vs. ) Case No. 99-4281RU
Respondent. )
On January 27, 2000, a formal administrative hearing in this case was held in Tallahassee, Florida, before William F. Quattlebaum, Administrative Law Judge, Division of Administrative Hearings.
For Respondent: Sonja P. Mathews, Esquire
and Employment Security Hartman Building, Suite 307 2012 Capitol Circle, Southeast
The issue in the case is whether the Department of Labor and Employment Security (Department), in implementing a workforce
reduction that resulted in layoffs and demotions for employees, should have adopted by rulemaking, policies related to compensation reductions that occurred during the workforce reduction.
By Petition for Administrative Hearing filed October 7, 1999, the Petitioners assert that actions taken by the Respondent in implementing a mid-1999 workforce reduction constitute an invalid exercise of delegated legislative authority. The Petitioners assert that the Respondent revised certain personnel policies immediately prior to the workforce reduction, and that such policies should have been promulgated as rules.
At the hearing, the Petitioners presented the testimony of nine witnesses including one by deposition, and had Exhibits numbered 1-11 and 13-15 admitted into evidence. The Respondent presented the testimony of five witnesses and had Exhibits numbered 1-4 and 14-16 admitted into evidence.
A hearing transcript was filed. Both parties filed Proposed Orders.
In 1999, a funding shortfall at the Department of Labor and Employment Security resulted in implementation of a workforce reduction plan.
Petitioners Altamese Thompson and Sue Ezell were employees of the Department with permanent status in the Career
Service system and whose employment and compensation were substantially affected by the Department’s workforce reduction program.
Petitioner Florida Public Employees Council 79, AFSCME, represented the employees on collective bargaining issues affected in the workforce reduction. AFSCME members’ employment and compensation were substantially affected by the Department’s workforce reduction program.
The 1999 workforce reduction was not the Department’s first experience with employee layoffs. In previous reductions, Department policy, set forth in LES Manual 1101.1.1.1 (October 1, 1996) was to retain, at existing salaries, as many employees as funding permitted. The Department policy was not adopted as an administrative rule.
When the Department began to consider the workforce reduction of mid-1999, the Department apparently decided to increase the number of retained employees by reducing the salaries of workers who accepted "voluntary" demotions in lieu of layoff.
By issuance of a "Change Notice" to LES Manual 1101.1.1.1, dated May 14, 1999, the Department redefined voluntary demotion to include "demotions requested by associates in lieu of layoff during workforce reduction pursuant to Chapter 60K-17, F.A.C." The revision also set forth a formula by which the compensation paid to employees who accepted voluntary
demotion in lieu of transfer would be reduced. The change in the Department policy was not adopted as an administrative rule.
Chapter 60K-17, Florida Administrative Code, sets forth the rules applicable to reduction of Career Service employees through the layoff process. The rule essentially establishes what is generally identified as the "bumping" procedure utilized by state agencies when employee levels are reduced.
Rule 60K-17.004(3)(j), Florida Administrative Code, states in part, "[w]ithin 7 calendar days after receiving the notice of layoff, the employee shall have the right to request a demotion or reassignment. "
Rule 60K-17.004(3)(p), Florida Administrative Code, states that "[a]n employee who accepts a voluntary demotion in lieu of layoff and is subsequently promoted to a position in the same class in the same agency from which the employee is demoted in lieu of layoff, shall be promoted with permanent status."
Chapter 60K-17, Florida Administrative Code, does not prohibit salary reductions implemented as part of a voluntary demotion.
Rule 60K-4.007, Florida Administrative Code, governs "demotion appointments" in the career service system. The rule states that a "demotion appointment" includes assignment to a job class having a "lower maximum salary or having the same or higher maximum salary but a lower level of responsibility.
