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December, 1997

Stephen H. Cypen, Esq., Editor

FLORIDA CIVIL RIGHTS ACT CLAIMS ANOTHER "VICTIM": We previously discussed the procedural differences between the federal Age Discrimination in Employment Act of 1967 and the Florida Civil Rights Act of 1992 (see C&C Newsletter for August, 1997). Well, the FCRA has claimed another victim. Section 760.11(3), Florida Statutes, provides that, within 180 days of filing a complaint with the Florida Commission on Human Relations, the Commission shall determine if there is reasonable cause to believe that discriminatory practice has occurred in violation of FCRA. Subsection (4) provides that if the Commission makes such determination, the aggrieved party may bring a civil action against the person named in the complaint. Subsection (8) states that if the Commission fails to make such a determination within said 180 day period, an aggrieved person may proceed as though the Commission had determined that there was reasonable cause. Because the one year limitation to file suit began to run at the expiration of the 180 day period within which the Commission was to make a determination (but did not), the Court affirmed dismissal of a wrongful-termination claim based on disability. Again, the Court noted differences between the state statute and the corresponding federal statute, in this case 42 U.S.C. §2000e-5(f). Milano v. Moldmaster, Inc., 22 Fla. L. Weekly D2455 (Fla. 4th DCA, October 22, 1997).

FLORIDA SBA WINS AWARD: The Florida State Board of Administration has won the National Association of Securities Professionals Pacesetter Award for 1997. As you probably know, SBA manages the $70 Billion Florida Retirement System. Pensions & Investments reports that the award is presented to trustees or funds that have promoted the full involvement of women and minorities in the investment industry. About $400 Million of FRS's assets are invested in equities with a "manager of managers," which allocates the assets to ten minority and women-owned firms.

ALL ABOARD THE PERFORMANCE ROLLER COASTER: How many times have you heard that past performance is not a guarantee of future performance? As if we really needed confirmation, a Smith Barney Consulting Group study reported by Pensions & Investments shows that top performing managers were more likely to drop to the bottom of performance comparisons in later periods than to repeat their successful performance. The study included 72 equity managers with at least ten years data through December 31, 1996, with styles ranging across the board. In terms of one-year returns, there were only six instances when a manager placed in the top quintile three years in a row and just one manager placed in the top quintile four years in a row. Only fifteen managers placed in the top quintile for two successive two-year periods. Not surprisingly, the study found that investment style-related correlations were partially responsible for a manager's presence at the top or at the bottom.

AND WHO WATCHES THE WATCHERS?: The former pension officer for the $1 Billion Austin Employees Retirement System faces a stiff prison term after pleading guilty to money laundering and bank fraud. Apparently the official took as much as $350,000.00 by electronically transferring assets from the fund to her own checking account, using a fake Social Security number. Unfortunately, fund officials did not suspect any wrong-doing until after an audit was completed following her voluntary departure. Ironically, she left the Austin Fund to become administrator of the Charlotte Firefighters' Retirement System. An audit following her three-month stint there uncovered no problems.

RETIREMENT PLAN HOLDINGS OF MUTUAL FUNDS INCREASE: At the end of 1995 retirement plans held $1 Trillion in mutual fund assets. As of the end of last year, those holdings had increased by 25%, to $1.24 Trillion -- representing 35% of all mutual fund assets. BNA reports that retirement plan holdings of mutual funds were split almost evenly between individual retirement accounts ($632 Billion) and employer-sponsored pension plans ($610 Billion).

OLDER WORKERS RICHER THAN THOUGHT: According to a Wharton School Study reported by Pensions & Investments, Americans nearing retirement might be better off financially than previously believed. Pensions, Social Security and Retiree Health Insurance account for 60% of the wealth anticipated by the median household of Americans between ages 51 and 62. The median wealth for such people totalled $340,000.00, including home equity. Nevertheless, many people enter retirement with inadequate assets and half of older Americans depend heavily on Social Security.

ACCEPTANCE OF EARLY RETIREMENT BARS JOBLESS BENEFITS: In a decision which follows a Florida appellate court (see C&C Newsletter for June, 1997), a New Jersey appellate court has held that acceptance of an early retirement incentive package disqualifies an employee from receiving unemployment benefits, unless he can show that he accepted the package because of a real, imminent and substantial risk of losing his job. As reported by BNA, the decision holds that unemployment benefits are a last resort mechanism, designed to ease the plight of employees whose jobs are terminated or who are otherwise compelled by work conditions to leave.

