STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JOHN M. POTTER, )

)

Petitioner, )

)

vs. ) CASE NO. 83-1747

) STATE OF FLORIDA, DEPARTMENT ) IF ADMINISTRATION, DIVISION ) OF RETIREMENT, )

)

Respondent. )

)

RECOMMENDED ORDER

On September 26, 1983, R. L. Caleen Jr., Hearing Officer with the Division of Administrative Hearings, held a formal hearing in this case at Moore Haven, Florida.

APPEARANCES

For Petitioner: Harry A. Blair, Esquire

Post Office Box 1467

Fort Myers, Florida 33902

For Respondent: Augustus D. Aikens, Jr., Esquire

Division of Retirement Cedars Executive Center 2639 North Monroe Street Suite 207, Building C Tallahassee, Florida 32303

ISSUE

Whether petitioner should be removed from the Florida Retirement System, as of July 1, 1979, on grounds of ineligibility.

BACKGROUND

By letter dated May 2, 1983, respondent State of Florida, Department of Administration, Division of Retirement ("Division"), notified petitioner John M. Potter ("petitioner") that he was ineligible for membership in the Florida Retirement System ("FRS") and that, as of July 1, 1979, he would be removed from its rolls.

Petitioner contested this decision and requested a Section 120.57(1) hearing, after which this case was forwarded to the Division of Administrative Hearings for assignment of a Hearing Officer. Hearing was thereafter held on September 26, 1983. The parties subsequently filed proposed findings of fact and conclusions of law by November 1, 1983; no transcript of hearing has been filed.

Based on the evidence presented at hearing 1/ and the parties' prehearing stipulation, the following facts are determined:

FINDINGS OF FACT

1. Petitioner, a licensed attorney, practices law in Clewiston, Hendry County, Florida.

   
   

2. Since at least September 1, 1970, he has continuously engaged in the private practice of law in Clewiston. On September 1, 1970, the Glades County School Board ("School Board" or "Board") hired him as the School Board attorney, a position which he continues to hold. This is a part-time position, since the Board has no need for a full-time attorney.

   
   

3. The School Board is headquartered at Moore Haven, 16 miles northwest of Clewiston, in neighboring Glades County.

   
   

4. The terms and conditions of petitioner's employment with the School Board have remained virtually unchanged since he was originally hired. Each year, the School Board sets his salary consisting of a monthly retainer or salary, plus a fixed amount per hour for any additional professional services or litigation required by the School Board. For the 1979-80 school year, the Board set his salary or retainer--terms which the School Board used interchangeably-- as shown by the Minutes of the July 11, 1979, meeting:

   
   

   3. SALARY/SCHOOL BOARD ATTORNEY - 1979-80 Chairman Hilliard opened the floor

   for discussion on the salary for the school board attorney for the 1979-80 school year. After some discussion between the board and Mr. Potter, the board proposed a retainer of $750.00

   per month. (annual salary of $9,000.00) plus $50.00 per hour for additional pro fessional services or litigation required by the board. ON MOTION by Sapp, seconded by Johnson, the board approved this pro- posal for school board attorney for the 1979-80 school year. (Vote: Arnold,

   yes; Johnson, yes; Taylor, yes; Sapp, yes; Hilliard, yes.)

   
   

5. His salary is paid from the School Board's regular employee salary account. But as the School Board's attorney, unlike other School Board employees, he does not accrue annual leave, sick leave, or pay during vacations, holidays or illness, though when he is sick or on vacation, there is no adjustment to his salary. He is reimbursed for work-related travel and meals at the rates provided by Section 112.061, Florida Statutes (1983), and is covered by the School Board's group health and life insurance, and Workers' Compensation. Since 1970, the Board has withheld his Social Security contributions from his fixed monthly salary payments; has paid the employer's Social Security contributions on his salary payments; and has annually reported his monthly salary payments on Internal Revenue Service Form W-2. To this

   extent, the School Board considered him an employee and treated him the same as it treated its other employees.