Rule 60K-2.004, Florida Administrative Code, governs
salary determinations upon appointment to employment. Rule 60K- 2.004(4), Florida Administrative Code, states, "[a]n employee who is given a demotion appointment in accordance with Chapter 60K-4, F.A.C., may be demoted with or without a reduction in base rate of pay. "
Rule 60K-9.005, Florida Administrative Code, addresses a Career Service employee’s right to appeal employment actions to the Public Employees Relations Commission. Generally, an employee who has attained permanent status in the Career Service System can appeal employment actions to the Public Employees Relations Commission. However, Rule 60K-9.005(5)(c), Florida Administrative Code, states than "[a]n employee who receives a reduction in pay, a demotion, or a transfer shall waive all rights to appeal such action if the employee has signed a written statement that the action is voluntary."
By certified letters dated May 24, 1999, Petitioners Thompson and Ezell were advised that "[d]ue to impending budget cuts" the Department was reducing the number of positions in the Department’s Division of Jobs and Benefits (where Petitioners Thompson and Ezell worked) and that "[r]egretfully, you will be adversely affected by this work force reduction on June 30, 1999, at the close of business."
The May 24 letter included a form titled "STATEMENT OF CHOICE OF OPTIONS DUE TO LAYOFF SITUATION" which set forth
available jobs and included an option allowing the employee to select a layoff rather than the job demotion.
The form included a signature line that stated, "I understand that by selecting demotion as an option, I am requesting a voluntary demotion in lieu of layoff, and my pay upon such voluntary demotion will be subject to the newly revised Section 1101.1.1.1.9d of the LES Personnel Manual."
The evidence fails to establish the content of Section 1101.1.1.1.9d of the revised LES Personnel Manual. The documents entered into evidence at the hearing are identified as 1101.1.1.1. There is no subsection 9d. Subsection (c)2.c. addresses pay upon voluntary demotion and states as follows:
Associates requesting voluntary demotions must have their base rate of pay reduced by one-half (1/2) of the percentage/salary increase received upon promotion and/or reassignment. For example, if an associate received a 10 percent promotional increase, his/her base rate of pay must be reduced by 5 percent. Permanent career service associates who have not had a promotional increase will have their base rate reduced by 5 percent.
The Division Director/Commission Chairman equivalent has authority to take final action provided, however, that any variations must be submitted to the Assistant Secretary of Administration for review prior to final action. This provision also applies to demotions to classes that are higher or lower than the classes held prior to promotion and/or reassignment.
Ms. Thompson noted her preferences as to the available jobs positions and signed the form.
Ms. Ezell noted her preferences as to the available jobs positions and signed the form, but wrote a notation on the form indicating her disagreement with the situation, in part stating, "I am not voluntarily requesting demotion. I have absolutely no other choice after 27 years. A pay reduction should not occur. "
At hearing, both Ms. Thompson and Ms. Ezell suggested that being forced to accept a demotion and pay reduction in lieu of total layoff did not present an entirely voluntary choice.
There is no evidence that the Department provided copies of the cited Personnel Manual revision directly to affected employees either before or after the May 24 letters were issued.
There is no evidence that either Ms. Thompson or
Ms. Ezell saw the revised Personnel Manual prior to signing the "STATEMENT OF CHOICE" forms.
During the spring of 1999, the Division’s Director circulated a publication entitled "Friday Fax" to employees of the Department’s Division of Jobs and Benefits.
The "Friday Fax" dated March 19, 1999 indicates that an employee demoted as part of the pending reduction in force would retain their current salary. This reflects the existing policy of the Department that had been applied in prior workforce reductions.
There is no credible evidence that the Division Director was explicitly authorized to restate the Department policy in the March 19, 1999 Friday Fax. There is evidence that the Department executives were considering the possibility of salary reductions during the ongoing planning for the workforce reduction.
By the following week, a new Division Director had been appointed. By April 2, 1999, publication of "Friday Fax" was suspended. A new publication "Just The Facts. . ." began to be issued by the Department’s Office of Communications and was circulated to agency personnel.
On May 24, 1999, the same day that the workforce reduction letters were mailed to Petitioners Thompson and Ezell, an issue of "Just The Facts" was published which stated that demotions in lieu of layoff would incur salary reductions, and referenced the revised LES Personnel Manual section as "1101.1.1.1 9.d.(1)(6)(c)2.c."
