social studies, and English. He is also certified as a school principal, business administrator, superintendent, and purchasing agent.
Following his retirement from the Garfield School district in 1997, appellant began receiving retirement benefits from TPAF. On September 24, 1997, appellant wrote the Division and inquired whether taking a business administrator position at another school would affect his pension benefits. The Division responded to appellant two days later, informing him in a letter that his assumption of the title of the school's business administrator would require him to reenroll in TPAF as an employment condition, and that his "retirement allowance would be canceled for the duration of [his] employment." In light of the Division's response, appellant delayed his plans to return to work for almost two years. In the meantime, he continued to collect his pension.
On July 19, 1999, appellant began working full time at a New Jersey educational institution, co-appellant Englewood on the Palisades Charter School ("EPCS"), in the title of a "Director" at the school. He notified the Board of his new position at EPCS in a letter dated August 17, 1999. In that letter, appellant asked whether he could continue to receive pension benefits while he worked at the school. After not initially receiving a response, appellant sent a second copy of the letter to the TPAF Board Secretary on September 2, 1999.
A representative of the Division, Mindy Smith-Sopko, responded to appellant's letter on September 8, 1999. In her letter, Smith-Sopko informed appellant that:
Teachers employed by charter schools in New Jersey must be enrolled in the TPAF as a condition of employment unless they are collecting a pension from a different NJ administered retirement system such as the Public Employees' Retirement System or the Police and Firemen's Retirement System.The representative's letter continued with the following words of caution:
Teachers employed by charter schools who are collecting a retirement allowance from the TPAF must cancel their retirement allowances and be reenrolled into the retirement system. If a TPAF retiree works in a covered position and continues to collect a pension benefit, that benefit must be refunded to the retirement system. I have enclosed a fact sheet regarding employment after retirement for your information. The Division is also in the process of sending a reminder letter to the administrators of charter schools in NJ regarding eligibility for enrollment in the TPAF.
[Emphasis added.]
You may work as a consultant, but you must be careful to remain independent of an employee-employer relationship with the school. There have been cases where the Board of Trustees, after a review of an employment situation, has determined that a consultant is actually an employee subject to reenrollment.
[Emphasis added.]
After receiving this response from the Division to his inquiry, appellant resigned his full-time position as the Director of EPCS in a letter dated September 13, 1999, with an effective date of September 15, 1999. In his resignation letter, appellant requested that EPCS consider retaining him instead in a capacity denominated as a "consultant" "until such time a replacement can be found for the position of Director." Appellant also requested that EPCS compensate him $4000 per month, and that he work twenty-five to thirty hours per week. He further proposed other terms, including an acknowledgment that he would not be entitled to sick or vacation days.
Following appellant's resignation, the EPCS board hired appellant the very next day to serve as a consultant, effective September 16, 1999. The board agreed to all of appellant's proposed terms, including the $4000 monthly compensation. Although appellant took on this role in September 1999, he did not send a letter to the Division alerting it to his revised arrangement with EPCS. Nor did he ask the Division whether the new arrangement would pass muster under the applicable pension laws and regulations.
According to appellant's testimony, in his role as a consultant he exercised control over various aspects of his work for EPCS. He was not trained or directed regarding how to perform his job. He was not required to perform his functions on the school premises. He did not have to check in with anyone when he went to the school, even though others working there had to sign in. Appellant was permitted to work from home, where he had a computer that he used for EPCS business. EPCS provided appellant with a password to access the school computer, but he purchased the computer himself and he paid for the internet access.
Even though appellant assumed various administrative duties at EPCS, he contended that those duties were limited. He lacked the power to hire or fire employees at the school, although he did review applications by job-seekers and provided recommendations about such applicants to the EPCS board. Appellant testified that the number of days he typically went to the school premises varied, and that his hours were not monitored. He usually did not work Fridays, nor on Mondays, during the summer. He sometimes worked five days per week, and other days he worked three days per week. Appellant estimated that, on the whole, he worked for EPCS twenty to twenty-five hours per week.
While performing work at EPCS, appellant occasionally worked as a volunteer for other schools. He also consulted for other charter schools, but apparently was not paid for such consulting.
Appellant was paid by EPCS in biweekly sums that were reported on a 1099 tax form. Consequently, he paid a self-employment tax on his federal tax return. He continued, meanwhile, to collect his full TPAF pension.
