|Legal Opinion: |
Text of Document: September 2, 1992
I spoke with both you and the city recorder about a question involving a demand by a former police officer for payment for unused sick and vacation pay. Based on a letter to the city from his attorney, he believes he is entitled to the payment on two contractual grounds: the municipal code provisons related to vacation and sick leave pay, and the city's custom and practice.
The recorder indicated the town paid the police officer for all his accrued vacation time at the time he left his employment with the town; therefore, I will focus on the question of whether the former officer is entitled to sick leave. However, the same legal considerations that govern the entitlement of municipal employees to unused sick pay generally govern their entitlement to unused vacation pay.
The Municipal Code Provison
The municipal code provision to which the former police officer points is section 1-803 (Section 1-802 governs vacation leave) of a municipal code drafted in 1982 by MTAS for the Town. However, our records show that code was never adopted by the town. If that is true, his reliance on that provision is misplaced.
However, it is doubtful that the former police officer would be entitled to the payment of unused sick leave even if the Section 1-803 had been adopted. Section 1-803 permits an employee to accrue sick leave time, but contains no language whatever suggesting that the employee is entitled to payment for unused sick leave.
The Tennessee courts have never considered the question of whether a municipal employee is entitled to payment for sick ( or vacation) leave under a statute, ordinance or employment contract that allows the accrual of leave, but does not expressly provide for a cash pay-out for unused leave. However, in Phillips v. Memphis Furniture Mfg. Co., 573 S.W.2d 493 (Tenn. 1978), the Tennessee Supreme Court was presented with a similar question regarding a claim for unused vacation pay on the part of a private employee. There, an employee handbook contained a vacation accrual schedule, and the express requirement that vacations had to be taken and that pay would not be given in lieu of them. An employee dismissed for cause shortly before taking his vacation insisted that he had a vested right in his vacation pay. The Court rejected his claim, interpreting the express requirement that vacations be taken to mean that the employee must take the vacation itself, and that he must be employed at the time he took the vacation. Because he had lost his job, the employee also lost his vacation time. It seems to me likely the Tennessee courts would follow the same logic if presented with a similar question involving a municipal employee.
The great weight of authority in other states is that a municipal employee claiming payment for unused sick leave pay must point to an express provision in a statute, ordinance or contract allowing a cash pay-out for such leave. [City of Clearwater v. Bekker, 526 So.2d 961 (Fla.App.2 Dist. 1988); Simpson v. City Blanchard, 797 P.2d 346 (Okla. App. 1990); J.C. Minton v. Town of Ahoskie, 205 S.W.2d 626 (1974); Rubenstein v. Simpson, 109 A.2d 885 (1985); and Halek v. City of St. Paul et al., 35 N.W.2d 705 (1949), in which the Minnesota Supreme Court declared that "where...the payment is granted is not made a contractual obligation, the grant thereof is a mere gratuity and creates no vested right."]
The former police officer in this case cannot do that. Section 1-803 provides only for the accrual of sick leave time; it contains no cash-out provision for unused sick leave.
In City of Blanchard, cited above, an Oklahoma appellate court was presented with the question of whether the city's former police chief was entitled to payment for unused sick leave pay under an ordinance that provided, "For each month in the employ of the City of Blanchard 1/2 day of sick leave will accrue to the employee [up to] 6 sick leave days in a year, which can accrue to a total of 45 days." That ordinance is substantively identical to Section 8-103. The Court rejected the former police chief's claim, declaring that the ordinance provided for earning and accumulating sick days, but "they must have been used or 'cashed in' for bona fide illness or injury in lieu of working days during the pay period preceding termination." The court further reasoned that:
This holding may appear to work a disadvantage to an employee who has not missed work due to illness, but it is no more 'unfair' than the related case of a healthy employee who never makes a claim against insurance benefits. The real benefit in either case is to afford some protection for the contingency of illness or injury.
Custom and Practice
The question of whether the former police officer is entitled to accumulated vacation and sick leave pay upon leaving the city's employment because of past custom and practice of the Town is more difficult.
