Back Pay and Creditable Service Natacha Thomas, Esq. Associate General Counsel Boston Retirement System

MACRS Fall Conference 2019 Back Pay and Creditable Service A member’s rights vest in a superannuation pension if he has rendered services for a certain number of years as a public employee. Creditable Service Based on the duration of a member’s employment in public service. “Creditable service in the case of any member shall include any period of his continuous absence with full regular compensation….”M.G.L. c. 32, § 4(1)(a). Regular Compensation G.L. c. 32, § 1 Courts have defined “Regular Compensation” as the wages, salary or other forms of compensation that have been paid to an employee for his services. Bulger v. Contributory Retirement Appeal Bd., 447 Mass. 651 (2006). This does not include overtime, bonus, severance pay, early retirement incentives or unused sick time.

If an employee is terminated, but later reinstated, is he entitled to creditable service? First ask does the reward include reinstatement with back pay for a specific time period? Capogreco v. Boston Retirement Board, (D.A.L.A dec. April 6, 2018.) Facts: Employee terminated from employment. Employee, through union, grieved the termination on the basis that the employer lacked “just cause” to terminate him. A neutral arbitrator ruled to reinstate the employee back to his former position. The ruling did not include an award for back pay.

What happens when an employee is terminated, but later receives back pay for the time he was out of work? Back pay is generally awarded when: A judgment is entered by a court, or an arbitrator, in a wrongful termination case, or A member reaches a settlement agreement with his employer, and the settlement agreement includes an award of back pay.

Judgment for Back Pay A judgment entered by a court in a wrongful termination case may include back pay. This also includes restoring an employee’s right to “seniority, tenure, or retirement.” Ballotte v. City of Worcester, 51 Mass. App. Ct. 728, 734-735 (2001). Retirement law allows for the incorporation of proportional creditable service for wrongful termination. The concept being, had the employee not been wrongfully terminated he would have received “regular compensation.” Therefore, he receives the pay and benefits as if he had been continuously employed.

Settlement Agreement for Back Pay If the purpose of the settlement agreement is to make the employee whole the retirement system may treat the employee as if he were employed regularly and earning creditable service. Settlement Agreement is different from a judgment! It’s a contract to resolve a dispute. The parties rights and duties have not been adjudicated by the court of law!

Settlement Agreement for Back Pay The retirement system is not bound by the settlement agreement if it is not a party to the agreement (e.g., the contract is only between the employer and the employee). An agreement that goes beyond what the employee would be entitled to under G.L. c. 32 is illegitimate and therefore unenforceable as it relates to the retirement system.

PERAC Memo# 28-2001 In 2001, PERAC issued a memo to provide a guideline in determining whether a court ordered settlement represents regular compensation and constitutes a period of creditable service. Determine the exact period that the back pay award covers. Determine the amount of regular compensation that the member would have received had he or she not been improperly terminated or had he or she been restored to service. Determine the amount of earnings that the member had during the period of the back pay award.

PERAC Memo#28-2001 cont. If the member received retirement allowance of any sort during the period of back pay award, the member must repay that allowance to the retirement system. Retirement contributions would be paid to the retirement system on the full amount of regular compensation that the member would have received at the appropriate contribution rate.

Tips Do not rely on the employer, or the employee, to interpret whether the settlement agreement is pensionable or not. Create a legal process review of settlement agreements, court orders, and arbitration decisions.

Questions?