R.J. Whalen v. PSERB ( 2020 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Raymond J. Whalen, :
Petitioner :
:
v. :
:
Public School Employees’ :
Retirement Board, : No. 45 C.D. 2020
Respondent : Argued: September 15, 2020
BEFORE: HONORABLE P. KEVIN BROBSON, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
OPINION BY
JUDGE COVEY FILED: October 27, 2020
Raymond J. Whalen (Whalen) petitions this Court for review of the
Pennsylvania Public School Employees’ Retirement Board’s (Board) December 6,
2019 order granting the Public School Employees’ Retirement System’s (PSERS)
Motion for Summary Judgment (Motion).1 Essentially, the issue before this Court is
whether the Board erred by determining that the money Whalen received in
settlement of his age discrimination action did not constitute retirement-covered
compensation (RCC) for purposes of calculating his final average salary (FAS).2
1
The Board’s order was mailed on December 12, 2019.
2
Whalen presents six issues for this Court’s review: Whether the Board erred by: (1) finding
that Whalen’s settlement amount did not constitute back pay for salary he should have received; (2)
excluding, as prohibited parol evidence, Whalen’s counterstatement of facts; (3) finding that
Whalen did not establish a genuine issue of material fact as to whether the settlement amount
represented actual pay he would have received had the alleged discrimination not occurred; (4)
finding Whalen’s receipt of salary enhancements progressing from July 1, 2014, is inconsistent with
his position that the settlement amount constituted back pay because those payments were made
with the now adjusted standard salary schedule and were in addition to the back pay; (5) relying on
its decision in Account of Robert Holder, Docket No. 2016-20; and (6) failing to liberally administer
the retirement system in favor of its members. See Whalen Br. at 5-6. These issues are subsumed
in the issue identified by this Court and in its analysis herein.
Whalen was employed by the Wyoming Valley West School District
(District) from July 1995 to September 24, 2014. He enrolled in PSERS in 1995 by
virtue of his employment with the District. During the 2011-2012 school year,
Whalen was paid $88,578.00. During the 2012-2013 school year, he was paid
$89,616.90. During the 2013-2014 school year, he was paid $90,588.00.
On May 26, 2011, Whalen filed an age discrimination charge against the
District with the Equal Employment Opportunity Commission (EEOC), wherein he
averred that, in 2010, as the oldest principal in the District, he was excluded from pay
raises awarded to other principals. Whalen sought compensation for his lost pay
resulting from the alleged age discrimination.
On October 15, 2013, Whalen filed an age discrimination action in the
United States District Court for the Middle District of Pennsylvania.3 In his
complaint, Whalen averred that his loss of compensation was due to the alleged age
discrimination, and he sought, inter alia, back pay and compensatory damages. See
Reproduced Record (R.R.) at 94a-100a. On October 17, 2013, he filed an amended
complaint averring the same claim for relief. See R.R. at 102a-108a. On June 27,
2014, Whalen and the District agreed to settle the matter and executed a Settlement
Agreement and Release (Settlement Agreement). The Settlement Agreement stated,
in pertinent part:
[Whalen], for and in consideration of payments and other
good and valuable consideration . . . does, hereby remise,
release, and forever discharge the [District] . . . of and from
all, and all manner of, actions, causes of action, suits,
claims . . . and any and all claims of whatever kind and
nature whatsoever, arising out of or related to his
employment . . . especially pertaining to those claims and
causes of action more specifically described in actions
filed in the United States District Court for the Middle
3
Whalen v. Wyoming Valley West School District, Docket No. 3:13-CV-02571.
2
District of Pennsylvania, docketed to number 13-2571
[seeking back pay for alleged age discrimination] . . . .
IT IS AGREED AND UNDERSTOOD that [the District]
agrees to pay $15,000[.00], in the form of a salary
enhancement in full and final settlement of this matter to
[Whalen] and $5,000[.00] in full and final settlement of
attorney’s fees and costs to [Whalen’s] attorney . . . . [The
District] will cause the salary enhancements to be made
before the end of business on June 30, 2014, and will make
such payment and withholdings as are required in the
normal course of payroll payments. It is the intent of the
parties that this salary adjustment be income qualified
for full pension credit by PSERS to be allocated to the
year 2013-2014.