In 2006, the Division performed an audit of EPCS, which led it to conclude that appellant was illegally collecting his pension while working as an employee at the charter school. The audit was performed by Michael Czyzyk, an external audit supervisor for the Division. Based on the audit results, the Division sent appellant a letter on August 10, 2006, informing him that his position at EPCS qualified as a TPAF-covered position requiring his re-enrollment in the system. The letter also informed appellant that he would be assessed retroactive pension contributions. The Division provided appellant with a chart listing the amount of pension benefits that he had received since October 1999, and the gross amount initially totaled $402,257.46.
The audit also concluded that two other retirees receiving State pensions were likewise improperly serving as employees at EPCS. The circumstances of those two other individuals are not part of this litigation.
The Division sent appellant a revised letter on August 16, 2006.
The Division originally had ordered appellant to pay retroactive pension contributions beginning from September 1, 1999, but the Division later changed that start date to February 1, 2000.
The Division's audit report memorializing the auditor's findings was issued on October 2, 2006. The audit report again stated that appellant had received a gross pension assessment of $402,257.46 for the period of October 1, 1999 through September 1, 2006. Thereafter, Czyzyk sent a letter to appellant's counsel with additional information explaining the basis for the audit.
B.
Appellant contested the audit findings and requested that the TPAF Board of Trustees review his objections. An initial hearing accordingly took place before the TPAF Board on April 5, 2007.
Following that initial hearing, the Board informed appellant on April 12, 2007 that it agreed with the auditor that he was not an independent contractor, but rather an employee of EPCS. In making its determination, the Board relied upon Internal Revenue Service ("IRS") Revenue Ruling 87-41, 1987-1 C.B. 296, which sets forth a twenty-factor test for determining whether an individual qualifies as an employee. Specifically, the Board relied on ten of the twenty enumerated IRS factors including: the integration of functions; services rendered personally; hiring, supervising, and paying assistants; a continuing relationship; set hours of work; doing work on the employer's premises; payments by hour, week, or month; making services available to the general public; the right to discharge; and the right to terminate.
The twenty factors are: (1) instructions; (2) training; (3) integration; (4) services rendered personally; (5) hiring, supervising, and paying assistants; (6) continuing relationship; (7) set hours of work; (8) full time required; (9) doing work on employer's premises; (10) order or sequence set; (11) oral or written reports; (12) payment by hour, week, month; (13) payment of business and/or traveling expenses; (14) furnishing of tools and materials; (15) significant investment; (16) realization of profit or loss; (17) working for more than one firm at a time; (18) making service available to general public; (19) right to discharge; and (20) right to terminate. Rev. Rul. 87-41, 1987-1 C.B. 296; see also Stevens v. Bd. of Trs. of Pub. Emps.' Ret. Sys. , 294 N.J. Super. 643, 653 n.1 (App. Div. 1996) ("Stevens I"), appeal on remand, 309 N.J. Super. 300 (App. Div. 1998) ("Stevens II").
Based upon its conclusion that appellant had become re-employed, the TPAF Board directed appellant's re-enrollment in the TPAF system, retroactive to February 2000. The Board also required "the repayment [by appellant] of retirement benefits received plus pension contributions which otherwise would have been paid."
On April 19, 2007, appellant requested emergent relief from the Board seeking a stay of its decision. The Board denied a stay, but approved appellant's request for a hearing in the Office of Administrative Law ("OAL"). In May 2007, the matter was referred to the OAL for a hearing before an ALJ.
After a non-evidential initial proceeding on May 24, 2007, the ALJ denied appellant's emergent motion to stay the Board's ruling. However, a few days later, on June 1, 2007, this court granted appellant's emergent stay application, pending the outcome of the ALJ hearing.
The ALJ thereafter presided over evidential hearings on two days in May 2010 and June 2010. Appellant testified in his own behalf. Additionally, appellant presented the testimony of Shirley Burns, the principal of EPCS, and Ted A. Carnevale, a certified public accountant. The Division presented the opposing testimony of Czyzyk, its external audit unit supervisor.
After considering the proofs, the ALJ issued a detailed thirty-seven-page decision on January 6, 2011 sustaining the Division's position. Much of the ALJ's decision focused upon an application of the factors in IRS Revenue Ruling 87-41 for assessing whether appellant had, in fact, an employee-employer relationship with EPCS, despite his contention that he was only serving there as a consultant and an independent contractor.
The ALJ carefully evaluated all ten factors under Revenue Ruling 87-41 that had been identified by the Division's auditor as indicative of employment. Of those factors, the ALJ found the following supported a finding of an employer-employee relationship.
