City of Oakland v. Police

• Decision Date: 26 March 2014
• Docket Number: A136769
• Citation: 169 Cal.Rptr.3d 51,224 Cal.App.4th 210
• Parties: CITY OF OAKLAND, Plaintiffs and Respondents. v. OAKLAND POLICE AND FIRE RETIREMENT SYSTEM et al., Appellants and Respondents, Retired Oakland Police Officers Association et al., Appellants and Interveners.
• Court: California Court of Appeals Court of Appeals

224 Cal.App.4th 210

169 Cal.Rptr.3d 51

CITY OF OAKLAND, Plaintiffs and Respondents.

v. OAKLAND POLICE AND FIRE RETIREMENT SYSTEM et al., Appellants and Respondents,Retired Oakland Police Officers Association et al., Appellants and Interveners.

A136769

Court of Appeal, First District, Division 4, California.

Filed February 28, 2014

As Modified on Denial of Rehearing March 26, 2014

See 8 Witkin, Cal. Procedure (5th ed. 2008) Extraordinary Writs, § 85 et seq.

Trial Court: Alameda County, Superior Court Trial Judge: Hon. Evilio M. Grillo. (No. RG11580626)

Counsel for Plaintiffs and Respondents: Nossaman LLP, Stephen N. Roberts, James H. Vorhis, San Francisco.

Counsel for Appellants: Olson Hagel & Fishburn, Sacramento, Richard C. Miadich.

Counsel for Intervenors: Davis, Cowell & Bowe, LLP, W. David Holsberry, Sarah Grossman–Swenson, San Francisco.

REARDON, ACTING P.J.

In this appeal, we revisit the provisions of the Oakland City Charter that determine how retirement benefits are calculated for members of the Oakland Police and Fire Retirement System (PFRS). The Retired Oakland Police Officers Association, along with several PFRS's members and beneficiaries (collectively, the “Association”), appeal from a judgment granting a peremptory writ of mandate and declaratory relief in favor of the City of Oakland (City). In the trial court, the City successfully argued that the Oakland Police and Fire Retirement Board (Board) had impermissibly included certain holiday premium pay and shift differential pay in the calculation of PFRS retirement benefits. The Board was ordered to correct its calculations for all future payments and to implement a plan for recovering past overpayments made to retirees.¹

I. BACKGROUND

A. The Oakland Police and Fire Retirement System (PFRS)

PFRS was created in 1951 when separate police and fire retirement systems were merged pursuant to article XXVI of the Oakland City Charter (Charter). (Charter, art. XXVI, § 2600.) Only members of the Oakland Police Department (Department) or Oakland Fire Department hired prior to July 1, 1976, are eligible for coverage by PFRS.² ( Id., §§ 2600, 2607.) Current members of the Department (except for one sergeant covered by PFRS who has not yet retired) are included in the state-created Public Employees' Retirement System (PERS). Thus, PFRS is essentially a closed system with a dwindling pool of retirees. As of January 31, 2012, PFRS had 619 retired police members and widows, with an average age of 73.

PFRS is funded through a combination of member contributions (reportedly between 5 and 13 percent of each member paycheck), investment returns and additional monies supplied by the City “as may be necessary.” ( Id., §§ 2601, subd. (e), 2619.) Its governing Board consists of seven members, including representatives of the City, the Department, the Fire Department and the PFRS retirees, as well as a local life insurance executive, a banker and a community representative. ( Id., § 2601.) Pursuant to the terms of the Charter, PFRS is managed and administered by the Board, which has “exclusive control of the administration and investment” of all PFRS funds. ( Ibid.)

In a fixed pension system, benefits are paid to a retiree based on the compensation paid to that retiree for a defined period of time prior to retirement. (Kreeft v. City of Oakland (1998) 68 Cal.App.4th 46, 48, fn. 1, 80 Cal.Rptr.2d 137 (Kreeft ), citing Dunham v. City of Berkeley (1970) 7 Cal.App.3d 508, 511, fn. 1, 86 Cal.Rptr. 569 (Dunham ).) PFRS, in contrast, is a “fluctuating” system under which pension benefits paid to retired members increase or decrease over time as the compensation paid to active members of the Department similarly rises or falls. (Kreeft, supra, 68 Cal.App.4th at p. 48, 80 Cal.Rptr.2d 137; see also Dunham, supra, 7 Cal.App.3d at p. 511, 86 Cal.Rptr. 569.) The primary purpose of a fluctuating pension plan such as PFRS “is to guarantee the pensioner a fairly constant standard of living despite inflation, and to maintain equality of position between the retired member and the person (or persons) currently holding the rank the pensioner attained before his retirement.” (Kreeft, supra, 68 Cal.App.4th at p. 54, 80 Cal.Rptr.2d 137.) Thus, a PFRS retiree receives benefits based on the compensation currently paid to active sworn personnel who hold the rank that the member held prior to retirement. Stated in terms of the applicable Charter language, the retiree receives benefits based on the current compensation that is “attached to the average rank held” by that retiree in the three years prior to retirement.³ This appeal involves the inclusion of certain holiday premium pay and shift differential pay as “compensation attached to rank” for purposes of calculating PRFS retirement benefits.

