Court: Key Parts of San Jose Measure B Unconsitutional

On December 20, 2013, the Santa Clara County Superior Court overturned the heart of Measure B, San Jose's attack on employees' pensions.  In doing so, the court followed the Monterey and Los Angeles superior court which have overturned similar attacks on employees' vested rights.

The court overturned part of Measure B that shifted financial responsibility for unfunded liabilities from the City to employees.  That section would have dramatically increased employees' contributions into the system.  The court found that employees had a vested right to have the City pay that portion.  As a result, Measure B unconstitutionally impaired their vested rights.

The court also overturned a provision that allowed the City council to suspend retirement Cost-Of-Living-Adjustments (COLAs) by "declaring a fiscal emergency."  COLAs are not always vested rights, but the court found that retirees in this system had a vested right to COLAs.  The court overturned this section, noting it is not enough for a city council to declare an emergency.  Instead, there has to really be an emergency.  Further, an impairment to a vested right on emergency grounds has to be temporary.  Since this section did not require a real emergency and impaired vested rights in a permanent way, the court ruled it was unconstitutional.

The court upheld other portions of Measure B related to disability retirement, supplemental payments to retirees, retiree medical, and wage cuts.  The court also found "that the Measure B sections at issue in this case can proceed as to new employees."

Trust Counsel: California Pensions More Secure Than Detroit's

After a Michigan bankruptcy judge opened the door to cutting public employees' pensions as part of the City of Detroit's bankruptcy, some observers suggested the ruling opens the door to similar tactics in California. But as Harvey Leiderman, the well-regarded trust counsel to CalPERS and other retirement systems, recently explained, California's pensions are very different from - and more secure than - Detroit's.

Leiderman explained Michigan's pension system hinges on a contractual relationship between two groups: retirees and employers, making it more vulnerable to impairment in bankruptcy.  That's because bankruptcy courts (unlike employers themselves) have special powers to impair contracts.  California's system, however, has three groups: retirees, employers, and pension trusts, such as CalPERS.

Leiderman explains that California's system includes legal duties between employers and pensions trusts on the one hand, and pension trusts and retirees on the other.  These duties are the product of state laws, not contracts.  He used this chart to illustrate the relationship:

Thus, even without contracts, California public employers have a duty to pay CalPERS and CalPERS has a duty to pay retirees.  Read the full article here.

Poll Shows Californians Oppose Reed Initiative

A recently survey conducted December 5-9, 2013 shows Californians coming out against the Reed Initiative by a margin of 49% to 35%.  The poll shows an overwhelming majority of Californians oppose efforts to eliminate public servants' pensions.  Specifically, the poll noted that 54% of California strongly oppose "Eliminating Police, Firefighters, and Other Public Employees Vested Pension Benefits."  Read the report on the new poll here.

Ninth Circuit: Reporting Safety Concerns to Supervisor May Not Be Protected by First Amendment

In Hagen v. City of Eugene (9th Cir. 12-35492 12/3/13), the Court of Appeals held when an employee makes statements within the chain of command, regarding an issue of employment, and has a duty to make those statements, they do not first amendment protections.

Officer Hagen was a K-9 Officer who worked on the SWAT team. Over ten years, the SWAT team had 4 accidental discharges, two of which injured a fellow officer. Ofc. Hagen brought up his concerns about safety several times to his supervisor, Sgt. Eichorn, but no one told him of any proposed remedies. When Ofc. Hagen continued to press the issue, Sgt. Eichorn became irritated and annoyed. Then, the Department suspended the K-9 team two months and Ofc. Hagen was removed from the K-9 team permanently in retaliation.

Ofc. Hagen filed lawsuit, saying the Department retaliated against him for an exercise of his First Amendment right to free speech. But, the Ninth Circuit said when Hagen reported the Department safety concerns, he was acting as an employee, not a private citizen, and therefore had no First Amendment protections. The court based its decision on the Department being a highly hierarchical employment setting, and said his statements were within the chain of command concerning his employment and safety. Furthermore, Hagen was required to report all safety concerns under Human Resources Policies and Procedures. Therefore, Hagen’s speech was made within the employment setting, pursuant to a duty to do so, and was not protected by the first amendment.

This case was just about First Amendment protection.  Employees have additional protections when they concertedly complain or engage with their union about workplace issues.