93-001886 James C. Breen vs. Department Of Banking And Finance Status: Closed Recommended Order on Monday, February 28, 1994.

Summary: Sec. of State employee in excluded position could not pay back overtime mis- payment w/annual leave hrs. w/o Banking & Finance's prior approval; cites.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JAMES C. BREEN, )

)

Petitioner, )

)

vs. ) CASE NO. 93-1886

)

DEPARTMENT OF BANKING AND FINANCE, )

)

Respondent. )

____________________________________)

RECOMMENDED ORDER

Upon due notice, this cause came on for formal hearing on October 19, 1993

in Tallahassee, Florida, before Ella Jane P. Davis, a duly assigned hearing

officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Douglas D. Sunshine, Esquire

Department of State

LL 10 The Capitol

Tallahassee, Florida 3399-0250

For Respondent: Scott C. Wright, Esquire

Office of the Comptroller

Department of Banking and Finance

The Capitol, Suite 1302

Tallahassee, Florida 32399-0350

STATEMENT OF THE ISSUE

Whether or not Petitioner is indebted to the State of Florida in the amount

of $897.01 arising out of his receipt of overtime pay while in an "excluded

position" with the Department of State.

PRELIMINARY STATEMENT

By letter dated March 10, 1993, the Department of Banking and Finance

notified Petitioner that he owed the State of Florida $897.01.

Petitioner filed a timely request for formal hearing, and the matter was

forwarded to the Division of Administrative Hearings for assignment of a hearing

officer and the scheduling of the formal hearing.

At formal hearing, Petitioner testified on his own behalf and presented the

oral testimony of Diana Maus, Chief, Bureau of Personnel Services, Division of

Administrative Services, Department of State; Dot Joyce, Director, Division of

Elections, Department of State; and Charlene Wilson, Personnel Services

Specialist, Benefits, Division of Administrative Services, Department of State.

Respondent, Department of Banking and Finance, presented the oral testimony

of Robert Henley, Labor Relations Specialist, Department of Management Services;

and William J. Schmitt, Chief, Bureau of State Payrolls, Department of Banking

and Finance.

The parties' joint Prehearing Stipulation executed on September 29, 1993

was admitted as Hearing Officer's Exhibit A.

The parties also stipulated to the admission in evidence of Joint Exhibits

A, B, C, D, E, F, and G.

A transcript was filed in due course, and all timely-filed proposed

findings of fact have been ruled upon in the appendix to this recommended order

pursuant to Section 120.59(2) F.S.

FINDINGS OF FACT

1. Petitioner is currently an employee of the State of Florida, Department

of State ("State"). He has been continuously employed by "State" from March

1991 to date.

2. Petitioner has consistently received his regular salary, annual leave,

sick leave, special holidays, and retirement contributions as part of his

employment package as a state government employee.

3. Petitioner was employed by the Division of Elections of "State" as an

Administrative Assistant II until April 1, 1991, at which time, he was promoted

to an Administrative Assistant III.

4. Petitioner went from an "included position" to an "excluded position"

upon his promotion on April 1, 1991.

5. Employees filling "included positions" may receive overtime

compensation.

6. Employees filling "excluded positions" may only receive compensatory

leave on an hour-for-hour basis for those hours worked in excess of 40 hours per

week. "Compensatory leave" may be withdrawn from an employee's leave

accumulation amount and utilized in the same way as annual leave for the

employee's rest and relaxation or other personal purposes.

7. Prior to Petitioner's promotion, "State's" Division of Elections had

never had an employee move from an Administrative II, included position, to an

Administrative III, excluded position. Neither "State's" administrative

personnel nor Petitioner had any prior knowledge that upon his promotion

Petitioner would/was no longer entitled to be paid money for the overtime he

worked in the new position.

8. "State's" March 27, 1991 appointment letter to Petitioner advising him

of his promotion did not advise him that the promotion had the effect of moving

him from an included to an excluded position for purposes of overtime pay.

9. The April 10, 1991 Report of Personnel Action regarding Petitioner's

promotion incorrectly indicated that he had moved from an Administrative II,

"excluded," to an Administrative III, "excluded" position.

10. The Department of Management Services (Management Services) is solely

responsible for the designation of whether an employee is in an included or

excluded position as it relates to a Report of Personnel Action. That agency's

personnel were unable to explain why the April 10, 1991 Report of Personnel

Action was incorrect.

