Title: O'Leary v. Contributory Retirement Appeal Board

State: massachusetts

Issuer: Massachusetts Supreme Court

Document:

NOTICE:  All slip opinions and orders are subject to formal 
revision and are superseded by the advance sheets and bound 
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error or other formal error, please notify the Reporter of 
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SJC-13229 
 
JOSEPH O'LEARY  vs.  CONTRIBUTORY RETIREMENT APPEAL BOARD 
& others.1 
 
 
 
Suffolk.     April 6, 2022. – August 11, 2022. 
 
Present:  Budd, C.J., Gaziano, Lowy, Cypher, Kafker, Wendlandt, 
& Georges, JJ. 
 
 
Retirement.  Police, Retirement, Vacation, Compensation.  
Municipal Corporations, Police, Vacations.  Public 
Employment, Retirement, Vacation pay.  Statute, 
Construction.  Public Employee Retirement Administration 
Commission.  Retroactivity of Judicial Holding.  Words, 
"Regular compensation." 
 
 
 
Civil actions commenced in the Superior Court Department on 
August 22 and 24, 2018. 
 
After consolidation, the case wase heard by Jackie A. 
Cowin, J., on motions for judgment on the pleadings. 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
Kenneth J. Hill for Public Employee Retirement 
Administration Commission. 
John M. Becker for the plaintiff. 
 
1 Retirement board of Lexington and Public Employee 
Retirement Administration Commission. 
2 
 
Kimberly Parr, Assistant Attorney General, for Contributory 
Retirement Appeal Board. 
Michael Sacco for retirement board of Lexington. 
Thomas F. Gibson, Gerald A. McDonough, Timothy J. Smyth, & 
Natacha Thomas, for Boston retirement system & others, amici 
curiae, submitted a brief. 
Matthew L. Feeney, Rachel L. Millette, & Katherine A. 
Hesse, for Norfolk County retirement system & others, amici 
curiae, submitted a brief. 
 
 
 
BUDD, C.J.  Joseph O'Leary, an employee of the town of 
Lexington, elected to forgo ten vacation days each year for 
seven years in exchange for payment until he retired.  The issue 
presented is whether these payments in lieu of unused, accrued 
vacation time are to be included as "regular compensation" for 
the purpose of calculating O'Leary's pension.  The retirement 
board of Lexington (board), a magistrate in the Division of 
Administrative Law Appeals (DALA), the Contributory Retirement 
Appeal Board (CRAB), and a Superior Court judge all concluded 
that the payments in lieu of vacation time did not constitute 
regular compensation.  We agree and therefore affirm.2 
 
Background.  Pursuant to G. L. c. 32, public employees who 
participate in the Commonwealth's retirement system (members) 
and meet certain age and years of service criteria receive a 
government pension (superannuation retirement allowance) at 
retirement.  G. L. c. 32, § 5 (2).  The amount received by each 
 
2 We acknowledge the amicus briefs submitted by the Norfolk 
County, Leominster, and Somerville retirement systems; and by 
the Boston, Brookline, and Fitchburg retirement systems. 
3 
 
member is a percentage of the highest average consecutive three-
year period of his or her "regular compensation" while an 
employee.  G. L. c. 32, § 5 (2) (a).  Over one hundred local 
retirement boards throughout the Commonwealth, such as the board 
in this case, are responsible for calculating and administering 
public retirement benefits to their respective members.  G. L. 
c. 32, §§ 2, 20.  The Public Employee Retirement Administration 
Commission (PERAC) is the State agency responsible for 
regulating and overseeing the work of local retirement boards.3  
G. L. c. 7, §§ 49, 50. 
 
On July 11, 2012, PERAC issued memorandum no. 39/2012, an 
advisory memorandum to local retirement boards -- guidance which 
is hereby invalidated, for the reasons discussed infra -- 
stating that payments for unused vacation time may be considered 
as regular compensation (and therefore counted for the purpose 
of calculating a member's retirement benefit) if they meet two 
threshold requirements:  (1) the payments must be part of the 
member's base salary or "other base compensation," but payments 
that are of limited duration or lack predictability do not count 
 
3 Although PERAC is responsible for the "efficient 
administration of the public employee retirement system," G. L. 
c. 7, § 50, its decisions and guidance are subject to review by 
CRAB, a three-member board empowered to consider appeals filed 
on behalf of an aggrieved member subject to a decision issued by 
either a retirement board or PERAC.  G. L. c. 32, § 16 (4).  
Decisions issued by CRAB are "final and binding" on the member, 
the retirement board, and PERAC.  Id. 
4 
 
as other base compensation; and (2) the payments must be for 
services performed.  The memorandum further states that if the 
payments satisfy both of these threshold requirements, the board 
then must make findings regarding ten additional criteria to 
determine whether the payments are considered regular 
compensation.4 
 
