Tyler v. Livonia Public Schools

• Decision Date: 30 December 1996
• Docket Number: Docket No. 179336
• Citation: 561 N.W.2d 390,220 Mich.App. 697
• Parties: , 117 Ed. Law Rep. 293 Reynold TYLER, Plaintiff-Appellant, v. LIVONIA PUBLIC SCHOOLS, and Corporate Services, Defendants-Appellees. (On Remand)
• Court: Court of Appeal of Michigan — District of US

Page 390

561 N.W.2d 390

220 Mich.App. 697, 117 Ed. Law Rep. 293

Reynold TYLER, Plaintiff-Appellant, v. LIVONIA PUBLIC SCHOOLS, and Corporate Services Defendants-Appellees. (On Remand)

Docket No. 179336.

Court of Appeals of Michigan.

Submitted March 19, 1996, at Detroit.

Decided Dec. 30, 1996, at 9:00 a.m.

Released for Publication March 18, 1997.

Sachs, Waldman, O'Hair, Helveston, Hodges & Barnes, P.C. by Granner S. Ries, Detroit, for plaintiff-appellant.

Keller, Thoma, Schwarze, Schwarze, DuBay & Katz, P.C. by Thomas L. Fleury and John J. Rabaut, Detroit, for defendants-appellees.

Before SMOLENSKI, P.J., and MARKEY and P.J. SULLIVAN, ^* JJ.

ON REMAND

MARKEY, Judge.

This appeal of a September 24, 1993, opinion and order of the Worker's Compensation Appellate Commission, one member dissenting, comes to this Court "for consideration as on leave granted" pursuant to the order of the Michigan Supreme Court, Tyler v. Livonia Public Schools, 447 Mich. 970, 523 N.W.2d 632 (1994). The WCAC decision affirms the decision of the magistrate, which, while awarding plaintiff worker's compensation disability benefits, allows defendant Livonia Public Schools to coordinate those benefits with plaintiff's disability pension provided pursuant to M.C.L. § 38.1386; M.S.A. § 15.893(196). We affirm.

The pertinent facts are not in dispute. After many years of employment in the public school system as a general laborer, plaintiff suffered work-related back injuries that have disabled him from further employment. His last day of work was November 9, 1989. Plaintiff is receiving a disability pension pursuant to the Public School Employees Retirement Act, M.C.L. § 38.1386; M.S.A. § 15.893(196). The sole question presented is whether those disability pension benefits can be coordinated against defendant's worker's compensation liability.

Plaintiff presents two issues for review:

I. Did the WCAC err as a matter of law in concluding that plaintiff's disability pension may be utilized for coordination purposes under § 354 of the WDCA to fund a portion of defendant's worker's compensation liability to plaintiff?

II. If defendant may utilize plaintiff's pension benefit to fund a portion of its worker's compensation liability to plaintiff, does this violate Const.1963, art. 1, § 10 and Const. 1963, art. 9, § 24?

The legal questions presented were not decided by the WCAC on the basis of a long-standing administrative interpretation of the relevant statutory provisions, but as an issue of first impression. Accordingly, we review such legal issues de novo, according only minimal deference to the administrative construction of the statute, and set aside an agency's ruling regarding a question of law only where a party's substantial rights were prejudiced because of a substantial and material error of law. Schuhknecht v. State Plumbing Bd, 277 Mich. 183, 186-187, 269 N.W. 136 (1936); Ronney v. Dep't of Social Services, 210 Mich.App. 312, 315, 532 N.W.2d 910 (1995).

The pertinent portions of § 354 of the Worker's Disability Compensation Act (WDCA), M.C.L. § 418.354(1)(d) and (14); M.S.A. § 17.237(354)(1)(d) and (14), are as follows:

(1) This section is applicable when either weekly or lump sum payments are made to an employee as a result of liability pursuant to section 351, 361, or 835 with respect to the same time period for which ... payments under ... a disability insurance policy provided by the employer; or pension or retirement payments pursuant to a plan or program established or maintained by the employer, are also received or being received by the employee. Except as otherwise provided in this section, the employer's obligation to pay or cause to be paid weekly benefits other than specific loss benefits under section 361(2) and (3) shall be reduced by these amounts:

* * * * * *

(d) The after-tax amount of the pension or retirement payments received or being received pursuant to a plan or program established or maintained by the same employer from whom benefits under section 351, 361, or 835 are received, if the employee did not contribute directly to the pension or retirement plan or program. Subsequent increases in a pension or retirement program shall not affect the coordination of these benefits.

* * * * * *

(14) This section does not apply to any payments received or to be received under a disability pension plan provided by the same employer which plan is in existence on March 31, 1982. Any disability pension plan entered into or renewed after March 31, 1982 may provide that the payments under that disability pension plan provided by the employer shall not be coordinated pursuant to this section.

