STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GILBERT M. RODRIGUEZ, )

)

Petitioner, )

)

vs. ) CASE NO. 92-2418RX

) DEPARTMENT OF ADMINISTRATION, ) DIVISION OF RETIREMENT, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, a formal administrative hearing and a rule challenge proceeding were heard on May 18, 1992, in Tampa, Florida, before Veronica E. Donnelly, a duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Gilbert M. Rodriguez, pro se

18506 Turtle Drive

Lutz, Florida 33549

For Respondent: Stanley M. Danek, Esquire

Division of Retirement Cedars Executive Center 2639 North Monroe Street Building C

Tallahassee, Florida 32399 STATEMENT OF THE ISSUES

Whether Rules 22B-6.001(11) and (16)(a)3, Florida Administrative Code, are invalid exercises of delegated legislative authority, as defined in Section 120.52(8), Florida Statutes.

PRELIMINARY STATEMENT

On April 21, 1992, Petitioner, Gilbert M. Rodriguez (Rodriguez) filed a petition to challenge the validity of two rules promulgated by Respondent, Department of Administration, Division of Retirement (the Division). The rules at issue describe the terms "bonus" and "compensation" as used by the Division in its classification of salary payments made to an employee by an agency for the calculation of the retirement benefit to be paid through the Florida Retirement System.

Petitioner Rodriguez contends that the terms set forth in Rules 22B- 6.001(11) and (16)(a)3, Florida Administrative Code, are invalid because they are overly broad, not reasonably related to the purpose of the enabling legislation, and generally conflict with the definitions of "compensation" and

"average final compensation" set forth in Chapter 121, Florida Statutes, the "Florida Retirement System Act." In addition, he alleges that restrictions placed upon salary payments by these rules adversely affect employees under the pay plan adopted by Hillsborough County for its management personnel from October 1, 1988 through September 30, 1991.

This rule challenge proceeding was consolidated with a pending formal administrative hearing previously assigned to Hearing Officer Veronica E. Donnelly for purposes of hearing. As the hearing officer has final order authority in the rule challenge proceedings and recommended order authority in the formal administrative hearing, the orders are filed separately.

During the hearing, Petitioner called three witnesses and filed sixteen exhibits. Six additional exhibits were marked and entered into evidence as joint exhibits. The Respondent presented two witnesses and filed three more exhibits. Official recognition was taken of Chapter 121, Florida Statutes [1985] through [1991], along with the applicable rules as they evolved over this time period.

A transcript of the proceeding was not ordered. The parties were granted leave until June 1, 1992, to file certain late-filed exhibits and until June 11, 1992, to file proposed findings of fact and conclusions of law. Rulings on the proposed findings of fact submitted by the parties which are related to the rule challenge are in the attached Appendix.

FINDINGS OF FACT

1. Between October 1, 1988 and September 30, 1991, Petitioner's salary as the Director of the Department of Emergency Support Services for Hillsborough County was controlled by the compensation structure set forth in the Hillsborough County Exempt Service Classification and Compensation Plan (the Plan). His retirement system benefits were governed by Chapter 121, Florida Statutes as he was a member of the Florida Retirement System administered by the Division of Retirement.

   
   

2. The Plan utilized by the County during this period of time created a pay structure for its exempt service employees that caused annual salary increases to be divided into two categories. The Plan referred to the categories as "merit increase" and "performance pay." Any salary adjustment under the "merit increase" category became part of the employee's adjusted base salary. "Performance pay" was an increase granted for a one year term. It was based upon work performance that exceeded performance standards during the preceding year.

   
   

3. According to the Plan, the increase in salary from each of the categories was directly tied to the employees' annual performance rating. The possible percentages of the increases were regulated at the high end of the adjustment scale by a Maximum Performance Compensation Table. The one year "performance pay" increase could only be granted if the maximum "merit increase" was granted during the same evaluation.

