19-002746 Lewis Velken vs. Department Of Management Services, Division Of Retirement Status: Closed Recommended Order on Friday, February 28, 2020.

Summary: Petitioner is an independent contractor pursuant to section 121.021(50) and rule 60S-6.001(33). Therefore, he did not violate the terms of the DROP agreement and gets to retain his FRS retirement benefits.

S TATEMENT OF T HE I SSUE S

Whether Petitioner Lewis Velken failed to meet the Deferred Retirement

Option Program ( " DROP " ) termination requirements set forth in chapter 121,

Florida Statutes; and, if so, whether he is liable for repayment of the

distr i b u tion from DROP in the amount o f $691,307.41.

P RELIMINARY S TATEMENT

By letter dated March 6, 2019, Respondent Department of Management

Services, Division of Retirement ( " Division " or " Respondent " ) , advised

Petitioner Lewis Velken ( " Velken " or " Petitioner " ) that the Division

intended to void his participation in DROP. The letter further instructed

Petitioner that he must repay all retirement benefits received, including

the health insurance subsidy , for a total of $691,307.41. The letter

relied upon section 121.021(39)(b) and Florida Adm inistrative Code

R ule 60S - 4.012(2)(a)2, as authority.

On March 28, 2019, Petitioner timely requested an administrative hearing

contesting the Division ' s determination.

On May 22, 2019, the Division transmitted Petitioner ' s request to the

Division of Admi nistrative Hearings ( " DOAH " ) and assigned the undersigned

A dministrative L aw J udge to the case. The case proceeded to hearing as

scheduled on November 19 and 20, 2019.

At hearing, Petitioner testified on his own behalf and offered the

testimony of six witnesses: Stephanie Leon, Marlen Martell, Elbert Wrains,

Dr. Joyce Morgan, Scott McArthur , and Kathy Gould. Petitioner ' s Exhibits 1

through 43 were received into evidence . Respondent presented the testimony

of seven witnesses: Lewis Velken, Stephanie Leon, Marlen Martell, Elbert

Wrains, Dr. Joyce Morgan, Scott McArthur , and Kathy Gould . Respondent ' s

Exhibits 1 through 30 were received into evidence.

The proceeding was recorded and transcribed . On December 10, 2019,

Volumes I, II, III, and IV of the Transcript w ere filed at DOAH. On

Janu a ry 9, 2020, the undersigned granted a deadline extension to

Jan u ary 17, 2020, for the parties ' proposed recommended orders. The parties

timely filed proposed recommended orders, which have been considered by

the undersigned in the preparation of the Recommended Order.

References to the Florida Statutes will be to the 2018 version , unless

otherwise noted.

F INDINGS OF F ACT

1. The Division is , and was , at all times material to this case, the state

agency charged with the responsibility of administering the Florida

Retirement System ( " FRS " ).

2. Petitioner Velken was employed by Miami - Dade County Sheriff ' s Office

( " Sheriff ' s Office " ) from Jun e 27, 1988, through January 31, 2018. For the last

12 years of his employment with the Sheriff ' s Office, Petiti oner served in the

position of l ieutenant.

3. On June 5, 2013, Velken filled out and signed the DP - ELE Form,

entitled Florida Retirement System P ension Plan Notice of Election to

Participate in the Deferred Retirement Option Program (DROP) and

Resignation of Employment, indicating that he wanted to enter DROP. The

form reads , in pertinent part:

I elect to participate in the DROP in accordance

with s. 121.091(13), Florida Statutes (F.S.), as

indicated below, and resign my employment on the date I terminate from the DROP. I understand that the earliest date my participation in DROP can

begin is the first date I reach normal retirement

date as determined by law and that my DROP

participation cannot exceed a maximum of

60 months from the date I reach my normal

retirement date, although I may elect to participate

for less than 60 months. Participation in DROP does not guarantee my employment for the DROP

period.

I understand that I must terminate all employment

with FRS employers to receive a monthly

retirement benefit and my DROP benefit under

Chapter 121, F.S. Termination requirements for

elected off icers are different as specified in

s. 121.091(13)(b) [ 4 . ] , F.S. I cannot add service

change options, change my type of retirement or elect the Investment Plan after my DROP begin

date. I have read and understand the DROP

Accrual and Distribution informatio n provided with

this form.

4 . Also, on June 5, 2013, Velken filled out and signed a DP - 11 Form ,

entitled Florida Retirement System Pension Plan Application for Service

Retirement and the Deferred Retirement Option Program (DROP). That form

states , in pertinent part:

I understand that I must terminate all employment

with FRS employers to receive a monthly retirement benefit and my DROP benefit under Chapter 121, F.S. If I fail to terminate employment

in accordance with s. 121.021(39)(b), F.S., on my

DROP termination date, my retirement will be null

and void and my FRS membership shall be established retroactively to the date I began DROP.

5. Effective July 1, 2013, Velken entered DROP , and , for the last

approximately four and one - half years of his e mployment with the Sheriff ' s

Office , he participated in DROP.

6. During the latter part of Velken ' s employment with the Sheriff ' s Office,

he took a position with the Los Angeles County Public Defender ' s Office as an

investigator while also being employed with the Sheriff ' s Office. In

December 2017, Velken left the Public Defender ' s Office and , eventually,

reunited with the Sheriff ' s Office.

7. Prior to ending his DROP participation, Velken completed a DP_TERM

F orm , entitled Drop Termination Notification Fo rm , on January 16, 2018,

confirming he would terminate his employment early on January 31, 201 8 .

