California Public Agency Labor & Employment Blog

California Public Agency Labor & Employment Blog

Useful information for navigating legal challenges

Allegations of Sexual Misconduct, Student Discipline on Campus, and Due Process: Keeping Up with Rapidly Evolving Interpretations of State and Federal Laws

Posted in Education

This blog was authored by Alysha Stein-Manes.

The manner in which institutions of higher education must address sexual assault in the educational context continues to evolve as both the federal government and courts weigh in on what procedures public and private colleges and universities must follow in order to comply with both Title IX of the Educational Amendments of 1972 and due process requirements under state and federal laws. Title IX of the Education Amendments Act of 1972 is a federal civil rights law that requires educational institutions to maintain policies, practices, and programs that do not discriminate against anyone “on the basis of sex.”  Title IX applies to all educational institutions, both public and private, that receive federal funds. Title IX and its implementing regulations set out certain requirements regarding investigations and hearing procedures. State laws governing the due process rights of individuals are likewise applicable to discipline in the public educational context.

Last year, we reported that the Office for Civil Rights (OCR) at the United States Department of Education (DOE), which is charged with the responsibility to enforce Title IX and its implementing regulations, rolled back a series of Title IX enforcement guidelines issued by the Obama Administration. In rescinding prior guidance, OCR, under current Education Secretary Betsy DeVos, criticized prior guidance and also many institutions’ definitions of assault and harassment, and noted that certain policies may also infringe on the individuals’ free speech and due process rights.

Secretary DeVos announced that the DOE would launch a public comment period to inform the development of new federal regulations pertaining to campus sexual assault policies. While we had previously expected the DOE to release its proposed regulations for notice and comment in April 2018, it has yet to do so.

As institutions of higher education wait for additional guidance from the DOE, courts continue to weigh in on obligations conferred on public and private educational institutions in regard to the rights of both the complainant and accused.

This month, a California Court of Appeal published a significant decision, John Doe v. Claremont McKenna College, addressing student discipline arising from an allegation of sexual assault.

John Doe v. Claremont McKenna College

While a freshman at Claremont McKenna College, John Doe met Jane Roe, a freshman at a neighboring school. On the night of a party, John and Jane engaged in sexual activity that Jane later alleged was a sexual assault in violation of the College’s sexual misconduct policy.

Claremont McKenna College (the “College”) initiated an investigation and hired a third-party investigator. The investigator interviewed Jane, John, and multiple other witnesses and reviewed other evidence. In accordance with the College’s policies, the investigator provided the complainant and accused with a preliminary investigative report before finalizing the report.  In response, John submitted a “Written Request for Additional Investigation Steps.” Specifically, he requested the investigator ask additional questions to witnesses already interviewed, including him and Jane, and interview new witnesses, explaining why each new witness was relevant to the investigation. John also sought additional documentary evidence, including relevant medical reports. While Jane submitted a response to the preliminary report, she did not request further investigation steps. The investigator interviewed one new witness and clarified a point raised by one of the original witnesses, but did not grant any of John’s other requests. Importantly, the investigator did not ask Jane any of the questions John submitted to the investigator. The investigator provided the parties with a final investigative report, and the College closed the investigation.

Pursuant to the College’s policies, the College then convened an “Investigations Findings and Review” Committee meeting. The Committee was comprised of the investigator and two members of the College’s faculty and staff. The Committee’s task was to evaluate the evidence and decide by majority vote, using the “preponderance-of-evidence” standard, whether John had violated the College’s sexual misconduct policy.

College policy allowed, but did not require, the parties to appear at the Committee meeting and make an oral statement to the Committee. Prior to the Committee meeting, both John and Jane submitted written statements. The procedures did not provide for any questioning of witnesses by the Committee or the parties. Jane did not appear at the meeting. Following the meeting, the Committee issued a written decision finding that John violated the College’s sexual misconduct policy.

John appealed the decision under the College’s procedures, but the College denied his appeal. The College suspended John for one year and implemented additional sanctions against him. Following the College’s denial of John’s appeal, John filed a petition for writ of administrative mandate (“writ”) asking a trial court to set aside the College’s sanctions against him. John filed his writ petition under California Code of Civil Procedure Section 1094.5(b), arguing that the trial court should set aside the sanctions because it did not provide him with a “fair trial.” The trial court denied his request, finding that John received a fair hearing. Additionally, the trial court held that John had no right to cross-examine Jane, he had an opportunity to review and respond to the evidence the Committee considered, and he failed to show prejudice from the investigator’s decision not to grant his requests for additional investigative steps. John appealed to a California Court of Appeal.

On appeal, John argued, among other things, he was denied a fair hearing because neither he nor the Committee was able to ask any questions of Jane who did not appear at the Committee meeting, and therefore, the Committee had no basis for evaluating her credibility.

The Court of Appeal agreed that Jane’s failure to appear at the hearing, either in person or via videoconference or other means, deprived John of a fair hearing where John faced potentially serious consequences and the case against him turned on the Committee finding Jane credible.

In its analysis, the Court examined recent court decisions addressing an educational institution’s obligations to provide students due process in disciplinary matters, including two California Cases, Doe v. Regents of University of California and Doe v. University of Southern California. These two cases also addressed fair hearings under Section 1094.5. The Court also analyzed a recent decision by the Sixth Circuit Court of Appeal analyzing whether an accused’s due process rights were violated in a sexual misconduct case. In that case, the Sixth Circuit found that under due process principles, accused students must have the right to cross-examine adverse witnesses in the most serious of cases.

After analyzing these cases, the Court synthesized a “set of core principles” applicable to cases in which the accused student faces a “severe penalty” and the school’s determination turns on the complaining witness’s credibility. First, the accused student is entitled to “a process by which the respondent may question, if even indirectly, the complainant.” Second, the complaining witness must be before the finder of fact either physically or through videoconference or similar technology so the finder of fact can assess the complaining witness’s credibility in responding to its own questions or those proposed by the accused student.

Applying these principles to the facts of the present case, the Court found that Jane’s allegations against John were still crucial to the Committee’s determination of misconduct even if the Committee relied on other evidence to “corroborate” those allegations. Although the investigator, who was on the Committee, had the opportunity to evaluate the credibility of both parties, the other Committee members did not. The Court noted that it was important for each member of the committee to assess Jane’s demeanor in responding to questions generated by the Committee or, indirectly, by John.

Ultimately, the Court held that a school’s obligation in a case turning on the complaining witness’s credibility is to “provide a means for the [fact finder] to evaluate an alleged victim’s credibility, not for the accused to physically confront his accuser.” The Court noted that schools can use many methods to meet this obligation, including granting the fact finder discretion to exclude or rephrase questions from the responding witness as appropriate, asking its own questions, physically separating the witnesses, or having a witness appear remotely via appropriate technology. The Court of Appeal reversed the trial court’s decision and instructed the trial court to review John’s request to review the College’s decision.

