Corona POA President Jason Perez Defeats CalPERS Board President

CalPERS has reported that Corona Police Officers Association President Jason Perez defeated incumbent CalPERS Board of Administration President Priya Mathur with 56.78% of the vote to her 43.22%.  His term will begin in January.  Perez ran on a platform of maximizing investment returns and putting an end to using CalPERS investments to advance unrelated social and political causes.

The Board of Administration is a 13-member board of elected, appointed, and ex-officio officials charged with overseeing and directing the management of CalPERS.  The executive leadership of the Board is elected from among its members. 

CalPERS Restoration of Service Credit and Compensation Earnable Upon Reversal of Termination for CalPERS School and Local Agency Members

Assembly Bill (AB) 2028 applies to all active California Public Employees’ Retirement System (CalPERS) school and local agency members. This recent legislation was introduced by Assembly Member Jim Cooper. AB 2028 allows active CalPERS school and local agency members who were wrongfully terminated to recover service credit and compensation earnable if their termination is reversed. This bill fixes a significant inconsistency in previous law, which treated school and local agency members differently than other state employees.

AB 2028 applies to members who were subject to a wrongful termination effective on or after January 1, 2017. Members who are reinstated by administrative or judicial order following the termination may now receive retirement benefits as though they were never terminated. Restoration of these benefits ensures that such members will be made “whole” following their disciplinary appeal.

Prior to AB 2028, school and local agency members could receive these benefits retroactively if they retired following the wrongful termination, but were later reinstated. This retirement condition was inconsistent with how other state employees were treated in the same situation. AB 2028 eliminates the inconsistency by making school and local agency members eligible to seek these same benefits, regardless of retirement.

AB 2028 provides that reinstatement of benefits will be effective as of the date from which salary is awarded. Employers are required to notify CalPERS within five days once an employee being reinstated after he or she had been wrongfully terminated.

Court of Appeal: No Requirement to Meet and Confer on Citizen Sponsored Initiatives

In City of San Diego v. PERB, an appellate court said a citizen sponsored initiative to end pensions for new government employees did not require the city of San Diego (City) to meet and confer with the unions whose members would be affected.  

In November of 2010 then Mayor of San Diego Jerry Sanders announced his plan to place a citizen sponsored initiative on the June 2012 ballot.  The initiative was called the Citizens Pension Reform Iniative (CPRI).  CPRI, if passed, would amend San Diego’s city charter.  The main effect of this amendment was eliminating the pension program for specified future employees, and replacing the program with a 401(k) plan.  

Mayor Sanders, along with many prominent city employees, spent significant time and used considerable resources to gain support for the initiative.  Eventually, enough signatures were collected to place the matter on the June 2012 ballot.  Several unions demanded to meet and confer with City Council before CPRI was placed on the ballot.  If CPRI passed Mayor Sanders would have effectively ended future pensions for city employees without any discussion with union representatives. 

City Council declined to meet with the union representatives, citing a law which requires a citizen sponsored initiative to be placed on the ballot if procedural requirements were met.  Here, the requirements were met, so CPRI was placed on the ballot and passed by the voters.

Several affected unions filed an unfair labor practice charge with PERB.  The City claimed it had no discretion to keep CPRI off the ballot.  According to the City, Mayor Sanders was acting in his capacity as a private citizen.  Since this was was not a government action, they argued, there was no requirement to meet and confer.

PERB found Mayor Sanders was acting as an agent of the City.  Essentially, the City used one of its stronger political figures to create, support, and pass a citizen sponsored initiative.  By doing so the City bypassed the MMBA’s requirement to meet and confer, and ended the pension program for most of the City's future employees.  PERB found this to be a violation of the MMBA, and ordered the City to repay employees for lost compensation, including pension benefits.  The City appealed.

On appeal one of the main argument was over a 1984 case commonly referred to as Seal Beach.  Seal Beach declared, before a governing body can place a charter amendment on the ballot it must satisfy the meet-and-confer obligations under the MMBA.  The unions argued Seal Beach was applicable in the present case.  In other words, 33 years of precedent said governing bodies cannot bypass unions by placing charter amendments on the ballot which will impact the terms and conditions of employment.  The Appellate Court disagreed.

First, the decision dismissed any argument that mayor Sanders was acting as an agent of the City. Concluding CPRI was neither ratified by the City, nor an action of its agent, the court next addressed whether Seal Beach applied.  

