MARK SHAHEEN V MICHIGAN PUBLIC SCHOOL EMPLOYEES RETIREMENT BD
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STATE OF MICHIGAN
COURT OF APPEALS
MARK SHAHEEN,
UNPUBLISHED
December 2, 2008
Petitioner-Appellee,
v
MICHIGAN PUBLIC SCHOOL EMPLOYEES
RETIREMENT BOARD,
No. 278751
Ingham Circuit Court
LC No. 06-001004-AA
Respondent-Appellant.
Before: Fitzgerald, P.J., and Bandstra and O’Connell, JJ.
PER CURIAM.
Respondent Michigan Public School Employees Retirement Board (“Board”) appeals by
leave granted from the trial court’s grant of service credit for long-term disability leave to
petitioner Mark Shaheen in a May 3, 2007, opinion overturning the Board’s administrative
decision. We reverse and remand.
Petitioner is a teacher employed by East Lansing Public Schools (“ELPS”). In September
2002, petitioner was seriously injured in a motorbike accident. He was hospitalized and
underwent months of rehabilitation. Consequently, he was unable to work for the rest of the
2002-2003 school year. Petitioner returned to work in August 2003.
Petitioner received sick leave pay from September 20 until October 28, 2002, when he
exhausted his accumulated sick leave time. He then received short-term disability (“STD”)
benefits from October 28 to December 20, 2002. Beginning December 20, 2002, petitioner
received long-term disability (“LTD”) benefit payments. These payments continued until
petitioner returned to work in August 2003. Pursuant to a collective bargaining agreement
negotiated between the teachers’ union and the ELPS school board, the school board provided
LTD coverage without cost to its teachers. The school board purchased and held the LTD policy
on behalf of the teachers, but the insurance carrier, not the school district, made the LTD
payments. Under the policy, petitioner was permitted to receive LTD payments for as long as he
was considered disabled, until age 65. His LTD payments were for approximately two-thirds of
his regular income, and he received these payments monthly from the LTD insurance carrier.
Petitioner is also a member of the Michigan Public Schools Employees’ Retirement
System (“MPSERS”). MPSERS uses service credit to determine an employee’s retirement
allowance; this credit is calculated based on the length of time that a retiree has worked for the
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school district. Petitioner received service credit for the time that he was on sick leave and for
the time he received STD benefits, but he did not receive service credit for the period during
which he received LTD benefits. Therefore, the school district made contributions to MPSERS
toward petitioner’s retirement benefits when he was on sick leave and received STD benefits, but
not when he received LTD benefits, because he was not accruing service credit for that time
period. Petitioner did not perform any service for ELPS when he received LTD payments.
Petitioner challenged MPSERS’s refusal to award him service credit for the time he
received the LTD payments, claiming that he was entitled to service credit for this time period.
MPSERS denied petitioner’s request for service credit, advising him that his LTD payments
were not considered “compensation” under section 3a of the Public School Employees
Retirement Act, MCL 38.1301 et seq., for purposes of calculating his retirement service credit.
Petitioner brought his complaint before the Board, which denied his request for service
credit. The Board noted that petitioner has the burden of proof, but had not carried this burden.
The Board noted that it is required to award service credit if a member receives remuneration for
services performed for a school, i.e., if he receives “compensation.” MCL 38.1308(1);
MCL 38.1368(1). It concluded, in pertinent part,
3. The LTD paid to Petitioner was not remuneration for services that he
performed for the school since he did not perform any service for East Lansing
School from December 20, 2002 through August 18, 2003.
4. MCL 38.1303a defines compensation, in part, as remuneration earned by a
member for service performed as a public school employee.
5. Therefore, Petitioner did not earn any service credit for the period from
December 20, 2002 through August 18, 20043 [sic, 2003] because he did not
receive any remuneration for any service that he performed as a public school
employee during that time period.