   
   

4. The method used to establish the pay increases for Petitioner under the Plan were applied because his salary was already above the midpoint of the pay grade the Plan dictated the County was willing to pay for the performance of his job when completed to the required standard.

5. Salary increases above the midpoint were divided into the two separate categories in order to balance two distinct County interests. The first was to keep the maximum salary range in a pay grade aligned with the competitive salary indicators in the geographical area for the same type of work. The second was to annually reward each employee whose performance exceeded standards over the past year and to motivate continued high performance on an individualized basis.

   
   

6. Petitioner's salary adjustments were divided between "merit increases" and "performance pay" for the three years which are the subject of this proceeding.

   
   

7. During the time period between October 1, 1988 and June 30, 1989, the County was required to make a contribution into the Florida Retirement System for Petitioner's benefit. This contribution was a statutorily designated percentage of his monthly salary, including the annual "performance pay" increase. The inclusion of the "performance pay" increase was required by Subsection 121.021(22), Florida Statutes, which defines "compensation".

   
   

8. In spite of this contribution into the system by the County, Subsection 121.021(24), Florida Statutes mandated that the Division had to exclude bonuses, whether paid as salary or otherwise, from the calculation of the "average final compensation" for a member seeking to establish the amount of his or her pension benefits.

   
   

9. Effective July 1, 1989, the Legislature removed the provision in Subsection 121.021(22), Florida Statutes, which required employers to make a contribution into the system based upon a definition of "compensation" that included "bonuses" in the calculation.

   
   

10. The Florida Retirement Systems Act has never included a definition of the word "bonus" as used in Subsections 121.021(22) and (24), Florida Statutes. The term, as used in Subsection 121.021(24) and as previously used in Subsection 121.021(22), is not plain nor the meaning clear.

    
    

11. The term "bonus" is defined by the Division's rules, which excludes Petitioner's "performance pay" from any calculation of his "average final compensation."

    
    

12. In its computation of Petitioner's "average final compensation", the Division determined that the "performance pay" category of the Hillsborough County Exempt Service Classification and Compensation Plan is a "bonus", as defined by Rule 22B-6.001(11), Florida Administrative Code.

    
    

13. A definition of the term "bonus" is necessary to allow the Division to compute the "average final compensation" for each member of the system and for the determination of an employer's contribution into the Florida Retirement System on behalf of the member based on "compensation."

    
    

14. Subsection 121.021(22), Florida Statutes, has consistently contained a clear definition of "compensation." The definition included the term "bonuses" until July 1, 1989 and excluded "bonuses" from the definition after that date.

    
    

15. The definitions of "bonus" and "compensation" as set forth in Rules 22B-6.001(11) and (16)(a)3, Florida Administrative Code, establish adequate standards for agency decisions regarding retirement benefits. The definitions are based on relevant factors duly considered by the agency and they have been uniformly applied to all members.

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of these proceedings. Sections 120.56 and 120.57, Florida Statutes.

    
    

17. A determination of what "bonus" means, as used in Chapter 121, Florida Statutes, is essential to allow the Division to collect contributions from employers and to calculate "average final compensation" for members of the system. Subsection 121.021(24), Florida Statutes; Rule 22B-6.001(6), Florida Administrative Code.

    
    

18. The term "bonus" as used in Chapter 121 is not plain nor the meaning clear. As a result, both the terms "compensation" and "average final compensation" are affected. To resolve any ambiguities as to the meaning of "bonus", Rules 22B-6.001(11) and (16)(a)3, Florida Administrative Code, were enacted by the Division.

    
    

19. The Division was delegated the legislative authority to promulgate rules defining the term "bonus" by Section 121.031, Florida Statutes, which provides:

    
    

    The Department of Administration through the Division of Retirement, shall make such rules as are necessary for the effective and efficient administration of this system.

    
    

20. Whether this delegation was a proper delegation of legislative authority is a question for the courts. The Hearing Officer's role is to determine whether "the action taken by the agency goes beyond the powers, functions and duties actually delegated by the Legislature." Section 120.56(1), Florida Statutes.

