295 P.3d 977
Haw. Ct. App.2013Background
- Petitioners Fratinardo and Self, retired Hawai'i police officers, sued ERS challenging its exclusion of car, uniform, and firearm allowances from compensation in calculating retirement benefits.
- Petitioners and their employers did not contribute to ERS on the allowances; contributions were based on regular compensation only.
- ERS calculated pension using average final compensation, excluding the allowances, under HRS Chapter 88.
- Petitioners filed a Petition for Declaratory Relief; ERS hearing officer recommended against them; Board adopted and affirmed the recommendation with minor changes.
- Circuit Court affirmed the Board’s Final Decision; Petitioners appealed on the statutory meaning of 'compensation' and ERS’s construction.
- Court emphasizes ERS’s long-standing practice of excluding these allowances as non-compensation and grants deference where statute is ambiguous.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of compensation | Fratinardo asserts broad meaning includes allowances. | ERS contends compensation is pay tied to services, excluding reimbursements. | Ambiguity exists; defer to ERS construction as not palpably erroneous. |
| Are allowances compensation or reimbursements | Allowances are part of compensation under ordinary meaning. | Allowances are reimbursements not tied to services. | ERS’s interpretation that allowances are reimbursements is upheld. |
| Effect of statutory amendments on interpretation | Legislative history supports including allowances as compensation. | Subsequent definitions (e.g., 88-21.5(a)) do not undermine ERS's view and show allowances are separate. | ERG’s interpretation remains not palpably erroneous; amendments do not control prior retirement disputes. |
| Deference to administrative construction | Court should independently interpret ambiguous terms to favor petitioners. | Court should defer to ERS’s expertise when language is ambiguous. | The agency’s construction is entitled to persuasive weight and not clearly erroneous. |
| External aids to interpretation (legislative history, tax, etc.) | Tax treatment and legislative history undermine ERS view. | Legislative history and tax provisions do not compel inclusion of allowances as compensation. | Extrinsic aids do not overturn ERS’s long-standing construction. |
Key Cases Cited
- Leslie v. Bd. of Appeals of County of Hawaii, 109 Hawai'i 384 (2006) (standards for review of agency decisions under HRS 91-14(g))
- Ka Pa’akai O Ka’Aina v. Land Use Comm’n, 94 Hawai'i 31 (2000) (statutory/constitutional review standards for agencies)
- Roxas v. Marcos (Estate of), 121 Hawai'i 59 (2009) (ambiguity and contextual interpretation principles)
- In re Water Use Permit Applications, 94 Hawai'i 97 (2000) (contextual approach to statutory interpretation (pari materia))
- Vail v. Employees’ Retirement System, 75 Haw. 42 (1993) (deference to agency construction of statute under ambiguity)