First, the ALJ addressed the "integration" factor, and determined that the services that appellant provided to EPCS were indeed integrated into the school's business operations. Specifically, the ALJ noted that: (1) appellant wrote in a September 27, 1999 letter that he would "oversee the educational and managerial aspects of the EPCS"; (2) EPCS passed a resolution adopting the terms of the September 27, 1999 letter; (3) the EPCS board president, Paul Raynault, wrote a letter on September 15, 2006 describing appellant's various functions; (4) the EPCS organizational chart listed appellant at the top of the chart; (5) appellant and the EPCS principal had confirmed the information contained in these documents; and (6) appellant's own CPA expert, Carnevale, had acknowledged that appellant was integrated into certain operations of EPCS.
Carnevale testified that appellant was only integrated into the school's "administrative and fiscal management directives," but not into its "educational" operations.
Second, the ALJ analyzed the "hiring, supervising, and paying assistants" factor. He determined that this factor supported a finding of an employer-employee relationship. The ALJ noted that, although appellant did not pay the staff at EPCS, he was in charge of hiring and supervising them. The ALJ also pointed out that appellant's placement on the organizational chart supported this finding. Additionally, the ALJ noted that appellant had access to a secretary that he did not use, but one that he, nevertheless, could control.
Indeed, while not specifically quoted by the ALJ, appellant wrote in his September 27, 1999 letter to the EPCS Board, that "I will oversee and be involved with the . . . interviewing, recommendation and hiring of new staff members."
The organizational chart did not, however, delineate appellant's responsibilities.
Third, the ALJ analyzed the "continuing relationship" factor, and found that it also was consistent with an employer-employee relationship. The ALJ based this conclusion on a finding that appellant had "served as the business administrator or director for EPCS without interruption since at least 1999[.]"
Fourth, the ALJ analyzed the "doing work on employer's premises" factor, and determined that it supported a finding of an employer-employee relationship. Even though EPCS did not require appellant to work on its premises, the ALJ noted that appellant did work there the majority of the time. Moreover, when appellant was considered an employee of EPCS before he resigned in September 1999 to become a "consultant," EPCS required him to work there. Because appellant continued to perform his work on the premises after becoming a consultant, that actual practice indicated to the ALJ that appellant was indeed required to work there.
Fifth, the ALJ considered the "payment by hour, week, [or] month" factor. He concluded that this factor "strongly" suggested the existence of an employer-employee relationship. The ALJ noted that EPCS paid appellant on a biweekly basis, and no evidence suggested that he was paid in that manner because it simply was convenient. Additionally, appellant had received annual salary increases.
Sixth, the ALJ analyzed the "making service available to the general public" factor. The ALJ determined that this factor also supported a finding of an employer-employee relationship. In particular, the evidence showed that appellant did not make "his services available to the general public on a regular and consistent basis." The record indicated that appellant occasionally assisted other charter schools, but he had not done so on a consistent basis.
Seventh, the ALJ analyzed the "right to discharge" factor, likewise finding that this factor reflected an employer-employee relationship. In this regard, the ALJ noted that EPCS could terminate appellant with only thirty days notice, and thus the school expressed control over appellant through the prospect of dismissal.
Eighth, and finally, the ALJ found that the "right to terminate" factor also supported a finding of an employer-employee relationship. The ALJ observed that appellant himself had a right to terminate the contract with thirty days notice.
The ALJ also reviewed two factors that the Division's auditor found supportive of a finding of an employer-employee relationship, but which the ALJ concluded were instead indicative of an independent contractor relationship.
First, the ALJ analyzed the "services rendered personally" factor, and found that this factor did not support a finding of an employer-employee relationship. The ALJ noted that appellant did, in fact, perform the work personally, but that EPCS did not require him to perform the work himself, conceivably allowing him to delegate certain tasks to others. The ALJ noted Raynault's September 15, 2006 letter stating that appellant "was given a very broad mandate[.]" The ALJ also pointed out that EPCS was "not interested in the methods [appellant] use[d] to accomplish the work[.]"
Then, the ALJ reviewed the "set hours of work" factor and found that this factor did not support an employer-employee relationship. As the ALJ observed, the EPCS principal had testified at the hearing that appellant did not have set hours of employment. This finding was also consistent with Raynault's September 15, 2006 correspondence.
In comprehensive fashion, the ALJ then turned to the ten other factors in the IRS Revenue Ruling that the Board had not relied upon in rendering its decision. Here again, the ALJ found some factors consistent with an employer-employee relationship, and some that were not. Specifically, the ALJ found that the following additional factors supported a finding of an employer-employee relationship.
