Opinion ID: 1364463
Heading Depth: 2
Heading Rank: 2

Heading: Vail's Claim To Full-Time Retirement Credit

Text: Review of a decision made by the circuit court upon its review of an agency's decision is a secondary appeal. Sussel v. Civil Service Comm'n of the City and County of Honolulu, 851 P.2d 311, 316 (Haw.1993); Chock v. Bitterman, 5 Haw. App. 59, 63-64, 678 P.2d 576, 580, cert. denied, 67 Haw. 685, 744 P.2d 781 (1984). The standard of review is one in which the reviewing court must determine whether the [circuit] court was right or wrong in its decision, applying the standards set forth in HRS § 91-14(g) to the agency's decision. [Appellate] review is further qualified by the principle that the Board's decision carries a presumption of validity and [Vail] has the heavy burden of making a convincing showing that the decision is invalid because it is unjust and unreasonable in its consequences. Sussel, 851 P.2d at 316 (quoting Chock, 5 Haw.App. at 64, 678 P.2d at 580 (footnote omitted) (citations omitted)); see also, Dole Hawaii Division  Castle & Cooke, Inc. v. Ramil, 71 Haw. 419, 794 P.2d 1115 (1990). HRS § 91-14(g) provides: (g) Upon review of the record the court may affirm the decision of the agency or remand the case with instructions for further proceedings; or it may reverse or modify the decision and order if the substantial rights of the petitioners may have been prejudiced because the administrative findings, conclusions, decisions, or orders are: (1) In violation of constitutional or statutory provisions; or (2) In excess of the statutory authority or jurisdiction of the agency; or (3) Made upon unlawful procedure; or (4) Affected by other error of law; or (5) Clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (6) Arbitrary, or capricious, or characterized by abuse of discretion or clearly unwarranted exercise of discretion. Under HRS § 91-14(g), conclusions of law are reviewable under subsections (1), (2), and (4); questions regarding procedural defects under subsection (3); findings of fact under subsection (5); and an agency's exercise of its discretion under subsection (6). Sussel, 851 P.2d at 317 (citing Outdoor Circle v. Harold K.L. Castle Trust Estate, 4 Haw.App. 633, 638-39, 675 P.2d 784, 789 (1983), cert. denied, 67 Haw. 1, 677 P.2d 965 (1984)). The circuit court in the present case, however, in review of the ERS declaratory order, applied subsection (5) instead of subsection (1) when it concluded that three of the ERS's conclusions of law regarding the interpretation of HRS § 88-43 were clearly erroneous and violat[ive] of H.R.S. § 88-42 and that the declaratory order as a whole was clearly erroneous and violates the Hawaii Revised Statutes. The precise issue presented to the circuit court concerned a question of statutory interpretation and, therefore, should have been reviewed under HRS § 91-14(g)(1), applying the right/wrong standard and not the clearly erroneous standard of review. Amfac, 74 Haw. at 119, 839 P.2d at 28. Accordingly, this court must apply HRS § 91-14(g)(1) under a right/wrong standard in our review of the circuit court's review of the ERS declaratory order. Moreover, this appeal essentially concerns the interpretation of certain broad terms in two specific statutory provisions, and [j]udicial deference to agency expertise has also been a guiding precept where the interpretation and application of broad or ambiguous statutory language by an administrative tribunal are the subject of review. Aio v. Hamada, 66 Haw. 401, 406, 664 P.2d 727, 731 (1983). We have recognized the wisdom of a well established rule of statutory construction that, where an administrative agency is charged with the responsibility of carrying out the mandate of a statute which contains words of broad and indefinite meaning, courts accord persuasive weight to administrative construction and follow the same, unless the construction is palpably erroneous. Id. at 407, 664 P.2d at 731 (citations omitted).