6. MCL 38.1303a(3) provides that compensation does not include other fringe
benefits paid by a school district. A fringe benefit is defined as a payment, other
than wages or salary, in the form of a pension, vacation or insurance. (New
World Dictionary, Second College Edition) The LTD payments were a type of
insurance payment paid to Petitioner when he was unable to work.
7. Thus, the LTD payments received by Petitioner are not compensation.
Therefore service credit may not be provided for the time that Petitioner received
LTD.
Noting that MCL 38.1303a(1), (2), and (3) did not specifically list whether LTD benefits
are or are not compensation, the Board invoked its authority under MCL 38.1303a(5) to
determine whether the LTD payments made to petitioner were a creditable form of
compensation. The Board explained its reasoning as follows:
The Board has exercised its authority by promulgating 1985 MR 4, Rule 38.1127
which states in part:
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Only if the kind of remuneration or item of economic value received by a
member is specifically authorized by either the retirement statute or the
retirement board shall it be included in computing the member’s final
average compensation.
Here, since LTD is not specifically listed in MCL 38.1303a or otherwise
authorized by the Board as compensation, it cannot be compensation and no
service credit may be provided for it.
The Board then noted,
1985 MR 4, Rule 38.1117 states that:
Service credit shall not be given except as authorized by the act for
reporting unit employment which was specifically excluded from
membership by statute or administrative directive. . . .
Here the directives set forth in the Reporting Instruction Manual do not provide
service credit for LTD. Thus, service credit may not be given for LTD paid to
Petitioner.
The Board concluded,
The Public School Employees Retirement System has interpreted MCL 38.1303a
to mean that compensation does not include LTD payments and therefore service
credit is not given for the time period that a member receives LTD payments.
There are no cogent reasons to change that interpretation.
Therefore, the Board determined that although petitioner received LTD payments, he failed to
prove that he was entitled to receive service credit for the period when he received LTD
payments.1 The Board summarized as follows its conclusions of law and its decision to deny
petitioner’s request for service credit:
The Retirement Board, exercising its mandate under MCL 38.1303a, has
determined that LTD is considered nonreportable compensation. Though
Petitioner has presented many reasons why he advocates that this determination
should be changed, the Board has broad authority to determine whether any form
of remuneration that is not identified in MCL 38.1303a should be considered
compensation reportable to the retirement system and has acted upon that
authority/mandate. Thus, Petitioner has failed to meet his burden of proof under
1
Essentially, petitioner failed to satisfy his burden of proof, which obligated him to establish that
the compensation that he received between December 2002 and August 2003, which he admitted
consisted of LTD benefits, was creditable toward his retirement.
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the statute and is not entitled to service credit from the time period in 2002-2003
that he was receiving LTD benefits.
Petitioner appealed the Board’s ruling to the circuit court, arguing that the LTD payments
constitute credible compensation under the statute. The circuit court agreed with petitioner,
ruling that “the long-term disability payments are creditable compensation for purposes of the
state retirement program” and reversing the Board’s decision.
We review a decision of an administrative agency in the same manner as the circuit
court—we “may set aside an order of an administrative agency if it violates the constitution or a
statute or if the ruling contains a substantial and material error of law.” Ronan v Mich Pub
School Employees Retirement Sys, 245 Mich App 645, 648; 629 NW2d 429 (2001).
This Court reviews a lower court’s review of an agency decision to
determine “whether the lower court applied correct legal principles and whether it
misapprehended or grossly misapplied the substantial evidence test to the
agency’s factual findings.” Boyd v Civil Serv Comm, 220 Mich App 226, 234;
559 NW2d 342 (1996). This standard of review is the same as a “clearly
erroneous” standard of review. Id. at 234-235. A finding is clearly erroneous
when, “on review of the whole record, this Court is left with the definite and firm
conviction that a mistake has been made.” Id. at 235.
