We alerted our blog followers to the recent decision in Marin Association of Public Employees v. Marin County Employees Retirement Association by the First District Court of Appeal in San Francisco.  The decision is a frontal attack on the vested rights doctrine.

Here is briefly what happened leading up to and in this case: In 1997, the Supreme Court decided in Ventura County Deputy Sheriffs’ Association v. Board of Retirement that pursuant to the County Employees’ Retirement Law (under which 20 California counties have set up pension systems) all compensation except overtime had to be treated as pensionable.  After Ventura, the Marin County Employees’ Retirement Association (“MCERA”), like many other county retirement boards, took the position that multiple premiums had to be treated as pensionable compensation (or “compensation earnable” as Government Code section 31461 calls it).  So for many years, standby pay, administrative response pay, call-back pay, cash-in-lieu of healthcare, and fringe benefits were included as pensionable.

That changed when the California Public Employees’ Pension Reform Act ("PEPRA") was passed.  After PEPRA came into effect, MCERA changed its rules and stopped including the premiums described above as pensionable. Various unions sued.  The trial court refused to find any part of PEPRA unconstitutional.

On appeal, the unions argued that under sixty years of California Supreme Court interpretation of the vested rights doctrine, and dozens of court of appeal cases following it, any disadvantageous change in current employee pension benefits had to be offset by a comparable advantage.

The appellate panel rejected conventional wisdom on what California vested rights law requires and offered a quite astonishing attack on public employee pensions and “pension spiking,” describing state and local government pension liabilities as a “ticking time bomb.”  The first five pages of the opinion is highly partisan stuff.  Later in the opinion, the panel concludes that the inclusion of the premiums can be eliminated, without any legal consequences.  It then attempts to neuter vested rights law, asserting that public employee pensions can be freely reduced so long as they are not destroyed.  Legal commentators and pension critics are describing the case as a game-changer.  It is a call to arms for unions to get this devastating decision reviewed before public agencies seek to undo pension promises to their employees.

We hope that the word of the Court of Appeal is not the last word. To that end, yesterday, along with our colleagues at the Leonard Carder and Weinberg, Roger & Rosenfeld law firms, we filed a Petition for Review with the California Supreme Court asking it to review this highly controversial ruling.

We expect amicus curiae from many fronts will weigh in on whether or not review should be granted and whether or not the Court of Appeal got it right.

If you have any questions, please contact Gregg Adam at gregg@majlabor.com.