Opinion
No. C7-95-2512.
Filed June 11, 1996.
Appeal from the Minnesota Public Employees Retirement Association Office of Administrative Hearing No. 3-3600-9404-5.
Bruce P. Grostephan, Peterson, Engberg Peterson, (for relator).
Hubert H. Humphrey, III, Attorney General, Jon K. Murphy, Assistant Attorney General, (for respondent).
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1994).
UNPUBLISHED OPINION
Relator appeals the decision of the Board of Trustees of the Public Employees Retirement Association to reduce his monthly pension payments. The Board determined that payments for unused sick leave did not fall within the statutory definition of "salary" for the purposes of calculating PERA benefits. We affirm.
FACTS
This is an appeal of the administrative decision of the Public Employees Retirement Association's Board of Trustees (Board) reducing the monthly retirement benefit paid to relator Robert Larson. Relator served as the business agent and recording secre tary/treasurer for School Service Employees Union, Local 284 (Local 284), and retired on March 29, 1991. Relator had been a member of the Public Employees Retirement's Association (PERA) for nearly 28 years and at one time served on its Board of Trustees both as a trustee and as president.
In 1994, PERA discovered that during the last year of relator's employment he received payments for unused sick leave that were reported to PERA as salary. PERA determined that these payments should have been excluded from relator's salary because they represented lump sum payments for unused sick leave and were a form of severance payment, both specifically excluded from the statutory definition of salary. A hearing was held before an administrative law judge, who concluded:
(1) PERA had the authority to reduce relator's benefits;
(2) the sick leave payments in question were excluded from the statutory definition of salary in effect at the time;
(3) relator had not shown a basis for promissory estoppel to prevent the reduction of his benefits; and
(4) PERA should reduce relator's benefits to the correct amount and recover the overpayment that resulted from the inclusion of the unused sick leave. PERA informed relator of its decision and relator appealed to the PERA Board of Trustees. In September 1995, the parties appeared before the Board and presented their respective positions. On October 4, 1995, the Board adopted the ALJ's decision, with several amendments. Relator now appeals. We granted relator's petition for review by writ of certiorari on November 29, 1995.
DECISION
Relator filed a writ of certiorari with this court seeking review of the PERA Board's decision to reduce his pension. Review by certiorari is confined to questions affecting the jurisdiction of the board, the regularity of its proceedings, and, as to merits of the controversy, whether the order or determination in a particular case was arbitrary, oppressive, unreasonable, fraudulent, under an erroneous theory of law, or without any evidence to support it.
Dietz v. Dodge County , 487 N.W.2d 237, 239 (Minn. 1992). Where an administrative board has heard the views of opposing parties presented in the form of both oral and written testimony, has examined the record, and has made findings of fact, this court is to review the board's decision under the substantial evidence test. Application of Allers , 533 N.W.2d 646, 651 (Minn.App. 1995), review denied (Minn. Aug. 30, 1995). Substantial evidence is defined as
1. Such relevant evidence as a reasonable mind might accept as adequate to support a conclusion;
2. More than a scintilla of evidence;
3. More than some evidence;
4. More than any evidence; and
5. Evidence considered in its entirety.
Cable Communications Bd. v. Nor-west Cable Communications Partnership , 356 N.W.2d 658, 668 (Minn. 1984).
Deference is given to an agency decision, especially where the agency's expertise or special knowledge is involved. Id. However, this court is not bound by the agency's decision on questions of statutory interpretation. Arvig Tel. Co. v. Northwestern Bell Tel. Co. , 270 N.W.2d 111, 114 (Minn. 1978).
I.
PERA is a pension plan for public employees, administered by a board of trustees. Minn. Stat. § 353.03 (1994). However, certain private employees like relator are allowed to participate in PERA. Minn. Stat. § 353. 017 (1994). Such a situation presents the PERA Board with an atypical situation and one where, under its fiduciary duty to the members of the plan, the taxpayers of the state, and the State of Minnesota, the Board is "to be even more diligent in policing the salary reports of the limited number of private employees within its purview." Allers , 533 N.W.2d at 651-52.
PERA pension benefits are calculated based upon a formula utilizing age, years of service, and the average highest salary paid for any five successive years of allowable service. Minn. Stat. § 353.29 (1994). Under this formula, any increase in salary during the last year of employment will result in an increased pension. Minn. Stat. § 353.29, subd. 3 (1994). During the last year of his employment, relator received payments for accrued unused sick leave that were added to his regular paychecks and reported to PERA as wages by his employer, Local 284. Relator argues that these payments were allowed under the 1990 statutory definition of "salary" and that the 1991 amendment excluding periodic payments for unused sick leave infers that such payments were previously allowed. We disagree.