Schools’ Obligations after Doe v. Claremont McKenna

Currently, many California colleges and universities use an “investigator model” for disciplinary proceedings, in which there is no formal hearing prior to imposition of discipline. The Court of Appeal’s decision in Doe v. Claremont McKenna may therefore require some revisions to school conduct policies that use the investigator model for hearings but do not generally allow for cross-examination of the complainant.

Schools should work with legal counsel to review and potentially update their policies and procedures in accordance with this new decision. In doing so, schools may want to consider not only updating their policies and procedures to include a “hearing” component, but also seeking to define what constitutes a “severe penalty” and provide guidance to fact finders for assessing the credibility of witnesses. When updating such policies and procedures, schools must consider their obligations under Title IX, as well as other federal and state laws governing fair hearings.

California Legislature Aims to Clarify Salary History and Equal Pay Statutes

Posted in Wage and Hour

This post was authored by Paul Knothe.

Assembly Bill 2282, signed into law by Governor Brown on July 18, 2018, attempts to clarify elements of California’s salary history and equal pay statutes, Labor Code sections 432.3 and 1197.5.  This legislation, which appears to help answer several common questions about these statutes, takes effect January 1, 2019.

Update to Salary History Statute

The salary history statute, Labor Code section 432.3, went into effect January 1, 2018.  In short, Labor Code section 432.3 prohibits employers from seeking an applicant’s salary history in previous private sector employment, requires an employer to provide an applicant with the pay scale for the position upon reasonable request, and restricts how employers can use properly obtained salary history information. For more detail, please refer to our previous blog post here.

AB 2822 answers four questions employers had about section 432.3:

  1. Does asking about an applicant’s salary expectations constitute “seeking” his or her salary history?

No. This was a commonly asked question by employers, concerned that asking an applicant for his or her salary expectations would be seen as a back-door way of “seeking” salary history.  The amended section 432.3, at subdivision (i), now reads “Nothing in this section shall prohibit an employer from asking an applicant about his or her salary expectation for the position being applied for.”

2. Is a current employee who applies for a different position with the employer an “applicant”?

No. New subdivision (k) defines “applicant” as an “individual who is seeking employment with the employer and is not currently employed with that employer in any capacity or position.”  This language avoids placing the employer in the untenable position of being required to avoid consideration of salary history information that is already in their possession.

3. What is a “pay scale”?

For purposes of the requirement that an applicant be provided with the pay scale for a position upon reasonable request, a revision to subdivision (c) defines “pay scale” as “a salary or hourly wage range.” Other pay, such as bonus pay, need not be included in the pay scale provided to an applicant.

4. What constitutes a “reasonable request” for a pay scale?

AB 2282 further revises subdivision (c) of Labor Code 432.3 to define a “reasonable request” for a pay scale as “a request made after an applicant has completed an initial interview with the employer.” Therefore, an employer is not required to comply with a request for a pay scale from an applicant who has not completed an interview.

Update to California Equal Pay Act

California’s Equal Pay Act, originally enacted in 1949, has been subject to several recent revisions. First, it was amended effective January 1, 2017, to prohibit employers from relying solely on an applicant’s previous salary in making pay determinations. It was amended again effective January 1, 2018, to specify that public sector employers are subject to the equal pay laws, with the exception of the Section 1199.5, which makes it a misdemeanor to fail to provide equal pay to employees of differing sexes, races, or ethnicities.

AB 2282 revises Section 1197.5 to further restrict consideration of an employee’s prior salary in making a pay determination. The statute currently provides that  “Prior salary shall not, by itself, justify any disparity in compensation”; when the revision goes into effect on January 1, 2019, the phrase “by itself” will be deleted.

However, AB 2822 also specifically permits an employer to make a compensation decision for one of its current employees based on that current employee’s existing salary, so long as any wage differential resulting from that compensation is justified by a seniority system, a merit system, a system that measures earning by quantitate or quality of production, or a bona fide factor other than race or ethnicity, such as education, training, or experience.

Employers who have questions about the effects of AB 2282 should seek advice from trusted employment counsel.

Free Speech Rights at Private Colleges and Universities

Posted in First Amendment

The post was authored by David Urban.

Controversies over free speech, disruptive protests, sharp debates among faculty, withdrawal of invitations to controversial speakers, and interference with rights of expression happen just as much at private as at public colleges and universities. The difference, however, is that the First Amendment to the U.S. Constitution binds only public actors.  At a public college or university, students and employees can assert First Amendment claims against the institution if it tries to discipline or censor them for speech activities.  Students and employees at a private institution, however, do not have that option, because the institution is not bound by the First Amendment.

This post addresses three ways in which, even without any First Amendment protections, those at private colleges and universities do have expression rights that are safeguarded by law. Private educators have to take these rights into consideration when making personnel, disciplinary, and other decisions that involve student and employee expression.

Faculty Academic Freedom Policies

First, faculty members often have academic freedom rights and other speech rights they can enforce against their employer as a matter of contract law. Many private colleges and universities have academic freedom policies that state in broad terms that members of the faculty have the right to engage in scholarship, teaching, and expression that can clash with the views of the institution.  If the institution disciplines a faculty member for such activities, the faculty member can bring a claim for breach of agreement if the policy is found to be contractual in nature and the discipline allegedly violates the policy provision.

The case McAdams v. Marquette University, decided last month by the Wisconsin Supreme Court, involves this type of contractual claim of academic freedom rights.  Professor McAdams, a tenured professor of philosophy, wrote on his personal blog criticizing a philosophy instructor at the university because she had not permitted a discussion in her classroom questioning gay rights.  McAdams’s post described that the instructor had written on the board among other issues “gay rights” and said “everybody agrees on this, and there is no need to discuss it.”  A student approached the instructor after class and said gay rights should be open to discussion.  The post described that the instructor responded, “you don’t have a right in this class to make homophobic comments,” and then invited the student to drop the class.  McAdams contended this was a stifling of free expression, and posted links to the instructor’s personal webpage, leading to harsh emails to the instructor from third parties.

The university placed McAdams on leave and then suspended him. McAdams asserted a breach of contract claim against the university, arguing that it had violated its own academic freedom policies.  The Wisconsin Supreme Court held that Professor McAdams should prevail on his claim and required that he be reinstated with back pay.

Student Statutory Speech Rights

In California, a 1992 statute known as the Leonard Law gives students at private colleges and universities free speech rights they can assert against their own institution. The statute was intended to transplant constitutional free speech rights students have off campus so that they apply in some way on campus.  It provides:

No private postsecondary educational institution shall make or enforce a rule subjecting a student to disciplinary sanctions solely on the basis of conduct that is speech or other communication that, when engaged in outside the campus or facility of a private postsecondary institution, is protected from governmental restriction by the First Amendment to the United States Constitution or Section 2 of Article I of the California Constitution. (Cal. Educ. Code § 94367(a).)

