Thomas L. BAKER, Bill C. McCawley, Thomas J. Riddle, Frank M. Comfort, Dan Herrington, Steve W. Cain and Jack Vickers, Plaintiffs, v. The OKLAHOMA FIREFIGHTERS PENSION AND RETIREMENT SYSTEM; the Oklahoma Firefighters Pension and Retirement Board; Paul Gallahar, Wendell Gilliam, Haskill Starbuck, James Smith, John Soos, Larry Barrett, Wyman Dobbs, James Luckett, Francis Campbell, Meredith Lacey and Fred Rucker, in their official capacities only; the Oklahoma Police Pension and Retirement System; the Oklahoma Police Pension and Retirement System; the Oklahoma Police Pension and Retirement Board; Everette Vanhoesen, Jeffrey Taylor, Jim Wingert, Charles Wingo, Darrell Routh, Chester Hodge, David Been, Jerry Bowen, Joe Johnson, Kenneth Nash and Gary Livingston, in their official capacities only, Defendants.
No. 64354.
Supreme Court of Oklahoma.
March 25, 1986.
Rehearing Denied May 20, 1986.
718 P.2d 348
Michael C. Turpen, Atty. Gen., John D. Rothman, Asst. Atty. Gen., Oklahoma City, for defendants.
Ferguson & Litchfield by E. Paul Ferguson and Thomas E. Prince, Oklahoma City, specially designated counsel for intervenors Governor George Nigh and Senator Marvin B. York.
The United States District Court for the Western District of Oklahoma has certified two questions of law to this Court pursuant to the
The repealed statute which had been codified as part of the Firefighters Pension and Retirement System,
Any person receiving a pension who became a member of the System prior to January 1, 1981, which was based upon a percentage of the average salary paid to him during the last thirty (30) or sixty (60) months of his service, shall have such pension, or the pension of his or her surviving spouse, as the case may be, increased or decreased by one-half (1/2) of all increases or decreases which shall occur in the salary of the regular fire fighters in the municipality from which said person is receiving a pension; provided that said pension shall never be reduced below the original pension paid to such person for that purpose. The term “regular fire fighters” shall for this purpose be defined as salaried fire fighters who have reached their maximum salary as “privates” in their departments and have not been promoted to a position of rank. It shall be a violation of this article to establish a special classification for the purpose of evading the intent of this section.
The parallel provision of the Police Pension and Retirement System,
The pension of any member or beneficiary of any member whose membership began prior to January 1, 1981, shall upon the increase or decrease of the base salary of a regular police officer of a municipality be adjusted by one-third (1/3) of such increase or decrease, provided that no pension shall be less than one-third (1/3) of the base salary of a regular
police officer, nor be reduced to an amount less than the pension at which the officer retired.
The two questions certified for answer by this Court are:
1. Was it possible for any police officer or firefighter to acquire a vested or accrued right susceptible of protection by
2. Is
I.
The two provisions of the Oklahoma Constitution referenced by the first question posed by the federal court provide respectively that the State of Oklahoma shall pass no laws impairing the obligations of contracts4 and that the repeal of a statute shall not affect any right accrued by virtue of the repealed statute.5 We thus construe the question asked to request a determination of whether the plaintiff classes had acquired contractual rights under the repealed pension adjustment provisions which might be subject to the protections of our constitutional provisions.
In Baker v. Tulsa Building & Loan Ass‘n.,6 we referred to the rights protected under these constitutional provisions as vested rights and offered the following observation:
A “vested right” is the power to do certain actions or possess certain things lawfully, and is substantially a property right, and may be created either by common law, by statute, or by contract. And when it has been once created, and has become absolute, it is protected from the invasion of the Legislature by those provisions in the Constitution which apply to such rights. And a failure to exercise a vested right before the passage of a subsequent statute, which seeks to divest it, in no way affects or lessens that right.
We must determine if, and at what point, plaintiff‘s rights became absolute under the repealed statutes.
Defendants and intervenors in this case argue that the rights of none of the classes represented by plaintiffs could ever become absolute. Defendants rely on the case of Ross v. Board of Trustees,7 for their proposition that the entitlement to pension payments is always subject to future contingencies and is therefore a mere expectancy which can never become a “vested” right. Intervenors rely on the case of City of Duncan v. Bingham,8 for their proposition that a pension is a mere gratuity which is subject at any time to being forfeited, withdrawn or terminated. As will be discussed within, we do not find either case or line of reasoning to be dispositive of the questions posed.