11. Due to the erroneous Report of Personnel Action, neither "State" nor

Petitioner were on actual notice that Petitioner had moved from an included to

an excluded position for purposes of overtime pay and that he was no longer

entitled to be paid money for the overtime he worked in the excluded promotional

position of Administrative Assistant III. However, all concerned had

constructive notice by prior documents and designations that the Administrative

Assistant II position was an "included" position. No agency deliberately misled

the Petitioner concerning his promotion, and there is no evidence that he would

have refused the promotion had he known of the change of status from "included"

to "excluded."

12. Petitioner's "State" supervisor who had authorized his April 1, 1991

promotion was without actual knowledge at the time of Petitioner's promotion

that Petitioner had moved from an included to an excluded position for purposes

of receiving overtime pay and did not advise him of his ineligibility for

overtime pay after his promotion.

13. Petitioner was paid $897.01 in overtime payments for overtime worked

during April through July 1991, while in an excluded position, despite not being

entitled to overtime pay after May 31, 1991 for hours worked in excess of 40

hours per week. (The May 31, 1991 date was stipulated by the parties, see

appendix.)

14. Petitioner's "State" supervisor erroneously authorized the overtime

payments Petitioner received while in his excluded promotional position.

15. The Respondent, Department of Banking and Finance's (Banking and

Finance's) payroll system that is designed to detect errors such as occurred

here upon receipt of an employee's authorized request for pay did not detect

this error because the system was not on-line during the four months Petitioner

worked and submitted authorized requests for overtime pay in the excluded

promotional position.

16. The fact that Petitioner had received overtime pay while in an

excluded position was neither discovered nor conveyed to him until six months

after his April 1, 1991 promotion.

17. Banking and Finance initiated an investigation concerning the overtime

payments received by Petitioner while in an excluded position after receiving an

anonymous complaint on October 28, 1991. In a March 10, 1993 letter, Banking

and Finance asserted that the overtime payments Petitioner received while in an

excluded position constituted a monetary debt to the State of Florida which

Petitioner must repay in money.

18. Petitioner spent the $897.01 to pay bills associated with the vacation

he had taken prior to his promotion.

19. Petitioner would have been able to repay the overpayment in cash had

the error been discovered after the first or second erroneous monthly overtime

payments, but he was not able to repay that large an amount in cash after the

third request was submitted.

20. Petitioner's request for authorization for overtime pay after his

promotion was not submitted fraudulently or mendaciously, but was submitted

because neither Petitioner nor anyone in his agency ("State") understood that he

was not legally entitled to overtime pay.

21. After determining that Petitioner had received overpayments, "State"

took steps to recoup the overpayments. "State" sought to work with Petitioner

to alleviate this problem for which its personnel felt partially responsible.

In fact, "State" permitted him to utilize one of its agency attorneys for

purposes of the instant formal proceeding.

22. Petitioner and "State", without consulting Banking and Finance,

entered into a negotiated agreement by which Petitioner would remit the $897.01

in overpayments in the form of 78 annual leave hours, and on December 31, 1991,

78 hours were deducted from Petitioner's accrued annual leave balance.

23. In calculating the repayment of the deducted 78 annual leave hours

from Petitioner's annual leave balance, "State" multiplied his rate of pay at

that time, with the number of annual leave hours necessary to equal the amount

of the overpayments, equaling $897.01. Neither Petitioner nor any agency

received a cash payment from the deduction of the 78 annual leave hours.

"State" merely deducted the hours from Petitioner's annual leave balance.

24. "State" represented to Petitioner that the deduction of an amount of

annual leave hours equivalent to the overpayments would satisfy his debt to the

State of Florida. However, "State" neither requested nor received written

permission from the Department of Banking and Finance to enter into an agreement

by which "State" could accept a non-monetary "repayment" from Petitioner.

25. Charlene Wilson, Personnel Services Specialist, Benefits Division of

Administrative Services, Department of State, testified that accrued paid leave

is a dollar-for-dollar payment since each hour of annual leave represents an

hour of active employment and, therefore, are equal. William J. Schmitt, Chief,

Bureau of Payrolls, Department of Banking and Finance, testified that an

employee is paid for annual leave when authorized by an agency. However, these

isolated pieces of evidence are not controlling.

26. Further testimony was provided as to the historical application of the

rules of the Department of Banking and Finance and the Department of Management

Services. Robert W. Henley, Labor Specialist for Management Services, and

William J. Schmitt each testified to the historical application and

interpretation of their respective agency rules. Each testified that, as their

agencies had interpreted and applied their own rules to date, employees who are

continually employed by the State of Florida may not use annual leave to repay a

debt in the manner Petitioner and the Department of State chose.

27. Prior to the December 31, 1991 deduction of the annual leave hours,

Petitioner had "banked" 109.097 annual leave hours. After the deduction of 78

hours to satisfy his agreement with "State," he had only 31.097 hours remaining.

