Every public safety professional who has banked unused leave across a long career understands the quiet promise embedded in that ledger. Those hours represent time not taken with family, shifts covered for colleagues, and holidays spent in uniform. The expectation has always been that those hours would count when the pension calculation finally arrived. On July 27, 2026, the California Supreme Court unsettled that expectation for legacy members of the state’s county retirement systems. In Ventura County Employees’ Retirement Ass'n v. Criminal Justice Attorneys Ass'n of Ventura County, No. S283978 (Cal. July 27, 2026) (“Ventura”), the Court held that the California Public Employees’ Pension Reform Act of 2013 (“PEPRA”) bars a retiring employee from counting leave cashouts above the annual limit fixed by the terms of employment, even when the employee designates a final compensation period that spans two calendar years. The decision affirms the Court of Appeal (see 98 Cal.App.5th 1119 (2024)), and it deserves the close attention of every association that negotiates leave and retirement terms on behalf of California’s peace officers, public sector attorneys, and other impacted public sector employees.
The Issue the Court Decided
The dispute turned on a single sentence in Government Code section 31461(b)(2). That provision excludes from compensation earnable any payment for unused leave “in an amount that exceeds that which may be earned and payable in each 12-month period during the final average salary period, regardless of when reported or paid.” (Cal. Gov’t Code § 31461(b)(2).) The retirement system read the phrase to incorporate the annual cashout cap set by an employee’s terms of employment, so that a member who may cash out 200 hours in a calendar year cannot inflate that figure by straddling two calendar years within a single final compensation window. The employee associations read the same phrase to permit inclusion of every hour cashed out during the elected final compensation period, subject only to what the period itself allowed. The Court adopted the retirement system’s reading and confirmed that section 31461(b)(2) caps includable cashouts at the annual allowance no matter how the final compensation period is drawn.
The facts illustrate the stakes with unusual clarity. The retired member accrued 368.16 hours of leave each year, and his terms of employment permitted him to cash out 200 hours in any single calendar year. He designated October 10, 2019 through October 10, 2020 as his final compensation period, and within that window he cashed out 40 hours in December 2019 and another 200 hours in February 2020, for a total of 240 hours. He asked the system to include all 240 hours in his final compensation. The system included only 200, and the Supreme Court agreed that the 40 additional hours fell outside compensation earnable because they exceeded the annual allowance that governed a single calendar year per the terms of his employment.
The Court Conceded Ambiguity and Then Resolved It Against the Member
The most consequential feature of the opinion is not the result but the route the Court traveled to reach it. The Court did not hold that the statute plainly compelled the retirement system’s position. It acknowledged instead that the system’s construction “may not be the most immediately obvious or intuitive reading of the statutory text,” and it described that construction as merely “plausible.” (Ventura, slip op. at p. 22.) Both the trial court and the Court of Appeal had likewise found the language ambiguous. Confronting genuine ambiguity, the Court turned to legislative purpose and concluded that “[c]onsiderations of statutory purpose conclusively resolve the issue” in the retirement system’s favor because the competing reading would reopen the door to the pension spiking that the Legislature enacted the statute to close. (Id. at p. 23.)
In a concurring opinion, Chief Justice Guerrero underscored the divergence from the actual text. She wrote to explain that the majority’s interpretation is not apparent on the face of the statute, that the ordinary use of the word “during” is inconsistent with the majority’s construction, and that the reading survives only because a latent ambiguity emerges once the statute’s anti-spiking purpose is considered. (Ventura, Guerrero, C.J., concurring op. at pp. 2-4.) Her concurrence is candid confirmation that the words the Legislature chose pointed one way while the result points another.
