S. States Police Benevolent Ass'n, Inc. v. Bentley

• Decision Date: 23 September 2016
• Docket Number: 1150360,1150265
• Citation: 219 So.3d 634
• Parties: SOUTHERN STATES POLICE BENEVOLENT ASSOCIATION, INC., et al. v. Governor Robert H. BENTLEY et al. Southern States Police Benevolent Association, Inc., et al. v. Governor Robert H. Bentley et al.
• Court: Alabama Supreme Court

219 So.3d 634

SOUTHERN STATES POLICE BENEVOLENT ASSOCIATION, INC., et al.

v.Governor Robert H. BENTLEY et al.

Southern States Police Benevolent Association, Inc., et al.

v.Governor Robert H. Bentley et al.

1150265

1150360

Supreme Court of Alabama.

Sept. 23, 2016

J. Flynn Mozingo of Melton, Espy & Williams, PC, Montgomery, for appellants.

Dorman Walker, David R. Boyd, and John Naramore of Balch & Bingham LLP, Montgomery; and Leura Canary, JoClaudia Moore, and Jared Morris, Retirement Systems of Alabama, Montgomery, for appellees.

PER CURIAM.

Southern States Police Benevolent Association, Inc. ("the SSPBA"), and three members of the SSPBA—Scott Kendall, Christopher Carver, and Patrick McCulloch, all of whom are employed as police officers by the City of Auburn (hereinafter referred to collectively as "the Auburn police officers" or collectively with the SSPBA as "the police plaintiffs")—sued Governor Robert H. Bentley and the other members of the Board of Control of the Employees' Retirement System of Alabama ("the ERS") (Governor Bentley and the other members of the Board of Control of the ERS are hereinafter referred to as "the ERSA"); David Bronner, the chief executive officer and secretary-treasurer of the Retirement Systems of Alabama ("the RSA")¹ and the ERS; and Thomas L. White, Jr., the State comptroller (hereinafter referred to collectively as "the State defendants"), in their representative capacities, in the Montgomery Circuit Court seeking injunctive relief and a judgment declaring that participants in the pension plan the ERSA operates could make retirement contributions—and therefore receive increased retirement benefits—based upon their "earnable compensation," which term, the police plaintiffs argue, rightly includes payments received for overtime worked. The trial court entered a summary judgment in favor of the State defendants, and the police plaintiffs appeal. We affirm.

I.

The ERSA operates a defined-benefit pension plan ("the ERS plan") established by the State of Alabama in 1945 to provide "retirement allowances and other benefits ... for employees of the State of Alabama."² § 36-27-2, Ala. Code 1975. Participation in the ERS plan is mandatory for covered employees if they work at least 20 hours per week in a nontemporary position. These "members" must contribute a percentage of their "earnable compensation" to the ERS plan each pay period, and, upon retirement, they will receive monthly pension payments, the amount of which depends upon the number of years of "creditable service" completed by the member and upon the member's "average final compensation." See § 36-27-1, Ala. Code 1975 (defining the terms "member," "earnable compensation," "creditable service," and "average final compensation"). The entity employing the member also makes a separate contribution to the ERS plan each pay period on behalf of the member.³ Although participation in the ERS plan is mandatory for most members beginning from the date they start employment, a member does not become entitled to receive retirement benefits until he or she has accumulated 10 years of creditable service. Upon doing so, the member is said to be "vested," and he or she is thereafter eligible to begin receiving retirement benefits when he or she retires after (1) accumulating 25 or 30 years of creditable service (depending upon the rules of the employing entity) or (2) reaching 60 years of age.⁴

Section 36-27-1(14), Ala. Code 1975, defines "earnable compensation" as "[t]he full rate of compensation that would be payable to an employee if he or she worked the full normal work-time." In 1975, the State police requested that overtime payments be included in the calculation of their officers' earnable compensation, and, in November 1975, the ERSA acceded to that request and adopted a policy whereby overtime payments were included in the earnable compensation of those members. Thereafter, in May 1978, the ERSA implemented a policy whereby overtime payments and subsistence allowances⁵ were included in earnable compensation for all members of the ERS plan. Accordingly, members made retirement contributions on those payments and allowances. When the Auburn police officers started their employment with the City of Auburn, they each began making retirement contributions based upon earnable compensation as defined by that policy, that is, they made contributions on both their base salary and on all overtime payments received.