There is some uncertainty how exactly the statute operates. The consensus is that students obtain some speech rights at a private college and university akin to those that students have at public colleges and universities, although by its terms, the Leonard Law protections are weaker than those provided by the First Amendment. For example, students cannot obtain damages for an institution’s violation of the Leonard Law.  Instead, declaratory and injunctive relief and attorney’s fees are available.  Also, to violate the law, an institution must “make or enforce a rule subjecting a student to disciplinary sanctions” and the rule must apply “solely” on the basis of protected expression.  (Cal. Educ. Code, § 94367(a).)

There is scant authority interpreting how the Leonard Law should work to confer student speech rights. In one case, Crosby v. South Orange County Community College District, the California Court of Appeal held that the statute (in particular, the component that applies to community colleges) did not turn the campus library into a public forum, and determined that the statute did not transplant every speech right a student might have outside campus in any context, for example in the home, onto the college campus.

Also, the courts have not determined whether the Leonard Law requires private institutions to open up speech areas on campus the same way public colleges and universities are expected to open up areas, although many private colleges and universities have reserved areas for free expression of students. (Also as a matter of contract law, policies at private institutions often confer speech rights on students that they can enforce under contract principles.)

Federal Protection for Employee Concerted Activity

Finally, employees of private institutions have substantial rights under labor relations laws, even if those employees have no union representing them. The federal National Labor Relations Act (“NLRA”) affords employees the right to engage in concerted activity for their mutual aid or protection, and this can include rights to picket and protest regarding wages, hours, and working conditions, rights to post about these matters on social media, and the right to criticize the institution and management.  The National Labor Relations Board, the federal agency responsible for enforcing the NLRA, has recently determined that graduate student assistants qualify as employees for protection under the act.  (The case is being reviewed by the federal courts and a decision will likely issue in the coming year.)

No doubt, vigorous protest and debate will continue in higher education in 2018 and 2019, and likely result in further developments in this area. We will report on important developments as they occur.

Is Your Agency Prepared to Manage Disaster Service Workers During a State of Emergency?

Posted in Employment

This post was authored by Lisa S. Charbonneau.

In July 2018 alone, California Governor Brown proclaimed a State of Emergency  for eight counties — Lake, Mendocino, Mariposa, Napa, Riverside, Santa Barbara, San Diego, Shasta, and Siskiyou Counties — due to fires, and proclaimed a State of Emergency in San Bernardino County due to damage caused by a monsoonal rainstorm event.  Under the California Emergency Services Act   (CESA), such proclamations have special significance for public agencies and their employees because a proclaimed State of Emergency may trigger the activation of the Disaster Service.

By law, all public employees in California are mandatory members of the Disaster Service by operation of oath / affirmation typically administered at the time of hire. Originally envisioned as a way to trigger a civilian defense force against military invasion or attack during World War II and the Cold War, today the Disaster Service is generally activated to combat States of Emergency due to natural disasters like wildfires, storms, and earthquakes when the damage and effects of these events are beyond the ability of any single local government to effectively address.

In a State of Emergency (or Local Emergency), local and distant law enforcement, medical personnel, and fire personnel will provide emergency response in the communities experiencing the effects of the disaster. Civilian public employees provide disaster-related duties that are not emergency response but are still critical in managing a disaster.  Typical civilian Disaster Service work duties include answering phones, staffing shelters, serving food, driving, managing volunteers, translating or interpreting, cleaning debris, sorting, packing and loading supplies, and otherwise providing victims with government services.  Once activated as Disaster Service Workers, public employees may be required to perform duties that differ greatly from their normal positions.  They may be assigned to perform Disaster Service work outside of their normal schedules and away from their usual job locations.

Unlike law enforcement/fire/medical personnel, most civilian public employees are not used to the extreme pressures and chaos of emergency response-related work. Thus overseeing civilian Disaster Service Workers poses its own challenges.  The best way to effectively marshal an agency’s resources in a State of Emergency is to pre-plan for the activation of civilian Disaster Service Workers and pre-train on logistics of Disaster Service Work as much as possible.  For example, employees should know where to call, what web site to check, or how otherwise to know where/when to report to work in a State of Emergency in their locality.  All employees should be regularly pre-trained on their responsibilities as Disaster Service Workers, and supervisors should receive additional pre-training on their specific roles, e.g., on assigning disaster-related tasks, special timekeeping requirements, and policies they must enforce.  Moreover, agencies should regularly audit Disaster Service records to ensure current contact information and up-to-date Disaster Service Worker classifications (the category of task a Disaster Worker is supposed to perform as stated on their Disaster Service registration).

Agencies should also develop payroll and personnel policies to govern work performed by employees in a State of Emergency and/or under Mutual Aid Agreements. For example, will MOU overtime provisions apply?  Who is permitted to approve overtime.  How will employees be compensated for time spent travelling to an out-of-area assignment?  Will employees be permitted to drive themselves to special disaster-related assignments?  Should non-exempt employees be allowed to volunteer to perform similar services as they are regularly employed to perform?  How will agencies monitor whether an employee’s Disaster Service assignment complies with any medical restrictions they may have?  What policies apply if an employee has been evacuated from their home or cannot show up to work due to responsibility for taking care of children or the elderly?  Are there special concerns when deploying disabled employees as Disaster Service Workers?  Who will determine what agency positions must be back-filled if the incumbent cannot fulfill his or her duties because he or she is serving as a Disaster Service Worker.

Finally, agencies should evaluate whether they have sufficient resources for employees to stay fed and hydrated, and to take breaks as needed, while working long and stressful hours as a Disaster Service Worker.

Voter – Backed Pension Reform Is Dealt a Blow by California Supreme Court

Posted in Pension

This post was authored by Frances Rogers and Brett A. Overby.

Last week, the City of San Diego’s Proposition B, a 2012 voter-approved ballot measure designed to save the City’s weakening pension system, was dealt a potentially fatal blow by the California Supreme Court in Boling v. Public Employment Relations Board.  Although put to City voters through a citizen’s initiative, the Court nonetheless reasoned the City caused the changes to employee pension benefits and did so without first negotiating with labor unions.  The fate of those pension reforms that may help stabilize the City’s pension obligations now hang in the balance.

