Patricia Batista v. Office of Retirement Services

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
PATRICIA BATISTA, DAVID BRITTEN, FOR PUBLICATION
TIMOTHY DONAHUE, AARON GAFFNEY, August 12, 2021
JOHN HEWITT, RONALD KOEHLER, AMY 9:00 a.m.
SWANTEK, CHRIS THOMSON, and MICHIGAN
ASSOCIATION OF SUPERINTENDENTS AND
ADMINISTRATORS,
Plaintiffs-Appellants,
V No. 353832
Court of Claims
OFFICE OF RETIREMENT SERVICES, LC No. 19-000019-MZ
MICHIGAN PUBLIC SCHOOL EMPLOYEES
RETIREMENT SYSTEM, MICHIGAN PUBLIC
EMPLOYEES RETIREMENT SYSTEM BOARD,
PUBLIC SCHOOL EMPLOYEES RETIREMENT
SYSTEM BOARD MEMBERS, and EXECUTIVE
DIRECTOR OF RETIREMENT SERVICES,
Defendants-Appellees.
Before: HOOD, P.J., and MARKEY and GLEICHER, JJ.
MARKEY, J.
This case involves issues regarding the determination of reportable “compensation” under
the Public School Employees Retirement Act (the Retirement Act), MCL 38.1301 et seq., and the
Reporting Instruction Manual (the manual) prepared and implemented by defendant Office of
Retirement Services (ORS). Resolution of these issues has a bearing on retirement allowances or
pension payments for public school superintendents and administrators who work under personal
employment contracts, not collective bargaining agreements. The Court of Claims granted
summary disposition to defendants, and plaintiffs appeal by right. We reverse and remand for
entry of judgment in favor of plaintiffs.
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I. THE STATUTORY FRAMEWORK
To provide context to and an understanding of our discussion of the facts, the procedural
history of the case, and the parties’ arguments, we begin with a review of the relevant language
contained in the Retirement Act. The “Michigan public school employees’ retirement system
[was] created for the public school employees of this state.” MCL 38.1321. The retirement system
is intended to “be a qualified pension plan created in trust under section 401 of the internal revenue
code, 26 USC 401[.]” MCL 38.1408(1). In general, “upon [a] member’s retirement from service
. . ., a member shall receive a retirement allowance that equals the product of the member’s total
years, and fraction of a year, of credited service multiplied by 1.5% of the member’s final average
compensation.” MCL 38.1384(1) (emphasis added).1 A member’s “final average compensation”
is defined, in part, as “the aggregate amount of a member’s compensation earned within the
averaging period in which the aggregate amount of compensation was highest divided by the
member’s number of years, including any fraction of a year, of credited service during the
averaging period.” MCL 38.1304(12).
With respect to the term “compensation,” MCL 38.1303a(1) provides that it “means the
remuneration earned by a member for service performed as a public school employee.” MCL
38.1303a(2) states that “[c]ompensation includes salary and wages and all of the following . . . .”
MCL 38.1303a(2) then lists eight specific types of payments that constitute compensation, e.g.,
“[l]ongevity pay[,]” MCL 38.1303a(2)(d). MCL 38.1303a(3) lists types of payments that do not
constitute compensation, including the following:
(e) Remuneration paid for the specific purpose of increasing the final
average compensation.
(f) Compensation in excess of an amount over the level of compensation
reported for the preceding year except increases provided by the normal salary
schedule for the current job classification. In cases where the current job
classification in the reporting unit[2] has less than 3 members, the normal salary
1
A “member” is, with some exceptions, “a public school employee.” MCL 38.1305(1). There is
no dispute that the individual plaintiffs are members. The term “retirement allowance” is defined
as “a payment for life or a temporary period provided for in this act to which a retirant, retirement
allowance beneficiary, or refund beneficiary is entitled.” MCL 38.1307(5).
2
MCL 38.1307(3) provides:
Except as otherwise provided in this subsection, “reporting unit” means a
public school district, intermediate school district, public school academy, tax
supported community or junior college, or university, or an agency having
employees on its payroll who are members of this retirement system. The reporting
unit shall be the employer for purposes of this act. . . . .