Vail argues that the plain language of HRS § 88-42 expressly mandates that per diem workers shall become members of the system, and therefore such workers cannot also be considered part-time employees to whom the ERS can deny membership under HRS § 88-43. Accordingly, Vail maintains that a per diem worker automatically qualifies for full-time membership service credit toward retirement. Both the ERS and Vail agree that a per diem judge is one of the class of per diem workers under HRS § 88-42. According to HRS § 88-21, the definitions section of chapter 88, a per diem worker is a person employed and compensated on an hourly or daily basis. HRS § 604-2, the statutory section which provides for the appointment of per diem district court judges, states in relevant part that such judges shall receive per diem compensation for the days on which actual service is rendered[.] Per diem judges are thus clearly compensated on [a] ... daily basis. Whether a per diem judge is also employed on a daily basis under chapter 88 is a question which requires a more complex analysis. Service under the chapter is defined as service as an employee paid by the State or county. HRS § 88-21. Also qualifying as service under the chapter is service during the period of a leave of absence ... if the individual is paid by the State or county during the period of the leave of absence[.] HRS § 88-21 in relevant part defines an employee as [a]n individual ... during the period of a leave of absence if the individual is in service, as defined in this part, during the period of the leave of absence[.] Thus, an individual who is not being paid during the period of a leave of absence is not an employee under the chapter during the period of that unpaid leave of absence. It therefore follows that an individual is an employee under the chapter while he or she is being paid by the State or county. Accordingly, a per diem worker, including a per diem judge, is only an employee, and therefore employed, on the days for which he or she receives compensation. The parties are thus correct that a per diem judge while performing his or her duties is a per diem worker under chapter 88. The circuit court agreed with Vail that he should get full-time service retirement credit for the entire period of his per diem judgeship despite the number of actual work days during that period. However, it is Vail's claim, rather than the ERS's interpretation, which would violate certain express statutory provisions of chapter 88. An ERS employee-member's retirement allowance under the system is based on a percentage of average final compensation multiplied by the total number of years of that member's credited service. HRS § 88-74. The calculation of a member's credited service is thus crucial to a correct determination of that member's retirement allowance. A member's credited service at retirement consists in relevant part of the member's membership service. HRS § 88-71. According to HRS § 88-21, a member's membership service is in relevant part all service rendered by a member. Service, as previously noted, is defined in relevant part as service as an employee paid by the State or county.  HRS § 88-21 (emphasis added). Based on the foregoing analysis, only the days for which Vail was actually paid by the State can qualify as service under chapter 88. Likewise, Vail's membership service can only comprise those days for which he was actually compensated. Consequently, Vail's credited service, upon which his retirement allowance must be based, can only include those days for which he was actually paid. To give Vail the full-time credit he claims for the entire period of his per diem appointment would violate the express method of calculating retirement allowances provided in HRS § 88-74 and would result in a substantial windfall to Vail in direct contravention of the mandates of chapter 88. In its reply brief, the ERS sets forth an instructive hypothetical that reveals the potential unjust and unreasonable result of Vail's interpretation of HRS §§ 88-42 and 88-43: Assuming a per diem employee worked over a period of 10 years, earning 5 years of [credited service] (based on actual service rendered), with an average final compensation of $10,000, and 3.5% as the applicable percentage, then a retirement allowance of $1,750 (5 × .035 × $10,000) would be earned and 1200 days of [actual] service [would have been] rendered (10 years × 12 months × 10 days per month) [to the employer]. But under [Vail's] theory, 10 years of [credited service] would be awarded even if only one day of [actual compensated] service per month was rendered, [for] a total of [only] 120 days [of actual service to the employer over the entire 10 year period]. The retirement allowance would then be $3,500 (10 × .035 × $10,000)[, a] 100% increase in retirement benefits ... while the employer received merely one-tenth [the amount] of [actual] service from the prior example, and [conceivably] not even one day of service for [any of] the month[s] of service credit claimed. (Emphasis in original.) Vail has failed to fulfill his burden of showing that the ERS's declaratory order was invalid. We hold that his claim is at odds with the specific mandates of chapter 88, and to sustain it would lead to an unjust and unreasonable result. For this reason alone, we must vacate the decision of the circuit court.