It took Petitioner 12 months to build his annual leave balance back to where it

was prior to the December 31, 1991 deduction.

28. During the 1991 year, but prior to the deduction of the 78 annual

leave hours, Petitioner had taken a vacation to Innsbruck, Austria utilizing his

annual leave accrued to that point in time and being paid his regular salary

while he was on vacation. Petitioner did not take a vacation in 1992, the year

following the deduction of the 78 annual leave hours, because of the lack of

sufficient accrued annual leave hours left in his balance to take the length of

vacation he wanted to take. In 1992 there were still low air-fare prices for

trips abroad.

29. In 1991, Petitioner utilized 80 annual leave hours while receiving

regular pay.

30. In 1992, Petitioner utilized 18.25 annual leave hours while receiving

regular pay.

CONCLUSIONS OF LAW

31. The Division of Administrative Hearings has jurisdiction over the

parties and subject matter of this cause pursuant to Section 120.57(1), F.S.

32. At formal hearing, Petitioner agreed to go forward with the

presentment of evidence, however it is clear that regardless of how the parties

elected to proceed, the Respondent Department of Banking and Finance may not

collect the alleged overpayment unless it has been proven to be an overpayment

and due, in exact amount, from Petitioner to the State of Florida.

33. Rule 3A-31.309(1)(e) F.A.C., provides:

In accordance with s. 17.04, F.S. only the

Department of Banking and Finance shall

establish the amount of the refund due the

State and the manner of its recovery. No

other department may enter into any agreement

by which the overpaid individual refunds to the

State a sum less than the exact amount due unless

that department has received written permission

from the Department of Banking and Finance.

(Emphasis supplied)

34. The Petitioner entered into an agreement with his employer, the

Department of State, whereby 78 annual leave hours were deducted from his

accrued balance, but that agreement was entered into without written permission

from the Department of Banking and Finance. The Department of State neither

requested nor received written permission from the Department of Banking and

Finance to enter into an agreement by which the Department of State could accept

a non-monetary "repayment" from Petitioner.

35. The Department of State is responsible for making a diligent effort to

recover the exact total amount of the overpayment to Petitioner. See, Rule

31.309(1)(b) F.A.C. However, pursuant to Rule 3A-31.309(1)(e), F.A.C., the

Department of State may not enter into an agreement by which an employee repays

less than the exact amount due as determined by the Department of Banking and

Finance or makes no cognizable repayment without written permission from the

Department of Banking and Finance.

36. Rule 3A-31.309(1)(f), F.A.C. is also applicable to this case. It

provides, in relevant part:

The exact amount of a refund may be a gross

amount, net amount, or some combination of

employer expense and employee salary . . . .

However, Petitioner's assertion that the providing of paid annual leave to an

employee for purposes of vacation or simply time away from the office is an

employer expense so that the Department of State may unilaterally quantify the

value of annual leave hours and compute them into a money bank account of some

kind is an erroneous and tortured interpretation that flies in the face of other

existing rules and of the standard operating procedures of the several agencies.

37. An agency's interpretation of its own rules is entitled to great

weight. See, Woodley v. Department of Health and Rehabilitative Services, 505

So. 2d 676 (Fla. 1st DCA 1987). The same is true of statutory construction by

an agency. An administrative construction of a statute by an agency responsible

for its administration is entitled to great weight and should not be overturned

unless clearly erroneous. See, e.g., Shell Harbor Group, Inc. v. Department of

Business Regulation, 487 So. 2d 1141, 1142 (1 DCA Fla. 1986). Even so, the

statutory construction must be a permissible one and not "any conceivable

construction of a statute . . . irrespective of how strained or ingeniously

reliant on implied authority it might be". See, State of Florida, Board of

Optometry, et al v. Florida Society of Ophthalmology, 538 So 2d 878 (Fla. 1st

DCA 1988). Herein, the construction of the statute and rules which was

advanced by the Respondent Department of Banking and Finance and by the

Department of Management Services is reasonable. While this interpretation may

not be the only one that could be made or the most desirable, it is a

straightforward, permissible construction, and not "clearly erroneous." "State"

is not charged with the ultimate administration of these rules. "State"

personnel who testified clearly are not knowledgeable in these areas. The

credible competent testimony and a clear reading of the rules establishes that

leave may be traded for leave, but leave may not be traded for money except

subsequent to termination.

