July, 1999Stephen H. Cypen, Esq., Editor
1. IFEBP PUBLISHES MUST-READ ARTICLE EXPLAINING PENSION PLANS: The June 1999 Employee Benefits Journal, published by the International Foundation of Employee Benefit Plans, contains an article explaining the "basics" of pension plans. Aptly entitled "An Explanation of Pension Plans," the article covers the difference between qualified and nonqualified plans, defined benefit and defined contribution plans, plan contributions, participants, vesting, determination of benefits, forms of benefits, payments and funding. Although the piece is not necessarily directed at public plans, it should be mandatory reading for all pension board trustees. And speaking of the International Foundation of Employee Benefit Plans (as we do on a regular basis), all boards should seriously consider membership, which includes the Journal and other regular publications. IFEBP can be reached at P. O. Box 69, Brookfield, WI 53008-0069, www.ifebp.org.
2. FLORIDA STATUTE LIMITS PUBLIC AGENCY EXPENSE REIMBURSEMENT NOTWITHSTANDING CONFLICTING GRANT GUIDELINES: The Riviera Beach Housing Authority receives grants from various sources, including funds for training, seminars and conferences. Some grants contain guidelines for per diem and subsistence rates to be reimbursed to participants at rates greater than those prescribed in Section 112.061, Florida Statutes, the Uniform Travel Expense Law for Florida public agencies. The legislative intent is that travel expenses and per diem for all public officers, employees or authorized persons whose travel expenses are paid by a public agency be subject to the rates and limitations set forth in the statute, unless expressly exempted by general law or in conflict with special or local law. While grants received by the Housing Authority may contain guidelines for reimbursement of travel expenses, Section 112.061, Florida Statutes, only recognizes special acts, local laws and specific exemptions in general laws as controlling such reimbursement in a manner other than prescribed by its terms. As such, these grants do not operate as an exception to Section 112.061, Florida Statutes, and the Riviera Beach Housing Authority may not use funds from federal or private grants to reimburse travel expenses or pay per diem to officers and employees of the Authority at rates other than those prescribed in said statute. AGO 99-33 (June 8, 1999).
3. APPELLATE RULING THAT RECEIPT OF SSDI BENEFITS BARS AGE DISCRIMINATION CLAIM WILL STAND: The United States Supreme Court will not disturb a ruling that barred a state age discrimination suit because claimant successfully applied for Social Security Disability benefits. The U.S. Court of Appeals for the Fourth Circuit had affirmed the U.S. District Court's grant of summary judgment to the employer on the reasoning that the Social Security Administration must have found claimant unable to perform her previous work based on the medical information she provided. BNA reported the U.S. Supreme Court's decision not to grant review. King v. Herbert J. Thomas Memorial Hospital Association, Case No. 98-134 (U.S., May 3, 1999).
4. BUT SSDI RECIPIENT NOT AUTOMATICALLY ESTOPPED FROM PURSUING ADA CLAIM: A unanimous United States Supreme Court has resolved disagreement among the Circuits about the legal effect upon an Americans With Disabilities Act (ADA) suit of the application for, or receipt of, disability benefits. The Social Security Disability Insurance (SSDI) program provides benefits to a person with a disability so severe that she is "unable to do her previous work" and "cannot engage in any other kind of substantial gainful work which exists in the national economy." The ADA prohibits discrimination against a qualified individual with a disability, defined as a disabled person who can perform the essential functions of her job, including those who can do so only with reasonable accommodation. The High Court held that pursuit, and receipt, of SSDI benefits does not automatically estop a recipient from pursuing an ADA claim or erect a strong presumption against recipient's ADA success. However, to survive a summary judgment motion, an ADA plaintiff cannot ignore her SSDI contention that she was too disabled to work, but must explain why that contention is consistent with her ADA claim that she can perform the essential functions of her job, at least with reasonable accommodation. Cleveland v. Policy Management Systems Corporation, 12 Fla. L. Weekly Fed. S271 (U.S., May 24, 1999).