The ALJ reviewed the "full time required" factor and he found that this factor supported a finding of an employer-employee relationship. The ALJ noted that appellant was free to work with other entities while working for EPCS, but that, in actual practice, he worked "practically full-time for EPCS." Additionally, appellant had not performed any significant work for any other entity.
The ALJ next determined that the "furnishing of tools and materials" factor supported the finding of an employer-employee relationship. The ALJ noted that EPCS provided appellant with an office (which the ALJ treated, in effect, as a form of "tools and materials"), and that appellant primarily worked on the school premises.
Aside from the six to eight weeks when appellant worked from home due to an injury, appellant's testimony supports this finding. However, appellant noted that he sometimes worked more hours at home than at school, but appellant only briefly mentioned this point without elaboration in his testimony.
The "significant investment" factor also supported the ALJ's finding of an employer-employee relationship. The ALJ noted that appellant did not invest funds to secure an office, and that EPCS provided him with one at the school premises. Thus, appellant had not made a significant investment.
Next, the ALJ reviewed the "realization of profit or loss" factor, concluding that it also reflected the existence of an employer-employee relationship. In this regard, the ALJ noted that appellant would not suffer a loss from performing his services. Additionally, appellant did not personally employ any staff, and thus he did not incur any potential liabilities such as salary.
Finally, the ALJ reviewed the "working for more than one firm at a time" factor and found that it supported a finding of an employer-employee relationship. The ALJ noted that appellant did not perform more than de minimis services for any other entity. The ALJ rejected appellant's argument that he had the ability to work for other entities but simply chose not to.
The ALJ also reviewed several factors that the Division had not analyzed, and which he found did not support a finding of an employer-employee relationship.
The ALJ found that the "instruction" factor did not support a finding of an employer-employee relationship. Notably, Raynault wrote in his September 15, 2006 letter that EPCS was too inexperienced to provide appellant with such instruction.
Similar to the "instruction" factor, the ALJ found that the "training" factor did not support a finding of an employer-employee relationship. For example, EPCS did not require appellant to work with a more experienced person. Additionally, the EPCS principal testified that EPCS was not capable of training appellant, and that appellant was not required to attend training.
The ALJ then addressed the "order or sequence set" factor, concluding that this factor did not support a finding of an employer-employee relationship. The ALJ noted that EPCS did not require appellant to perform his job in any particular order, and that the only requirements were those set by the State regarding how to file the reports.
As with respect to the "oral or written reports" factor, the ALJ determined that it did not support a finding of an employer-employee relationship. The ALJ noted that appellant was only required to file reports with the State, and that he did not have to file these reports with EPCS.
Next, the ALJ reviewed the "payment of business and/or traveling expenses" factor. He found that this factor did not support a finding of an employer-employee relationship. According to the ALJ, there was no evidence that EPCS paid appellant's business expenses, such as for his computer or internet access. Additionally, appellant did not incur any traveling expenses.
In presenting his analysis of these twenty IRS factors, the ALJ recognized that the factors "are designed only as a guide and special scrutiny is required in applying them." The ALJ noted that the Board had found that ten of the twenty factors supported a finding of an employer-employee relationship, and that he agreed with the Board's assessment as to eight of those ten positive factors. Additionally, the ALJ had identified five additional factors that supported a finding of an employer- employee relationship, even though the Board had not mentioned them. Aside from those additional five positive factors, the ALJ concluded that the eight factors that he and the Board agreed upon were themselves sufficient to support a finding of an employer-employee relationship.
The ALJ rejected appellant's other arguments, including equitable estoppel and laches.
Based upon his conclusion that appellant was, in fact, an employee of EPCS, the ALJ ordered appellant to repay the retirement benefits that he had improperly received since February 2000. He also directed appellant to re-enroll in the TPAF.
C.
Appellant filed exceptions with the Division contesting the ALJ's decision. On February 4, 2011, the Board informed appellant by letter that it had adopted the ALJ's decision at its meeting of February 3, 2011. That letter further indicated that the Board had terminated this court's previously-issued stay.
Appellant then filed the present appeal. In the meantime, the Division notified appellant that his health benefits would be terminated or waived, effective July 1, 2011. That notification prompted appellant to seek an emergent stay of the cessation of health benefits, which we granted in June 2011. In July 2011, we modified our stay "so as to clarify that the stay . . . was limited to precluding the termination of appellant's health benefits pending appeal."
D.
