On appeal from the Board of Trustees of the Teachers' Pension and Annuity Fund, Agency Docket No. TPAF 1-10-079756.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges A. A. Rodriguez, Sabatino, and Fasciale.
Appellant Anthony Barckett,*fn1 a retired public school employee, appeals a February 4, 2011 final agency decision of the Board of Trustees ("the Board") of the Teachers' Pension and Annuity Fund System ("TPAF") within the Division of Pensions and Benefits ("the Division"). In that decision, the agency adopted the post-hearing findings of an Administrative Law Judge ("ALJ"), who concluded that appellant had violated the State's pension laws and regulations by working as the director and business administrator of a private charter school while he was simultaneously receiving a TPAF retirement pension. The agency also required appellant to repay pension benefits he had improperly received since February 2000, and to make additional contributions into the pension system coextensive with his new employment.
We affirm the agency's determination, as there is substantial credible evidence in the record to support the mutual and reasonable conclusion of the Board and the ALJ that appellant was serving as an employee of the charter school rather than as an independent contractor, and that he was thereby ineligible to collect his State pension at the same time. We also reject appellant's claim that the agency's decision is barred by principles of equitable estoppel and laches. However, we conclude that the recoupment period may be reduced by up to two years by virtue of a statutory provision, N.J.S.A. 18A:66-53.2(b), which allows certain school administrators to work for up to two years under one-year contracts without forfeiting their pension benefits. Consequently, we remand this matter to the agency to fairly consider a potential reduction of appellant's recoupment period in accordance with N.J.S.A. 18A:66-53.2(b), and, if a basis for relief under the statute is shown, to make a corresponding adjustment in the payback amount.
The record developed at the hearings before the ALJ presents the following pertinent facts.
Appellant was employed by the Garfield Board of Education as a teacher and an administrator for approximately thirty-four to thirty-five years until he retired in 1997. He is certified as a teacher in middle school science, mathematics, social studies, and English. He is also certified as a school principal, business administrator, superintendent, and purchasing agent.
Following his retirement from the Garfield School district in 1997, appellant began receiving retirement benefits from TPAF. On September 24, 1997, appellant wrote the Division and inquired whether taking a business administrator position at another school would affect his pension benefits. The Division responded to appellant two days later, informing him in a letter that his assumption of the title of the school's business administrator would require him to reenroll in TPAF as an employment condition, and that his "retirement allowance would be canceled for the duration of [his] employment." In light of the Division's response, appellant delayed his plans to return to work for almost two years. In the meantime, he continued to collect his pension.
On July 19, 1999, appellant began working full time at a New Jersey educational institution, co-appellant Englewood on the Palisades Charter School ("EPCS"), in the title of a "Director" at the school. He notified the Board of his new position at EPCS in a letter dated August 17, 1999. In that letter, appellant asked whether he could continue to receive pension benefits while he worked at the school. After not initially receiving a response, appellant sent a second copy of the letter to the TPAF Board Secretary on September 2, 1999.
A representative of the Division, Mindy Smith-Sopko, responded to appellant's letter on September 8, 1999. In her letter, Smith-Sopko informed appellant that:
Teachers employed by charter schools in New Jersey must be enrolled in the TPAF as a condition of employment unless they are collecting a pension from a different NJ administered retirement system such as the Public Employees' Retirement System or the Police and Firemen's Retirement System. Teachers employed by charter schools who are collecting a retirement allowance from the TPAF must cancel their retirement allowances and be reenrolled into the retirement system. If a TPAF retiree works in a covered position and continues to collect a pension benefit, that benefit must be refunded to the retirement system. I have enclosed a fact sheet regarding employment after retirement for your information. The Division is also in the process of sending a reminder letter to the administrators of charter schools in NJ regarding eligibility for enrollment in the TPAF. [Emphasis added.]
The representative's letter continued with the following words of caution:
You may work as a consultant, but you must be careful to remain independent of an employee-employer relationship with the school. There have been cases where the Board of Trustees, after a review of an employment situation, has determined that a consultant is actually an employee subject to reenrollment. [Emphasis added.]
After receiving this response from the Division to his inquiry, appellant resigned his full-time position as the Director of EPCS in a letter dated September 13, 1999, with an effective date of September 15, 1999. In his resignation letter, appellant requested that EPCS consider retaining him instead in a capacity denominated as a "consultant" "until such time a replacement can be found for the position of Director." Appellant also requested that EPCS compensate him $4000 per month, and that he work twenty-five to thirty hours per week. He further proposed other terms, including an acknowledgment that he would not be entitled to sick or vacation days.
Following appellant's resignation, the EPCS board hired appellant the very next day to serve as a consultant, effective September 16, 1999. The board agreed to all of appellant's proposed terms, including the $4000 monthly compensation. Although appellant took on this role in September 1999, he did not send a letter to the Division alerting it to his revised arrangement with EPCS. Nor did he ask the Division whether the new arrangement would pass muster under the applicable pension laws and regulations.
