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Cypen & Cypen
NEWSLETTER
for
SEPTEMBER 15, 2005

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. CORRECTION ON ORLANDO PENSION REVOCATION:

Relying upon a piece from WESH.com, we recently reported that Orlando’s Police Pension Board had revoked lifetime benefits of two former Orlando Police Department retirees (see C&C Newsletter for August 25, 2005, Item 3). Well, WESH.com apparently was wrong -- and, thus, so were we. Although the one who admitted stealing more than $10,000 from Crimeline did forfeit his pension, the other, a former s.e.x. crimes detective serving 26 years for long-term s.e.x.u.a.l abuse of a 14-year-old girl, has not yet had a hearing on forfeiture of his pension. Sorry for perpetuating misinformation.

2. PROFESSOR’S SUIT CLAIMS CITY ENCOURAGES TICKETS TO ENHANCE POLICE PENSION FUND!:

In what may be the most absurd lawsuit ever filed, a University of South Florida Associate Professor has filed a federal lawsuit against the City of Tampa, alleging that it encourages police officers “maliciously” to prosecute drivers...to augment the police pension fund. According to the St. Petersburg Times, Barbara Orban received a $100 traffic ticket, which was eventually dismissed. Supposedly at the time, a rookie Tampa police officer told Orban that he had to cite her because of agency policy. Apparently, this remark got the academician thinking, and she came up with the following “logical” conclusion. People in most Florida cities, including Tampa, pay a tax on .85% on insurance premiums. She is no doubt referring to the .85% state-authorized excise tax on casualty insurance premiums, which, of course, is not paid by the “people.” In any event, she says this money represents the state’s only contribution to local police pension funds. So, as police officers write more tickets, individual car insurance premiums rise, increasing the tax dollars that flow into police pensions. Once pension needs are met, cities have discretion over how to spend extra money, as long as it goes toward extra police benefits. In Tampa, when the state gives more than what the pension fund needs, the extra money reduces what employees and the city must contribute. So, in Orban’s view, the more tickets an officer writes, the less the officer has to pay toward the pension fund. No wonder U.S. District Judge Steven Merryday recently dismissed the complaint, without prejudice. In making his ruling, the judge indicated skepticism that Orban could prove her case using “malicious prosecution” as a ground. To meet federal jurisdictional requirements, Orban has to prove that she was unreasonably stopped, detained and seized without probable cause -- which could be difficult because she was the one who called the police to come to the scene of the accident in which she had rearended another car. “We need a constitutional detention, ...a constitutional seizure, and I don’t see it anywhere,” said Judge Merryday. Anything else we have to say would be unnecessarily cruel and unkind.

3. FIREFIGHTERS/PARAMEDICS NOT ENGAGED IN FIRE PROTECTION FOR FLSA OVERTIME PAY PURPOSES

The Fair Labor Standards Act of 1938 provides for payment of premium overtime compensation at one and one-half times the regular rate when an employee works more than forty hours in a seven-day week. There is an exemption under which an employer must compensate fire protection employees with payment of premium overtime payment only after 204 hours of work within a twenty-seven-day period. Employees of the City of Los Angeles who perform as “dual function” or “cross-trained” firefighters/paramedics sued the City because they work a rotating schedule that results in nine scheduled twenty-four-hour shifts every twenty-seven-days, for a total of 216 hours per work week, but were not paid overtime. During certain periods, the employees were assigned to work as paramedics on “paramedic ambulances,” at which time they were responsible for providing medical care, transporting patients to hospitals, maintaining ambulances and completing related paperwork. Dual function and single function paramedics assigned to paramedic ambulances perform the same job -- that is, they provide medical care and support assistance. Paramedic ambulances are not designed to provide fire protection services. They do not carry water, hoses, pumps, ladders or suppression breathing equipment. Paramedic ambulances are rarely dispatched to fire scenes, so such dispatches make up a very small portion of the employees’ work. The City relied upon FLSA’s exemption to pay the employees as employees in fire protection activities. The District Court concluded that the employees did not qualify as employees in fire protection activities because (1) they do not have the responsibility to engage in fire prevention, control or extinguishment; (2) they are not regularly dispatched to fire scenes; (3) their nonexempt work is not limited to less than 20% of their total work hours; and (4) they do not have responsibility to engage in fire suppression. The trial court concluded that the employees were entitled to liquidated damages because the City did not act reasonably or in good faith. On appeal, the judgment was affirmed: the City did not meet its burden of proving that the employees qualify as employees engaged in fire protection, and thus the FLSA exemption therefor does not apply. Cleveland v. City of Los Angeles, Case No. 03-55505 (U.S. 9th Cir., August 22, 2005).

4. DOES YOUR 401(k) ACCOUNT WORK AS WELL AS A TRADITIONAL PENSION PLAN?:

An article in insideindianabusiness.com (where do we find these things?) concludes that traditional employer-funded pension plans outperformed worker-funded 401(k) plans during the 2000-2002 bear market. While both types of plans lost money during the 3-year bear market, 401(k) plans fared worse by an average of 3.86% a year compared with professionally-managed pension plans. Although 401(k) plans outperformed pension plans during the 3 years preceding the bear market, pension plans still averaged better returns than 401(k) accounts over a 12-year period ending in 2002: 7.42% annually vs. 6.86%. Over a period of many years, the 50 basis point-plus spread can make a big difference. Individuals tend not to have an investment strategy, sufficiently diversify or rebalance their assets. The consequences of not rebalancing periodically became apparent in the wake of the boom market years of 1995-1999. Because workers typically did not rebalance, the stock portion of their portfolios grew disproportionately large. By 1999, stocks made up 72% of 401(k) account values, while defined-benefit pension plans held only 59% in equities. Thus, when the stock market tumbled from 2000 to 2002, stock-heavy 401(k) accounts suffered steeper losses.


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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.


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