David P. Mastagni Interviewed About Independent Contractor Ruling

Earlier this year, the California Supreme Court cracked down on companies taking advantage of workers by calling them independent contractors when they're really employees.  Before the ruling, many employers claimed their employees weren't really employees at all, meaning they did not have any right to overtime or could be fired if they got sick, for example.  This Court's ruling means employers can't shirk their responsibilities for overtime, unemployment insurance, workers' compensation, payroll taxes, the right to join a union, and other benefits of employment status.

Mastagni Holstedt founding partner David P. Mastagni was interviewed in response of some companies objection the ruling hurts their profits.  He explained calling employees independent contractors "is cheap and they're cheap and they want to make a greater profit on the back of someone else.  But he explained, "after this case, there's a glimmer of hope and responsible employers will embrace it."  Watch the full interview at https://sacramento.cbslocal.com/2018/09/13/independent-contractors-whats-next-california/.

In Dynamex Operations West v. Superior Court of Los Angeles, the Court held workers only count as independent contractors if "(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

Mastagni Holstedt Appeals Alameda County Deputy Sheriff’s Association PEPRA Decision to Supreme Court

David E. Mastagni and Isaac S. Stevens petitioned the California Supreme Court to review the First District Court of Appeals’ decision in Alameda County Deputy Sheriff’s Associationv. Alameda County Employees’ Retirement Association (“ACDSA”). The petition asks the Court to reverse the appellate court’s holding that detrimental changes to employees’ pension benefits need not be offset by comparable new advantages to be constitutional.

This case arose from the enactment of the Public Employees’ Pension Reform Act (“PEPRA”). On behalf of the ACDSA, we sued the Alameda County Employees Retirement Association (“ACERA”) in December 2012, after it announced plans to begin excluding forms of leave cash out and other pay items from ACDSA members’ pension calculations, supposedly to comply with PEPRA’s changes to the definition of “compensation earnable.” “Compensation earnable” is the pay used to calculate employees’ pension benefits.  The lawsuit alleged that, by excluding these pay items from members’ pension benefits, PEPRA infringed on members’ vested pension rights. The case was eventually consolidated with cases from Contra Costa County and Merced County asserting similar claims.

The trial court largely ruled against employees and unions in the case. According to the court, there was no vested right to pension that included terminal pay, and there was no basis for using the doctrine of promissory estoppel to require ACERA to continue including terminal pay in retirees’ pension benefits. We appealed.

While the case was on appeal, the First District issued a decision in a case raising issues very similar to ours, MarinAssociation of Public Employees v. Marin County Employees’ Retirement Association (“MAPE.”) The MAPE case also challenged the legality of excluding terminal pay from pension benefit calculations pursuant to PEPRA. In MAPE, the First District appellate court ruled that a detrimental change to vested pension rights did not need to be offset by a new advantage to survive scrutiny, so long as the remaining pension benefit was reasonable. Shortly thereafter, the First District issued a decision in Cal Fire v. California PublicEmployees Retirement System (“CalFire”), affirming the MAPE court’s decision that comparable new advantages were required when pension benefits were reduced.

The MAPE represented a radical departure from decades of case law protecting pension benefits from being reduced. In Allen v. City of Long Beach (1955) 45 Cal.2d 128, the Court ruled that the Constitution required any changes to vested benefits be material to the theory of a pension system, and any detriment resulting from such a change should be offset by a comparable new advantage. This principle is often referred to as the California Rule. Over the years, the courts repeatedly affirmed the validity of this rule, and required detrimental changes be offset by new advantages to survive constitutional scrutiny. By turning the requirement for a new advantage into a mere suggestion, the MAPE court made public employees’ pension benefits vulnerable to reductions in the future. Indeed, Governor Brown himself acknowledged that, when the next recession comes around he will “have the option of considering pension cutbacks for the first time in a long time.”[1]

The California Supreme Court granted review in the Cal Fire and MAPE cases while the ACSDA case was still pending in the appellate court. In granting review in MAPE, the Court ordered further proceedings in that case deferred until our case was decided.