IT IS AGREED AND UNDERSTOOD that [Whalen] will
receive any and all entitlements he is currently entitled to
under the Administrative Compensation Plan based upon a
retirement date of September 24, 2014.
IT IS AGREED AND UNDERSTOOD that there is no
warranty by [the District] as to how PSERS treats the salary
enhancement set forth above for settlement.
IT IS AGREED AND UNDERSTOOD that [Whalen] will
submit an irrevocable letter of retirement from his
employment with the [] District to be effective September
24, 2014.
IT IS AGREED AND UNDERSTOOD that this is a full
and final release of all claims of every nature and kind
whatsoever and that it releases all claims for injuries, losses,
and damages that are presently known or suspected and all
claims for injuries, losses, and damages that are not
presently known or suspected but which may later develop
or be discovered.
IT IS AGREED AND UNDERSTOOD that the
consideration paid in exchange for this release is not to be
construed as an admission of liability on the part of the
[District] herein, all liability being expressly denied, and
that said payment is made to effect a compromise of a
disputed claim.
....
3
IT IS FURTHER AGREED AND UNDERSTOOD that this
release contains the entire agreement between the parties
hereto and that the terms of this release are contractual and
not a mere recital.
R.R. at 60a-64a (emphasis added). Also on June 27, 2014, in accordance with the
Settlement Agreement, Whalen signed a separate document irrevocably retiring from
his District employment effective September 24, 2014. On June 30, 2014, the
District paid Whalen $15,000.00.
On August 11, 2014, Whalen submitted an Application for Disability
Retirement to PSERS. The District reported to PSERS that Whalen worked 62 total
days from July 1 through September 24, 2014, and his total actual wages were
$21,655.26, which annualized a $90,230.25 salary for the 2014-2015 school year. On
September 24, 2014, Whalen retired. On September 26, 2014, PSERS notified
Whalen that his disability retirement had been approved for one year. On January 30,
2015, PSERS provided Whalen with a Finalized Retirement Benefit letter that
identified his FAS as $89,726.48, which excluded the $15,000.00 settlement
payment.
On April 16, 2015, Whalen filed a nonadjudicatory benefit appeal with
PSERS’ Executive Staff Review Committee (ESRC) contending that the settlement
payment should have been considered RCC for the 2013-2014 school year. On
February 3, 2016, the ESRC denied Whalen’s appeal, concluding that “[t]he
$15,000[.00] settlement amounts to a damage award and does not represent your
standard salary or back wages and benefits for the period at issue. PSERS cannot
recognize a damage award as [RCC].” R.R. at 132a.
The ESRC explained:
In this case, your salary for the 2013-2014 school year was
confirmed by [the District] to be $90,588.00. While the
[Settlement] Agreement characterizes the $15,000.00 lump
sum payment as a ‘salary enhancement’ to be allocated to
4
the 2013-2014 school year, you cannot receive retirement
credit based on a salary that is higher than what you were to
earn on the standard salary schedule. Moreover, it is well
settled that the parties to an agreement cannot turn
payments that are not ‘compensation’ under the [Public
School Employees’ Retirement Code (Retirement Code)4]
into ‘compensation’ through the contractual language they
use. Nor is PSERS bound by the language that was used in
the [Settlement] Agreement. The $15,000.00 settlement
amounts to a damage award and does not represent your
standard salary or back wages and benefits for the period at
issue. It is, therefore, not [RCC] that can be included in the
calculation of your FAS, and your records have been
corrected accordingly.
R.R. at 135a (citations omitted).
On March 4, 2016, Whalen filed an adjudicatory benefit appeal with the
Board alleging that the $15,000.00 settlement should be included in his RCC for the
2013-2014 school year for FAS calculation purposes. See R.R. at 8a. On March 8,
2016, PSERS filed an answer to Whalen’s appeal. On August 14, 2019, PSERS filed
the Motion and a supporting memorandum of facts contending that, “[t]o constitute
[a] valid RCC, a settlement agreement must identify the payment as lost wages and
indicate when the lost wages would have been earned -- not received -- and the
payment must represent the actual pay that would have been earned but for the
adverse employment action[,]” R.R. at 41a, and accordingly, “the $15,000.00
payment to [Whalen] by the District was not compensation as defined by the
Retirement Code. Rather, it was a payment made in exchange for a release of all
claims by [Whalen] against the District and was made in conjunction with an
irrevocable notice of retirement.” R.R. at 47a.