B. The Disputed PFRS Payments1. Holiday Premium Pay

Although the relevant provisions of the Charter with respect to the calculation of pension benefits based on “compensation attached to rank” have not changed over the years, the application of that Charter language in the context of holiday premium pay has not been similarly static. Indeed, there is a long and storied history to the holiday pay issue, involving multiple lawsuits, stipulated settlements, and numerous changes to the various memoranda of understanding (MOU's) governing the City's holiday compensation obligations with respect to active members of the Department. While the City attempts to limit the discussion in this case to the current MOU's provisions authorizing holiday pay, we find the history instructive and therefore summarize it here.

Before we begin, however, we note that discussion and analysis of the holiday pay issue has been clouded in the past by failure to define the terms “holiday pay” and “holiday premium pay” in a precise manner. For purposes of this opinion, we will use the two terms interchangeably to refer to that pay in excess of the regular or base pay to which a member of the Department may be entitled due to the occurrence of a holiday. Thus, holiday pay includes the extra compensation payable to a police officer who works on a holiday (over and above base pay), as well as the compensation due to an officer who has a regular day off or takes vacation on a holiday and therefore does not work.

The question of whether holiday pay is “compensation attached to rank” for purposes of calculating PFRS retirement benefits was first addressed by Division Four of the First Appellate District in 1971 in the case of Buck v. City of Oakland (August 25, 1971, 1 Civ. 28402) [nonpub. opn.] ( Buck ). When Buck was decided, the compensation payable to active members of the Department was set by salary ordinance. (See Oakland Ord. No. 4817, amending section 1.19 of Oakland Ord. No. 4727 (the 1971 Ordinance).) With respect to holiday pay, the 1971 Ordinance provided in relevant part: “Time worked by any officer or member of the Police Department ... in excess of 40 hours during any one-week period shall be deemed overtime work; provided, however, that ... whenever any legal holiday, as herein designated, shall fall within any such one-week period, the said officer or member of the Police Department shall be credited with 8 hours of work in computing said 40 hours during said one-week period.” ( Ibid.) The 1971 Ordinance, which designated 11 holidays, maintained that “[s]uch extra compensation shall not be construed to increase pensions paid from the Police and Fire Retirement Fund, nor deductions for contributions thereto.” ( Ibid.)

In Buck, active and retired members of the Department sought a writ of mandate to compel the City and the Board to include the value of certain fringe benefits paid to active members—including holiday pay—as “compensation attached to rank” for purposes of calculating PFRS retirement benefits. ( Buck, supra, 1 Civ. 28402 at pp. 1–3.) After reviewing the provisions of the Charter set forth above which define “compensation” and “compensation attached to the average rank held,” the court first concluded that the express provision in the 1971 Ordinance attempting to exclude holiday pay from retirees' pensions was not controlling. ( Id. at pp. 2–5 [effectuating such a provision would permit the City to amend the Charter by ordinance which cannot be done].) The court went on to determine that remuneration for holiday work did not constitute overtime and therefore was not excluded from the Charter's definition of “compensation.” ( Id. at pp. 11–12; see also Charter, art. XXVI, § 2607 [“ ‘compensation’ ” defined as monthly remuneration excluding overtime].) Finally, the court opined that the eight hours credited to a police officer who worked on a holiday was most often paid to that officer in cash and was therefore “ ‘extra compensation’ [citation] for having worked on a ‘legal holiday.’ [Citation.]” ( Buck, supra, 1 Civ. 28402 at p. 12.) As such, it was “compensation” for purposes of the Charter and “must be included in the computation of retirement allowances.” ( Ibid.)

In the wake of Buck, the City reportedly tried to avoid the inclusion of holiday pay in PFRS retirement benefits by altering the holiday pay structure for active members of the Department. Specifically, the Department began giving active officers compensatory time off in lieu of actual holiday pay. In response to this change, lawsuits were filed and eventually the City was permanently enjoined from enforcing any “ordinance, resolution or directive which decreases or attempts to decrease the holiday pay ... received by Oakland police officers or firemen as ‘monthly compensation comprising salary.’ ” ( Doan v. City of Oakland (Super. Ct. Alameda County, 1972, No. 426926) ( Doan ).) In addition, the City was ordered to pay active members retroactively for any lost holiday pay and was directed “to pay the increased retirement allowances based thereon pursuant to the [ Buck ] decision.” ( Ibid.)

The City and the Oakland Police Officer's...