Opinion ID: 2509899
Heading Depth: 2
Heading Rank: 1

Heading: Whether a Contract Exists Between the State and Retirees

Text: Retirees argue that where the statute did not create a contract, the Retirement Systems had the authority to fill up the details by requiring Retirees sign forms stating they would not be required to pay into the Retirement Systems, and in doing so, these forms created a contract between the State and Retirees, which was then breached when the State began requiring these contributions. We disagree. This Court has often described a state agency's rulemaking power as its authority to fill up the details of the laws promulgated by the General Assembly. Heyward v. S.C. Tax Comm'n, 240 S.C. 347, 355, 126 S.E.2d 15, 19-20 (1962); S.C. Hwy. Dept. v. Harbin, 226 S.C. 585, 594, 86 S.E.2d 466, 470 (1955). While [t]he Legislature has the right to vest in the administrative officers and bodies of the state a large measure of discretionary authority . . . to make rules and regulations, an agency may not make rules that conflict with, or . . . change in any way the statute conferring such authority. Fisher v. J.H. Sheridan Co., Inc., 182 S.C. 316, 326, 189 S.E. 356, 360 (1936). Accordingly, an agency does not have the power to convert a right that is merely statutory into a contractual right. McKinney v. S.C. Police Officers Ret. Sys., 311 S.C. 372, 375, 429 S.E.2d 797, 798 (1993). Therefore, to fully address Retirees' argument that the Retirement Systems created a contract by filling up the details of the statute, it is necessary to examine this Court's basis in Layman for determining that the legislature intended to create a contractual right in the TERI statute, but did not intend the same when drafting the Working Retirees statutes. Ordinarily, statutes do not create contractual rights. Layman, 368 S.C. at 637, 630 S.E.2d at 268. In South Carolina, the legislature may only create contractual rights in a statute through the express language of the statute. Id. at 638, 630 S.E.2d at 268. This Court found in Layman that the old TERI statute outlined the rights and responsibilities of each party. Id. at 639, 630 S.E.2d at 269. In exchange for the right to lock in a retirement benefit based on the average final compensation of the member, a program participant shall agree to continue employment with an employer participating in the system for a program period, not to exceed five years. S.C.Code Ann. § 9-1-2210(A) (Supp.2001) (emphasis added). During this term of employment, the receipt of retirement benefits was deferred, and placed in a non-interest bearing trust account. Id. § 9-1-2210(B). A program participant was not required to make any further retirement contributions, accrued no service credit, and was not eligible to receive certain employment benefits. Id. § 9-1-2210(D). This Court found the following terms used in the old TERI statute as indicative of a contract: `A . . . member who is eligible [to retire under TERI] . . . and complies with the requirements of this article . . . . shall agree to continue employment. . . .' Layman, 368 S.C. at 639, 630 S.E.2d at 269 ( quoting S.C.Code Ann. § 9-1-2210(A)) (emphasis added). In contrast, this Court found that the General Assembly did not outline the rights and responsibilities of each party in the SCRS statute. See S.C.Code Ann. § 9-1-1790(A) (Supp.2001). The SCRS statute provided that sixty days after a state employee officially retires, he  may return to employment covered by the system and earn up to fifty thousand dollars a fiscal year without affecting the monthly retirement allowance he is receiving from the system. Id. (emphasis added). Under this statute, an employee's decision to return to work after retiring was optional, as was an employer's decision to re-hire that employee. The question of whether the PORS statute created a contractual right was not before this Court in Layman. However, because the language of the PORS statute is largely similar to the SCRS statute, [7] we find our analysis of the SCRS statute in Layman to be binding precedent with regard to the PORS statute. With this in mind, we disagree with Retirees' contention that the Retirement Systems filled up the details and created binding contracts between the State and Retirees through the use of signed forms. The various forms that were required to be signed by employees wishing to enter the old working retirees program contained substantially the same language: I hereby notify you that I am an employee of the State of South Carolina or its political subdivisions, and that I meet the requirements not to become a member of the South Carolina Retirement System or the Police Officers Retirement System, and I hereby exercise my option to become a non-member. I take this action under the provisions of the Retirement Act with full knowledge that I will not be credited with retirement service for this period of employment since I have elected nonmembership and, as such, will not be making retirement contributions. Retirees argue that the language of these forms is contractual in nature and is similar to the language used in the TERI statute. However, we believe the language used in the form supports the contrary. The form states that the authority to enter the working retiree program is derived from the provisions of the Retirement Actthe statute that this Court held in Layman did not create a contractual right. See Layman, 368 S.C. at 643, 630 S.E.2d at 271. Even assuming these forms, on their own, were binding contracts, we do not believe that the Retirement Systems had the authority to create contracts without the statutory directive of the legislature. In McKinney v. South Carolina Police Officers Retirement System, this Court decided this exact issue. 311 S.C. 372, 429 S.E.2d 797 (1993). In that case, the PORS terminated the plaintiff's retirement benefits, finding that the plaintiff did not establish twenty-five years of creditable service as required by the statute. On appeal, the plaintiff argued that certain correspondence from the Retirement Systems created a binding contract entitling the plaintiff to benefits not authorized by the statute. Id. This Court found that the source of the plaintiff's right is the statutes, not a contract, and that neither the plaintiff nor the PORS have the authority to convert a statutory right into a contractual one. Id. at 375, 429 S.E.2d at 798. Despite the dissent's contention that the facts of McKinney do not apply here, we believe the important premise that an agency cannot convert a statutory right to a contractual right maintains in this case. Any other holding would permit an executive agency to usurp the essentially legislative function of amending laws by binding the legislature through contract where it had no intention of being bound. We cannot support such a result. Additionally, in stating there is no basis for treating the TERI statute and the Working Retirees statutes differently, the dissent overlooks important distinctions that weighed heavily on our determination in Layman that the TERI statute created a contract and the SCRS statute did not. Employees who retired under TERI were required, as a condition of their retirement, to continue employment with an employer participating in the TERI system for the program period. S.C.Code Ann. § 9-1-2210(A) (Supp.2001). Importantly, state employees who retired under the Working Retirees statutes were not bound by this same obligation. Under those statutes, when an eligible employee retired, that employee had the option of returning to employment after having retired for sixty days or fifteen days (depending on the statute); and even their return was conditioned on whether an employer in the system chose to hire that employee. Id. § 9-1-1790(A) (Supp.2001) & 9-11-90(4)(a) (Supp.2002). The dissent claims that the Working Retirees statutes constituted a valid offer to eligible participants that was then accepted by the signing of Election of Non-Membership forms. We respectfully disagree. Because there was no guarantee of rehire, and because these retirees were under no obligation to return to work after retirement, we view the language of the Working Retiree statutes as providing a mere option to retirees, rather than an offer. Additionally, the TERI statute specifically provided in its text that a program participant makes no further employee contributions into the system. Id. § 9-1-2210(D). The Working Retirees statutes are void of this express guarantee that retirement contributions would not be required. With an absence of consideration in the Working Retirees statutes, these statutes provide no framework to which a contractual right can attach. See Alston v. City of Camden, 322 S.C. 38, 45, 471 S.E.2d 174, 177 (1996) (South Carolina law is clear that public employees generally have no contractual rights in their employment merely by virtue of a statute describing the terms of that employment.).