The appellate court in ACDSA ruled on our appeal in early January.  The court issued a lengthy ruling, finding the trial court failed to include a vested rights analysis, and its analysis of PEPRA’s impact on the pensions of legacy members was incorrect.  In the ruling, the court cited the MAPE decision approvingly, ruling that PEPRA’s changes to employees’ pension benefits did not need to be offset by corresponding new advantages to be constitutional.  Beyond merely agreeing with the MAPE decision, the court in ACDSA went so far as to describe MAPE’s evisceration of California vested rights case law as “not controversial.”

While the court determined that legacy PEPRA members could be entitled to have the excluded pay items included in their pension calculations under a theory of promissory estoppel, it left the door open for the State to continue reducing employees’ pension benefits in this future. We appealed the decision to ensure the California Supreme Court had an opportunity to overturn the First District’s efforts to erode public employees’ pension rights.

The petition for review we filed this week asks the Supreme Court to review the appellate court’s ruling on the comparable new advantage issue, while leaving the estoppel ruling intact. As discussed in our petition, review is necessary to reverse the First District appellate court’s efforts to overturn decades of vested rights case law and protect public employees’ pensions in the future.

The State of California has also petitioned the Supreme Court for review, seeking to overturn the appellate court’s ruling on whether retirement associations had the authority to agree to include the pay items at issue in employees’ pension benefits to settle disputes over benefit calculations after the Court’s landmark ruling in Ventura. The State’s appeal thus challenges the appellate court’s ruling on promissory estoppel, while leaving its destruction of the California Rule intact.

By appealing the appellate court’s decision, the appeal ensured that the ACDSA has a seat at the table when the Supreme Court considers the First District’s ruling, and an opportunity to defend our clients’ rights to receive the pensions they spent decades working for. The Court will address this issue when it considers the MAPE and Cal Fire cases, and an adverse ruling on those appeals could supersede the appellate court’s decision in the ACDSA case. By appealing, the ACDSA ensured its objection to the First District’s attack on the California Rule would be heard. For similar reasons, we filed an amicus brief on behalf of the ACSDA and public safety associations across California in the Cal Fire case, asking the Court to affirm the continued existence of the California Rule. Be sure to check the blog to keep up to date on what happens. 

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[1] http://www.sacbee.com/news/politics-government/the-state-worker/article194434479.html

LA Times Quotes David P. and David E. Mastagni on Supreme Court Pension Case

On November 22, 2016, the Los Angeles Times turned to David P. and David E. Mastagni for analysis about the pending California Supreme Court appeal in the MCERA pension case.  The LA Times asked about the Court's decision to consolidate the Marin and Alameda cases.

The Times wrote: "David P. Mastagni, who represents Alameda County deputy sheriffs in the pending case, said the Supreme Court’s decision to wait for a ruling “really to me signals they understand the gravity and significance of the issues.”

Given the complexity and importance of the dispute, he said, he was not surprised that the court of appeal has yet to schedule a hearing. The court is required to issue a decision within 90 days of a hearing.

David E. Mastagni, the elder lawyer’s son and law partner, said it was not uncommon for the California Supreme Court to postpone a decision until a lower court acts first in a similar case.

“It gives them a more complete record,” he said. “They want to have another fully developed factual background.”

Supreme Court Denies Active Duty Peace Officers Labor Code 4458.2 Disability Benefits Provided to Volunteer Peace Officers

On October 26th, the California Supreme Court decided the case of Larkin v. Workers’ Compensation Appeals Board. The Supreme Court ruled that Labor Code section 4458.2 does not apply to sworn peace officers who are regular, salaried employees of a law enforcement agency.  The Court held that this enhancement of disability benefits was only applicable to so-called "Posse Comitatus" (i.e. volunteer or certain reserve officers) and declined to extend the benefit to regular active duty officers.

Brian Dixon and Gregory Gomez from the Law Offices of Mastagni Holstedt, A.P.C. represented Officer Larkin before the California Supreme Court.  Larkin filed a claim for TD benefits under Section 4458.2 arguing the express language of the Section did not exclude full time active duty officers. Larkin sought these enhanced benefits after having utilized all available 4850 time.  The Workers’ Compensation Appeals Board had denied his claim for these post-4850 benefits. The Court of Appeal upheld the WCAB.