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schedule for the most nearly identical job classification in the reporting unit or in
similar reporting units shall be used.
MCL 38.1303a(5)(a) and (b) provide that the retirement board,3 based on information and
documentation provided by a member, shall determine “[w]hether any form of remuneration paid
to a member is identified in this section[,]” and “[w]hether any form of remuneration that is not
identified in this section should be considered compensation reportable to the retirement system
under this section.” Finally, MCL 38.1303a(6) states that “[i]n any case where a petitioner seeks
to have remuneration included in compensation reportable to the retirement system, the petitioner
shall have the burden of proof.”
II. BACKGROUND – OVERVIEW
Plaintiffs are current or retired public school superintendents and administrators who work
or worked under personal employment contracts, not collective bargaining agreements. 4 Pension
payments made to superintendents and administrators are calculated by taking into consideration
years of credited service and, relevant here, their “final average compensation.” Accordingly,
there must be a determination of the individual’s annual compensation during the years of
employment. MCL 38.1303a(3) makes clear that not all compensation is reportable for purposes
of ascertaining a member’s final average compensation. And annual increases in compensation in
excess of the normal salary schedule for a job classification are, effectively, nonreportable. MCL
38.1303a(3)(f).5 The Retirement Act does not define “normal salary schedule” or provide any
further elaboration on the phrase. This is where the ORS’s manual comes into play with respect
to superintendents and administrators.
The ORS, which is a division of the Department of Technology, Management and Budget,
administers the retirement system. The ORS’s manual, prepared annually, is designed to assist
payroll offices, working in unison with the ORS, in ensuring the accuracy of account information
and pension payments for members. The manual indicates that it is a summary of basic plan
provisions found in the Retirement Act and that the Retirement Act governs if there are any
discrepancies between the Retirement Act and the manual. The ORS creates normal salary
increase (NSI) schedules for superintendents and administrators. These schedules are then placed
in the manual. The following is an excerpt from the manual presented to the Court of Claims:
In cases where a job classification has fewer than three members
(superintendents, assistant superintendents, administrative assistants), ORS applies
a normal salary schedule for the most nearly identical job classification in similar
reporting units. To determine what constitutes a normal salary schedule for these
job classifications, ORS has aggregated salary data for each classification and has
3
The “retirement board” is “the board provided to administer th[e] retirement system.” MCL
38.1307(7).
4
Plaintiffs also include the Michigan Association of Superintendents and Administrators.
5
The ORS’s manual speaks in terms of “reportable” and “nonreportable” compensation.
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calculated the annual average increases, which resulted in the Normal Salary
Increase (NSI) percentage tables provided below.
For each of the respective job classifications, similar reporting units are
grouped into one of four categories based on payroll size. For each grouping, the
annual average salary increase percentage is calculated and doubled to allow a more
generous and flexible deviation of ‘normal.’ Annual increases in compensation for
a particular job classification are reportable if they are within the NSI percentages
for a given year. Increases in excess of the NSI are excluded.
Because the [Retirement Act] requires that all compensation increases fall
within a normal salary schedule, any portion of salary above the applicable NSI in
a given year will remain subject to the NSI in subsequent years. This is because the
NSI included for one year becomes the base salary upon which the next year’s
allowable increase is calculated. . . .
As indicated, the NSI schedules set forth annual allowable percentages with respect to
increases in compensation. Yearly compensation increases at or below a particular enumerated
percentage constitute reportable compensation that can be used for determining a member’s final
average compensation. But annual compensation increases above the percentage represent
nonreportable compensation that cannot be considered in calculating the final average
compensation. Plaintiffs received, in various forms, annual increases in compensation, not all of
which were taken into consideration for purposes of ascertaining their final average compensation.
In other words, a portion of the increase in compensation was characterized as nonreportable
compensation under the NSI schedules created by the ORS.
