EDWARD SZAKACS v. BOARD OF TRUSTEES PUBLIC EMPLOYEES' RETIREMENT SYSTEM

 
(NOTE: The status of this decision is Published.)

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1572-11T4

EDWARD SZAKACS,

Petitioner-Appellant,

v.

BOARD OF TRUSTEES, PUBLIC

EMPLOYEES' RETIREMENT SYSTEM,

Respondent-Respondent.

______________________________________________

May 3, 2013

 

Submitted April 16, 2013 Decided

 

Before Judges Fisher, St. John and Leone.

 

On appeal from the Board of Trustees, Public Employees' Retirement System, Docket No. 2-10-188459.

 

Chamlin, Rosen, Uliano & Witherington, attorneys for appellant (Marcie L. Mackolin, of counsel and on the brief).

 

Jeffrey S. Chiesa, Attorney General, attorney for respondent (Melissa Raksa, Assistant Attorney General, of counsel; Chris M. Tattory, Deputy Attorney General, on the brief).

 

PER CURIAM

Appellant Edward Szakacs appeals from the final decision of the Board of Trustees of the Public Employees' Retirement System (Board), which determined he did not have a bona fide retirement from the Department of Human Services, Division of Developmental Disabilities, North Jersey Developmental Center (NJDC) and consequently required him to return $208,545.09 in retirement benefits received. Additionally, Szakacs' retirement allowance was recalculated to exclude the three additional years of service he received through the Early Incentive Retirement Program (ERI) and he was required to pay pension contributions for the period from February 1, 2003, through January 20, 2006. Following our review of the arguments advanced on appeal, in light of the record and applicable law, we affirm.

I.

The record discloses the following facts and procedural history leading to the administrative determination under review.

On February 1, 2003, Szakacs retired from NJDC, taking advantage of an early retirement package. The package provided inclusion of three additional years of service credit in calculating monthly pension benefits. Szakacs had been employed as the business manager of NJDC from 1975 until his retirement. Prior to retiring, Szakacs discussed returning to NJDC with its CEO, Bruce Werkheiser. Werkheiser asked Szakacs to return as a consultant to oversee operations until Werkheiser hired a new business manager.

Prior to accepting the early retirement package, Szakacs attended a seminar where a Division of Pensions and Benefits (Division) trainer informed him that he would be unable to return to the State payroll for thirty days after retiring. After speaking with Werkheiser about returning to NJDC, Szakacs did not contact the Division to seek the Division's advice and he did not consult the Division's factsheets, member handbooks, or website.

Szakacs' consultant contract with NJDC became effective February 1, 2003, the date the Division considered him to be an active member of the Public Employees' Retirement System (PERS). The contract was for a one-year period, included a maximum of thirty-five hours per week of work, and a contract maximum payment to him of $25,000 that could be earned under a voucher title. After the $25,000 contract maximum was reached, Szakacs would be converted to temporary employee status (TES) and receive an hourly wage.

Szakacs consulted from February 2003 until January 20, 2006. For each of these years Szakacs entered into a one-year contract. Each year that Szakacs worked as a consultant for NJDC he earned in excess of $15,000. For example, in the 2004 contract year, Szakacs earned $59,016.90 and in the 2005 contract year $58,920.76. While consulting for NJDC, Szakacs was also paid his pension benefit of $5500 a month. On October 1, 2005, a new business manager was hired by NJDC, but Szakacs continued to work at NJDC until January 2006.

On January 8, 2008, the Division notified Szakacs that, as a result of a review of his post-retirement employment, it was determined that his post-retirement employment with the NJDC was in violation of N.J.S.A. 43:15A-57.2 and that he should not have received retirement benefits. Szakacs wrote the Division, stating that his employment was not in violation because he was employed at NJDC as a consultant in a TES position and was therefore not eligible for enrollment in PERS.

In a letter dated June 10, 2009, the Division informed Szakacs that, based on its analysis of the information presented, including an IRS 20-factor questionnaire used to evaluate an individual's employment status, it determined that his post- retirement employment with NJDC was a continuation of his pre-retirement employment. As such, the Division requested the return of $208,545.09 in retirement benefits received between March 1, 2003 and February 1, 2006. Back pension contributions of $6,122.02 for the period of February 1, 2003 through January 20, 2006 were also to be deducted from Szakacs' retirement allowance. Further, he was advised that as an active member of PERS he would not be entitled to the three additional years of service he received through the ERI.

