Cypen & Cypen   Miami
Home Attorney Profiles Clients Resource Links Newsletters navigation
825 Arthur Godfrey Road
Miami Beach, Florida 33140

Telephone 305.532.3200
Telecopier 305.535.0050

Click here for a
free subscription
to our newsletter

Cypen building

September, 2000

Stephen H. Cypen, Esq., Editor

1. BONUSES TO MUNICIPAL EMPLOYEES DO NOT VIOLATE FLORIDA STATUTES: Section 215.425, Florida Statutes, provides that no extra compensation shall be made to any officer, agent, employee or contractor after the service has been rendered or the contract made. "Extra compensation" refers to an additional payment for services rendered or compensation over and above that fixed by contract or by law when the services are rendered. This section was amended in 1992 to provide that it does not apply to extra compensation given to municipal employees pursuant to policies adopted by municipal ordinances. Therefore, payment of bonuses to existing municipal employees for services they have already performed and have been compensated for does not violate the statute if there is a preexisting employment contract making such bonuses a part of their salary or the city has adopted a lump-sum bonus payment program to reward outstanding employees whose performance exceeds standards, provided the bonus payment is not included in the employee's regular base rate or pay or carried forward in subsequent years. The proviso was also added in 1992, when the legislature simultaneously amended Section 166.021, Florida Statutes. AGO 2000-48 (August 29, 2000).

"It's not hard to meet expenses, they're everywhere."

2. WORKERS' COMP EXCLUSION NOT APPLICABLE TO ON-DUTY LAW ENFORCEMENT OFFICER: Section 440.091, Florida Statutes, provides that a law enforcement officer is deemed to have been acting within the course of his employment if he was discharging his primary responsibility and was not engaged in services for which he was paid by a private employer. A 25-year municipal police officer was injured while driving home in his unmarked police car for lunch. The city defended against his workers' compensation claim on the grounds that the accident was not within the course and scope of employment and that claimant was not discharging the responsibilities of a law enforcement officer as required by Section 440.091, Florida Statutes. (The city also defended under Section 440.092, Florida Statutes, the "going-or-coming" rule, but that defense was not an issue on appeal.) The judge of compensation claims applied Section 440.091, Florida Statutes, and denied benefits. On appeal, the District Court of Appeal reversed: "We determine here that Section 440.091 is inapplicable to an officer who is on duty during his normal working hours; therefore, the officer here should be provided protection under the workers' compensation statute." Note all witnesses indicated that the officer was considered to be on duty at time of the accident; the collective bargaining agreement considers officers to be on duty while at lunch and they are paid for that time; officers at lunch are subject to call; and officers at lunch are required to carry their identification, radio, handcuffs and weapons. In fact, the officer's radio was on at the time of the accident and he was carrying his badge, gun and identification. Klyse v. City of Largo, 55 Fla. L. Weekly D1936 (Fla. 1st DCA, August 16, 2000).

3. FLORIDA SUPREME COURT ANSWERS CIVIL RIGHTS ACT QUESTION: The Supreme Court of Florida has answered the following certified question in the negative: "Does the Section 760.11(5), Florida Statutes (1995), one-year statute of limitations for filing civil actions 'after the date of determination of reasonable cause by the commission' apply also upon the commission's failure to make any determination as to 'reasonable cause' within 180 days as contemplated in Section 760.11(8), Florida Statutes (1995), so that an action filed beyond the one-year period is time barred?" The Supreme Court found that Chapter 760, Florida Statutes, the Florida Civil Rights Act, does not provide clear and ambiguous guidance to those who file complaints under its provisions or to those who are brought into court on allegations of violating its terms. Interpretation of the statute must be in keeping with the legislative intent embodied in the statutory scheme, while protecting the procedural due process rights of claimants. Thus, the court held that if the commission on human relations does not make a reasonable cause determination on a complaint within the 180 days contemplated by Section 760.11(8), Florida Statutes, the general four-year statute of limitations for statutory violations applies to actions filed pursuant to Chapter 760, Florida Statutes. Presumably, the Supreme Court will ultimately affirm the First District Court of Appeal's decision last month that came to the same conclusion and certified the question. (See C&C Newsletter for August, 2000, Item 17.) Joshua v. City of Gainesville, 25 Fla. L. Weekly S641 (Fla., August 31, 2000).