The form included the following statement above his notarized signature:

Termination Requirement: In order to satisfy your

employment termination requirement, you must

terminate all employment relationships with all

participating FRS employers for the first 6 calendar

months after your DROP termination date. Termination requirement means you cannot remain employed or become employed with any FRS covered employer in a position covered or non -

covered by retirement for the first 6 calendar

months following your DROP termination date. This includes but is not limited to: part - time work,

temporary work, other personal services (OPS),

substitute teaching, adjunct profe ssor or non -

Division approved contractual services.

8. V elken ' s brother was married to Stephanie Leon ' s ( " Leon " ) sister , and

they have known each other since Leon was approximately 11 years old.

9. After leaving the FRS, on or about February 5, 2018, Velken started

working for Leon ' s property management and maintenance company,

Stephanie Leon P . A . , as an independent contractor. Stephanie Leon P . A . does

not have any other employees. While working for Stephanie Leon P . A . ,

Velken ' s law enforcement experti se was utilized to make properties safer and

to help the agents remain safe. Velken also performed administrative duties

such as reviewing contracts and proofreading , as well as generating business

for Stephanie Leon P . A.

10. Leon also has another company named Realty Empire, Incorporated

( " Realty Empire " ) , which is a brokerage company. Velken , at the time of the

hearing , had not been affiliated with Realty Empire.

11. Leon has a broker ' s license and real estate license in Florida.

12. While working for Le on, Velken looked into getting a real estate

license. He also was still considering law enforcement opportunities. He was

actively attempting to get an investigator position with the California

Department of Insurance.

13. Leon and Velken neither had a con tract nor finalized Velken ' s salary

amount , because they did not know how much business Velken would be able

to generate for the company. However, Velken was living off his FRS pension ,

and he understood he was going to be compensated when Leon was

compens ated.

14. On April 16, 2018, Velken ' s friend called him to let him know that

North Bay Village ( " Village " ) was looking for a police chief and that he had

recommended Velken for the position. Velken told his friend he was not

interested in the position but was convinced by his friend to meet with

Marlen Martell ( " Martell " ), the Village manager, because she was under

pressure to hire a police chief expeditiously , since the individual who was

going to serve in the position decided not to accept the position at the last

minute.

15. Velken met with Martell that same afternoon.

16. When the two met, Martell summarized the challenges the Village

police department had and asked Velken about ideas to resolve the issues.

The meeting ended with Martell letting Velken know that she had several

others to meet with regarding the position and that she would get back with

him.

17. Later that same day, Martell called Velken and offered him the chief

of police position. As the Village manager, Martell had the authority to co ntract for services on behalf of the Village. She also had the sole authority

to hire the police chief. They agreed to meet the next day to discuss the

position further.

18. The following day, Velken discovered that the Village was a n FRS

employer. So, Vel ken let Martell know that he would not be able to take the

position because he had just recently retired and exited DROP from a n FRS

agency.

19. Martell responded by suggesting that Velken meet with the new

human resources c oordinator, Ana DeLeon ( " DeLeon " ) , about the retirement

issue.

20. On April 17, 2018, Velken met with DeLeon who called the FRS

hotline. DeLeon briefed the representative on Velken ' s retirement status and

explained that he ended his DROP in January 2018 and that the Village was

offering him a position. DeLeon inquired how the Village could bring Velken

on board to work and him continue to receive his benefits. The FRS

representative instructed Velken that he could not be placed on the payroll of

an FRS agency , unless he had been unemploy ed for six months , because , once

in DROP , a participant cannot receive an FRS salary and pension check at

the same time. Additionally, the representative advised that there is no option around the six - month or one - year reemployment restrictions. Velken

was told he could not go back to work without violating the termination

requirement.

21. After the teleconference meeting with the FRS representative, Velken

informed Martell again that he could not come to work for the Village

according to FRS requirements. Martell then suggested that Velken become a " contracted employee " to accept the police chief position, which would not

interfere with his retirement because he would not be a Village employee in

the FRS system.

22. Martell then took Velken upstairs to the Village attorney, Norman

Powell ( " Powell " ) , to discuss a possible contracted employee arrangement .

Powell informed them that he did not see any problems with a contracted

employee arrangement for police chief. Powell indicated he would research

and get bac k with them to inform them if he found anything contrary.

23. Soon thereafter, Martell let Velken know that Powell had approved

the contractual employee arrangement to move forward with Velken

becoming a contracted police chief for the Village.

24. Velken then approached Leon about the opportunity of expanding her

business to include a temporary staffing service and making the service

available to the Village to help increase her bottom line.

25. Leon researched temporary staffing service businesses and wh at was

legally required to become one. She checked to see what insurance was

needed and checked with the Department of Business and Professional

Regulation , where she found out she did not need a license for a temporary

staffing agency. When Leon did not f ind anything that prevented her from

having a temporary staffing service , she expanded Stephanie Leon P . A . to

include temporary staffing services.

26. Leon never contacted the Division while she was expanding her

business or about Velken serving as an ind ependent contractor for Stephanie

Leon P . A .

27. On April 25, 2018, Leon modified the purpose of Stephanie Leon P . A .,

so that the new venture, temporary staffing services, would be included

under executive services. She amended her Articles of Incorporation with the

Division of Corporations for her property management company, Stephanie

Leon P . A . , and modified the purpos e to say " engage in real estate sales,

management, executive services , and/or any and all lawful business. "

28. Leon decided to place Velken at the Village as her first attempt at

temporary staffing.

29. Since Leon did not know anything about police work, she authorized

Velken to negotiate the terms and conditions of the agreement with the

Village. However, Leon had the final approval on each portion of the

negotiated agreement.