O'Leary's employment with the Lexington police department 
was covered by a collective bargaining agreement that included a 
"[v]acation [e]lection" provision.  That provision allowed 
participants with at least twenty years of service to convert up 
to ten unused vacation days into compensation each year.  
Eligible participants could make the election each December, and 
the compensation, if selected, would be paid biweekly in the 
ensuing fiscal year.  The provision stated: 
"Annually, Captains and Lieutenants with at least [twenty] 
years of service as a police officer with the Lexington 
Police Department will have the option each December to 
choose to convert up to ten (10) unused vacation days to 
compensation (i.e., the Vacation Election), with such 
compensation paid on a bi-weekly basis in the ensuing 
fiscal year.  The bi-weekly vacation election payment shall 
begin on July 1, 2008 (FY09) and shall be subject to all 
normal tax withholdings.  The value of the vacation 
election payment will be based on the Officer's daily rate 
as of the fiscal year in which it is paid.  The daily rate 
is defined as the base wage, educational incentive and duty 
differential. 
 
 
4 Because, as discussed infra, we conclude that the payments 
in lieu of vacation time cannot meet the threshold requirements 
set forth in the PERAC memorandum, we need not address the 
additional ten criteria. 
5 
 
". . . 
 
"Vacation Election payment shall not be considered regular 
income for the purposes of retirement, educational 
incentive payments, overtime calculation, holiday pay or 
duty differential pay." 
 
O'Leary chose to convert ten unused vacation days into 
compensation beginning in 2008, when he first became eligible.  
He made the same election each year until his retirement in 
January 2015. 
 
Shortly before his retirement, O'Leary asked the board 
whether the payments he had received in lieu of taking vacation 
time would be considered as regular compensation for purposes of 
calculating his retirement allowance.  When he learned that the 
board did not consider these payments to be regular 
compensation, he appealed to CRAB, which assigned the matter to 
DALA.  DALA affirmed the board's decision.  O'Leary then 
appealed to CRAB, which affirmed the decision by DALA.  See 
G. L. c. 32, § 16 (4), second par.5  O'Leary filed a complaint in 
the Superior Court seeking reversal of CRAB's order.  See G. L. 
c. 30A, § 14.  PERAC, which had been joined at the request of 
the board as a necessary party in the proceedings before DALA, 
 
5 General Laws c. 32, § 16 (4), second par., instructs that 
CRAB automatically must assign any appeal in the first instance 
to a magistrate in DALA for a hearing.  The magistrate makes 
factual findings and issues a binding decision on the board, 
PERAC, and the individual member.  This final decision may be 
appealed to CRAB for further review, or CRAB may on its own 
initiative review the final decision by DALA.  Id. 
6 
 
also filed a complaint seeking a reversal of CRAB's order.  The 
two complaints were consolidated, and all parties subsequently 
filed cross motions for judgment on the pleadings.  A Superior 
Court judge affirmed CRAB's decision that the payments in lieu 
of vacation time were not regular compensation.  O'Leary and 
PERAC appealed, and we transferred the case to this court on our 
own motion. 
Discussion.  1.  Analysis.  As the facts are undisputed, 
the issue involves a pure question of law (specifically, one of 
statutory interpretation).  We therefore review the Superior 
Court judge's decision on a de novo basis.6  See Kraft Power 
Corp. v. Merrill, 464 Mass. 145, 147 (2013).  The central 
question is whether payments made in lieu of vacation time may 
be included as "regular compensation" under G. L. c. 32, § 1, 
when calculating a participant's retirement allowance provided 
for in G. L. c. 32, § 5.  We conclude the answer is no. 
"Regular compensation" is defined in G. L. c. 32, § 1, as 
"compensation received exclusively as wages[, i.e., the base 
 
 
6 Although we normally give weight to agency expertise, here 
PERAC and CRAB have different views on the matter.  See Public 
Employee Retirement Admin. Comm'n v. Contributory Retirement 
Appeal Bd., 478 Mass. 832, 834 (2018) (Vernava), quoting Pelonzi 
v. Retirement Bd. of Beverly, 451 Mass. 475, 478 n.8 (2008).  In 
any case, as the question is one of statutory interpretation, 
ultimately it is for the court to decide.  See Vernava, supra. 
 