You indicated to me that under a previous administration a former city employee (the police chief) was paid for his accrued vacation time upon leaving city employment sometime around August 1991, that a new administration took office around October 1991, and in February 1992 adopted a written policy that town employees are not entitled to accrued vacation and sick leave pay, and that the former police officer demanding payment for unused sick leave pay worked for the city until around October 1991, but didn't make his claim until a few days ago.
The town's payment to the former police chief of unused sick leave pay under a prior administration gives the former police officer an argument that the payment gave him a property right in a similar payment, and that the refusal of the city to make that payment to him is discriminatory treatment.
Some of the courts that have considered the question of whether a municipal employee is entitled to unused vacation and sick leave have weighed, at least indirectly, the prior practice of the municipality in question. It is extremely important to note that the Phillips Court was one of them. There, in one breath, the Court outlined the city's argument that the employee handbook required the employee to be actually employed at the time of the vacation, and in the next declared, "The proof is that the defendant [city] had not in the past paid any amount to a discharged employee as vacation pay." Those are ominous words coming, as they do, from the Tennessee Supreme Court.
In Blanchard, the Court observed, without comment, that the city itself pointed to the fact that it had never paid an employee for unused sick leave upon termination as evidence of its intent not to pay employees for such time. The court of Appeals of Iowa in Jackson v. City of Ottumwa, 396 N.W.2d 794 (1986) in denying a municipal employee payment for unused sick leave, implied that if the employee had been able to prove his claim that the city had paid similar claims to other employees the result would have been different.
However, a North Carolina and a Florida case give the Town a reasonably solid argument to support its denial of the former police officer's claim based upon custom and practice.
In Town of Ahoskie, cited above, a city ordinance provided that "Only employees who retire and have 20 years continuous service may [emphasis is mine] be paid for the amount of accumulated sick leave to his credit as terminal leave [accrued annual leave] pay. Provided further that payment may be made only by Council action." A police officer who retired after 20 years continuous service demanded payment for 169 days of accrued sick leave. He argued that he was entitled to payment for his unused sick leave because at least five other city employees retired during the time after the ordinance was adopted and before the police officer retired, and the city paid in full the accrued unused sick leave of each of them.
Not so, said the North Carolina Court of Appeals. The ordinance in question provided that the city "may" pay for unused sick leave, and a motion in city council meeting that the police officer be paid for his accrued sick leave didn't pass. The court recognized that the police officer was the first retiring employee of the city not to be paid for unused sick leave time, but declared that the word "may" in the ordinance gave the city council discretion in that area.
We are not dealing with a vacation or sick leave ordinance with that kind of built-in discretion in your case, but that appears to be a distinction without a difference. The Town had no legal obligation to pay unused sick (or vacation) leave to either the former police chief, or to the former police officer in your case. (That would have been true even if Section 1-803 of the municipal code had been was effective.) In that respect, such payments as were made were discretionary; no right to the payments arose under statute, ordinance or contract. Under the logic of Town of Ahoskie, the exercise of discretion relative to the payment to municipal employees of unused sick leave may have a discriminatory effect without being fatal.
City of Clearwater, cited above, supports that conclusion. There police officers sued the city alleging that the city's termination of a sick leave conversion benefits was a violation of the equal protection and due process clauses of the Florida and U.S. Constitutions. The city had adopted a cafeteria benefits plan containing a sick leave benefits component. That component provided that employees who remained with the city until retirement could convert a certain percentage of their unused sick leave into terminal pay. The city manager unilaterally withdrew the sick leave conversion plan when he determined that its cost was excessive.
Between the time the plan was introduced and the time it was withdrawn, none of the complaining police officers attempted to retire. Some of them selected new benefits, and some of them refused to select new benefits, maintaining they had a vested right in the "old" sick leave benefit. However, two other city employees (including a police officer) did retire during that period. The city manager approved a cash payout for their unused sick leave.