WHISTLE-BLOWER GETS NEW TRIAL AGAINST SCHOOL BOARD: A high school teacher brought an action for relief from discrimination by retaliation under both Florida (Section 112.3187, Florida Statutes) and federal (42 U.S.C. §2000(e)(3)) "Whistle-Blower" acts. The appellate court reversed a jury verdict against him because the lower court erroneously failed to admit into evidence an internal school board investigation finding probable cause that the teacher's principal had retaliated against him because of his testimony in an age discrimination case against the principal. However, cases interpreting the state law and federal law required that the case be dismissed against the principal because relief is not authorized against anyone other than the agency which retaliated. Costa v. The School Board of Broward County, Florida, 22 Fla. L. Weekly D2567 (Fla. 4th DCA, November 12, 1997).

FLORIDA CIVIL RIGHTS ACT PROTECTS PERCEIVED HANDICAPS: Following the Second District Court of Appeal (see C&C Newsletter for June, 1996), the Fifth District Court of Appeal held that the Florida Civil Rights Act of 1992, which prohibits discrimination against the disabled, protects not only persons who are actually handicapped but persons who are perceived to have handicaps -- in this case, morbid obesity. Thus, the Court reversed the lower court's dismissal of plaintiff's complaint. The appellate court also found that plaintiff stated a cause of action for damages arising out of a hostile work environment because federal courts have held harassment actionable under the Americans With Disabilities Act and the Rehabilitation Act of 1973. Greene v. Seminole Electric Cooperative, Inc., 22 Fla. L. Weekly D2601 (Fla. 5th DCA, November 14, 1997).

SOUTH FLORIDA UNEMPLOYMENT DOWN: Florida's unemployment rate fell .6% to 4.6% in October from 5.2% in September, according to the Florida Department of Labor. In Dade, the jobless rate fell .5% to 6.8% in October from 7.3% in September. In Broward and Palm Beach, rates fell .4% (to 4.7%) and 1.1% (to 6.6%), respectively. While business services was the fastest growing sector in Dade and Broward, health services was the fastest growing in Palm Beach.

AIMR MAKES RECOMMENDATIONS ON SOFT-DOLLAR ARRANGEMENTS: The Association of Investment Management Research has issued a report calling for sweeping soft-dollar reform. According to Pensions & Investments, recommendations would (1) limit the definition of "research" expenses money managers can claim against brokerage trades to custom-made products and services used by investment managers in making investment decisions, (2) require brokerage firms to break out the cost of providing routine research reports, (3) require money managers to give their clients an annual listing of total brokerage commissions as well as a breakdown of what was paid for through the individual account, (4) provide guidance on mixed use of commission dollars used not only to purchase research products and services but also services necessary for a firm's day-to-day operations, (5) require managers to provide guidance to plan sponsors on directed brokerage arrangements and (6) require money managers to disclose to clients their soft-dollar policies and procedures and the methods they use to review research firms and allocate brokerage accordingly. AIMR also made the following, extremely controversial recommendation: Managers should be required to disclose to their pension clients if they receive research as a result of trades where no commissions are paid, such as principal and fixed-income trades.

SOCIAL INVESTING GROWS: Socially and environmentally responsible investments passed the $1 Trillion mark in the United States, up from $639 Billion in 1995. The growth is attributable to over 710 major mutual funds, pension funds and community development funds that screen their portfolios for socially irresponsible investments. The big loser, according to Pensions & Investments, tobacco: more than 97% of these investors' managers avoid investments in tobacco stocks.

FRS PROTECTS SURVIVING SPOUSE: Subsequent to completion of ten years of creditable service in the Florida Retirement System, Section 121.091(7)(b), Florida Statutes, contemplates two kinds of death benefits: (1) for a beneficiary who qualifies as a joint annuitant, payment for the joint annuitant's lifetime and (2) for a beneficiary who does not qualify as a joint annuitant, only return of the member's personal contributions. A joint annuitant is defined as a spouse, child or certain other persons who are dependent upon the member. Here, the member had named as beneficiaries persons not meeting the definition of joint annuitant. But the member was survived by a spouse. The Division of Retirement argued that no benefits were payable to anyone (the member had earlier received a refund of contributions he had made to FRS before the system became non-contributory in 1975). Because the Division conceded that the surviving spouse of a vested retirement system member is entitled to death benefits where the member never attempted to name a beneficiary, the court held that there was no basis for denying the same benefits to the surviving spouse where an attempt to direct payment to others is wholly ineffective. Eaves v. Division of Retirement, 22 Fla. L. Weekly D2644 (Fla. 1st DCA, November 19, 1997). Question: If this particular widow subsequently enters the Deferred Retirement Option Program, would that be an Eaves D.R.O.P.?