In 1990, when relator began cashing out his unused sick leave, the PERA statute provided that "[l]ump sum annual or lump sum sick leave payments" were not to be considered salary. Minn. Stat. § 353.01, subd. 10 (1989). Effective June 5, 1991, this section was amended, in part, to read, "[u]nused annual sick leave payments, in lump sum or periodic payments, are not considered salary." 1991 Minn. Laws ch. 341, § 3. PERA maintains that the 1991 amendment was merely a clarification of its long standing policy to exclude unused sick leave from the definition of salary and not a substantive change in the law. The ALJ found, and we agree, that the evidence shows a clear and consistent approach by PERA that payments for unused sick leave are excluded from salary in calculating pension benefits. Allen Eldridge, a manager of a benefits division at PERA, and Arlen Enstad, the PERA counselor with whom relator consulted prior to his retirement, both testified that payments for unused sick leave were not considered salary by PERA. In addition, the payroll reporting forms provided by PERA to Local 284 during 1990 and 1991 stated that "PERA DEDUCTIONS SHOULD NOT BE TAKEN FROM UNUSED VACATION, UNUSED SICK PAY OR ANY OTHER SEVERANCE PAY."
This case is like Allers , where this court held that "income reserve" payments based on accumulated unused sick leave did not constitute "salary" for the purposes of PERA deductions. Allers , 533 N.W.2d at 653. In that case, another official of the same union, Local 284, received periodic "income reserve" payments as part of his regular bi-weekly paychecks. Id. 648-49. This payment method was devised to raise the recipient's "highest and best five." Id. Because the "income reserve" payments had a direct causal relationship to the accumulated unused sick leave, this court held the payments constituted lump sum payments of unused sick leave and were excluded from the statutory definition of salary. Id. at 653 (emphasis added). In examining the nature of sick leave payments, we observed that [t]he concept of sick leave recognizes that an employee who misses work due to illness should not be penalized financially. Days missed due to sickness in a year are compensated through the use of sick leave, thus providing the employee with a steady income unimpaired by health interruptions. In this manner, used sick leave is rationally considered as salary.
Id. See also Michigan State Police Command Officers' Ass'n v. State, Dep't of Pub. Safety , 263 N.W.2d 47, 48 (Mich. 1978) ("salary" is paid for service, not sick leave). The court noted that any sick leave funds drawn when work is not interrupted due to illness is in excess of the employee's annual wage and not "salary" for the purposes of calculating PERA pension benefits. Id. at 653-54.
It is our view the statutory change simply made clear that the exclusion applied to unused sick leave. The pre-1991 wording referred to annual lump sum or lump sum payments. This means the legislature intended that PERA deductions were not to be taken from annual lump sum payments or similar but more frequent lump sum payments; otherwise, the legislature would not have used the word "or." A contrary construction would render the language following "or" meaningless. The legislature was guarding against relator's conduct in 1989.
Even if we were to decide that the payments received by relator were not specifically excluded as lump sum payments under the pre-1991 statutory language, we conclude the payments constitute severance pay, an item specifically excluded from the statutory definition of salary. Minn. Stat. § 353.01, subd. 10 (1989).
Pursuant to the language of the union resolution and according to relator's own testimony, relator was permitted to cash out his unused sick leave payments only if he was anticipating retirement and notified the union in writing within twelve months of his retirement date. Because these payments could only be paid if an employee anticipated retirement, they constitute "severance" pay. The payments are directly related to one's retirement package of severance benefits. Relator's cash out of unused sick leave in this instance was a form of concealed severance pay specifically excluded from the definition of salary.
Relator also argues that the PERA Board's decision to recover benefits from him based on Minn. Stat. §§ 353.27, subd. 7(b), (c) (1994), retroactively expands its jurisdiction. We disagree.
Minn. Stat. § 353.27, subd. 7b, (1994) mandates that the executive director of PERA has an affirmative duty to recover any overpaid benefit amounts made to a member. Prior to May 9, 1990, any erroneously taken deduction had to be refunded within three years or the contribution was deemed valid. Minn. Stat. § 353.27, subd. 7 (1988). This language was amended, effective May 9, 1990, to allow erroneously taken deductions to be refunded "at any time." 1990 Minn. Laws ch. 570, Art. 11, § 5.
Relator contends that pursuant to Minn. Stat. § 353.27, subd. 7 (1988), PERA had until sometime in 1993 to return any erroneously taken deductions or else they were deemed valid. According to relator, to apply the amendment removing the three year statute of limitations for recovery of erroneous contributions taken before May 9, 1990, violates Minn. Stat. § 645.31 and Minn. Stat. § 645.21. These sections provide that no laws shall be applied retroactively unless clearly and manifestly intended by the legislature, and that any amendments to an existing statute shall become effective only from the time of their first enactment. Minn. Stat. §§ 645.21, 645.31 (1994). PERA counters arguing that an amendment to a statute of limitations period enlarging the time period within which an action can be brought is not retroactive legislation.