30. Stephanie Leon P . A . through Velken and the Village through Martell

reached a verbal agreement for Velken to perform temporary police chief

services. Martell hired Stephanie Leon P.A. for approximately $130, 0 00.00

annually.

31. T he verbal agreement provided that termination of the agreement

could b e by Stephanie Leon P . A . , or Leon could authorize Velken to do so , or

Martell could terminate the agreement for the Village, without any financial

penalty. There was not a set term for the verbal agreement between

Stephanie Leon P . A . and the Village.

32. T he agreement began in April and was not reduced to writing. In her

capacity, Martell had the authority to make verbal agreements for the Village

for services with Stephanie Leon P . A.

33. Velken did not contact FRS again to review the agreement between

Ste phanie Leon P . A . and the Village , because the Village attorney , Powell ,

had approved the legality of his employment relationship as an independent

contractor. Velken followed his advice.

34. Martell ret ained Velken as the chief of police by " going through an

agency, as we did with other employees in the V illage, to be able to hire him

at that time, without jeopardizing any of his existing benefits. "

35. Velken was not the first contract ed non - FRS employee hired by the

Village. The Village had hired numerous other contract ed employees outside

the FRS system to provide services. Some of the high - ranking V illage

positions , such as public works director, director of the P lanning D epartment ,

and V illage engineer , had been contracted non - FRS employee s. The Village

had also typically provided offices and assistants to the contracted employees ,

even though the Village used staffing agencies to fill many of the contracted

employee positions.

36. Martell notified the Village ' s finance department and DeLe on that

Velken would be providing services through an agency.

37. On or about April 17, 2018, Velken was drug tested by Quest

Diagnostics Incorporated as part of pre - employment for his services to the

Village. The results of h is tests were negative .

38. DeLeon had Velken fill out some paperwork when he started.

However, Velken did not fill out the standard Village employee FRS

paperwork because he was not an employee of the V illage. Since Velken was

not an employee of the Village, he was not on the Villag e ' s payroll , and the

Village did not provide Velken any benefits such as worker s ' compensation

insurance , health insurance, deferred compensation, retirement

contributions, and vacation or sick leave. Also, the Village did not provide

Velken a W - 2 or W - 4 t ax form .

39. On or about April 20, 2018, as the new Village police chief, Velken

signed above the employee signature line on the Oath of Office for Elected

and Appointed Village Officials ( " Oath " ) template form , affirming to " support

and obey the Constitut ion of the United States and of the State of Florida,

and that I will, in all respects, observe the provisions of the Charter and

O rdinances of the Village. " The Oath also stated Velken was " a legal resident

of the State of Florida and being employed [ with the Village ] . "

40. The Village had joined the FRS to cover their police officers in 2004.

41. By doing so, the Village signed a federal - state agreement to cover their

police officers and , also , had an agreement with the Social Security

Administration to cover services.

42. Village Resolution 2018 - 023 formally affirmed and documented the

appointment of Velken as the police chief and was used to introduce Velken

to the Village commission.

43. Vel ken began services as Village chief of police while still working at

Stephanie Leon P . A . as an independent contractor.

44. The Village provided Velken an executive assistant, Ana Gonzalez

( " Gonzalez " ), who assigned him equipment. Velken was given a cell ph one,

handcuffs, holster, whistle, badge, uniform, shoulder mike, laptop, building fob, office keys, building keys, gym card, vehicle, rifle, shotgun, and taser.

45. The majority of Velken ' s work as police chief was at an administrative

level. He did not c arry a gun and never patrolled or conducted enforcement

activities ; s o, he did not use most of the equipment provided. Additionally , he

supplied some of his own equipment.

46. Velken typically wore his own purchased street clothes or a shirt and

tie as pol ice chief , and only wore the issued uniform about twice.

47. Velken did use the Village cell phone for city - related calls to avoid

public records issues if he used his own cell phone.

48. Velken ' s work hours were determined by him. Velken was never

instr ucted when to be at work, how to perform the job, what job to do, or

where to perform services. He worked independently. Additionally, neither

Stephanie Leon P . A . nor Velken were provided any training for the position.

49. Velken once received a Village pa rking reimbursement check for

$12.00, which he never cashed.

50. Martell briefed Velken as to issues she had with the police

department , such as overtime budget, accreditation, and preparation of a

hurricane plan. Martell informed Velken that those were challenges she

hoped could be resolved. However, she did not tell him how to resolve those

issues.

51. While working at the Village, Velken maintained his office at

Stephanie Leon P . A . and another at his home. He continued to provide

services to Stephanie Leon P . A . and , also , continued seeking employment

with the California Insurance Commissioner. Velken even flew to California

and participated in an in - person panel interview while assigned to the

Village to work. Velken did not get the Village ' s approval to be absent while

in California. He just told them he would be gone for a few days.

52. Neither Stephanie Leon P . A . nor Velken ever submitted regular

reports to Martell regarding his services performed for the Village.

53. On July 10, 2018, Martell resigned as Village manager.

54. That same month, Velken was appointed and sworn in as interim

Village manager. Velken ' s services for the Village changed to interim Village

manager , and he started the services of his new position . However, the

original temporary staffing verbal agreement with Stephanie Leon P . A .

continued unchanged with the Village for Velken ' s management services.

Also, Velken continued to provide services to Stephanie Leon P . A . while

working with the Village.

55 . Village Resolution 2018 - 47 formally documented the appointment of

Velken as interim Village manager and is how Powell introduced Velken to

the Village commission in his new capacity.

56. Neither Velken nor the Village controlled Velken ' s pay while he was

chief of police or interim manager. Leon generally prepared monthly invoices

for services to the Village and submitted them to the Village for payment.