On appeal, appellant now contends that (1) the ALJ and the Division incorrectly found that he was an employee of EPCS; (2) the ALJ and the Division failed to apply a pertinent statutory exception, i.e., N.J.S.A. 18A:66-53.2(b), that could abate his liability; (3) the Division's actions were barred by principles of equitable estoppel and laches; (4) the Division erred as a matter of law; (5) the Division violated the Open Public Meetings Act; and (6) the ALJ erred when he did not recuse himself.
For the reasons we detail in Part II, infra, we reject these contentions, except for appellant's claim that the Division failed to give proper consideration to the potential applicability of N.J.S.A. 18A:66-53.2(b).
II.
The TPAF statutes include several provisions that are relevant to this case. Pursuant to N.J.S.A. 18A:66-4, among other restrictions, "[t]he membership of the retirement system shall consist of . . . any person becoming a teacher on or after January 1, 1956[.]" Notably, N.J.S.A. 18A:66-2(p) defines a "teacher" to include the title of "director."
Furthermore, N.J.S.A. 18A:66-53.2 provides:
[I]f a former member of the retirement system who has been granted a retirement allowance for any cause other than disability, becomes employed again in a position which makes him eligible to be a member of the retirement system, his retirement allowance and the right to any death benefit as a result of his former membership, shall be canceled until he again retires.Additionally, an associated regulation, N.J.A.C. 17-3:2.1(a), states:
[Emphasis added.]
Any person appointed by the State, local board of education or charter school to a position listed in the definition of "teacher" found at N.J.S.A. 18A:66-2(p) or as a regular, full-time or part-time employee in a position that meets the following conditions shall be required to become a member of the Fund effective as of the date of their employment:
1. The position requires a valid certificate issued by the State Board of Examiners, pursuant to N.J.S.A. 18A:6-34 et seq. and N.J.A.C. 6A:9, and the person employed holds this valid certificate;
2. The position is covered by Social Security; and
3. Prior to November 2, 2008, the salary for the position is $500.00 or more within a year.
[Emphasis added.]
In applying these provisions, we are mindful of the general principle that "pension statues 'should be liberally construed and administered in favor of the persons intended to be benefited.'" Francois v. Bd. of Trs., Pub. Emps.' Ret. Sys., 415 N.J. Super. 335, 349 (2010) (quoting Klumb v. Bd. of Educ. of the Manalapan-Englishtown Reg'l High Sch. Dist., 199 N.J. 14, 34 (2009)). Nevertheless, "'an employee has only such rights and benefits as are based upon and within the scope of the provisions of the statute.'" Ibid. (quoting Casale v. Pension Comm'n of the Emps.' Ret. Sys. of Newark, 78 N.J. Super. 38, 40 (Law Div. 1963)). Accordingly, courts must construe pension statues "so as to preserve the fiscal integrity of the pension funds." DiMaria v. Bd. of Trs. of Pub. Emps.' Ret. Sys., 225 N.J. Super. 341, 354 (App. Div.), certif. denied, 113 N.J. 638 (1988). "Moreover, while a person 'eligible for benefits' is entitled to a liberal interpretation of the pension statute, 'eligibility [itself] is not to be liberally permitted.'" Francois, supra, 415 N.J. Super. at 350 (alteration in original) (quoting Krayniak v. Bd. of Trs., Pub. Emps.' Ret. Sys., 412 N.J. Super. 232, 242 (App. Div. 2010)).
We have previously approved the use of the IRS's twenty-factor test under Revenue Ruling 87-41 as a guide "to determine whether a public sector employer had sufficient 'control' over a person [] so that the person was an employee whose service and salary was creditable in PERS[.]" Id. at 350-51 (discussing this court's approval of the test); see also Hemsey v. Bd. of Trs., Police & Firemen's Ret. Sys., 393 N.J. Super. 524, 542 (App. Div. 2007) (approving the use of the twenty-factor test to determine whether an individual was an employee or an independent contractor), overruled in part on other grounds, 198 N.J. 215 (2009); Stevens II, supra, 309 N.J. Super. at 303-04 (endorsing PERS's use of the twenty-factor test); Stevens I, supra, 294 N.J. Super. at 652-53 n.1 (discussing the twenty-factor test).
Here, the ALJ and the Board reasonably utilized the IRS factors to determine whether appellant was an employee or an independent contractor. Appellant acknowledges that the factors in the Revenue Ruling are appropriate for consideration. However, he contends that the ALJ and the Board misapplied those factors. He also contends that the ALJ's analysis is flawed, because it makes certain material findings about his work at EPCS that were not supported by the record. Appellant further argues that the ALJ gave short shrift to the opinions of his CPA expert, Carnevale. We disagree.