The decision said, what took place in San Diego was different from Seal Beach.  CPRI was a citizen sponsored initiative.  In Seal Beach, the city council was using its own authority to place matters on the ballot without an initiative.  Thus, CPRI was not a proposal by a governing body.  Accordingly, there was no obligation to meet and confer.

PERB's decisions are given significant deference on appeal.  Their factual findings are considered final if there is any substantial evidence to support them.  Despite this strong presumption, the court overturned PERB's decision.

Stay tuned as the unions are likely to seek review in the Supreme Court of California.

California Supreme Court Grants Review of CAL FIRE Airtime Credit Case

On April 12, 2017, the California Supreme Court granted CAL FIRE Local 2881's petition for review of the First District Court of Appeal's decision on December 20, 2016 to uphold the elimination of the “airtime credit” benefit in the Public Employment Retirement Systems (“PERS”).

The most significant part of the previous decision by the  Court of Appeal for the First District was the court's decision to adopt the ruling in Marin Association of Public Employees v. Marin County Employees’ Retirement Association (MAPE) regarding the authority of the Legislature to reduce retirement benefits if they do not destroy the pension. The MAPE ruling broke with a half century of precedent holding that any modification of a pension resulting in a detriment must include an offsetting advantage.

The California Supreme Court has now granted review of both the MAPE and Cal Fire rulings. This is a significant opportunity to right the ship and overturn the damage these decisions did to the California vested rights doctrine.

Our office is currently representing two law enforcement associations in separate pension-related appeals in the First Appellate District, including the Alameda Deputy Sheriff's Association. 2017 continues to be an important year for determination of pension rights.

Third Appellate District Upholds Elimination of Pension Pick Ups

In San Joaquin County Correctional Officers' Association v. County of San Joaquin the Court of Appeal upheld a County’s ability to force employees to pay a portion of cost of living (“COLA”) adjustments to their retirement program. This case involved two laws governing public employee retirement, the County Employees Retirement Law of 1937 (“CERL”) and the Public Employees’ Pension Reform Act of 2013 (“PEPRA”).

Prior to PEPRA’s passage, the default retirement program arrangement was that counties and county employees shared the cost of COLA contributions to retirement programs. However, as an option, CERL permitted counties to pay all of the cost of COLA contributions of its employees if it chose to do so. This was known as a “pickup.” This pick up was a common strategy employed by Counties to provide a benefit that was less expensive than a salary adjustment.  In 1975, San Joaquin was one of the counties that agreed to pay the employee share of COLA contributions as part of some of its MOUs.

PEPRA was passed in 2013 to reduce unfunded liabilities in public employee retirement systems. One of PEPRA’s provisions seeks to eliminates the pickups of the employee share of COLA contributions, but does not take effect until 2018.

In 2012, the County negotiated a new MOU with the San Joaquin County Correctional Officers’ Association which eliminated the pickup. The membership voted the MOU down and impasse procedures were engaged. Once impasse was reached, the County unilaterally imposed the elimination of its pick up as part of last best and final offer. The Association challenged the imposition arguing that PEPRA shielded them from such a change until 2018.

Rejecting the Association's challenge, the Court found counties have always had the power to eliminate or reduce pickup under CERL. The CERL permitted the pick up employee costs of COLA contributions, but did not require the pickups nor restrict the employers ability to modify or eliminate them. The court concluded, “In short, the County always has had the power to eliminate the COLA pickup, subject to labor laws, and those laws permitted the county to do so in the event of a bargaining impasse, which occurred. Nothing in PEPRA limited the County’s power in this regard.”

Interestingly, the court cited Marin Assn. of Public Employees v. Marin County Employees’ Retirement Assn. (2016) 2 Cal. App. 5th 674, 681, review granted Nov. 22, 2016, (MAPE) in explaining "the historical backdrop animating recent pension reform legislation in California", but "express[ed] no view" over MAPE's "interpretation of precedent regarding the validity of changes to retirement benefits."

First Appellate District Challenges Vested Rights Doctrine in Upholding Elimination of Airtime Credit

In Cal Fire Local 2881 v. California Public Employees’ Retirement System, the Division Three of the First District Court of Appeal upheld the elimination of the “airtime credit” benefit in Public Employment Retirement Systems (“PERS”). Airtime credit was a benefit available to CalPERS and some other PERS programs that allowed members who had already earned five years of service credit, to purchase another five years of “nonqualified retirement service credit.” The record reflected that PERS had been under charging for the benefit.  In 2013, the Public Employees’ Pension Reform Act of 2013 (“PEPRA”) was passed in what was billed as an effort to reign in unfunded pension liabilities. One of the provisions of PEPRA eliminated the ability to purchase airtime credit.