Under Labor Code section 4458.2 an officer’s temporary disability (or “TD”) benefit is set at the maximum statutory rate instead of being based on what they were actually earning. This means that if an officer was serving as a volunteer or reserve officer when they were injured on duty, they would receive TD benefits as if they were full-time employees of the agency. And the officer would receive TD benefits at the highest possible rate even if they were actually paid less while they were working.

This makes a huge difference in the amount an officer is paid for an on-the-job injury. Normally, an employee’s TD benefit payment is only two-thirds (2/3) of their regular salary. But under Section 4458.2 an officer would receive the maximum statutory rate of TD, as if they were among the highest paid employees.

To put this in real terms, in 2008 Police Officer John Larkin was seriously injured in a vehicle accident while on duty. His average weekly salary at that time was around $1000. The City of Marysville said it would only pay Larkin TD at two-thirds of his salary, meaning around $670 per week. But if Section 4458.2 was applied and Larkin was paid TD at the maximum statutory rate, he would receive over $900 per week in TD benefits. That is a difference of more than $10,000 over a year.

 

The Supreme Court’s explained Section 4458.2 was originally written to provide disability coverage to volunteer peace officers. Officer Larkin’s attorneys pointed out that the word “volunteer” was removed from the law in 1989 and is not in the other law it references (Labor Code section 3362). Selectively relying upon the legislative history, the Court held these amendments were not intended to broaden the law to apply to all peace officers. 

The Court further opined that regular peace officer employees are covered under Labor Code sections 4850 and 4853. These laws allow an injured officer to take up to one year of full-paid leave and then up to one year of TD benefits at the normal two-thirds rate. The Court argued that it was “balancing” the interests of regular and volunteer peace officers by denying regular officers Section 4458.2 benefits.

The Court ignored the reality facing many peace officers in smaller cities and rural counties. Officers like Larkin choose to serve in dangerous positions for less pay than their colleagues in wealthier cities and counties. They should not be punished when they suffer an on-the-job injury. But now, not only will officers like Larkin get less in TD benefits than many regular peace officers. They cannot even get the same TD benefits that volunteer peace officers receive. This ruling affects the rights of more than 73,000 police and sheriff patrol officers across in the state. (Employment Development Department, Police and Sheriff Patrol Officers in California.)

On behalf of the thousands of peace officers hurt by this inequity, Mastagni Holstedt, A.P.C. hopes the Legislature immediately fixes the law and overturns the Supreme Court’s ruling.

California Supreme Court Grants Review of Mastagni Holstedt, APC Workers Compensation Case

The California Supreme Court agreed to hear oral arguments on one of Mastagni Holstedt, APC's workers compensation cases. At issue in the case is whether a permanent peace officer is entitled to the maximum temporary disability benefit as a result of an on the job injury.

Officer John Larkin was injured in a motor vehicle accident in November of 2008 while employed as an active police officer with the City of Marysville. He received benefits under Labor code section 4850 which expired. He then received temporary disability benefits. The temporary disability benefits are paid at two thirds the weekly earning rate. Officer Larkin's weekly earnings were $1008 resulting in a $671 weekly temporary disability benefits rate.

However, Labor Code section 4458.2 states temporary disability benefits are paid at the maximum statutory rate for eligible peace officers. The maximum rate in 2008, the time of the case, was $916 per week. Labor Code section 4458.2 makes reference to Labor Code section 3362 which defines who is eligible for the maximum benefit. Labor Code section 3362 states that every person registered as an active police officer shall be considered an employee of the municipality he or she works for.

Labor Code section 3362 has evolved over time. Originally the language included only men and specified the peace officer had to be a volunteer to receive the maximum benefit. However, the California State Legislature in 1989 modernized the statute including both genders and removing the word "volunteer." This evidences the intent of the legislature to provide maximum benefits to all peace officers.

Officer Larkin challenged the lower compensation rate in front of the Workers' Compensation Appeals Board. He argued he was entitled to the full $916 per week rather than the $671 per week. The Workers' Compensation Appeals Board argued that since Labor Code section 3362 only applied to volunteer peace officers, Officer Larkin was not entitled to the maximum temporary disability benefit. On appeal, the California Court of Appeal for the Third District upheld the Workers' Compensation Appeals Board determination.

Mastagni Holstedt, APC appealed the decision to the California Supreme Court. In its briefs, the firm argues all officers, regardless of status, are entitled to maximum benefits. This is the clear language of the statute which must be followed by the court system. By reading extra terms into the statute, the Court of Appeal created an absurd result which harms peace officers across the state.

