Tyler v. Livonia Public Schools, Docket No. 109196

Citation459 Mich. 382,590 N.W.2d 560
Decision Date23 March 1999
Docket NumberNo. 13,Docket No. 109196,13
Parties, 133 Ed. Law Rep. 1016 Reynold TYLER, Plaintiff-Appellant, v. LIVONIA PUBLIC SCHOOLS, Defendant-Appellee. Calendar
CourtSupreme Court of Michigan

Sachs, Waldman, O'Hare, Helveston, Bogas & McIntosh, 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 defendant-appellee.

Martin L. Critchell, Detroit, amicus curiae, for Michigan Self-Insurers' Association.

Opinion

TAYLOR, J.

We granted leave to appeal in this case to determine (1) whether M.C.L. § 418.354(14); MSA 17.237(354)(14) of Michigan's Worker's Disability Compensation Act 1 excepts disability pension payments made under the Public School Employees Retirement Act 2 (PSERA) from coordination with worker's compensation payments as mandated under M.C.L. § 418.354(1); MSA 17.354(1), and (2) if coordination is required, whether the resulting reduction in worker's compensation payments violates Const. 1963, art. 9, § 24, which prohibits the diminishing or impairing of an accrued financial benefit under a state pension plan.

We hold that § 354(14) does not except PSERA pension payments from coordination under § 354(1), and that the resulting reduction in worker's compensation benefits does not violate art. 9, § 24. Accordingly, we affirm the judgments of the Court of Appeals and the Worker's Compensation Appellate Commission.

I. FACTS AND PROCEEDINGS

Plaintiff Reynold Tyler began working as a brick mason for the Livonia Public Schools in February, 1978. As a result of a work-related back injury in 1989, he began receiving a PSERA disability pension in May 1990.

In March, 1991, a worker's compensation magistrate awarded plaintiff worker's compensation benefits, subject to coordination under § 354(1) 3 of the Worker's Disability Compensation Act. The magistrate concluded that § 354(1) required coordination of these worker's compensation benefits with plaintiff's PSERA disability pension benefits (which resulted in a decrease in the worker's compensation payments by the amount of the pension benefits), and that the exception to coordination found in § 354(14) 4 did not apply to plaintiff's PSERA disability pension plan.

Plaintiff appealed that portion of the magistrate's decision calling for the coordination of his benefits to the Worker's Compensation Appellate Commission, arguing that the magistrate's order to coordinate benefits was "legally incorrect." 1993 Mich. ACO 1604. The WCAC, with one member dissenting, upheld the magistrate's decision, agreeing that the exception to coordination set forth in § 354(14) did not apply to PSERA disability pension payments.

The WCAC concluded that the purpose of § 354(14) was to "permit[ ] employees to negotiate non-coordination of disability pension plan benefits" with worker's compensation benefits. 1993 Mich. ACO 1608. The WCAC reasoned that, in establishing the right of employers to coordinate benefits, the Legislature was cognizant that existing plans were the result of many years of collective bargaining that did not contemplate coordination. Accordingly, the WCAC concluded that the Legislature had enacted § 354(14) primarily with the negotiation of collective bargaining agreements by the private sector in mind. The commission noted that § 354(14) uses the terms "same employer," "renewed," and "entered into" because the section does not contemplate inclusion of "disability pension plans for public employees, established by mandatory edict of statute." 1993 Mich. ACO 1608. 5

The Court of Appeals initially denied plaintiff's application for leave to appeal. We remanded for consideration as on leave granted. 447 Mich. 970, 523 N.W.2d 632 (1994). On remand, the Court of Appeals affirmed the decision of the WCAC in a two-to-one decision, with the majority agreeing that § 354(14) does not apply to PSERA disability payments. 220 Mich.App. 697, 702, 561 N.W.2d 390 (1996). In addition, the Court of Appeals addressed a newly raised constitutional question regarding the validity of this result in light of Const. 1963, art. 9, § 24, which prohibits an accrued pension benefit provided by the state from being diminished or impaired. The Court stated that the constitutional provision did not apply to disability pensions, "except for persons who are already disabled and therefore whose right to such pension has vested ('accrued')." Id. at 704, 561 N.W.2d 390. On the basis of this reasoning, the Court concluded that because plaintiff was not disabled on March 31, 1982 (the date § 354 coordination became effective), he had no right to a disability pension and therefore had no "accrued" disability benefit that could be diminished or impaired in violation of the constitutional section. Id. at 703-704, 561 N.W.2d 390.