    
    

21. In an administrative determination of the invalidity of rules as invalid exercise of delegated legislative authority, Section 120.52(8), Florida Statutes, provides in pertinent part:

    
    

    . . . A proposed or existing rule is an invalid exercise of delegated legislative authority if any one or more of the following apply:

    1. The agency has materially failed to follow the applicable rulemaking procedures set forth in s. 120.54;

    2. The agency has exceeded its grant of rulemaking authority citation to which is required by s. 120.54(7).

    3. The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(7);

    4. The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; or

    5. The rule is arbitrary or capricious.

       
       

22. In this case, the agency's definitions of "bonus" and "compensation" as set forth in its rules are reasonably related to enabling legislation and are

not arbitrary or capricious. The Division proved at hearing that it had considered all relevant factors and formulated its definitions of "bonus" and "compensation" so that it could effectively administer the Florida Retirement System. Due to the reasonableness of the statutory interpretations, the agency's construction of what the terms "bonus" and "compensation" mean are persuasive. Manasota-88, Inc. v. State, Department of Environmental Regulation,

567 So.2d 895 (Fla. 1st DCA 1990); AMISUB v. Department of Health and Rehabilitative Services, 577 So.2d 648 (Fla. 1st DCA 1991).

ORDER

Based upon the foregoing, it is hereby ORDERED:

The Petition to invalidate Rules 22B-6.001(11) and (16)(1)3, Florida Administrative Code, is denied.

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 8th day of July, 1992.

VERONICA E. DONNELLY

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 8th day of July, 1992.

APPENDIX TO FINAL ORDER, CASE NO. 92-2418RX

Petitioner's proposed findings of fact are addressed as follows:

1. Accepted. See HO #1.

2. Accepted.

3. Accepted.

4. Accepted.

5. Accepted.

6. Accepted.

7. Accepted.

8. Accepted. See HO #9.

9. Accepted.

10. Accepted.

11. Accepted.

12. Accepted.

13. Accepted.

14. Accepted.

15. Accepted.

16. Accepted.

17. Accepted.

18. Accepted.

19. Accepted.

20. Accepted.

21. Accepted.

22. Accepted.

23. Rejected. Contrary to law.

24. Rejected. The Compensation plan in effect for Exempt Employees is given the greatest weight as to what "performance pay" means in relation to Petitioner's compensation during the relevant time periods. See HO #11 and #12.

Respondent's proposed findings of fact are addressed as follows:

1. Accepted. See HO #2.

2. Rejected. Irrelevant.

3. Rejected. Irrelevant.

4. Rejected. Irrelevant.

5. Rejected. Irrelevant.

6. Accepted. See HO #3 - #6.

7. Accepted.

8. Rejected. Irrelevant, the Plan is the best evidence.

9. Accepted.

10. Accepted.

11. Accepted.

12. Accepted.

13. Rejected. The calculations in this exhibit are incorrect as to 1988 and 1989 as it relates to Petitioner.

14. Rejected. Irrelevant.

15. Accepted. See HO #14 - #16.

COPIES FURNISHED:

Gilbert M. Rodriguez 18506 Turtle Drive

Lutz, Florida 33549

Stanley M. Danek, Esquire Division Attorney Division of Retirement

Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560

A. J. McMullian, III, Director Division of Retirement

Cedars Executive Center, Building C 2639 N. Monroe Street

Tallahassee, Florida 32399-1560

John A. Pieno Secretary

Department of Administration

435 Carlton Building Tallahassee, Florida 32399-1550

Augustus D. Aikens, Jr. General Counsel

Department of Administration

435 Carlton Building Tallahassee, Florida 32399-1550

Liz Cloud, Chief

Bureau of Administrative Code The Capitol, Room 1802 Tallahassee, Florida 32399 0250

Carroll Webb, Executive Director Administrative Procedures Committee Holland Bldg., Room 120 Tallahassee, Florida 32399 1300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 92-002418RX

Orders for Case No: 92-002418RX