Proposition B

In reaching its decision, the Supreme Court relied heavily on the following facts. Under the City of San Diego’s “Strong Mayor” form of government, the mayor acts as the City’s chief executive officer whose responsibilities include recommending measures and ordinances to the City Council, and conducting labor negotiations with the City’s labor unions.  In 2010, San Diego’s former Mayor, Jerry Sanders, was outspoken on the need for pension reform due to mounting unfunded liabilities and the City’s budget strain. Reforming the City’s pension plan required an amendment to the City’s Charter which can only be accomplished through voter approval.  Proposals to amend the City’s Charter can be placed on a ballot before voters either by the City Council’s own motion or a citizens’ initiative whereby the proposed amendment is placed on the ballot by a petition of at least 15 percent of the City’s registered voters.  Mayor Sanders decided to champion a citizen’s initiative to bring his pension reform plan before the voters.

The citizen’s initiative sought to eliminate traditional defined benefit pensions for all newly-hired City employees, except for peace officers, and replace them with 401(k)-style defined contribution plans. Between November 2010 and March 2011, Mayor Sanders gave several press conferences in front of City Hall and issued numerous press releases containing the City seal publicizing his intent to craft language and gather signatures for a citizen’s ballot initiative to reform public pensions.  Mayor Sanders even declared his intent in his January 2011 State of the City address.  In March 2011, Mayor Sanders participated in a series of negotiations with his Chief of Staff, the City’s Chief Operating Officer, City Attorney, and a Councilmember to finalize the terms of the Initiative.

In April 2011, Mayor Sanders, two Councilmembers and the City Attorney held a press conference to announce the filing of a notice of intent to circulate the initiative. Thereafter, Mayor Sanders promoted the initiative and solicited signatures in interviews, in media statements, at speaking appearances, and in a “message from the mayor” circulated to the San Diego Regional Chamber of Commerce.

The Registrar of Voters certified that the initiative had over 15% of the verified voter approval required, entitling the initiate to a spot on the June 2012 election ballot. Mayor Sanders wrote an argument in favor of the initiative that appeared on the ballot.

Meanwhile, beginning in July 2011 the San Diego Municipal Employees Association and other employee organizations sought to negotiate the terms of any pension reform before putting it to voters. The unions argued the Mayor was acting in his official capacity to promote the initiative and, in doing so, made a policy determination related to mandatory subjects of bargaining.  City officials believed that a voter’s initiative that had a rightful place on the ballot upon meeting all legal and procedural requirements could not be subject to mandatory bargaining within the meaning of the Meyers-Milias Brown Act (“MMBA”).

The Ensuing Unfair Practice Charge

Prior to the election, Employee labor organizations filed unfair practice charges with the Public Employment Relations Board (“PERB”) over the City’s failure to meet and confer on the pension changes sought by the initiative. The unions also filed a petition for injunction in superior court which was denied.  In June 2012, Proposition B won approval by the City’s voters.

In December, 2015, after administrative hearing, PERB held the City violated the MMBA by placing the initiate on the ballot before exhausting the meet and confer process. PERB applied common law agency principles to find the Mayor was the City’s statutorily defined agent and had in effect ratified his policy decision.  PERB found the Mayor was not legally privileged as a private citizen to pursue changes in the terms and conditions of employment for the City’s represented employees.

The Court of Appeal’s Reversal of PERB’s Decision

The City challenged PERB’s decision by filing a petition for a writ of extraordinary relief in the Court of Appeal. The Court of Appeal annulled PERB’s decision and found that the City’s decision to place the citizens’ initiative measure on the ballot was purely ministerial because the City was required under its own Charter to do so upon the verified signatures of at least 15% of the City’s voters.  Thus, the City was not the actor and had no obligation to meet and confer.  The California Supreme Court granted review. 

The California Supreme Court Holds That the Obligation to Meet and Confer Should be Broadly Construed

The California Supreme Court initially held that when the facts are undisputed, PERB’s legal determinations are entitled to deferential review by the Court, even if conflicting inferences may be drawn from those undisputed facts.

The Court took guidance from its decision in People ex rel. Seal Beach Police Officers Assn. v. City of Seal Beach (1984) 36 Cal.3d 591, which addressed whether the meet-and-confer provisions of Government Code section 3505 applied when a city council exercised its own constitutional power to propose charter amendments to its voters.  In Seal Beach, the Court found that a public agency must comply with section 3505, even when it decides to take a proposal directly to the voters that could alter mandatory subjects of bargaining.  In this case, the Court held that the pension benefits in San Diego citizen’s initiative affected the terms and conditions of employment and fell within the scope of the unions’ representation.

The Court observed that Mayor Sanders was the City’s Chief Executive Officer and designated bargaining agent and was empowered by the City Charter to make policy decisions affecting City employees and negotiate with the City’s unions. The Court held that the Mayor used his authority and position within the City to draft, promote, and advocate for the initiative and used City resources and employees to assist him.  The Court found that it would defeat the intent of the Legislature in enacting section 3505 to allow public officials to “purposefully evade the meet-and-confer requirements of the MMBA by officially sponsoring a citizens’ initiative.”

The Supreme Court reversed the Court of Appeal ‘s decision and has now remanded the case to back to the Court of Appeal to rule upon a judicial remedy for the unlawfully imposed changes to the City’s pension system. PERB has requested the courts invalidate the results of the voter’s initiative election and/or issue a “make-whole” remedy of lost compensation for City employees affected by the changes to the City’s pension system.

Department of Fair Employment and Housing Issues New Regulations on National Origin, Immigration-Related Practices, and Language and Height/Weight Restrictions

Posted in Discrimination

This post was authored by Stefanie K. Vaudreuil.

It’s time to check your policies. New DFEH regulations (California Code of Regulations, title 2, sections 11027.1 and 11028) went into effect on July 1, 2018 that provide definitions on “national origin” and “undocumented applicant or employee,” in addition to outlining specific employment practices regarding language restrictions and height/weight restrictions.

New “National Origin” Definitions

The new “national origin” definition includes the individual’s or ancestor’s actual or perceived (1) physical, cultural, or linguistic characteristics associated with a national origin group; (2) marriage to or association with persons of a national origin group; (3) tribal affiliation; (4) membership in or association with an organization identified with or seeking to promote the interests of a national origin group; (5) attendance or participation in schools, churches, temples, mosques, or other religious institutions generally used by persons of a national origin group; and (6) name that is associated with a national origin group.

What is a “national origin group”? The new definition provides that it includes, but is not limited to, “ethnic groups, geographic places of origin and countries that are not presently in existence.” The regulations also define an “undocumented applicant or employee” as someone who “lacks legal authorization under federal law to be present and/or work in the United States.”

