Final Non-Precedential Decision Adopted: April 25, 2001
By: Howard Schwartz, DPA Chief Counsel
DECISION
This matter was heard by Mary C. Campisi, Administrative Law Judge (ALJ), Department of Personnel Administration (DPA), at 9:00 a.m. on March 20, 2001, at
Sacramento, California.
Appellant was present without representation.
W. Gregory Day, Senior Tax Counsel, represented the State Board of Equalization (BOE), respondent. Hortencia Morales, Consultant, Classification and Compensation Division, represented DPA.
Evidence having been received and duly considered, the ALJ makes the following findings of fact and Proposed Decision.
I - JURISDICTION
On December 15, 1999, appellant filed an out-of-class grievance with BOE. On April 11, 2000, it was finally denied by the BOE at the third level. On April 21, 2000, appellant appealed the Level 3 Denial to DPA. On November 16, 2000, DPA issued a preliminary determination denying the claim. On December 19, 2000, appellant appealed the preliminary determination through his then counsel, Donna N. Shioya, and requested an evidentiary hearing in the matter.
Government Code sections 19815.4(e) and 19818.16 provide for DPA to review and consider a denial of an out-of-class grievance from an excluded employee so long as the employee files a timely appeal. The time for filing an appeal is within thirty (30) calendar days after service of the preliminary determination. Allowing five (5) days for service by mail, appellant’s appeal is considered timely. Therefore, it is concluded that this matter is properly before DPA for review.
II - CAUSE FOR OUT-OF-CLASS GRIEVANCE
Appellant claims that from July 1995 through December 1999, he worked out-of-class as a Business Taxes Administrator II (BTA II).
As relief from working out-of-class, appellant initially requested permanent reclassification to BTA II and a back-pay adjustment for the last 12 months. At the hearing, appellant requested “lost wages” of $14,507.74 for the period from July 1995 forward to retirement, lost potential retirement income, and attorney’s fees in the amount of $1,896.70.1 Appellant also requested punitive (treble) damages for DPA’s conduct in falsely stating its preliminary review was a final review and for falsely stating that appellant had no further appeal rights. He also requested punitive damages for DPA/BOE withholding documents relating to his claim.
Pursuant to Government Code section 19818.16, appellant is only entitled to reimbursement for out-of-class work for the 12-month period immediately preceding his filing of the grievance in December 1999.
III - PRELIMINARY STATEMENT OF FACTS
The BOE was created in 1879 and charged with responsibility for ensuring that county property tax assessment practices were equal and uniform throughout the State of California. Currently, the tax programs administered by BOE are concentrated into the following areas: sales and use taxes, property taxes, special taxes and the tax appellant program.
Beginning in 1989, BOE established various investigative sections to handle investigations of tax fraud for the programs it administers. In 1989, BOE established the Cigarette Tax Enforcement Team (CTET) in STD to investigate cigarette tax evasion. In 1993, BOE established the SES in SUTD to investigate fuel tax evasion. In 1995, the enforcement responsibility for fuel tax evasion, along with new diesel tax law enforcement, was relocated to STD. The new section at STD was named the Fuel Taxes Investigation and Enforcement Section (FTIES). Also in July 1995, the SES was renamed the Special Investigations Section (SIS). It remained in SUTD but its new function was to criminally investigate sales and use tax evasion. By July 1995 there were three distinct investigative sections handling tax evasion programs—CTET, FTIES and SIS.
In 1997 BOE contracted with the Commission on Peace Officer Standards and Training (POST) to audit its investigative programs. The purpose was to assess organizational structure and operations and to ensure that the investigative functions were being efficiently performed. Based upon the POST review and recommendations, BOE decided to consolidate the criminal investigation sections into one division. That division would handle all external criminal tax evasion cases. In January 1999, a new Chief was selected; and he was assigned to report directly to the Director on all investigative matters. Thereafter, information and data were gathered; and a proposal for a new Investigations Division was presented to the Board at BOE in May 1999. In 2000 the Investigations Division was formally established. The separate investigative programs, including CTET, FTIES and SIS, were consolidated within its structure.