Oral argument for the case will be held on September 2, 2015 at 9 AM in San Francisco. The case will be argued by Mastagni Holstedt, APC attorney Brian A. Dixon. Mastagni Holstedt, APC attorney Gregory G. Gomez assisted in drafting the briefing materials for the case.

Mastagni Holstedt, APC Files Amicus Brief at California Supreme Court

Mastagni Holstedt, APC attorneys filed an amicus brief with the California Supreme Court about the application of the California Public Records Act (“CPRA”). The CPRA defines the electronic communications of public officials as public documents. Therefore, any public citizen may acquire the electronic communications of public officials through an information request.

The California Court of Appeal for the Sixth District held when a public official sends an electronic communication using a personal cell phone or e-mail account, those documents are not public records. In its brief, Mastagni Holstedt argues the ruling is incorrect and explains some of the unintended consequences to labor associations. The ruling allows public officials to do business behind closed doors, circumventing the purpose of the CPRA. Furthermore, it prevents public unions and other entities from holding public officials accountable by limiting their access to information.

Mastagni Holstedt, APC filed the brief to bring important legal arguments to the Court’s attention, ensuring the rights of employee organizations are protected. Mastagni Holstedt attorneys David E. Mastagni, Isaac S. Stevens, and Jeffrey R. A. Edwards represent the amici in the matter.

California Supreme Court Clarifies Pitchess Process Protects Officer Privacy

On July 6, 2015, the California Supreme Court reversed the Court of Appeal to protect the confidentiality of peace officers' personnel files.  In People v. The Superior Court of San Francisco County, the Supreme Court held District Attorneys offices must file Pitchess motions to review personnel files, ending attempts by some DAs offices to have unfettered access to officers' private information.

Evidence Code section 1043 and 1045 regulate access to peace officers' personnel files in California. The sections make peace officers' personnel files preemptively confidential, but permit parties that have a reason to believe the personnel records contain information material to a case to file what's typically called a Pitchess motion, to gain access to relevant parts of a file.  If party makes a preliminary showing, a judge reviews potentially relevant portions of the file and decides if they are material to the case and must be turned over.

This process applies in criminal cases, but also civil and administrative cases.  In criminal cases, another feature of this process is a prosecutor's duties under Brady v. Maryland.  Under that case, a prosecutor must disclose information that may help a criminal defendant in court.

In San Francisco, the Police Department had a Brady policy that took into account officer privacy and prosecutors' Brady obligations.  Under the policy, the Department had a Brady committee consider potential Brady issues, permitted comment by the affected employee, and made a recommendation to Chief, who decided whether to inform the DA.  The DA then had to file a Pitchess motion to access relevant portions of the officer's file.

But recently, some DAs claimed their Brady duty is so broad that they are entitled to unfettered access to peace officers' personnel files so they can decide what to give criminal defendants.  In this case, the trial court and the Court of Appeal agreed with this conclusion.

The Court of Appeal held prosecutors could access peace officer personnel records without filing a Pitchess motion for two reasons.  First, it concluded disclosing peace officers’ personnel records to the DA did not count as a “disclosure” within the meaning of the statute.  Second, the Court interpreted an exception to the Pitchess process about “investigations” to apply any time a criminal defendant filed a Pitchess motion.  The Supreme Court disagreed with this reasoning.

The Supreme Court noted the Pitchess process balances officers’ privacy with the needs of prosecutors to perform their duties under Brady.  It found the limited exception allowing direct access showed the Legislature did not intend DAs to have direct access under normal circumstances.  Second, Supreme Court disagreed the argument a Pitchess motion triggers a DA’s right to investigate an officer.  The Court defended peace officers noting, “A police officer does not become the target of an investigation merely by being a witness in a criminal case.”  The Supreme Court explained the exception applied, instead, to cases where the DA needs to do a criminal investigation of the officer’s own conduct.

Thus, the Supreme Court held, "the prosecution does not have unfettered access to confidential personnel records of police officers who are potential witnesses in criminal cases. Rather, it must follow the same procedures that apply to criminal defendants, i.e., make a Pitchess motion, in order to seek information in those records."