New Protections for “Undocumented applicants or employees”

The DFEH has established new protections for “undocumented applicants or employees,” making it unlawful to discriminate against them because of their immigration status, “unless the employer has shown by clear and convincing evidence that it is required to do so in order to comply with federal immigration law.” The regulation provides an example of unlawful discrimination by stating that it is unlawful for an employer to discriminate against an applicant or employee because he or she “holds or presents a driver’s license issued under section 12801.9 of the Vehicle Code” (which establishes that undocumented immigrants may be eligible for a California driver’s license)

The new regulations also prohibit employers from inquiring into an applicant’s or employee’s immigration status unless it is necessary to comply with federal law. The DFEH does not identify or explain under what circumstances, however, federal law requires an employer to make such an inquiry.  Like California law, federal law prohibits pre-offer inquiries into an applicant’s immigration status.

New Regulations on Employer Implemented Language Restrictions

The new regulations include an explanation of what “language restrictions” may be implemented by employers. It has been unlawful for an employer to adopt or enforce an “English-only” rule, except in limited circumstances. The new regulation creates further protection. Employers will not meet the threshold of business necessity if the “language restriction merely promotes business convenience or is due to customer or co-worker preference.” Employers also may not discriminate based upon an applicant’s or employee’s accent, “unless the employer proves that the individual’s accent interferes materially with the applicant’s or employee’s ability to perform the job in question.”

It is unlawful for the employer to establish English-only rules for employees applicable to breaks, lunch, or unpaid employer-sponsored events.

New Regulations on Height/Weight Requirements

According to the DFEH, height and weight requirements may create a disparate impact on the basis of national origin. Therefore, if the applicant or employee is able to show a disparate impact, the employer must demonstrate the requirements are job-related and justified by business necessity. Note, however, that height and weight restrictions may still be unlawful if the business requirements “can be achieved effectively through less discriminatory means.”

Compliance is Key

Employers should review their Equal Employment Opportunity policies, as well as recruitment and retention procedures, to avoid potential noncompliance with or violation of the new regulations. Importantly, if the employer uses a third party to conduct recruitment, the employer should ensure that the third party also complies with the new regulations. Individuals responsible for recruitment and hiring should be trained in the application of these new regulations.

Deadline For Reporting Out-of-Class Appointments to CalPERS Is Fast Approaching: Are You Ready?

Posted in Retirement

The post was authored by Stephanie Lowe.

CalPERS agencies must report the number of hours worked by employees in “out-of-class appointments” to CalPERS no later than July 30, 2018.  As discussed in our earlier blog, Assembly Bill 1487 went into effect January 1, 2018 adding Government Code section 20480 to the Public Employees’ Retirement Law.  The statute prohibits out-of-class appointments of members for more than 960 hours per fiscal year.  To ensure compliance, CalPERS issued Circular Letter No,: 200-021-18 directing contracting agencies to track and report hours worked in “out-of-class appointments” each fiscal year.  With the July 30 reporting deadline quickly approaching, here is everything CalPERS agencies need to know to meet the reporting requirements.

Definition of “Out-of-Class Appointment”

Section 20480 expressly defines “out-of-class appointment” as “an appointment of an employee to an upgraded position or higher classification by the employer or governing board or body in a vacant position for a limited duration.”  A “vacant position” is defined as “a position that is vacant during recruitment for a permanent appointment.”  The definition of “vacant position” excludes a “position that is temporarily available due to another employee’s leave of absence.”

The compensation for the appointment must also be stated in a collective bargaining agreement or a publicly available pay schedule.

How to Report Out-of-Class Appointments to CalPERS

CalPERS requires agencies to report “out-of-class appointments” for each member using the Out-of-Class Appointment Employer Certification form no later than 30 days following the end of each fiscal year.

What Information to Report

For CalPERS purposes, the previous fiscal year began July 1, 2017 and ended June 30, 2018. Since Section 20480 went into effect on the middle of the fiscal year on January 1, 2018, the Out-of-Class Appointment Employer Certification form only requires agencies to report information for the period between January 1, 2018 to June 30, 2018.

The information requested by CalPERS includes: the member’s name, permanent position title and “out of class” position title; beginning and end date of the out-of-class appointment; pay rates of both the permanent and out-of-class positions; and special compensation and total earnings.

The form further requires the employer to disclose if the out-of-class appointment is in a “vacant” position. Note that the statute, as reiterated in the CalPERS Circular Letter, defines “vacant” as “a position that is vacant during recruitment for a permanent appointment.”   If the appointment is to a filled position, such as when another employee is on extended leave of absence, or the agency is not actively recruiting for the vacancy, such as a temporary position, then it is not an “out of class appointment” subject to the 960-hour limitation.  Although the form is somewhat unclear, because the Circular Letter reiterates the definition of “vacancy,” it is unlikely employers are required to disclose appointments that do not meet the definition of “vacancy.”  Employers may need additional clarification from CalPERS.

Reporting Notices

CalPERS agencies should receive an Annual Notice from CalPERS in June reminding them of the July 30 reporting requirements for out-of-class appointments.  CalPERS will send out a Second Notice in September to inform agencies if CalPERS has not received their Out-of-Class Appointment Employer Certification form.

Failure to Report

Failure to report the information may result in penalties under Section 20480 and notification to CalPERS Office of Audit Services to initiate an audit of the employer’s records.

A CalPERS agency that fails to comply with Section 20480, including any failure to report out-of-class appointments, shall pay penalties to CalPERS in an amount equal to three times the employee and employer contributions that would otherwise be paid to CalPERS for the difference between the compensation paid for the out-of-class appointment and the compensation paid and reported to CalPERS for the member’s permanent position for the entire period the member serves in the out-of-class appointment. The employer must also reimburse CalPERS for administrative expenses incurred by CalPERS in responding to the violation.  Although the statute did not provide the amount of administrative expenses, the Circular Letter states the fee will be $200.  The penalties and fees are not credited to the employer or the employee’s individual account and the employer may not pass the penalties or fees onto the employee.

If your agency needs assistance in reporting this information to CalPERS, please contact one of our offices.

Top 10 Questions about Senate Bill 866 – New State Legislation Impacting How Public Employers Communicate with Employees and Manage Employee Organization / Union Membership Dues

Posted in Labor Relations

The post was authored by Erin Kunze.

On June 27, 2018, Governor Brown signed into law the Final State Budget, along with budget trailer bill, Senate Bill 866. In brief, though there is little comment in the Bill’s legislative analysis, it is clear that Senate Bill 866 is a direct response to the Supreme Court’s anticipated, and now adopted, holding in Janus v. AFSCME.  As noted in our related Special Bulletin, the Supreme Court’s decision in Janus v. AFSCME overturned forty-plus years of case law that authorized agency shop – or mandatory union service fees – in public sector employment.  The Court’s decision in Janus v. AFSCME means that public agency employers and unions that represent public employees can no longer mandate as a condition of employment that employees pay a service fee (or comparable religious objector charitable contribution) for the portion of union dues attributable to activities the union claims are “germane to [the union’s] duties as collective bargaining representative.”