***
A circuit court’s review of an administrative agency’s decision is limited
to determining whether the decision was contrary to law, was supported by
competent, material, and substantial evidence on the whole record, was arbitrary
or capricious, was clearly an abuse of discretion, or was otherwise affected by a
substantial and material error of law. Const 1963, art 6, § 28; MCL 24.306; Boyd,
supra at 232. “Substantial” means evidence that a reasoning mind would accept
as sufficient to support a conclusion. Kotmar, Ltd v Liquor Control Comm, 207
Mich App 687, 689; 525 NW2d 921 (1994). Courts should accord due deference
to administrative expertise and not invade administrative fact finding by
displacing an agency’s choice between two reasonably differing views. MERC v
Detroit Symphony Orchestra, 393 Mich 116, 124; 223 NW2d 283 (1974); In re
Kurzyniec Estate, 207 Mich App 531, 537; 526 NW2d 191 (1994). [Dignan v
Mich Pub School Employees Retirement Bd, 253 Mich App 571, 575-576; 659
NW2d 629 (2002).]
“The primary goal of judicial interpretation of statues is to ascertain and give effect to the intent
of the Legislature.” Colbert v Conybeare Law Office, 239 Mich App 608, 616; 609 NW2d 208
(2000). A court or other entity entrusted with the duty of interpretation should consider the
object of the statute and the harm it is designed to remedy, and apply a reasonable construction
that best accomplishes the statute’s purpose. Id.
The Public School Employees Retirement Act, MCL 38.1301 et seq., entitles public
school employees to service credit for time spent off work while receiving “compensation.”
Ronan, supra at 648-649. An employee’s length of service is measured in service credits, which
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are important for calculating retirement benefits. The central issue presented to the Board, the
circuit court, and now us, is whether LTD payments constitute “compensation” that may be
credited toward retirement benefits. Essentially, this necessitates dissecting the provisions of
MCL 38.1303a, which defines the scope of the term “compensation” as used in the Public
School Employees Retirement Act and designates to the Board the authority to determine
whether a particular employee benefit constitutes “compensation.” MCL 38.1303a states,
(1) Except as otherwise provided in this act, “compensation” means the
remuneration earned by a member for service performed as a public school
employee.
(2) Compensation includes salary and wages and all of the following:
(a) Remuneration earned for all services performed as a public school
employee including, but not limited to, teaching, coaching, and
participation in extracurricular activities.
***
(f) Pay for vacation, holiday, and sick leave while absent from work. As
used in this subdivision, “sick leave” includes weekly worker’s disability
compensation payments received for personal injury in the employ of and
while employed by a reporting unit.
***
(3) Compensation does not include any of the following:
(a) Payments for unused sick or annual leave.
(b) Bonus payments.
(c) Payments for hospitalization insurance and life insurance premiums.
(d) Other fringe benefits paid by and from the funds of employers of
public school employees.
(e) Remuneration paid for the specific purpose of increasing the final
average compensation.
(f) Compensation in excess of an amount over the level of compensation
reported for the preceding year except increases provided by the normal
salary schedule for the current job classification. In cases where the
current job classification in the reporting unit has less than 3 members, the
normal salary schedule for the most nearly identical job classification in
the reporting unit or in similar reporting units shall be used.
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(4) The retirement board shall require a sworn affidavit from the member that
final compensation does not include remuneration paid either directly or indirectly
for actual or anticipated expenses.
(5) Based upon information and documentation provided by the member, the
retirement board shall determine both of the following:
(a) Whether any form of remuneration paid to a member is identified in
this section.
(b) Whether any form of remuneration that is not identified in this section
should be considered compensation reportable to the retirement system
under this section.
(6) In any case where a petitioner seeks to have remuneration included in
compensation reportable to the retirement system, the petitioner shall have the
burden of proof.
The statute does not mention whether LTD payments are compensation, and the parties
dispute whether LTD benefits should be considered a form of creditable compensation.
Essentially, the Board argues, “Look at this laundry list of what is included as compensation;
LTD benefits are not among them, so they are not compensation.” Petitioner argues, “Look at
the laundry list of items that are specifically excluded from the definition of compensation; LTD
benefits are not listed, so they must be a form of compensation.” However, MCL 38.1303a(5)
clearly indicates that the retirement board has the authority to determine whether any form of
remuneration paid to a member, including LTD payments, should be considered compensation.
