Court of Appeal Affirms Employer’s Authority to End Pickup of Employee Pension Contribution Post-PEPRA

San Joaquin County Correctional Officers’ Association v. County of San Joaquin (Dec. 20, 2016)
Cal. Court of Appeal, 3d Appellate Dist., Case No. C079413, __ Cal. App. 5th

The Public Employees’ Pension Reform Act of 2013 (PEPRA) contains language that permits a County employer to require employees who were employed before the Act took effect to pay 50% of the normal cost of their pension benefit (subject to some limitations), effective January 1, 2018. Unions have argued that provision prohibits County employers from unilaterally making any changes to employee pension contributions before 2018. In only the third published court of appeal decision interpreting PEPRA, the Third District Court of Appeal rejected that argument, and held that the County of San Joaquin could stop paying the required member contribution in 2013 even without mutual agreement.

Facts and Procedural Background

The County Employees’ Retirement Law of 1937 (CERL) requires employees to pay half the contribution required to fund the cost-of-living adjustment (COLA) portion of their pension benefit. An employer county or special district may choose to pay some or all of this member contribution.
In 1975, the San Joaquin County Board of Supervisors adopted a resolution whereby the County would pay the full member contribution for the COLA. On January 29, 2013, after reaching impasse with the San Joaquin County Correctional Officers Association (COA), the County implemented its last, best, and final offer, which included elimination of the COLA contribution pickup.
After a brief detour to the Public Employment Relations Board, which held it had no jurisdiction over the matter, COA filed a writ of mandate in superior court. The trial court ruled in favor of the County, and the COA appealed.

The Court of Appeal’s Decision

The court of appeal concluded that, as of January 29, 2013, the County had the authority to unilaterally end the pickup of the member contribution toward the COLA upon reaching impasse with COA. COA’s claim was based on Government Code ยง 31631.5, a provision added to the CERL by PEPRA. Subdivision (a) of that section prohibits an employer from requiring employees hired before PEPRA took effect (“classic” or “legacy” members) to pay 50% of the normal cost of their pension benefit prior to January 1, 2018, unless they agree to do so through collective bargaining. However, subdivision (b) provides:
Nothing in this section shall modify a board of supervisors’ or the governing body of a district’s authority under law as it existed on December 31, 2012, including any restrictions on that authority, to change the amount of member contributions.

COA did not dispute that prior to PEPRA taking effect, i.e., as of December 31, 2012, the County could unilaterally stop paying the member contribution towards the COLA upon reaching a bargaining impasse. The court held that subdivision (b) preserved this existing authority, and the County thus did not violate PEPRA when it ended the pickup on January 29, 2013.

Impact of this Decision

In this decision, the court affirmed that rules governing pickups of member contributions remain unchanged under PEPRA.[1] The court’s confirmation of the status quo is valuable, as it brings more certainty to employee relations and perhaps heads off future challenges on this issue.
This case involved a CERL provision that explicitly preserves the employer’s existing authority to change member contributions. There is no similar language in the general PEPRA provisions or in the provisions PEPRA added to the Public Employees’ Retirement Law. However, the court did state that interpreting PEPRA to limit an employer’s pre-existing ability to have employees pay their own share of pension costs would be contrary to the statute’s overriding purpose – to reduce public pension liability by having employees pay more of the cost of their benefits. The court’s recognition of this principle should provide support for employers in future challenges under PEPRA to elimination of a pickup.
Although PEPRA has been in effect for almost four years, this is only the third published court of appeal decision to interpret the Act. All three decisions arose from CERL retirement systems. The other two decisions are:

Marin Assn. of Public Employees v. Marin County Public Employees’ Retirement Assn. (2016) 2 Cal.App.5th 674. PEPRA’s elimination of certain specialty pays from pensionable compensation on a prospective basis did not impair employees’ vested right to a reasonable pension. The California Supreme Court has granted review of this decision.

Deputy Sheriffs’ Association of San Diego County v. County of San Diego, et al. (2015) 223 Cal.App.4th 573. Future employees have no vested right in a particular pension benefit and thus PEPRA’s reduction of retirement benefits for future employees did not impair any vested right. The County could not require employees to pay 50% of the normal cost of pension benefits until the current labor contract expired.

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[1] PEPRA prohibits employers from paying any of the employee contribution for new members who entered a retirement system on or after January 1, 2013.
Contact Info: Press Release

For more information please contact Erich Shiners (eshiners@publiclawgroup.com, 916-258-8803) or Jeff Sloan (jsloan@publiclawgroup.com, 415-867-5097).