While public employers and public employee organizations (i.e. unions or local labor associations) can no longer mandate these fees as a condition of continued employment, Senate Bill 866 amends and creates new state law regulating: (1) how public employers and employee organizations manage organization membership dues and membership-related fees; and (2) how public employers communicate with employees about their rights to join or support, or refrain from joining or supporting employee organizations.  It also prohibits public employers from deterring or discouraging public employees and applicants for public employment from becoming or remaining members of employee organizations (a declaration of existing law).  Finally, Senate Bill 866 expands employee organization access to employee orientations by making such orientations confidential.

Below, we outline the top 10 questions arising from Senate Bill 866:

  1. Does Senate Bill 866 Apply to My Public Agency?

Yes. Senate Bill 866 applies to all public agencies, though it does not apply to all public agencies in the same manner.  For example, for the purposes of salary and wage deductions in relation to employee organization membership dues and related fees, the Bill defines a “public employer” as the state, Regents of the University of California, the Trustees of the California State University, as well as the California State University itself, the Judicial Council, a trial court, a county, city, district, public authority, including transit district, public agency, or any other political subdivision or public corporation of the state, but not a “public school employer or community college district.”

But while public schools and community college districts are not included in the definition of “public employer” for the purposes of salary and wage deductions, they are not exempt from Senate Bill 866. Instead, separate provisions apply to those agencies.  The provisions that apply to public school and community college district employers largely reflect those that apply to other public employers regarding the management of employee organization membership dues and related fees, though there are some distinctions.

Provisions governing wage and salary deductions for public employers, other than public schools and community college districts, are now codified at Government Code sections 1152, 1153, 1157.3, 1157.10, and 1157.12. (Section 1153 applies to state employers only, and section 1157.10 applies only to state employees of public agencies.)

Provisions governing wage and salary deductions applicable to public schools and community college districts are codified at Education Code sections 45060, 45168, 87833, and 88167 (reflecting deductions for public school certificated and classified employees, and community college district academic and classified employees).

2. What Should I do if an Employee Asks My Agency to Discontinue the Employee’s Union / Employee Organization Membership Dues Deduction? Can I Respond?

You can respond, but your response is limited to referring the employee back to the employee organization.  With the passage of Senate Bill 866, public employers as well as public school and community college district employers are required to direct employee requests to cancel or change authorizations for payroll dues deductions or other membership-related fees to the employee organization.  Employee organizations are responsible for processing these requests.

Distinct from employee organization / union membership dues and membership-related fees, the Supreme Court’s holding in Janus v. AFSCME, requires employers to immediately stop withholding involuntary service fees; but employers should also notify and meet and confer with any employee organizations regarding the negotiable effects of that change as soon as possible.  Though Senate Bill 866 does not specify how agencies respond to employer inquiries about service-fees, it may also be appropriate to direct the question to the employee organization (e.g. if an employee asks whether he/she can voluntarily pay the union something other than membership dues).  This assessment should be made on a case-by-case basis.

3. Must My Agency Rely on an Employee Organization’s Statement Regarding an Employee’s Organization Membership?

Yes. Public employers are required to honor employee organization requests to deduct membership dues and initiation fees from their members’ wages.  Public employers are also required to honor an employee organization’s request to deduct their members’ general assessments, as well as payment of any other membership benefit program sponsored by the organization.  Public employers must additionally rely on information provided by the employee organization regarding whether deductions for an employee organization have been properly canceled or changed.  Consequently, because public employers will be making these deductions in reliance on the information received from employee organizations, employee organizations must indemnify public employers for any claims made by an employee challenging deductions.

Public school and community college district employers are similarly required to rely on information provided by employee organizations regarding whether deductions for the organization have been properly canceled or changed. However, as with public employers, the employee organization must indemnify the public school or community college district employer for any claims made by an employee challenging deductions.

4. Can My Agency Demand that the Union / Employee Organization Provide the Agency with a Copy of an Employee’s Written Authorization for Payroll Deductions?

No, except in very limited circumstances. As an initial matter, public employers must honor employee authorizations for deductions from their salaries, wages or retirement allowances for the payment of dues, or for any other membership-related services.  Deductions may be revoked only pursuant to the terms of the employee’s written authorization.  Similarly, public school and community college district employers must honor the terms of an employee’s written authorization for payroll deductions.  However, public employers that provide for the administration of payroll deductions (as required above, or as required by other public employee labor relations statutes), must also rely on the employee organizations’ certification that they have the employee’s authorization for the deduction.  A public employer is prohibited from requiring an employee organization to provide it with a copy of an individual’s authorization, as long as the organization certifies that it has and will maintain individual employee authorizations. The only exception is where a dispute arises about the existence or terms of the authorization.

Similarly, public school and community college district employers must rely on an employee organization’s certification that it has an employee’s authorization for payroll deductions. Upon certification, public school and community college district employers are prohibited from requiring the employee organization to provide it with a copy of the employee’s written authorization.  As with public employers, a public school or community college district employer can only request a copy of the employee’s written authorization if a dispute arises about the existence or terms of the authorization.  Again, because employers will be making deductions in reliance on the information received from employee organizations, employee organizations must indemnify employers for any claims challenging these deductions.

5. Can I Discourage or Deter Employees from Becoming or Continuing in Union / Employee Organization Membership? Can I Discourage or Deter them from Enrolling in Automatic Membership Dues Deductions?

No to both questions. Public employers remain prohibited from deterring or discouraging public employees, or applicants, from becoming or remaining members of employee organizations.  They are similarly prohibited from deterring or discouraging public employees or applicants from authorizing representation by an employee organization, or from authorizing dues or fee deductions to such organizations.  The statute provides that this is a declaration of existing law.

Notably, for the purposes of this provision, a public employer is any employer subject to the Meyers-Milias Brown Act (MMBA), the Ralph C. Dills Act, the Judicial Council Employer-Employee Relations Act (JEERA), the Educational Employment Relations Act (EERA), the Higher Education Employer-Employees Relations Act (HEERA), the Trial Court Employment Protection and Governance Act, the Trial Court Interpreter Employment and Labor Relations Act, the Los Angeles County Metropolitan Transportation Authority Transit Employer-Employee Relations Act, and Employers for in-home supportive services (IHSS) providers (pursuant to Welfare and Institutions Code section 12302.25). This provision also applies to public transit districts with respect to their public employees who are in bargaining units not subject to the provisions listed above.

6. Does Senate Bill 866 Prohibit My Agency from Informing Employees about the Cost of Being a Union / Employee Organization Member? 

Yes. This could be seen as deterring or discouraging an employee from becoming an employee organization member or authorizing dues or fee deductions to an employee organization.  As noted in response to question 5, this conduct is prohibited.  In addition, as discussed in question 7 below, employers are prohibited from sending mass communications to employees about employee organization membership without first meeting and conferring with the organization about the content of the communication.

