A decision handed down in MARIN ASSOCIATION OF PUBLIC EMPLOYEES et al., v. MARIN COUNTY ASSOCIATION OF PUBLIC EMPLOYEES et al. is a shock to public employees in California. Brought by a group of public sector employee unions and workers, the suit challenged Marin County’s 2013 implementation of AB 197.
One purpose of the California Public Employees’ Pension Reform Act (PEPRA), as amended by trailer bill AB 197, was to eliminate pension spiking. It did away with employees’ ability to use certain kinds of alternative pay in pension calculations, like callback, standby, admin response and cash payments, which opponents asserted were “pension padding.” Unions filed the lawsuit after Marin moved to implement AB 197 claiming that the elimination was a contract violation, because workers were repededly promised these benefits and planned their retirements around these pension calculations. Unions argued that AB 197 infringed on vested rights, and that the employer should be required offer a comparable benefit in place of these reductions.
The decision was a total slap in the face- the ruling found that there is no absolute right to a fixed pension benefit or to specific pension calculations. It even claimed that AB 197 actually creates a “benefit” for workers in that it puts more money in employees’ paychecks now. The decision admitted that while employers cannot completely abolish a pension and refuse to fund it, plenty of “reasonable” changes can be made. “Reasonable modifications” that can be made include: (1) change in retirement age with reduction of the maximum amount of pension; (2) repeal of COLA’s; (3) pension reduced before retirement from 2/3 to ½ of salary; (4) change in number of years of service required to vest; (5) changes in minimum years required or employee contribution amount.
The good news is that this case is very limited in scope, dealing only with pension spiking. There is no reasonable conclusion that this decision opens the door to overturning numerous Supreme Court decisions upholding the vested rights of public employees to retirement benefits. It’s also an appellate court decision, which can be appealed to the Supreme Court. The California Supreme Court has repeatedly affirmed the “California Rule” protecting pensions and maintaining they are a vested right. Finally, no changes to pensions have been made been by the Court, and would require legislative action.