III. THE LITIGATION
In Count I of their amended complaint, plaintiffs alleged in pertinent part that the
Retirement Act does not authorize the ORS to create the NSI schedules and apply them to
plaintiffs. Plaintiffs asserted, therefore, that the ORS acted in violation of the Retirement Act by
imposing the NSI schedules on plaintiffs. In Count II, plaintiffs contended that the NSI schedules
violate Const 1963, art 9, § 24, which provides, in relevant part, that “[t]he 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 thereby.” In Count
III of the complaint, plaintiffs alleged a violation of the Administrative Procedures Act (APA),
MCL 24.201 et seq. Plaintiffs claimed that the NSI schedules, assuming their validity under the
Retirement Act, must be promulgated as “rules,” as defined in MCL 24.207, under the specific
procedures set forth in Chapter 3 of the APA, MCL 24.231 et seq., and that the failure to do so
constitutes a violation of the APA. In Count IV, plaintiffs maintained that their rights to procedural
due process under the Michigan and United States Constitutions had been violated. Plaintiffs
asserted that they had a property right to their compensation and pensions which entitled them to
notice and a hearing before their pensions were capped by the application of the NSI schedules,
and that the ORS had not provided them with pre-deprivation hearings or proper post-deprivation
reviews. In Count V of the complaint, mistakenly labeled Count IV, plaintiffs alleged that they
are entitled to civil damages under 42 USC 1983 for the violation of their due-process rights.
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Although plaintiffs did not request any type of relief with respect to each individual count,
at the conclusion or very end of the complaint, plaintiffs sought the following rulings and relief
from the Court of Claims:
(1) Issue declaratory ruling holding the NSI [schedules] as created by the
ORS and placed into the [manual] to be unlawful and stricken from the [manual]
and to no longer be used in application to the Plaintiffs and all other affected public
employees[;]
(2) Issue declaratory ruling holding that the application of the NSI
[schedules] to be unlawful and that any prior application of it to any Plaintiff or
other affected public employee to be stricken[;]
(3) Issue an order that ORS conduct a new review of compensation for any
Plaintiff or other affected public employee that has had their compensation reduced
through the usage of the NSI [schedules] and order that review to be conducted
without consideration of the NSI [schedules;]
(4) Issue an order granting back pay to any affected public employee that is
currently receiving a pension that was reduced in any manner because of the
application of the NSI [schedules;]
(5) Issue an order that ORS must follow the protocols and procedures of the
APA when adopting or amending portions of the [manual] that are used and applied
as rules by the ORS[;]
(6) Issue an order that a pre-deprivation hearing must be conducted prior to
reducing the reported compensation or [final average compensation] of a member
of the System[;]
(7) Issue an order granting reasonable costs and actual attorney fees to
Plaintiffs for bringing this matter and administrative proceedings leading to this
matter[;6]
(8) Appoint a Special Master for purposes of reviewing pleadings and
claims supporting the creation of a Class pursuant to MCL § 600.6419(1)(c) . . . [;
and]
(9) Any other relief that this Court deems proper.
6
The individual plaintiffs had previously pursued administrative relief by arguing to the retirement
board that the creation and application of the NSI schedules violated the Retirement Act. The
retirement board rejected the argument on the basis that the same argument regarding the NSI
schedules had been entertained by the retirement board many times in the past or on judicial review
and that all those challenges had been unsuccessful.
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Defendants moved for summary disposition, presenting a variety of arguments in support
of dismissal of plaintiffs’ lawsuit. The Court of Claims granted the motion for summary
disposition, except in regard to plaintiffs’ APA count, in an extensive written opinion and order.
The Court of Claims first addressed defendants’ contention that the Court lacked subject-matter
jurisdiction because plaintiffs had failed to exhaust their administrative remedies. The Court of
Claims ruled that to the extent that plaintiffs’ claims were challenging the validity of using the NSI
schedules in general, the claims were not barred by a failure to exhaust administrative remedies.