The court considered whether the ability to purchase airtime credit was a “vested benefit.” The court started its analysis with a general presumption against the granting of a vested benefit, unless its text or legislative history evidence an intent to be bound. Applying the reasoning in Employees Assn. of Orange County, Inc. v. County of Orange (2011) 52 Cal.4th 1171, the court held “there is nothing in either the text of the statute, or its legislative history, that unambiguously states an intent by the Legislature to create a vested pension benefit. This demonstration of intent, as we explained above, is required by California law.” The court found no such intent with respect to airtime.

Further, the court held no right was destroyed, noting PEPRA provided members with a seven month window to purchase the service credit, and that such applications would be honored if they were submitted prior to December 31, 2012. "Thus, nothing in the revised statutory scheme immediately destroyed plaintiffs’ right to purchase the airtime service credit ... To the extent plaintiffs lost out on the opportunity to purchase the airtime service credit, such loss was, accordingly, a product of their own doing."

The court also held that the elimination of airtime did not destroy any benefit because the cost of airtime was always intended to be borne entirely by the employee.  Because the benefit was established as cost neutral to the employer, "the employees, not the state, paid for this benefit" and therefore the court held "this simply is not a case where the state provided a retirement benefit to its employees in exchange for their work performance, and then took the benefit away."

Most significantly, the court endorsed Division Two of the First District's holdings in Marin Association of Public Employees v. Marin County Employees’ Retirement Association (MAPE) regarding the authority of the Legislature to reduce retirement benefits s long as they do not destroy the pension.  This superfluous basis for upholding the elimination of airtime is striking given that the Supreme Court had granted Review of MAPE.

MAPE broke with a half century of precedent holding that any modification of a pension resulting in a detriment must include an offsetting advantage.  On November 22, 2016, the California Supreme Court issued an order granting review of MAPE, holding, "The petition for review is granted. Further action in this matter is deferred pending the decision of the Court of Appeal, First Appellate District, Division Four, in Alameda County Deputy Sheriff's Association et al. v. Alameda County Employees' Retirement Association et al., A141913
 
Although the elimination of airtime is not particularly significant, the court's unnecessary adoption of the MAPE reasoning in the face of Supreme Court review could affect broader legal principles involving the California vested rights doctrine.  Our office currently is representing two law enforcement associations in two separate pension related appeals in the First Appellate District, including the Alameda Deputy Sheriff's Association.  2017 is shaping up to be an important year for determination pension rights.

Third Appellate District Upholds Award of Penalties for Late Advance Disability Pension Payments

In the recently decided Gage v. Workers Compensation Appeals Board, (CA3, Nov. 22, 2016 No. C081618)  the Court upheld the ability for employees to receive penalties for late advance disability pension payments. In this case, a Sacramento County Sheriff’s Deputy, represented by Greg Gomez of Mastagni Holstedt, APC, sustained a job-related injury and applied for an industrial disability retirement. In cases like these involving peace officers, the injured party can also apply for advance disability pension payments in order to cover living expenses while the disability retirement application is being decided.

Here, Gage petitioned for these advance payments and applied for industrial disability retirement on March 6, 2015. When payments did not arrive, Gage petitioned for late payment penalties against the County on June 2. The County claimed not to have received the application until June 11. The County also asserted that the Workers Compensation Appeal Board (WCAB) did not have authority over advance payments of pension because that would fall under another a different law (County Employees Retirement Law of 1937), and thus it could not apply penalties.

While this issue was being decided, the County continued to stall payments due to some additional technicalities (legal joinder). On June 29, it finally approved payment of benefits. Gage filed a petition for penalties because the benefit check wouldn’t arrive until July 2, almost 4 months after her initial request.

A workers compensation judge initially agreed with Gage that disability pension payments were considered compensation, and thus were subject to penalties for late payment. The County appealed arguing that advance pension disability payments were an obligation of the retirement system, and thus not subject to the penalty. On appeal, the WCAB overturned the workers compensation judge’s initial decision.

When the case was finally appealed to the Third Appellate District, the Court explained that the workers compensation law was intended to be liberally construed for the purpose of extending benefits to those injured in the course of employment. This includes making sure that those in law enforcement are given all the rights attendant to the workers compensation law. The advance disability pension payments are specifically provided to help officers who would otherwise have difficulty making the monthly bills if they had no income due to being injured. In fact, the payment of such benefits was made mandatory in 2002.