5. U.S. SUPREME COURT ISSUES TRILOGY OF ADA DECISIONS: A month later, the Supreme Court released three other important ADA opinions:
In Sutton v. United Air Lines, Inc., 12 Fla. L. Weekly Fed. S415 (U.S., June 22, 1999), the Supreme Court reviewed lower court dismissals of ADA actions for failure to state a claim upon which relief can be granted. The court concluded the complaint was properly dismissed, holding that determination of whether an individual is disabled should be made with reference to measures that mitigate the individual's impairment, including, in this instance, eyeglasses and contact lenses. Our readers know that the Americans With Disabilities Act of 1990 prohibits certain employers from discriminating against individuals on the basis of their disabilities. The court also held that petitioners/plaintiffs failed to allege properly that respondent/defendant "regarded" them as having a disability within the meaning of ADA. The case involved severely myopic twin sisters, having uncorrected visual acuity of 20/200 or worse, but with corrective measures functioning identically to individuals without similar impairments. They had applied to a major commercial airline carrier for employment as commercial airline pilots, but were rejected because they did not meet the airline's minimum requirement of uncorrected visual acuity of 20/100 or better.
In Murphy v. United Parcel Service, Inc., 12 Fla. L. Weekly Fed. S435 (U.S., June 22, 1999), the court naturally followed its decision that day in Sutton. Here, United Parcel Service, Inc. had dismissed petitioner/plaintiff from his job as a UPS mechanic because of high blood pressure. The district court granted summary judgment to respondent/defendant, and the court of appeals affirmed. In affirming, the Supreme Court decided that the court of appeals correctly considered petitioner/plaintiff in his medicated state when it held that his impairment does not "substantially limit" one or more of his major life activities and correctly determined that he is not "regarded as disabled." Unmedicated, petitioner/plaintiff's blood pressure is approximately 250/160. With medication, however, his hypertension does not significantly restrict his activities and in general he can function normally and engage in activities that other persons normally do.
In Albertsons, Inc. v. Kirkingburg, 12 Fla. L. Weekly Fed. S443 (U.S., June 22, 1999), the Supreme Court held that an employer who requires as a job qualification that an employee meet an otherwise applicable federal safety regulation is not required to justify enforcing that regulation solely because the standard may be waived in an individual case. In this case, an employee with amblyopia, an uncorrectable condition that left him with 20/200 vision in his left eye and thus effectively monocular vision, was erroneously certified as meeting department of transportation standards. When his vision was correctly assessed in a subsequent physical, he was told that he had to get a waiver of DOT standards. Nevertheless, the employer fired him for failing to meet those basic DOT vision standards and refused to hire him after he received a waiver. The Supreme Court reversed the court of appeals, which had reversed the district court's granting summary judgment for the employer.
6.EEOC GIVES GUIDANCE ON REASONABLE ACCOMMODATION UNDER ADA: Title I of the Americans With Disabilities Act (ADA) requires covered employers to provide reasonable accommodation to qualified individuals with disabilities who are employees or applicants for employment, unless the accommodation would result in undue hardship for the employer. According to a summary from Buck Consultants, the Equal Employment Opportunity Commission (EEOC) has issued enforcement guidance on reasonable accommodation and undue hardship. The guidance, which is to be added to EEOC's manual, provides the rights and responsibilities of employers and employees, and addresses various types of reasonable accommodations that may be offered to employees. It also addresses interaction of ADA with requirements of the Family and Medical Leave Act with regard to leave and modified schedules. In light of the above U.S. Supreme Court decisions, we suspect EEOC will soon go back to the drawing board.
7.FUNDS ROLLED OVER INTO IRA ACCOUNT FROM DEBTOR'S SARSEP ARE EXEMPT IN BANKRUPTCY: Section 222.21(2)(a), Florida Statutes, provides that any money or other assets payable to a participant or beneficiary from, or any interest of any participant or beneficiary in, a retirement plan or profit-sharing plan that is qualified under s. 401(a), s. 403(a), s. 403(b), s. 408 or s. 409 of the Internal Revenue Code is exempt from all claim of creditors of the beneficiary or participant. A Salary Reduction Simplified Employee Agreement (SARSEP) is governed by Section 408(k) of the Internal Revenue Code. Thus, the debtor's rollover of his SARSEP into his IRA did not disqualify the latter as exempt in bankruptcy. In addition, the IRA was not similarly disqualified because the debtor distributed an interest to his former wife without the benefit of a qualified domestic relations order, because IRC §408(d)(6) indicates that a QDRO is not required for such a distribution. In Re: Groff, 12 Fla. L. Weekly Fed. B191 (Bankr. M.D. Fla., February 19, 1999).