   
   

6. The legal services which he furnished the School Board are described in his employment agreement and the School Board's job description for the position:

   
   

   TYPICAL DUTIES:

   1. Attend all regular Board meetings and such special meetings as deemed

      advisable by Board Chairman or Superintendent.

   2. Be available for routine telephone or personal consultations with Board

      Chairman, Superintendent and Staff members.

   3. Perform legal research.

   4. Prepare or approve leases or agreements prior to execution by Board.

   5. Prepare and prosecute law suits in behalf of Board and defend law suits against Board, including any actions against Superintendent, Staff or other

      school district employees allegedly arising etc., unless special counsel is deemed necessary by Board Attorney with Board's concurrence.

   6. Attend the quarterly seminars/meetings of Florida School Board Attorneys Association; and any other approved by Board.

   7. Represent Board and/or Superintendent in personnel matters where appropriate, as

      well as student discipline matters.

      
      

      School Board meetings, held monthly, last approximately one and one-half hours. Litigation, although described as a typical duty, is considered extra work, and an hourly rate is charged over and above the monthly salary. Petitioner agrees that he would not knowingly accept any new clients which would cause a conflict of interest with his School Board employment. Although he has been free to turn down work assigned by the School Board, he never has--at least through 1976. As explained by Mr. Strope, Superintendent of Schools from 1968 to 1976, although petitioner was free to turn down work, he "shouldn't have." Petitioner is not required to maintain any set office hours, and his monthly salary does not vary with the number of hours' work.

      
      

7. He is not furnished office space by the School Board. The majority of his legal work for the Board is performed at his private law office, in Clewiston. The cost of operating his law office is not a budget item in the School Board's budget. Under his employment arrangement with the School Board, he furnishes all personnel, equipment, and facilities needed to perform his services. He is responsible for supervising the secretaries who work in his private office. Occasionally, when he is at School Board headquarters in Moore Haven he will ask a School Board employee to type a document.

   
   

8. At his request, however, the School Board will furnish him pencils, legal pads, legal periodicals and stationery. It also pays for his travel; for per diem expenses incurred while attending legal seminars or meetings; and for long distance telephone calls made in connection with his School Board employment.

9. He is neither responsible for, nor supervises, any employee of the School Board. The School Board does not furnish him any legal secretaries or part-time attorney assistants.

   
   

10. He has not shown what percentage, or amount, of his working hours are devoted to performing legal services for the School Board, as opposed to legal services which he performs for his other clients.

    
    

11. Other than assigning specific legal tasks, the School Board exercises no more control over the means, methods, and manner by which petitioner performs the legal work given him than is ordinarily exercised by any client over an attorney. Because of ethical constraints and the nature of legal work, petitioner must exercise independent professional judgment.

    
    

12. Since September 1, 1970 2/, petitioner has been enrolled in the FRS. This was accomplished by his filling out a prescribed form which the School Board then filed with the Division. The Board then began reporting him on its employee rolls. There is no evidence that the initial FRS entry form, filed with the Division, described petitioner's work duties or the nature of his employment with the School Board. Both the Board and the Division enrolled him in the FRS, believing that he was eligible for membership. The Division did not question or investigate the nature of his employment relationship with the Board until 1983.

    
    

13. From his initial enrollment until January 1, 1975, when FRS became a non-contributory system, petitioner contributed one-half of the the required FRS contribution, while the School Board contributed the other half. Since January 1, 1975, the School Board has contributed 100 percent of his contributions to FRS.

    
    

14. During the 1970s petitioner's membership in the FRS prevented him from participating in any other tax sheltered retirement plan. 3/

    
    

15. Since July 1, 1979, the Division has, by rule, given notice that consultants and other professional persons contracting with public employers are, ordinarily, ineligible for membership in the FRS. All public employers, including the School Board, have been asked to remove such persons from their retirement payrolls.

