vs. ) CASE NO. 88-4369
JIM C. HAYWOOD, )
Respondent. )
Pursuant to written notice a formal hearing was held in this case before Larry J. Sartin, a duly designated Hearing Officer of the Division of Administrative Hearings, on November 29, 1989, in Jacksonville, Florida.
For Petitioner: John E. Duvall, Esquire
For Respondent: Stephen K. Moonly, Esquire
By letter dated May 3, 1988, the Petitioner, the University of North Florida (hereinafter referred to as the "University"), informed the Respondent, Jim C. Haywood, that Mr. Haywood had received an overpayment of $7,487.52 for annual leave and requesting that Mr. Haywood repay the University for this amount. By letter dated May 12, 1988, Mr. Haywood disputed the amount of the alleged overpayment and requested an administrative hearing pursuant to Section 120.57(1), Florida Statutes. Mr. Haywood's request for hearing was forwarded to the Division of Administrative Hearings.
At the formal hearing the parties filed a Stipulation as to Undisputed Facts. In this Stipulation the parties have agreed to certain facts. Those facts have been accepted and incorporated in this Recommended Order. Pursuant to paragraph 5 of the Stipulation, the parties agreed that Mr. Haywood should be designated as the Petitioner and the University should be designated as the Respondent. The University, however, has the burden on proof in this case and will therefore remain designated as the Petitioner.
At the formal hearing the University presented the testimony of Art Cozart and Edward Cellon. The University also offered six exhibits which were marked as "UNF" exhibits and accepted into evidence.
Mr. Haywood presented the testimony of Brett J. Lewis and testified on his own behalf. Mr. Lewis was accepted as an expert in tax law.
The parties have filed proposed recommended orders containing proposed findings of fact. A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order or the proposed finding of fact has been accepted or rejected in the Appendix which is attached hereto.
Whether the University can require that Mr. Haywood repay $7,487.52?
Jim C. Haywood is a Certified Public Accountant and has several years experience in financial and administrative positions. Mr. Haywood has earned a Masters in Accounting Degree.
From 1959 through April, 1968, Mr. Haywood served as the Director of Financing and Accounting for the Florida Board of Regents.
From April, 1968, through September, 1969, Mr. Haywood served as the Associate Director of Planning and Evaluation and the Budget Administrator for the State University System under the Florida Board of Regents.
From September, 1969, through August, 1970, Mr. Haywood served as Comptroller of the University.
From August, 1969, through January, 1986, Mr. Haywood served as Dean, Associate Vice President or Vice President and as head of administrative affairs at the University.
Mr. Haywood was employed by the University from September 1, 1969, through August 30, 1987.
Mr. Haywood is familiar with the policies of the Florida Board of Regents concerning accrued annual leave and the payment therefore upon retirement. In August and September of 1987, Mr. Haywood refamiliarized himself with these policies.
Mr. Haywood retired from the University in August of 1987.
Prior to his retirement, Mr. Haywood met with Art Cozart, University Classification and Pay Coordinator. Mr. Cozart provided Mr. Haywood with a certificate (hereinafter referred to as the "Certificate") which described the amount of accrued annual and sick leave Mr. Haywood was entitled to payment for upon his retirement.
The Certificate provided, in pertinent part, the following: This is to certify that Mr. Jim C.
Haywood, S.S.#252-52-7270, has a leave balance with the University of North Florida as follows:
Annual Leave: 352.0 hours
$7,458.96
Sick Leave: 2,328.50 hours
$14,599.62
The stated amount will be laid upon termination of service with the University. [Emphasis added].
The total amount to "be paid upon termination of service" according to the certificate is $22,058.58. This is the gross amount of pay attributable to Mr. Haywood's accrued leave. The actual amount Mr. Haywood was entitled to receive, the net amount payable, was $22,058.58 less twenty percent federal income tax withholding. The Certificate does not, however, distinguish between the gross amount of pay and the net amount which Mr. Haywood was to receive. Nor did Mr. Haywood and Mr. Cozart discuss whether the amounts on the Certificate were gross amounts or net amounts to be paid to Mr. Haywood.
Mr. Haywood was provided a Leave Payment Clearance Form dated September 14, 1987, indicating that Mr. Haywood was entitled to payment for only
240 hours of annual leave.
