Public Emp. Retirement Bd. v. Washoe County

• Decision Date: 05 September 1980
• Docket Number: No. 11719,11719
• Citation: 615 P.2d 972,96 Nev. 718
• Parties: PUBLIC EMPLOYEES' RETIREMENT BOARD of the State of Nevada; Legislative Commission of the State of Nevada, Appellants, v. WASHOE COUNTY, Nevada, a political subdivision of the State of Nevada; Washoe County Employees, Respondents.
• Court: Nevada Supreme Court

Page 972

615 P.2d 972

96 Nev. 718

PUBLIC EMPLOYEES' RETIREMENT BOARD of the State of Nevada Legislative Commission of the State of Nevada, Appellants, v. WASHOE COUNTY, Nevada, a political subdivision of the State of Nevada; Washoe County Employees, Respondents.

No. 11719.

Supreme Court of Nevada.

Sept. 5, 1980.

Robert R. Barengo, Reno, and Frank W. Daykin, Legislative Counsel, Carson City, for appellants.

Calvin R. X. Dunlap, Dist. Atty., Chauncey Griswold, Chief Civil Deputy Dist. Atty., and David Kladney, Reno, for respondents.

OPINION

BATJER, Justice:

In 1947, a public employees' retirement system (PERS) was established. Chapter 286. Police officers and firemen are eligible to retire earlier than other public employees, NRS 286.510, ¹ and, since 1971, their rate of contribution has been 0.5 percent higher than that of other members of the system. NRS 286.410(3), NRS 286.450(2).

Before 1975, "police officer" was not defined. ² However, all of the employee-respondents were treated as eligible for early retirement by the PERB, and all employees made the requisite additional 0.5 percent contribution. In 1975, "police officer" was defined to include members of the University of Nevada police department and special investigators employed by the attorney general and by the district attorneys. 1975 Nev.Stats. ch. 575 § 8, at 1028. At least until 1977, the PERB continued to include PSC inspectors, parole counselors, and juvenile probation officers under the early retirement provision, presumably pursuant to its power to stipulate employee positions in the enumerated categories whose holders would be deemed "police officers". NRS 286.061(2). ³

In 1977, the Legislature removed the investigators and university police from the definition of police officer, effective July 1, 1977. ⁴ 1977 Nev.Stats. ch. 594 § 11 at 1575. At that point, Washoe County and its affected employees sought injunctive and declaratory relief. They argued that the 1977 amendments were unconstitutional to the extent they purported to remove existing employees from the early retirement provisions. The PERB and the commission, as intervenor, ⁵ argued that unless and until an employee acquires a vested right to the benefit of the PERS by completing 10 years of creditable service, he or she has no protectible interest in early retirement. NRS 286.6793.

Both parties moved for summary judgment. After a hearing, the district judge rendered a declaratory judgment in favor of respondents. He concluded that the 1977 amendments could operate only prospectively to those employees hired after the effective date of the amendments. We affirm.

No state may pass a law impairing the obligation of contracts. U.S.Const., Art. 1 § 10; Nev.Const. art. 1, § 15. Public employment contracts are within the ambit of the contract clause. Singer v. City of Topeka, 227 Kan. 356, 607 P.2d 467 (1980).

Appellants argue that before the vesting of an employee's right to receive pension benefits or retire early, the Legislature may modify the terms and conditions of receiving such benefits without impairing any contractual obligations. Historically, pension benefits were treated as gratuities subject to alteration, amendment, and repeal without any constitutional ramifications. See e. g., Dodge v. Board of Education, 302 U.S. 74, 58 S.Ct. 98, 82 L.Ed. 57 (1937). The modern and better-reasoned view recognizes that employees accept their positions, perform their duties, and contribute to the retirement fund in reliance upon the governmental employer's promise to pay retirement benefits and permit early retirement if certain conditions are met. By rendering services and making contributions, an employee acquires a limited vested right to pension benefits which may not be eliminated or substantially changed by unilateral action of the governmental employer to the detriment of the member. ⁶ Brazelton v. Kansas Public Emp. Retirement System, 227 Kan. 443, 607 P.2d 510 (1980); Singer, 607 P.2d at 473; Betts v. Bd. of Admin. of Pub. Emp. Ret. System, 21 Cal.3d 859, 148 Cal.Rptr. 158, 582 P.2d 614 (1978); Taylor v. Multnomah Cty. Deputy Sher. Retire. Bd., 265 Or. 445, 510 P.2d 339 (1973); Weaver v. Evans, 80 Wash.2d 461, 495 P.2d 639 (1972); Hanson v. City of Idaho Falls, 92 Idaho 512, 446 P.2d 634 (1968); Yeazell v. Copins, 98 Ariz. 109, 402 P.2d 541 (1965) (no change without employee's consent). See generally, 3 McQuillan, Municipal Corporations, § 12.144, at 609; 52 A.L.R.2d 437 at 442.

The limited vesting theory is premised on the principle that a pension is an element of compensation and thus part of the employment contract. Betts, 582 P.2d at 617. A pension right may not be destroyed without impairing the contractual obligation of the public employer. However, prior to absolute vesting, pension rights are subject to reasonable modification in order to keep the system flexible to meet changing conditions, and to maintain the actuarial soundness of the system. Id.; Brazelton, 607 P.2d at 518; Allen v. City of Long Beach, 45 Cal.2d 128, 287 P.2d 765 (1955). To be sustained as reasonable, the modification must bear some material relationship to the purpose of the pension system and its successful operation; and any disadvantage to employees must be accompanied by comparable new advantages. Singer, 607 P.2d at 475-476.

In this case, the employee-respondents were deprived of the right to become eligible for early retirement. The district court, applying the limited vesting theory, concluded that the legislature acted unreasonably and unnecessarily, because there was no evidence that the change was essential to maintain the system's integrity or flexibility. See Singer, 607 P.2d at 476; Glaeser v. City of Berkeley, 148 Cal.App.2d 614, 307 P.2d 61 (1957). But cf. Eisenberger v. Police Pension Com'n of Harrisburg, 400 Pa. 418, 162 A.2d 347 (1960) (court assumed an increase in retirement age enhanced actuarial soundness). In addition, the fact that the affected employees would no longer be required to pay the extra 0.5 percent is not comparable to the disadvantage of a postponed retirement.

Having concluded that retroactive application of the 1977 amendments is unreasonable, we turn to the question of who should be included in the class of people eligible for early retirement. As noted above, all employee-respondents either were within the definition of police officer before 1977, or were granted that status by the PERB. 1975 Nev.Stats. ch. 575 at 1028. An administrative construction that is within the language of the statute will not be readily disturbed by the courts. Oliver v. Spitz, 76 Nev. 5, 348 P.2d 158 (1960). Here, the PERB's inclusion of non-enumerated positions in the early retirement provision, prior to 1977, was within the PERB's delegated power to stipulate employee positions, within general categories, whose holders are deemed police officers. ⁷ Consequently, employee-respondents, and those public employees similarly situated, who were hired before the effective dates of the 1977 amendments, will be eligible for early retirement if they continue to contribute the additional 0.5 percent and complete the requisite number of years of creditable service.

The judgment is affirmed.

MOWBRAY, C. J., and THOMPSON, GUNDERSON and MANOUKIAN, JJ., concur....