On September 12, 2019, Whalen filed his response to the Motion,
wherein he acknowledged that he did not dispute the facts in PSERS’ memorandum,
4
24 Pa.C.S. §§ 8101-8547.
5
but he submitted a counterstatement of facts, a supporting affidavit and exhibits, and
a brief wherein he asserted:
1. In [Whalen’s] employment by the [District], he
was a principal and an Act 93[5] administrator subject to the
Administrative Compensation Plan of [the District].
2. The averments contained in [Whalen’s] charge of
age discrimination against [the District] with the [EEOC],
filed on May 26, 2011, . . . are true and correct, as younger
principals were awarded raises in 2010 ranging from
$2,000.00 to $10,000.00 per year.
3. [The District] vigorously defended [Whalen’s]
claim of age discrimination, both before the EEOC and in
the Federal District Court for the Middle District of
Pennsylvania, where he had filed his claim under the Age
Discrimination [i]n Employment Act (ADEA)[, 29 U.S.C.
§§621-634.]
4. The statements asserted by John Freund, III,
Esq[uire] [(Freund)], counsel for [the District], in his letter
of July 8, 2014, implementing the [Settlement A]greement
between [the District] and [Whalen] are true and correct.
Specifically, the $15,000[.00] pay adjustment identified in
[the Settlement A]greement was inclusive of [Whalen’s]
new rate of pay from July 1 to September 24[, 2014] based
upon his new adjusted salary. . . .
5. The statement contained in the letter of Joe
Rodriguez [(Rodriguez)], [the District’s] Finance Manager,
dated October 18, 2018, that the lump sum payment of
$15,000[.00] received by [Whalen] was to be treated as
back pay, was true and correct. . . .
6. The $15,000[.00] payment was intended to
compensate [Whalen] for salary he should have received,
5
Section 1164 of the Public School Code of 1949, Act of March 10, 1949, P.L. 30, as
amended, 24 P.S. §§ 1-101 - 27-2702, added by the Act of June 29, 1984, P.L. 438, No. 93, 24 P.S.
§ 11-1164, “is commonly known as ‘Act 93.’ It provides for the compensation of school
administrators through the adoption of a written compensation plan.” Wrazien v. Easton Area Sch.
Dist., 926 A.2d 585, 590 n.7 (Pa. Cmwlth. 2007).
6
but did not, due to age discrimination, in the three years
prior to the end of his employment with [the District].
7. [Whalen’s] salary loss was equivalent to the
amount received by him by the [Settlement A]greement.
R.R. at 203a-205a (citations omitted). In his memorandum, Whalen contended that
the District’s $15,000.00 payment represented salary to which he was entitled and
would have earned but for the age discrimination and, thus, it should be included in
his FAS calculation.
On December 6, 2019, the Board granted the Motion, concluding that
there were no material issues of disputed fact and, as a matter of law, “the
$15,000[.00] payment to [Whalen] by the District was not ‘compensation’ as defined
by the Retirement Code. Rather, it was a payment made in exchange for a release of
all claims by [Whalen] against the District and was made in conjunction with an
irrevocable notice of retirement.” R.R. at 246a. Whalen appealed to this Court.6
Initially,
[t]he Board is charged with the execution and application of
the Retirement Code, and the Board’s interpretation should
not be overturned unless it is clear that such construction is
erroneous. ‘The restrictive definitions of compensation
under the Retirement Code and regulations reflect the
Legislature’s intention to preserve the actuarial integrity of
the retirement fund by exclud[ing] from the computation of
employes’ final average salary all payments which may
artificially inflate compensation for the purpose of
enhancing retirement benefits.’ Christiana v. Pub. Sch.