Mr. Haywood used the Certificate to obtain a thirty-day loan of
$22,893.00 from a private institution. Mr. Haywood borrowed this amount because of the amount listed on the Certificate. Mr. Haywood intended to use the money he received for his accrued leave to repay this loan. Mr. Haywood intended to use this money for living expenses between his retirement and the time when his retirement benefits were to begin.
On September 25, 1987, Mr. Haywood received two checks from the Florida Office of Comptroller. One check was in the amount of $5,939.15 and the other was in the amount of $5,990.02. There was no indication on the checks as to what they were in payment for.
On October 8, 1987, Mr. Haywood received a check from the Florida Office of Comptroller in the amount of $11,831.00. There was no indication on the check indicating what the payment was for.
The total amount of the three checks received by Mr. Haywood on September 25, 1987, and October 8, 1987, was $23,760.17. The total amount Mr. Haywood received was consistent with what Mr. Haywood expected to receive because it was similar to the amount listed on the Certificate. What Mr. Haywood expected, however, was the gross amount he was entitled to before federal income tax withholding. The amount of the three checks Mr. Haywood received, however, was the net amount payable on a gross amount of $29,764.00.
One of the two checks received by Mr. Haywood on September 25, 1987, constituted the net amount owed to Mr.
Haywood for annual leave. The other check received on September 25, 1987, was an overpayment of accrued annual leave. This overpayment was made in error by the University. Mr. Haywood was paid twice for annual leave. The evidence failed to prove why there was a discrepancy in the amounts of the two checks or which check constituted the overpayment.
The W-2 form provided to Mr. Haywood for the 1987 tax year included the amount of gross income for which Mr. Haywood received an overpayment. Mr. Haywood therefore, included $7,487.52 in his gross taxable income for federal
income tax purposes for 1987, attributable to the overpayment of accrued annual leave he received.
As a result of the inclusion of the overpayment in Mr. Haywood's taxable income, approximately $2,665.00 of federal income taxes attributable to the $7,487.52 of gross income and its effect on taxable income were paid by Mr. Haywood.
Mr. Haywood has not filed an amended federal income tax return for 1987. Nor has Mr. Haywood communicated with the Internal Revenue Service concerning this matter.
Mr. Haywood has not been provided with an amended W-2.
In April of 1988, the University determined that Mr. Haywood had been overpaid for accrued annual leave.
On May 3, 1988, the University notified Mr. Haywood of the overpayment of accrued annual leave and demanded reimbursement.
On May 12, 1988, Mr. Haywood disputed the amount of the overpayment and requested an administrative hearing pursuant to Section 120.57, Florida Statutes. Mr. Haywood has not repaid any amount of the overpayment.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding. Section 120.57(1), Florida Statutes (1987). The University and Mr. Haywood have standing to participate in this proceeding. See Section 240.2011, Florida Statutes.
The burden of proof in this proceeding is on the University to prove its entitlement to require payment of the amount in controversy. Department of Transportation v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981). Although the parties stipulated to a redesignation of which party was the Petitioner and which party was the Respondent, counsel for the Respondent indicated that there was no agreement as to the burden of proof in this case. Page 8, lines 6-10, of the transcript. Therefore, the designation of party status has not been changed.
The parties have not disputed that Mr. Haywood received a gross overpayment of $7,487.52 from the University by mistake. Pursuant to Rule 6C- 5.305(1)(d)1, Florida Administrative Code, Mr. Haywood was entitled to payment upon his retirement for 240 hours of accrued annual leave. Mr. Haywood was paid twice for his 240 hours of accrued annual leave, however.
Nor has Mr. Haywood disputed the fact that the State of Florida is entitled to reimbursement of some amount of the overpayment that he received. Pursuant to Rule 3A-31.309(1)(a), Florida Administrative Code, the double payment received by Mr. Haywood for his accrued annual leave constitutes an overpayment of salary. Pursuant to Rule 3A-31.309(1)(b), Florida Administrative Code, the University is obligated to seek repayment from Mr. Haywood.
The dispute between the parties to be resolved in this proceeding is the amount of the overpayment which should be repaid by Mr. Haywood and the manner in which the overpayment to be repaid should be remitted by Mr. Haywood. The University has taken the position that it has no authority to agree to
anything other than immediate and full payment of the entire amount of the gross overpayment. Mr. Haywood has apparently taken the position that he should be provided with an amended W-2 form so that he can obtain a refund of the federal income tax paid as a result of his reporting the overpayment in his 1987 taxable income and that he be allowed to pay some portion of the gross overpayment pursuant to a schedule of payments to be agreed upon. Mr. Haywood's position is not totally clear, however, because he has taken several positions during the pendency of this case.