The invoices listed " labor wages for Lewis Velken. " The Village paid

Stephanie Leon P . A . for Velken ' s services based on the invoices.

57. After Stephanie Leon P . A . received payment from the Village, Leon

determined Velken ' s salary and paid him. The Village never paid Velken any

compensation.

58. The Village benefited from not providing benefits for the agreement

with Stephanie Leon P.A. , because it did not have to pay the costs for the

benefits. By utilizing a temporary staffing service, the Village saved money.

59. Leon solely determined how much Velken was paid after receiving the

Village payments. Ve lken never received the total amount of money the

Village paid Stephanie Leon P . A.

60. When Velken served a s both police chief and V illage manager, the

verbal agreement between Stephanie Leon P.A. and the Village for Velken ' s

temporary contracted services remained the same. As when Velken provided

services as police chief, Velken still did not have structured or required hours

as interim manager . In fact , Velken independently decided what services to

perform and how to perform the services ; he received a Village office,

maintained an office at Stephanie Leon P . A. , and was not trained. However,

Village Resolution 2018 - 47 did provide that Velken was supposed to follow

the charter.

61. Stephanie Leon P.A. paid Velken $48,579.00 in 2018. Leon ke pt the

remaining approximate $89,000.00 of the Village payments from the invoices.

62. Stephanie Leon P.A. did not withhold any taxes or Social Security

from the checks it paid Velken. Additionally, the company did not provide

Velken any benefits.

63. Ve lken ' s pay was reported to the Internal Revenue Service by

Stephanie Leon P.A. by a 1099 tax form.

64. On June 29, 2018, Velken signed a State of Florida Statement of

Financial Interests for the fiscal year ending December 31, 2017, reporting

his previous primary source of income from " Miami - Dade Police Department "

(Sheriff ' s Office) and the Public Defender ' s Office in California . The n ame of

the agency listed on the financial statement was " North Bay Village Police

Department , " and the name of office blank was filled out as " Police Chief. "

65. On January 9, 2019, Village Commissioner Julianna Strout

( " Commissioner Strout " ) questioned Elbert Wrains ( " Wrains " ), Village f inance

d irector, by email as to who Leon was and requested th at Wrains please

clarify the labor wages related to Leon .

66. That same day, Wrains responded : " Mr. Velken was hired through the

firm of Stephanie Leon P.A. Staffing Services by Marlen Martell. This is for contract wages vs a paid salary. Mr Velken does no t receive any wages

directly from North Bay Vi llage. He is paid by Stephanie L eon P.A. "

67. On January 30, 2019, Wrains further explained by email to

Commissioner Strout about the multiple Leon invoices. The email stated , in

pertinent part:

I am resending the invoices,

I do not believe that we have a contract with

Stephanie Leon P.A.

The I nterim Village M anager is a contract

employee and there is no contact with FRS for his cost to the Village.

He works for a firm and we contract for his services. We have several contract employees

including ou r building official, all our building

inspectors, The Village attorney, one of my

accountants, Johnny our computer tech, several

public works employees, Amy in the V illage C lerks

office, Jim Larue, Gary Ratay of Kimle y Horn,

Marie Bennett in public works. We do not report

any of their costs to FRS because they are not

employees.

If you have any questions please feel free to call me

and ask. I would rather try and get you the right

answer than speculation.

68. Leon aut horized Velken to end the Stephanie Leon P . A . agreement

with the Village because of bad publicity . On or about February 11, 2019, the

verbal agreement ended the same day Velken informed Powell.

69. On February 22, 2019, Gonzalez followed the Acting Chief of Police

Brian Collins ' s instructions and removed Velken from the F lorida

Department of Law Enforcement ( " F DLE " ) A utomated Training Management

System . Gonzalez checked the box " [v] oluntary separation not involving

misconduct " when filling out the form. The Village submitted an Affidavit of

Separation to FDLE on behalf of Velken. The FDLE Profile Sheet was

improperly checked , indicating Velken was an employee of the Village , before

being forwarded to FDLE.

70. After Stephanie Leon P . A . ended the agreement with the Village, Leon

continued the temporary employee staffing part of the company by

attempting to place Velken in loss prevention positions with other businesses .

71. Velken stopped working for Stephanie Leon P . A . in May 2 019.

D IVISION I NVESTIGATION

72. Two anonymous complaints were reported to the Division regarding

Stephanie Leon P . A . and Velken ' s services at the Village.

73. On or about January 14, 2019, William McArthur ( " McArthur " ),

r etirement a nalyst I for the Division , received one of the anonymous

complaints regarding the employment relationship of Velken and the Village.

74. Afterwards, McArthur was assigned to look into the matter and to get

any documentation from the Village regarding Velken ' s employment t o

determine what was going on. The Village provided McArthur

documentation , including payment ledgers and some copies of resolutions.

75. McArthur reviewed the Village ledgers and found enteries to

Stephanie Leon P . A. , listing " labor wages for Lewis Velken . " The ledgers also

showed where the city reimbursed Stephanie Leon P . A . for wages. McAr t hur

then searched the Division of Corporations and discovered Leon ' s Realty

Empire company . Neither McArthur nor his supervisors looked into

Stephanie Leon P . A. McArthur believed that Realty Empire and Stephanie

Leon P . A . were one in the same business.

76. McArthur concluded his review without contacting Leon or Velken. He

was never provided the terms of the work arrangement. Also, he failed to

follow up with the Village and find out why the Village was paying Stephanie

Leon P . A . when the payment ledgers indicate the payments were for Velken ' s

services.

