IN THE SUPREME COURT OF MISSISSIPPI

NO. 96-CC-00678-SCT

ROY L. HORTON

v.

PUBLIC EMPLOYEES' RETIREMENT SYSTEM OF

MISSISSIPPI, AGENCY OF THE STATE OF

MISSISSIPPI, ACTING BY AND THROUGH ITS

BOARD OF TRUSTEES

DATE OF JUDGMENT: 05/24/96

TRIAL JUDGE: HON. JAMES E. GRAVES, JR.

COURT FROM WHICH APPEALED: HINDS COUNTY CIRCUIT COURT

ATTORNEYS FOR APPELLANT: JAMES C. MARTIN

JAMES A. PEDEN, JR.

ATTORNEY FOR APPELLEE: OFFICE OF THE ATTORNEY GENERAL

BY: DAVIS C. SCOTT, JR.

NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES

(OTHER THAN WORKERS' COMPENSATION)

DISPOSITION: AFFIRMED - 5/14/98

MOTION FOR REHEARING FILED:

MANDATE ISSUED: 6/4/98

BEFORE PRATHER, C.J., ROBERTS AND MILLS, JJ.

PRATHER, CHIEF JUSTICE, FOR THE COURT:

STATEMENT OF THE FACTS AND CASE

¶1. The position of Executive Director of the Board of Public Accountancy was created on February

26, 1976 and was offered to and filled by Roy L. Horton ("Horton") on that date. The Executive

Director is responsible for the operation of the agency and serves at the pleasure of the Accountancy

Board. The Accountancy Board receives no state-appropriated funds but is funded rather by fees

charged to accountants in this State. The "special" funds are held by the State Treasurer in a separate

account and released to the Board pursuant to an annual budget request of the Board with legislative

approval.
¶2. Horton served as Executive Director for 18 years and 7 months; from February 26, 1976 through

September 30, 1994. In addition to his work as Executive Director of the Board, Horton ran a

private certified public accountancy (CPA) practice from the same offices and location from which he

conducted his Board duties. When necessary, Horton used his employees in his private CPA practice

to assist him in his work for the Accountancy Board. Horton reimbursed himself for the Board's use

of his private offices, and he charged the Board for various other expenses, such as for copies made

at his office.

¶3. The record reveals that Horton understood that his job classification as Executive Director was

not considered by the Public Employees Retirement System (PERS) to be that of a state employee

eligible for participation in PERS, and Horton made efforts to change this classification. In 1981,

Horton requested that the State Personnel Board recognize the Executive Director as an employee

position, but the Personnel Board informed Horton that he needed legislative approval for such a

reclassification. The Legislative Budget Analyst informed Horton that the Legislature would not

consider such a reclassification without first receiving a recommendation from the Personnel Board.

In 1986, Horton submitted the Accountancy Board's budget proposal with the Executive Director

designated as an employee position, but the Legislature once again denied the employee designation

request for the Executive Director position(1)

.

¶4. In 1993, following the Internal Revenue Service's (IRS) classification of the Executive Director

position as an employee position, Horton formally requested membership in the retirement system as

an employee, including retroactive service credit for over eighteen years service, in the PERS

retirement system. The PERS Policy Committee denied Horton the membership and credit by a letter

dated August 26, 1994, following which Horton appealed to the Claims Committee of the PERS

Board of Trustees. On February 21, 1995, the PERS Board of Trustees issued an order denying

Horton's appeal, and Horton filed a Petition/Complaint for Mandatory Injunction in the Nature of a

Judicial Review with the Chancery Court of the First Judicial District of Hinds County.

¶5. The Chancery Court transferred the complaint to the Circuit Court of the First Judicial District of

Hinds County and, on May 24, 1996, the Circuit Court affirmed the order of the PERS Board of

Trustees. Horton timely appealed to this Court.

ISSUES

A. The Circuit Court Erred in Determining That Roy Horton Was An Independent

Contractor.

B. The Circuit Court Erred by Disregarding The Findings and Determination of the

Internal Revenue Service That Roy Horton Was Not An Independent Contractor, To

Which Findings And Determination The State Of Mississippi Accepted and Acquiesced.

C. The Circuit Court Erred In Determining That The Decision of the Board of Trustees

of PERS is in Accordance With the Law.