"I assume full responsibility for my actions, except the ones that are someone else's fault."

4. FLORIDA HAS WAIVED SOVEREIGN IMMUNITY UNDER CIVIL RIGHTS ACT: And speaking of the Florida Civil Rights Act of 1992, the First District Court of Appeal recently held that the Florida Legislature has unequivocally waived the defense of sovereign immunity for claims brought under the FCRA. Although the decision is certainly significant, we wonder how the lower court came to the contrary conclusion when Section 760.02(6), Florida Statutes, specifically makes the "state or any governmental entity or agency" subject to a claim for violation. Klonis v. State of Florida, 25 Fla. L. Weekly D2103 (Fla.1st DCA, August 30, 2000).

5. FLORIDA APPELLATE COURT "CLARIFIES" DEPUTY SHERIFF/EMPLOYEE DECISION: As we reported last month (see C&C Newsletter for August, 2000, Item 10), the Fifth District Court of Appeal certified to the Florida Supreme Court the question of whether deputy sheriffs are excluded from collective bargaining under Chapter 447, Florida Statutes. The appellate court has now clarified its June 30, 2000 decision in that while the sheriff's petition for writ of prohibition was denied (which we should have reported in the first place), the court granted a stay of proceedings to enable the parties to seek review in the Florida Supreme Court. The dissenter reasserted his position, finding that the "substituted" opinion is of no effective difference from the earlier one. Williams v. Coastal Florida Police Benevolent Association, Inc., 25 Fla. L. Weekly D2051 (Fla. 5th DCA, August 25, 2000).

6. "EURO" UPDATE: A newsletter from Westwood Group deals with the euro, which was introduced on January 1, 1999 as the common currency for trade and investment in eleven European nations. Those countries (Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain) encompass almost 300,000,000 people and have combined economies of over $6 Trillion. Proponents of the euro claim it will save these countries $60 Billion per year in foreign exchange conversion costs, making it easier to sell products with a reduced risk of exchange rate losses. Since its introduction, however, the euro has struggled against the dollar, falling from its introductory rate of $1.17 to an all time low of $.874 (as of August 31, 2000). Four European countries do not participate in the euro: Denmark, Sweden and the United Kingdom have opted to wait; Greece does not yet meet the economic criteria for inclusion, but hopes to join soon. Criteria for inclusion in the European Monetary Union are (1) annual government deficit must not exceed $3% of GDP; (2) total outstanding government debt must not exceed 60% of GDP; (3) rate of inflation must be within 1.5% of the best three performing EU countries; (4) average nominal long-term interest rate must be within 2% of the average rate of the three participating countries with the lowest inflation rates; and (5) for at least two years the country has kept within "normal" fluctuation margins of the European Exchange Rate Mechanism. Curiously, actual euro currency will not be introduced until January 1, 2002! Another reason for the euro's decline: Europeans bought $35 Billion more U.S. shares than they sold in the second quarter. And while the number is down from $59 Billion in the first quarter, it is still substantially more than any other quarter on record.

7. MANAGING THE PENSION CONSULTANT: Apropos our piece on evaluating the investment consultant (see C&C Newsletter for August, 2000, Item 15), Ted Siedle (see C&C Newsletter for August, 2000, Item 7) proposes the following simple questions to be asked of pension consultants prior to hiring: (1) What services does your firm or its affiliates offer in addition to pension consulting services? (2) What financial arrangements exist with affiliated or other financial organizations? (3) What policies and procedures are in place to prevent possible conflicts of interest? (4) Does your firm accept soft dollars as a method of payment for services provided? and (5) What fees or other consideration do you receive from managers? He also suggests that pension funds require their consultants to adhere to the following standard operating procedures: (1) please advise us promptly, and in advance when possible, of personnel or organizational changes at your firm; (2) please advise us immediately of any legal or regulatory proceedings involving your firm; (3) please provide specific notification whenever a former employee of your firm is employed by a manager you have recommended to us; (4) please return all phone calls to board members within 24 hours and to staff within 48 hours; and (5) please provide board members with an agenda and materials for board meetings at least 10 days in advance.