8.PERC PERSISTS: On June 10, 1999 the Florida Public Employees Relations Commission issued a declaratory statement in response to a petition therefor filed by Teamsters Local 385. In Re Petition for Declaratory Statement of the Teamsters Local 385, Case No. DS-99-002 (Order Number: 99DS-152). Following its prior decision involving the City of Miami Beach (see C&C Newsletter for August, 1997, Page 11) and disagreeing with the Florida Attorney General's contrary opinion involving the very same city (see C&C Newsletter for October, 1998, Item 1), PERC again held that a collective bargaining agreement in conflict with a municipal charter overrides the charter even though the negotiated changes were not approved by referendum of the municipality's electors. Respectfully, we disagreed with PERC before the Attorney General rendered his opinion and still do.
9.PUNITIVE DAMAGES AVAILABLE IN TITLE VII CLAIMS: Under the terms of the Civil Rights Act of 1991, punitive damages are available in claims under Title VII of the Civil Rights Act of 1964 and the Americans With Disabilities Act of 1990. Punitive damages are limited, however, to cases in which the employer has engaged in intentional discrimination and has done so "with malice or with reckless indifference to the federally protected rights of an aggrieved individual." The United States Supreme Court has held that the law does not require a showing of egregiousness independent of employer's state of mind. The terms "malice" and "reckless indifference" ultimately focus on the employer's state of mind and pertain not to the employer's awareness that it is engaging in discrimination, but to its knowledge that it may be acting in violation of federal law. Kolstad v. American Dental Association, 12 Fla. L. Weekly Fed. S437 (U.S., June 22, 1999).
10. EEOC MAY SOCK FEDERAL AGENCIES WITH DAMAGES: In another case involving Title VII of the Civil Rights Act of 1964, the United States Supreme Court held that the Equal Employment Opportunity Commission possesses legal authority to require federal agencies to pay compensatory damages when they discriminate in employment. In 1972 Congress extended Title VII so that it applies not only to employment in the private sector but to employment in the federal government as well. Here, the Department of Veterans Affairs had been found liable for discrimination by denying an employee a promotion on the basis of his gender. West v. Gibson, 12 Fla. L. Weekly Fed. S357 (U.S., June 14, 1999).
11. PREVAILING DEFENDANT'S RIGHT TO ATTORNEYS' FEES UNDER ADA LIMITED: The Americans With Disabilities Act (ADA) contains a fee-shifting provision allowing the prevailing party reasonable attorneys' fees. However, the standard for a prevailing plaintiff is different than the standard for a prevailing defendant. Like Title VII, a prevailing plaintiff should ordinarily be awarded attorneys' fees in all but special circumstances. On the other hand, a prevailing defendant should only be awarded attorneys' fees upon a finding that plaintiff's case was frivolous, unreasonable or without foundation, even though not brought in subjective bad faith. The latter determinations are to be made on a case-by-case basis, based on several factors: (1) whether plaintiff established a prima facie case, (2) whether defendant offered to settle and (3) whether the trial court dismissed the case prior to trial or held a full-blown trial on the merits. Here, the appellate court reversed an award of attorneys' fees to defendant, which had prevailed on summary judgment, because plaintiff's lawsuit was not so factually or legally groundless as to constitute a frivolous lawsuit from the outset. Bruce v. City of Gainesville, Georgia, 12 Fla. L. Weekly Fed. C882 (11th Cir., May 28, 1999).