77. Dr. Joyce Morgan ( " Dr. Morgan " ), b ureau c hief for the Bureau of

Enrollment and Contributions for the Divisi on, was also provided the Velken

issue to evaluate. However, Dr. Morgan was not provided many details

regarding the nature of the employment relationship between the Village,

Velken, and Stephanie Leon P . A. Usually , when determining a DROP

participant ' s st atus , Dr. Morgan is provided an employment relationship

questionnaire to fully evaluate the circumstances of the DROP participant

and to decide the employment relationship. However, Dr. Morgan was not

provided the questionnaire while evaluating Velken.

78. Dr. Morgan was informed of little else than that Velken was serving as

Village police chief. Dr. Morgan utilized the documents provided for review and concluded that Velken was a compulsory employee in an established

position under the IRC § 3401 and , the refore , a n FRS employee.

79. After Velken was designated an employee, the Division concluded that

Velken committed a reemployment violation by working at the Village. As a

result of the violation, the Division rendered Velken ' s retirement null and

void, a dded the time he had been working for the V illage to his years of

service, and determined he had to repay retirement received because it was

like he never retired.

80. McArthur was instructed to call Velken and tell him of the Division ' s

decision. McArthu r called Velken to explain that the Division was suspending

his pension because Velken had violated terms of the DROP agreement.

81. On March 6, 2019, the Division issued an agency action letter voiding

Velken ' s FRS DROP retirement and retroactively establishing service credit

to July 1, 2013 . The letter also requested the repayment of $691,307.41.

H EARING

82. At hearing, Dr. Morgan credibly explained that when she was

assigned to review Velken to determine the e mployment relationship with

the Village , " there was very little to review. There was nothing that showed

that he was not an employee. Everything supported being an employee. "

83. Dr. Morgan testified that she reviewed all documents provided ,

including his Oath, global profile sheet that indicated his employer was the

Village, resolutions affirming appointment, and payment registry. She also

testified that her review of Velken ' s employment relationship did not include

any information about benefits, payroll, the agreement between Stephanie

Leon P . A . and the Village, or an ERQ - 1 employment questionnaire form.

84. Dr. Morgan also admitted , at hearing , that she did not do an

independent contractor review because no one asked for one or submitted any staffing do cuments.

85. Dr. Morgan summarized the process of her review and explained that

she was looking to see what position Velken was filling. Once she determined

he was a police chief , then she knew he was in an employee position under

federal law. She further explained tha t IRC § 3401(c) classifies public

officials , and Velken fell into that category because of his regularly

established position as police chief, which allowed him to administer or

enforce the public laws. Dr. Morgan testified that her determination was

made because Velken was a compulsory employee in a regularly established

position and , as such , also a mandatory FRS employee because he was a

public official.

C ONCLUSIONS OF L AW

86. DOAH has jurisdiction of the parties and subject matter of this

proceeding. §§ 120.569 and 120.57, Fla. Stat. (2019).

87. This proceeding is de novo. § 120.57(1)(k), Fla. Stat.

88. The burden of proof in an administrative proceeding is on the party

asserting the affirmative of the issue. Young v. State, Dep ' t of Cmty. Aff.,

567 So. 2d 2 (Fla. 3d DCA 1990); Balino v. Dep ' t of HRS , 348 So. 2d 349

(Fla. 1st DCA 1977). The Division , as the party asserting that Petitioner

violated the terms of the DROP agreement , has the burden of proof in this

proceeding.

89. Section 120.57(1)(j) , Florida Statutes, requires that evidence be

consi dered by the preponderance of the evidence standard. A preponderance

of the evidence is defined as " the greater weight of the evidence, " or evidence

that " more likely than not " tends to prove a certain outcome. Gross v. Lyons ,

763 So. 2d 276, 280 n.1 (Fla. 2000). Accordingly, as the party seeking

termination of Petitioner ' s DROP retirement, Respondent must demonstrate

that Petitioner violated the termination requirements.

90. The Division is the state agency responsible for administering the

FRS. See § § 12 1.025 and 121.031, Fla. Stat.

91. The Legislature set limitations on individuals who participate in

DROP. After termination of employment and before a participant can return

to employment with an FRS employer, there is a six months ' waiting period.

Termina tion is defined in section 121.021(39)(b)2 . and states , in pertinent

part:

(b) " Termination " for a member electing to

participate in the Deferred Retirement Option

Program occurs when the program participant ceases all employment relationships with

participating employers in accordance with

s. 121.091(13), however:

* * *

2. For terminat ion dates occurring on or after

July 1, 2010, if the member becomes employed by

any such employer within the next 6 calendar

months, termination will be deemed not to have occurred, except as provided in s. 121.091(13)(b)4.c.

A leave of absence constitutes a continuation of the

employment relationship.

92. Section 121.091(13)(c)5.d. provides that failure to meet the definition

of termination results in the DROP election becoming null and void, as

follows:

At the conclusion of the member ' s participation i n

DROP, the Division shall distribute the member ' s

total accumulated DROP benefits, subject to the

following:

* * *

d. A DROP participant who fails to terminate all employment relationships as provided in s. 121.021(39) shall be deemed as not retired, and

the DROP election is null and void. Florida

Retirement System membership shall be

reestablished retroactively to the date of the commencement of DROP, and each employer with whom the member continues employme nt must pay to the Florida Retirement System Trust Fund the

difference between the DROP contributions paid in

paragraph (i) and the contributions required for the applicable Florida Retirement System class of membership during the period the member

partici pated in DROP, plus 6.5 percent interest

compounded annually.

93. Rule 60S - 11.004 further details that a member who fails to meet the

termination requirement voids or cancels their retirement and DROP. The

rule mandates that the participant must repay all retirement benefits

received, including accumulated DROP benefits.