7. Can My Agency Still Send Mass Communications to Employees about Union / Employee Organization Membership?

Yes, but only if the agency first meets and confers about the content of the communication with the recognized employee organization.

A public employer that chooses to send mass communications to their employees or applicants concerning the right to “join or support an employee organization, or to refrain from joining or supporting an employee organization” must first meet and confer with the exclusive representative about the content of the mass communication. If the employer and exclusive representative do not come to an agreement about the content of the communication, the employer may still choose to send it.  If it does, however, it must also include with its own communication, a communication of reasonable length provided by the exclusive representative.  Notably, this requirement does not apply to a public employer’s distribution of a communication from PERB concerning employee rights that has been adopted for the purposes of this law.

For the purposes of mass communication provisions, a public employer means any employer subject to the Meyers-Milias Brown Act (MMBA), the Ralph C. Dills Act, the Judicial Council Employer-Employee Relations Act (JEERA), the Educational Employment Relations Act (EERA), the Higher Education Employer-Employees Relations Act (HEERA), the Trial Court Employment Protection and Governance Act, the Trial Court Interpreter Employment and Labor Relations Act, the Los Angeles County Metropolitan Transportation Authority Transit Employer-Employee Relations Act, and Employers for in-home supportive services (IHSS) providers (pursuant to Welfare and Institutions Code section 12302.25). This provision also applies to public transit districts with respect to their public employees who are in bargaining units not subject to the provisions listed above.

8. Just What is a “Mass Communication” for the Purposes of Senate Bill 866?

For the purposes of Senate Bill 866, a “mass communication,” means a written document, or script for an oral or recorded presentation or message, that is intended for delivery to multiple public employees regarding an employee’s right to join or support or not to join or not to support an employee organization. This includes email communications.

9. With Whom Can I Share Information about Employee Orientations?

Senate Bill 866 requires that new employee orientations be confidential. In addition to existing law that provides exclusive representatives with mandatory access to new employee orientations following the passage of AB 119 last year, the “date, time, and place of the orientation shall not be disclosed to anyone other than the employees, the exclusive representative, or a vendor that is contracted to provide services for the purposes of the orientation.”

10. When Does Senate Bill 866 Take Effect?

Today! As a budget trailer bill, Senate Bill 866 is considered “urgency legislation.”  This means it goes into effect immediately upon the Governor’s signature.  As noted above, Governor Brown signed Senate Bill 866 into law on June 27, 2018.  Accordingly, the time to comply with the new law is now!


Mandatory Agency Shop Fees Ruled Unconstitutional in Janus v. AFSCME

Posted in Labor Relations

 This post was authored by Kevin J. Chicas.

The United States Supreme Court today, on Wednesday June 27, 2018, reversed the Seventh Circuit Court of Appeals in Janus v. AFSCME, and held that mandatory agency shop service fees are unconstitutional under the First Amendment of the U.S. Constitution.

Under an agency shop arrangement, employees within a designated bargaining unit who decline membership in a labor organization (i.e., a union or local labor association) must pay a proportionate “fair share” agency shop fee to the labor organization. These agency shop fees are different from dues, which are voluntarily deducted typically through an employee authorization form.  In theory, the agency shop fees are meant to cover the labor organization’s  representation costs for collective bargaining activities conducted on unit members’ behalf.

Mark Janus challenged this theory, claiming he was being compelled to pay agency shop fees, which labor organizations could use to advance political speech to which he disagreed.  The U.S. Supreme Court ruled against AFSCME 5-4, and specifically held that public agencies and “public-sector unions may no longer extract agency fees from nonconsenting employees.”  The Court also held that compelling employees to pay agency fees “violates the First Amendment and cannot continue.  Neither an agency fee nor any other payment to the union may be deducted from a nonmember’s wages, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay. By agreeing to pay, nonmembers are waiving their First Amendment rights, and such a waiver cannot be presumed … Rather, to be effective, the waiver must be freely given and shown by ‘clear and compelling’ evidence.”

How does Janus affect your agency and how to address its impacts?

Public agencies should first understand that Janus is now the prevailing law in the country.  The U.S. Supreme Court made clear that public agencies are immediately prohibited from mandating and collecting agency shop fees from employees.  Given the Court’s holding, public agencies will likely need to account for various competing obligations when implementing Janus.

Additionally, the following are some key steps agencies should consider and plan to implement to address the Janus decision.

  1. The first step to address the immediate impacts of Janus is to determine if your public agency has an agency shop arrangement with a local labor organization.

For local public agencies governed by the Meyers-Milias-Brown Act (MMBA), agency shop arrangements are established by agreement with the labor organization or by a vote of the applicable bargaining unit. (Government Code section 3502.5)  For public school agencies governed by the Educational Employment Relations Act (EERA), agency shop arrangements are set up after the labor organization provides notice to the employer to deduct the agency shop fees.  (Government Code section 3546.)

Therefore, your agency should review your payroll systems and each collective bargaining agreement, paying particular attention to provisions related to processing service fee (i.e., agency shop fees) wage deductions.

If your collective bargaining agreement has a severability or savings provision which identifies what happens if a provision of the agreement is determined to be unlawful, you need to follow that provision. Many agency shop arrangements are contained in collective bargaining agreements.  As of today, since agency shop has been declared unconstitutional, agency shop provisions will likely trigger your severability or savings provisions.

  1. Public agencies should then identify employees who are dues payers, service fee and religious or conscientious objector payers, and discontinue service fee and religious objector deductions. Janus does not directly impact labor organization member employees because they are voluntarily paying dues to be a member of the labor organization.  The U.S. Supreme Court ruled, however, that mandatory agency shop fees are unconstitutional.  Therefore, Janus directly impacts the agency’s service fee payers and any bargaining unit members who have a religious objection, but are required to donate their wage deductions to a charitable organization.

To determine which category each bargaining unit member falls within, public agencies should review the election forms on file for each employee. In conjunction with this, employers can also review payroll records that use separate deduction codes to help identify who, historically, has been a dues, service fee and religious/conscientious objector payer.

As described further below, S.B. 866 (signed by Governor Brown today this morning and signed into law as urgency legislation, meaning it goes into effect immediately) may impact this process if, for example, an agency cannot determine the categories of unit employees, and will need to rely on certifications from labor organizations regarding which employees have authorized dues deductions.

While Janus may impact labor organizations on a greater scale, agencies with an agency shop may be required to make administrative changes to their payroll practices as soon as possible.  Once you identify your employee categories, agencies should develop an action plan with the appropriate departments to identify payroll cutoff deadlines for cessation of specific deductions.  Your agency should take steps to both immediately implement changes mandated by Janus, and to notify and meet and confer with any labor organizations regarding negotiable effects of the changes as soon as possible.  Regardless of the meet and confer obligations, effective immediately, your agency is precluded from making a deduction from the wages of any employee who has been a service fee payer or religious objector. This means today, June 27, 2018, regardless of whether today is in the middle of your pay period. 