With respect to claims seeking a recalculation of the pension benefits for individual plaintiffs, the
Court of Claims proceeded on the assumption that those claims were not precluded by a failure to
exhaust administrative remedies.7
The Court of Claims next determined that claims involving the pension benefits of
individual plaintiffs were barred for failure to strictly comply with the notice requirements of MCL
600.6431(1),8 even if there were actual notice and regardless whether prejudice was incurred. The
Court of Claims agreed with defendants’ contention that the claims of the individual plaintiffs
accrued on June 30, 2017;9 therefore, because the complaint was filed more than a year later, any
effort to revisit the calculation of their pension benefits was essentially time-barred under MCL
600.6431(1). The Court of Claims noted that “plaintiffs have not even argued that they complied
with MCL 600.6431, nor have they challenged defendants’ assertions about the accrual dates of
their respective claims.” Given the failure to meaningfully refute defendants’ argument under
MCL 600.6431(1), the Court of Claims concluded that plaintiffs’ claims seeking re-visitation or
recalculation of individual pension benefits were time-barred by operation of MCL 600.6431(1).
The Court of Claims determined that the same reasoning applied to the claims alleging state and
federal due-process violations, the claim seeking relief under 42 USC 1983, and the claim asserting
a violation of Const 1963, art 9, § 24. Accordingly, pursuant to MCR 2.116(C)(7), the Court of
Claims summarily dismissed Counts II, IV, and V of plaintiffs’ complaint.
The Court of Claims ruled, however, that MCL 600.6431(1) did not preclude plaintiffs’
claims for declaratory relief. With respect to Count I of plaintiffs’ complaint, the Court of Claims
addressed whether the ORS’s creation and use of the NSI schedules were authorized by the
7
Earlier in its discussion, the Court of Claims acknowledged that the individual plaintiffs had
sought agency review and were rebuffed by the retirement board. The Court of Claims also
indicated that plaintiffs had “presented a compelling argument as to why further administrative
review—were it required—would have been futile[.]”
8
MCL 600.6431(1) provides:
Except as otherwise provided in this section, a claim may not be maintained
against this state unless the claimant, within 1 year after the claim has accrued, files
in the office of the clerk of the court of claims either a written claim or a written
notice of intention to file a claim against this state or any of its departments,
commissions, boards, institutions, arms, or agencies.
9
In the fact section of its written opinion and order, the Court of Claims stated that “plaintiffs have
not disputed the notion that all of OSR’s discrete decisions that purportedly harmed[] the
individual plaintiffs were made on or before June 30, 2017.”
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Retirement Act. The Court of Claims stated that MCL 38.1303a(5) grants the retirement board,
and thus the ORS, the authority to review forms of remuneration paid to members in order to assess
whether it is reportable compensation. The Court of Claims then focused its attention on MCL
38.1303a(3)(f), which, as indicated earlier, excludes from compensation the following:
Compensation in excess of an amount over the level of compensation
reported for the preceding year except increases provided by the normal salary
schedule for the current job classification. In cases where the current job
classification in the reporting unit has less than 3 members, the normal salary
schedule for the most nearly identical job classification in the reporting unit or in
similar reporting units shall be used.
The Court of Claims agreed with defendants that MCL 38.1303a(3)(f) gives the ORS the
authority to create the NSI schedules for superintendents and administrators because those
individuals are not subject to a normal salary schedule that would typically be found in a collective
bargaining agreement. The Court of Claims also opined that the exclusions from compensation in
MCL 38.1303a(3) apply to all members, which would necessarily include superintendents and
administrators. The Court of Claims observed that “there is no support for the proposition that
administrators and superintendents were intended to be excluded from any exception.” The Court
of Claims further explained:
While . . . superintendents and administrators are not subject to a typical
salary schedule like other public school employees might be, MCL 38.1303a(3)(f)
expressly anticipates members—like superintendents and administrators—who are
not subject to a normal salary schedule. The statute does so by allowing the ORS
Board to use, in the case of small reporting units not subject to a salary schedule,
“the normal salary schedule for the most nearly identical job classification” in the
school district or similar school districts. . . . Stated otherwise, the plain language
of the statute, consistent with recognizing the authority of the ORS Board to review
all forms of remuneration, unambiguously gives the ORS Board authority to ensure
that all salary increases—without exception—are in line with a “normal salary
schedule” for the type of job classification at issue. The ORS Board’s interpretation
of MCL 38.1303a(3)(f) as authorizing the creation of the NSI is not in conflict with
the plain language of the [Retirement Act].
