Deputy Sheriffs' Ass'n of San Diego Cnty. v. Cnty. of San Diego

• Decision Date: 22 January 2015
• Docket Number: D065364
• Citation: 233 Cal.App.4th 573,182 Cal.Rptr.3d 759
• Court: California Court of Appeals Court of Appeals
• Parties: DEPUTY SHERIFFS' ASSOCIATION OF SAN DIEGO COUNTY, Plaintiff and Appellant, v. COUNTY OF SAN DIEGO et al., Defendants and Respondents.

233 Cal.App.4th 573

182 Cal.Rptr.3d 759

DEPUTY SHERIFFS' ASSOCIATION OF SAN DIEGO COUNTY, Plaintiff and Appellant

v.COUNTY OF SAN DIEGO et al., Defendants and Respondents.

D065364

Court of Appeal, Fourth District, Division 1, California.

Filed January 22, 2015

Silver, Hadden, Silver, Wexler & Levine, Stephen H. Silver, Santa Monica, and Brian P. Ross, for Plaintiff and Appellant.

Thomas E. Montgomery, County Counsel and Timothy M. Barry, Senior Deputy County Counsel, for Defendant and Respondent County of San Diego.

Kamala D. Harris, Attorney General, Douglas J. Woods, Assistant Attorney General, Mark R. Beckington and Anthony P. O'Brien, Deputy Attorneys General, for Defendant and Respondent State of California.

Crowell & Moring and Steven P. Rice, Irvine, for Defendant and Respondent San Diego County Employees' Retirement Association.

MCCONNELL, P.J.

INTRODUCTION

In this appeal, we consider whether the state Constitution's prohibition against the impairment of contracts precludes the application of the defined benefit formulas and employee contribution provisions of the California Public Employees' Pension Reform Act of 2013(Act) (Gov.Code, § 7522 et seq. )¹ to County of San Diego (county) safety employees who were hired after the Act's effective date, but who were covered by preexisting collective bargaining agreements containing conflicting terms. We conclude the application of the defined benefit formula provisions does not result in a constitutionally prohibited impairment of the agreements. We do not reach the constitutional question as to the application of the employee contribution provisions as we conclude their application resulted in a statutorily prohibited impairment of the agreements. We, therefore, affirm the judgment as to the application of the defined benefit formula provisions and remand the matter to the superior court for further proceedings as to the application of the employee contribution provisions.

DISCUSSION

IApplication of Act's Defined Benefit Formula Provisions

ABackground

The county and the Deputy Sheriffs' Association of San Diego County (association) were parties to collective bargaining agreements covering two groups of employees, the deputy sheriffs' unit and the safety management unit, through June 26, 2014 (agreements). The agreements required the county to provide covered employees hired “after a date determined by the Board of Supervisors” with defined pension benefits based on a 3 percent at age 55 (3 percent at 55) formula.²

The Act became effective January 1, 2013 (§ 7522.02, subd. (a)(1)), and applies to the county and the county's retirement system, which is administered by the San Diego County Employees' Retirement Association (SDCERA).³ (Ibid .) Among the Act's provisions, the Act limits the defined benefit formulas available to new members of the county's retirement plan.⁴ (§§ 7522.15, 7522.25, subd. (e).) For new safety members, the available formulas are 2 percent at age 57, 2.5 percent at age 57, and 2.7 percent at age 57.⁵ (§§ 7522.15, 7522.25, subds. (b)-(d).) The Act generally requires the employer to offer the formula closest to the formula the employer offered to comparable employees on December 31, 2012 (§ 7522.25, subd. (e)), which in this case would be the 2.7 percent at age 57 (2.7 percent at 57) formula.

BAnalysis

The association contends the application of the 2.7 percent at 57 formula to new members who were hired and became covered by the agreements on or after January 1, 2013, but before the agreements' expiration date of June 26, 2014, violates the state Constitution's contract clause. We review this contention de novo. (California Assn. of Professional Scientists v. Schwarzenegger (2006) 137 Cal.App.4th 371, 382, 40 Cal.Rptr.3d 354 (Professional Scientists ).)

Article 1, section 9, of the California Constitution prohibits the passage of a “law impairing the obligation of contracts.” The contract clause limits the state's power “to modify its own contracts with other parties, as well as contracts between other parties.” (Board of Administration v. Wilson (1997) 52 Cal.App.4th 1109, 1130, 61 Cal.Rptr.2d 207.) Analysis of a contract clause claim requires inquiry into: “ ‘(1) the nature and extent of any contractual obligation ... and (2) the scope of the Legislature's power to modify any such obligation.’ ” (Id., at p. 1131, 61 Cal.Rptr.2d 207 ; accord, Teachers' Retirement Bd. v. Genest (2007) 154 Cal.App.4th 1012, 1027, 65 Cal.Rptr.3d 326.) The party asserting a contract clause claim has the burden of “mak[ing] out a clear case, free from all reasonable ambiguity,” a constitutional violation occurred. (Floyd v. Blanding (1879) 54 Cal. 41, 43.)

