Retired Employees Ass'n of Orange County, Inc. v. County of Orange
52 Cal. 4th 1171
| Cal. | 2011Background
- County began offering group medical insurance to retirees in 1966 and later pooled active and retired employees in a single premium pool from 1985 to 2007.
- In 2007, due to budget concerns, County split the pool effective January 1, 2008, after negotiating with active employees but not retirees.
- REAOC sued in federal court alleging impairment of contract and sought to preserve a single pooled premium arrangement for retirees; Board resolutions and MOUs were silent on duration but implied a long-standing practice.
- District court granted summary judgment for County, holding California law does not recognize implied contracts binding the County absent statutory authorization.
- Ninth Circuit certified whether California law permits an implied contract to confer vested health-benefit rights on retirees, prompting California Supreme Court review.
- Court held that a county may be bound by an implied contract in the absence of a statutory prohibition, and that implied terms may arise from resolutions/MOUs governing compensation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can a county form an implied contract with employees for health benefits? | REAOC argues implied terms from resolutions/MOUs bind County to a single pooled health-benefits scheme. | County contends implied contracts cannot bind public agencies or exceed statutory authorization. | Yes, under limited circumstances implied terms may bind. |
| Do vesting rights to health benefits exist by implication in California public employment? | Retirees acquire irrevocable rights to benefits via implied contract or deferred compensation. | Vesting requires clear legislative or contractual intent; implied vesting is limited and fact-specific. | Vesting may be implied under appropriate circumstances, not categorically barred. |
| Does Government Code §31692 bar vesting of health benefits derived from §31691/53201? | Pooling methods and premiums may constitute a vested right to health benefits. | §31692 anti-vesting language applies to contributions toward premiums, not to implied pooling methods. | Anti-vesting provision does not compel a negative ruling on implied pool-based rights. |
| Is there a statutory prohibition specifically preventing implied contractual health-benefit rights for retirees? | Legislation may imply private rights where exchange of consideration is evident. | Absent explicit prohibition, implied terms can arise, but must be carefully evidenced. | No categorical statutory prohibition; implied rights may be recognized under appropriate evidence. |
Key Cases Cited
- Youngman v. Nevada Irrigation Dist., 70 Cal.2d 240 (1969) (governmental entities may be bound by implied contracts absent statutory prohibition)
- Markman v. County of Los Angeles, 35 Cal.App.3d 132 (1973) (public compensation terms controlled by statute/ordinance; implied terms limited)
- California Teachers Assn. v. Cory, 155 Cal.App.3d 494 (1984) (legislative intent to contract can be implied from statute with exchange consideration)
- Sappington v. Orange Unified School Dist., 119 Cal.App.4th 949 (2004) (no vested right to free PPO coverage absent explicit contractual language)
- San Bernardino Public Employees Assn. v. City of Fontana, 67 Cal.App.4th 1215 (1998) (benefits earned year-to-year may not vest; context matters)
- Association for Los Angeles Deputy Sheriffs v. County of Los Angeles, 154 Cal.App.4th 1536 (2007) (department policies not reflecting statute/ordinance can be invalid; focus on contractual terms)
- Olson v. Cory, 27 Cal.3d 532 (1980) (public contracts may be enforceable when properly authorized; Meyers-Milias-Brown Act relevance)
- Glendale City Employees’ Assn., Inc. v. City of Glendale, 15 Cal.3d 328 (1975) (collective agreements interpreted to implement mutual intent; public employment contracts)