Appellant served as the STA II in charge of the SIS from July 1995 until its absorption into the new Investigations Division in 2000.
IV - SPECIFICATIONS/COMPENSATION FOR CLASSIFICATIONS
The classification of STA II is one in a series of seven Tax Auditor classifications used by BOE to perform professional, supervisory, or managerial responsibilities in its business taxes audit program. An STA II either plans, directs and evaluates the work of an audit crew, unit or program, or, in the Hearing Section, conducts tax hearings.
More specifically, an STA II working in a large district office supervise a large group of Associate and Staff Tax Auditors conducting the most difficult field audits. An STA II in a district office which is not large works through multiple subordinate supervisors to direct the office’s audit programs. An STA II assigned to a headquarters’ unit supervises an audit group performing the most difficult and highly specialized audit functions. An STA II in the Legal Section conducts formal hearings on taxpayer’s protests of audit procedures or findings, recommends the next appropriate step for cases, and presents tax cases before the Board.
Typical audit duties include conducting audits or financial examinations of taxpayer’s accounts and records; meeting with and obtaining the cooperation of persons subject to tax and regulation; creating and maintaining an atmosphere of good will in beginning and completing an audit and disclosing findings critical in nature; analyzing data and drawing sound conclusions; analyzing situations accurately and taking effective action; preparing clear, complete and concise reports; and communicating effectively.
The classification of BTA II is one in a series of three Business Tax Administrator classifications used by BOE for supervisory and managerial positions with responsibility for directing the operations of a Department of Business Taxes Field facility or a major headquarters tax program involved in the administration of the Sales and Use Tax law, the Motor Vehicle and Use Fuel laws and various State excise tax laws. Each BTA classification requires responsibility for managing a “total (audit and compliance) tax program.”
A BTA II who works in a branch office (comprised of 25 or more total staff including 15 or more professional staff) is responsible for managing, through multiple subordinate supervisors, the total (audit and compliance) tax program in the office or a group of branch offices. A BTA II in headquarters functions as one of the following unit supervisors: Special Taxes, Environment Fees and Internal Audit.
It was undisputed at the hearing that BTA II is a higher classification than STA II. The pay range is approximately five percent (5%) higher than the pay range for STA II. Currently, the STA II pay range is $4,960 - $6,028. The pay range for BTA II is $5,201 to $6,284.2
The primary distinction between the two is that the STA II supervises strictly an audit function and a BTA II supervises a tax program encompassing both audit and compliance functions.
V - STANDARD OF REVIEW
In determining whether or not appellant’s assigned work was performed at the higher classification of BTA II, one must evaluate the kind and variety of duties performed and the relative amount of time spent performing the duties. An employee will be considered as working in a higher classification when he is performing the full range of duties of the higher class on a regular and consistent basis (at least 50% of the time).
During the period December 1998 and December 1999, when appellant was the Section Supervisor for the SIS, he reported to the Assistant Chief of the FOD of SUTD. He, in turn, directly supervised three employees in the Headquarters’ Office—two Business Tax Specialist I’s and one Office Technician. He also directly supervised three STA’s who, in turn, supervised the three field offices (Sacramento, Torrance and Riverside). Each field office contained eight to nine employees.3 The field offices included a ratio of 16 audit staff to 9 compliance staff.
Auditors typically perform or supervise audit functions. Business Taxes Compliance Specialist and Business Tax Representatives perform collection and compliance functions. Business Tax Specialists provide technical advice or guidance to audit and compliance staff and serve as highly skilled technical experts. However, as set forth below, the staff of appellant’s offices performed integrated review audits and investigative work.
According to testimony and documentation provided by appellant, the mission of the SIS between December 1998 and December 1999 was to criminally investigate felony sales and use tax evasion for BOE in much the same manner that the staff of SES had previously investigated felony fuel tax evasion.
Appellant submitted copies of the duty statements for his position and audit and compliance staff positions which he supervised. Those duty statements demonstrated that appellant’s primary responsibility was to plan, organize, direct and monitor tax audits and fraud investigations performed by his subordinate staff and to assist in the prosecution of tax fraud. He was responsible for directing the time allotted for audits and investigations and for serving as a technical resource to his first-line supervisors on the most complex audit and/or fraud investigations. He was similarly responsible for coordinating technical support with the Attorney General’s office on development of legal opinions, accusations and prosecution. The STA I’s, whom he directly supervised, planned, distributed and evaluated the workload of the staff performing audits and fraud investigations and completed special assignments of a sensitive or complex nature including appearing in court on fraud cases and overseeing the preparation and serving of subpoenas and providing staff guidance. The duties assigned to the STA II and to STA I’s in the SIS were clearly broader than those provided for by the specification for the auditor series. The duties included overseeing a program of criminal fraud investigation including the supervision and performance of fraud investigations, criminal audits and prosecution.
Appellant testified that he supervised a total staff of over 35 employees including 16 auditors and nine professional compliance staff. (As set forth above, a BTA II supervises 25 or more staff including 15 or more professional staff.)
Appellant also testified that he had responsibility for managing, through the subordinate supervisors, the total tax program for investigating sales and use tax evasion, not just a tax or audit project. He stated that the section was not designed to perform the civil audit function or standard compliance checks. Instead, each of the audit and compliance staff worked to develop tips, which were pursued to determine if there was probable cause to prosecute cases of tax evasion. Irrespective of their actual classification, the professional staff wrote affidavits for search warrants; developed searches with peace officers; worked with the Department of Justice; and worked with other law enforcement agencies to perfect search warrants. They would then seize and store documents and perform criminal audits to determine the tax loss in dollars to show whether there was enough evidence to pursue a felony conviction. (The standard was $25,000 during a 12-month period.) Appellant also testified that the professional staff interviewed witnesses; issued third-party subpoenas for records; and developed prosecution packages. Staff also “knocked on the door of prosecutors” and testified at preliminary and court hearings. They even wrote up press releases. The structure of the unit was such that audit and compliance crews worked together to garner tax fraud convictions.
Appellant testified that the structure for the SIS paralleled the structure proposed by the Investigations Division. The employees performed in specialized (commingled) teams to investigate and prosecute tax evasion, rather than in separate compliance and tax crews.
VI - PRIOR FINDINGS OF BOE AND DPA
BOE found that appellant supervised a number of compliance staff, but the majority of his staff consisted of tax auditors. Further, BOE found that appellant did not directly supervise any Business Tax Compliance Supervisors, but rather supervised three STA I’s. BOE relied upon “past and current practice” to determine that the classification of BTA II was only to be used when the functions being supervised included “separate” audit and compliance crews who were supervised by “separate” classifications (i.e. STA’s and Business Taxes Compliance Supervisors). It then concluded that because appellant’s audit and compliance staffs were functioning in three commingled crews, appellant should not be considered to be working out of class as a BTA II.
In its preliminary review, DPA found that appellant supervised the number of professional staff within the range typically supervised by a BTA II. DPA found that the audit to compliance staff ratio he supervised was within the ratio typical for a BTA II. DPA relied upon BOE’s statements that most of its BTA II’s structure their staff into separate audit crews and compliance crews and assign first-level supervision of these crews to separate audit and compliance supervisors, respectively. (It noted appellant supervised only auditor supervisors rather than both audit and compliance supervisors.)
Based upon the lack of division of subordinate staff and the lack of diversity at the first level of supervision, DPA assumed that the separation of audit and compliance functions into crews with compliance specific and audit specific levels of review (by first line supervisors) constituted a scope of work and level of specialization indicative of a “total tax program.” It also assumed that audit and compliance staff working jointly in a single unit, such as appellant’s constituted a project or case specific workload. Consequently, DPA concluded that, while appellant’s position was “substantial and approaching the requirements of a BTA II,” it did not meet the requirements of separation of the audit and compliance functions into separate crews and function-specific first level supervision. Therefore, appellant was not supervising a total tax program and was not working out of class as a BTA II.
VII - APPELLANT’S RESPONSE
Appellant challenged BOE’s and DPA’s differentiation between the supervision and oversight of a unit consisting of separate audit and compliance crews and a unit consisting of crews containing both audit and compliance staff. He considered it a false distinction, since in both instances supervision and oversight may be exercised over a program and all of its elements--whether the elements are physically separated by crews or intermingled within a crew.
Appellant testified that SIS’s decision to use three crews with combined audit and compliance staff was done to reduce staff to supervisory ratios (rather than have 6 tiny crews, 3 audit and 3 compliance) and to recognize the work being done by SIS staff—investigations of felony sales tax evasion, which included various elements of the audit and the compliance functions. It was not done because the section was performing audit specific work or a project. Further, appellant testified that he used only STA I’s for crew chiefs because at the time the section was formed, the best individuals for the first level supervisor positions happened to be in the STA I classification. Although they could have been reclassified by transfer, management directed him not to do so at that time. Finally, appellant testified that when his Southern California STA I’s were absorbed in 2000 into the Investigations Division, management did, in fact, reclassify them as BTA I’s. The reason for the reclassification was to permit those employees as well as their crews to function as investigation specialists performing the broad range of investigative functions including auditing and compliance work.
As support for his testimony, appellant placed in the record a February 25, 2000, memorandum from the Chief of the new Investigations Division to the Chief of the Personnel Management Division. The memorandum outlined the history of criminal enforcement at BOE. It also stated that there were, “confusing standards and lines of authority prevalent in the existing investigative units, as well as the variety of approaches to conducting investigative work.” The memo went on to recommend restructuring the investigative units into a single division. Specifically it stated that because field investigators were to be responsible for investigating all types of tax evasion, “staff will no longer have one main function (audit or compliance) as was the situation in the past and will be required to do additional duties over and above what normal audit and compliance staff have been assigned to do.... This staff will be required to conduct field investigations and perform audit work.” The proposal which was submitted to the Personnel Chief for adoption included using BTA I’s to provide field supervision of the consolidated (commingled) staff positions and a BTA II’s to oversee the field operations and the level-one supervisors. In essence, what was proposed was a model very similar to the SIS consolidated crews handling criminal investigations of sales and use tax evasion under appellant’s supervision between July 1995 and December 1999.
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PURSUANT TO THE FOREGOING FINDINGS OF FACT THE ALJ MAKES THE FOLLOWING DETERMINATION OF ISSUES:
Government Code section 19818.18 provides an employee who works out-of-class with the right to request reimbursement by filing an appeal with DPA. Reimbursement may be granted only if the employee proves the he has performed duties outside the scope of his present classification. If the employee can establish satisfactorily that he performed such duties, DPA has the responsibility for determining whether he is entitled to be reimbursed for duties performed pursuant to Government Code section 19818.18. In accordance with the provisions of Section 19818.16(a) retroactive payment of an out-of-class claim shall be awarded for a period no greater than one year preceding the filing of the claim.
In seeking reimbursement, an appellant has the burden of proof and the burden of going forward in the appeal hearing. In determining whether or not the assigned work is in a higher classification, the kind and variety of duties performed and the relative amount of time which the employee spent in performing the duties must be evaluated.
In this case, appellant demonstrated that he had 100% responsibility for overseeing a special section established by BOE to conduct audits and investigations of sales and use tax evasion. SIS, which he supervised, came into being in 1995 and its purpose was to gather information from audits conducted by field offices and establish criminal violations by an audit of the records and other information gathered during investigation. From July 1995 through December 1999, the work and function paralleled other investigative units performing investigation functions, except that in appellant’s section the audit and compliance functions were intermingled and the auditors and compliance personnel handled both audit and investigatory duties. Irrespective of their actual classification, the evidence established his staff primarily were investigation specialists, seeking out records and performing criminal audits and prosecution. In the SIS even the first-line supervisors (although designated as STA I’s) performed both audit and investigative functions including assisting in prosecution after the fraud investigation was completed.
Further, the SIS, like the CTET and FTIES, worked independently in effectuating a criminal tax fraud program, which was separate and distinct from BOE’s other tax programs. When the function and supervision were absorbed into the new Investigations Division at BOE, STA’s whom appellant directly supervised, were reclassified as BTA I’s in recognition of the specialized work staff in the unit performed.
The distinction made by BOE management and perpetuated in the original DPA analysis was that if appellant was supervising only STA’s and the preponderance of his staff were auditors, he could not have been supervising a total (audit and compliance) program. However, it was clearly demonstrated at the hearing that appellant’s subordinate staff consisted of both tax and compliance employees and, further, those employees were not performing the usual and customary duties ascribed to their classes. It was also established that the entire audit and compliance program for criminal investigation of sales and use tax evasion was under appellant’s supervision.
Therefore, it is concluded that appellant was not supervising merely an audit group nor was he responsible for merely an audit function. Appellant performed a much broader supervisory role as the head of SIS. Despite the fact that appellant’s staff contained more auditors than collection personnel and despite the fact that he did not directly supervise anyone designated as a Compliance Program Supervisor, his first line supervisors and their staff performed functions, which were part and parcel of a total (compliance and audit) program intended to curb sales and use tax evasion.
Based upon the above, it is concluded appellant’s duties more nearly fit the classification of BTA II than STA II; and appellant was required to work out-of-class between December 1998 and December 1999, thereby justifying his claim for out-of-class compensation.
Government Code section 19818.16(b) limits appellant’s recovery to one year’s salary differential. Accordingly, appellant should be awarded the difference between the salary for a BTA II and a STA II for the period December 15, 1998, through December 14, 1999. All other claims for reimbursement should be denied. DPA is without authority to award damages or attorney’s fees under this provision.
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WHEREFORE IT IS DETERMINED
that the claim for out-of-class compensation effective December 15, 1998, through December 14, 1999, is granted. All other claims for compensation are denied as untimely and/or outside the statutory time limit for a claim of reimbursement.
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FOOTNOTES
1. Appellant stated that he was required to hire an attorney to find out about his appeal rights and to file the appeal since DPA sent him two separate letters which provided misinformation regarding his appeal rights. On November 16, 2000, the Policy and Operations Division at DPA sent him a letter telling him that the claim was denied and that it was the final level of review for out-of-class claims. (In fact, it was a preliminary denial and the letter failed to state that appellant had appeal rights for 30 days following service of the preliminary determination.) Appellant’s attorney, acting on legal advice from another attorney, telephoned the Statutory Appeals Unit at DPA and was advised to file a timely appeal. An appeal was filed and a hearing date scheduled. On January 9, 2001, the Classification and Compensation Division of DPA sent appellant a letter stating in part, “a hearing may not be particularly helpful in deciding your claim unless you are presenting additional evidence.” The letter also stated that the materials relied upon by DPA in making the preliminary determination were attached. They were not. Again appellant’s attorney contacted DPA to find out if the letter was “in error,” and to obtain the materials. The letter was in error; and the materials were mailed. The cost to appellant was well over the amount that could be recouped statutorily for the out-of-class claim.
2. The pay range for the classifications between December 1998 and December 1999 were not made part of the record.
3. In the Sacramento Office (which included Bakersfield) there were five Associate Tax Auditors, one Business Taxes Specialist I, one Business Taxes Compliance Specialist and one Business Taxes Representative. In the Torrance Office there were two Associate Tax Auditors, two Tax Auditors, one Business Taxes Specialist, two Business Taxes Compliance Specialist, one Business Taxes Representative and one Office Technician. In the Riverside Office there were four Associate Tax Auditors, four Business Taxes Compliance Specialists and one Office Technician.