38. The permissible methods of repaying a salary overpayment are described

in Rule 3A-31.309(1)(i), F.A.C. The "agreement" between Petitioner and his

employing agency by which annual leave hours were deducted from Petitioner's

balance is not an authorized repayment of the employee's debt. Put another way,

any purported repayment in annual leave hours is less than the exact amount due

because no authority has been provided for this use of annual leave. Thus,

while clearly well-intentioned, the Department of State lacked authority to

enter into the "agreement" without the Department of Banking and Finance's

written permission.

39. Pursuant to Rule 60K-5.010(1)(g) and (2)(a) [formerly 22A-8.010(1)(g)

and (2)(a)], F.A.C., annual leave may be used only for leave purposes (i.e.,

rest and relaxation). No authority has been cited permitting Petitioner to use

annual leave to repay a money debt to the state.

40. Pursuant to Rule 60K-5.010(4)(a) F.A.C., the only circumstance under

which Petitioner can receive an "annual leave payment" is upon terminal

separation from state government employment. Because Petitioner never

terminated state government employment, the Department of State lacked authority

to enter into an "agreement" under which Petitioner was directly or indirectly

paid money value for any accrued annual leave.

41. The payments to Petitioner were also prohibited by Rule 3A-31.219(2)

F.A.C. which requires that requests for "annual leave payment" be submitted

after the employee's last day of actual work, that is, after termination from

state government employment. Accordingly, since Petitioner did not terminate

state government employment during the relevant period, the Department of State

had no authority to convert Petitioner's annual leave hours into cash money by

direct or indirect means.

42. Section 17.04 F.S. gives the Department of Banking and Finance the

sole authority to audit and adjust money accounts. Rule 3A-31.309(1)(e) F.A.C.

sets out how that is to be done. The lack of authority in the Department of

State for the purported settlement means that there is no lawful basis for

Petitioner to allege that he has made repayment for his salary overpayment.

43. Petitioner's reliance on New v. Department of Banking and Finance, 554

So. 2d 1203 (Fla. 1st DCA 1989), is appropriate to the degree it establishes

that the Division of Administrative Hearings is the correct forum to resolve

this issue and that in order to be heard, the Department of Banking and Finance

must be a full party to the proceedings in this forum. See, also, Department of

Corrections v. Career Service Commission 429 So. 2d 1244 (Fla. 1st DCA 1983).

However, nothing in New supports Petitioner's assertion that repayment of a cash

amount can be made in annual leave hours pursuant to a settlement agreement

unauthorized by the appropriate agency, the Department of Banking and Finance.

New involved a repayment of cash in the exact amount owed and whether or not the

employing agency's funds could be utilized in the settlement.

44. Petitioner also cited Green v. Galvin, 114 So. 2d 187 (Fla. 1st DCA

1959), which addresses conversion of annual leave to money for estate purposes

after termination of state government employment by the employee's death. Green

does not provide authority for the innovative use of trading annual leave for

cash as we have seen it used here during this Petitioner's continued state

government employment. Green also does not expand the definition of

"compensation" as that term is used in the current Department of Banking and

Finance rules.

45. Petitioner has made a case that shows the Department of State notified

Petitioner in writing of the error and how it occurred, made arrangements with

the employee with the intent of reclaiming the overpayment, and effectuated a

payroll change to correct the employee's salary to the correct amount for future

pay periods. In so doing, "State" had to coordinate with the Department of

Management Services. To properly recoup the overpayment from the employee, the

Department of State was also required to coordinate with the Department of

Banking and Finance. It did not. The result is that the Department of Banking

and Finance may recover the cash payments.

46. This is an innocent and unintended error by the Department of State,

but it is not an estoppel situation as applies to the Department of Banking and

Finance. The three elements necessary for an estoppel have not been adequately

demonstrated, and the State of Florida is not estopped by conduct resulting from

a mistake of law. Estoppel does not arise against the state by the unauthorized

acts or representations of its officers. See, Kuge v. Department of

Administration, 449 So. 2d 389 (Fla. 3d DCA 1984); Salz v. Department of

Administration, 432 So. 2d 1376 (Fla. 3d DCA 1983); Greenhut Construction Co. v.

Henry A. Knott, Inc. 247 So. 2d 517 (Fla. 1st DCA 1971). Moreover, in Warren v.

Department of Administration, 554 So. 2d 568 (Fla. 5th DCA 1990), the test of

imposing estoppel against the state was held to be higher than for other legal

persons. In order to apply estoppel against the state, "rare and exceptional

circumstances" must be shown. The Petitioner's desire to take a 1992 vacation

and his speculative ability to do so do not qualify. Petitioner used some leave

in 1992 without going on vacation. This also depleted his annual leave balance.