12. EX-GOVERNOR'S CONVICTIONS OVERTURNED: Having ragged on former Arizona Governor Fife Symington (see C&C Newsletters for October, 1997, page 3 and March, 1998, pages 2-3), we thought it only fair to report that the Ninth U.S. Circuit Court of Appeals, in a 2-1 ruling, overturned his 1997 bank fraud convictions. Because the trial court erred in removing a juror, Symington will get a new trial. He had been sentenced to two and one-half years in prison but remained free during his appeal.
13. FLORIDA ATTORNEY GENERAL REITERATES "SHADE MEETING" PARAMETERS: Reviewing several recent cases, one of which we also reported (see C&C Newsletter for January, 1999, Item 12), the Florida Attorney General set forth limits of closed-door meetings held in accordance with Section 286.011(8), Florida Statutes. These so-called shade meetings may only be used when the attorney for a governmental entity seeks advice on settlement negotiations or strategy relating to litigation expenditures. Such meetings should not be used to finalize action or discuss matters outside these two narrowly prescribed areas. AGO 99-37 (June 14, 1999).
14. FLORIDA ENACTS Y2K LEGISLATION: On June 4, 1999, Florida Governor Jeb Bush approved Senate Bill 80, designated as Chapter 99-230. Entitled "Commerce Protection Act," the law provides that if you act reasonably, properly and in accordance therewith between now and December 1, 1999, you can substantially reduce your liability to others if you cause them damage due to your own internal Y2K failures. The law provides a formula that you must begin following immediately. Unless you have a contract specifically providing to the contrary, under the Act your business is only liable for direct economic damages caused by the failure of your information technology products to be year-2000 compliant. If you comply with the Act's procedures, you may not even be responsible for direct economic damages.
15. DOL SUPPORTS FRS'S APPOINTMENT AS LEAD PLAINTIFF: In a Memorandum of Law filed as a "friend of the court" in class actions against Telxon Corporation, the Secretary of Labor supports FRS's appointment as lead plaintiff. Incredibly, some defendants had argued that ERISA bars fiduciaries such as those who administer FRS from serving as lead plaintiffs in class action lawsuits. Our readers may wonder why the Secretary of Labor, who is charged with interpreting and enforcing Title I of ERISA -- to which public plans are not subject -- is nosing into a case involving FRS. The answer is a bit convoluted: Section 215.47(9), Florida Statutes, says that FRS in performing its investment duties shall comply with the fiduciary standards set forth in ERISA. Thus the Secretary of Labor must have figured that an adverse ruling might apply to private pension plans seeking lead plaintiff status in class actions. When we are advised of the Court's ruling, we will report it here.
16. COURT CLARIFIES WORKERS' COMP WAIVER ISSUE: As we reported earlier this year (see C&C Newsletter for April, 1999, Item 11), Section 440.09(1), Florida Statutes, provides that an employer shall pay compensation, except for situations specifically enumerated therein. An agreement by an employee to waive Workers' Compensation is invalid -- as is the option to use sick leave and vacation leave in lieu of payment of Workers' Compensation benefits. However, the court has now distinguished the facts of this case from a circumstance in which the employer allows an injured employee to use another benefit, such as sick leave or personal leave, to cover the difference in the amount between Workers' Compensation benefits and the employee's full compensation -- a practice not barred by the holding. Nolan v. Delta Airlines, 24 Fla. L. Weekly D1137 (Fla. 1st DCA, May 5, 1999) (corrected opinion).
17. FLORIDA SUPREME COURT AFFIRMS STATE-EMPLOYED ATTORNEYS' RIGHT TO BARGAIN: Adopting the First District Court of Appeal's reasoning (see C&C Newsletter for July, 1998, pages 2-3), the Florida Supreme Court has affirmed its decision that Section 447.203(3)(j), Florida Statutes (1997), is an unconstitutional abridgement of the Florida Constitutional right to collective bargaining. By its terms, the statute excludes from the definition of "public employee" those persons who by virtue of their positions of employment are regulated by the Florida Supreme Court. On appeal, the Supreme Court found that the state failed to demonstrate that its interest in preserving the attorney-client relationship justifies an absolute prohibition against collective bargaining by public sector lawyers. The decision is consistent with the conclusion reached by the American Bar Association and the Florida Bar Board of Governors that lawyer collective bargaining is not inherently incompatible with the attorney-client relationship. Chiles v. State Employees Attorneys Guild, 24 Fla. L. Weekly S225 (Fla., May 20, 1999).
