Wednesday, September 8, 2021

Courts Hand Victory to Public Pension Systems at the Expense of Public Employees

 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.)


Jon Wilmot, an employee of the Contra Costa County Fire Protection District, submitted his paperwork for retirement in December 2012, prior to PEPRA taking effect on January 1, 2013. In April of 2013, the Contra Costa County Employees’ Retirement System (CCERA) officially approved his application for retirement. However, at some point, it was discovered that Wilmot had been stealing property and equipment from the Fire Protection District for over 13 years. Charges were filed against him in 2013, and he entered a no contest plea in 2015. As a result, CCERA reduced Wilmot’s monthly pension benefits in accordance with PEPRA’s forfeiture law.

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.