The WCAC unanimously viewed subparagraph 14 as addressing disability pension arrangements resulting from collective bargaining, and this assessment is correct. What the parties and the WCAC seem to have overlooked, however, is the delicate phraseological distinctions the Legislature made between subparagraphs 1 and 14. In subparagraph 1, the Legislature authorized coordination for, inter alia, "pension or retirement payments pursuant to a plan or program established or maintained by the employer." By comparison, in subparagraph 14, an exception was made for payments received or to be received under a "disability pension plan provided by the same employer which plan is in existence on March 31, 1982."

Section 354 was initially added to the WDCA by 1981 P.A. 203, effective March 31, 1982. The Legislature linked the effective date of the statute with its disavowal of intent to affect preexisting disability pension plans for a reason that becomes obvious when the distinction between "plans" and "programs" is understood. Section 354(1), which deals collectively with plans and programs, is distinguished from subparagraph 14, which deals only with "plans," because a "plan" is a reflection of a contractual relationship between an employer and an employee, subject to regulation under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq.

By the same token, the ERISA provides a blanket exemption from its regulatory ambit for "government plans" established or maintained by the government of any state or political subdivision for its employees. 29 U.S.C. 1002(2)(A), (32) and 1321(b)(2). Although the Legislature did not provide a glossary in 1981 P.A. 203 (which became, inter alia, § 354 of the WDCA), we must construe the statute in a manner that recognizes that phraseological distinctions in the subparagraphs of a statutory section presumably reflect a legislative intent to treat some things differently. Stowers v. Wolodzko, 386 Mich. 119, 133-134, 191 N.W.2d 355 (1971); In re Brzezinski, 214 Mich.App. 652, 663-664, 542 N.W.2d 871 (1995).

We think the distinction between a "program" and a "plan" as used in § 354 is based on a "program" as being a reference to a governmentally created system of reimbursement, protection, or remuneration. The disability pension benefits called for by the Public School Employees Retirement Act constitute a "program" that, albeit "established" by the Legislature, is "maintained" by the individual school district employer funding the program. For this purpose, funding is equivalent to "maintaining" such a program. Dezwaan v. Holland Motor Express 189 Mich.App. 575, 578, 473 N.W.2d 788 (1991). Plaintiff thus errs in contending that, if the disability pension benefits he receives are not immune from coordination because they are not a "plan" for purposes of subparagraph 14, they are likewise not a "plan" for purposes of coordination under subparagraph 1. This argument overlooks the crucial fact that subparagraph 1 applies to "programs" as well as "plans."

In recognizing that the reference in subparagraph 14 to "plans" refers only to contractual obligations, the Legislature reveals that it properly concerned itself with constitutional limitations on its authority. But for its inclusion of such a provision, the entire section might be declared unconstitutional as an impairment of the obligation of contracts, in violation of Const.1963, art. 1, § 10 and U.S. Const. art. I, § 10. See Monroe Beverage Co. Inc. v. Stroh Brewery Co., 211 Mich.App. 286, 297, 535 N.W.2d 253 (1995); Washtenaw Community College Ed. Ass'n v. Washtenaw Community College Bd. of Trustees, 50 Mich.App. 467, 471-473, 213 N.W.2d 567 (1973). The Legislature thus applied coordination to contractual plans only if such plans are renewed or created after March 31, 1982, because the constitutional impediment does not apply to contracts made after the effective date of a statute. See, e.g., Seitz v. Probate Judges Retirement System, 189 Mich.App. 445, 451-452, 455, 474 N.W.2d 125 (1991).

In contrast, government benefits payable pursuant to statute are not contractual in nature. See Powers v. Peoples Community Hosp. Authority, 183 Mich.App. 550, 554, 455 N.W.2d 371 (1990); Guilbault v. Dep't of Mental Health, 160 Mich.App. 781, 784-785, 408 N.W.2d 558 (1987). Hence, the Legislature is not constrained by the Impairment of Contracts Clauses of the state and federal constitutions in modifying or amending statutory pension programs before the time that rights thereunder become fixed.

Plaintiff attempts to turn this prophylaxis on its head by arguing that the effect of coordinating his disability pension is to impair a contractual obligation. Plaintiff argues that, while under the Constitution of 1908, pensions granted by public authorities were not deemed to be contractual obligations but rather gratuitous allowances that could be revoked at will, Const.1963, art. 9, § 24 declares that the accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions "shall be a contractual obligation thereof which shall not be diminished or impaired." Thus, the Constitution of 1963 treats pension benefits as contractual obligations that may not be impaired by legislative...