The Court’s analytical move carries real significance for public employees because it required the Court to set aside a rule that has long favored pensioners. For decades, California courts have construed pension statutes liberally and resolved ambiguities in favor of the applicant. (See Barrett v. Stanislaus Cnty. Emps. Ret. Ass'n (1987) 189 Cal.App.3d 1593, 1603.) The employee associations pressed that principle here, and it pointed squarely toward the broader reading. The Court answered that liberal construction “must be consistent with the clear language and purpose of the statute,” and it held that the pensioner favoring canon must yield here because it conflicts with the Legislature’s overarching anti-spiking design. (See Ventura Cnty. Deputy Sheriffs' Ass'n v. Bd. of Ret. (1997) 16 Cal.4th 483, 490.) In other words, the tie no longer runs to the employee once a court identifies a countervailing legislative purpose, and pension spiking supplies a purpose that a reviewing court can invoke across a wide range of compensation disputes.
Why the Reasoning Matters Beyond Leave Cashouts
The holding governs a discrete question about leave cashouts in a final compensation period that straddles two calendar years, yet its method reaches much further. PEPRA is a sprawling statute enacted quickly, and many of its provisions have given rise to disputes and are likely to continue doing so in the future. Every one of those provisions is now subject to interpretation under the framework this Ventura decision reaffirms, and that framework instructs courts to consult the anti-spiking purpose whenever the words admit more than one reasonable meaning. A retirement association that wishes to exclude a category of pay will attempt to frame inclusion as a potential avenue for spiking, and after this decision, that framing will carry substantial weight. Members should therefore expect systems to press expansive exclusions in future disputes over on-call pay, specialty premiums, uniform and equipment allowances, and other items whose treatment PEPRA did not spell out with precision.
The decision also weakens a tool that member advocates
have relied upon for a generation. When a pension statute was ambiguous, the
liberal construction canon gave employees a thumb on the scale, and it often
proved decisive in close cases. This opinion subordinates that canon to
legislative purpose and thereby shifts the balance of interpretive advantage
toward the systems in exactly the situations where the statute is least clear.
Associations litigating future ambiguities will need to build their arguments
on text and structure rather than on the presumption that ambiguity favors the
applicant, because the Court has now signaled that the presumption gives way
whenever the anti-spiking rationale is available.
The Signal to the Legislature
The opinion carries a further lesson for those who shape pension policy in Sacramento. The Court repeatedly grounded its reading in the practical concerns of plan administration and funding, observing that the retirement system’s interpretation allows counties to anticipate their obligations rather than absorb liabilities that swing between one hundred and two hundred percent of the annual cashout limit depending on how a member elects a final compensation period. (Ventura, slip op. at p. 24.) Legislation should be assessed against this backdrop in which courts will fill statutory gaps with cost containment and anti-spiking assumptions rather than with the older presumption favoring the pensioner. If the Legislature intends a benefit to be included, it will need to say so with precision, because ambiguity will no longer be construed generously in the member’s favor. Associations that seek legislative clarification of favorable treatment for particular pay items should draft proposed amendments with that reality in mind and should not assume that silence or generality will be read to their advantage.
What This Means for Your Members
The immediate practical consequence is straightforward. Legacy members who plan to cash out substantial accrued leave near retirement can no longer increase their final compensation by designating a final compensation period that reaches into a second calendar year in order to stack two annual allowances. The annual cap set by the terms of employment now controls the entire 12-month final compensation period regardless of when it falls in relation to calendar years. Associations should review their memoranda of understanding and their members’ retirement planning materials so that no member approaches retirement expecting credit for cashouts that this decision now excludes.
The larger consequence is strategic. This case
reflects a determined and well-resourced effort to secure the broader reading
for public employees. Nevertheless, that effort did not prevail before the
state’s highest court despite thoughtful advocacy and a serious textual
argument that even the Chief Justice found more faithful to the statute’s
words. The outcome confirms that the interpretive terrain has shifted and that
future gains for members will come from careful bargaining and precise
legislative drafting rather than from favorable canons of construction. We
stand ready to help our client associations reassess their leave and retirement
provisions, to model the effect of this ruling on individual members nearing
retirement, and to press for the statutory clarity that will protect the
benefits our public safety professionals have earned through decades of
service.