6
Our scope of review of an order granting or denying a motion for
summary judgment is limited to determining whether the trial court,
or in this case the Board, committed an error of law or abused its
discretion. Summary judgment is only appropriate when, after
examining the record in the light most favorable to the non-moving
party, there is no genuine issue of material fact, and the moving party
establishes that he is entitled to judgment as a matter of law.
Allen v. Pub. Sch. Emps.’ Ret. Bd., 848 A.2d 1031, 1033 n.7 (Pa. Cmwlth. 2004) (citation omitted).
7
Emps.[’] Ret. Bd., . . . 669 A.2d 940, 944 ([Pa.] 1996)
(quotation marks omitted). ‘[A]n employee has only those
rights created by the Retirement Code, and none beyond it.’
Hughes v. Pub. Sch. Emps.[’] Ret. Bd., 662 A.2d 701, 706
(Pa. Cmwlth. 1995). While a member is entitled to liberal
administration of [] PSERS, ‘a liberal administration of the
retirement system does not permit the [B]oard to
circumvent the express language of the [Retirement] Code,
which does not permit inclusion of a [severance payment]
in the computation of final average salary.’ Dowler v. Pub.
Sch. Emps.[’] Ret. Bd., . . . 620 A.2d 639, 644 ([Pa.
Cmwlth.] 1993). ‘PSERS is bound to follow the intent of
the General Assembly in administering the provisions of the
Retirement Code. 1 Pa.C.S. § 1921(a).’ Hughes, 662 A.2d
at 706.
Mento v. Pub. Sch. Emps.’ Ret. Sys., 72 A.3d 809, 813 (Pa. Cmwlth. 2013) (citation
omitted). The Pennsylvania Supreme Court has recognized:
To further [its responsibility to guarantee the actuarial
soundness of the retirement fund], ‘the Board has
determined that it is statutorily required to exclude
nonregular remuneration, nonstandard salary, fringe
benefits, bonuses, and severance payments from inclusion
as compensation under the Retirement Code. The Board
has developed the concepts of ‘standard salary’ and ‘regular
remuneration’ as part of its understanding of
compensation.’ Christiana, [669 A.2d] at 945 (emphasis
added).
We agree the salaries not based on the standard salary
schedule constitute an artificial inflation of compensation
for purposes of retirement benefits calculations.
Kirsch v. Pub. Sch. Emps.’ Ret. Bd., 985 A.2d 671, 677 (Pa. 2009).
Section 8102 of the Retirement Code defines FAS, in pertinent part, as
“the highest average compensation received as an active member during any three
nonoverlapping periods of 12 consecutive months . . . .” 24 Pa.C.S. § 8102. The
Retirement Code defines “compensation,” in relevant part, as
any remuneration received as a school employee
excluding reimbursements for expenses incidental to
8
employment and excluding any bonus, severance
payments, any other remuneration or other emolument
received by a school employee during his school service
which is not based on the standard salary schedule[7]
under which he is rendering service, payments for unused
sick leave or vacation leave, bonuses or other compensation
for attending school seminars and conventions, payments
under health and welfare plans based on hours of
employment or any other payment or emolument which
may be provided for in a collective bargaining agreement
which may be determined by the [Board] to be for the
purpose of enhancing compensation as a factor in the
determination of final average salary . . . .
24 Pa.C.S. § 8102 (emphasis added).
Whalen argues that the Board erred by finding, based on the Settlement
Agreement’s terms, that the District’s $15,000.00 payment was not RCC.
This Court has explained:
A settlement agreement . . . is ‘in essence a contract binding
the parties thereto.’ Commonwealth v. U.S. Steel Corp., . . .
325 A.2d 324, 328 ([Pa. Cmwlth.] 1974) . . . . Accordingly,
‘settlement agreements are governed by contract law
principles.’ Lesko v. Frankford Hosp.-Bucks C[]ty., . . . 15
A.3d 337, 341-42 ([Pa.] 2011).
Roe v. Pa. Game Comm’n, 147 A.3d 1244, 1250 (Pa. Cmwlth. 2016). “The goal of
contract interpretation is to ascertain and give effect to the parties’ intent, as well as
to all portions of the document.” Dick Enters., Inc. v. Dep’t of Transp., 746 A.2d
1164, 1168 (Pa. Cmwlth. 2000); see also Wert v. Manorcare of Carlisle PA, LLC,
124 A.3d 1248, 1259 (Pa. 2015) (“A contract shall be interpreted in accordance with
the parties’ intent. When a written contract is clear and unambiguous, the parties’
intent is contained in the writing itself.” (Citation omitted)).