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. Section 120.57(1), Florida Statutes.
Section 120.52(8)(a), Florida Statutes provides as follows:
"Invalid exercise of delegated legislative authority" means action which goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or
existing rule is an invalid exercise of delegated legislative authority if any one of the following applies:
The agency has materially failed to follow the applicable rulemaking procedures or requirements set forth in this
chapter. . . .
The sole issue for determination in this case is whether the Department’s policy regarding the voluntary demotion/pay reduction matter is an invalid exercise of delegated legislative authority. Other issues related to the Department’s implementation of the mid-1999 reduction in force are the subject of pending litigation before the Florida Public Employees Relations Commission and are outside the scope of this proceeding.
Chapter 60K-17, Florida Administrative Code, sets forth the rules applicable to reduction of Career Service employees through the layoff process. The rule requires that employees be provided the right to request demotion in lieu of layoff. The rule does not prohibit salary reductions implemented as part of a voluntary demotion.
Rule 60K-4.007, Florida Administrative Code, governs "demotion appointments" in the career service system and defines a demotion appointment to include assignment to a job class having a lower salary or lower responsibilities.
Rule 60K-2.004(4), Florida Administrative Code, states, "[a]n employee who is given a demotion appointment in accordance
with Chapter 60K-4, F.A.C., may be demoted with or without a reduction in base rate of pay. "
A reduction in pay is defined as a discretionary action taken by an agency in reducing an employee’s base rate of pay where such reduction is not required by Chapter 60K-2, Florida Administrative Code. Section 60K-2.010(1), Florida Administrative Code.
Persons who have attained permanent status in the Career Service system may appeal pay reductions to the Public Employees Relations Commission. Section 60K-2.010(2), Florida Administrative Code.
Based on a review of the administrative rules cited herein, an agency has the authority to reduce an employee’s compensation when such a salary reduction is part of a job demotion.
The issue then becomes whether the written policy utilized by the Department in the mid-1999 workforce reduction is a "rule" and should have been adopted through rule promulgation proceedings.
Section 120.52, Florida Statutes, in part defines a rule as follows:
(15) "Rule" means each agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of an agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule.
The term also includes the amendment or repeal of a rule. The term does not include:
(a) Internal management memoranda which do not affect either the private interests of any person or any plan or procedure important to the public and which have no application outside the agency issuing the memorandum.
The Department’s policy related to demotion and pay reduction in lieu of termination is clearly a statement of general applicability that prescribes policy.
The Department asserts that the policy at issue is exempt from the definition of "rule" because, in the Department’s view, the policy is an "internal management memoranda" which does not affect the private interests of any person and which has no application outside the agency. The Department’s assertion must fail.
In issues of compensation to an employee for services performed, any action taken which impacts the existing level of compensation affects the private interest of an employee. Such private interests are particularly impacted when the action is "self-executing" as in this case, where the pay reduction was automatic upon an employee’s decision to accept a demotion in lieu of layoff. Florida State University v. Dann, 400 So. 2d 1304, (Fla. 1st DCA 1981); State Dept. of Administration v. Stevens, 344 So. 2d 290 (Fla. 1st DCA 1977). An employee has a private interest in continued employment and compensation.
The Department suggests that the recent case of Department of Revenue v. Novoa, 24 Fla. L. Weekly D2358, (Fla.
1st DCA, 1999) supports its assertion that no "private interest" was affected by the Department of Labor and Employment Security’s reduction in employee compensation. Review of the cited case fails to support the Department’s assertion.
In the Novoa case, tax auditors employed by the Department of Revenue challenged the Department’s policy prohibiting employees from preparing tax returns for private parties during non-working hours. In relevant part, the Department of Revenue maintained the policy was an internal management memorandum and did not require promulgation as a rule. An Administrative Law Judge rejected the Department’s position, determined the policy to be an unpromulgated rule, and declared it invalid.