94. In this case, there is no dispute that Velken was aware of the

termination requirements.

95. However, there are exceptions to the termination requirements.

Respondent provides the ex ceptions to DROP participants in its FRS

Employer Handbook ( " Handbook " ). Specifically, C hapter 13 of the Handbook

is entitled " Reemployment After Retirement " and explains the limitations on

a retiree ' s reemployment with an FRS a gency and exceptions that al low a

participant to return to work.

96. The Handbook also explains what private employers a retiree can

work for and provides , in pertinent part:

No restrictions apply to post - retirement

employment in the private sector. When an

employee retires from the consolidated FRS, the

employee may work for any private employer

without affecting retirement benefits.

97. The Handbook also sets forth the same reemployment restriction as in

the DROP retirement forms and states , in pertinent part:

If a DROP participan t is reemployed after the

DROP termination date by a participating

employer before meeting the definition of

termination, as provided in section 121.091(39), the DROP participant will also void the retirement (including any period of DROP participation), f orfeit any DROP accumulation, and reestablish

active membership retroactive to the date of DROP commencement. The former DROP participant will be considered to have never retired.

98. The Handbook even has a section entitled " Exceptions to the

Reemployment Restriction in Subsection C. " This subsection notifies a retiree

that , in pertinent part:

Independent contractors are self - employed

individuals who are not eligible for membership in

the FRS. They are not subject to reemployment

limitations b ecause they are not employees of the

agency.

99. Respondent also publishes a guide entitled Ready.Set.Retire, which

provides retirees with the reemployment restrictions. In pertinent part, this

guide advises retirees that:

You may work for the following employers without

affecting your retirement benefit

A Private Employer

A Florida public employer not covered by the

FRS

Public employer in another state or covered by another state ' s retirement [.]

100. The Ready.Set.Retire guide also specifically states that " independent

contractors are not employees and are therefore not subject to termination

and reemployment limitations. "

101. The crux of the dispute in this case is Velken ' s employment

relationship while working for the Village. The Division contends Velken was

a n FRS employee at the Village. However, Petitioner maintains that he

worked for the Village in the exception category as an independent

contractor. Before a determination can be made as to whether Petitioner

violated the terms of the DROP agreement, Velken ' s employment

relationship must be determined.

102. Respondent ' s position is that Velken is a n FRS employee . Respondent

rests on the partial information received by the Division during the

investigation of the anonymous complaints. First, Respondent relies on

section 121.021(10) , which classifies the Village as an employer and provides ,

in pertinent part:

" Employer " means any agency, branch,

department, institution, university, institution of

higher education, or board of the state, or any county agency, br anch, department, board, district

school board, municipality, metropolitan planning

organization, or special district of the state which

participates in the system for the benefit of certain

of its employees, or a charter school or charter

technical career center that participates as

provided in s. 121.051(2)(d). Employers are not

agents of the department, the state board, or the Division of Retirement, and the department, the state board, and the division is not responsible for erroneous information provid ed by representatives

of employers.

103. Respondent also utilizes Dr. Morgan ' s evaluation of Velken under

IRC § 3401(c) to conclude that , as a police chief, Velken was a compulsory

employee of the Village in a regularly established position. Respondent re lies

on section 121.021(11) to support its position, which provides , in pertinent

part:

(11) " Officer or employee " means any person

receiving salary payments for work performed in a

regularly established position and, if employed by a municipality, a metr opolitan planning

organization, or a special district, employed in a covered group. The term does not apply to state employees covered by a leasing agreement under s. 110.191, other public employees covered by a

leasing agreement, or a coemployer relations hip.

104. Section 121.021(52) defines regularly established position and

provides , in relevant part:

" Regularly established position " means:

* * *

(b) With respect to a local agency employer (district

school board, county agency, Florida College System institution, municipality, metropolitan

planning organization, charter school, charter

technical career center, or special district), other

than a wat er management district operating

pursuant to chapter 373, a regularly established

position that will be in existence for a period

beyond 6 consecutive months, except as provided by

rule.

105. The undersigned is not persuaded by Respondent ' s position that

Velken is a compulsory member and FRS employee because he is in a

" regularly established position , " solely because he served as police chief or

interim city manager. Likewise, the Oath, resolutions, and Statement of

Financial Interests are not determinati ve of Velken ' s employment

relationship. In this cause, the greater weight of the evidence contravenes

Respondent's position and does not meet sections 121.021(11) or 121.021(52).

106. In paragraph 103 of Respondent ' s Proposed Recommended Order ,

Respondent also contends that Velken ' s circumstance s do not comply with the

independent contractor guidelines , and , therefore , Velken must be considered

a n FRS employee while at the Village.

107. " The standard for determining whether one is an independent

contractor is the degree of control exercised by the employer or owner over

the agent. More particularly, it is the [ extent ] of control, and not actual

control, which determines the relationship between the parties. " Nazworth v.

Swire Fla., Inc ., 486 So. 2d 637, 638 (Fla. 1st DCA 1986).

108. The Legislature defined independent contractor in section

121.021(50) as:

An individual who is not subject to the control and

direction of the employer for whom work is being

performed, with respect not only to what shall be

d one but to how it shall be done. If the employer

has the right to exert such control, an employee -

employer relationship exists, and, for purposes of

this chapter, the person is an employee and not an

independent contractor. The Division shall adopt rules p roviding criteria for determining whether an

individual is an employee or an independent

contractor.

