Boston Police Patrolmen's Association, Inc. v. Boston
| Decision Date | 16 November 1999 |
| Docket Number | 96-6222E |
| Citation | 1999 MBAR 355 |
| Parties | Boston Police Patrolmen's Association, Inc. and others1 v. City of Boston and another2 |
| Court | Massachusetts Superior Court |
Mass L. Rptr. Cite: 11 Mass. L. Rptr. 11
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): GARSH
Plaintiffs Boston Police Patrolmen's Association, Inc. ("the Association")3 and Richard Bradley, James Carnell, Robert Duggan and Michael O'Hara, on their own behalf and as representatives of all those similarly situated, and plaintiffs-intervenors, Boston Police Detectives Benevolent Society, Inc. ("the Society")4 and John Rogers, Dennis Harris, and Joseph Geary, on their own behalf and as representatives of all those similarly situated, bring this action seeking damages allegedly resulting from the violation of Massachusetts' weekly wage law, G.L.c. 149, 148 and 150, by defendants, the City of Boston ("the City") and the Boston Police Department ("the Department"). Injunctive and declaratory relief is sought as well. Plaintiffs and plaintiffs-intervenors allege that, prior to January of 1996, the defendants violated the state weekly wage law by failing to timely transmit employee deferred compensation plan deductions to designated plan coordinators.
This Court (Roseman, J.) ordered that the trial of this action be bifurcated, with liability to be tried before damages. Subsequently, the parties submitted a joint statement of agreed facts comprising all of the facts deemed material by the parties to a determination of liability, together with supporting exhibits, and the court heard oral argument as to the sole legal issue whether deferred compensation deductions constitute "wages" within the meaning of G.L.c. 149, 148. For the reasons stated below, the plaintiffs are not entitled to relief.
The City offers a deferred compensation plan to its employees pursuant to G.L.c. 29, 64B. Participation in the plan is voluntary. Those employees who opt to participate in the plan designate a percentage of their annual base pay to be invested in one or more of several tax-deferred funds. The City transfers employee plan deductions to certain plan coordinators.
Each employee participating in the plan completes a Payroll Authorization Card for filing with the plan coordinator. That card indicates the amount of money to be deducted from the employee's paycheck. Every employee who opts to participate in the plan also completes a Participation Agreement for filing with the plan coordinator. The terms of that contract include the following:
You've agreed to reduce your salary. By signing this form, you authorize your Employer to reduce your salary or wages in amounts equal to the Employee Contributions that you've specified. Your Employer will use these amounts to make the contributions to your Plan Account...
Plan withdrawal restrictions: Because your Plan is designed to help you save for your retirement, the tax law imposes certain withdrawal restrictions on your Plan money. You won't be permitted to get any money out of the Plan until after you permanently leave work for your Employer. You may get a limited withdrawal if you have a severe financial hardship that is approved by the Plan Administrator. You must understand that you shouldn't participate in the Plan if you don't have enough savings for regular expenses.
...
Deferred compensation is not your property. To get its tax advantages your Plan requires that each investment (including any life insurance contract) is the exclusive property of your Employer. While your Employer intends to hold your Account solely to invest your Deferred Compensation and then make Plan payments to you, to meet tax Code rules, your Plan Account can't be legally restricted.
...
Compliance with Internal Revenue Code. You agree that your Employer... can take any action that may be necessary to ensure that your participation in your Plan is in compliance with any applicable requirement of the Internal Revenue Code.
(Emphasis in original).
An employee who participates in the plan chooses the amount of the deduction and the type of investment vehicle, such as an annuity or mutual fund, into which the deduction is to be deposited. The plan coordinator then notifies the City of the employee's enrollment in the plan and the amount of that employee's designated deduction.