18. AFSCME CITES HIGH PRICE OF INCLUDING PUBLIC WORKERS IN SOCIAL SECURITY: A report from The Segal Company to the American Federation of State, County and Municipal Employees (and reviewed by BNA) indicates that including public workers into the Social Security System will cost more than $25 Billion just in the first five years. About 25% of public employees -- some five million state and local government workers -- are currently exempt from Social Security. The report also concludes that mandatory coverage would (1) shift contributions away from current public retirement programs, leaving underfunding at an average 7.5% of payroll; (2) result in the need to increase state and local taxes, make cuts in existing benefits and/or make reductions in personnel and services; and (3) destabilize existing plans on which current public workers and retirees depend.
19. U.S. SUPREME COURT WON'T REVIEW FELONY PENSION REVOCATION: A Rhode Island law permits revocation or reduction of pensions for those public employees who are convicted of or plead guilty or nolo contendere to an employment-related felony. According to BNA, the Rhode Island Supreme Court held that the Public Employee Pension Revocation and Reduction Act is civil, does not impose an affirmative disability or restraint, imposes a result not historically regarded as criminal punishment and thus does not violate the double jeopardy prohibition of the Fifth Amendment to the United States Constitution. Rhode Island's highest court also found that such pension revocation does not constitute cruel and unusual punishment in violation of the Eighth Amendment. The U.S. Supreme Court has declined to review the state court holding. Azar v. Retirement Board of Employees' Retirement System of Rhode Island, Case No. 98-1623 (U.S., May 17, 1999). Remember that Florida has two similar general law pension forfeiture provisions, exclusive of the Florida Retirement System provision: Section 112.3173, Florida Statutes (see C&C Newsletter for October, 1997, page 1) and Sections 175.195/185.185, Florida Statutes (see C&C Newsletter for May, 1999, item 6).
20. FLORIDA DISTRICT COURT OF APPEAL CERTIFIES WHISTLE-BLOWER CONFLICT: Section 448.102, Florida Statutes, part of the Florida Public Whistle-blower's Act, prohibits an employer from taking any retaliatory personnel action against an employee because the employee has: (1) disclosed or threatened to disclose to any appropriate governmental agency, under oath, in writing, an activity, policy or practice of the employer that is a violation of a law, rule or regulation; (2) provided information to or testified before any appropriate governmental agency, person or entity conducting an investigation, hearing or inquiry into an alleged violation of a law, rule or regulation by the employer; or (3) objected to or refused to participate in any activity, policy or practice of the employer which is in violation of a law, rule or regulation. However, subsection (1) expressly does not apply unless the employee has, in writing, brought the activity, policy or practice to the attention of a supervisor or the employer and has afforded the employer a reasonable opportunity to correct the activity, policy or practice; subsections (2) and (3) are silent on the requirement of notice. Following one of its earlier decisions, the Second District Court of Appeal has affirmed summary judgment against an employee claiming a violation of subsection (3), but who did not give notice. The Court did certify conflict with decisions from the Third and Fifth Districts, which have held that the written notice requirement applies only to claims brought under subsection (1), meaning that the Supreme Court of Florida could resolve the issue. In light of the obvious absence of a presuit notice requirement in subsections (2) and (3), we would predict that this decision will, if reviewed by the Supreme Court, be overturned. Judd v. Englewood Community Hospital, 24 Fla. L. Weekly D1327 (Fla. 2d DCA, June 4, 1999).
