Board of Educ. of Town of Avon v. Connecticut State Employees Retirement Com'n

• Court: Connecticut Supreme Court
• Writing for the Court: Before PETERS; HULL
• Citation: Board of Educ. of Town of Avon v. Connecticut State Employees Retirement Com'n, 556 A.2d 572, 210 Conn. 531 (Conn. 1989)
• Decision Date: 28 March 1989
• Docket Number: No. 13466,13466
• Parties: , 52 Ed. Law Rep. 1114 BOARD OF EDUCATION OF the TOWN OF AVON et al. v. CONNECTICUT STATE EMPLOYEES RETIREMENT COMMISSION.

Page 572

556 A.2d 572

210 Conn. 531, 52 Ed. Law Rep. 1114

BOARD OF EDUCATION OF the TOWN OF AVON et al. v. CONNECTICUT STATE EMPLOYEES RETIREMENT COMMISSION.

No. 13466.

Supreme Court of Connecticut.

Argued Dec. 15, 1988.

Decided March 28, 1989.

Lisa B. Bingham, with whom was Lynn M. Daggett, Hartford, for appellants (plaintiffs).

Arnold B. Feigin, Asst. Atty. Gen., with whom were Barney Lapp, Asst. Atty. Gen., and, on the brief, Joseph I. Lieberman, Former Atty. Gen., Hartford, for appellee (defendant).

Before PETERS, C.J., and ARTHUR H. HEALEY, SHEA, GLASS and HULL, JJ.

HULL, Associate Justice.

The plaintiffs, the boards of education of the towns of Avon, Cromwell and Madison, filed a petition with the defendant Connecticut state employees retirement commission (commission) requesting that the commission issue a declaratory ruling on whether the wages paid by the respective boards of education to their teachers for services rendered in connection with school-related extra duty and coaching assignments are subject to the social security tax under General Statutes §§ 7-452 through 7-459. The commission determined that such wages are subject to the social security tax. The plaintiffs appealed to the Superior Court, which affirmed the commission's ruling. The plaintiffs then appealed to the Appellate Court and we transferred the case to ourselves pursuant to Practice Book § 4023. We find no error.

A proper understanding of the issues presented in this case requires that we first discuss briefly the statutory framework of the social security system as it pertains to the claims of the parties. While participation in the social security system is mandatory for most employees in the private sector, employees of state and local governments can be brought into the system only by means of a voluntary agreement entered into by the states with the federal government. 42 U.S.C. § 418(a)(1); ¹ 20 C.F.R. § 404.1201(a). The state of Connecticut entered into such an agreement on January 24, 1952. The agreement provides that the social security system is extended to include the employees of the Connecticut municipalities listed in the appendix to the agreement. The towns of Avon, Cromwell and Madison, within which the plaintiff boards of education are respectively located, are listed in this appendix.

In Connecticut, before a municipality may be brought into the social security system under the federal-state agreement, the municipality must, by vote of its legislative body and with the approval of the commission, ² apply for membership in the system. General Statutes § 7-453. ³ Upon acceptance of a municipality into the system, the municipality and the commission enter into an agreement specifying the terms and conditions of the municipality's participation in the system. General Statutes §§ 7-453, 7-457. Municipalities and their employees participating in the social security system are taxed in a manner virtually identical to that of private sector employers and employees: "A municipality shall deduct an amount from the wages of its employees whose services are covered under the system by federal-state agreement and shall contribute an equal amount for each employee on its own behalf so that the sum of these amounts shall be equivalent to the taxes which would be imposed by the Federal Insurance Contributions Act...." General Statutes § 7-453.

The extension of the social security system to a participating municipality's employees, however, is not all-inclusive. Connecticut law provides that certain state and municipal positions that are already covered by local and state retirement systems shall be excluded from social security coverage. General Statutes § 7-454. ⁴ Since retirement benefits for teachers in Connecticut are provided by the Connecticut Teachers' Retirement System; General Statutes § 10-183b et seq.; teaching positions are among those municipal positions excluded from social security coverage and taxation under General Statutes § 7-454. Specifically, § 7-454(2) provides an exemption for "individuals in positions covered under the Connecticut state teachers' retirement [system]."