7 
 
salary or other base compensation of an employee,7] by an 
employee for services performed in the course of employment for 
his employer."  We previously have held that the 
"'straightforward and unambiguous' language of § 1 indicates 
that 'regular compensation' is 'ordinary, recurrent, or repeated 
payments not inflated by any "extraordinary ad hoc" amounts such 
as bonuses or overtime pay.'"  Public Employee Retirement Admin. 
Comm'n v. Contributory Retirement Appeal Bd., 478 Mass. 832, 835 
(2018) (Vernava), quoting Pelonzi v. Retirement Bd. of Beverly, 
451 Mass. 475, 479 (2008). 
Thus, we conclude that "regular compensation" does not 
encompass payments, such as those at issue here, that an 
employee chooses to receive annually or at some other interval, 
even if the employee consistently elects to receive such 
payments.  Such payments are not by their nature "recurrent" or 
"repeated," but rather repeat only upon specific election by the 
 
7 General Laws c. 32, § 1, defines "[w]ages" in relevant 
part as "the base salary or other base compensation of an 
employee."  The provision goes on to delineate what the term 
does not mean: 
 
"'wages' shall not include, without limitation, overtime, 
commissions, bonuses other than cost-of-living bonuses, 
amounts derived from salary enhancements or salary 
augmentation plans which will recur for a limited or 
definite term, . . . [one]-time lump sum payments in lieu 
of or for unused vacation or sick leave." 
 
G. L. c. 32, § 1. 
8 
 
employee during the election period.  See Vernava, 478 Mass. at 
835.  The employer cannot predict year to year whether an 
eligible employee will opt to receive these buyback8 payments, or 
how many hours of compensation an employee will elect to buy 
back. 
In addition to being elective rather than naturally 
recurring, periodic elective payments received in lieu of 
vacation time are "amounts derived from salary enhancements or 
salary augmentation plans which will recur for a limited or 
definite term," which is explicitly excluded from the definition 
of "[w]ages" in G. L. c. 32, § 1.  In O'Leary's collective 
bargaining agreement, for example, the election period is 
annual, meaning the payment will last only one year.  Cf. 
Vernava, 478 Mass. at 836 (vacation time not considered "of 
indefinite duration" because it is "limited in amount"). 
For all of these reasons, payment in lieu of vacation time 
that requires an employee to select payment annually or at some 
other interval is not "regular compensation."9  The 2012 PERAC 
 
8 We use the term "buyback" to refer to payments, such as 
those at issue here, "related to the selling back of vacation 
time by an employee as a result of that employee not using that 
vacation time," as referenced in PERAC's memorandum no. 39/2012. 
 
9 Because we conclude that the statutory language is 
unambiguous, we do not address the parties' legislative history 
arguments.  Additionally, it is not dispositive that the 
collective bargaining agreement at issue stated that payment in 
 
9 
 
memorandum is invalid to the extent it directs otherwise because 
no elective, periodic vacation buyback scheme, such as the one 
at issue here, could pass the first threshold requirement and be 
considered part of an employee's "base compensation."10 
 
lieu of vacation time would not be considered regular 
compensation.  General Laws c. 32 is not one of the statutory 
provisions that a collective bargaining agreement with public 
employees may overrule.  See G. L. c. 150E, § 7 (d).  See also 
National Ass'n of Gov't Employees v. Commonwealth, 419 Mass. 
448, 452, cert. denied, 515 U.S. 1161 (1995) ("[S]tatutes not 
specifically enumerated in § 7 [d] will prevail over contrary 
terms in collective bargaining agreements"). 
 
10 O'Leary and PERAC argue that because the definition of 
"[w]ages" in G. L. c. 32, § 1, specifically excludes only one 
type of vacation pay, i.e., "[one]–time lump sum payments in 
lieu of or for unused vacation . . . leave," see note 7, supra, 
payments not distributed as a one-time lump sum are necessarily 
included in the definition of wages.  We disagree.  We 
consistently have emphasized that "the maxim of negative 
implication -- that the express inclusion of one thing implies 
the exclusion of another –- 'requires great caution in its 
application'" (citation omitted).  Halebian v. Berv, 457 Mass. 
620, 628 (2010).  See, e.g., Verveine Corp. v. Strathmore Ins. 
Co., 489 Mass. 534, 546 (2022); Reuter v. Methuen, 489 Mass. 
465, 474 (2022); Commonwealth v. Garvey, 477 Mass. 59, 65 
(2017).  Caution is especially warranted here because the 
payments in lieu of vacation time at issue are expressly 
excluded as "amounts derived from salary enhancements or salary 
augmentation plans which will recur for a limited or definite 
term."  G. L. c. 32, § 1.  Moreover, the list of excluded types 
of wages in § 1 is provided "without limitation," further 
belying the notion that the absence of some explicit words here 
necessarily excludes the logical result derived from the 
statute's plain language.  See Federal Nat'l Mtge. Ass'n v. 
Nunez, 460 Mass. 511, 519 (2011) ("we understand the phrase 
'without limitation' to mean the broadest reasonable definition 
of acts"). 
 