"Mental floss prevents moral decay."

8. SURVEY SHOWS PUBLIC RETIREMENT PLANS DOING WELL: The August 2000 Government Finance Review contains a summary of the latest PENDAT survey conducted by the Public Pension Coordinating Council. The PPCC comprises the Government Finance Officers Association, the National Association of State Retirement Administrators, the National Conference on Public Employee Retirement Systems and the National Council on Teacher Retirement. In short, state and local retirement plans have prospered during the 1990s' bull market and remain in strong financial health. The survey was sent to more than 700 pension systems, of which 246 systems, managing 371 plans, responded. The responding systems serve 85% of the 12.8 million active state and local plan members and hold 77% of the $2.3 Trillion in state and local retirement system assets. Ninety one percent provide a defined benefit retirement plan as the primary retirement plan, 5% offer a defined contribution plan and 4% offer a hybrid that combines features of both defined benefit and defined contribution plans. The funding ratio -- a "snapshot" of financial health -- compares the actuarial value of plan liabilities against assets. For example, if a plan's assets equal its actuarial accrued liabilities, the plan is considered 100% funded. The survey found that total assets were worth $1.32 Trillion, nearly matching (95.8%) the actuarial accrued liabilities of $1.38 Trillion. That funding ratio is up from 87.2% two years before. Pension obligations also increased, but plan assets grew at an even faster pace. The actuarial value of assets grew 26.8%, from $1.04 Trillion to $1.32 Trillion, dropping the unfunded actuarial accrued liability 28%, from $144.3 Billion to $103.8 Billion. As in the past, respondents had strong double-digit investment returns, averaging 17.6% (up from 14.4%). Five-year returns went from 11.7% to 14.5%. By comparison, actuarial assumptions for investment returns remain the same at about 7.9%. The distribution thereof was narrow: only 4% assumed investment returns of less than 7% or greater than 9%. And even though these strong investment returns did not match the S&P 500 Index, one must remember that these pension systems own stocks, bonds, cash and alternative investments like real estate. Expectedly, governmental employers had to contribute less; the dollar amount of employer contributions fell slightly from $30.2Billion to $29.6 Billion. However, as a percent of payroll, average employer contributions declined significantly from 13.2% to 11.4%. In a defined benefit plan, benefits are typically determined using formulas that include a benefit multiplier, an employee's years of service and final average salary. On average, for those covered by Social Security, general employees earned benefits at 1.89% per year and police/fire employees garnered 2.37%. (Legislators and judges accrued benefits at a rate of 2.76% per year -- gee, what a surprise.) But only about 75% of current state and local government full-time employees are covered by Social Security, and some employers offer a higher annual benefit percentage to plan members not so covered. The annual average for all employees covered by Social Security grew from 1.99% of final average salary to 2.02%. For members not covered by Social Security, the average benefit percentage grew from 2.32% to 2.35%. All in all, quite an excellent report card.

9. IRS PENSION LIMITS ARE PROJECTED TO INCREASE FOR 2001: ASA projects that some IRS pension limits will change for 2001. The Section 415 defined benefit plan dollar limitation, rounded in $5,000.00 increments, will increase to $140,000.00 from $135,000.00. The Section 415 defined contribution limit, also rounded in $5,000.00 increments, will increase to $35,000.00, after remaining at $30,000.00 for three years. The Section 401(a)(17) annual compensation limit, rounded in $10,000.00 increments, will stay the same at $170,000.00. And the Section 457 deferred compensation limit, rounded in $500.00 increments, will increase to $8,500.00 from $8,000.00.

"A fool and his money are soon partying."