According to appellant's testimony, in his role as a consultant he exercised control over various aspects of his work for EPCS. He was not trained or directed regarding how to perform his job. He was not required to perform his functions on the school premises. He did not have to check in with anyone when he went to the school, even though others working there had to sign in. Appellant was permitted to work from home, where he had a computer that he used for EPCS business. EPCS provided appellant with a password to access the school computer, but he purchased the computer himself and he paid for the internet access.
Even though appellant assumed various administrative duties at EPCS, he contended that those duties were limited. He lacked the power to hire or fire employees at the school, although he did review applications by job-seekers and provided recommendations about such applicants to the EPCS board. Appellant testified that the number of days he typically went to the school premises varied, and that his hours were not monitored. He usually did not work Fridays, nor on Mondays, during the summer. He sometimes worked five days per week, and other days he worked three days per week. Appellant estimated that, on the whole, he worked for EPCS twenty to twenty-five hours per week.
While performing work at EPCS, appellant occasionally worked as a volunteer for other schools. He also consulted for other charter schools, but apparently was not paid for such consulting.
Appellant was paid by EPCS in biweekly sums that were reported on a 1099 tax form. Consequently, he paid a self-employment tax on his federal tax return. He continued, meanwhile, to collect his full TPAF pension.
In 2006, the Division performed an audit of EPCS, which led it to conclude that appellant was illegally collecting his pension while working as an employee at the charter school.*fn2 The audit was performed by Michael Czyzyk, an external audit supervisor for the Division. Based on the audit results, the Division sent appellant a letter on August 10, 2006, informing him that his position at EPCS qualified as a TPAF-covered position requiring his re-enrollment in the system.*fn3 The letter also informed appellant that he would be assessed retroactive pension contributions.*fn4 The Division provided appellant with a chart listing the amount of pension benefits that he had received since October 1999, and the gross amount initially totaled $402,257.46.
The Division's audit report memorializing the auditor's findings was issued on October 2, 2006. The audit report again stated that appellant had received a gross pension assessment of $402,257.46 for the period of October 1, 1999 through September 1, 2006. Thereafter, Czyzyk sent a letter to appellant's counsel with additional information explaining the basis for the audit.
Appellant contested the audit findings and requested that the TPAF Board of Trustees review his objections. An initial hearing accordingly took place before the TPAF Board on April 5, 2007.
Following that initial hearing, the Board informed appellant on April 12, 2007 that it agreed with the auditor that he was not an independent contractor, but rather an employee of EPCS. In making its determination, the Board relied upon Internal Revenue Service ("IRS") Revenue Ruling 87-41, 1987-1 C.B. 296, which sets forth a twenty-factor test for determining whether an individual qualifies as an employee.*fn5 Specifically, the Board relied on ten of the twenty enumerated IRS factors including: the integration of functions; services rendered personally; hiring, supervising, and paying assistants; a continuing relationship; set hours of work; doing work on the employer's premises; payments by hour, week, or month; making services available to the general public; the right to discharge; and the right to terminate.
Based upon its conclusion that appellant had become re-employed, the TPAF Board directed appellant's re-enrollment in the TPAF system, retroactive to February 2000. The Board also required "the repayment [by appellant] of retirement benefits received plus pension contributions which otherwise would have been paid."
On April 19, 2007, appellant requested emergent relief from the Board seeking a stay of its decision. The Board denied a stay, but approved appellant's request for a hearing in the Office of Administrative Law ("OAL"). In May 2007, the matter was referred to the OAL for a hearing before an ALJ.
After a non-evidential initial proceeding on May 24, 2007, the ALJ denied appellant's emergent motion to stay the Board's ruling. However, a few days later, on June 1, 2007, this court granted appellant's emergent stay application, pending the outcome of the ALJ hearing.
The ALJ thereafter presided over evidential hearings on two days in May 2010 and June 2010. Appellant testified in his own behalf. Additionally, appellant presented the testimony of Shirley Burns, the principal of EPCS, and Ted A. Carnevale, a certified public accountant. The Division presented the opposing testimony of Czyzyk, its external audit unit supervisor.
After considering the proofs, the ALJ issued a detailed thirty-seven-page decision on January 6, 2011 sustaining the Division's position. Much of the ALJ's decision focused upon an application of the factors in IRS Revenue Ruling 87-41 for assessing whether appellant had, in fact, an employee-employer relationship with EPCS, despite his contention that he was only serving there as a consultant and an independent contractor.
The ALJ carefully evaluated all ten factors under Revenue Ruling 87-41 that had been identified by the Division's auditor as indicative of employment. Of those factors, the ALJ found the following ...