Additionally, the ERS persuasively argues that per diem workers, including per diem judges, can be included within the category of part-time employees to whom the agency may deny membership in the system under HRS § 88-43. The two statutory sections at issue, currently designated HRS §§ 88-42 and 88-43, were both part of the original version of HRS chapter 88, enacted in 1925, see Act 55, §§ 3(1) and 3(3), 1925 Haw.Sess.Laws, although per diem workers were not specifically mentioned in § 3(1) of Act 55. Both sections have been amended since 1925. We have reviewed the available legislative history for all subsequent amendments to both sections and have found nothing that speaks directly to whether per diem workers can be considered part-time employees. However, as the ERS points out, although per diem workers were not specifically recognized as eligible employees and granted membership in the system until 1951, see Act 110, § 1(b), 1951 Haw.Sess. Laws, the ERS has possessed the specific authority to deny membership to any class of part-time employees since the original 1925 version of the retirement law. The ERS notes that the Hawaii State legislature in 1951 decided to grant membership status to per diem workers specifically to provide[] a retirement allowance computed in the same manner for all government employees and remove[] the exclusion of a group not at present permitted to become members because of the method of payment (daily or hourly basis). Sen. Stand.Comm.Rep. No. 357, in 1951 Senate Journal, at 842 (emphasis added). The ERS therefore concludes that the legislature intended merely to permit per diem workers to enter the system on the same basis as all other government employees. The ERS argues that per diem workers should consequently be subject to the same qualifications and restrictions as all other government employees, specifically including those pertaining to part-time employees under HRS § 88-43. The ERS further notes that in Act 110, the legislature amended the § 88-21 definition of employee to specifically include workers employed and compensated on an hourly or daily basis, i.e., per diem workers. Act 110, § 1(a), 1951 Haw.Sess.Laws. Because the ERS possessed the general authority to exclude from membership any class of part-time employees from the inception of the retirement law, the agency concludes that the legislature, obviously aware of the ERS's general exclusionary authority, must have intended that per diem workers also be subject to that authority, in common with every other class of employee. The ERS thus admits that per diem workers are expressly admitted to membership in the system under HRS § 88-42, along with all [other State or county] employees. However, the agency contends that HRS § 88-43 gives it the specific authority to then exclude from membership any class of part-time employees who would otherwise be members of the system under HRS § 88-42. In other words, according to the agency's view, HRS § 88-42 is the general admission section from which HRS § 88-43 gives it the power to carve out specific exceptions under the part-time employee provision. An analysis of the specific statutory language at issue supports the ERS's argument. The term part-time employee is left undefined by the statute. However, the term employee, as defined in HRS § 88-21, specifically includes per diem employees. Moreover, simple logic dictates that part-time employees must likewise be included within the more general class of all employees, and HRS § 88-42 specifically provides that all employees ... shall be members of the system[.] Thus, the plain language of HRS § 88-42 dictates that all employees  full-time, part-time, and per diem  shall be members of the system. However, HRS § 88-43 just as plainly gives the ERS the power to deny membership to any class of part-time employees and therefore must logically be considered a specific qualification of HRS § 88-42's blanket admission of all employees. The issue presented is whether the ERS can include per diem employees within the class of part-time employees over which HRS § 88-43 gives the agency authority. We note that in its administrative rule implementing HRS § 88-43, the ERS does not differentiate between per diem and part-time employees. The agency simply assumes that part-time employees are those individuals who work less than full-time, and further assumes that any per diem worker who falls into this category must also be a part-time employee under the statute. Vail's sole argument against the ERS position is that, because HRS § 88-42 specifically mentions both all employees and per diem workers, per diem employees must represent a special class not subject to the restrictive power of the ERS under HRS § 88-43. But as previously discussed, this interpretation runs afoul of the specific § 88-21 definition of employee as including per diem workers. Otherwise, the most that can be said for Vail's argument is that the applicable parts of HRS §§ 88-21, 88-42, and 88-43 give rise to some ambiguity, and that, by failing to define the broad term part-time employees, the statute leaves the ERS's authority to include per diem workers within the class of part-time employees less than crystal clear. However, as we have noted, in the case of broad or ambiguous statutory language, the applicable standard of review regarding an agency's interpretation of its own governing statute requires this court to defer to the agency's expertise and to follow the agency's construction of the statute unless that construction is palpably erroneous. Aio v. Hamada, 66 Haw. 401, 407, 664 P.2d 727, 731 (1983). Vail has failed to demonstrate that the ERS's construction of HRS §§ 88-42 and 88-43, and its implementation of HRS § 88-43 through administrative rule § 6-21-14, are palpably erroneous. On the other hand, the ERS has persuasively argued that per diem employees are included in the class of part-time employees to whom the agency may deny membership in the system under HRS § 88-43 and its implementing administrative rule § 6-21-14. Therefore, because at least portions of Vail's time as a per diem judge fell within categories specified in Rule § 6-21-14, we hold that the agency correctly determined that Vail did not qualify for full-time credited service under the retirement law. [6]