10. FEDERAL APPELLATE COURT MODIFIES "DUTY TO INFORM" DECISION: Last year, the U.S. 9th Circuit Court of Appeals handed down a decision in Bins v. Exxon Company U.S.A., Case No. 98-55662 (U.S. 9th Cir., August 30, 1999) (see C&C Newsletter for September, 1999, Item 11). There, the appellate court reversed a summary judgment in favor of the employer, concluding that a private-sector plan sponsor has a duty both accurately to answer a participant's questions about potential plan changes and to disclose material plan changes under consideration, regardless of whether participants inquire about these changes. The new decision, by the full court, modifies the earlier panel decision and holds that when a plan participant inquires about potential plan changes an employer-fiduciary has a duty to provide complete and truthful information about any such changes then under serious consideration. In the absence of an employee inquiry, however, there is no affirmative duty to volunteer information about any changes prior to their final adoption. Further, an employer does not have a duty to follow up with an employee if, subsequent to the employee's inquiry, the proposed changes reach the serious consideration stage, unless the employer agrees to do so. A contrary rule would invite a process whereby employees would include boilerplate requests to be updated whenever they made an inquiry, forcing upon the employer a responsibility which it may be unwilling to assume and could, consequently, discourage employers from seriously considering otherwise beneficial plan changes. Because there were genuine issues of material fact to be considered by the trial court, the court still reversed the trial court and remanded for trial: If, on remand, Bins can provide evidence that any of the Exxon representatives he asked about the potential pension changes promised to let him know if anything changed, then, assuming serious consideration occurred before his retirement decision became irrevocable, that promise would be a basis for recovery. Bins v. Exxon Company U.S.A., Case No. 98-55662 (U.S. 9th Cir., August 10, 2000) (en banc). Interestingly, the original companion case to Bins was not affected, and presumably became final as originally decided on August 30, 1999.

11. HOW TO DIAGNOSE FIBROMYALGIA: In a recent case, the First District Court of Appeal reversed a workers' compensation award in favor of a claimant who had been diagnosed -- by one doctor out of seven -- as suffering from trauma-induced fibromyalgia. The claimant had been examined by an expert medical advisor, appointed under the provisions of Section 440.13(9)(c), Florida Statutes, because there was a disagreement of opinion among health care providers. According to the statute, an expert medical advisor's opinion is presumed to be correct unless there is clear and convincing evidence to the contrary as determined by the judge of compensation claims. In any event, we report the case here because of its discussion on how to diagnose fibromyalgia, a condition with which our pension board clients are frequently confronted: Diagnosing fibromyalgia requires applying about ten pounds of pressure to a series of more or less symmetrical "trigger points" scattered throughout the musculature in the trunk and the extremities, and noting the patient's responses. In cases of fibromyalgia, palpation of these trigger points elicits muscular banding and rigidity, which differs from what is found at tender places where a patient reports pain to a very light touch. A patient's responses to palpation of these trigger points can be cross-matched and checked against the control areas -- including areas such as the forehead or bony joints -- to validate or invalidate a finding of fibromyalgia. Interestingly, one of claimant's own physicians believed that fibromyalgia was a legitimate diagnosis in certain cases but emphatically rejected the suggestion that trauma could have caused it. Walgreen Company v. Carver, 25 Fla. L. Weekly D2099 (Fla.1st DCA, August 30, 2000).

"I need not suffer in silence while I can still moan, whimper and complain."

12. STATE COURT CANNOT ORDER CHANGE OF BENEFICIARY OF MILITARY SURVIVOR BENEFIT PLAN: When husband retired from the military he was still married and elected to participate in the Survivor Benefit Plan, a program through which a service member eligible for retirement may purchase an annuity for a surviving spouse or child, with the premium payment deducted from his retirement pay. Husband named his then- minor daughter as beneficiary of the SBP. However, in their subsequent divorce, the parties agreed that husband would elect wife as beneficiary of the SBP. Husband failed to do so, claiming that federal law prevented the change. In reversing a trial court order to the contrary, the appellate court found that under federal law a court may require a person who is a participant in the SBP and "providing coverage for a spouse or spouse and child" to revoke that coverage to provide the annuity for a former spouse who was not a former spouse at the time the service member became eligible to participate in the plan. Husband was not providing coverage for a spouse or spouse and child; he was providing coverage for a child only. Because federal law preempts state law on this point, the change of beneficiary could not be accomplished. However, husband may wish he had been able to accomplish the change: finding that the annuity was awarded to wife as part of the overall scheme of equitable distribution in the final judgment, the district court of appeal remanded to the lower court to revisit the equitable distribution or otherwise effect terms of the dissolution judgment. Wise v. Wise, 25 Fla. L. Weekly D2107 (Fla.1st DCA, August 25, 2000). Or maybe not so wise.