Having laid the preliminary statutory groundwork for review of this appeal, we now look to the factual and procedural history of this case. The source of the controversy between the parties can be traced to Public Acts 1971, No. 185. That act revised General Statutes § 10-160 (now § 10-183b, ⁵ which defines a teacher's "annual salary" for purposes of the teachers' retirement system. Specifically, Public Acts 1971, No. 185 excluded from the definition of "annual salary" any sums paid to a teacher "for any extra duty assignments, coaching, unused sick leave, unused vacation or terminal pay." Compensation for these items had previously been treated as part of a teacher's annual salary and was therefore considered to be excluded from social security taxation under the exemption for teachers contained in General Statutes § 7-454(2). However, because Public Acts 1971, No. 185 directed that extra duty and coaching assignments should no longer be considered part of a teacher's annual salary for purposes of the teachers' retirement system, a question arose as to whether the earnings received by teachers in connection with such assignments were still exempt from social security taxation under § 7-454(2). The commission made known its position on this matter through a November 19, 1971 letter, sent to all participating municipalities, stating that due to the statutory change in the law, "services in the position of coach are covered [by social security] and wages should be reported."

Apparently, the commission's recommendation went unheeded by the plaintiffs since, as a result of an audit conducted in 1984, the commission found that the plaintiffs owed back social security taxes for wages paid to their teachers for extra duty ⁶ and coaching assignments. The plaintiffs disputed the commission's finding and petitioned the commission for a declaratory ruling ⁷ on the issue of whether such wages were subject to the social security tax under General Statutes §§ 7-452 through 7-459.

Prior to issuing its ruling, the commission conducted a formal hearing on the matter. ⁸ General Statutes § 4-177 et seq. At the hearing, the plaintiffs contended that the wages paid ⁹ to their teachers for services performed in connection with extra duty and coaching positions were not subject to social security taxation on any one of three grounds. The plaintiffs claimed that: (1) they were excluded from the social security system under General Statutes § 7-452(1) ¹⁰ because they were independent "municipalities" that had never separately agreed to participate in the system; (2) the compensation paid for extra duty and coaching assignments fell within the statutory exemption for teacher salaries contained in § 7-454(2); and (3) the commission's letter informing them of their taxability was invalid because of the absence of a properly promulgated regulation pursuant to the Uniform Administrative Procedure Act. General Statutes § 4-166 et seq. The commission, however, was not persuaded by the plaintiffs' arguments and ruled that the wages in question were subject to the social security tax under General Statutes §§ 7-452 through 7-459.

Having exhausted their administrative remedies, the plaintiffs appealed to the Superior Court; General Statutes § 4-183; where they presented the same claims to the trial court. The trial court rejected each of the plaintiffs' claims and upheld the ruling of the commission.

The plaintiffs' appeal to this court assigns error to the trial court's rejection of their claims. Before addressing the merits of the plaintiffs' claims, however, we must first consider the applicable standard of review. "The standard of judicial review of administrative agency rulings is well established. Section 4-183(g) permits modification or reversal of an agency's decision 'if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are: (1) In violation of constitutional or statutory provisions; (2) in excess of the statutory authority of the agency; (3) made upon unlawful procedure; (4) affected by other error of law; (5) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (6) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.' The trial court may not retry the case or substitute its judgment for that of the agency on the weight of the evidence or questions of fact.... Rather, an agency's factual and discretionary determinations are to be accorded considerable weight by the courts." (Citations omitted.) State Medical Society v. Board of Examiners in Podiatry, 208 Conn. 709, 717, 546 A.2d 830 (1988). It is for the courts, however, to expound and apply governing principles of law. Id.; see also United Parcel Service, Inc. v. Administrator, 209 Conn. 381, 385-86, 551 A.2d 724 (1988); Real Estate Listing Service, Inc. v. Real Estate Commission, 179 Conn. 128, 138-39, 425 A.2d 581 (1979).

This case presents questions of law turning upon the interpretation of statutes. Specifically, the dispute between the parties centers around the interpretations to be given General Statutes § 7-452(1), which defines a "municipality" for purposes of participation in the social security system, and General Statutes § 7-454(2), which provides a qualified exemption from social security coverage and taxation for teachers. Such questions of statutory interpretation invoke "a broader standard of review than is ordinarily involved in deciding whether, in light of the evidence, the agency has acted unreasonably, arbitrarily, illegally or in abuse of its discretion." State Medical Society v. Board of Examiners in Podiatry, supra, 208 Conn. at 718, 546 A.2d 830. "Ordinarily 'the...