In the letter filed by Mr. Haywood requesting an administrative hearing, Mr. Haywood simply stated that he disputed the amount of the overpayment. In light of the fact that the parties have stipulated that the gross amount of the overpayment is $7,487.52, Mr. Haywood has apparently abandoned this position. The parties have not specifically stipulated, however, that this is the amount which Mr. Haywood is ultimately required to repay.
In the opening statement on behalf of Mr. Haywood, it was argued, in part, as follows:
It's our position, and what we're here today seeking, actually, is that a ruling, if it's possible from the hearing officer, that the state be ordered to issue Mr. Haywood a revised W-2 form so that the detrimental tax
consequences incurred by him as a result of the procedural error in the overpayment would be vitiated somewhat, and alternatively we request that Mr.
Haywood pay back $4,862.52, which is the net amount remaining due and owing after you take out the net tax consequences suffered by him.
This argument supports the conclusion that the parties have not agreed upon the amount of salary overpayment which Mr. Haywood should be required to repay.
Finally, Mr. Haywood has taken another position in the proposed recommended orders included in his Proposed Recommended Order filed in this case. In pertinent part, the proposed recommended orders include the following:
The State Comptrollers' Office shall issue Jim Haywood an amended W-2 form to correct the adverse impact upon Mr. Haywood due to the University of North Florida's administrative procedural error.
Mr. Haywood shall submit a proposed schedule of repayment to the bureau of payroll for approval and all
parties shall proceed in accordance with s3A-31.309(g) et seq, Florida Administrative Procedure Act [sic].
Based upon the evidence in this proceeding and the conclusions of law made in this Recommended Order, it is concluded that the Mr. Haywood is either
not entitled to, or has failed to prove entitlement to, the various forms of relief which he is apparently seeking. It is also concluded, however, that the University has failed to meet its burden of proving the amount of the gross overpayment which must be refunded by Mr. Haywood
The University's position in this proceeding that it has no authority to take any action except to collect the entire amount of the gross overpayment is incorrect. The University is a public agency of the State of Florida. See Chapter 240, Florida Statutes. As such, the University must operate and manage its financial functions in accordance with applicable Florida statutory and administrative laws, including the provisions of Chapter 3A-31, Florida Administrative Code.
Rule 3A-31.309, Florida Administrative Code, governs the repayment or "refund" of overpayments of salary. Pursuant to Rule 3A-31.309(1)(a), Florida Administrative Code, a salary overpayment has occurred "when a State ... employee is paid an amount greater than that which is authorized and a refund is due and payable to the State of Florida." Simply determining the amount of the overpayment does not, however, complete the University's obligation. The University must comply with Rule 3A-31.309(1)(f), Florida Administrative Code, in determining the amount which must be refunded by the employee. In pertinent part, Rule 3A-31.309(1)(f), Florida Administrative Code, provides the following:
The exact amount of refund may be a gross amount, net amount, or some combination of employer expense and employee salary. The determination of whether an amount will be gross or net depends upon when the salary overpayment(s) occurred in relation to the Bureau's schedule for reporting federal withholding tax, social security, retirement, and other related information.
This portion of the Rule recognizes that an employee who receives an overpayment of salary may only receive a portion of the overpayment and that some portion of the overpaid salary may be paid for other obligations such as withholding tax and social security. When this occurs, whether the amounts paid for these other obligations may be recovered directly by the State (or the University on behalf of the State) as opposed to recovering these amounts from the employee should be considered in determining the "exact amount of the refund." Where, as here, the overpayment is not discovered until a taxable year later than the year in which the overpayment occurs the issue of how the overpayment should be recovered becomes more complicated.
The University's failure to take into account Rule 3A-31.309(1)(f), Florida Administrative Code, places Mr. Haywood in the position of refunding the entire amount of the gross overpayment without being able to recoup amounts paid by the State for federal income tax withholding.