Our review of cases dealing with the questions here presented require a conclusion that, under Oklahoma law, the right to a pension would vest, or become absolute, upon the pension recipient‘s becoming eligi
The statement made by this Court in City of Duncan v. Bingham,15 upon which intervenors attempt to rely in their arguments, we find must be disapproved. Bingham involved a workers’ compensation action in which it was claimed that a workers’ compensation award should be reduced or eliminated because the worker was eligible for a pension under the disability provisions of the firefighters’ retirement plan. The basis for this argument was
In reviewing the statements of this Court in the cases cited, it is apparent that the view of pension benefit rights taken in this jurisdiction has been that such rights neither vest nor accrue until the contract between the state and the beneficiary comes into existence. We have also examined the views expressed by other jurisdictions regarding the time of vesting of such rights. In doing so we have found great diversity. Those views vary both as to how the retirement pension relationship between the state and its employees is perceived and as to when that relationship matures into vested rights. Some jurisdictions have ex
We have reviewed the various approaches advanced by the opinions regarding the conceptual problem of when rights under a retirement pension plan come into existence. We find the best resolution of that problem to be that inherent in our own previous case law. In a review of its case law, which is closely parallel to the reasoning in our own, the Supreme Court of Delaware made the following observations:19
In State Employees’ Pension Plan this Court ruled that vested contractual rights were held by those employees and former employees who satisfied the eligibility requirements for a pension, i.e., a pension contract exists when the pension is vested. 364 A.2d [1228] at 1235 [1976]. Although the Court did not consider whether contractual rights inured to employees, whose pensions had not yet vested, this issue was resolved in Grant v. Nellius, Del.Supr., 377 A.2d 354 (1977). That decision, construing the right to a cost-of-living allowance, described State Employees’ Pension Plan as being based on the premise that those who participate in a pension plan acquire contractual rights upon fulfillment of the eligibility requirements. 377 A.2d at 357. See also State ex rel. State Board of Pension Trustees v. Dineen, Del.Ch., 409 A.2d 1256, 1259 (1979) (pension vests upon completion of minimum period of credited service). Furthermore, Grant held that there was no protected interest in a statutory benefit if the statute was repealed prior to its effective date, and that such future benefits could lawfully be adjusted or eliminated. The import of these cases is that pension rights may be changed at any time before they become vested.
Thus, it is clear that no contract exists between an employee and the State, concerning the state pension plan, unless and until the pension vests. This result is consistent with that reached in other jurisdictions. See, e.g., Police Pension and Relief Board v. McPhail, 139 Colo. 330, 338 P.2d 694 (1959); City of Jacksonville Beach v. State, Fla.Supr., 151 So.2d 430 (1963); Hickey v. Pension Board, 378 Pa. 300, 106 A.2d 233 (1954). See also 60 Am.Jur.2d Pensions & Retirement Funds § 49, at 920-21; § 55, at 929-30 (1972). . . .
Viewing the contract between the state and its employees as coming into existence at the point of eligibility allows the necessary flexibility in fiscal planning which must be given the Legislature. This view also avoids the necessity of engaging in the tortuous applications of contract law which other jurisdictions have applied in finding that rights, which they have characterized as being in existence, remain subject to unilateral modifications. This view also realistically acknowledges the contingent nature of the relationship as it ripens into a contractual obligation on the part of the state.
II.
The second question presented for answer by the federal court concerns only those classes of firefighters and police officers who had not become eligible for payment of pension benefits prior to the repeal of the pension adjustment provisions. Under the view adopted in this jurisdiction, the rights of those classes did not become absolute and susceptible to the protections of
SIMMS, C.J., and HODGES, HARGRAVE and WILSON, JJ., concur.
OPALA and SUMMERS, JJ., concur in result.
DOOLIN, V.C.J., dissents.
KAUGER, J., disqualified.
DOOLIN, Vice Chief Justice, dissenting.
The Court today holds the right to retirement pension benefits provided to firefighters and police officers vest at the time those benefits become payable to those eligible. This decision ignores the fact that the promise of generous pension plan benefits are part of the basis of the bargain which induces persons to accept public employment.
When persons accept public employment, they are promised certain rights and benefits in exchange for their services. The retirement benefits are a valuable part of the consideration for entering into and continuing in public service. Since public employment seldom pays salaries comparable to those found in the private sector, these benefits are a prime inducement in the recruiting and retaining of qualified employees.
These mutually agreed upon benefits are deferred compensation and as such are vested contractual rights upon the acceptance of employment.
In Dangott v. ASG Industries, Inc., 558 P.2d 379 (Okl.1976) we cited with approval Cantor v. Berkshire Life Ins. Co., 171 Ohio St. 405, 171 N.E.2d 518 (1960) which sets forth a contemporary and enlightned view of such contractual rights:
There has been, however, in recent years a gradual trend away from the gratuity theory of pensions. The courts, recognizing that a consideration flows to an employer as a result of such pension plans, in the form of a more stable and more contented labor force, have determined that such arrangements will give rise to contractual obligations enforceable by the employee who has complied with all the conditions of the plan, even though he has made no actual monetary contribution to the fund.”
The fact that the individual may have contributed to his pension fund, merely strengthens the thrust and force of the last cited Ohio case.
Other jurisdictions have faced this issue. In Betts v. Board of Administration, 21 Cal.3d 859, 148 Cal.Rptr. 158, 582 P.2d 614 (1978) the California Supreme Court said:
“A public employee‘s pension constitutes an element of compensation, and a vested contractual right accrues upon the acceptance of employment.”
Pension rights, because of their nature as deferred compensation, vest upon the commencement of employment or service. They constitute property and as property amount to an estate. Plaintiff‘s property in a pension, therefore, seems to us to be much like his property interests in paid up insurance, his bank accounts, his home and furniture and his automobile. In short his pension rights are an integral part of his estate.”
I believe the cases cited above reflect a better reasoned and eminently fairer analysis of the nature of pension benefits. The class of plaintiffs in the instant case accepted employment contracts partly because of the pension plan, including the cost of living adjustments. The plaintiffs had a reasonable expectation that the contract of employment they agreed to upon the acceptance of employment would be honored by the employer. Today‘s decision defeats their contractual rights and in my opinion is contrary to
Notes
No bill of attainder, ex post facto law, nor any law impairing the obligation of contracts, shall ever be passed. No conviction shall work a corruption of blood or forfeiture of estate: Provided, that this provision shall not prohibit the imposition of pecuniary penalties.
The repeal of a statute shall not revive a statute previously repealed by such statute, nor shall such repeal affect any accrued right, or penalty incurred, or proceedings begun by virtue of such repealed statute.