Here, the Board concluded that the Settlement Agreement is not
ambiguous, but rather clearly establishes the parties’ obligations. This Court agrees
7
The Retirement Code does not define the term “standard salary schedule.”
9
that the Settlement Agreement is unambiguous.8 Importantly, “unambiguous
contracts are interpreted by the court as a matter of law, [while] ambiguous writings
are interpreted by the finder of fact.” Ins. Adjustment Bureau, Inc. v. Allstate Ins.
Co., 905 A.2d 462, 469 (Pa. 2006). Thus, this Court interprets the Settlement
Agreement as a matter of law.
Notwithstanding the Board’s interpretation, the Settlement Agreement
clearly reflects that the District’s $15,000.00 payment was intended to be a part of
Whalen’s salary. First, the Settlement Agreement specifically acknowledges it is in
settlement of Whalen’s age discrimination action wherein Whalen sought back pay
for alleged discrimination that affected his compensation. Further, the Settlement
Agreement expressly provides that “[i]t [wa]s the intent of the parties that this salary
adjustment be income qualified for full pension credit by PSERS to be allocated to
the year 2013-2014.” R.R. at 61a (emphasis added).
The Board acknowledges:
Although the Retirement Code does not recognize
settlement payments as RCC, the Board has followed this
Court’s jurisprudence and liberally construed the
Retirement Code to allow the constructive awarding of
such amounts as RCC when ordered by a court for the
purpose of upholding a member’s contractual rights for
a specified period. This interpretation allows a member,
who successfully challenges or settles an adverse
employment action, to be made whole by allocating back
8
Whalen also argues in his brief that the Board improperly ruled that the parol evidence rule
barred consideration of his counterstatement of facts and supporting exhibits. “The parol evidence
rule bars the admission of oral testimony which purports to explain or vary the terms of an
integrated written agreement.” Green Valley Dry Cleaners, Inc. v. Westmoreland Cty. Indus. Dev.
Corp., 832 A.2d 1143, 1154 (Pa. Cmwlth. 2003). The law is well-established that “[w]here the
terms of a contract are clearly expressed, interpretation of those terms must be determined from the
language itself. Only where the language in a written contract is ambiguous may extrinsic or
parol evidence be considered to determine the intent of the parties.” Dep’t of Transp. v. Brozzetti,
684 A.2d 658, 663 (Pa. Cmwlth. 1996) (emphasis added; citation omitted). Having found that the
Settlement Agreement is not ambiguous, this Court need not address Whalen’s argument.
10
pay to the period when it was earned while ensuring
against potential windfalls.
Board Br. at 11 (emphasis added; citations omitted).
In concluding that the $15,000.00 salary enhancement was not RCC, the
Board reasoned:
The Settlement Agreement . . . fails to make any mention or
reference to ‘back pay’ or ‘lost wages.’[9] Rather, the
agreement classifies the lump sum $15,000[.00] payment to
[Whalen] as a salary enhancement paid as a full and final
settlement, to effect a compromise of a disputed claim.
Moreover, the Settlement Agreement makes no reference to
either the 2011-2012 or 2012-2013 school years. Nor does
the [Settlement] [A]greement identify when the salary
enhancement was earned. See 22 Pa. Code § 211.2(b) (‘For
final average salary purposes, retirement-covered
compensation is credited in the school year in which it is
earned, not paid.’). The Settlement Agreement specifies
only that the salary enhancement [is] to be made before the
end of business on June 30, 2014[,] and is intended to be
allocated to the year 2013-2014.