The Board determined, consistent with its administrative rules, that LTD payments did not fall
within the definition of “compensation” under which service credit may be given. We find this
reasoning to be sound and defer to the Board’s interpretation of the statute.
In Dignan, supra at 576, 579, this Court applied MCL 38.1303a(5) and held that the
circuit court had erred in failing to defer to the retirement board’s characterization of a
contractual terminal allowance payment as outside the definition of “compensation.” The parties
in Dignan had disputed the calculation of the petitioner’s retirement benefits based on her final
average compensation. Id. at 573. The petitioner argued that the $14,500 payment made
pursuant to her employment contract was longevity pay that should factor into her final average
compensation. Id. at 573-574. The retirement board disagreed, concluding that the payment was
not longevity pay, and thus not compensation, but the circuit court reversed the decision. Id. at
575.
The Dignan Court affirmed the board’s decision and reversed the circuit court for failing
to defer to the board’s authority to make that determination, stating:
The fact that the school district did not treat the $14,500 payment as longevity pay
is consistent with the contract’s unambiguous language. Given that respondent’s
decision was supported by competent, material, and substantial evidence, the
circuit court was prohibited from substituting its discretion for that of respondent,
even if the court might have reached a different result. Deference is afforded to
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an agency’s choice between two alternative views because of the agency’s
administrative expertise. [Dignan, supra at 578-579 (internal citations omitted).]
In this case, we conclude that the Board’s reasoning was sound and a proper application
of the law. Therefore, the circuit court clearly erred when it failed to defer to the Board’s
reasoning and conclusion. Again, as the Board noted in its ruling on this matter, its rules dictate
that “[o]nly if the kind of remuneration or item of economic value received by a member is
specifically authorized by either the retirement statute or the retirement board shall it be included
in computing the member’s final average compensation.” 1985 MR 4, Rule 38.1127. This rule
essentially constitutes an adoption of the principle of expression unius est exclusion alterius, the
express mention of one thing is the exclusion of others. This is a valid, longstanding principle of
statutory construction, and the Board’s decision to apply this principle to determine whether a
form of compensation is creditable is not a substantial or material error of law. Feld v Robert &
Charles Beauty Salon, 435 Mich 352, 355, 362-363; 459 NW2d 279 (1990). The Board
concluded that because “LTD is not specifically listed in MCL 38.1303a or otherwise authorized
by the Board as compensation, it cannot be compensation and no service credit may be provided
for it.” The Board’s reading of the statute to indicate that LTD payments are not creditable
compensation is a valid application of the statute.
The circuit court based its decision to reverse the Board’s ruling entirely on its mistaken
understanding of the reasoning of the Supreme Court majority in Adrian School District v
Michigan Public School Employees’ Retirement System, 458 Mich 326; 582 NW2d 767 (1998).
In that case, the parties disputed whether an employee earned service credit during the time that
he received worker’s compensation payments. Id. at 328-330. The Adrian School District Court
held that weekly worker’s compensation benefits qualified as “compensation,” as the statute
defined the term at that time. Id. at 334. It explained,
First, included in the items comprising “compensation” is “sick leave pay while
absent from work.” Worker’s disability compensation benefits are a form of sick
leave pay because they are compensation for illness or injury suffered by a public
school employee while on the job. Accordingly, a reasonable interpretation of
“sick leave pay” encompasses worker’s disability compensation benefits. [Id.]
The majority also reasoned that because the statute did not exclude such payments from the
definition of “compensation,” the Legislature must have intended to include them:
Worker’s disability compensation is not an expressly excluded form of
remuneration. Hence, it must be viewed as falling within the expansive definition
of compensation. Common sense dictates that it must be included in the phrase
“sick leave pay while absent from work.” The Legislature provided a list of
inclusive phrases to outline types of remuneration included in the term
“compensation,” such as the phrase “sick leave pay while absent from work.” It
seems likely that it chose that terminology because, had it done otherwise, the
retirement act would have to be amended each time a new form of compensation
is negotiated.
