Mitchell v. Employees' Retirement System of Alabama

• Decision Date: 11 February 1994
• Citation: 642 So.2d 480
• Parties: William E. MITCHELL v. EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA. James WELDON and Kenneth Fortner v. EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA. CITY OF AUBURN v. EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA. AV92000318 to AV92000320.
• Court: Alabama Court of Civil Appeals

Page 480

642 So.2d 480

William E. MITCHELL v. EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA.

James WELDON and Kenneth Fortner v. EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA.

CITY OF AUBURN v. EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA.

AV92000318 to AV92000320.

Court of Civil Appeals of Alabama.

Feb. 11, 1994.

Rehearing Denied March 18, 1994.

Certiorari Denied May 20, 1994

Alabama Supreme Court

1930897 and 1930899.

Mark W. Lee and John M. Bergquist of Parsons, Lee & Juliano, Birmingham, for William E. Mitchell.

T. Dudley Perry, Jr. of Perry & Perry, Montgomery, for James Weldon and Kenneth Fortner.

William T. Stephens, Montgomery, for appellee.

YATES, Judge.

The City of Auburn, Alabama, and three former City employees filed a declaratory judgment action against the Retirement System of Alabama to determine if an employee of the City of Auburn is entitled, under the laws of Alabama, to use, in calculating retirement benefits, sums paid, in anticipation of retirement, for accrued sick leave and annual leave. Specifically, the City sought a determination that deductions could be withheld from this money for retirement purposes. The City's position was that sums paid by the City to certain employees upon retirement for unused annual and sick leave constituted "earnable compensation" for the purposes of determining contributions to the Retirement System and calculating retirement benefits paid by the Retirement System. William Mitchell, a former City employee who had received such payments, intervened as a plaintiff. Two former City employees, Kenneth Fortner and James A. Weldon, who had not received such payments, but who wanted the enhanced retirement benefits, also intervened as plaintiffs.

At trial, the parties submitted the case upon a stipulation of facts and orally argued their respective legal contentions. The trial court entered a judgment in favor of the Retirement System, ruling that payments for accumulated annual or sick leave made in contemplation of retirement do not constitute "earnable compensation" under Ala.Code 1975, § 36-27-1. It further found that the City had improperly deducted and submitted retirement contributions on such payments.

The employees of the City were members of the Retirement System, pursuant to Ala.Code 1975, § 36-27-10. The City offered retiring employees the option of being paid for, rather than using, accrued sick and annual leave during their last year of employment. If an employee chose to be paid for his or her accrued time, that amount was included as "earned income" on the employee's W-2 form, and a contribution on the amount was paid to the Retirement System by both the City and the employee. The City contends that that practice was proper. The Retirement System argues that retirement contributions should be withheld only from the employee's regular rate of pay.

This court must determine whether the payments to retiring employees for unused sick and annual leave are included within the meaning of "earnable compensation" under Ala.Code 1975, § 36-27-1(14).

The City joined the Retirement System in October 1966. From then until trial, 21 employees had retired; 13 employees were given lump-sum payments at retirement for accrued annual and sick leave, without retirement contributions being withheld; 8 employees were paid for accrued...