A statute of limitations is a matter of remedy, not a matter of substantive right. Wschola v. Snyder , 478 N.W.2d 225, 226 (Minn.App. 1991), review denied (Minn. Feb. 2, 1992). Accordingly, the legislature has the power to expand a limitations period for a cause of action accrued but not yet time-barred. Id. Here, the amendment enlarging the statute of limitations period for recovery of erroneous contributions occurred before PERA's authority to recover those amounts had run under the old statute of limitations period. Thus, PERA's reliance on Minn. Stat. § 353.27, subd. 7(c) (1994), does not constitute retroactive application of the statute. See Minnesota Landmarks v. M.A. Mortenson Co. , 466 N.W.2d 413, 416 (Minn.App. 1991) (amendment applied because original claim not yet barred on effective date), review denied (Minn. May 10, 1991).
II.
Next, relator contends that the doctrine of promissory estoppel should apply on these facts to prevent the PERA Board from reducing his monthly pension benefits. We disagree.
A governmental agency may be estopped when justice requires, but estoppel is not loosely applied against the government. Brown v. Minnesota Dept. of Pub. Welfare , 368 N.W.2d 906, 910 (Minn. 1985). A party seeking to invoke equitable estoppel against a government agency bears a "heavy burden of proof." Id. The party asserting estoppel against a government agency must prove the following five elements: 1) that representations or inducements were made to claimant; 2) that there has been reasonable reliance on those representations or inducements by the claimant; 3) that the representations or inducements involve some element of fault or wrongful conduct by the government agency; 4) that the claimant will be harmed if estoppel is not allowed; and 5) the equities of the case outweigh any public interest frustrated by the estoppel. Id.
Here, the record supporting relator's argument on estoppel is weak. Absent relator's cryptic testimony, there is no evidence to support the claim PERA made any representation to relator that he could include unused sick leave in his PERA salary. Arlen Enstad, the PERA counselor with whom he met to discuss various retirement options, testified that unless sick leave were actually used by an employee, it could not be included as salary for the purposes of PERA. It seems unlikely that Enstad made any representations to relator that he could include unused sick leave in his salary. Next, if there were such a conversation, reliance by relator was unreasonable. The conversation between relator and Arlen Enstad occurred nearly a year and a half before the union resolution authorizing the cash out of unused sick leave. This fact renders claimed reliance by relator unreasonable. The documents used by PERA and Local 284 clearly made it known that unused sick leave was not to be considered salary. The reverse side of the payroll reporting forms completed by Local 284, forms that went to relator, said:
REMEMBER, PERA DEDUCTIONS SHOULD NOT BE TAKEN FROM UNUSED VACATION, UNUSED SICK PAY, OR ANY OTHER SEVERANCE PAY. A lump sum payment for unused vacation or sick leave is not considered salary. If, however, a member uses sick leave or vacation prior to termination; that is receives full payment for each day used and it appears on the payroll with these earnings, such salary is subject to PERA deductions and service credit. The effective date of termination is advanced.
Given his experience on the PERA Board, both as trustee and as president, relator knew or should have known that unused sick leave was not considered salary.
Relator made no showing of fault or wrongful conduct on the part of Enstad or PERA. Absent such a showing, relator's claim of promissory estoppel is defective. Id. ; Ridgewood Dev. Co. v. State , 294 N.W.2d 288, 292-93 (Minn. 1980) (where there is no wrongful governmental conduct, equitable estoppel does not apply). Further, because relator was not entitled to the benefit amount initially awarded him, he suffers no recognizable harm. See Department of Human Servs. v. Muriel Humphrey Residences , 436 N.W.2d 110, 118 (Minn.App. 1989), review denied (Minn. Apr. 26, 1989) (no legal harm is incurred where an individual is compelled to return payments that he was not entitled to in the first place). It is no detriment not to retain money that should never have been received. Id. (quoting Heckler v. Community Health Servs. , 467 U.S. 51, 61, 104 S.Ct. 2218, 2225 (1984)). Lastly, the equities in this case do not lie in favor of relator. PERA is not estopped from collecting erroneous overpayments that were paid to relator.
After reviewing the record, we conclude that substantial evidence exists to support the ALJ's findings of fact as adopted by the Board. Further, relator has failed to prove the elements required for promissory estoppel.
III.
Finally, relator argues that the Board's decision to reduce his monthly pension benefits constitutes an impairment of contract in violation of both the United States and Minnesota Constitutions. We disagree.
Under both the federal and state constitutions, it is unlawful for the state to pass any law impairing the obligation of contracts. U.S. Const. art. 1, § 10; Minn. Const. art. 1, § 11. Here, the payments received by relator constituted lump sum payments for unused sick leave and severance pay. Both are specifically excluded from the statutory definition of salary whether, one applies the pre-1991 statutory language or the amended language. Although relator may have the right to receive a pension, this right does not include the right to receive a pension based on erroneously reported salary.