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To calculate retirement date, vacation and sick pay supplementing workers’ comp not ‘regular pay’

By Harold S. Berman J.D.

An injured public employee who received supplemental vacation and sick time along with his workers’ compensation benefits was entitled to retirement six months before he filed his accidental disability application, as provided under state statute, rather than almost a year later when he stopped receiving the vacation and sick time, as a state retirement commission had determined, the Massachusetts Supreme Judicial Court ruled. The court affirmed a state trial court ruling that overturned the administrative decision, holding that supplemental vacation and sick time received along with workers’ comp could not be considered “regular compensation” under state statute because the employee had stopped working and inherently was unable to work (Public Employee Retirement Administration Commission v. Contributory Retirement Appeal Board, February 13, 2018, Cypher, E.).

Injured worker. The employee worked for the town of Swampscott’s public works department. On June 13, 2010, he was injured on the job, and began receiving workers’ comp that same day. He also received two hours per week of sick or vacation pay so he could maintain his union membership and life insurance. In February 2012, the town sought to retire the employee involuntarily for accidental disability, and the town retirement board voted to do so in June.

Retirement date set. The state Public Employee Retirement Administration Commission (PERAC) determined, under its interpretation of M.G.L. c. 32, § 7, that the employee’s effective retirement date would be July 7, 2012, because that was the last day he received “regular compensation” in the form of his sick and vacation pay. The town retirement board did not agree with PERAC’s ruling, but was required to follow it.

Appeals. The employee appealed PERAC’s ruling to the division of administrative law appeals, which reversed PERAC’s decision, finding that the employee’s sick and vacation pay did not constitute “regular compensation” under M. G. L. c. 32, § 1, and consequently that the employee last received “regular compensation” on June 13, 2010, the date of his injury. The division of administrative law appeals, based on its ruling, set the employee’s effective disability retirement date as August 1, 2011, six months before he filed his accidental disability application, as provided by state statute.

PERAC appealed the decision to the Contributory Retirement Appeal Board (CRAB), which upheld the decision. PERAC then appealed to the state trial court, which also affirmed the decision. The Supreme Judicial Court then reviewed the trial court’s judgment.

Supplemental pay not regular compensation. The Massachusetts Supreme Judicial Court affirmed the trial court’s judgment, finding that under state statute, the employee’s vacation and sick time pay received in conjunction with his worker’s compensation benefits was not “regular compensation” for purposes of determining his effective retirement date. The court had previously held that the straightforward and unambiguous meaning of “regular compensation” as defined by M.G.L. c. 32, § 1, was “ordinary remuneration” for the work performed, and did not include extraordinary or ad hoc amounts, such as bonuses or overtime pay, which were to be exempted from the retirement base.

The court rejected PERAC’s assertion that the only relevant exception to the statute’s definition of “wages” as used in “regular compensation” was sick and vacation payments received in a one-lump sum. Rather, the statute included other exceptions to its definition of “wages,” including “payments in kind and all payments other than payment received by an individual from his employing unit for services rendered to such employing unit.” The employee was injured and was receiving workers’ compensation, and so was no longer able to provide services to his employer. That the supplemental vacation and sick time payments he received were not explicitly excluded by statute did not prelude them from falling outside the scope of “regular compensation,” especially because the statutory definition of “wages” stated that its list of exceptions applied “without limitation.”

Additionally, PERAC’s own regulations mandated that regular compensation be of “infinite duration,” whereas sick and vacation time was finite. The worker used his remaining vacation and sick time to supplement his workers’ compensation payments while he was out on disability. Several previous appellate cases, addressing diverse scenarios, supported the conclusion that sick and vacation pay received while an employee could no longer provide services to his employer did not constitute regular compensation. In the employee’s case, he did not receive his supplemental vacation and sick pay for work performed, but instead because he was unable to work because of his injury.

The court also rejected PERAC’s argument that the supplemental vacation and sick time the employee received along with his workers’ compensation was earned before he was injured for services rendered, and so it fell within the definition of regular compensation. The court held, instead, that because the employee was injured and on workers’ compensation, and so inherently was unable to work, he had effectively ceased providing services to his employer.