NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 13, 2013
On appeal from the Board of
Trustees of the Public Employees' Retirement System, Department of the Treasury, PERS #2-10-192073.
O. Gene Hurst, attorney for appellant.
Jeffrey S. Chiesa, Attorney General, attorney for respondent Board of Trustees, Public Employees' Retirement System (Lewis A. Scheindlin, Assistant Attorney General, of counsel; Robert H. Stoloff, Assistant Attorney General, on the brief).
Before Judges Simonelli and Koblitz.
This matter involves the arrangement appellant Joseph Sharp (Sharp) had with the County of Union (County) to continue as the administrator for Runnells Specialized Hospital of Union County (Runnells) following his July 1, 2003 retirement and receipt of pension benefits from respondent Public Employees' Retirement System (PERS). In a March 20, 2012 initial decision, Administrative Law Judge Walter M. Braswell (ALJ Braswell) determined that: Sharp was an employee of the County, not an independent contractor, who returned to a PERS-covered position following his retirement in violation of N.J.S.A. 43:15A-57.2; his retirement was not bona fide pursuant to N.J.A.C. 17:2-6.2; and he had to re-enroll in PERS, pay pension contributions for that enrollment, and repay all retirement benefits he received between August 1, 2003 and October 2009. On April 20, 2012, PERS issued a final decision adopting ALJ Braswell's initial decision. We affirm.
Sharp is a licensed nursing home administrator (LNHA). From 1984 to June 30, 2003, he was employed at Runnells as the administrator, a PERS-covered position. According to the County's Administrative Code (County Code), the administrator was directly responsible for "[o]rganizing, directing and supervising the overall activities of [Runnells] to ensure an effective and efficient operating organization[, ]" among other duties. The County Code also required the administrator to perform "such other duties as may be required by the County Manager."
Sharp claimed that he decided to retire in 2003 for health reasons. The County issued a Request for Proposal (RFP), requesting proposals from qualified individuals "for the position of hospital/long term care administrator and for the management of all aspects of . . . Runnells[.]" Section 2 of the RFP required the administrator to report directly to the County Manager and contained an extensive list of the administrator's duties and responsibilities, including patient care, human resources, finance, physical environment, and leadership and management. Section 3 required the administrator to be a LNHA.
Prior to his retirement, Sharp formed Aruspex, LLC, a New Jersey limited liability company, and became its president and sole employee. On June 22, 2003, Aruspex submitted a proposal to the County to "serve as [Runnells's] administrator and LNHA." The proposal provided as follows:
Aruspex will be administratively responsible for all aspects of [Runnell's] operations as required by N.J.A.C. 8:39-9.2(a) and as otherwise required by the [County's RFP]. Aruspex will ensure the efficient and economical operation of [Runnells, comply] with all Federal, State and local regulations and will perform all tasks required to carry out the strategic plan as approved by the Union County Board of Chosen Freeholders and will report directly to the Union County Manager and/or his designee(s).
The contracted Administrator will manage the day-to-day operations of [Runnells] in accordance with the . . . [County] Code and will address any and all contingencies promptly. The Administrator will meet all requirements of the Nature/Scope of Services, Section 2 of the RFP. The primary goal of this relationship is to manage the assets of [Runnells] so as to uphold its traditional high standard of care while working with staff to reduce costs and increase revenue.
Aruspex's proposal requested that the County include the LNHA's professional liability insurance in the County's standard insurance program at standard amounts and coverage.
Sharp, as Aruspex's president, signed a contract with the County to provide a LNHA to Runnells for payment not to exceed $95, 000 per year. The contract, which was renewed annually, required the LNHA to be "administratively responsible for all aspects of [Runnells] as required by [N.J.A.C.] 8:39-9.2(a) in accordance with [Aruspex's] proposal submitted on June 22, 2010 incorporated herein as part of this contract." The contract identified Aruspex and its employees as independent contractors not entitled to overtime, retirement benefits, workers' compensation benefits and injury or other leave.
Sharp retired under the PERS Early Retirement Program and began receiving a pension on July 1, 2003. On August 1, 2003, he returned to work at Runnells as the Aruspex-designated LNHA. He received monthly payments for his services, which the County reported as Form 1099 income.
In 2007, the Division of Pension and Benefits (Division) discovered that Sharp had continued working full-time as Runnells's administrator following his retirement. The Division began an investigation to determine Sharp's employment relationship with the County. Sharp maintained he was an independent contractor, not an employee of the County, from and after August 2003.
The Division utilizes the Internal Revenue Service (IRS) common law "control test" to determine whether a worker is an employee or an independent contractor. Stevens v. Bd. of Trs., Pub. Emps.' Ret. Sys., 309 N.J.Super. 300, 304 (App. Div. 1998). The IRS generally considers an employer-employee relationship to exist where the employer has the right to direct and control how the worker performs the services for which he or she was hired. Rev. Rul. 87-41, 1987-1 C.B. 296. "In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if the employer has the right to do so." Ibid.
The IRS identifies twenty factors in three categories, behavioral control, financial control and relationship of the parties, to be used to determine if there is sufficient control present to establish an employer-employee relationship:
1. Instructions. A worker who is required to comply with other persons' instructions about when, where, and how he or she is to work is ordinarily an employee. This control factor is present if the person or persons for whom the services are ...