A Santa Clara County Superior Court judge has declared unconstitutional the City of San Jose’s attempt to increase employee pension contributions and reduce retirement benefits because this would unconstitutionally impair employees’ contractual rights under the “vested rights doctrine.” Judge Patricia M. Lucas’s tentative decision, if made final, would invalidate the key components of “Measure B,” which was put before the San Jose electorate by San Jose Mayor Chuck Reed in a politically-motivated attack on public employees. The lead plaintiff, the San Jose Police Officers Association, is represented by Carroll, Burdick & McDonough. Labor Partner Gregg Adam was assisted by Appellate Partner Gonzalo Martinez and Labor Associate Amber Griffiths.

The court ruled that the City of San Jose cannot impair the vested rights of its employees based on “reservation of rights” language in the City Charter. It further ruled against the City’s attempt to saddle employees with the costs of its unfunded pension liabilities, striking language that would have required employees to contribute to the unfunded liability of the City’s general pension fund. The judge also ruled in the employees’ favor in the protection of Cost of Living Adjustments. In addition, she ruled against the City’s attempt to force employees to pay more for their current pension plan or be forced into one with more limited benefits.

According to the court, certain changes—such as modification to disability retirement benefits—were permissible as modifications not disturbing rights of employees to enjoy a “substantial or reasonable pension.” Also, although the court upheld the “poison pill” language in the measure, which states that the City can initiate pay cuts if any portion of the measure is ruled invalid, the City gains nothing with this. SJPOA members are being informed that this ruling cannot touch their wages based on protections under a two-year Memorandum of Understanding.

It remains to be seen whether the outcome of this case will dissuade Mayor Reed from continuing to pursue his “Pension Reform Act,” which is intended to eliminate vested pension rights by amending the California Constitution. But Judge Lucas’s rationale for upholding the vested rights of San Jose employees in this case would certainly seem to pour some cold water on such politically-motivated aspirations.

If you have any questions, please contact Jennifer Stoughton at jennifer@majlabor.com.