Opinion ID: 2614971
Heading Depth: 1
Heading Rank: 5

Heading: interpreting average final compensation

Text: A PERS I pension is calculated as a percentage of the employee's average final compensation. AFC is defined as  the annual average of the greatest compensation earnable by a member during any consecutive two year period of service for which service credit is allowed. (Italics ours.) RCW 41.40.010(15)(a). Compensation earnable in turn is defined as  salaries or wages earned during a payroll period for personal services . (Italics ours.) RCW 41.40.010(8)(a). Does compensation earnable include all of an employee's leave cashout, or only the cashout relating to the leave that accrued during the 2-year AFC period? The plaintiffs argue that leave cashouts are not earned until they are received by the employees. They rely on a dictionary definition of earn: to receive (salary, wages, etc.) for one's labor or service. (Italics ours.) Webster's New Twentieth Century Dictionary 569 (2d ed. 1983). Brief of Respondents/Cross Appellants, at 70. They point out that although employees receive leave throughout the course of employment, employees receive pay for accrued leave only at retirement. They therefore argue the entire leave cashout is earned at the termination of the employee's service. Because most employees' AFC period is their last 2 years of service, the entire leave cashout would be included in their AFC calculation. The Department counters that leave cashouts are included in the AFC amount only to the extent that the leave accrued during the 2-year AFC period. It argues the definition of compensation earnable focuses on salaries or wages being earned through the performance of personal services. The personal services are performed at the time the particular leave accrued, thus the earning takes place when the personal service is rendered, not when the leave is cashed out. Furthermore, it maintains that its interpretation better serves the statutory purpose of determining an employee's earning capacity during a 2-year period. In conclusion, it argues [a] leave cashout is payment for previously earned and accrued leave. Reply Brief of Appellants (Department), at 35-36. [2] We agree with the Department's position. Leave, just like salaries and wages, is earned when the employee performs the personal services. It can then be used at future times to allow the employee to take time off from work without losing pay, or it can sometimes be cashed out if it is not used during the period of employment. Under either of these scenarios, however, the compensation is earned at the time of the personal services, not at the later time when the employee receives the benefit of a day off or a cashout. The cashout is best characterized as a form of deferred compensation, earned at one time and received at another. The Department's argument therefore better fulfills the express language and the purpose behind the AFC statutory definitions. [3, 4] Additionally, the Attorney General issued an opinion agreeing that the Department's interpretation of this issue was correct. AGO 1 (1976). Although not controlling, Attorney General opinions are given considerable weight. Everett Concrete Prods., Inc. v. Department of Labor & Indus., 109 Wn.2d 819, 828, 748 P.2d 1112 (1988). Moreover, the Attorney General opinion constitutes notice to the Legislature of the Department's interpretation of the law, and the Legislature has not acted since 1976 to overturn the Department's interpretation. Greater weight attaches to an agency interpretation when the Legislature acquiesces in that interpretation. See Newschwander v. Board of Trustees, 94 Wn.2d 701, 711, 620 P.2d 88 (1980). We affirm the trial court's decision that a PERS I employee's pension should take into account leave cashouts only to the extent that the leave accrued during the employee's 2-year AFC period.