The Court of Claims additionally remarked that “[i]f the Legislature had intended to
exclude administrators and superintendents from the reach of MCL 38.1303a(3)(f), it could have
expressly done so.” The Court of Claims also indicated that the ORS’s construction of MCL
38.1303a(3)(f) was entitled to respectful consideration. The Court of Claims granted summary
disposition in favor of defendants under MCR 2.116(C)(8) with respect to Count I of plaintiffs’
complaint.
In regard to Count III of the complaint pertaining to the alleged APA violation, the Court
of Claims declined to address the matter because defendants had not actually presented an
argument for summary dismissal of that count in their brief. The Court of Claims later denied
plaintiffs’ motion for reconsideration relative to the counts that had been dismissed.
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Subsequently, the parties filed competing motions for summary disposition on the issue of
the alleged APA violation in Count III of the complaint. The Court of Claims noted that the issue
before it was whether the NSI schedules reflected rulemaking by the ORS without honoring the
required APA procedures for rule promulgation. The Court of Claims ruled that the NSI schedules
merely explain reportable and nonreportable “compensation,” including when a job classification
in a reporting unit has fewer than three members. According to the Court of Claims, the NSI
schedules do not add requirements or terms to the statutory meaning of “compensation.” The
Court of Claims further indicated that the manual itself provides that it is merely a summary of the
Retirement Act and is simply meant to assist schools in determining reportable compensation. The
Court of Claims viewed the manual as an interpretive statement or guideline, not a rule, opining
that there was “ample caselaw wherein explanatory manuals did not constitute ‘rules’ under the
APA.” Ultimately, the Court of Claims concluded that there was no genuine issue of material fact
that the NSI schedules found in the manual are not administrative rules. Therefore, the APA’s
rulemaking procedures did not apply. The Court of Claims granted defendants’ motion for
summary disposition under MCR 2.116(C)(10), denied plaintiffs’ motion for summary disposition,
and dismissed the case. Plaintiffs appeal by right.
IV. ANALYSIS
A. PLAINTIFFS’ ARGUMENTS ON APPEAL
On appeal, plaintiffs present four broad arguments. First, they contend that the Court of
Claims erred by ruling that the NSI schedules defendants created and administered do not violate
the Retirement Act. Second, plaintiffs maintain that the Court of Claims erred by concluding that
the NSI schedules do not violate the APA and its rulemaking procedures. Third, plaintiffs assert
that the Court of Claims erred by determining that the claim of an alleged violation of Const 1963,
art 9, § 24, was time-barred with respect to broad declaratory relief under the notice requirements
of MCL 600.6431(1). Fourth, and finally, plaintiffs argue that the Court of Claims erred by ruling
that the claims alleging due-process violations were time-barred in regard to broad declaratory
relief under the notice requirements of MCL 600.6431(1).
B. STANDARD OF REVIEW
We review de novo a trial court’s decision on a motion for summary disposition. Hoffner
v Lanctoe, 492 Mich 450, 459; 821 NW2d 88 (2012). This Court additionally reviews de novo
issues of statutory interpretation. Estes v Titus, 481 Mich 573, 578-579; 751 NW2d 493 (2008).
We also review de novo questions of constitutional law. Adair v Michigan, 497 Mich 89, 99; 860
NW2d 93 (2014).