California Court of Appeal Strikes Blow to Employee Pension Rights

On January 22, 2015 the California Court of Appeal changed how the Legislature can change pension benefits under a contract.  The Legislature may change current contractual pension benefit formulas for new employees. But, the Legislature may not alter pension contribution requirements under a current contract.

In DeputySheriff’s Association of San Diego County v. County of San Diego the County and Deputy Sherriff's Association had a memorandum of understanding. The contract contained provisions related to pension benefits. The contract's pension formula for members was 3 percent at 55. The contract also required the employer to pay a percentage of the employee’s pension contribution.
 

The California Public Employees’ Pension Reform Act of 2013 went into effect on January 1, 2013. The Act required that new safety members receive less than 3 percent at 55. PEPRA also limits employer contributions. Employers may not cover an employee's required contributions. The DSA argued PEPRA unconstitutionally impaired the contract terms. If a contract is in place then the Legislature cannot alter it until it expires. 
 

The Court of Appeal did not agree with the DSA.  The Court said a benefit vests when the employee begins working under the terms of the contract. Future employees cannot claim a vested benefit until they begin working. Thus, the Legislature could alter the pension benefits for new members.
 

The Court of Appeal also found an impairment of the contributions under the contract. PEPRA's contributions provisions cannot conflict with current contract terms. PEPRA as applied here would change the terms of the agreement.  Therefore, PEPRA would not apply until the agreement expired on June 26, 2014.

Supreme Court Grants Review, Stay in Controversial Peace Officer Personnel Records Case

The California Supreme Court granted review and a stay today in the controversial Court of Appeal decision in People v. Superior Court (Johnson). The Court of Appeal ruled prosecutors must review police officers' confidential personnel files to identify information relevant to the defense in a criminal case. This decision delivered a blow to officers' confidentiality interests in their personnel records. The California Supreme Court will decide whether a prosecutor must file a Pitchess motion before accessing peace officer personnel files to search for Brady material that may be subject to disclosure to a criminal defendant.

The Court of Appeal previously considered whether the prosecution is entitled to direct access to peace officer personnel files to search for Brady material. To answer this question, the Court of Appeal considered the interplay between Brady v. Maryland, which requires the prosecution to disclose evidence material to the defense and Pitchess discovery procedures, which hold officer personnel records are confidential absent discovery under Evidence Code section 1043.

The Court of Appeal divided the Brady disclosure process into two "stages." The "first stage" requires prosecutors to have access to confidential personnel records to identify Brady material subject to disclosure. The "second stage" requires the court to conduct a private, in camera review and disclose relevant information to the defense.

The Court of Appeal found Section 832.7 does not preclude prosecutors' access to officer personnel files for Brady purposes. The court noted that because police are considered part of the "prosecution team," the two agencies can share confidential information. In coming to this conclusion, the Court of Appeal disagreed with People v. Gutierrez, and its progeny, which held the prosecution could not access officer personnel files absent a motion under section 1043. Gutierrez, following a prior California Supreme Court case City of Los Angeles v. Superior Court (Brandon), found the statutory Pitchess procedures implement Brady rather than undercut it, because a defendant who cannot meet the less stringent Pitchess standard cannot establish Brady materiality. Rather than following this precedent, the Court of Appeal ruled prosecutors may conduct a preliminary inspection of officers' personnel files. But if the prosecutor identifies Brady material, the prosecutor must file a Pitchess motion before disclosing it to the defense.

This case will be very important for law enforcement throughout the state. The Court of Appeal's decision has already been used by public agencies and courts to circumvent the Pitchess process. The California Supreme Court should overturn this misguided decision and restore Pitchess. A favorable Supreme Court decision will protect officers' privacy rights and prevent unnecessary disclosures of confidential personnel information.

Court of Appeals Upholds Termination for Medical Marijuana Card-Holder

In Casias v. Walmart (Sept. 19, 2012) 2012 WL 4096153, the Court of Appeals for the Sixth Circuit upheld the termination of an employee who tested positive for marijuana even though he had a state-issued medical marijuana registry card.  Casias was an employee of Walmart in Michigan when he tested positive for marijuana on a drug test and Walmart fired him.  He claimed he never used marijuana at work or came to work under the influence and that Walmart should not be allowed to fire him because he had a state-issued medical marijuana card.  The Court disagreed.