The Court also discredited the County’s argument that under the applicable code section, the repayment of retirement benefits was outside of WCAB’s jurisdiction. The Court stated that while the repayment of retirement benefits once disability retirement was approved was outside the scope of the WCAB’s jurisdiction, that did not bar it from asserting penalties on late payments, because such payments are considered compensation and therefore fall under WCAB’s jurisdiction. While the court remanded the case to determine if the delay in this case was sufficiently unreasonable such that penalties were required, this case still stands as a big win for employees seeking disability retirement. Mastagni Holstedt, APC is requesting that this case be published so that it has precedential value.

Mastagni Holstedt, APC is privileged to have represented the Sacramento Deputy Sheriffs Association and Ms. Gage in obtaining this important result. Greg Gomez of Mastagni Holstedt, APC represented Ms. Gage in this matter.

Court of Appeal Breaks from Supreme Court Precedent in Upholding Prospective Reduction of Pension Benefits

The attack on public employee pensions continues with the California Court of Appeal's recent decision in Marin Association of Public Employees et al. v. Marin County Employees' Retirement Association et al. The Court of Appeal upheld the Marin County Employees' Retirement Association's ("MCERA") implementation of the Pension Reform Act (A.B. 197) in the face of constitutional challenges by employee organizations.

MCERA is subject to the County Employees Retirement Law of 1937 (often referred to as "CERL" or "the '37 Act.") In 2012, the Legislature passed the Public Employees' Pension Reform Act ("PEPRA"), which, in part, excluded forms of pay from the "compensation earnable" used to calculate employees' pension benefits.

After PEPRA's enactment, MCERA implemented policies to effectuate these changes. Under the new policy, MCERA would begin to exclude standby pay, administrative response pay, call-back pay, cash payments for waiving health insurance, and other pay items from employees' final compensation after January 1, 2013. Four employee organizations and four plaintiffs challenged these changes on the basis that they were unconstitutional impairments of current employees' vested rights under the state and federal contract clauses.

The court found PEPRA's prospective changes to pension calculations, and MCERA's implementation of such changes, were constitutional. The court agreed that current employees have vested rights to a "substantial" and "reasonable" pension, but held they do not have an "immutable entitlement to the most optimal formula for calculating the pension." Rather, in the court's view, pensions are subject to "reasonable" modification before they become payable.

The court's ruling abandons over fifty years of California Supreme Court rulings protecting public employee pension rights. In 1955, the California Supreme Court issued its ruling in Allen v. City of Long Beach, which established that any changes to pension benefits that result in a disadvantage to employees must be accompanied by comparable new advantages.

In this case, the court did not follow this precedent and claimed the Supreme Court did not intend its use of "must" to to be literal or inflexible. Rather, the court preferred the formulation that a disadvantageous change to pension benefits only "should" be accompanied by a comparable new advantage. In any event, the court determined under the facts of this case, that the employees received a comparable advantage to the reduction in their pension benefits in the form of reduced employee contributions to the retirement system. Since MCERA excluded standby pay, administrative response pay, and call-back pay from pension calculations, it would no longer collect retirement contributions on such pay. This ruling seemingly ignored the fact that, for years, employees contributed to MCERA to fund pension benefits that included such pay.

This case has significant limitations and is sure to be promptly challenged in the California Supreme Court.

Mastagni Holstedt, APC Protects Retirement Rights in the Court of Appeal

Mastagni Holstedt, APC filed an amicus brief with the California Second Appellate District, Division One. At issue are adjustable retirement health subsidies under the City of Los Angeles’ retirement system. In 2006, the City of Los Angeles passed an ordinance which allowed the Board of the Los Angeles Fire and Police Pension System to provide an adjustable retirement health subsidy. This adjustable rate would allow the City to increase contributions as costs increased over time.

However, in 2011, the City of Los Angeles passed an ordinance freezing future increases to the subsidy. Los Angeles employee organizations brought suit alleging this violated their vested right to a variable subsidy. The trial court agreed and ordered the City to increase the subsidy pursuant to the 2006 ordinance.

The City appealed the decision arguing it had plenary authority to modify the pension subsidy as it was a type of “employee compensation.” In its brief, Mastagni Holstedt, APC argues a pension subsidy is not salary, but is instead a vested benefit. The California courts have already held on numerous occasions a pension benefit, once vested, cannot be revoked. The California Constitution’s Contracts Clause prohibits such an action. Thus, the City cannot arbitrarily revoke a benefit by reforming it as “employee compensation.”

