Pacific Grove Poa, Porac Ldf Win Landmark Pension Impairment Case

JEFFREY R.A. EDWARDS
Associate Attorney
Mastagni, Holstedt, Amick,
Miller & Johnsen

On May 17, 2013, the Monterey County Superior Court struck down a local voter initiative impairing police officers’ pensions. The decision reaffirms peace officers’ constitutional right to receive their pensions. The win came after a lengthy court battle. The support of PORAC LDF and law enforcement labor associations throughout the state were critical to securing the victory. The decision has far-reaching implications in California because Pacific Grove was one of the first cities to go after officers’ pensions at the ballot box and the decision comes as other legal challenges are still underway.

The case started in 2010 when a citizens’ group gathered enough signatures to put an initiative on the ballot. The initiative would cap the City’s contributions to their pension system at 10% of the officers’ salary. That would have more than doubled officers’ contributions because the City participated in CalPERS and the employer rate was over 24% at the time. Then the City Council adopted the initiative, instead of putting it before the voters, and made its own initiative that went even further. It tried to revoke officers’ vested rights and amend the City Charter to require voters to approve changes to officers’ pensions.

PORAC LDF supported the Pacific Grove Police Officers’ Association (PGPOA) from the beginning. PGPOA filed a lawsuit challenging both measures the day after the election. The City pushed back hard, and the case went through several rounds of litigation before the judge’s final ruling.

The Superior Court made three major rulings affecting peace officers throughout California. First, the court ruled that the initiative, which capped how much the City could pay into the pension system, was unconstitutional because the officers have a constitutionally protected vested right to a pension, where the officers pay a fixed rate and the City pays an adjustable rate. The court ruled that the City’s efforts to cap its contributions to officers’ pensions violates Article 1, Section 9, of the California Constitution, also known as the Contract Clause. The Contract Clause requires local governments to keep the promises they make to public employees. It also forbids them from impairing contracts with labor associations.

Under Pacific Grove’s pension rules, the City has to contribute the employer’s share, but the rules do not specify how much the rate is or what will happen if the employer rate goes up. This victory establishes that when an employer agrees to pay an “employer contribution,” it assumes the risk that CalPERS will increase its employment rates. As a result, if rates go up, the employer has to pay them and cannot shift responsibility back on the employees.

Second, the court ruled that it was unconstitutional for the City to amend its charter to take away officers’ vested rights. The initiative tried to take away officers’ vested rights by claiming they did not have vested rights to receive pension benefits for “time not yet worked.” But the court rejected the City’s claim, ruling that once an employee has a vested right to a pension, an employer cannot change the formula, even for the time the employee hasn’t worked yet.

Third, the court ruled that the City violated the City Charter and the general law by having citizens vote on pensions at all. The court ruled that the City Council had to decide officers’ pensions. Under the Government Code, the elected body of general law cities and counties must “fix the compensation of all appointive officers and employees.” As a result, voters can’t set employee compensation by the initiative. Different rules apply to charter cities and counties. However, many charters, like Pacific Grove’s, use the same language as the Government Code and require the elected body to set employee compensation. PGPOA’s victory establishes that the same language should be interpreted the same way. As a result, the court ruled that the citizens’ initiative capping contributions to CalPERS violated the City Charter and the general law.

The case has major implications statewide because it establishes that cities and counties can’t go back on the pension promises they made to employees. Pacific Grove was one of the first cities in California to face this kind of voter initiative, and the officers’ success in holding the line there bodes well for similar challenges elsewhere in the state.

PGPOA was represented by attorneys Christopher W. Miller and Jeffrey R.A. Edwards of the firm Mastagni, Holstedt, Amick, Miller & Johnsen.

About the Author

Jeffrey R. A. Edwards is an associate attorney in the labor department at Mastagni, Holstedt, Amick, Miller & Johnsen, A.P.C. His practice focuses on complex civil, class-action and collective-action litigation concerning the Fair Labor Standards Act, Meyers-Milias-Brown Act, Public Safety Officers’ Procedural Bill of Rights, California Labor Code and other statutes providing labor and employment rights to employees.

Christopher W. Miller is a partner in the labor department at Mastagni, Holstedt, Amick, Miller & Johnsen, A.P.C. Christopher is a former Stanislaus County prosecutor emphasizing labor and employment law representation and civil and criminal defense of peace officers.