For the same reason, we are not persuaded by O'Leary's 
argument that the exclusion from "[w]ages" of "all payments 
 
10 
 
2.  Retroactivity.  O'Leary argues that if we conclude, as 
we do, that periodic elective payments in lieu of using vacation 
time are not "regular compensation," we should apply our 
decision prospectively only because of the adverse effect it may 
have on those participants whose retirement sums were calculated 
in reliance on the 2012 PERAC memorandum.  We are not convinced. 
"In general, when we construe a statute, we do not engage 
in an analysis whether that interpretation is given retroactive 
or prospective effect; the interpretation we give the statute 
usually reflects the court's view of its meaning since the 
statute's enactment."  Eaton v. Federal Nat'l Mtge. Ass'n, 462 
Mass. 569, 587 (2012).  We did have occasion to consider 
prospective application in Eaton, where our interpretation of 
the term "mortgagee" was different from the meaning that 
commonly and widely had been ascribed to it up until the case 
was decided.  Id. at 587-588.  Because we concluded that 
retroactive application of our interpretation of the term likely 
would have resulted in significant uncertainty in determining 
the validity of many land titles, we limited our holding to 
 
other than payment received by an individual . . . for services 
rendered," G. L. c. 32, § 1; 840 Code Mass. Regs. § 15.03(3)(f) 
(2010), creates the negative implication that payments that are 
received by an individual for services rendered always will be 
classified as wages. 
11 
 
prospective application only.  Id. at 588-589.  However, we have 
no such problem here. 
In this case, none of the relevant considerations provide 
reason to depart from the presumption of retroactive 
application.  As explained supra, our interpretation is not 
novel, but rather is based on the plain language of the statute.  
Indeed, the board, DALA, and CRAB correctly interpreted the 
relevant statute consistent with our holding today.11 
Moreover, O'Leary has failed to provide support for his 
contention that retirees whose pension amounts were calculated 
pursuant to the 2012 PERAC memorandum may be required to repay 
any amounts improperly paid out and may be subject to a 
recalculation and reduction of future retirement payments, 
creating a "truly imminent" risk of hardship.  See Worcester 
Regional Retirement Bd. v. Public Employee Retirement Admin. 
Comm'n, 489 Mass. 94, 105 (2022).  This is especially true 
because G. L. c. 32, § 20 (5) (c) (3), provides that, upon 
 
11 For the same reason, O'Leary's argument that retroactive 
application of our decision violates G. L. c. 32, § 25 (5), also 
fails.  General Laws c. 32, § 25 (5), states that the pension 
law "shall be deemed to establish and to have established 
membership in the retirement system as a contractual 
relationship . . . , and no amendments or alterations shall be 
made that will deprive any such member . . . of their pension 
rights or benefits provided for thereunder, if such member or 
members have paid the stipulated contributions."  There are no 
"amendments or alterations" at issue here; as discussed supra, 
we merely have interpreted statutory language, not changed it. 
12 
 
request, retirement boards may "waive repayment or recovery of 
such amounts" from members who inadvertently have been paid more 
than that to which they were entitled.12  See Worcester Regional 
Retirement Bd., supra ("Th[e] absence of specific evidence 
establishing the likely occurrence of extraordinary hardship 
weighs in favor of the presumption of retroactive application"). 
Conclusion.  Payment in lieu of unused vacation time 
requiring periodic election by an employee, whether annually or 
at some other interval, does not qualify as "regular 
compensation."  Accordingly, the judgment is affirmed. 
So ordered. 
 
12 General Laws c. 32, § 20 (5) (c) (3), states: 
 
"At the request of a member or beneficiary who has been 
determined to have been paid amounts in excess of those to 
which he is entitled or at the request of a member who has 
been determined to owe funds to the retirement system, the 
board may waive repayment or recovery of such amounts 
provided that: 
 
"(i) the error in any benefit payment or amount contributed 
to the system persisted for a period in excess of one year; 
 
"(ii) the error was not the result of erroneous information 
provided by the member or beneficiary; and 
 
"(iii) the member or beneficiary did not have knowledge of 
the error or did not have reason to believe that the 
benefit amount or contribution rate was in error."