Appellant complains that the agency also considered factors in a document described as "Fact Sheet #28." We discern no prejudice to appellant in that regard, as numerous factors contained in Fact Sheet #28 are identical to those in IRS Revenue Ruling 87-41, and several of the remaining factors in the Fact Sheet embrace factors that are similar to those in the Revenue Ruling.
Our standard of review of the agency's final decision, which relied upon the ALJ's detailed analysis, is limited. "Three channels of inquiry inform the appellate review function." In re Herrmann, 192 N.J. 19, 28 (2007). These three inquiries entail:
(1) whether the agency's action violates express or implied legislative policies, that is, did the agency follow the law; (2) whether the record contains substantial evidence to support the findings on which the agency based its action; and (3) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.When the decision of the agency satisfies these criteria, the "court owes substantial deference to the agency's expertise and superior knowledge of a particular field." Ibid. "However, an appellate court is not bound by an agency's determination of a purely legal issue." Francois, supra, 415 N.J. Super. at 348.
[Ibid. (quoting Mazza v. Bd. of Trs., Police & Firemen's Ret. Sys., 143 N.J. 22, 25 (1995)).]
Viewed through this prism of deference, we sustain the agency's pivotal finding that appellant has been functioning as an employee of EPCS and not as a mere consultant or independent contractor. Although, as the ALJ's meticulous analysis noted, some of the particular IRS factors are either inapplicable or weigh in favor of appellant's position, the totality of the factors, on balance, were reasonably found by the ALJ and the Board to support the finding of employment status.
The record as a whole reflects that appellant has played a key role in the day-to-day operation of this charter school. He has not been a fringe participant in the school's management and supervision. Although he performs a limited amount of work off-site and does not typically work five days each week, appellant regularly devotes a considerable amount of his time and attention to the school's affairs, without any comparable gainful endeavors at or for other schools.
The change in nomenclature of appellant's title from "director" to "consultant" shortly after he began working for EPCS in the fall of 1999 and after he received the Division's cautionary letter, does not suffice to mask the employee-like functions that appellant actually performs. The ALJ concluded, after considering the testimony, that appellant's circumstances met thirteen of the twenty IRS factors indicative of an employer-employee relationship. Even if, for the sake of argument, reasonable minds might differ about some of those particularized findings, the ALJ's analysis, on the whole, was sound and reasonably adopted by the Board.
In sum, there is substantial credible evidence in the administrative record to support the agency's finding of actual employment. The decision is neither arbitrary nor capricious. The applicable pension statutes and regulations clearly prohibit appellant from working as an employee of EPCS while simultaneously collecting his TPAF retirement pension. We thus affirm the agency's final determinations, substantially for the cogent reasons expressed by ALJ Barry E. Moscowitz in his written decision of January 6, 2011.
Neither party has addressed the 2010 amendment to N.J.S.A. 18A:66-4(b)(4) that establishes an "hours per week worked" requirement for pension eligibility. That amendment is apparently not applicable here because it was not made effective until 2010, after the events giving rise to this appeal.
III.
We further reject appellant's claim that the agency's adverse determination is precluded by equitable principles of laches and estoppel.
Laches arises from "'the neglect[] for an unreasonable and unexplained length of time . . . to do what in law should have been done.'" Lavin v. Bd. of Educ. of Hackensack, 90 N.J. 145, 151 (1982) (quoting Atlantic City v. Civil Serv. Comm'n, 3 N.J. Super. 57, 60 (App. Div. 1949)). The doctrine bars relief when the delaying party had ample opportunity to bring a claim, and the party invoking the doctrine was acting in good faith in believing that the delaying party had given up on its claim. Knorr v. Smeal, 178 N.J. 169, 181 (2003); Lavin, supra, 90 N.J. at 152.
When determining whether the doctrine of laches should be invoked, the court considers: (1) "the length of the delay," (2) "the reasons for the delay," and (3) how the circumstances of the parties have changed over the course of the delay. Knorr, supra, 178 N.J. at 181. The period of time during which laches can be raised as an equitable defense is flexible, not fixed. Lavin, supra, 90 N.J. at 151.
The related concept of equitable estoppel involves similar considerations. In order to establish an equitable estoppel claim, "the claiming party must show that the alleged conduct was done, or representation was made, intentionally or under such circumstances that it was both natural and probable that it would induce action." Miller v. Miller, 97 N.J. 154, 163 (1984). Additionally, the party asserting estoppel must rely on the conduct, "'and the relying party must act so as to change his or her position to his or her detriment.'" Boritz v. N.J Mfrs. Ins. Co., 406 N.J. Super. 640, 647 (App. Div. 2009) (quoting Miller, supra, 97 N.J. at 163).