In addition, the Settlement Agreement does not reference or
incorporate any salary schedule, and the undisputed facts
establish that [Whalen’s] wages were not increased by
$15,000[.00] in the following school year (i.e., the 2014-
2015 school year). Thus, there is no evidence that would
indicate the salary enhancement was to be anything other
than a one-time payment, outside of [Whalen’s] standard
salary. [Whalen] argues for the first time, in response, that
a portion of the $15,000[.00] settlement payment included
monies for future salary during the period July 1, 2014 to
September 24, 2014. The plain and unambiguous terms of
the Settlement Agreement, however, do not support that
assertion. Indeed, there is no mention of the 2014-2015
school year in the Settlement Agreement. Moreover,
9
Notably, there is nothing in the Retirement Code requiring a PSERS member to use the
terms back pay or lost wages in a settlement agreement in order for settlement monies to constitute
RCC. Such terms are not magical words. Ignoring the meaning of a settlement agreement based
upon the omission of these terms would place form over substance and be contrary to the
requirement that the retirement system be liberally administered. See Mento.
11
[Whalen’s] assertion is inconsistent with his claim that the
$15,000[.00] amount was intended to represent ‘back pay.’
R.R. at 244a-245a (citations and quotation marks omitted).
Citing Martsolf v. State Employees’ Retirement Board, 44 A.3d 94 (Pa.
Cmwlth. 2012), the Board asserts that “[f]or a settlement payment to qualify as RCC
for a particular school year, the amount awarded must represent the actual pay the
member would have earned in that school year had the purported adverse
employment action not occurred.” Board Br. at 12.
In Martsolf, a Pennsylvania State Police (PSP) sergeant who had been
selected as a sharpshooter for PSP’s Special Emergency Response Team (SERT) was
notified that he was being temporarily removed from his SERT position, which
removal was later made permanent. Martsolf filed grievances from those removals
seeking “all appropriate relief.” Martsolf, 44 A.3d at 96. Thereafter, the PSP, the
Pennsylvania State Troopers Association (PSTA), and Martsolf entered into a
settlement agreement under which Martsolf would be reinstated to the SERT, but he
would immediately and permanently resign. PSP also agreed to pay him a
$40,000.00 lump sum settlement. Martsolf sought to treat the settlement payment as
RCC, but the State Employees’ Retirement System (SERS) denied that the settlement
payment was “compensation” under the State Employees’ Retirement Code (SERS
Code),10 and Martsolf appealed to the State Employees’ Retirement Board (SERS
Board).
Martsolf testified before a hearing examiner that
his compensation for his membership on [the] SERT was
almost entirely overtime and was based on if - or when - the
team was called out; that he was guaranteed at least three
hours’ pay for each call-out, regardless of how long it
actually lasted; however, there was no guarantee as to how
many hours of compensation he would receive annually as a
10
71 Pa.C.S. §§ 5101-5958.
12
SERT member. . . . He grieved his temporary and then
permanent removal and testified that to settle those
grievances, he told the PSP’s attorney that he [had] lost
wages, which were between $26,000[.00] and
$29,000[.00] in his ‘high year,’ and after some
discussion, they arrived at the $40,000[.00] figure.
Martsolf, 44 A.3d at 95-96 (emphasis added; record citation omitted). Finding that
Martsolf did not specifically seek back pay, but rather, “all appropriate relief,”
id. at 96, and that bonuses or settlements are not generally considered RCC, the
hearing examiner concluded:
[T]he terms of the [a]greement were clear and unambiguous
and did not support Martsolf’s contention that the
settlement payment was intended to be compensation under
the [SERS] Code. She provided that the only support for
Martsolf’s contention was his own testimony that he was
seeking lost wages, and while Martsolf may have wanted
the payment to be counted as compensation, the
[a]greement did not reflect that. The hearing examiner said
that the parol evidence rule limited her to the terms of the
[a]greement, and based on that review, the payment could
not be considered compensation for SERS purposes. She
recommended that Martsolf’s request to receive pension
credit for the payment be denied.
Martsolf, 44 A.3d at 97 (emphasis added). Martsolf filed exceptions with the SERS
Board, challenging the hearing examiner’s recommendations that the settlement
payment should not be considered compensation. The SERS Board denied Martsolf’s
exceptions.