    
    

16. Since at least July 8, 1981, petitioner was on notice that his status as an employee, and his eligibility for continued membership in the FRS, were in question.

    
    

17. Both the parties stipulate that part-time electricians, plumbers, painters, combustion engine mechanics, air conditioning mechanics, janitors or sewage plant operators (and even other occupations) employed in 1983 by the Glades County School Board on a year-round salary basis (i.e., at least 10 consecutive months), and paid out of the School Board's regular salary and wage account, would be mandatory members of FRS by statute. (Prehearing Stip., para.

    E. 6)

    
    

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. 120.57(1), Fla. Stat. (1983).

19. The Division of Retirement has the burden of proving that petitioner, a member of the FRS for over 12 years, is ineligible and should be removed from membership. It is the Division which asserts the affirmative of the issue--that petitioner is ineligible and should be removed--and it is the Division which seeks to change the status quo. See, Florida Department of Transportation v. J.W.C., Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981); Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977).

    
    

20. An employee, for whom membership in the FRS is compulsory, is defined as "...any person receiving salary payments for work performed in a regularly established position (e.s.) 121.021(11), Fla. Stat. (1983). A regularly established position is one which will be in existence for at least 4 consecutive months. Rule 22B-1. 04 (5)(b), Fla. Admin. Code. There is, however, an exception for temporary positions, which--even if existing for 4 months or more--are not eligible for membership in the FRS. Rule 22B-1.04(5), (6). A temporary position in a local agency, such as the School Board, is defined by Rule 22B-1.04(6)(e)6 and 22B-6.01(12), Florida Administrative Code:

    
    

    22B-1.04(6)(e).

    The following types of positions in a local agency [defined to include county school boards] are considered temporary positions for retirement purposes. This is not a complete

    list of temporary positions and should be used only as a guide, along with the definitions above, in determining

    if an individual is filling a temporary position.

    * * *

    6. Consultants and Other Professional Persons on contract (as defined in

    22B-6.01(12)

    * * * 22B-6.01(12).

    
    

    CONSULTANT OR OTHER PROFESSIONAL PERSON--

    Means an individual who: agrees to pro- vide certain services; works according to his own methods; is not subject to the con- trol of his employer, except as to the results of his work; and does not enjoy

    the fringe benefits offered by the employer. A consultant or other professional person usually: is compensated from another salaries and wages account; does not earn annual or sick leave; and may frequently

    do a majority of his work in his own office rather than on the employer's premises. (See 22B-1. 04(6)(e)(6).

    
    

21. By its April 29, 1983, notice to petitioner, the Division takes the view that, since 1970, petitioner has been a consultant or other professional person for the School Board within the meaning of the above rule; that he thus has occupied a temporary position, not a regularly established one, and is ineligible for membership in the FRS as of the effective date of Rule 22B- 6.01(12)--July 1, 1979. The Division has substantiated its position by a

    preponderance of the evidence and it is, therefore, concluded that petitioner has acted as, and continues to be, a consultant or other professional person for the board; that he has filled, and continues to fill, a temporary position within the meaning of Rules 22B-1.04(5),(6)(e), and 22B-6.01(12); and that he is thus ineligible for membership in the FRS as of July 1, 1979, the effective date of Rule 22B-6.01(12), the rule which interprets and refines the statutory language being implemented.

    
    

22. This conclusion follows from applying the factors expressed by Rule 22B-6.01(12). Annually, since 1970, petitioner has engaged in the private practice of law. As part of that practice, he agreed to provide legal services to the school board of a neighboring county. He performs the services according to his own methods; he is not accountable to the board nor subject to its control except as to the assignment of specific tasks and the results reached; and he does not receive the same fringe benefits enjoyed by other school board employees. Although he was compensated from the Board's salary and wage account, he does not earn annual or sick leave; and he does a majority of his School Board work in his own private law office, not on the Board's premises. The Board furnishes him no office space, office equipment, or secretarial assistance.