109. Additionally, the Division ' s administrative rule provides the

framework to evaluate who is in control of the work performed and how the

work is done to make a determination whether an individual is an

independent contractor. Independent contractor factors are comprehensively

outlined in rule 60S - 6.001(33) and , in pertinent part , state:

(33) INDEPENDENT CONTRACTOR - - Means an

individual who is not subject to the control and

direction of the employer for whom work is being

performed, with respect not only to what shall be

done but also to how it shall be done. If the employer has the right to exert such control, an employee - employer relationship exists and the

person is an employee and not an independent

contractor. The Division has adopted the following

factors as guidelines to aid in determining whether

an individual is an employee or an independent contractor. The weight given each factor is not always th e same and varies depending on the

particular situation.

(a) INSTRUCTIONS: An employee must comply

with instructions from his or her employer about

when, where, and how to work. The instructions

may be oral or may be in the form of manuals or written procedures that show how the desired

result is to be accomplished. Even if no actual instructions are given, the control factor is present

if the employer has the right to give instructions.

(b) TRAINING: An employee is trained to perform services in a pa rticular manner. This is relevant

when the skills and experience which would be

used as an independent contractor were gained as a

result of previous employment. Independent contractors ordinarily use their own methods and

receive no training from the p urchasers of their

services.

(c) INTEGRATION: An employee ' s services are

integrated into the business operations because the

services are critical and essential to the success or continuation of an agency ' s progress/operation.

This shows that the employee is subject to direction

and control.

(d) SERVICES RENDERED PERSONALLY: An

employee renders services personally. This shows

that the employer is interested in the methods as

well as the results. Lack of employer control may be indicated when a person has the right to hire a substitute without the employer ' s knowledge or

approval.

(e) HIRING ASSISTANTS: An employee works for an employer who hires, supervises, and pays assistants. An independent contractor hires,

supervises, and pays assistants under a contract

that requires him or her to provide materials and labor and to be responsible only for the result.

(f) CONTINUING RELATIONSHIP: An employee

has a continuing relationship with an employer. A

continuing relationship may exist where work is performe d at frequently recurring, although

irregular intervals.

(g) SET HOURS OF WORK: An employee usually

has set hours of work established by an employer. An independent contractor is the master of his or her own time and works on his or her own

schedule.

(h) FULL - TIME OR PART - TIME WORK: An

employee may work either full - time or part - time for

an employer. Full - time does not necessarily mean

an 8 - hour day or a 5 or 6 - day week. Its meanings

may vary with the intent of the parties, the nature of the occupation and customs in the locality. These

conditions should be considered in defining " full -

time. " An independent contractor can work when

and for whom he or she chooses.

(i) WORK DONE ON PREMISES: An employee

works on the premises of an employer, or works on

a rou te or at a location designated by an employer.

The performance of work on the employer ' s

premises is not controlling in itself; however, it

does imply that the employer has control over the

employee. Work performed off the employer ' s

premises does indicate some freedom from control;

however, it does not in itself mean the worker is not

an employee.

(j) ORDER OR SEQUENCE OF SERVICES: An employee generally performs services in the order or sequence set by an employer. This shows that

the employee is subject to direction and control of

the employer.

(k) REPORTS: An employee submits oral or written

reports to an employer. This shows that the

employee must account to the employer for his or her actions.

(l) PAYMENTS: An employee is usually paid by the

hour, we ek, or month. An independent contractor is

paid periodically (usually a percent of the total

payment) by the job or on a straight commission.

(m) EXPENSES: An employee ' s business and/or

travel expenses are paid by an employer. This shows that the employer is in a position to control

expenses and therefore the employee is subject to regulations and control.

(n) TOOLS AND MATERIALS: An employee is furnished significant tools, materials, and other equipment by an employer. An independent contractor usually p rovides his or her own tools,

materials, etc.

(o) INVESTMENT: An employee is usually furnished the necessary facilities. An independent

contractor has a significant investment in the

facilities he or she uses in performing services for someone else.

(p) PROFIT OR LOSS: An employee performs the

services for an agreed upon wage and is not in a

position to realize a profit or suffer a loss as a

result of his or her services. An independent

contractor can make a profit or suffer loss. Profit or

loss implies t he use of capital by the individual in

an independent business of his or her own.

(q) WORKS FOR MORE THAN ONE PERSON OR

FIRM: An employee usually works for one organization. However, a person may work for a number of people or organizations and still be a n

employee of one or all of them. An independent

contractor provides his or her services to two or

more unrelated persons or firms at the same time.

(r) OFFERS SERVICES TO GENERAL PUBLIC:

An independent contractor makes his or her

services available to th e general public. This can be

done in a number of ways: Having his/her own

office and assistants, hanging out a " shingle " ,

holding business licenses, having listings in

business directories and telephone directories, and

advertising in newspapers, trade jo urnals, etc.

(s) RIGHT TO TERMINATE EMPLOYMENT: An employee can be fired by an employer. An

independent contractor cannot be fired so long as

he or she produces a result that meets the specifications of the contract. An independent contractor can be termi nated but usually he or she

will be entitled to damages for expenses incurred, lost profit, etc.

(t) RIGHT TO QUIT: An employee can quit his or her job at any time without incurring liability. An

independent contractor usually agrees to complete

a specific job and is responsible for its satisfactory

completion, or is legally obligated to make good for failure to complete it.

110. Applying the independent contractor factors from rule 60S - 6.001(33)

to this case establishes that the Village was not in control as an employer ,

and Velken is an independent contractor , contracted through a third - party

agency. Specifically, the evidence shows the Village did not provide

instructions to Stephanie Leon P . A . or Velken as to when, where , or how to

provide the co ntracted services. The Village did not provide training to

Stephanie Leon P . A . or Velken. Additionally, Stephanie Leon P . A . and

Velken were permitted to hire assistants if they felt it was needed. Any such

hires would have been at Stephanie Leon P . A . ' s exp ense , not the Village.

