Deonier v. State, Public Employee Retirement Bd.

• Citation: 114 Idaho 721,760 P.2d 1137
• Decision Date: 17 June 1988
• Docket Number: No. 16706,16706
• Parties: Frederick A. DEONIER, Plaintiff-Appellant, Cross Respondent, v. STATE of Idaho, PUBLIC EMPLOYEE RETIREMENT BOARD, Defendant-Respondent, Cross Appellant. William H. KELLER, Plaintiff-Appellant, Cross Respondent, v. STATE of Idaho, PUBLIC EMPLOYEE RETIREMENT BOARD, Defendant-Respondent, Cross Appellant.
• Court: United States State Supreme Court of Idaho

Page 1137

760 P.2d 1137

114 Idaho 721

Frederick A. DEONIER, Plaintiff-Appellant, Cross Respondent, v. STATE of Idaho, PUBLIC EMPLOYEE RETIREMENT BOARD, Defendant-Respondent, Cross Appellant.

William H. KELLER, Plaintiff-Appellant, Cross Respondent, v. STATE of Idaho, PUBLIC EMPLOYEE RETIREMENT BOARD, Defendant-Respondent, Cross Appellant.

No. 16706.

Supreme Court of Idaho.

June 17, 1988.

Rehearing Denied Sept. 21, 1988.

Skinner, Fawcett & Mauk, Boise, for plaintiffs-appellants, cross respondents. William L. Mauk and Alan C. Herzfeld argued.

Jim Jones, Atty. Gen., and David G. High, Deputy Atty. Gen., Boise, for defendant-respondent, cross appellant. David G. High argued.

HUNTLEY, Justice.

This is a consolidated appeal from a decision of the Industrial Commission which upheld two closely related orders of the Public Employees Retirement Board (PERS Board). The appellants, Frederick Deonier and William Keller, were formerly employed by the Boise City Fire Department--Deonier from 1947 through 1981, and Keller from 1975 through 1982. Both men were injured on the job and negotiated lump sum monetary settlements of their worker's compensation claims. Prior to their involuntary retirements, Deonier had contributed $18,121.69 to the Firemen's Retirement Fund, and Keller had contributed $9,688.12. (Neither amount includes interest accrued thereon.) Subsequently, Deonier and Keller sought disability retirement benefits. The PERS Board granted the disability retirement benefits, but ordered, pursuant to I.C. § 72-1414, that the disability retirement benefits must be offset by the amount of the lump sum worker's compensation benefits which they had previously received.

Both firemen appealed the PERS Board's decision to the Industrial Commission pursuant to I.C. § 72-1423. The appeals were consolidated by the Commission because of the similarity of the legal issues. The Commission entered a final decision on appeal on September 29, 1986, affirming the setoff, but reducing the amount thereof. The primary issues raised by this appeal involve the legal interpretation of I.C. § 72-1414 by the PERS Board and the Commission, and the constitutionality of I.C. § 72-1414. We hold that, irrespective of constitutional infirmities, the interpretation of § 72-1414 by the Board and the Commission is erroneous. We then hold § 72-1414 unconstitutional as an impairment of the right to contract and as a violation of equal protection of the law.

The legislation instituting the Firemen's Retirement Fund (FRF) was enacted in 1945. See, I.C. § 72-1401 et seq. As originally enacted, § 14 of the Act (I.C. § 72-1414) provided that the amount of payments payable under the FRF "shall be reduced by the amount to which said paid fireman is entitled under the said Workman's Compensation Law." ¹ I.C. § 72-1414 has been restructured since 1945, but continues to provide for a setoff for worker's compensation benefits paid, albeit in different subsections of the statute. ²

INTERPRETATION OF IDAHO CODE, TITLE 72

On its face, I.C. § 72-1414 operates to decrease the amount of disability retirement benefits received by employees by the amount of worker's compensation benefits they are entitled to receive. It is difficult to reconcile the provisions of I.C. § 72-1414 with I.C. § 72-318, which provides in pertinent part:

Invalid agreements--penalty.--(1) No agreement by an employee to pay any portion of the premiums paid by his employer for workmen's compensation, or to contribute to the cost or other security maintained for or carried for the purpose of securing the payment of workmen's compensation, or to contribute to a benefit fund or department maintained by the employer, or any contract, rule, regulation or device whatever design to relieve the employer in whole or in part from any liability created by this law, shall be valid. ... (Emphasis added).

In Shill v. Shill, 100 Idaho 433, 599 P.2d 1004 (1979), we commented upon the nature of retirement benefits received pursuant to the Idaho Firemen's Retirement Fund.

