On August 28, 2026, the Second District Court of Appeal, Division Seven, certified for publication its decision in City of Los Angeles v. American Federation of State, County and Municipal Employees, Nos. B336981 and B340065. The court affirmed an order of the City of Los Angeles Employee Relations Board requiring the City to bargain the effects of ending pension reciprocity and to make represented employees whole for reduced pensions and related losses until that bargaining obligation is satisfied. Publication converts a municipal labor dispute into statewide guidance under the Meyers-Milias-Brown Act.
BACKGROUND
From approximately 1980 until 2014, employees transferring between the Department of Water and Power and other City departments could carry pension service credit between the Water and Power Employees’ Retirement Plan and the Los Angeles City Employees’ Retirement System, with the result that the receiving plan treated the worker as if the entire career had been spent under that system. In 2010 the Water and Power Employees’ Retirement Plan Board commissioned a study that found net transfers had added approximately $183 million to that plan’s unfunded liability, and the Board voted to suspend reciprocity. The City thereafter adopted Ordinance No. 182824, effective January 1, 2014, and stopped counting prior Water and Power service when calculating Los Angeles City Employees’ Retirement System benefit amounts, except for the limited purpose of determining eligibility to retire.
The financial effect on employees who had moved between the two systems was substantial. A stipulated example established that a Senior Clerk Typist who spent fifteen years in each system would receive $16,195 less each year than the employee would have received under reciprocity, and an employee earning $100,000 who sought to purchase two years of lost service would have been required to pay $60,000. The Coalition of City Unions demanded that the City meet and confer over those consequences. The City refused formal bargaining and offered only to answer questions.
THE ERB’S FINDINGS
The Employee Relations Board found that the City had no duty to bargain the decision to end reciprocity. Administrative Code section 4.1095, subdivision (k), made complete portability dependent upon participation by the Water and Power Employees’ Retirement Plan, and once that plan withdrew the City was obligated to stop counting the transferred service for benefit amounts. The City nevertheless retained discretion over the manner in which the change would be implemented. Disability retirement calculations, recognition of prior service for benefit amounts, retiree health treatment after a transfer, protected leave return windows, transfer rules, and the price of buying back service credit were effects of the decision rather than the decision itself, and those subjects therefore had to be bargained.
DECISION BARGAINING VERSUS EFFECTS BARGAINING
The court recognized the controlling distinction between decision bargaining and effects bargaining under the Meyers-Milias-Brown Act. Decision bargaining applies when the employer’s action itself falls within the scope of representation because the action significantly affects wages, hours, or other terms and conditions of employment, and a successful decision bargaining case can support rescission of the policy and restoration of the prior rule. Effects bargaining applies when the underlying decision lies outside the scope of representation, yet the policy change has reasonably foreseeable impacts on bargainable subjects. Pensions, severance, vacation, and seniority are classic effects subjects. The employer may lawfully make the core decision, but it must still give notice and an opportunity to bargain the effects after the decision is firm and before implementation.
The court treated the controversy as an effects bargaining case because the City could lawfully end reciprocity once its partner plan withdrew. Residual discretion over implementation, rather than any vested right to the former formula, is what made bargaining mandatory. The court therefore did not order restoration of the reciprocal arrangement itself and instead required bargaining over the discretionary aspects of implementation.
THE REMEDY
The court recognized that the Board could not recreate the arrangement that existed before 2014 or compel a nonparty retirement plan to return to it, and that full restoration of the prior system was therefore unavailable. The court held that a proper effects remedy must include an order to bargain together with limited make whole relief that continues until the parties reach agreement, reach impasse and exhaust any procedures that follow impasse, or the exclusive representative fails to request bargaining or to bargain in good faith. Back pay in this setting must include pension losses and other benefit reductions, and doubts about the measure of that relief are resolved against the employer whose unlawful conduct created the uncertainty.
The City argued that the make whole order conflicted with American Federation of State, County and Municipal Employees v. City of Los Angeles (2025) 109 Cal.App.5th 179, which held that employees possessed no vested contractual right to continued reciprocity. The court refused to conflate the vested rights doctrine with the statutory duty to bargain under the Meyers-Milias-Brown Act. The absence of a vested right does not erase the duty to bargain effects. The employees were not awarded permanent restoration of reciprocity. They were instead restored, for a limited period, to the economic position they occupied when the bargaining duty attached.
That approach is consistent with Boling v. Public Employment Relations Board (2019) 33 Cal.App.5th 376, which held that when a labor board cannot undo the underlying action, compensatory payments run until agreement or impasse. A permanent order would have functioned as a repeal of the 2013 Ordinance and would have exceeded the Board’s remedial authority. The court instead approved a bridge remedy that restores the economic status quo only until bargaining concludes and that does not compel the City Council to legislate.
THE BOARD’S AUTHORITY
The Board’s authority to award that relief was not confined to a prospective cease and desist order. The court relied on Ordinance section 4.810, subdivision (f)(12), which authorizes the Board to perform such other duties as may be necessary to carry out its responsibilities, and on Government Code section 3509, subdivision (d), which requires the Board to issue orders consistent with the policies of the Meyers-Milias-Brown Act. The Public Employment Relations Board has long treated retroactive make whole relief as standard relief for compensating harm, deterring unilateral action, and restoring bilateralism. The Employee Relations Board’s reading of its ordinance was therefore not clearly erroneous. Because the analysis rests on the Act rather than on a local peculiarity, the Public Employment Relations Board and other reviewing courts should be expected to follow it. The court also affirmed attorney fees under Code of Civil Procedure section 1021.5 and directed a further fee award on appeal.
TAKEAWAYS
The published opinion confirms that effects bargaining is not a lesser right. It identifies pension features that remain negotiable even after a lawful plan design decision, including disability calculations, service recognition for benefit amounts, retiree health treatment after a transfer, leave return windows, transfer rules, and the cost of buying prior service. An agency that implements first and bargains later can face make whole liability measured by the pension dollars members actually lost.
It is therefore advisable that exclusive representatives treat any announced change to reciprocal service credit, disability calculation, retiree medical eligibility, or service purchase terms as an event that at a minimum triggers an effects bargaining obligation. Notwithstanding an employer’s claim that plan design is reserved, the foreseeable impacts on pension amounts and related benefits remain inside the statutory duty. In light of the fee holding, successful enforcement of that duty can support an award under Code of Civil Procedure section 1021.5. The exclusive representative must request effects bargaining promptly and must participate in good faith, because a failure to do so can terminate the make whole remedy. For members who transfer, promote, or retire across systems, the opinion imposes a meaningful limitation on an employer’s ability to implement pension related changes unilaterally and to retain the resulting savings before the bargaining duty has been satisfied.