On review, this Court considered the relief Martsolf requested in his
lawsuit and affirmed the SERS Board’s decision, reasoning:
[I]n this case, the issue is whether the settlement payment
is back pay and compensation under the [SERS] Code or
some other ‘appropriate relief.’ Answering that question,
unless a settlement agreement provides that wages lost
are being compensated and for what periods, all that a
settlement agreement indicates is that a grievance is
being ‘brought’ and settled, nothing else. The settlement
13
agreement here is silent as to the basis of the award, and
there is no way of determining whether any hours are
connected to the payment, how many hours would be
attached, and where to place the contribution in Martsolf’s
account.
Martsolf, 44 A.3d at 97-98 (bold, italic and underline emphasis added).11
Martsolf is clearly distinguishable from the instant matter. In Martsolf,
Martsolf did not specifically seek back pay, but instead sought “[a]ll appropriate
relief[,]” id. at 95, based on his removal from the SERT for which his compensation
was almost entirely overtime and dependent upon if or when the team was called out,
with no particular number of hours or annual compensation guaranteed. Here,
Whalen’s lawsuit specifically sought back pay resulting from the District’s alleged
discriminatory failure to grant him raises to his fixed annual salary where younger
principals were awarded raises. In addition, the Whalen Settlement Agreement
clearly describes the parties’ intent that the payment was salary for the 2013-2014
school year, explaining that “[i]t is the intent of the parties that this salary adjustment
be income qualified for full pension credit by PSERS to be allocated to the year
2013-2014.” R.R. at 61a.
The Board complains that there is no proof that the settlement amount
represented the actual pay Whalen would have earned in that school year had the
purported adverse employment action not occurred. Nonetheless, the amount Whalen
sought was for raises he was not awarded due to alleged age discrimination and,
thus, the Settlement Agreement itself is evidence of the amount of actual pay he
would have received during the 2013-2014 school year. Further, as Whalen alleged
in his complaint, he was denied raises other District principals received. Given that
11
The Martsolf Court announced the rule of law specifically in the context of the facts of
that case. Unlike here, where Whalen explicitly sought “back pay” in the age discrimination action
referenced in the Settlement Agreement, R.R. at 106a, 107a, Martsolf sought only “all appropriate
relief.” Martsolf, 44 A.3d at 96.
14
other similarly situated District principals allegedly received such raises in
accordance with their contracts, acknowledging Whalen’s payment as a comparable
salary increase to cure the alleged age discrimination, is consistent with the Board’s
liberal construction of the Retirement Code “to allow the constructive awarding of
such amounts as RCC . . . for the purpose of upholding a member’s contractual
rights for a specified period.” Board Br. at 11 (emphasis added).
The Board also relies on Laurito v. Public School Employes’ Retirement
Board, 606 A.2d 609 (Pa. Cmwlth. 1992), to support its position. Therein, PSERS
determined that a $16,000.00 salary adjustment for a school principal with 42 years
of school district service did not constitute RCC, stating:
Laurito’s annual salary was negotiated each year with the
school district. His salary for the 1984-1985 school year
had been $32,600[.00]. On July 25, 1985, at a special
meeting, the school board awarded Laurito a $16,000[.00]
‘salary adjustment’ resulting in setting his salary for the
1985-1986 school year at $48,600[.00]. The school board’s
minutes of July 25, 1985[,] reflect approval of the
$16,000[.00] increase for the 1985-1986 school year. In
addition, the same minutes also reflect approval of a leave
of absence for Laurito for the 1985-1986 school year, as
well as acceptance of Laurito’s resignation for retirement
purposes effective July 1, 1986.
Laurito, 606 A.2d at 609.
Laurito appealed from the determination to the Board for a hearing on
that issue. After a hearing, the hearing examiner recommended that the $16,000.00
salary adjustment should be considered RCC. However, the Board rejected the
hearing examiner’s recommendation, concluding, instead, that the salary adjustment
was a severance payment excluded from RCC.12
12
“Whether or not a payment must be considered a severance payment is a question of law.”