It is well-settled that the equitable estoppel doctrine is "'rarely invoked against a governmental entity.'" Middletown Twp. Policemen's Benevolent Ass'n Local No. 124 v. Twp. of Middletown, 162 N.J. 361, 367 (2000) (quoting Wood v. Borough of Wildwood Crest, 319 N.J. Super. 650, 656 (App. Div. 1999)). However, it may be invoked against a governmental entity "where interests of justice, morality and common fairness clearly dictate that course." Gruber v. Mayor of Raritan, 39 N.J. 1, 13 (1962); see also Twp. of Neptune v. N.J. Dep't of Envtl. Prot., 425 N.J. Super. 422, 438 (App. Div. 2012) (rejecting an appellant's equitable estoppel claim against the State, even though the appellant was likewise a governmental entity).
Appellant maintains that he is entitled to equitable relief under these principles because he allegedly relied on the Division's correspondence to him in September 1999, which he interpreted as authorizing him to serve as a consultant for EPCS without forfeiting his continued stream of TPAF pension benefits. However, appellant conveniently downplays the cautionary language within the Division's correspondence that clearly pointed out the pitfalls involved.
As we have already noted, the Division's September 8, 1999 letter explicitly informed appellant that he "may work as a consultant, but [he] must be careful to remain independent of an employee-employer relationship with the school. There have been cases where the Board of Trustees, after a review of an employment situation, has determined that a consultant is actually an employee subject to reenrollment." The Division thus fairly informed appellant that he could attempt to work as a consultant, but also explicitly warned him of the adverse consequences if he was ultimately determined to be acting as an employee.
Appellant could have sought further guidance or an updated assessment from the Division after his functions at EPCS were redefined by agreement in September 1999. Instead, appellant took a risk, by his silence, that his activities at EPCS would ultimately pass muster. Unfortunately, assuming that risk turned out to be imprudent. It is not the fault of the agency, however, that appellant finds himself in his current predicament resulting from the Division's job audit.
Appellant maintains that the Division was aware that he was going to work only as an independent contractor for several reasons. First, as part of his responsibilities of EPCS, he submitted a list to the Division containing all individuals at EPCS who were members of the pension, and he did not include himself on that list. Second, unlike "employees" who could access the Division's pension website without a password, he was required to use a password.
These arguments are unconvincing. The Division cannot reasonably be expected to be on notice of appellant's job status based on his signature accompanying a routine list of EPCS pension participants. Furthermore, the mere fact that appellant was required to use a password to access the pension website did not put the Division on notice of what his actual duties at EPCS were.
The cases cited by appellant in support of his laches and equitable estoppel arguments are unavailing. In Mastro v. Bd. of Trs., Pub. Emps.' Ret. Sys., 2 66 N.J. Super. 445 (App. Div. 1993) and Keenan v. Bd. of Trs., Police & Firemen's Ret. Sys., 393 N.J. Super. 524 (App. Div. 2007), overruled in part on other grounds, 198 N.J. 215 (2009), the appellants relied on incorrect information provided by the Division concerning pension eligibility. Those cases are both distinguishable from the present case because, here, the Division did not provide appellant with erroneous information. In Indursky v. Bd. of Trs. of Pub. Emps.' Ret. Sys., 137 N.J. Super. 335 (App. Div. 1975), the Division waited six years to issue a decision regarding a pension matter, after informing the appellant that a decision was forthcoming. Id. at 343-44. Indursky is distinguishable from this case because appellant here was not waiting for a decision from the Division. Instead, he held back and did not request a decision, perhaps hoping that the Division would not conduct an audit.
Defendant's laches claim fails for an additional reason because the Division pursued recoupment from him within the applicable ten-year statute of limitations that is generally applicable to claims brought by the State or its agencies, unless a shorter limitations statute pertains. See N.J.S.A. 2A:14-1.2a; see also N.J. Div. of Taxation v. Selective Ins. Co. of Am., 399 N.J. Super. 315, 323-28 (App. Div. 2008) (applying N.J.S.A. 2A:14-1.2a). Here, the starting month of the recoupment period, February 2000, is well within ten years of the Division's commencement of administrative steps against appellant in 2006 seeking to terminate his pension and to have him repay his improperly-received pension benefits. As the
Supreme Court very recently held in Fox v. Millman, ___ N.J. ___, ___ (2012) (slip op. at 26-32), the equitable doctrine of laches cannot be used to bar an action that was brought, as here, within the time constraints of the applicable statute of limitations.
