Simonds v. New York City Housing Authority, 39 N.Y.2d 260 (1976)

Lump-sum payments for accrued annual leave and retirement terminal leave, paid upon retirement, are not included in the calculation of retirement benefits based on the employee’s final year’s salary.

Summary

The case concerns a retired New York City Housing Authority lawyer who sought to include lump-sum payments for accrued annual leave and retirement terminal leave in the computation of his retirement benefits. The court held that these payments, made in lieu of taking time off before retirement, were not part of the “earnable” compensation during his last year of service and, therefore, could not be included in the retirement benefit calculation. This decision hinged on the interpretation of the Administrative Code and the established practice of excluding such payments from the retirement salary base.

Facts

The petitioner, an attorney, retired from the New York City Housing Authority at the mandatory retirement age. He had been employed for 23 years and his gross salary during his last year was $31,221.79. Upon retirement, he received two cash payments totaling $12,749.57, representing accrued annual leave and retirement terminal leave. He sought to have these payments included in his final year’s salary for the purpose of calculating his retirement benefits.

Procedural History

The Special Term ruled against the petitioner, holding that the lump-sum payments were merely a substitute for time off and could not be added to his compensation for retirement benefit calculation purposes. The Appellate Division unanimously affirmed this decision. The case then went to the New York Court of Appeals.

Issue(s)

Whether lump-sum payments made to a retired employee for accrued annual leave and retirement terminal leave should be included in the computation of retirement benefits under the Administrative Code, specifically section B3-42.0 (subd. a, par. 7), which defines the salary base as the “member’s annual salary or compensation earnable by him for city-service in the year prior to his retirement.”

Holding

No, because the payments for terminal leave and retirement terminal leave were not “earnable” during the year prior to retirement, as required by the Administrative Code. They accrued upon retirement and were paid after the employee left city service.

Court’s Reasoning

The court reasoned that the Administrative Code provision B3-42.0 (subd. a, par. 7) explicitly defines the basis for retirement benefits as the compensation “earnable” in the year prior to retirement. The court emphasized that the payments in question were not earned during that year but rather accrued upon and were paid after retirement. The court also pointed to the historical context, noting that prior to 1964, employees took terminal leave before retiring, and the lump-sum payments were introduced as a substitute for this deferment of retirement. The court distinguished this case from cases like Kranker v. Levitt, where accumulated vacation credits had been consistently included in the base salary before a statutory change. Here, the consistent policy had been to exclude such lump-sum payments. The court also differentiated the case from situations involving actual salary increases or payments for services rendered, such as in Board of Educ. of Union Free School Dist. No. 3 of Town of Huntington v. Associated Teachers of Huntington, where a retirement bonus was deemed a salary increase. The court noted that the consistent practice of excluding terminal leave payments from the retirement salary base, based on the code provision and a 1963 Corporation Counsel opinion, was a key factor in its decision. The court concluded that there was no legislative intent to include such payments in the calculation of retirement benefits. As stated by the court, “The code provision is unequivocal in establishing as its basis the compensation earnable in the year prior to retirement.”