The State of Idaho Firemen's Retirement Fund establishes a pension plan funded by contributions from each paid fireman deducted from the fireman's wages or salary. Other revenues are also added to the fund. ... A firefighter's interest in the pension fund attributable to fund income from sources other than employee contributions is not a gratuity but a form of deferred compensation accrued by reason of the individual's service ... (Emphasis added).

100 Idaho at 436, 599 P.2d at 1007.

Under like circumstances, the court in Symington v. City of Albany, 5 Cal.3d 23, 95 Cal.Rptr. 206, 485 P.2d 270 (1971), held that a city could not reduce the pension of a disabled fireman by the amount of workmen's compensation the fireman had received, where Ca. Labor Code § 3751 provided that "[n]o employer shall exact or receive from any employee any contribution, or make or take any deduction from earnings of any employee, either directly or indirectly, to cover ... any part of the cost of [worker's] compensation...."

In Symington, the city contributed an amount equal to employees' contributions to the fund. The court allowed an offset of one-half of the worker's compensation benefits received from the pension proportional to the city's contribution to the pension fund. The court noted that to hold otherwise would "deprive [the fireman] of the benefit of his many years of contributions to the pension system and compel him, in violation of Labor Code section 3751, to pay indirectly for his own workmen's compensation benefits." 95 Cal.Rptr. at 207, 485 P.2d at 271.

While the California court opted for a partial offset to avoid violating Ca. Labor Code § 3751, we are not bound to accept their rationale in its entirety. Shill establishes that retirement benefits under the FRF are deferred compensation or wages. Requiring a firefighter to contribute to the cost of his own worker's compensation benefits solely from his own contribution to his retirement fund violates the mandate of I.C. § 72-318 and undercuts a firefighter's right to rely upon the benefits earned over a lifetime of work. However, even allowing a partial offset for those funds contributed to the Fund by the city would also deprive firemen of their own delayed wages. During wage negotiations, increases in retirement contributions by the city are often sought in lieu of increases in regular wages. The firefighter earns both payments from the city and is entitled to both. Further, one of the purposes underlying the enactment of the FRF as codified in § 72-1401 is the encouragement of long service in fire fighting. The State's reading of I.C. § 72-1414 actively retards that worthy goal by encouraging firefighters to serve less time and risk less injury in order to preserve the full value of their own delayed wages. ³

Importantly, allowing no offset comports with the mandate of I.C. § 72-1420, that "provisions of this chapter shall be liberally construed, with the object of promotion of justice and the welfare of the person subject to its provisions " (emphasis added), by not unjustly depriving retired firemen of a pension they have already earned.

It should be noted that the commission relied heavily upon Larson's Treatise on Workmen's Compensation in upholding the total offset. In particular, the commission focused upon the following language:

Wage-loss legislation is designed to restore to the worker a portion, such as one-half to two-thirds, of wages lost due to the three major causes of wage-loss: physical disability, economic unemployment, and old age. The crucial operative fact is that of wage-loss; the cause of the wage-loss merely dictates the category of legislation applicable. Now if a workman undergoes a period of wage loss due to all three conditions, it does not follow that he should receive three sets of benefits simultaneously and thereby recover more than his actual wage. He is experiencing only one wage loss and, in any logical system, should receive only one wage-loss benefit. This conclusion is inevitable, once it is recognized that workmen's compensation, unemployment compensation, non-occupational sickness and disability insurance, and old age and survivors' insurance are all parts of a system based upon a common principle. (Emphasis added).

4 Larson, The Law of Workmen's Compensation, § 97.10 (1971).

We cannot support any use of the above language from Larson to support the total offsetting of worker's compensation benefits received from retirement benefits to which one is entitled. The language highlighted in the above quotation indicates that, under no circumstances, should a retired employee recover "more than his actual wage." However, the central theme found in our statutes and case law is that retirement benefits are "wages." Further, plaintiffs in this case have argued that, under no circumstance, could any retired firefighter receive more than one hundred percent of his wage pursuant to Idaho's Worker's Compensation Laws and the retirement benefits of the FRF, irrespective of any offsetting. ⁴ The State has not disputed this assertion.

Additionally, even if a worker's deferred wages, when coupled with monies received as worker's compensation, total more than one-hundred percent of previous wages, such should not cut into the employee's right to his retirement benefits, since worker's compensation awards are received for discrete independent injuries--not as wages.

Both Larson, in the foregoing quote, and the Commission, in relying upon it, misperceive the true nature of the bulk of worker's compensation benefits when they reason that a worker may not recover "two or three sets of WAGE-LOSS benefits." When a worker receives a permanent partial disability payment for loss of his leg at the hip, he is not receiving wages --he is being paid for loss of the leg. If, for example, the computer operator who lost a leg is rated for impairment when his...