The Court ruled Michigan's medical marijuana law did not prevent employers from firing workers who use marijuana, it just prevented State and local agencies from seeking criminal penalties against card holders.  The Court's ruling mirrors California law.  In Ross v. RagingWire Telecommunications, Inc. (2008) 42 Cal.4th 920, the California Supreme Court ruled California's medical marijuana law does not prohibit employers from firing marijuana users.  Several attempts to change California law to ban the practice have failed, most recently SB 129 which died in committee in February.

California Supreme Court Upholds Abolition of Redevelopment Agencies

In an opinion sure to have state-wide impact on the nearly 400 existing redevelopment agencies, the California Supreme Court held, “Redevelopment agencies ... do not have protected right to exist that immunizes them from statutory dissolution by the legislature.”  The ruling in California Redevelopment Assn. v. Matosantos (Cal., Dec. 29, 2011, S194861) 2011 WL 6822391, has broad implications for for public safety services.  Redevelopment agencies had been used to siphon local revenue away from core services, such as law enforcement and fire protection, but Thursday’s ruling makes it much more difficult for cities and counties to continue the practice.

The Court ruled on two state laws addressing so-called “Redevelopment Agencies.”  The Court held, “Assembly Bill 1X26, the Dissolution Measure, is a proper exercise of the legislative power vested in the legislature by the State Constitution.”  The Court explained that the power to create entities such as redevelopment agencies carried with it the corollary power to dissolve those entities.  However, the Court invalidated the measure’ companion bill, A.B. 1X27, which conditioned further redevelopment agency operations on additional payments by the agencies’ community sponsors to state funds benefitting schools and special districts.  The Court found this mandate violated Proposition 22, which amended the Constitution to prevent the state from redirecting redevelopment funds.

The opinion also chronicles how community redevelopment agencies, formed to combat urban decay, developed into the principal instrument of economic development for most cities.  These agencies principally acquire and transfer property on favorable terms for residential or commercial development.  Unable to levy taxes, the agencies rely on tax increment financing, whereby the property tax revenues for government entities other than the redevelopment agency are frozen, while revenues from any increase in values are awarded to the redevelopment agency on the theory that the increase is the result of redevelopment. The tax increment financing has, “sometimes been misused to subsidize the city’s economic development through the diversion of property tax revenue for other tax entities.”  The agencies are used to shield property tax revenue from other governmental agencies and create a shell game amongst local governments with respect to property tax funds.

The tax increment financing is a hot political issue because of the arguable unfair advantage it provides cities over school districts and local taxing agencies, and the loss of revenue to the state’s general fund.  While Governor Brown considered eliminating redevelopment agencies altogether as a partial mean of closing the state’s projected budget deficit, the legislation enacted “freezes” conditions by placing restrictions on modification of existing plans and barring creation of new agencies.  The legislation was intended to preserve redevelopment assets and revenues to fund core local services, i.e. public safety and education.  The dissolution component transfers control of redevelopment agency assets to the local public entity that created the agency and requires performance of existing obligations.  The Court invalidated the provision that created an exemption for agencies that agreed to make specified payments to other governmental funds.

California Supreme Court Issues Landmark Decision Affirming Public Employees' Vested Rights

In Retired Employees Association of Orange County, Inc. v. County of Orange (November 21, 2011) 2011 WL 5829598, a unanimous California Supreme Court ruled public employees can receive constitutionally-protected vested rights by way of implied contract terms.  The holding means public employers can be liable for promises made to employees, even if they do not formally adopt them by ordinance.  The case has been closely watched for its broad implications on labor relations, employee compensation, and pension benefits.

The case arose after Orange County substantially increased the cost of retirees' health insurance premiums by splitting retirees into a separate pool from active employees for calculating premiums.  The retirees filed suit in federal court, arguing they have a vested right to premiums calculated from a joint pool.  The County claimed the retirees have no vested rights because the MOUs under which they retired did not expressly indicate how the cost of retiree health benefits would be calculated.  The District Court sided with County, finding the County could not be liable because it did not explicitly confer vested rights through an ordinance.  The retirees appealed and the federal Court of Appeals asked the California Supreme Court to decide the issue.