Also, neither Stephanie Leon P . A . nor Velken had set work hours. Velken

w as free to perform the services when he wanted based on hi s own schedule.

Even so, both Stephanie Leon P . A . and Velken also performed services

outside of the co ntract with the Village. The evidence shows that all of

Velken ' s time was not devoted to the Village. The record further

demonstrates that Velken was provided an office like other Village contract

employees. However, t he re was no require ment that the offic e be utilized.

Velken also maintained an office at Stephanie Leon P . A . and at his home. To

this end, Velken continued to work for Stephanie Leon P . A . while working for

the Village. Also, Velken did not have to obtain permission to perform

services outside the Village premises or seek permission to not be at the

location. The record confirms neither Stephanie Leon P . A . nor Velken had a

set sequence to perform services. Instead, the services could be completed

however and whenever. Likewise, no reporting requ irements existed as part

of the services provided by V elken. Furthermore, Velken was paid by

Stephanie Leon P . A ., and only received a percentage of the total payment .

Stephanie Leon P .A. received the payments invoiced to the Village. The

evidence establishes that Velken ' s percentage was approximately 32 percent

of the monies Stephanie Leon P . A . received from the Village. Also, no taxes or

Social Security was taken out of Velken ' s checks , a nd he received a 1099 tax

form from Leon. Similarly, neither Leon nor Velken received any benefits

from the Village or were paid business or travel expenses from the Village.

However, Velken did receive one short - term parking expense of $12.00 for

parking when meeting with the Village manager, which he did not cash. Even

though the Village supplied standard police equipment to Velken, rarely, if

ever, did he use it because his role as police chief was an administrative

position. He only wore his uniform at the most twice and dressed daily in

street clothes or a shirt and tie, which he purchased, putting himself out to

the public as a regular citizen , not police chief. Velken did use the Village cell

phone to avoid public records issues that might have occurr ed had he used his personal cell phone. Stephanie Leon P . A . and Velken worked for more

than one organization while working for the Village because Stephanie Leon

P . A . ' s business never stopped operating , and Velken was working there

simultaneously. Besides, Leon had just started the temporary staffing

business with Velken being her first placement. She continued to attempt to

place Velken after the Village contract ended. While Velken was contracted

with the Village, he continued to make his services availab le to others as

demonstrated by his active pursuit of employment in California. Moreover,

the agreement between the Village and Stephanie Leon P . A . provided that

each party could terminate the agreement.

111. In sum, the credible evidence above demonstrate s that Velken had

greater control than the Village over the way he carried out his work. The

evidence shows that he was not subject to the control and direction of the

Village and meets the following independent contractor factors in rule 60S - 6.001(33)(a) , (b) , (e) , (g) , (h) , , (i) (k) , (l) , (m) , (n) , (q ) , (r) , and (s). Therefore,

under the Division's rule, Velken is an independent contractor of the Village contracted through a third party, Stephanie Leon P . A.

112. In light of the foregoing, the Division has not met its burden because

the record does not establish Velken was an FRS employee with the Village.

Instead, the greater weight of the evidence demonstrates Velken wa s an

independent contractor pursuant to sect ion 121.021(50) and rule 60S -

6.001(33). The Division allows one to work as an independent contract or

because it does not violate the six - month restictions, as outline d in the

Division ' s Handbook and Ready.Set.Retire. Accordingly, Velken , as an

independent contractor working for a private employer , did not violate the

terms of the DROP agreement and should maintain his pension.

R ECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

R ECOMMENDED that the Department of Management Services, Division of

Retirement, enter a final order dismissing its request for reimbursement of

past FRS benefits , reinstat ing Petitioner ' s monthly retirement benefits, and

paying any and all past due amounts to Petitioner, with interest.

D ONE A ND E NTE RED this 2 8 th day of February , 2020 , in Tallahassee, Leon

County, Florida.

J UNE C. M CKINNEY

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 2 8 th day of February , 2020 .

C OPIES F URNISHED :

H. B. Stivers, Esquire

Levine & Stivers, LLC

245 East Virginia Street

Tallahassee, Florida 32301

(eServed)

William R. Tunkey, Esquire

William Tunkey, P.A.

Four th Floor

2250 Southwest Thir d Avenue

Miami, Florida 33129

(eServed)

Thomas E. Wright, Esquire

Office of the General Counsel

Department of Management Services

4050 Esplanade Way , Suite 160

Tallahassee, Florida 32399

(eServed)

Nikita S. Parker, Esquire

Office of the General Counsel

Department of Mangement Services

4050 Esplanade Way , Suite 160

Tallahassee, Florida 32399

(eServed)

Mark S. Levine, Esquire

Levine & Stivers, LLC

245 East Virginia Street

Tallahassee, Florida 32301

(eServed)

Ronald G. Stowers, Esquire

Levine & Stivers, LLC

245 East Virginia Street

Tallahassee, Florida 32301

(eServed)

David DiSalvo, Director

Division of Retirement

Department of Mangement Services

Post Office Box 9000

Tallahassee, Florida 32315 - 9000

(eServed)

Sean Gellis, General Counsel

Office of the General Counsel

Department of Mangement Services

4050 Esplanade Way, S uite 160

Tallahassee, Florida 32399 - 0950

(eServed)

N OTICE OF R IGHT T O S UBMIT E XCEPTIONS

All parties have the right to submit written exceptions within 15 days from

the date of this Recommended Order. Any exceptions to this Recommended

Order should be filed with the agency that will issue the Final Order in this case.