State Supreme Court to hear arguments in California pension case

The California Supreme Court will hold online oral arguments Tuesday in a public pension case that could challenge the so-called "California Rule."

The state’s highest court will hear Alameda County Deputy Sheriff’s Association v. Alameda County Employees’ Retirement Association, one of several cases pending on the court’s docket that challenge certain aspects of the Public Employees’ Pension Reform Act of 2013.

California Supreme Court

The cases have garnered broad attention in California and nationally, where laws similar to the California Rule have prevented significant changes to public pensions by states and municipalities struggling with retirement liabilities.

The rule is based on a series of court decisions dating back to the 1950s that have been interpreted as preventing any changes to existing employee pensions.

The oral arguments will be heard online in light of the COVID-19 pandemic.

Counsel will deliver oral arguments remotely using video or teleconferencing.

Up to five Justices and up to 15 members of the press will be permitted in the San Francisco courtroom, subject to appropriate social distancing requirements. No public seating will be available, but the argument will be available via livestream on the court’s website.

The Alameda County case challenges PEPRA’s change to the definition of “compensation earnable,” under the County Employees Retirement Law of 1937.

The case "arises out of the tension between two undeniably valid, and yet fundamentally opposed public interests: the interest of the government in maintaining the flexibility to alter statutes to conform to current needs and the interest of public employees in a stable and predictable pension, earned through years of public service," the three-judge appellate court wrote in its split-decision ruling.

The union plaintiffs appealed the decision to the Supreme Court in February 2018 because "the appellate court flatly refused to follow this Court’s longstanding precedent requiring that any detrimental changes to pension rights “must” be offset by new advantages."

California Gov. Jerry Brown signed PEPRA, portrayed as an attempt to curb pervasive abuses in public pension systems throughout California, into law in September 2012.

Compensation earnable is the amount of salary used to calculate pension benefits at retirement. PEPRA amended the definition of the concept to exclude certain pension-enhancing pay items, such as leave cash-outs and on-call and standby pay.

Employees and employee organizations from various counties sued, claiming that PEPRA’s changes to the definition of “compensation earnable” cannot be applied to employees who were employed prior to PEPRA because they have a vested contractual right to have their pension benefits determined based on the prior definitions.

Last year, the court decided the case of Cal Fire Local 2881 v. California Public Employees’ Retirement System in a narrow ruling favoring the state while explicitly avoiding the California Rule.

The Cal Fire case involved a challenge to the provision of PEPRA that eliminated the option for employees enrolled in CalPERS to purchase up to five years of service credit, commonly known as airtime, to add to their pension benefit.

The Cal Fire union’s attorneys argued that the California Rule prevents modification of vested pension benefits except in very limited circumstances. The union contended that those employees’ right to the airtime benefit was improperly eliminated.

The high court ruled that airtime was not a vested pension benefit, making the decision outside the scope of the California Rule.

The Alameda County case is the second case on the court’s morning oral argument calendar, which starts at 9 a.m.

Once oral argument is heard, the court has 90 days to issue an opinion.