The University is correct in its argument that it cannot agree to repayment of anything less than the amount of the overpayment. See Section 17.04, Florida Statutes. Rule 3A-31.309, Florida Administrative Code, takes this into account. Rule 3A-31.309(1)(e), Florida Administrative Code, reiterates the provisions of Section 17.04, Florida Statutes. The Rule goes on to provide, however, that the agency may obtain written permission from the
Department of Banking and Finance as to the amount of an overpayment to be refunded by an employee. The University has not taken any action in this case to determine what amount should be refunded by Mr. Haywood. Until the University makes this determination, the amount which must be refunded by Mr. Haywood cannot be determined.
Although the University has failed to prove the amount of the overpayment which may be recovered, Mr. Haywood has failed to prove he is entitled to the relief which he has indicated he is seeking in his request for hearing, the opening statement made on his behalf or in the proposed recommended orders quoted, supra.
First, with regard to the request that an amended W-2 be issued, no authority has been cited by any party, nor is the undersigned aware of any such authority, which authorizes the issuance of an amended W-2 form. Rule 3A- 31.309(1)(k), Florida Administrative Code, does authorize the issuance of corrected W-2's but the evidence in this case does not prove that the W-2 issued to Mr. Haywood for 1987 was in error or that it needs to be corrected. Mr. Haywood did in fact receive the amount of the overpayment in 1987, and it was not repaid. The overpayment did, therefore, constitute taxable income for 1987, and was properly included in gross income for federal income tax purposes. In the taxable year during which Mr. Haywood repays the overpayment, he may be entitled to a deduction from taxable income for the taxable year of the overpayment but this will not change the fact that the overpayment constituted gross income for federal income tax purposes in 1987.
Finally, Mr. Haywood has failed to prove that he should be allowed to repay whatever amount of the overpayment should be refunded by him pursuant to Rule 3A-31.309(1)(g), Florida Administrative Code. This portion of the Rule provides the following:
Each salary overpayment and
refund situation must be handled on an individual case basis. In the interest of fairness and equity, it is acknowledged that an individual who has received a salary overpayment may be unable to refund the exact amount in a lump sum. If such is the circumstance and the individual agrees to refund equitable partial amounts over a limited period of time, the department may draft a proposed schedule of payments and must submit such schedule to the Bureau for approval. If the schedule of payments is approved by the Bureau, then, and only then, the department is authorized to accept partial amounts over a limited period of time until the exact amount of the refund has been recovered on behalf of the State... [Emphasis added].
Pursuant to this portion of the Rule, the University may draft a schedule of payments which it must submit for approval. The schedule of payments may be drafted, however, only if the schedule is required "in the interest of fairness and equity", the individual is "unable to refund the exact amount in a lump sum", and the individual "agrees to refund equitable partial
amounts over a limited period of time." Although evidence was presented concerning whether fairness and equity require a payment schedule, Mr. Haywood failed to prove that he is unable to refund the exact amount in a lump sum.
Without such proof, the University is not required to submit a proposed payment schedule for approval.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the University's demand for repayment of $7,487.52, from
Mr. Haywood be denied until the University determines from the Department of Banking and Finance the amount of the gross overpayment which should be refunded by Mr. Haywood. It is further
RECOMMENDED that, once the University determines from the Department of Banking and Finance what amount of the gross overpayment should be refunded, the University should demand payment of the refund from Mr. Haywood and Mr. Haywood should pay the refund to the University.
DONE and ENTERED this 3rd day of February, 1989, in Tallahassee, Florida.
LARRY J. SARTIN
Filed with the Clerk of the Division of Administrative Hearings this 3rd day of February, 1989.
Norman R. Haltiwanger
4567 St. Johns Bluff Road South Jacksonville, Florida 32216
John E. Duvall, Esquire Post Office Box 41566 Jacksonville, Florida 32203
Stephen K. Moonly, Esquire Suite 2501, Independent Square Jacksonville, Florida 32202
The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.
Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection
1 4-6 and 8.
2-3 Hereby accepted.
4 11.
5 16.
6 See 23.
7 21.
8 22.
9 17.
10 See 18.
11-12 19.
15 23.
19 9.
20 Not supported by the weight of the evidence. The Certificate did not indicate that Mr. Haywood was entitled to payment for only 240 hours of annual leave.
21-22 12.
27-28 Hereby accepted.
29-31 Not supported by the weight of the evidence.
Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection
3-4 16.