C. PRINCIPLES OF SUMMARY DISPOSITION UNDER MCR 2.116(C)(7), (8), AND (10)
In RDM Holdings, Ltd v Continental Plastics Co, 281 Mich App 678, 687; 762 NW2d 529
(2008), this Court set forth the principles governing a motion for summary disposition brought
pursuant to MCR 2.116(C)(7):
Under MCR 2.116(C)(7) . . ., this Court must consider not only the
pleadings, but also any affidavits, depositions, admissions, or other documentary
evidence filed or submitted by the parties. The contents of the complaint must be
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accepted as true unless contradicted by the documentary evidence. This Court must
consider the documentary evidence in a light most favorable to the nonmoving
party. If there is no factual dispute, whether a plaintiff’s claim is barred under a
principle set forth in MCR 2.116(C)(7) is a question of law for the court to decide.
If a factual dispute exists, however, summary disposition is not appropriate.
[Citations omitted.]
MCR 2.116(C)(8), which provides for summary disposition when a “party has failed to
state a claim on which relief can be granted,” tests the legal sufficiency of a complaint. Beaudrie
v Henderson, 465 Mich 124, 129; 631 NW2d 308 (2001). The trial court may only consider the
pleadings in rendering its decision under MCR 2.116(C)(8). Id. All factual allegations in the
complaint are accepted as true. Dolan v Continental Airlines/Continental Express, 454 Mich 373,
380-381, 563 NW2d 23 (1997). “The motion should be granted if no factual development could
possibly justify recovery.” Beaudrie, 465 Mich at 130.
MCR 2.116(C)(10) provides that summary disposition is appropriate when, “[e]xcept as to
the amount of damages, there is no genuine issue as to any material fact, and the moving party is
entitled to judgment or partial judgment as a matter of law.” A motion brought pursuant to MCR
2.116(C)(10) tests the factual support for a party’s action. Pioneer State Mut Ins Co v Dells, 301
Mich App 368, 377; 836 NW2d 257 (2013). “Affidavits, depositions, admissions, or other
documentary evidence in support of the grounds asserted in the motion are required . . . when
judgment is sought based on subrule (C)(10),” MCR 2.116(G)(3)(b), and such evidence, along
with the pleadings, must be considered by the court when ruling on the (C)(10) motion, MCR
2.116(G)(5). “When a motion under subrule (C)(10) is made and supported . . ., an adverse party
may not rest upon the mere allegations or denials of his or her pleading, but must, by affidavits or
as otherwise provided in this rule, set forth specific facts showing that there is a genuine issue for
trial.” MCR 2.116(G)(4). “A trial court may grant a motion for summary disposition under MCR
2.116(C)(10) if the pleadings, affidavits, and other documentary evidence, when viewed in a light
most favorable to the nonmovant, show that there is no genuine issue with respect to any material
fact.” Pioneer State, 301 Mich App at 377. “A genuine issue of material fact exists when the
record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon
which reasonable minds might differ.” West v Gen Motors Corp, 469 Mich 177, 183; 665 NW2d
468 (2003). The trial court is not permitted to assess credibility, weigh the evidence, or resolve
factual disputes, and if material evidence conflicts, it is not appropriate to grant a motion for
summary disposition under MCR 2.116(C)(10). Pioneer State, 301 Mich App at 377. “Like the
trial court’s inquiry, when an appellate court reviews a motion for summary disposition, it makes
all legitimate inferences in favor of the nonmoving party.” Skinner v Square D Co, 445 Mich 153,
162; 516 NW2d 475 (1994). A court may only consider substantively admissible evidence actually
proffered by the parties when ruling on the motion. Maiden v Rozwood, 461 Mich 109, 121; 597
NW2d 817 (1999); see also MCR 2.116(G)(6).
D. STATUTORY CONSTRUCTION
In Slis v Michigan, 332 Mich App 312, 335-336; 956 NW2d 569 (2020), this Court recited
the well-established rules of statutory construction:
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This Court’s role in construing statutory language is to discern and ascertain
the intent of the Legislature, which may reasonably be inferred from the words in
the statute. We must focus our analysis on the express language of the statute
because it offers the most reliable evidence of legislative intent. When statutory
language is clear and unambiguous, we must apply the statute as written. A court
is not permitted to read anything into an unambiguous statute that is not within the
manifest intent of the Legislature. Furthermore, this Court may not rewrite the plain
statutory language or substitute its own policy decisions for those decisions already
made by the Legislature.