    
    

23. Contrary to petitioner's assertion, the Division is not estopped from removing him from the FRS, as of July 1, 1979. In Henry v. State Department of Administration, 431 So.2d 677 (Fla. 1st DCA 1983), the court upheld the Division's authority to disenroll Henry as of the date when he was determined to be ineligible, but found that retroactive disenrollment would be inequitable because:

    
    

    During the four and a half years in which the agency failed to

    investigate appellant's eligibility and treated him in all respects as if he were a properly participating

    member of FRS, appellant had no notice that he was ineligible for membership

    in FRS or that his status was tentative, pending an investigation. He was forced to forgo other retirement alternatives during the period in question. (e.s.)

    
    

    431 So.2d at 681.

    
    

24. In the instant case, the Division failed to investigate petitioner's eligibility for approximately 13 years. During that time, it treated him in all respects as if he were an eligible member of the FRS. But here, unlike in Henry, the Division gave notice by Rule 22B-6.01(12), effective July 1, 1979, that consultants or other professional persons, as defined, were ordinarily ineligible for membership in the FRS. This rule placed him on notice, at least constructively, that his enrollment was tentative or questionable. And here, unlike in Henry, the Division seeks to disenroll only as of the date petitioner was placed on notice that his status in the FRS was in doubt.

    
    

25. Furthermore, estoppel has not been proven. It contains three essential elements: (1) A representation as to a material fact as contrary to a later asserted position; (2) reliance on that representation; and (3) a change in position detrimental to the party claiming estoppel caused by the representation and reliance thereon. State Department of Revenue v. Anderson,

    403 So.2d 397 (Fla. 1981). It may be applied against the state only under exceptional circumstances. A state officer must have committed a positive act upon which an aggrieved party reasonably relied to its detriment; failure to act will not suffice. See, Greenhut Construction Co., v. Henry A. Knott, Inc., 247 So.2d 517, 524 (Fla. 1st DCA 1971); State v. Hadden, 370 So.2d 849, 852 (Fla. 3d DCA 1979)

    
    

26. In the instant case, petitioner failed to prove an essential element: that an officer of the Division, by positive act, made a representation as to a material fact which petitioner relied on to his detriment. While the Division may be faulted for waiting 13 years before affirmatively investigating and deciding his eligibility, such failure to act cannot invoke equitable estoppel.

    
    

27. The harshness of disenrolling petitioner from the FRS can be lessened if accompanied by two actions--one by the Division, the other by the School Board. First, the Division should refund to petitioner and the Board all contributions which, in the past, have been made to his FRS account. Second, the Board should promptly pay its refunded contribution to petitioner. After all--for 13 years--both parties to this employment relationship acted upon the assumption that petitioner was an FRS member and entitled to FRS benefits. His ultimate, and unexpected disenrollment creates a dilemma since the Board cannot make good on its promise of FRS benefits. However, if petitioner receives the Board's refunded contribution, he can--at least to some extent--be compensated without any additional expenditure by the Board. The Board, of course, is not a party to this proceeding and any remedial action it may take rests with its sound discretion.

    
    

28. Refunding all FRS contributions to petitioner and the Board is consistent with, and logically follows from, the Division's position in this case. As made clear in its proposed recommended order, the Division asserts that petitioner has never been legally qualified for FRS membership, that his enrollment was an error or void from the beginning:

    
    

    Since petitioner has always been a professional person on contract he has never been "classified" as "employee."

    
    

    ...In [this]...case, we are questioning the original enrollment and we do not agree that the original enrollment was proper. The passage of time does not cure an improper enrollment. (e.s.)

    
    

    (Petitioner's Proposed Recommended Order, p. 12.)

    
    

    No authority has been found which would forbid the return of FRS contributions which were mistakenly paid by an employer and an employee, and mistakenly accepted and retained by the Division.