13. FLORIDA SECURITY FOR PUBLIC DEPOSITS ACT AMENDED: Effective July 1, 2000, Chapter 00-352 amends Chapter 280, the Florida Security for Public Deposits Act. Among other things, the amendment defines "book-entry form" and clarifies that monies in deposit notes and in other nondeposit accounts such as repurchase or reverse repurchase operations, and securities, mutual funds and other similar types of investments are not considered public deposits subject to the law. The amendment also substantially rewords the law's general provisions, so trustees would do well to have their custodians review the law, as amended, to reconfirm compliance.

14. FEDERAL APPEALS COURT APPLIES ADEA TO RETIREES: In a decision that will no doubt disturb employers, the U.S. Court of Appeals for the Third Circuit has ruled that the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, applies to retirees. Thus, an employer that offers different benefits to Medicare-eligible retirees than to retirees who are not yet Medicare-eligible may violate ADEA unless it satisfies the Act's equal benefit or equal cost standard. Until now, many people believed that the ADEA did not apply to retirees. Such a view is not unreasonable in light of the OWBPA's legislative history: "We acknowledge that our analysis is complicated by the presence of the term 'older worker' ... . As mentioned, the legislative history of the OWBPA reveals that Congress specifically chose the word 'worker' over 'individual' ... ." Because of the strong dissent, this case may receive further judicial attention or may even spur legislative action. Erie County Retirees Association v. The County of Erie, Pennsylvania, Case No. 99-3877 (U.S. 3d Cir., August 1, 2000).

"Sometimes a majority simply means that most of the fools are of one mind."

15. FAMILY LEAVE EXPANDED: From Buck Consultants we learn that regulatory and legislative efforts to expand rights under the Family and Medical Leave Act and state family leave laws have recently increased. The Department of Labor has issued final regulations allowing states to pay unemployment compensation benefits to individuals who take leaves (or terminate employment) to care for newborn or newly-adopted children, although, to date, no state has implemented this type of benefit. Further, recently proposed regulations would allow federal employees to use up to 12 weeks of sick leave to care for a seriously ill family member.

16. S&P TO USE NEW INDUSTRY CLASSIFICATIONS: On September 25, 2000 Standard & Poor's will begin calculating its domestic indices (including the S&P 500) using industry classifications prescribed by the Global Industry Classification Standard. The standard consists of 10 economic sectors aggregated from 23 industry groups, 59 industries and 123 sub-industries covering over 10,000 companies globally. All economic sectors will have a two-digit identification code; industry groups, a four-digit identification code; industries, a six-digit identification code; and sub-industries an eight digit identification code. The ten economic sectors are Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Telecommunications Services and Utilities.

17. IS U.S. DEBT REALLY BEING PAID DOWN?: An article by James Lebherz in the Miami Daily Business Review indicates that the overall U.S. debt is not being reduced as we thought. In effect, there are two different budgets with two different surpluses. The larger budget measures income and expenditures of the federal government. The other budget relates to revenue from Social Security taxes, the funding of the Social Security trust fund and a number of other government trust funds. Together, the budgets are known as the "unified budget," the one with which we are all familiar. The larger budget benefits from the various income taxes that are used to fund the federal government. A deficit or surplus is known as an "on-budget" deficit or surplus. When there is a deficit, the Treasury borrows money from the private sector by selling marketable treasury securities. When there is a surplus, as now, the Treasury pays down (retires) or buys-in marketable debt. Revenue in the other budget comes from Social Security taxes (FICA) and other special taxes, used to finance Social Security and other government trust funds. Deficits or surpluses here are referred to as "off-budget." These surpluses are used to buy nonmarketable treasuries for the trust funds, which increases the outstanding debt. In other words, they are IOUs of the government to make payments from nonmarketable treasury holdings as needed. The total public federal debt is $5.65 Trillion. The marketable portion is $3.47 Trillion and the nonmarketable portion is $2.18 Trillion. With net debt being paid down, the scenario is somewhat rosy. However, there is always the danger that the economy will tank and surpluses will vanish or that politicians will attempt to spend the surpluses.

"Borrow money from a pessimist - he won't expect it back."

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.

Site Directory:
Home // Attorney Profiles // Clients // Resource Links // Newsletters