Judicial construction of a statute is only permitted when statutory language
is ambiguous. A statute is ambiguous when an irreconcilable conflict exists
between statutory provisions or when a statute is equally susceptible to more than
one meaning. When faced with two alternative reasonable interpretations of a word
in a statute, we should give effect to the interpretation that more faithfully advances
the legislative purpose behind the statute. [Quotation marks and citations omitted.]
An agency’s construction of a statute that the agency is charged with executing is entitled
to respectful consideration, and there must be cogent reasons for overruling the agency’s
interpretation of the statute. In re Complaint of Rovas Against SBC Mich, 482 Mich 90, 103; 754
NW2d 259 (2008). “Furthermore, when the law is ‘doubtful or obscure,’ the agency’s
interpretation is an aid for discerning the Legislature’s intent.” Id. But an agency’s construction
is not binding on the courts, and the interpretation cannot conflict with the intent of the Legislature
as expressed in the plain language of the statute at issue. Id.E. DISCUSSION AND HOLDING
We hold that the Retirement Act does not authorize the ORS to create and implement NSI
schedules and apply them to superintendents and administrators under the plain and unambiguous
language of the statutory scheme. In light of our ruling, it is unnecessary to address the additional
arguments plaintiffs pose in this appeal.
As indicated earlier, reportable compensation does not include “[c]ompensation in excess
of an amount over the level of compensation reported for the preceding year except increases
provided by the normal salary schedule for the current job classification.” MCL 38.1303a(3)(f).
This is the first of two sentences in Subdivision (f) of the statute, each of which we will separately
analyze. Again, the Legislature did not define the terminology “normal salary schedule.” We find
it abundantly clear from the Legislature’s references to “the” normal salary schedule and “the”
current job classification that the Legislature was necessarily alluding to schedules and
classifications that were familiar to school personnel and already in place or existence in the
particular contextual setting of collective bargaining. The language “normal salary schedule” for
a “job classification” plainly pertains to salary schedules contained in collective bargaining
agreements. See Kalamazoo City Ed Ass’n v Kalamazoo Pub Sch, 406 Mich 579, 590-591; 281
NW2d 454 (1979) (“The second finding entailed defendant’s failure to observe the automatic
salary progression schedule traditionally incorporated into each collective bargaining agreement
between the parties.”); Ranta v Eaton Rapids Pub Sch Bd of Ed, 271 Mich App 261, 270; 721
NW2d 806 (2006) (“The Court held that where the collective bargaining agreement required all
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teachers to be placed at a step level applicable to his or her experience, the petitioner’s placement
on the salary schedule involved a labor dispute and presented an issue of contract interpretation.”);
Martin v East Lansing Sch Dist, 193 Mich App 166, 169; 483 NW2d 656 (1992) (“the 1983-1986
collective bargaining agreement . . . contained a step-scale salary schedule”). The language in the
initial sentence of MCL 38.1303a(3)(f) simply does not invite or authorize the creation of salary
schedules and classifications by the ORS. Superintendents and administrators such as plaintiffs
are not compensated pursuant to normal salary schedules; rather, they perform their duties and
functions pursuant to personal employment contracts that by definition are distinct and tailored to
particular individuals.
To justify the creation of the NSI schedules by the ORS, defendants rely on the second
sentence of MCL 38.1303a(3)(f), which provides that “[i]n cases where the current job
classification in the reporting unit has less than 3 members, the normal salary schedule for the most
nearly identical job classification in the reporting unit or in similar reporting units shall be used.”
Indeed, the heart of this case involves the construction of this provision. The second sentence of
MCL 38.1303a(3)(f) clearly concerns the same setting as and is a continuation of the preceding
sentence, except that it addresses a situation where the job classification has fewer than three
members—no other deviation is involved or contemplated. The plain language of the sentences
does not reflect a jump from addressing employees subject to salary schedules and collective
bargaining agreements to a focus on employees who work under personal employment contracts.