Generally, the terms and conditions of public employment are not protected by the contract clause because they are controlled by statute or ordinance, not by contract. (Olson v. Cory (1980) 27 Cal.3d 532, 537-538, 178 Cal.Rptr. 568, 636 P.2d 532 ; Professional Scientists,supra, 137 Cal.App.4th at p. 375, 40 Cal.Rptr.3d 354.) Nonetheless, “once a public employee has accepted employment and performed work for a public employer, the employee obtains certain rights arising from the legislative provisions that establish the terms of the employment relationship—rights that are protected by the contract clause of the state Constitution from elimination or repudiation by the state.”

(White v. Davis (2003) 30 Cal.4th 528, 566, 133 Cal.Rptr.2d 648, 68 P.3d 74.) Among these protected rights are vested pension rights. (Betts v. Board of Administration of Public Employees' Retirement System (1978) 21 Cal.3d 859, 863, 148 Cal.Rptr. 158, 582 P.2d 614 [a pension right, once it has vested, cannot be destroyed without impairing a contractual obligation]; Kern v. City of Long Beach (1947) 29 Cal.2d 848, 853, 179 P.2d 799 [same].)

The association properly recognizes the new safety members covered by the agreements did not have a vested right to the application of the negotiated 3 percent at 55 formula because they had not performed any services for the county before the Act's effective date. Generally, “ ‘[t]he contractual basis of a pension right is the exchange of an employee's services for the pension right offered by the statute’ and thus ‘ “[f]uture employees do not have a vested right in any particular pension plan.” ’ ” (Professional Scientists,supra, 137 Cal.App.4th at p. 383, 40 Cal.Rptr.3d 354, quoting Claypool v. Wilson (1992) 4 Cal.App.4th 646, 662, 6 Cal.Rptr.2d 77 ; accord, City of San Diego v. Haas (2012) 207 Cal.App.4th 472, 490, 143 Cal.Rptr.3d 438.)

Instead, the association contends the new safety members covered by the agreements had a constitutionally protected right to the application of the 3 percent at 55 formula because the agreements predated the Act, they were binding, and they required the use of the 3 percent at 55 formula until they expired. (§ 3505.1; Glendale City Employees' Assn., Inc. v. City of Glendale (1975) 15 Cal.3d 328, 336, 124 Cal.Rptr. 513, 540 P.2d 609 [a collective bargaining agreement between a public employer and a public employee labor organization is binding for the agreement's duration]; Retired Employees Assn. of Orange County, Inc. v. County of Orange (2011) 52 Cal.4th 1171, 1182–1183, 134 Cal.Rptr.3d 779, 266 P.3d 287 [same]; San Bernardino Public Employees Assn. v. City of Fontana (1998) 67 Cal.App.4th 1215, 1220, 79 Cal.Rptr.2d 634 [same].) However, the association's position conflicts with authorities indicating there is no contract clause protection for unvested contractual pension rights. (See Welfare Rights v. Frank (1994) 25 Cal.App.4th 415, 423–424, 30 Cal.Rptr.2d 716 [state and federal contract clauses protect only vested contractual rights]; Vielehr v. State of California (1980) 104 Cal.App.3d 392, 396, 163 Cal.Rptr. 795 [unless and until contractual pension rights become vested, the Legislature may modify them without violating the contract clause]; accord, Miller v. State of California (1977) 18 Cal.3d 808, 815–817, 135 Cal.Rptr. 386, 557 P.2d 970 ; City of San Diego v. Haas,supra, 207 Cal.App.4th at p. 497, 143 Cal.Rptr.3d 438 ; County of Orange v. Association of Orange County Deputy Sheriffs (2011) 192 Cal.App.4th 21, 41, 121 Cal.Rptr.3d 151 ; San Diego Police Officers' Assn. v. San Diego City Employees' Retirement System (2009) 568 F.3d 725, 737 ; see also, In re Marriage of Guthrie (1987) 191 Cal.App.3d 654, 663, 236 Cal.Rptr. 583 [test for whether a statute unconstitutionally impairs a contractual right is the same as the test for whether a statute unconstitutionally impairs a vested property right]; In re Marriage of Doud (1986) 181 Cal.App.3d 510, 520, 226 Cal.Rptr. 423 [same]; In re Marriage of Potter (1986) 179 Cal.App.3d 73, 83, 224 Cal.Rptr. 312 [same]; Donlan v. Weaver (1981) 118 Cal.App.3d 675, 684, 173 Cal.Rptr. 566 [same].)

The association's reliance on Sonoma County Org. of Public Employees v. County of Sonoma (1979) 23 Cal.3d 296, 152 Cal.Rptr. 903, 591 P.2d 1 (Sonoma County ) to support its position is misplaced. The Sonoma County case involved the impairment of negotiated wage increases for existing employees. (Id., at pp. 304–305, 152 Cal.Rptr. 903, 591 P.2d 1.) The case did not address the impairment of negotiated pension benefits for prospective employees. “ ‘A decision is authority only for the point actually passed on by the court and directly involved in the case.’ ” (Doe v. California Dept. of Justice (2009) 173 Cal.App.4th 1095, 1107, 93 Cal.Rptr.3d 736.)

We are also not persuaded by the language in the Professional Scientists case stating: “When a collective bargaining agreement purports to secure pension rights for future employees, it may well be that the federal and state contract clauses protect the rights of future employees as much as the rights of existing employees.” (Professional Scientists,supra, 137 Cal.App.4th at p. 383, 40 Cal.Rptr.3d 354.) After making the statement, the Professional Scientists court expressly declined to analyze it...