Friday, January 23, 2015
C.A. Upholds Constitutionality of Public Employee Pension Cuts
By KENNETH OFGANG, Staff Writer
A statute reducing retirement benefits for some public employees may be applied to workers hired between the law’s effective date and the expiration of collective bargaining agreements otherwise requiring a greater benefit, the Fourth District Court of Appeal ruled yesterday.
Div. One said application to those employees of the defined benefit formulas in the California Public Employees’ Pension Reform Act of 2013 does not violate the state Constitution’s contract clause. The panel also held, however, that the plain language of the act itself bars employers from applying another part of it, a substantial increase in employee contributions to their retirement plans, to those employees.
The decision partially reverses a ruling by San Diego Superior Court Judge Timothy Taylor in favor of San Diego County, in a suit brought by the deputy sheriffs’ union against the state, the county, and the county retirement system.
The state limited its participation to a defense of the act’s constitutionality, while the retirement system said it would implement whatever ruling the courts handed down, leaving the county to actively defend its implementation of the statute.
Impairment of Contract
The union alleged in its complaint that the act unconstitutionally impaired the county’s obligations under two collective bargaining agreements which expired in June of last year, to the extent it subjected employees hired between Jan. 1, 2013 and the pact’s expiration date to a new retirement formula. The act effectively changed the retirement formula for those employees from “3%@55”—meaning that employees could retire at age 55 and receive three percent of their “pensionable compensation” for each year of service—to “2.7%@57.”
Presiding Justice Judith McConnell rejected the union’s argument, as had the trial judge.
“Generally, the terms and conditions of public employment are not protected by the contract clause because they are controlled by statute or ordinance, not by contract,” McConnell explained. While the clause protects public employees’ vested benefits, she added, the deputies affected by the act have no vested pension benefits because they were not working for the county before the act took effect.
Longstanding California law, the jurist added, permits the Legislature to prospectively amend retirement benefits, as long as it has not limited its own right to do so. Cases also hold that an employee lacks a reasonable expectancy of a contractual benefit prior to commencing employment, McConnell noted.
She went on to say that it was unnecessary to determine whether application to the affected deputies of the act’s increase in employee contributions was unconstitutional, because it clearly violated the act itself.
The act provides that employees hired after its effective date must pay at least 50 percent of their own retirement contributions. The expired agreements provided that some employees had to pay six percent of their own contributions, while others had to pay three percent for their first five years of employment and six percent after that.
The statute also provides, however:
“If the terms of a contract . . . between a public employer and its public employees, that is in effect on January 1, 2013, would be impaired by any provision of this section, that provision shall not apply to the public employer and public employees subject to that contract until the expiration of that contract.”
This language clearly means that for the period from Jan. 1, 2013 to the expiration of the agreements last June 26, newly hired employees in the bargaining units covered by the contracts were not subject to the contribution increase, McConnell said.
The case is Deputy Sheriffs’ Association of San Diego County v. County of San Diego, 15 S.O.S. 429.
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