Moreover, the second sentence of MCL 38.1303a(3)(f) in no form or manner authorizes the
creation of a normal salary schedule or an NSI schedule as described in the ORS’s manual.
Instead, it merely directs the use of an existing normal salary schedule for another job classification
in the reporting unit or a similar reporting unit. Because the plain and unambiguous language does
not authorize the creation of the NSI schedules, we need not entertain plaintiffs’ arguments
regarding legislative history or their uncontested assertion that some reporting units have three or
more assistant superintendents, yet the NSI schedules are applied to them.
MCL 38.1303a(5)(a) and (b) provide that the retirement board, based on information and
documentation provided by a member, shall determine “[w]hether any form of remuneration paid
to a member is identified in this section[,]” and “[w]hether any form of remuneration that is not
identified in this section should be considered compensation reportable to the retirement system
under this section.” The plain and unambiguous language of MCL 38.1303a(5) does not provide
broad authority to the ORS or any of the defendants to create NSI schedules for superintendents
and administrators. MCL 38.1303a(5) authorizes the retirement board to make individual
compensation determinations. See Dignan v Mich Pub Sch Employees Retirement Bd, 253 Mich
App 571, 576-577; 659 NW2d 629 (2003) (Retirement Act empowers the retirement board to
determine what remuneration is to be considered a retiree’s reportable compensation under MCL
38.1303a[5], with the petitioner having the burden of proof in the setting of a contested case).
Moreover, MCL 38.1303a(5) confines the retirement board’s decision-making authority to
ascertaining whether a “form” of remuneration received by a member constitutes reportable
compensation. There does not appear to be any dispute that the form of remuneration received by
the individual plaintiffs was generally reportable compensation under MCL 38.1303a(1) and (2).
Finally, to be clear, we are not ruling that superintendents and administrators such as
plaintiffs are not otherwise subject to the provisions of MCL 38.1303a; as members, MCL
38.1303a generally applies to them. We are only holding that MCL 38.1303a(3)(f) does not govern
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members who work pursuant to personal employment contracts because in such cases normal
salary schedules and collective bargaining agreements are not involved. MCL 38.1303a(3)(f) does
not authorize the ORS to create NSI schedules for superintendents and administrators.
In sum, the ORS had no statutory authority under MCL 38.1303a to create the NSI
schedules. Moreover, even assuming that the NSI schedules were merely interpretive statements
or guidelines, as urged by defendants, and not rules, we find they were still challengeable and are
invalid. See Chonlara, Inc v State Bd of Ed, 442 Mich 230, 243; 501 NW2d 88 (1993) (interpretive
statements that go beyond the scope of the law may be challenged and an interpretation
unsupported by the enabling statute or act constitutes an invalid interpretation).
In light of our holding that the NSI schedules were not lawfully created and are invalid, we
need not address plaintiffs’ argument that the NSI schedules violated the APA’s procedural
requirements with respect to rulemaking. Plaintiffs also argue that the trial court erred by
summarily dismissing the constitutional claims in Counts II and IV because the claims not only
concerned the individual plaintiffs, they also constituted broad facial challenges seeking
declaratory relief that would impact a whole class of individuals who were not employed under
collective bargaining agreements.10 Given that we have invalidated the NSI schedules because
their creation exceeded the authority of the ORS, we need not assess whether they were also
unconstitutional. See Int’l Business Machines, Corp v Dep’t of Treasury, 496 Mich 642, 662 n
67; 852 NW2d 865 (2014) (we will not reach constitutional issues when unnecessary to do so to
resolve an appeal).
We reverse and remand for entry of judgment in favor of plaintiffs with respect to
declaratory relief and the invalidity of the NSI schedules under the Retirement Act. We do not
retain jurisdiction. We decline to award taxable costs under MCR 7.219.
/s/ Jane E. Markey
/s/ Karen M. Fort Hood
/s/ Elizabeth L. Gleicher
10
Plaintiffs do not challenge the dismissal of Count V that sought civil damages under 42 USC
1983.
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