Sometime in early 2011, White, the State comptroller, and Jackie Graham, the director of the State Personnel Department and a member of the Board of Control of the ERS, requested an advisory opinion from the Alabama Attorney General clarifying whether overtime payments and subsistence allowances were properly considered "earnable compensation" under § 36-27-1(14). On August 22, 2011, the attorney general issued an opinion answering both inquiries in the negative. With regard to overtime payments, the attorney general specifically stated:

"The [ERS], as set forth in § 36-27-1, etseq. , [Ala. Code 1975 ], provides a defined-benefit plan for certain employees of the State of Alabama whose salary is paid by a state warrant. ... Specifically, [Ala. Code 1975,] § 36-27-24(b)[,] provides that ‘each employer shall cause to be deducted from the salary of each member on each and every payroll of such employer for each and every payroll period [a percentage] of his earnable compensation .’ ... (emphasis added).

" ‘Earnable compensation’ is defined as ‘[t]he full rate of compensation that would be payable to an employee if he or she worked the full normal work-time. In cases where compensation includes maintenance, the Board of Control shall fix the value of that part of the compensation not paid in money.’ Ala. Code [1975,] § 36-27-1(14) (2001) [ (emphasis added) ].

"The statutory provisions governing the [RSA] do not allow for contributions on extraordinary payments. See Mitchell v. Employees' Retirement Sys. of Ala. , 642 So.2d 480, 481 (Ala.1994) (disallowing retirement calculations on sick and annual leave payments). State law clearly provides that deductions for retirement shall be made from an employee's salary . By definition, ‘overtime’ is not ‘salary.’

"....

"Pursuant to state law, the salary of each employee is based upon a semi-monthly rate, regardless of the number of hours in the semi-monthly pay period. For example, during a calendar year, the semi-monthly pay period contains 72, 80, 88, and 96 work hours depending on the work days contained within each semi-monthly time period. Regardless, however, of the number of hours within the semi-monthly time period, an employee's salary remains constant.

"Additionally, Rule 670-X-11-.01 and .04 of the Rules of the State Personnel Board establish uniform regulations for all employees under the State Merit System and requires the number of hours to be uniform for all employees whose positions are allocated to the same class, unless specifically provided otherwise by action of the Board. A ‘regular work week’ is described as a 40-hour work week. (A 40-hour week shall be used for the purpose of calculating the pay of employees paid on a semi-monthly basis.) Ala. Admin. Code [Personnel Board] r. 670-X-11-.01 and -.04 (eff. June 26, 2006). The State Personnel Board Rules, not in conflict with the laws of Alabama, have the force and effect of law. See Ala. Code [1975,] § 36-26-9 (2001). With respect to state law enforcement officers, section 36-21-4 of the Code specifically provides that a normal work week is a 40-hour week. Ala. Code [1975,] § 36-21-4 (2001).

"Therefore, based upon the foregoing, only the salary an individual is normally entitled to receive on a semi-monthly basis is ‘earnable compensation’ as that term is used in § 36-27-1(14). Overtime payments are not salary as that term is used in § 36-27-24(b), and may not be used for retirement calculation purposes."

Ala. Op. Att'y Gen. No. 2011-090 (August 22, 2011). For similar reasons, the attorney general also concluded that subsistence allowances were not "earnable compensation" for retirement purposes. Id .

In accordance with the attorney general's opinion, White stopped collecting from state employees retirement contributions attributable to overtime payments or subsistence allowances, effective September 1, 2011. The RSA informed other entities participating in the ERS plan to do likewise, and the City of Auburn complied with that directive, stopping the collection of retirement contributions attributable to overtime payments received by the Auburn police officers as of that same date.⁶ On February 6, 2012, the police plaintiffs initiated this action, challenging the ERSA's decision to exclude overtime payments from a member's earnable compensation and arguing that the State defendants had a contractual obligation to continue calculating members' earnable compensation in the same manner the ERSA had for approximately 36 years.⁷ Before the trial court could rule, however, the legislature passed a bill amending the definition of "earnable compensation" in § 36-27-1(14), effective May 9, 2012. Specifically, a subsection b was added, which read as follows:

"b. The term earnable compensation for retirement purposes shall not include subsistence payments that are made to an employee and shall include overtime payments that are made to an employee; however, earnable compensation shall not exceed 120 percent of any employee's annual base compensation as certified by the employer."⁸

Following the amendment of § 36-27-1(14), the State defendants adjusted their policies to comply with the amended statute, and the ERSA has since accepted retirement contributions attributable to overtime payments received by a member only to the extent that the member's earnable compensation does not exceed 120% of his or her "annual base compensation," which the ERSA interprets to mean base salary. In response to this legislative action, the police plaintiffs amended...