GOING OR COMING RULE DOES NOT BAR RECOVERY FOR INJURIES IN COURSE OF EMPLOYMENT: Since 1990 Florida's Workers' Compensation Law has contained the going or coming rule: an injury suffered while going to or coming from work is not an injury arising out of and in the course of employment whether or not the employer provided transportation if such means of transportation was available for the exclusive personal use by the employee, unless the employee was engaged in a special errand or mission for the employer. See Section 440.092(2), Florida Statutes. In this case, an attorney took a client's case file home to prepare for a deposition the following morning. Early that morning, the attorney began preparing for the deposition, and while walking to his car to drive to the deposition, he was struck by a vehicle. The parties agreed that it was an essential part of the attorney's employment to travel to client's homes, hospitals, courts in different jurisdictions and various professional offices for depositions. In reversing an order that the attorney's injury was not compensable, the appellate court found no significant break or interruption in his employment activity beginning with his preparation for taking the deposition and his embarkation to the site of the deposition. Thus, the going or coming rule did not apply because the trip was a regular part of his employment and could not be equated with routine travel to his office to begin a workday. Schoenfelder v. Winn & Jorgensen, P.A., 22 Fla. L. Weekly D2649 (Fla. 1st DCA, November 19, 1997).

OFF-DUTY PHYSICAL TRAINING BY SRT MEMBERS NOT COMPENSABLE UNDER FLSA: Current and former members of the Metro-Dade Police Department's Special Response Team sued Dade County under the Fair Labor Standards Act to recover overtime pay for off-duty hours spent performing physical fitness training. A jury made factual determinations in their favor, including that Dade County either knew, or showed reckless disregard, that its conduct violated FLSA. In an unusual nonfinal appeal, the United States Court of Appeals reversed, concluding that, as a matter of law, off-duty physical training mandated by SRT job requirements does not constitute compensable work under FLSA. In so ruling, the court followed prior case law and applied Department of Labor regulations appearing at 29 C.F.R. §785.27: training programs need not be counted as working time if (1) attendance is outside the employee's regular working hours, (2) the employee does not perform productive work during the program, (3) attendance is voluntary and (4) the program is not directly related to the employee's job. Dade County, Florida v. Alvarez, 11 Fla. L. Weekly Fed. C623 (11th Cir., October 16, 1997).

MUTUAL FUNDS' CASH INFLOW DROPS: Estimates from the Investment Company Institute indicate that net new cash flows to stock and bond mutual funds fell from over $29 Billion in September to $24 Billion in October. Net flow to stock funds fell to $21 Billion from almost $26 Billion, while cash influx to bond funds fell to $3 Billion from $3.6 Billion.

ILLINOIS SETS DANGEROUS PRECEDENT: The State of Illinois has passed a bill permitting the Chicago Board of Education to skip its annual contribution to the Public School Teachers' Pension & Retirement Fund of Chicago if the current funded ratio of 95% reaches 90%. As a result, the $8 Billion Fund could lose hundreds of millions of dollars over the next ten years. We often wonder where these state legislators get their expertise in actuarial science and pension funding.

PUBLIC FINANCE SECTOR BENEFITS FROM ECONOMY: Good monetary and fiscal policies benefit everyone -- especially state and local governments. Medicaid no longer ravages state budgets as it did in the early 1990s. And although welfare case loads have dropped, associated revenue from the federal government has not, resulting in a windfall for the states. In addition, there has been an increase in personal and corporate income tax revenues over the past several years, allowing states to establish healthy reserve funds (even while cutting taxes in some instances). Thus, Standard & Poor's has recently handed out far more credit upgrades than downgrades. The following table reflects: (1) the recession and poor financial management in the years 1990 through 1994 and (2) the change in philosophy and good fiscal policies in 1995 through 1997.

Credit upgrades and downgrades
1990 1991 1992 1993 1994 1995 1996 1997YTD
Upgrades: 140 145 410 248 293 324 658 830
Downgrades: 465 607 489 239 324 289 192 125

Copyright, 1996-2004, all rights reserved.

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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