Dowler v. Pub. Sch. Emps.’ Ret. Bd., 620 A.2d 639, 643 (Pa. Cmwlth. 1993). Relying on Hoerner
v. Public School Employees’ Retirement Board, 684 A.2d 112 (Pa. 1996), the Board also argues that
the $15,000.00 is a severance payment. In Hoerner, a school superintendent entered into two
15
On appeal, this Court affirmed the Board’s decision. Notably, this Court
considered Laurito’s testimony regarding his understanding of the purpose behind the
salary adjustment.13 Notwithstanding, the Laurito Court found
[] especially persuasive the observation made by the
[B]oard that the $16,000[.00] payment in the final year of
service provided a mechanism for the school district to
recognize [the principal’s] devoted service, as well as to
remedy the perceived inequity of a below-average salary
throughout a working lifetime, by effectuating an inflated
final salary for purposes of retirement benefits.
Laurito, 606 A.2d at 611-12.
In contrast to the facts in Laurito, here, the record evidence clearly
reveals that the District’s $15,000.00 payment was not to “recognize [Whalen’s]
devoted service” or to remedy a “below-average salary[.]” 606 A.2d at 611-12.
Rather, it was to remedy alleged wrongful, discriminatory withholding of salary
increases to which Whalen was entitled. Thus, Laurito is inapposite.
The Pennsylvania Supreme Court has held that, “as an independent
administrative agency governed by statute, PSERS cannot be bound by
characterizations of money payments made to a PSERS member pursuant to a private
termination agreements with school districts arising from contract disputes. PSERS informed him
that the payments received thereunder were not RCC. The Pennsylvania Supreme Court held that
“salary increases made strictly pursuant to termination agreements are tantamount to severance
payments, such increases should not be used in calculating a party’s final average salary for
purposes of retirement benefits.” Id. at 112 (emphasis added). Here, although the Settlement
Agreement included the provision that Whalen would retire on a date certain, it was not a
termination agreement. Rather, it was an agreement resolving the age discrimination lawsuit
wherein Whalen sought back pay for the alleged discriminatory withholding of salary increases.
Thus, Hoerner is inapposite.
13
This Court notes that in both Martsolf and Laurito, the SERS Board, the Board and this
Court considered the employees’ testimony to be significant in determining whether the payments
were RCC.
16
contractual settlement to which it is not a party.”14 Hoerner v. Pub. Sch. Emps.’ Ret.
Bd., 684 A.2d 112, 117 n.10 (Pa. 1996). However, if, as the Board argues, it “has
followed this Court’s jurisprudence and liberally construed the Retirement Code to
allow the constructive awarding of such amounts as RCC . . . for the purpose of
upholding a member’s contractual rights for a specified period[,]” Board Br. at 11,
the Board must render a decision on whether such payment is RCC based on the
evidence, and, in doing so, must review the Settlement Agreement to “ascertain and
give effect to the parties’ intent[.]” Dick Enters., Inc., 746 A.2d at 1168.
In the instant matter, reading the Settlement Agreement as a whole, the
provision that “[i]t is the intent of the parties that this salary adjustment be income
qualified for full pension credit by PSERS to be allocated to the year 2013-2014[,]” is
not a characterization but, rather, a clear expression of the parties’ intent that the
payment was what Whalen should have received as part of his salary and, thus, be
credited to his pension. R.R. at 61a. The Settlement Agreement clearly expresses the
parties’ intent that the $15,000.00 payment was a salary enhancement to resolve
Whalen’s claim for back pay, and was to be RCC. Therefore, this Court concludes,
as a matter of law, that the Board should have treated the District’s $15,000.00
payment as RCC. Accordingly, the Board erred by granting the Motion.
Given that PSERS maintained there was no genuine issue of material
fact, that Whalen agreed to PSERS’ statement of facts, and this Court’s conclusion
that as a matter of law the Settlement Agreement is unambiguous, clearly revealing
14
Although the Board may not be bound by such characterizations in a private contractual
settlement, those characterizations may reflect the intent of the contracting parties and thus the true
nature of such payments.
17
that the parties intended the $15,000.00 payment to be back pay and, thus, RCC, the
Board’s order is reversed.
___________________________
ANNE E. COVEY, Judge
18
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Raymond J. Whalen, :
Petitioner :
:
v. :
:
Public School Employees’ :
Retirement Board, : No. 45 C.D. 2020
Respondent :
ORDER
AND NOW, this 27th day of October, 2020, the Public School
Employees’ Retirement Board’s December 6, 2019 order is reversed.
___________________________
ANNE E. COVEY, Judge