Appeals Court Holds That Erroneously Deducted Contributions Cannot Be Considered “Regular Compensation” to Determine an Employee’s Accidental Disability Retirement Allowance

On October 7, 2024 the Massachusetts Appeals Court issued a decision in O’Malley, et al. v. Contributory Retirement Appeal Board, et al., No. 23-P-1147 (2024). That decision affirmed a decision by the Contributory Retirement Appeal Board (“CRAB”), which had denied a claim by two former employees that retirement deductions for certain work they had performed should be included in calculating their accidental disability retirement allowances.

The two retirees were a Brockton Schools Resource Officer and a Brockton Schools custodian. In addition to their regular duties, each had performed additional work as school crossing guards. Both had retired for accidental disability after being injured at work. Historically, pay for this crossing guard work had been treated by the Brockton Retirement Board as “regular compensation” which is used to calculate retirement allowances under G.L. Chapter 32. Retirement deductions were made to the Retirement Board for this work by the retirees. Following proceedings that resulted in the Superior Court’s decision affirming CRAB’s rejection of their claim, the retirees appealed.

The Appeals Court ruled first on whether these additional payments are included in “regular compensation” under the statute. The record showed that while employed the employees “could work traffic duty whenever they chose to do so, traffic duty was not a part of their contractual duties, their hours varied, … compensation for traffic duty was irregular and akin to overtime pay [and they] were paid their overtime rate for traffic duty.” Based on this the court ruled that these payments “lack the ‘ordinary’ nature required for an employee’s regular compensation under G. L. c. 32, § 1.”

The court then addressed the retirees’ argument that they had relied on the fact that deductions were made. The court distinguished circumstances where an employee relies on a specific statute which is later changed and the facts in the case before it, which involved erroneous deductions. The court noted that the retirees’ claim was based “solely on the board’s erroneous practice of deducting retirement contributions” but that “there may be a degree of facial appeal to the equitable nature of the” claim. Nonetheless, the court decided that “expectations grounded in an administrative board’s error are not the same as expectations grounded in a statutory right” and that the error “is not a tenable basis to ignore the language and meaning of “regular compensation” under G. L. c. 32.” In a footnote the court noted that the Retirement Board had confirmed that the erroneous deductions would be returned to the retirees if CRAB’s decision was affirmed.

This decision shows that the courts will continue to construe “regular compensation” in accordance with the basic concept under Chapter 32 and PERAC’s regulations that irregular, occasional, one-time, and similar payments for work are different from regular, predictable, and recurring wages.

We are pleased to provide advice to employers regarding obligations under the Contributory Retirement Law, including issues involving appropriate deductions and remedies that involve the employer and its relationship to the retirement system.

This update is provided for informational purposes only and should not be considered legal advice.