In reversing the Final Order of the Administrative Law Judge, the Court in Novoa found that the Department’s policy did not affect the "private interest of any person." Although the Court found that the policy impacted the employees "to the extent that it prevents them from earning additional income by preparing tax returns for private parties," the court determined that the employees had not demonstrated a "protected right to prepare tax returns for additional compensation in their off-duty hours."
The instant case is clearly distinguishable from Novoa. Here, the Petitioners are not seeking to obtain the right to earn outside income. The Petitioners are seeking the right to
maintain the income they had been receiving prior to the reduction in workforce.
The Novoa Court also noted that the Department of Revenue policy was not "self-executing." As the Court stated, "[a]lthough the policy sets a standard of conduct that might ultimately result in disciplinary action, it does not provide a remedy or establish a procedure that could be used to impose a penalty."
On the other hand, in this case, an employee’s compensation was reduced upon the employee’s decision to accept a demotion in lieu of complete loss of job. The salary reduction was "self-executing," the only question being whether an employee opted for a pay cut of five percent or of 100 percent.
Whether the Department had the authority to take the compensation reduction action is not at issue in this case. The Department’s policy, including the formula utilized to reduce the compensation of employees who chose demotion over termination, is a rule. The Department did not follow the applicable rulemaking procedures or requirements set forth in Chapter 120, Florida Statutes, and therefore, the rule is an invalid exercise of delegated legislative authority.
The Petitioners assert that a legally recognized private interest was created by the "Friday Fax" publication which stated that demotions would not involve pay reductions, by the federal Wagner-Peyser Act (which provided federal funding for
the Department) and by the State’s Master Contract, the result of the collective bargaining agreement.
The March 19, 1999 "Friday Fax" publication set forth the Department’s previous policy related to demotion salaries.
At the time of the publication, the Department was unaware of the extent of the funding shortfall and was eventually required to reduce the workforce by a much greater number than had originally been projected.
There is no credible evidence that the Department’s executive explicitly authorized inclusion of the policy statement in the March 19, 1999, "Friday Fax". Although there is evidence that the policy was discussed during the continued planning for the mid-1999 reduction in workforce, there is no evidence that at the time of the March 19, 1999, publication, a decision had been made regarding the issue.
The evidence fails to establish that the publication of the March 19, 1999, "Friday Fax" conferred a "private interest" on the Petitioners as the term is applied in Section 120.52(15)(a), Florida Statutes.
There is no evidence that the Wagner-Peyser Act has any applicability to this case. The federal act was one of the revenue streams used by the Department to fund its operations. Nothing in the act prohibits demotion or layoff of government employees. Nothing in the act provides such employees with any
"private interest" related to compensation as the term is applied in Section 120.52(15)(a), Florida Statutes.
The State Master Contract is the result of the collective bargaining agreement between the state and the state employee’s bargaining agent, Petitioner AFSCME. Career Service rules affecting the hours, wages, and conditions of employment are the subject of collective bargaining.
Article 8 of the Master Contract addresses issues of workforce reduction. Section 1(A) provides that when employees "are to be laid off as defined in the Florida Statutes, the State shall implement such layoff in accordance with the provisions of Chapter 60K-17 of the Personnel Rules of the Career Service System." Such rules are those codified at Chapter 60K-17, Florida Administrative Code.
Based on the foregoing Findings of Fact and Conclusions of Law, Department of Labor and Employment Security Personnel Manual Section 1101.1.1.1 9.d.(1)(6)(c)2.c revised as of May 14, 1999, is an invalid exercise of delegated legislative authority.
Jurisdiction is retained for an award of reasonable costs and reasonable attorneys' fees as required by Section 120.595(4), Florida Statutes.
DONE AND ORDERED this 22nd day of March, 2000, in Tallahassee, Leon County, Florida.
WILLIAM F. QUATTLEBAUM
Filed with the Clerk of the Division of Administrative Hearings this 22nd day of March, 2000.
Sonja P. Mathews, Esquire Jackson Greene, Esquire Department of Labor
and Employment Security Hartman Building, Suite 307 2012 Capitol Circle, Southeast
Bureau of Administrative Code The Elliott Building Tallahassee, Florida 32399-0250
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 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.