On August 19, 2009, Szakacs appeared before the Board arguing that his post-retirement employment at NJDC was not in violation of N.J.S.A. 43:15A-57.2 and that he should not have to repay the requested retirement benefits. On August 25, 2009, the Board informed him that his receipt of retirement benefits was in violation of N.J.S.A. 43:15A-57.2 and denied his request to stay the repayment schedule but extended the schedule from a five-year plan to a ten-year plan.

Szakacs requested a fair hearing and a stay of the repayment schedule. The Board denied the stay and transferred the matter to the Office of Administrative Law pursuant to N.J.S.A. 52:14B-1 to -15 and N.J.S.A. 52:14F-1 to -13 where it was filed for determination as a contested case.

A hearing was conducted after which the administrative law judge (ALJ) issued a comprehensive initial decision which affirmed the action taken by the Board. Szakacs appealed and filed exceptions. The Board adopted the initial decision and recommendations of the ALJ. This appeal ensued.

 

 

 

II.

Established precedents guide our task on appeal. Appellate review of an administrative agency decision is limited. See In re Herrmann, 192 N.J. 19, 27 (2007). The burden is on Szakacs in his appeal to demonstrate grounds for reversal. McGowan v. N.J. State Parole Bd., 347 N.J. Super. 544, 563 (App. Div. 2002); see also Bowden v. Bayside State Prison, 268 N.J. Super. 301, 304 (App. Div. 1993) (holding that "[t]he burden of showing the agency's action was arbitrary, unreasonable, or capricious rests upon the appellant"), certif. denied, 135 N.J. 469 (1994).

"Appellate courts ordinarily accord deference to final agency actions, reversing those actions if they are 'arbitrary, capricious or unreasonable or [if the action] is not supported by substantial credible evidence in the record as a whole.'" N.J. Soc'y for the Prev. of Cruelty to Animals v. N.J. Dep't of Agric., 196 N.J. 366, 384-85 (2008) (quoting Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980)) (alteration in original). Under the arbitrary, capricious, and unreasonable standard, the reviewing court is guided by three major inquiries: (l) whether the agency's decision conforms with relevant law; (2) whether the decision is supported by substantial credible evidence in the record; and (3) whether in applying the law to the facts, the administrative agency clearly erred in reaching its conclusion. In re Stallworth, 208 N.J. 182, 194 (2011). When an agency decision satisfies such criteria, the reviewing court accords substantial deference to the agency's fact-finding and legal conclusions, while acknowledging the agency's "'expertise and superior knowledge of a particular field.'" Circus Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 10 (2009) (quoting Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992)). A reviewing court should not substitute its own judgment for the agency's even though it might have reached a different conclusion. Stallworth, supra, 208 N.J. at 194; see also In re Taylor, 158 N.J. 644, 656 (1999) (discussing the narrow appellate standard of review for administrative matters).

III.

With those principles in mind, we turn to Szakacs' contentions. Szakacs argues that his retirement was bona fide and that after his retirement he returned to NJDC as an independent contractor in a position that was not PERS covered employment. The burden is on Szakacs in his appeal to demonstrate that the Board's determination was arbitrary, capricious or unreasonable. See N.J. Soc'y for the Prev. of Cruelty to Animals, supra, 196 N.J. at 384-85; McGowan, supra, 347 N.J. Super. at 563. Szakacs has not met this burden.

The ALJ carefully evaluated the facts and methodically reviewed the IRS-20 factor test,1 analyzing each factor in reference to Szakacs' relationship with NJDC. In comprehensively analyzing the IRS-20 factors, the ALJ determined that fifteen of the factors supported an employee relationship and only five factors supported an independent contractor status. The ALJ then found that:

the factors weigh heavily toward behavioral and financial control. Szakacs essentially resumed a part of his job, shedding some duties, but not all. The core work was that which he had previously performed. The work was extremely important to the proper functioning of the Center, such that it could affect certifications. He had no other clients, he had no financial risk in the enterprise, and he had no investment in it. Moreover, the case is different from those in which the employee made some inquiry of the Division as to what was acceptable. Szakacs freely admitted that he did not consult the Division fact sheet or Handbook. Although he recalled being advised at a seminar that he could not go on the State payroll for thirty days, he apparently made a logical leap, based on his own specialized knowledge of the State accounting system, that so long as the check was not technically a payroll check, he would be safely clear of the requirement.

