STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HEARTLAND PRIVATE INDUSTRY )

COUNCIL, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 91-7578

)

DEPARTMENT OF LABOR AND )

EMPLOYMENT SECURITY, )

)

Respondent. )

)

RECOMMENDED ORDER

There being no dispute regarding the operative facts here involved the parties waived the holding of a formal hearing and, in lieu thereof, submitted to the Hearing Officer a Joint Stipulation Of Facts, proposed recommended orders and requested the Hearing Officer submit a recommended order to the Department. The Joint Stipulation was received June 30, 1992.

APPEARANCES

For Petitioner: Larry R. Jackson, Esquire

300 Parkview Place Lakeland, Florida 33805

For Respondent: Carolyn Cummings, Esquire

Hartman Building, Suite 307-2102 Capitol Circle SE

Tallahassee, Florida 32399 STATEMENT OF THE ISSUES

Whether the Department of Labor and Employment Security properly disallowed the payment by Petitioner of $24,096 to a former executive director of the Federal Job Training Program as settlement of a proposed action at law in the Federal Court by the Former executive director as a result of his dismissal as executive director by Petitioner.

PRELIMINARY STATEMENT

In August 1989, the Heartland Private Industry Council (HPIC) Executive Board voted to terminate the employment contract of the HPIC executive director, Clifton Thomas, Jr. Thereafter, Thomas engaged the services of an attorney who advised the HPIC that Thomas would file a suit against the HPIC in the Federal district court to recover damages for Thomas' dismissal, but that he would drop the suit upon the payment of $24,096 to Thomas. This was presented to the executive board at a December 14, 1989, meeting at which it was pointed out to the Board that use of Federal monies to settle this claim was questionable and would likely be contested. The Board voted to accept the offer and pay Thomas

the funds requested. At a subsequent audit, the auditor excepted the payment of this settlement from Joint Training And Partnership Act (JTPA) funds, and the Department of Labor and Employment Security demanded HPIC reimburse the JTPA funds from non-appropriated funds. HPIC objected to this demand and requested an administrative hearing to challenge this assessment. These proceedings followed. The findings below are those stipulated to by the parties.

FINDINGS OF FACT

1. On August 17, 1989, the Executive Board acting for the Local Elected Officials of the Heartland Employment and Training Consortium, voted to terminate Clifton Thomas, Jr., from his position as Executive Director of the Heartland Private Industry Council.

   
   

2. At the time of his termination from employment, Mr. Thomas was being paid the sum of $47,528 per annum.

   
   

3. Mr. Thomas' salary was established on an annual basis by the Executive Board.

   
   

4. On or about December 1, 1989, Mr. Thomas, acting through his attorney, Mr. Robert McKee, notified E. John Dinkel, III, acting as counsel for the Executive Board, that he intended to file a law suit against the Heartland Employment and Training Consortium and its Executive Board. The complaint to be filed in the United States District Court, Middle District of Florida, Tampa, Division, demanded equitable relief and damages and alleged that Mr. Thomas was fired without justification and "was not accorded due process."

   
   

5. Mr. Dinkel, acting as counsel for the Executive Board, was able to obtain agreement from Mr. McKee, acting as counsel for Mr. Thomas, that the complaint would be dropped upon payment of $24,096 to Mr. Thomas.

   
   

6. At a regularly scheduled meeting of the Heartland Private Industry Council held on December 14, 1989, the Council voted to concur in a payment of

   $24,096 to Mr. Thomas to avoid the cost of litigation. It was understood and agreed that a statement would be signed by Mr. Thomas denying any liability or wrongdoing by any of the parties to the action.

   
   

7. At a specially convened meeting of the Executive Board of the Heartland Consortium held on December 15, 1989, the Board unanimously agreed to the settlement.

   
   

8. On December 21, 1989, a check in the amount of $21,598.40 was issued to Mr. Thomas. This amount represented the agreed upon amount minus a levy from the Internal Revenue Service. The check (#010471) was charged to the pooled administrative funds from allocations through State of JTPA formula monies.

   
   

9. In consideration of the above payment, Mr. Thomas gave up his threatened law suit and signed a statement, dated December 22, 1989, denying any wrongdoing on the part of the Executive Board, the Heartland Private Industry Council and any officers or employees of the Board or Council.

   
   

10. In the annual audit of the Heartland Private Industry Council conducted by Grant Thornton, Accountants and Management Consultants, the use of JTPA monies to pay the former Executive Director was questioned. The auditor stated: "The use of JTPA funds in settlement of legal claims was determined by Florida Department of Labor and Employment Security to be an unallowable cost

    under State and Federal law as indicated in a letter to the Council's attorney dated November 6, 1989, therefore this is a questioned cost."