Plaintiff filed an application with this Court for leave to appeal, and we granted plaintiff's application. 456 Mich. 955, 577 N.W.2d 691 (1998).

II. STANDARD OF REVIEW

This Court has the power to review questions of law involved in any final order of the WCAC. M.C.L. § 418.861; MSA 17.237(861). We review such legal issues de novo, Hagerman v. Gencorp Automotive, 457 Mich. 720, 727, 579 N.W.2d 347 (1998), according great weight to the administrative interpretation of the statute unless such interpretation is clearly wrong. Murphy v. State of Michigan, 418 Mich. 341, 348-349, 343 N.W.2d 177 (1984); Schuhknecht v. State Plumbing Bd., 277 Mich. 183, 186-187, 269 N.W. 136 (1936).

III. DISCUSSION
A. The Worker's Disability Compensation Act

In the early 1980's, the Legislature, after a good deal of public discussion, came to the view that the costs of Michigan's worker's compensation system were excessive and therefore a deterrent to the state's nascent economic recovery from the recession of the late 1970's. See Senate Analysis Section, SB 573, January 7, 1982. To sense the tenor of the argument of the reformers, it is helpful to recall, as this Court did in Franks v. White Pine Copper, 422 Mich. 636, 655, 375 N.W.2d 715 (1985), the words of the then Governor William Milliken, who described the system as the " 'biggest single liability to Michigan's job climate today.' " Having determined to reduce worker's compensation's costs, the Legislature passed a series of measures, including legislation limiting attorney fees in worker's compensation cases, 6 legislation regulating medical fees, 7 and legislation excluding certain fringe benefits from the calculation of worker's compensation. 8 See id.

These bills also included a measure to end the duplicative payment of worker's compensation benefits to employees who receive other forms of wage-loss benefits, M.C.L. § 418.354; MSA 17.237(354). This reform, described as "coordination," meant that the injured party's worker's compensation was to be reduced by the amount of the other wage-loss benefits received, such as payments from a disability pension. This approach, which served to reduce disincentives to return to work, was in harmony with the traditional goal of Michigan's worker's compensation, which has always been to rehabilitate workers so as to facilitate their return to work. Bower v. Whitehall Leather Co., 412 Mich. 172, 191, 312 N.W.2d 640 (1981).

To implement coordination, § 354(1) sweeps broadly. It states in pertinent part that worker's compensation benefits "shall be reduced by ... [t]he after-tax amount of the pension ... payments received or being received pursuant to a plan or program established or maintained by the same employer from whom [worker's compensation] benefits ... are received...." (Emphasis added.)

With this section having established across the board coordination, the Legislature then carved out, in § 354(14), some narrow exceptions to universal coordination. The scope of these exceptions is at issue here.

The initial sentence of § 354(14) states that coordination "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." The second sentence of § 354(14) states: "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." These are essentially "opt out" clauses. By their terms, they apply only to disability pension plans that are entered into or renewed after March 31, 1982. These provisions permit plans that are entered into or renewed after March 31, 1982, to be exempted from the general coordination requirement. Said another way, these clauses, if utilized, allow parties to a disability pension plan entered into or renewed after March 31, 1982, to except such plan from the general regime of coordination by specifically so providing in the plan.

The scope of this "opt out" language is central to the resolution of this dispute. In particular, is the language of § 354(14) to be read to apply to statutory pensions as well as privately negotiated pensions, or only to the latter? We conclude it applies only to privately negotiated pensions.

This section of the statute when read in context clearly applies only to private pension plans because of the words used and their meaning in the law. Contextual understanding of statutes is generally grounded in the doctrine of noscitur a sociis: "[i]t is known from its associates," see Black's Law Dictionary (6th ed), p. 1060. This doctrine stands for the principle that a word or phrase is given meaning by its context or setting. State ex el. Wayne Co. Prosecutor v. Diversified Theatrical Corp., 396 Mich. 244, 249, 240 N.W.2d 460 (1976), quoting People v. Goldman, 7 Ill.App.3d 253, 255, 287 N.E.2d 177 (1972). 9 As the second sentence of § 354(14) enables employers and employees who "enter[ ] into" or "re...

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