21. TAPE RECORDINGS DISCLOSE ACTUARIES' TRUE FEELINGS: In an article captioned "Actuaries Become Red-Faced Over Recorded Pension Talk," the May 5, 1999 Wall Street Journal reports on tape recordings of actuaries describing how they help employers cut pension benefits and change retirement plans to reshape work forces -- contradicting what they have been saying publicly about reasons for the changes. (Note that the tapes were not recorded surreptitiously, but with knowledge of the participants at professional seminars attended by their colleagues.) The chatter is relevant to millions of workers because companies nationwide are converting pension plans to so-called cash-balance plans. Conversion of traditional pension plans into the new style often means that accrual of pension benefits can halt for older employees, resulting in significantly smaller pensions than they would receive under a traditional plan. Understandably, employers -- often with the support of actuaries -- play down these cost-saving features. In the tapes, actuaries, some of whom have been publicly quoted to the contrary, are heard to say: "Converting to a cash-balance plan does have an advantage as it masks a lot of the changes." Some other choice tidbits: (1) "You switch to a cash-balance plan where the people are probably getting smaller benefits, at least the older-longer-service people; but they are really happy, and they think you are great for doing it." (2) "It is not until they are ready to retire that they understand how little they are actually getting." (3) Disclosure laws "don't require you to say, 'We're significantly lowering your benefit.' All they say is, 'Describe the amendment.' So you describe the amendment." And (4) "Since the [required notice] doesn't have to include the words that 'your rate of future-benefit accrual is being reduced,' you don't have to say those magic words. You just have to describe what is happening under the plan... . I wouldn't put in those magic words." Why are we not surprised by these revelations? Footnote: Senator Daniel Patrick Moynihan (D-NY) recently introduced the Pension Right to Know Act of 1999, requiring disclosure of any reductions in future defined benefit plan accruals.
22. MIAMI F&P CHAIRMAN QUESTIONS DC PUSH: The June 1999 Plan Sponsor contains a one-page article on Florida's recently-failed legislative attempt to offer Florida Retirement System members the option to move their retirement funds from the defined benefit plan currently in place to a new defined contribution plan. The piece is fairly balanced, reporting the two main arguments asserted by critics of DC plans: (1) DC plan administration is, at minimum, twice as expensive as that of a DB plan for the same level of benefit and (2) DC plans, which do not guarantee benefits, erode retirement security. Russell Bjorkman, Chairman of our client the City of Miami Fire Fighters' and Police Officers' Retirement Trust and a skeptic about DC plans, is quoted: "[W]hat happens when these workers get to be retirement age and are faced with an inadequate retirement? A defined benefit plan is like an ocean liner, steady and with radar to see ahead. Defined contribution plans are more like speedboats. Yes, they move faster, but are more susceptible to market fluctuations and much less secure." Sort of like the tortoise and the hare, eh, Russ?
23. YET REPORT SHOWS WORLDWIDE TREND TOWARD DC PLANS: A recent report from William M. Mercer, Inc. shows a worldwide trend toward defined contribution plans. In the United States, DC arrangements -- typically 401(k) and 403(b) plans -- account for 60% of all employer-sponsored retirement plans. By 2003, the percentage will grow to 70%. Around the world, DC plans now account for half of all employer-sponsored retirement arrangements in 14 of the 38 countries surveyed. Such DC plans are likely to continue growing globally, increasing more than one-third by the year 2003. But the survey also shows the inherent risk with DC plans: employees who participate in DC plans are financially risk-adverse and tend to opt for conservative investments yielding modest returns at best.
24. 1998 PREMIUM TAX DISTRIBUTIONS MADE: The Municipal Police Officers' & Firefighters' Retirement Trust Funds' office has released the list of 1998 premium tax distribution amounts. The total exceeds $70.5 Million: approximately $29,500,000.00 for firefighters under Chapter 175 and $41,200,000.00 for police officers under Chapter 185. Since §§175.351 and 185.35, Florida Statutes (1999), define "additional premium tax revenues" to mean revenues received by a municipality or a special fire control district that exceed the amount received for calendar year 1997, trustees should immediately make the determination of whether additional monies are available to comply with the minimum benefit provisions of the new law (see Special Supplement to C&C Newsletter dated March 15, 1999). Statewide increases in the gross premiums for Property Taxes for firefighters' pension trust funds amounted to 9.0% and for Casualty Taxes for the municipal police officers' retirement funds amounted to .39%.
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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.