If he had repaid the overpayment in cash, there is no guarantee he would have

been financially able to take advantage of 1992's low airfares. The Department

of State's apparent authority to make the representations it did in this

instance is also not as clearly apparent as in the situation related in Warren.

47. An appropriate and fair resolution of this cause would be the entry of

a final order requiring Petitioner to repay $897.01 to the Department of Banking

and Finance in reasonable increments and further requiring the Department of

State and Department of Management Services to coordinate whatever procedures

are necessary to reinstate Petitioner's 78 annual leave hours and appropriately

recompute his accrued compensatory leave hours earned after his promotional

date, but the latter two agencies technically are not parties to this action.

Therefore, this paragraph and any final order can be only advisory as to them.

RECOMMENDATION

Upon the foregoing findings of fact and conclusions of law, it is

recommended that the Department of Banking and Finance enter a final order

providing as follows:

(1) That Petitioner is indebted for salary overpayments to the Department

of Banking and Finance for the amount of $897.01;

(2) That Petitioner shall repay the aforesaid amount within one year from

date of this order in payment amounts of not less than $100.00 each or the total

remaining balance of the debt in any single payment and that failure of

Petitioner to repay the full amount in the year provided shall result in the

Department of Banking and Finance debiting his salary for the unpaid balance at

the end of the year's grace period, and

(3) That once full payment is completed, the Department of Banking and

Finance shall coordinate, to the degree possible, with all other agencies the

restoration of 78 hours annual leave to Petitioner's annual leave account

balance and the crediting of Petitioner with the appropriate compensatory leave

hours earned after his promotional date.

RECOMMENDED this 28th day of February, 1994, at Tallahassee, Florida.

___________________________________

ELLA JANE P. DAVIS, Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 28th day of February, 1994.

APPENDIX TO RECOMMENDED ORDER 93-1886

The following constitute specific rulings, pursuant to S120.59(2), F.S.,

upon the parties' respective proposed findings of fact (PFOF).

Petitioner's PFOF:

1-5 Accepted in substance, but not adopted verbatim.

7-11 Accepted in substance, but not adopted verbatim.

6,12 Rejected as stated due to the legal words of art employed. See

FOF 2 and 11 which more accurately conform to the record as a whole.

13-32 Not adopted verbatim. Accepted in substance except for

unnecessary, subordinate or cumulative material. It is noted that PFOF 21 and

22 seem to be contradictory but were in fact stipulated as fact by the parties.

Although a date of March 31 makes better sense, the hearing officer assumes that

the parties' use of the May 31 date accounts for pre-earned payments of overtime

delayed into a following pay period. This is not a dispositive issue and the

parties' stipulation has been honored in FOF 13.

33-34 Rejected because these proposals are misleading as stated and are

not dispositive. Covered in FOF 25-26.

35-36 Not adopted verbatim. Accepted in substance except for

unnecessary, subordinate, or cumulative material.

37 Rejected as stated because it contains words of art and represents a

proposed conclusion of law. See Conclusions of Law.

38 Covered only as necessary in FOF 21-23. Otherwise rejected as a

proposed conclusion of law or as cumulative to the facts as found.

39-40 Rejected as conclusions of law or legal argument and as

unnecessary and non-dispositive. See FOF 21-23 and Conclusions of Law.

41-49 The interspersed conclusions of law, including but not limited to

the "payment" of leave hours, are rejected as such. The interspersed and

footnoted legal arguments also are rejected. See FOF 28-30 Conclusions of Law.

Otherwise, the proposals are accepted in substance but not adopted verbatim to

avoid subordinate, cumulative and verbose material.

50 Accepted.

Respondent's PFOF:

1-2 Accepted, but some unnecessary, subordinate and cumulative material

has been excised.

COPIES FURNISHED:

Douglas D. Sunshine, Esquire

Department of State

The Capitol, LL-10

Tallahassee, FL 32399-0250

Scott C. Wright, Esquire

Office of the Comptroller

The Capitol, Suite 1302

Tallahassee, FL 32399-0350

Honorable Gerald Lewis, Comptroller

Department of Banking and Finance

The Capitol, Plaza Level

Tallahassee, FL 32399-0350

William G. Reeves

Department of Banking and Finance

The Capitol, Room 1302

Tallahassee, FL 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended

Order. All agencies allow each party at least 10 days in which to submit

written exceptions. Some agencies allow a larger period within which to submit

written exceptions. You should contact the agency that will issue the final

order in this case concerning agency rules on the deadline for filing exceptions

to this Recommended Order. Any exceptions to this Recommended Order should be

filed with the agency that will issue the final order in this case.