***
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Thus, in making its declaratory ruling that disability payments are a form of sick
leave pay that earn retirement service credit, the retirement board gave effect to
the Legislature’s intent. [Id. at 335-336 (emphasis in original).]
Notably, the statutory definition of “compensation” applicable in Adrian School District
is not the definition applicable in this case. When our Supreme Court decided Adrian School
District, the statute defined “compensation” to include “sick leave pay while absent from work.”
Ronan, supra at 649. In support of its holding, the majority in Adrian School District reasoned
that worker’s compensation payments were akin to “sick leave.” Id. at 334. However, in 1996,
the Legislature amended the definition of “compensation” to expressly include weekly worker’s
compensation payments as “sick leave.” Id. at 337. The statute now states,
As used in this subdivision, “sick leave” includes weekly worker’s disability
compensation payments received for personal injury in the employ of and while
employed by a reporting unit. [MCL 38.1303a(2)(f). See also 1996 PA 268;
Ronan, supra at 649 n 2.]
In this case, the circuit court acknowledged the statutory amendment but still found the Court’s
reasoning in Adrian School District persuasive and applied it to support its reasoning that LTD
payments are a form of creditable compensation.
Our Supreme Court’s decision in Adrian School District is not controlling in this case.
Adrian School District addressed a different form of remuneration, worker’s compensation
payments, under a different statutory definition of compensation. Its persuasive authority in this
case is questionable. Significantly, the majority in Adrian School District found support for its
holding in the fact that when the case was pending on appeal, the Legislature amended the
definition to specifically include worker’s compensation payments as a form of “sick leave.”
Adrian School Dist, supra at 337. The amendment bolstered the majority’s conclusion that the
amended version of the statute was meant to clarify the Legislature’s original intent to include
worker’s compensation benefits in its definition of sick leave. Id. Yet we cannot glean any such
indication about legislative intent regarding LTD payments in this case.
The Legislature has defined what types of remuneration are and are not “compensation”
for purposes of the Public School Employees Retirement Act. The statute specifies that
compensation include certain investments, longevity pay, overtime pay, merit pay, and vacation,
holiday and sick leave while absent from work. The 1996 revision redefined compensation and
specifically redefined “sick leave.” Id. “[T]he further definition of ‘sick leave’ provided by the
amendment was specifically limited to include only weekly worker’s disability compensation
payments, and not some broader category like ‘payments made pursuant to worker’s
compensation claims’” or, by extension, payments that serve the same purpose as sick leave, or
payments made to an employee during an illness or injury that prevents the employee from
working. See Ronan, supra at 651. The retirement board, acting under its statutory authority to
determine “[w]hether any form of remuneration that is not identified in this section should be
considered compensation reportable to the retirement system . . . ,” MCL 38.1303a(5)(b),
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determined that the unmentioned LTD payments are not compensation. We agree with the
board’s application of the law and conclude that the circuit court erred in disturbing the board’s
decision. No substantial and material error of law necessitating reversal was found in this case.2
Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction.
/s/ E. Thomas Fitzgerald
/s/ Richard A. Bandstra
/s/ Peter D. O’Connell
2
Petitioner claims that the retirement board erred when it refused to award him service credit for
LTD benefits because, in another case, it had determined that service credit could be awarded
during the time an employee received STD benefits. However, petitioner fails to provide any
authority to support his position that the Board is bound in some manner by a declaratory ruling
in one case holding that a particular type of benefit constituted creditable compensation when
deciding, in a separate case involving separate parties and circumstances, whether a different
type of benefit constitutes creditable compensation. Therefore, we will not consider this
argument further. See Mitcham v Detroit, 355 Mich 182, 203; 94 NW2d 388 (1959).
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