D. The Circuit Court Erred in Determining That The Findings of Fact of the Board of

Trustees of PERS Were Not Arbitrary and Capricious.
LAW

¶6. Horton's first four points of error are combined as they all deal with the issue of whether the

Circuit Court ruled correctly in affirming the ruling of the PERS Board of Trustees. Although Horton

discusses the issue of whether or not his job with the Accountancy Board was in the nature of an

independent contractor position, the PERS Board of Trustees ruling from which this appeal is taken

did not issue a finding in this regard. The PERS Board of Trustees' ruling was based rather on the

Board's finding that the Accountancy Board lacked the authority to hire the Executive Director as an

non-contractual employee at all and that Horton was thus not an "employee in the state service" for

the purpose of PERS.

¶7. The PERS Board of Trustees wrote in its ruling that:

An individual may not be an employee within the meaning of these sections if the individual's

employer has no authority to employ any individual as an employee. In this instance, the

Mississippi Legislature, by appropriation each year, had not authorized any employee positions,

nor any funds for the payment of salaries, for the Accountancy Board during Mr. Horton's

tenure as executive director until 1989 when it approved one position that was later occupied

by an individual other than Mr. Horton. The Legislature did authorize the payment of

contractual service funds to individuals providing services. Under these circumstances, it

appears that the Accountancy Board was without lawful authority to employ and pay any

individual, including Mr. Horton, as an employee until 1989. This limitation on the lawful

authority of the Accountancy Board was acknowledged by a member of the Accountancy

Board in his testimony before the Claims Committee.

¶8. In the view of this Court, the Board of Trustees was correct in concluding that the Accountancy

Board lacked statutory authority to employ the Executive Director as a salaried employee eligible for

PERS participation. The evidence in the record is overwhelming that, prior to the IRS' classification

of Horton as an employee in 1993, both Horton and the Accountancy Board were aware that the

Executive Director position was classified a contractual, non-employee position. It is undisputed that,

prior to January 1, 1994, Horton classified his income from the Accountancy Board on his IRS tax

returns as "non-employee" income for which no W-2 withholdings were made.

¶9. Communications between the Accountancy Board and PERS clearly indicate that both Horton

and the Accountancy Board were aware that Horton's PERS status was that of a non-employee. On

June 14, 1976, Horton's secretary wrote a letter to PERS in which she stated that:

This is to inform you that as of March 1, 1976, the Mississippi State Board of Public

Accountancy no longer has a paid employee. The last salaried employee was Mrs. Delynn

Oliver.

The Accountancy Board did not claim employee status for any of their workers until June 30, 1989,

when Horton wrote to PERS that:

The Mississippi State Board of Public Accountancy requests that the Public Employees

Retirement System reactivate the Mississippi State Board of Public Accountancy, #69-

0650001-403, effective July 1, 1989, because on July 1, this agency will have a full-time
salaried employee.

Horton and the Accountancy Board did undertake formal efforts to have the Executive Director

position classified as a salaried employee following the IRS' classification of the position as an

employee position in 1993. On March 24, 1994, Thomas A. Ross, Secretary of the Accountancy

Board, wrote to Mississippi House Representative Ted Foster, requesting that the status of the

Executive Director position at the Accountancy Board be changed from contractual to employee.

Specifically, Ross wrote that:

The Mississippi Board of Public Accountancy (The Board) believes that the State of Mississippi

and The Board will be better served by converting the method of compensating the Executive

Director of the Board from contractual to employee. In order to accomplish this, we

respectfully request that the Fiscal Year 1995 Budget Request be amended to increase Salaries,

Wages & Fringe Benefits by $ 75,000 and to decrease Contractual Services by $ 75,000.

Further, we request that the number of personnel positions authorized be increased from two

(2) to three (3). It is the intent of The Board to have the Executive Director be compensated by

The Board rather than under a contractual arrangement.

It is thus apparent that the Board considered it necessary to seek a reclassification of the Executive

Director position by the Legislature in order to have Horton "compensated by the Board as an

employee rather than under a contractual arrangement." The fact that the Legislature did not change

the classification of the Executive Director position from a contract position to a salaried employee

position clearly supports the PERS trustees' conclusion that the Board did not have the authority to

compensate Horton as a salaried employee instead of as a contractual worker. Upon failing to secure

legislative approval, Horton would have this Court assume a legislative role in determining that the

Executive Director position is in fact a salaried employee position entitled to retroactive funding.