Mastagni Holstedt, APC thanks the employee organizations who joined the firm in fighting back against the destruction of employee benefits.  Mastagni Holstedt attorneys David E. Mastagni, Isaac S. Stevens, and Ian B. Sangster represent the amici in the matter.

Chuck Reed Tries New Tactic in Pension Assault

Chuck Reed announced a new strategy to attack pensions in California today.  The text of new proposal has several features designed to take away employees retirement benefits.

It would abolish pensions for employees hired after January 1, 2019 and replace them with a "defined-contribution" system unless changes to benefits are approved in an election.  In a defined-contribution system, employees have to pay in a fixed amount with no guarantee of what their retirement income would be.  As a result, this approach shifts the risk and could result in thousands of public employees unable to retire.

The proposal is not limited to retirement benefits.  It provides, "Voters have the right to use the power of initiative or referendum... to determine the amount of and manner in which compensation and retirement benefits are provided to employees of a government employer."  As a result, the measure could be read to allow voter initiatives to eliminate or change MOUs, severely limiting collective bargaining in California.

The proposal also seeks to prevent the Public Employment Relations Board from hearing unfair practice cases involving ballot measures to strip employees of bargained-for compensation.

Illinois Supreme Court Blocks Attack On State-Funded Pensions

The Illinois Supreme Court blocked an attack on state employees and their pensions when it upheld a lower court ruling on May 8, 2015. In Pension Reform Litigation v. Pat Quinn, the Court struck down a 2013 law aimed at slashing state-funded public employee pensions. The Court ruled the law violated the Illinois State Constitution’s contracts clause.

In 1970, Illinois ratified an amendment to its constitution protecting state-funded pensions. From 1970 until 2013, the funding for the state-funded pensions stagnated, having only 41% of the funding necessary to meet the fund’s liabilities. Conversely, the Illinois Municipal Retirement Fund is funded at 96%. The IMRF is not state funded.

To meet growing concerns with its state-funded pensions and other budgetary issues, the Illinois state legislature passed Public Act 98-599. The heart of PA 98-599 aimed to cut state-funded pensions. The bill sought to delay eligibility for members. It also capped the maximum salary used to calculate benefits. PA 98-599 then tried to effectively reduce base pension amounts for some members. Senator Kwame Raoul, one of PA 98-599’s chief sponsors, characterized the bill as sacrificing state employee pensions to protect state finances.

Former Governor Pat Quinn signed PA 98-599 in 2013. Five separate lawsuits challenging the law’s validity were immediately filed. The lawsuits, all decided in this case, claimed that PA 98-599 violated Illinois’s contracts clause. Just like the California's contracts clause, the Illinois Constitution prohibits the impairment of state pensions. PA 98-599’s proponents characterized the bill as an exercise of the legislature’s emergency police powers. The Illinois Supreme Court disagreed. The Court ruled that the PA 98-599 violates the Illinois Constitution.

The Illinois Supreme Court warned against a slippery slope of unnecessarily using police powers. Writing for the Court, Justice Lloyd Karmeier instructed that emergency police powers must be reserved for true emergencies. If not, “no rights or property would be safe from the State. Today it is nullification of the right to retirement benefits. Tomorrow it could be renunciation of the duty to repay State obligations. Eventually, investment capital could be seized.” Justice Karmeier further explained that “crisis is not an excuse to abandon the rule of law. It is a summons to defend it.” The Court pointed to the possibility of raising taxes to meet the fund’s needs.

The Illinois pension victory represents just one battle in that state’s fight. Though the ruling came from the Midwest, the fallout hits close to home. Just like Chuck Reed here in California, Governor Bruce Rauner wants to amend the Illinois constitution so that he can gut state-funded pensions.

Similar attacks on retiree benefits have failed in California on similar grounds.  In Stockton, the superior court found a fiscal emergency declaration does not authorize City to renegotiate a closed labor contract.  In Los Angeles, a court determined a fiscal emergency declaration does not permit freezing retiree medical benefits or imposing furloughs, and in Pacific Grove the court found a local ballot measure capping PERS pension contributions violated California's contracts clause.  Mastagni Holstedt attorneys David E. Mastagni and Isaac S. Stevens represented the employee groups in Stockton and Los Angeles.  Mastagni Holstedt attorney Jeffrey R. A. Edwards represented the employee groups in Pacific Grove.