The trial court had found the complaining police officers had acquired a property right in the old sick leave conversion benefit which was entitled to due process protection. The District Court of Appeal of Florida, Second District, overturned the trial court, saying, "We cannot find any basis under contract or otherwise which would raise these benefits to the level of a property right." The Court's reasoning on that point is worth quoting at length:
The record in this case disclosed that the city's fringe benefit programs had been altered over the years by unilateral city action. The appellees were not represented by a union or other entity and no negotiations took place between the parties that culminated in the city's extension of this additional sick leave benefit. There was no bargaining between the parties, but only an opportunity provided to the appellees to choose among several new available benefit option. Mere expectancy by the appellees are insufficient to create a binding contract requiring the city to provide this sick leave benefit to the appellees on a continuing basis for any definite period of time. [Citing Muller v. Stromberg Carlson Corp, 427 So.2d 266 (Fla. DCA 1983). Emphasis is mine.]
The complaining police officers had not "acquired a legitimate claim of entitlement to this new sick leave benefit," concluded the Court.
The Court also overturned the trial court's decision that the change in the sick leave conversion plan constituted a violation of equal protection. It reasoned that while under the federal and state equal protection clauses, governmental acts that classify persons arbitrarily may be invalid if they result in treating similar people in a dissimilar manner, the two city employees permitted to retire under the old sick pay conversion plan and the complaining police officers were not similarly situated. The difference was that:
... unlike Williams and O'Neill [the two city employees permitted to retire under the old sick leave conversion plan], none of the appellees sought to exercise their rights to obtain the sick leave conversion benefit during the period when the new plan was in effect...The different treatment afforded by the city to these two groups of employees, i.e., those retiring within the effective period of the new sick leave plan, and those continuing in the city's employ beyond the termination date of the plan, was justified in light to the distinct factual positions of the two groups and the fact that as we have previously determined, the city was under no obligation, contractual or otherwise, to continue to offer these benefits. [Emphasis is mine.]
Applying City of Clearwater to the former police officer in your case, that officer's due process argument would probably fail because at most he had a mere expectancy in payment for his unused sick leave--and probably not even that. Such expectancy as there was had to arise solely from the town's payment to the former police chief for his unused sick leave pay. But he apparently didn't learn about that payment until months after he left employment with the town; otherwise, he would have applied for payment of his unused sick leave upon his termination. The town was under no obligation to take the initiative to pay him for his unused sick leave based upon such a payment to the former police chief because it had no obligation under statute, ordinance or contract to make such payments to either employee.
The former police officer's equal protection claim would probably also fail on similar grounds under City of Clearwater. A salient point of that case was that the City of Clearwater could change its sick leave benefit plan at will as long as it didn't discriminate between employees within the same class where the employees within the class had a vested interest in the sick leave benefit. Vesting in neither the former police chief nor the former officer in your case occurred, and the police officer waited to make his claim for the payment of unused sick leave six or seven months after the written policy prohibiting such payments was promulgated by the town under a new administration.
If the facts I have are correct, there is no record of discrimination against the former police officer. He can point to no application to the town for payment of unused sick leave, and to no rejection of the application by the town, from the date he was employed until after the town adopted a formal policy against paying for unused sick leave. The town made a gratuitous payment of unused sick leave to the former police chief, but that payment, in and of itself, didn't represent discrimination against the former police officer in your case. He continued to work for a couple or months or so after the former police chief left employment with the city, but neither during that period nor at the time of his termination did he ask for sick leave pay. (He did ask for and was paid for his unused vacation time, also a gratuitous payment.) His present demand follows the adoption of a written policy prohibiting the payment for unused sick leave, a policy the city clearly had the right to adopt at will.
Let me emphasize here that while I think the town has a reasonable good case, if it comes to that, if I had to try it, I would feel a lot more comfortable if the town hadn't paid the former police chief sick leave pay. In the background lurks the one sentence in Phillips about proof the city had not in the past paid vacation pay to any employee; I can envision a court fixing on that sentence and disregarding "out-of-state-law" in City of Ahoskie and City of Clearwater. For that reason, let me suggest that you run this letter by whoever will have to try it if the former police officer challenges your denial of his claim. He may have some other ideas and views on how this case would turn out. This letter will give him a place to start.
Sidney D. Hemsley
Senior Law Consultant
[Note: On 11/4/04 Sid Hemsley reviewed upon request fo Rex Barton and declared this opinion still valid. -- FAO