    
    

11. On September 30, 1991, the Heartland Private Industry Council received notification from Patricia S. Gilbert, Director, DLET that the costs questioned by the auditor were disallowed. No reason other than that cited by the auditor was given.

    
    

12. On October 24, 1991, Heartland Private Industry Council, Inc., notified the Department of Labor of their intent to appeal the disallowed cost.

    
    

13. On November 1, 1991, Jack E. Lyons, Executive Director of the Heartland Private Industry Council, wrote a letter to Secretary Scruggs, questioning the applicability of the statutes, both State and Federal, that were cited by the auditor in the statement of questioned costs.

    
    

14. At a regularly scheduled meeting of the Heartland Private Industry Council held on April 17, 1992, the Council denied any misapplication of Federal JTPA dollars and voted to not permit the Executive Director to settle the disallowed costs by payment from non-JTPA dollars.

    
    

15. The attached documentation styled Index of Exhibits, containing fourteen (14) exhibits is incorporated by reference into the proposed Statement of Facts.

    
    

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

    
    

17. Section 215.425, Florida Statutes, provides generally that "no extra compensation shall be made to any officer, agent, employee, or contractor after the service has been rendered or the contract made; . . . " Petitioner argues that Thomas was not an officer or employee as contemplated by the statute and, even if he was, he was not paid for past performance but solely to induce him to drop a law suit defending which could have become very expensive for Petitioner. To resolve the issue here, it is not necessary to rely on Section 215.425.

    
    

18. This program resulted from Federal law, and most of the monies to carry out the program are Federal funds. 20 C.F.R. 629.37 provides in pertinent part:

    
    

    1. General. To be allowable, a cost must be necessary and reasonable for proper and efficient administration of the program, be

       allowable thereto under these principles, and, except as provided herein, not be a general expense required to carry out the overall responsibilities of the Governor or sub- recipient. Costs charged to the program

       shall be consistent with those normally allowed in like circumstances in non- federally sponsored activities and with applicable state and local law, rules or regulations, as determined by the Governor.

       * * *

       1. The Governor shall issue guidelines on allowable costs for SDA, Title III substate area and statewide programs that shall include provisions that:

          1. Costs resulting from violations or failure to comply with federal, state or local laws and regulations are not allowable; . . .

       
       

19. In a U.S. Department of Labor Final Determination (August 30, 1990), Grant No. 99-3-3192-02-252-020 case involving the State of Wisconsin, operation of Employment and Training Administration (ETA) funded programs, auditors questioned costs in the amount of $7000 because the grantee paid grievance settlement charges with Federal funds. The costs in the settlement document were called back pay. "Further investigation of the issues revealed that the basis for the back pay of funds paid to the employee was a court order" resulting in the costs being disallowed. Since the court found the employee's entitlement to the "back Pay" resulted from violations of federal or state regulations, the costs were clearly barred by 20 C.F.R. 629.37(c)(a), noted above.

    
    

20. The payment made here was to avoid the possibility of a court order directing the council to pay Thomas damages resulting from the council's violation of Thomas' constitutional right to due process. If the payment had been directed by the court, it would not have been allowed as a cost paid from federally supplied funds under the Wisconsin decision noted above. The cost of a settlement to preclude the issuance of a court order can have no more authorization for payment than could the court order.

    
    

21. Although the council was sincere in its belief that the best solution of the problem represented by the law suit was to settle the suit, the settlement itself is predicated upon the premise that the court could have found the action of the council in discharging Thomas to be a violation of federal or local laws. Accordingly, the payment of this settlement from federal funds is not authorized.

RECOMMENDATION

It is recommended that a Final Order be entered finding the payment to Clifton Thomas, Jr., of $24,096 in settlement of his law suit against the Heartland Private Industry Council Inc. to be a nonallowable cost and improperly charged to federally provided funds.

RECOMMENDED this 29th day of July, 1992, in Tallahassee, Florida.

K. N. AYERS Hearing Officer

Division of Administrative Hearings The Desoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 29th day of July, 1992.

COPIES FURNISHED:

Larry R. Jackson, Esquire

300 Parkview Place Lakeland, FL 33805

Carolyn Cummings, Esquire Hartman Building, Suite 307-2102 Capitol Circle SE

Tallahassee, FL 32399

Frank Scruggs, Secretary

303 Hartman Building 2012 Capital Circle SE

Tallahassee, FL 32399-2152

Cecilia Renn

Chief Legal Counsel

307 Hartman Building 2012 Capital Circle SE

Tallahassee, FL 32399-2152

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 91-007578

Orders for Case No: 91-007578