The Court held the County could be held liable for its promises to employees, regardless of whether it expressly adopted them through an ordinance.  The Court reasoned employees could hold their employer accountable for the implied terms of a contract, such as the duration of a benefit.  As a result, the Court concluded, "[w]hether an implied term creates vested rights... is a matter of the parties' intent" and general contract principles apply to determine the intent.

The Court went on to reject the County's argument that vesting should be treated differently, noting "[n]either County nor amici curiae [] offer any legal authority for this distinction."  As a result, the Court concluded, "[v]esting remains a matter of the parties' intent."  Once intent is established, the implied terms are treated as part of the contract and are protected by the Contract Clause of the California and federal constitutions.

Court of Appeal Permits Waiver of POBR Rights In Limited Circumstances

In Lanigan v. City of Los Angeles (Cal. Ct. App., Oct. 4, 2011) 2011 WL 4552533, the Court of Appeal for the Second District overturned the trial court, finding POBR protections can be waived in a minority of discipline cases. The case concerned a Los Angeles police officer facing several serious discipline charges resulting from his treatment of an officer from another department. The Department proposed termination and the officer entered into a detailed settlement agreement under which he was reinstated.  He also agreed to specific future discipline in the event of additional disciplinary charges being filed against him for harassing or failing to cooperate with officers of an outside agency, and agreed to waive several of his rights under POBR.

Within a year, the officer again faced discipline charges for providing false information and failing to cooperate with an LASD officer.  In response, the Department processed his resignation pursuant to the settlement agreement.  He petitioned for peremptory writ of mandate to obtain judicial review of the LAPD’s decision. The lower court issued a writ ordering the city to set aside its acceptance of the officer's resignation and reinstate him to his position.

The Court of Appeal overruled the trial court, but acknowledged the provisions of POBR are not subject to a blanket waiver because POBR was established for a public purpose. Instead, the Court looked to the California Supreme Court's ruling in County of Riverside v. Superior Court (2002) 27 Cal.4th 793 and concluded a waiver of POBR rights could be permitted in certain unusual circumstances. In this case, the Court noted the officer did not waive all of his POBR rights and his waiver applied to discipline for a specific type of alleged misconduct. The Court also emphasized the original settlement was in lieu of almost certain termination.

This case primarily concerned statutory rights.  Other pre-termination rights have a federal constitutional dimension that presents additional barriers to waiver.  In Walls v. Central Contra Costa Transit Authority (9th Cir. 2011) 653 F.3d 963, the court found a public employee had not waiver his Skelly rights.  The court noted "federal courts 'indulge every reasonable presumption against waiver of fundamental constitutional rights' and 'do not presume acquiescence in the loss of fundamental rights.'" The court therefore concluded "a waiver [of the right to a pre-termination hearing] should not be implied and should not be lightly found."

California Supreme Court to Hear Challenge to City's Purported Fiscal Emergency

The California Supreme Court recently depublished City of Los Angeles v. Superior Court (Engineers and Architects Association) (2011) 193 Cal.App.4th 1159, and granted review.  The decision of our Supreme Court to grant review appears to reflect a greater willingness of the courts to provide judicial oversight of local bureaucrats attempting break contractual obligations by declaring fiscal emergencies, rather than negotiate concessions or seek bankruptcy protection.

Some prominent law firms representing public agencies have been advocating that the Los Angeles case supported their contention that agencies can suspend MOUs merely by declaring fiscal emergencies and that the resulting contract violations could not be arbitrated because declarations of emergency are not subject to review, and that more cities should declare emergencies to avoid contractual obligations.   These firms contend that review of cities' declarations of emergency and suspension of MOU terms is an improper delegation of cities' salary setting and budget making powers.  Under this rationale, cities' would not need Chapter 9 bankruptcy, because they could avoid court oversight of their true financial situation and any reorganization plan by suspending contractual obligations at their discretion.

This expansive reading of the Los Angeles case conflicts with Prof'l Engineers in Cal. Gov't v. Schwarzenegger (2010) 50 Cal.4th 989, 1043, where in our Supreme Court held the establishment of an emergency does not provide any substantive power to take an action not already authorized, but only avoids meet and confer obligations.   The Supreme Court will likely address the ability of local agencies to suspend their contractual obligations through misuse of emergency declarations in this case.