For these numerous reasons, we affirm the agency's rejection of appellant's invocation of the principles of laches and equitable estoppel.
IV.
We do part company with the agency on one aspect of its decision that requires appellant to reimburse it for pension benefits and imputed pension contributions for the entire period commencing February 1, 2000. Specifically, the record on appeal suggests that appellant may be fairly entitled to up to a two-year reduction of that amount through the application of a special statutory exemption, N.J.S.A. 18A:66-53.2(b).
In particular, N.J.S.A. 18A:66-53.2(b) exempts certain former members of the retirement system from having to reenroll in TPAF, provided that they are employed under one-year contracts that do not exceed two years total. Specifically, the exemption states:
The cancellation, reenrollment, and additional retirement allowance provisions of subsection a. of this section shall not apply to a former member of the retirement system who is a certificated superintendent or a certificated administrator and who, after having been granted a retirement allowance, becomes employed by the State Department of Education in a position of critical need as determined by the State Commissioner of Education, or becomes employed by a board of education as a certificated superintendent or a certificated administrator on a contractualThis exemption potentially applies to appellant's circumstances. Appellant contends that, if the agency's analysis of his functions at EPCS is correct, he was working in a position as a "certificated administrator" there. He further maintains that, if he had known for certain that the Division would treat his consulting arrangement with EPCS as a form of employment, he could have sought to restructure his arrangement to take advantage of the exception within N.J.S.A. 18A:66-53.2(b) by entering into two successive one-year employment contracts.
basis for a term of not more than one year; except that the cancellation, reenrollment, and additional retirement allowance provisions shall apply if the former member becomes employed within 120 days of retirement with the employer from which the member retired. Nothing herein shall preclude a former member so reemployed with a board of education from renewing a contract for one additional year, provided that the total period of employment with any individual board of education does not exceed a two-year period.
[Emphasis added.]
We note the agency has not adopted regulations explaining how a pension recipient may pursue an exemption under N.J.S.A. 18A:66-53.2(b), and, in particular, how a recipient would know whether or not he or she is working in a position of "critical need" as determined by the Commissioner of Education. Cf. N.J.A.C. 17:2-2.3(a)(11) (regarding PERS retirees).
This appears to be a reasonable contention, one which the ALJ's decision did not specifically address and one to which the agency did not give fair and full consideration. Although we reject appellant's speculative contention that he would have identified other potential school employers and negotiated with them a string of additional one-year contracts from 1999 to the present, appellant has advanced a tenable argument that he is entitled, at the very least, to a two-year reduction of the period of recoupment.
We also are mindful of the very substantial amount of recoupment that has been ordered by the agency, and the fact that such a two-year abatement would slightly ameliorate what appellant contends are the unjustly-harsh consequences of the agency's final decision. To be sure, appellant's own improvident decision-making is mainly responsible for those harsh consequences. Nevertheless, the application of N.J.S.A. 18A:66-53.2(b) might serve to mitigate the full impact of the recoupment remedy without diluting the agency's legitimate enforcement interests. We therefore remand these discrete issues to the agency for plenary consideration, and for potential modification of the recoupment sum.
Our analysis makes it unnecessary to decide whether appellant's position at EPCS was one of "critical need," an issue that is not well developed in the briefs. The agency shall formally consider this alternative basis for an exemption under N.J.S.A. 18A:66-53.2(b) if appellant's role at EPCS is determined on remand not to satisfy the statutory exemption for "administrators." The remand proceedings should also consider whether appellant's position at EPCS, a charter school, should be fairly included within the statutory meaning of "being employed by a board of education."
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V.
We have considered the balance of appellant's arguments, including, among other things, his contentions that the agency improperly relied upon internal memoranda before referring this matter to the OAL; that the agency violated the Open Public Meetings Act, N.J.S.A. 10:4-6 to -21 by conducting a closed executive session; and that the ALJ was obligated to recuse himself at the merits hearing because he had denied appellant's pre-hearing motion for a stay. These contentions all lack sufficient merit to be addressed in a written opinion. R. 2:11-3(e)(1)(E).
The stay previously issued by this court is dissolved, effective thirty days from this opinion, unless a timely petition for certification is filed, in which case the stay shall remain in effect until the Supreme Court directs otherwise.
Affirmed in part, and remanded in part. We do not retain jurisdiction.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION