Chief Required To Repay $174k In Retirement Benefits

Gary Walker was employed as a police officer with the City of Eden, North Carolina, from 1968 until his retirement on April 1, 1994. During his employment, Walker was a member of the North Carolina Local Government Employees Retirement System (LGERS). Upon his retirement, Walker began receiving monthly retirement benefits.

Walker was subsequently recruited to work as a police officer for the Town of Stoneville, North Carolina. The Town was a participating employer in LGERS. Walker informed the Town’s police chief that he was receiving retirement benefits from LGERS and that he was willing to work for the Town as long as his employment did not jeopardize his retirement benefits. Walker then met with the Town’s finance officer, who assured Walker that he could work for the Town as long as (1) he did not receive regular employee benefits from the Town, (2) he did not join LGERS, and (3) he did not receive compensation in an amount exceeding the maximum compensation allowed under a North Carolina statute.

In July 1995, Walker returned to work as a police officer with the Town, and by January 1996, Walker was regularly working 40 hours per week. Sometime during 1996, the Town promoted Walker to Police Chief. From January 1996 through November 2006, the Town did not enroll Walker as an LGERS member nor did it make retirement contributions on his behalf. During this time, Town officials informed Walker that his employment with the Town complied with state laws governing LGERS.

In late-2006, LGERS learned of the details of Walker’s employment with the Town and notified him that his retirement benefits would be suspended on the basis that he returned to regular employment with the Town. After an administrative hearing, LGERS required Walker to reimburse it the $174,283.37 in retirement benefits he received while working for the Town. Walker challenged the LGERS decision in the court system.

Walker’s main argument was that LGERS should be “equitably estopped” from seeking repayment of the benefits, and that the Town was acting as an agent of LGERS in any misrepresentations made to Walker. The North Carolina Court of Appeals disagreed, and upheld the repayment order.

The Court’s decision turned on whether the Town officials who made statements to Walker were the “apparent agents” of LGERS. An “apparent agency” exists where “a person by words or conduct represents or permits it to be represented that another person is his agent.” If that occurs, the person (in this case LGERS) “will be estopped to deny the agency as against third persons who have dealt, on the faith of such representation, with the person so held out as agent, even if no agency existed in fact.”

The Court found that Walker failed to establish that the Town was the apparent agent of LGERS: “There is no indication in the record that LGERS by words or conduct represented or permitted the Town to represent that the Town is its agent. Walker did not suggest that LGERS in any way referred him to the Town for information regarding his retirement benefits. Nor did he say that he consulted with the Town’s officials because of a belief that they were respondent’s agents.

“Walker’s arguments overlook the critical elements of establishing apparent agency. Walker was required to show (1) representations through words or conduct of LGERS to Walker indicating that the Town was its agent and (2) that Walker dealt with the Town and relied upon the Town’s representations in reliance on respondent’s representations regarding the Town’s agency. None of Walker’s contentions relate either to representations to him by LGERS regarding agency or Walker’s reliance on those representations of agency.”

Walker v. Department of State Treasurer, 2010 WL 3633752 (N.C. App. 2010).

Note: There is no mention in the case of any claim Walker might have brought against the Town for relying on the representations made by Town officials.

This article appears in the November 2010 issue