 

The ALJ concluded that Szakacs' consultant position at NJDC was PERS covered employment and that, since Szakacs went on the payroll from PERS covered employment approximately two weeks after his retirement as business manager, he did not have a bona fide retirement in February 2003.

Szakacs has not demonstrated how the ALJ's conclusion, that he returned to PERS covered employment, was arbitrary, capricious or unreasonable. Without such a showing, this court must accord substantial deference to the agency's fact-finding and legal conclusions and may not substitute its own judgment for the agency's even though it might have reached a different conclusion. Stallworth, supra, 208 N.J. at 194.

N.J.S.A. 43:15A-57.2 states:

 

a. Except as provided in subsections b., c., and d. of this section, if a former member of the State Employees' Retirement System or the retirement system, who has been granted a retirement allowance for any cause other than disability, becomes employed again in a position which makes him eligible to be a member of the retirement system, his retirement allowance and the right to any death benefit as a result of his former membership, shall be canceled until he again retires.
 
 

Such person shall be re-enrolled in the retirement system and shall contribute thereto at a rate based on his age at the time of re-enrollment. Such person shall be treated as an active member for determining disability or death benefits while in service and no benefits pursuant to an optional selection with respect to his former membership shall be paid if his death shall occur during the period of such re-enrollment.
 

. . . .

 

b. The cancellation, re-enrollment, and additional retirement allowance provisions of subsection a. of this section shall not apply to a former member of the retirement system who, after having been granted a retirement allowance, becomes employed again by: (1) an employer or employers in a position or positions for which the aggregate compensation does not exceed $15,000 per year[.]

 

N.J.A.C. 17:2-6.2 further requires an individual to separate from service for thirty days before returning to employment after retirement.

In applying these provisions, we are mindful of the general principle that "pension statues 'should be liberally construed and administered in favor of the persons intended to be benefited.'" Francois v. Bd. of Trs., Pub. Emps.' Ret. Sys., 415 N.J. Super. 335, 349 (2010) (quoting Klumb v. Bd. of Educ. of the Manalapan-Englishtown Reg'l High Sch. Dist., 199 N.J. 14, 34 (2009)). Nevertheless, "'an employee has only such rights and benefits as are based upon and within the scope of the provisions of the statute.'" Ibid. (quoting Casale v. Pension Comm'n of the Emps.' Ret. Sys. of Newark, 78 N.J. Super. 38, 40 (Law Div. 1963)). Accordingly, courts must construe pension statues "so as to preserve the fiscal integrity of the pension funds." DiMaria v. Bd. of Trs. of Pub. Emps.' Ret. Sys., 225 N.J. Super. 341, 354 (App. Div.), certif. denied, 113 N.J. 638 (1988). "Moreover, while a person 'eligible for benefits' is entitled to a liberal interpretation of the pension statute, 'eligibility [itself] is not to be liberally permitted.'" Francois, supra, 415 N.J. Super. at 350 (alteration in original) (quoting Krayniak v. Bd. of Trs., Pub. Emps.' Ret. Sys., 412 N.J. Super. 232, 242 (App. Div. 2010)).

It is undisputed that Szakacs returned to NJDC before the requisite thirty-day separation period expired. It is further undisputed that Szakacs' annual compensation from NJDC exceeded $15,000 after his February 2003 retirement as business manager.

The Board's decision requiring Szakacs to return $208,545.09 in retirement benefits received, pay pension contributions for the period from February 1, 2003, through January 20, 2006, and to exclude from his retirement allowance the three additional years of credit, was amply supported by credible evidence and was not arbitrary, capricious or unreasonable.

Affirmed.

 

1 The twenty factors are: (1) instructions; (2) training; (3) integration; (4) services rendered personally; (5) hiring, supervising, and paying assistants; (6) continuing relationship; (7) set hours of work; (8) full time required; (9) doing work on employer's premises; (10) order or sequence set; (11) oral or written reports; (12) payment by hour, week, month; (13) payment of business and/or traveling expenses; (14) furnishing of tools and materials; (15) significant investment; (16) realization of profit or loss; (17) working for more than one firm at a time; (18) making service available to general public; (19) right to discharge; and (20) right to terminate. Rev. Rul. 87-41, 1987- 1 C.B. 296.