  1. Public agencies should then notify the impacted labor organizations regarding the planned changes to the deduction of service fees, and then plan to meet and confer over the negotiable impacts of those changes. Public agencies may receive push-back in implementing Janus, but they should understand complying with the requirements of the law is their legal obligation.  Regardless, public agencies need to meet and confer over the negotiable effects of the decision.

After notifying the labor organization and/or during negotiations, the labor organizations may identify various effects in discontinuing service fee deductions.  The obligation to negotiate over effects includes the obligation to consider the proposals in good faith within the parameters of the law.

  1. In a post-Janus world, public agencies will need to be ready to address inquiries from employees and labor organizations regarding issues, such as how to withdraw from the labor organization or how to revoke dues authorizations.  As discussed above, Janus does not prohibit voluntary dues deductions, so this practice should continue consistent with applicable law, the agency’s collective bargaining agreements and employer relations rules. You should review this information right away so that you know the answers.  In responding to employee inquiries, employers may provide factual information to employees, but they cannot do so in a manner that would discourage employees from joining or remaining labor organization members.  (Government Code section 3550.)  Additionally, S.B. 866 provides for additional substantial restrictions on issuing “mass communications” to multiple employees and requirements to direct labor organization membership inquiries to the labor organization. Public agencies should no longer send employees any mass communication about the Janus decision without meeting and conferring with exclusively recognized representatives about the content of such communications.  Public agencies should also defer membership inquiries to labor organizations.

Janus is a landmark decision, with far-reaching impacts. So is S.B. 866.  Based on the current state of the law and the considerations above, public agencies should coordinate internally to develop action/contingency plans to address any and all legal obligations.  LCW is available to assist and has been following Janus and actively advising public agencies on how to best prepare and handle the decision the day it comes out. That day has come! As part of LCW’s coverage of the Janus decision and related state legislation, LCW will be providing the following services to our clients:

LCW’s Special Bulletin discussing CA’s new legislation, S.B. 866 is available here.

Overpaid Pensioners Lose on All Grounds

Posted in Pension

This post was authored by Erin Kunze.

In a Fourth District appellate case, Krolikowski v. San Diego City Employees’ Retirement System,  issued in May 2018, the Court found that two overpaid retirees had no valid defense against the San Diego City Employees’ Retirement System (“SDCERS”) in recouping payments made to the retirees for 7 to 12 years.  The two former San Diego City employees began collecting pensions from SDCERS in 2001 and 2006.  At the time of retirement, SDCERS calculated the monthly payments due to each former employee as their SDCERS pension.  Unfortunately, at the time of calculation, SDCERS used incorrect retirement factors, corresponding with inaccurate retirement dates and, as to one retiree, the wrong annuity factor.  The incorrect calculation also relied on a mistaken assumption about individuals’ participation in social security.

In 2013, SDCERS conducted an audit and learned that it had made these mistakes. As a result of its mistakes, SDCERS concluded that it had overpaid the two retirees $17,049.48 and $18,783.99 between the dates the retirees began receiving pension benefits and the date of the audit (not accounting for interest).  Within months of discovering the error, SDCERS sought to recoup payments from the two retirees, with interest.  One retiree reimbursed the system under protest, while the other was subject to an involuntary monthly pension reduction to make the system whole.

The two retirees brought suit against SDCERS after failing to obtain favorable results through the System’s administrative process. In their lawsuit, the retirees brought a number of claims against SDCERS, including a claim of estoppel and a claim that the Code of Civil Procedure’s three-year statute of limitations should apply.  The retirees also argued that the System was not legally authorized to take unilateral action to recoup an overpayment of pension benefits.

Ultimately, the Court rejected these, and all claims made by the retirees. With respect to estoppel, the Court found that the retirees did not “meet their burden” of demonstrating that SDCERS was “apprised of the facts” at issue prior to 2013, nor that they sufficiently demonstrated that they had “sustained an injury” in reliance on SDCERS’s failure to earlier inform them of the calculation error.  The Court additionally noted the extra burden required to bring an equitable estoppel claim against a government entity.  Specifically, it explained that the government “may not be bound by an equitable estoppel…unless, ‘in the considered view of a court of equity, the injustice which would result from a failure to uphold an estoppel is of sufficient dimension to justify any effect upon public interest or policy which would result from the raising of an estoppel.’”  A high burden.

With respect to the Code of Civil Procedure’s three-year statute of limitations, the Court first noted that it did not apply to this matter because SDCERS sought recovery of overpayments through an administrative action, not through the Civil law system. Unlike other pension systems (such as CalPERS, STERS, and some County Retirement systems), nothing in City of San Diego’s law establishing the scope of SDCERS’s authority to administer the City’s pension system prevents SDCERS from seeking recoupment of overpayments through an administrative process in excess of three years.  Moreover, the Court explained, even if the Code of Civil Procedure statute of limitations were applicable, it would not help the retirees in this case.   Code of Civil Procedure section 338, subdivision (d) provides that “an action for relief on the grounds of fraud or mistake . . . is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.”  Here, the court determined that the 2013 audit would be the applicable point of discovery.  In short, even though the overpayments were the System’s mistake in 2001 and 2006, the statute of limitations would not have started until the System discovered the mistake it made.  This begs the question, if the System has not discovered the mistake in the 2013 audit, would any later audit be considered the point of “discovery,” initiating a statute of limitations?  The Court rejected the notion that the System’s initial duty to set a correct pension benefit would sufficiently trigger the Civil Code limitation.  It additionally upheld the trial court’s decision to exclude evidence that the System acted unreasonably in making the mistake, by failing to audit or double check its calculations in a prompt manner.

Finally, regarding the System’s unilateral authority to withhold pension payments from retirees, the Court found that SDCERS has this authority. While pension benefits may not be levied or attached by a “judgment creditor” under state law, the Court explained that the public pension system itself is not a judgment creditor. When it recoups overpayments, it is “not levying or attaching any funds to satisfy a money judgment.” On the contrary, the Court found that the System was required to take this action because it lacked the authority to provide benefits in excess of amounts authorized by the City.

While some portions of this holding will not relate to other retirement systems (e.g. where SDCERS law and CalPERS, STERS, and other City and County retirement system laws deviate), the decision reflects the strong position of pension systems in seeking, and retaining, reimbursements when they determine such reimbursements are owed.

Have you audited your agency’s pension payments and reporting? If not, doing so now – and acting affirmatively to correct errors – may help avoid the accrual of interest and overpayments (or underpayments of pension contributions prior to retirement) that may become substantial over time.