    
    

29. The parties' proposed findings of fact have been considered in preparing this recommended order. To the extent the findings were not consistent with the weight of credible evidence, they have been either rejected, or, when possible, modified to conform to the evidence. Additionally, proposed findings which were subordinate, cumulative, immaterial, or unnecessary, have been rejected.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED:

1. That the Division enter an order removing petitioner from membership in the Florida Retirement System, as of July 1, 1979; and

   
   

2. That the Division return to petitioner and the School Board their respective FRS contributions, mistakenly made to his account.

DONE and RECOMMENDED this 14th day of February, 1984, in Tallahassee, Florida.

R. L. CALEEN, JR. Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 14th day of February, 1984.

ENDNOTES

1/ The evidence consists of the testimony of Lester Mensch, Juanita Morris, L.

E. Strope, Richard Cooney, and Andy Snuggs, together with petitioner's Exhibit Nos. 1-3 and Respondent's Exhibit No. 1.

2/ He was not enrolled in any preexisting retirement system when he first joined FRS, in September, 1970.

3/ See, Federal Internal Revenue Code 219 (1974)

COPIES FURNISHED:

Harry A. Blair, Esquire Post Office Box 1467

Fort Myers, Florida 33902

Augustus D. Aikens, Jr., Esquire

Division of Retirement Cedars Executive Center 2639 North Monroe Street Suite 207 - Building C Tallahassee, Florida 32303

Nevin G. Smith, Secretary Department of Administration

435 Carlton Building Tallahassee, Florida 32301

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA DIVISION OF RETIREMENT

JOHN M. POTTER,

Petitioner,

vs. DOAH CASE NO. 83-1747

DR83-10

STATE OF FLORIDA, DEPARTMENT OF ADMINISTRATION, DIVISION OF RETIREMENT,

Respondent.

/

FINAL ORDER

On September 26, 1983, R. L. Caleen, Jr., Hearing officer with the Division of Administrative Hearings, held a formal hearing in this case at Moore Haven, Florida.

APPEARANCES

For Petitioner: Harry A. Blair, Esquire

Post office Box 1467

Fort Myers, Florida 33902

For Respondent: Augustus D. Aikens, Jr. Esquire

Division of Retirement Cedars Executive Center 2639 North Monroe Street Suite 207, Building C Tallahassee, Florida 32303

A recommended order was issued on February 14, 1984. After consideration of the evidence, pleadings and recommended order in the case, the Hearing Officer's recommended order is adopted by the Division of Retirement except as follows:

Upon consideration of the evidence in this cause, Paragraph 12 of the Findings of Fact is amended to read as follows:

12. Since January 31, 1971, 2/ Petitioner has been enrolled in the FRS. This was accomplished by his filling out a prescribed form which the School Board then filed with the Division. The Board then began reporting him on its employee rolls. There is no evidence that the initial FRS entry form, filed with the Division, described Petitioner's work duties or the nature of his employment with the School Board. Both the Board and the Division enrolled him in the FRS, believing that he was eligible for membership. The Division through its auditor questioned Petitioner's employment status in 1981. / 2a

The Conclusion of Law is also amended to read:

2. The burden of proof lies with Petitioner.

The affirmative of the issue before the undersigned is: whether John

M. Potter, has met the requirements for membership in the Florida Retirement System from (at least) July 1, 1979 to present.

Respondent did not attempt to assert the affirmative of that issue, rather it was forced to defend the contrary position. As the court so eloquently stated in Balino v. Department of Health and Rehabilitative Services, 348 So.2d

349 (Fla. 1st DCA 1977) at p. 351, "certainly one who defends a position cannot at the same time be described as having the affirmative of that position.