Court of Appeal: No Vested Rights in Post-Retirement Pension Benefit Enhancements

On March 27, 2015, the California Court of Appeal held employees who retired before certain pension benefit enhancements went into effect did not have vested rights to those benefits. The court's decision in Protect Our Benefits v. City and County of San Francisco held retirees' post-retirement benefit enhancements were exposed to legislative impairment.

Beginning in 1996, retired employees of the City and County of San Francisco ("City") received supplemental cost of living allowances ("supplemental COLA") for their pension benefits when the retirement fund's earnings from the previous year exceeded projected earnings. But in November 2011, voters passed an initiative conditioning payment of the supplemental COLA on the retirement fund being "fully funded."

The court held the initiative improperly impaired vested contractual rights for current City employees and those who retired after the 1996 supplemental COLA went into effect. However, the court upheld the November 2011 initiative for City employees who retired before the 1996 supplemental COLA went into effect because they had no vested rights in the supplemental COLA. Vested pension rights are created at the time the employee provides services for the employer. The pre-1996 retirees' vested rights were limited to the pension benefits in effect at retirement, and they had no vested rights in the post-retirement supplemental COLA enhancements.

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 Addresses Private Sector Vested Rights

On Monday the Supreme Court struck a blow to vested health-care benefit rights under collective-bargaining agreements in the private sector. Previously, courts assumed health-care benefits in a collective-bargaining agreement vested for life absent language to the contrary. This case changes that presumption. Now, health care benefits will not vest for life unless clearly stated in the collective-bargaining agreement. 

The issue in M&G Polymers USA, LLC v. Tackett is how health-care benefits vest under a collective-bargaining agreement. The Court of Appeals for the Sixth Circuit said health-care benefits are vested unless the collective-bargaining agreement say they are not. This presumption protects the vested benefit right.

The Supreme Court reversed that presumption. The Court said the presumption had no basis in contract law. Thus, when a contract is silent as to the duration of benefits, a court may not infer that the parties intended for those benefits to vest for life. The Court did not reinterpret the contract.  Instead, it asked the Sixth Circuit to review the case under “ordinary principals of contract law.”

This opinion does not reflect California law in the public sector. Article 1, Section 9 of the California Constitution prohibits the legislature from passing a law which impairs the obligation of contracts. The California Supreme Court has clearly stated that once a public employee accepts employment and works for an employer, the employee’s rights are protected by the Contract Clause. (White v. Davis (2003) 30 Cal.4th 528, 566.) Among these protected rights are vested pension rights. (Betts v. Board of Administration of Public Employees’ Retirement System, (1978) 21 Cal.3d 859, 863.)

Additionally, this ruling does not change the presumption in California that a public employee’s right to health benefits may be based on the implied terms of a collective bargaining agreement. (Retired Employees Association of Orange County, Inc. v. County of Orange (2011) 52 Cal.4th 1171.) However, an implied right to health-care benefits will only be inferred if there is a clear basis in the contract or convincing extrinsic evidence supporting the vested right.

Illinois Supreme Court: Pensions Protected By State Constitution

In Kanerva v. Weems (July 3, 2014), the Illinois Supreme Court ruled health-insurances subsidies for retired state workers are protected under the Illinois Constitution. The ruling poses a challenge to Illinois’ recent pension reform legislation and may force the State to consider raising revenue rather than cutting benefits.

Recently, the State attempted to reform the pension system by imposing healthcare insurance premiums on its retired workers, reducing cost-of-living increases for pensions, raising retirement ages, and limiting the salaries on which pensions are based. Retirees challenged a recent amendment to the State Employees Group Insurance Act, arguing it violated pension protection clause of the Illinois Constitution. The high court agreed, finding the pension protection clause applies to an Illinois public employer’s obligation to contribute to the cost of health care benefits for employees covered by one of the state retirement systems.

In a similar case, David E. Mastagni and Isaac S. Stevens, obtained a decision in the Los Angeles County Superior Court for the Los Angeles City Attorneys’ Association (LACAA). They argued the City of Los Angeles’ freeze ordinance, which capped retiree medical premiums at $1,190 with no increases, unconstitutionally impaired a contractual obligation to LACAA’s members because a maximum medical plan premium subsidy is a vested right. The court agreed, finding the freeze ordinance was an impairment of a vested right to a substantial or reasonable benefit and issued a writ of mandate directing the City to compute and provide the health insurance premium to LACAA’s members without regard to the City’s freeze ordinance.