233 Cal. App. 4th 573
Cal. Ct. App.2015Background
- County of San Diego and Deputy Sheriffs' Association had collective bargaining agreements (CBA) in effect through June 26, 2014, that required a 3% at 55 pension formula for certain safety hires and specific employer-paid contribution terms.
- The California Public Employees' Pension Reform Act of 2013 (PEPRA) became effective Jan 1, 2013 and limited defined benefit formulas for new safety members to options such as 2.7% at 57; it also generally required new members to pay at least 50% of normal cost (employer prohibited from paying that share).
- The dispute concerns employees hired after Jan 1, 2013 (new members under PEPRA) who nonetheless were covered by preexisting CBAs that ran until June 26, 2014.
- Association sued, challenging (1) application of PEPRA’s defined-benefit formula restrictions (2.7% @57) to those new hires as an unconstitutional impairment of the CBA, and (2) application of PEPRA’s employee-contribution rules requiring employee payment of normal cost as an impairment.
- The trial court ruled against the association on both questions; the association appealed. The Court of Appeal affirmed as to the formula issue but reversed as to employee contributions and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether applying PEPRA's defined-benefit formulas (e.g., 2.7% @57) to new safety hires covered by preexisting CBAs violates the California contract clause | The CBA secured a right to 3% @55 for hires covered by the agreement until it expired; substituting PEPRA formulas impairs that contract | PEPRA governs retirement plan options for prospective employees; unvested pension expectations of prospective hires are not protected by the contract clause | Application of PEPRA formula provisions to these new hires does not violate the contract clause; affirmed |
| Whether PEPRA's employee-contribution requirement (new members must pay ≥50% of normal cost; employer cannot pay) violates the contract clause or other law when it conflicts with CBAs | The employer promise in the CBA to pay part of contributions cannot be displaced by PEPRA and its imposition impairs contractual obligations | PEPRA imposes contribution rules on new members, but subdivision (f) preserves application of PEPRA only after existing contracts expire | Court did not decide contract-clause question; held PEPRA §7522.30(f) statutorily exempts existing contracts from the conflicting contribution provisions until contract expiration — the trial court’s contrary ruling reversed and remanded |
Key Cases Cited
- Professional Scientists v. Schwarzenegger, 137 Cal.App.4th 371 (court held changes applicable only to prospective employees do not necessarily violate contract clause when CBAs incorporate statutorily available options)
- White v. Davis, 30 Cal.4th 528 (public employees obtain certain contractual rights after performing work; vested pension rights protected)
- Betts v. Bd. of Admin. of Public Emp. Ret. Sys., 21 Cal.3d 859 (vested pension rights cannot be destroyed)
- Sonoma County Org. of Pub. Employees v. County of Sonoma, 23 Cal.3d 296 (distinguishes impairment of wage terms for existing employees; not authority for prospective pension rights)
- Allen v. Bd. of Admin., 34 Cal.3d 114 (reservation of governmental power read into contracts; contract expectations limited by existing law)
- Teachers' Ret. Bd. v. Genest, 154 Cal.App.4th 1012 (analysis of contract-clause claims; prudential avoidance of constitutional questions)
- City of San Diego v. Haas, 207 Cal.App.4th 472 (prospective employees have no right to benefits before hiring; agency may change benefits prior to hire)
- Welfare Rights v. Frank, 25 Cal.App.4th 415 (contract clauses protect only vested contractual rights)
- Olson v. Cory, 27 Cal.3d 532 (terms of public employment generally governed by statute, not contract)