In the early 1970s, the City offered a deferred compensation plan with Variable Annuity Life Insurance Company ("VALIC"), Aetna, and Security First as plan coordinators. Later, the City offered investors a deferred compensation plan through PEBSCO as the plan coordinator. Existing investors were permitted to continue to invest through VALIC, Aetna, and Security First. In 1994, the City began to utilize the services of the Commonwealth's deferred compensation plan, and, through that plan, investors could invest through Copeland Companies ("Copeland"). Existing investors were permitted to continue with VALIC, Aetna, Security First, and PEBSCO as plan coordinators.
The City currently utilizes the services of the state's deferred compensation plan pursuant to the terms of an agreement between the City and the Commonwealth ("the Agreement"). The Agreement provides that all amounts of the compensation deferred under the City's plan, although invested in accounts in the name of the Commonwealth, "shall remain (until made available to the participant or other beneficiary) solely the property and right of the [City of Boston], subject only to the claims of the [City of Boston's] general creditors." The Commonwealth's plan operates pursuant to the terms of the Deferred Compensation Plan Document (the "Document"). The Document also states that all assets of the plan, including all deferred amounts, shall remain solely the property and rights of the employer until made available to the participant or beneficiary subject only to the claims of creditors of the employer. It further states that the rights of the participant shall be those of a general creditor of the employer. Since 1994, Copeland has coordinated the deferred compensation investments of the City's employees under the Deferred Compensation Plan Contract between Copeland and the Commonwealth. Beginning in 1994, employees who invested through VALIC, Aetna, Security First, or PEBSCO could change to Copeland by forwarding a completed Copeland deduction card to Copeland, which then would notify the City of the employee's participation and the amount of the designated deduction.
The Department's employees receive weekly paychecks. The pay period is Wednesday to Tuesday. The Department's payroll department, on a weekly basis, submits a payroll document for all Department employees to the City's Auditing Department. After auditing the payroll, the City Auditor prepares a signed warrant indicating approval of the payroll. On Thursday of every week, the Treasury Department ("Treasury") receives the warrant for the Department's payroll covering the pay period ending on Tuesday of that week. The payroll, along with payrolls from other City departments, is then transmitted to the City's Management Information Systems Department ("MIS"), which processes the payroll through a computer and prepares unsigned, undated paychecks. The checks are usually prepared by MIS on Wednesday or Thursday, but sometimes Friday, for the pay period ending the previous Tuesday. The checks are then transmitted to Treasury, where they are signed and dated. Treasury then allocates the funds for the paychecks by transferring money from the City's General Fund bank account or accounts to the bank account or accounts from which the paychecks are drawn. Treasury thereafter distributes the paychecks to the Department's employees, who receive their paychecks on Friday for the pay period ending the previous Tuesday.
The Department's payroll indicates the type, number and amount of deductions from each employee's paycheck, including, but not limited to, income tax, insurance premium payments, and deferred compensation payments. The amount of money which the Treasury transfers from the General Fund account or accounts into the account from which paychecks are drawn does not include the amount of any paycheck deductions.
Prior to January 1996, the City employed the following procedures for transfer of deferred compensation deductions. After processing all of the City's payrolls for the week for the City's approximately twenty thousand employees, MIS prepared a deduction report that indicated the amount of money to be deducted from each department's payroll for particular items. With regard to deferred compensation deductions, MIS prepared a list indicating each department and the total amount of deferred compensation deductions for all employees in that department. In 1995, approximately 3,500 to 4,000 employees participated in the deferred compensation plan in any given week. MIS transmitted the deduction report to Treasury on Friday for the pay period ending the previous Tuesday.
Treasury would then divide the report into a list of individual plan coordinators receiving deductions, reconcile the information in the report, and determine the specific amount of money to be transferred to each different plan coordinator. Treasury completed this process no later than the following Monday unless there was an intervening holiday. Treasury then prepared a "special draft," or payment form, in the amount of the total deduction for all the plan coordinators and would thereafter transmit the draft to the Auditing Department on Tuesday or Wednesday of the week next following the end of the pay period.
The Auditing Department processed the special draft as part of the entire accounts payable...
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