Petitioner, has sought, to rely on Balino for a contrary holding. However, an enlighted reading of Balino offers Petitioner little support. The federal regulation (45 C.P.R. 405-126-128) did not require Medicaid recipients to prove continued eligibility. The Florida Retirement Act, Chapter 121, Florida Statutes, requires participants to prove continued eligibility. Section 121.021(12) defines member as "any officer or employee who is covered or who becomes covered under this system in accordance with this chapter..."(emphasis supplied). Participation is compulsory as a condition of employment only for officers or employees. Whether an employee or not, retirees employed on or after December 1, 1970 and officers and employees of University Athletic Association, Inc., are excluded from participation. Section 121.051, Florida Statutes.

Once employed in a covered position, the employee becomes a member from the date of employment and creditable service is awarded to the member "beginning with the first day of employment with an employer covered under a state- administered retirement system consolidated herein and continuing for as long as the member remains in an employer-employee relationship with an employer covered under this Chapter..." Section 121.021(30). Even the properly enrolled member can participate only so long as they remain in an employer-employee relationship. If the relationship changes, the employee must reapply and submit appropriate information to enroll the member. Rule 22B-1.02(5).

Since Petitioner has always been a professional person on contract he has never been "classified" as "employee". His status is contrary to the initial classification of eligibility of Balino.

In Balino, the Petitioner was properly enrolled (or given the benefit) at the time he or she first applied. So there was never any question of his/her initial eligibility and award-of the benefit. Proper enrollment and award of the benefit was assumed at the Balino hearing.

In this case, Petitioner's original enrollment is questioned and I do not agree that original enrollment was proper. The passage of time does not cure an improper enrollment.

The instant case is no different than a case in which a person is enrolled in FRS and the Division immediately (or very quickly) challenges the enrollment. In such a case, the burden would be on the Petitioner to justify the initial enrollment.

In this case, we are asking Mr. Potter to justify his original enrollment.

Accordingly, Balino is applicable to the instant proceeding only to the extent it affirms the general rule that the burden of proof is on the party asserting the affirmative of the issue before an administrative tribunal. The burden of proof was on Petitioner, and he has failed to carry forth his burden.

Accordingly, it is ORDERED

1. That Petitioner is removed from the Florida Retirement System, as of July 1, 1979 and

   
   

2. All contributions made by the Clades County School Board for Petitioner's service after July 1, 1979, shall be returned to the School Board and Petitioner's account will be adjusted accordingly.

DONE and ORDERED this 2nd day of March, 1984, at Tallahassee, Florida.

ANDREW J. MCMULLIAN III

State Retirement Director Division of Retirement Cedars Executive Center 2639 North Monroe Street Suite 207 - Building C Tallahassee, Florida

FILED WITH THE CLERK OF THE DIVISION OF RETIREMENT THIS 2nd DAY OF MARCH, 1984.

ENDNOTES

1/ *

2/ He was not enrolled in any preexisting retirement system when he was first employed by the School Board in September, 1970. (Testimony of Andy Snuggs) No members were enrolled in FRS until December 1, 1970. Section 121.051, Florida Statutes, (1983).

2a/ In Petitioner's written agreement with the Clades County School Board dated July 8, 1981, covering the 1981-82 school year, Petitioner acknowledges his 'employee" status had been questioned before 1983 by Respondent's auditor.

"The state auditor has recently questioned my status as an employee."

The agreement was drawn in a manner to provide protection to Petitioner if it was finally determined he was not an employee. (Petitioner's Exhibit 1.)

*NOTE: Endnote 1/ was not found in the document on file in the Clerk's Office and therefore not a part of this ACCESS document.

COPIES FURNISHED:

Harry A. Blair, Esquire Post Office Box 1467

Fort Myers, Florida 33902

Augustus D. Aikens, Jr., Esquire

Division of Retirement Cedars Executive Center 2639 North Monroe Street Suite 207 - Building C Tallahassee, Florida 32303

R. L. Caleen, Jr., Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

Docket for Case No: 83-001747

Orders for Case No: 83-001747