Such an action by this Court would, however, be improper.

¶10. This Court has sympathy for Horton's position, given that it appears that the approval of his

participation in PERS was caught in something of a legislative "Catch-22." The record indicates that

the Legislature refused to classify the Executive Director position as an employee position in large

part because the Personnel Board would not recommend that he be classified as an employee. In turn,

the PERS ruling from which the present appeal is taken is based on the fact that the Legislature had

not classified the Executive Director position as an employee position. Nevertheless, the fact remains

that, whatever its reasons for doing so, the Legislature refused to grant the Accountancy Board the

authority to hire the Executive Director as a non-contractual employee during Horton's tenure. In the

view of this Court, the remedy for legislative inaction on an issue within the Legislature's purview

and authority does not lie with this Court, but rather with the Legislature.

¶11. This Court's scope of review in the present case is quite limited. This Court should only reverse

PERS' ruling in the present case if this ruling is arbitrary and capricious and unsupported by

substantial evidence. It can not be validly contended that the actions of the PERS Board were

arbitrary and capricious, and the Board's ruling is consistent with applicable statutory provisions.

Miss. Code Ann. § 25-11-105(a) (Supp. 1997) provides that:

All persons who shall become employees in the state service after January 31, 1953, and whose

wages are subject to payroll taxes and are lawfully reported on IRS Form W-2, except those
specifically excluded, or as to whom election is provided in Articles 1 and 3, shall become

members of the retirement system as a condition of their employment.

Thus, Miss. Code Ann. § 25-11-105 requires that a worker be an "employee in the state service" in

order to qualify for State retirement benefits, and the PERS Board concluded that, whatever the

characteristics of Horton's position, the Legislature's failure to grant the Board permission to

compensate the Executive Director as an employee precluded Horton's participation in PERS under

applicable statutes. This ruling by the PERS Board of Trustees is supported by substantial evidence

and is affirmed.

E. The Chancery Court Erred in Refusing Jurisdiction and Review and Transferring the

Appeal To Circuit Court, Which Resulted in the Circuit Court Providing Less Than the

Review to which Appellant was Entitled.

¶12. Horton's final point of error is a procedural one in which he argues that his complaint filed in

Chancery Court was improperly transferred to Circuit Court. Horton originally sought review of the

ruling of the PERS Board of Trustees through a Petition/Complaint in Chancery Court for a

mandatory injunction to permit his membership in the retirement system and to grant him retroactive

service credit. The Chancery Court transferred the complaint to the Circuit Court, which granted a

writ of certiorari, but which nevertheless affirmed the ruling of the PERS Board of Trustees. Horton

argues that the Chancery Court erred in transferring the case to Circuit Court, but he cites no

authority to the effect that the Chancellor did not act within his authority in transferring the case to

Circuit Court.

¶13. Effective April 7, 1995, Mississippi Code Ann. § 25-11-120 (Supp. 1994) requires that all

appeals from the PERS Board be made by writ of certiorari to Circuit Court. Although this statute

was not in effect at the time Horton filed his petition with the Chancery Court, it nevertheless appears

that the Circuit Court was the proper court to hear Horton's appeal from the PERS Board ruling.

Moreover, Article 6, § 147 of the Mississippi Constitution provides that:

No judgment or decree in any chancery or circuit court rendered in a civil cause shall be

reversed or annulled on the ground of want of jurisdiction to render said judgment or decree,

from any error or mistake as to whether the cause in which it was rendered was of equity or

common-law jurisdiction ...

Thus, even if the transfer of the case to circuit court had been in error, which it was not, the

Mississippi Constitution would bar a reversal on this grounds. This point of error is without merit,

and the ruling of the Chancery Court transferring the present case to Circuit Court is affirmed

¶14. JUDGMENT IS AFFIRMED.

SULLIVAN AND PITTMAN, P.JJ., BANKS, McRAE, ROBERTS, SMITH, MILLS AND

WALLER, JJ., CONCUR.
1. The Legislature approves the designation of "state employee" and controls the number of

employees a state agency may employee.