In Wilmot v. Contra Costa County Employees' Retirement Assn. (2021) 60 Cal.App.5th 631, review denied (May 12, 2021), the California Court of Appeals for the Second District upheld the constitutionally of a portion of the Public Employees’ Pension Reform Act (PEPRA) that mandates the forfeiture of pension benefits if a public employee is convicted of “any felony under state or federal law for conduct arising out of or in the performance of his or her official duties.” (Gov. Code § 7522.72.)
In a scathing opinion,
the Court of Appeal held that the forfeiture provision was both constitutional
and was properly applied to Wilmot. First, Wilmot argued when PEPRA took effect
in January 2013, he was no longer a “public employee” because he worked his
final day and submitted his retirement paperwork in December 2012. The Court of Appeal disagreed, stating that
an employee’s retirement application is pending until approved by a retirement
board. When PEPRA took effect, Wilmot’s application was submitted, but CCERA
did not approve his application until April 2013. Thus, he was subject to PEPRA’s forfeiture
provision.
The Court also rejected
Wilmot’s argument that PEPRA’s forfeiture provision violated the contract
clause of the California Constitution. Citing to the California Supreme Court’s
opinion in Alameda County Deputy Sheriff's Assn. v. Alameda County
Employees’ Retirement Assn. (2020) 9 Cal.5th 1032 (Alameda), the Court acknowledged that to be
constitutional, modifications of public pension plans must relate to the
operation of the plan and intend to improve its function or adjust to changing
conditions. Previously, Wilmot’s attorneys had unsuccessfully argued
before the Second District Court of Appeals in Hipsher v. Los Angeles County
Employees Retirement Assn. (2020) 58 Cal.App.5th 671 (Hipsher) that
the forfeiture provision was an unconstitutional impairment of the contract
clause. The Wilmot Court relied on the analysis in Alameda and Hipsher,
stating that the primary objective in providing pensions to public
employees is to “induce competent persons to enter and remain in public service.” Therefore, “withholding that inducement if an employee’s performance is not
faithful” (such as Wilmont who pled guilty to embezzling County property) is an
“entirely logical response” to improve the function of a public pension plan.
The Court opined:
An employee who draws
public pay while stealing public property, or embezzling public funds, or who
uses public facilities or equipment to run an illegal business (which is what
occurred in Hipsher), is the antithesis of a ‘faithful’ servant of
the public trust. When misconduct turns into outright criminality, it is beyond
dispute that public service is not being faithfully performed. To give such a
person a pension would further reward misconduct.
Finally, the Court rejected Wilmot’s claim that
the forfeiture statute was an “ex post facto law.” The court determined that civil
forfeiture of benefits earned while committing a job-related crime was not
unlawfully punitive but rather was a proper “remedial civil measure.”
Two California Courts of
Appeal have now upheld the constitutionality of PEPRA’s forfeiture statute in
light of the Supreme Court’s reasoning in Alameda. Given these rulings,
plaintiffs and their attorneys should carefully consider whether additional challenges
to PEPRA should be brought. Bringing such challenges may risk transforming gray
areas into black letter law that benefits employers and harms public employees.
