Breaking News1.jpgThis blog post was authored by Randy Parent

CalPERS issued Circular Letter No. 200-002-14 on January 14, 2014, providing an overview of the law that applies to CalPERS retired annuitants of all CalPERS employers.  To provide further assistance in navigating this complex topic, CalPERS has provided a Checklist for Hiring CalPERS Retirees to assist public employers with their analysis to determine whether or not it is permissible to employ a retired annuitant under the variety of circumstances the agency may face.

The Circular Letter and Employer Checklist apply to CalPERS retirees on service retirement only.  The Circular Letter emphasizes that employers must enroll retirees employed by the public agency in the my|CalPERS system and report the rate of pay and the number of hours worked.

The Circular Letter summarizes legislative amendments and additions to the Government Code that we have written about at length:  (1) AB 1028, which took effect on January 1, 2012; (2) SB 1021, which took effect on June 28, 2012; and (3) The Public Employees’ Pension Reform Act of 2013 (the “PEPRA”) – AB 340 and SB 13 (clean-up legislation), which took effect on January 1, 2013, with clean-up legislation provisions taking effect on October 4, 2013.

The Public Employees’ Retirement Law (the “PERL; Gov. Code, section 20000 et seq.) regulates post-retirement employment of CalPERS retired annuitants at Government Code section 21220, et seq.  The PEPRA added Government Code section 7522.56, which set forth additional post-retirement employment limitations.  When there is a conflict, PEPRA prevails; however, the Circular Letter emphasizes that provisions under the PERL dealing with post-retirement employment that are not in conflict with PEPRA still apply.

It appears from the Circular Letter that CalPERS has changed course on the employment of retirees as independent contractors.  As we reported, CalPERS had revised its Public Agency and Schools Reference Guide to state that independent contractors are subject to retirement law restrictions for retired annuitant employment.  In contrast, the Checklist provides that if the relationship is truly that of an independent contractor (i.e. a common law employer-employee relationship does not exist with the CalPERS employer), then the employment is exempt from the post-retirement employment requirements.  However, the Circular Letter warns that just because a retiree is retained as an “independent contractor” does not necessarily mean employment in that position is exempt from the retired annuitant requirements.  An independent contractor in any position that would meet the common law employment test is not an independent contractor at all, but is an employee subject to the post-retirement employment restrictions in the PERL and the PEPRA.

As mentioned above, the Circular Letter states that employers must enroll retirees in the my|CalPERS system and report the number of hours worked; however, CalPERS has not clarified whether agencies must enroll and report on retirees employed as true independent contractors.  CalPERS has previously indicated that agencies should report independent contractors’ hours, but now, after this Circular Letter, it is unclear whether CalPERS is requiring employers to report the hours of retirees hired as true independent contractors.

CalPERS reaffirmed its guidance from a 2012 Circular Letter that retired annuitants can only perform work of a limited duration.  The appointment may not be for an indefinite period nor to a regular staff position.  Rather, the retiree’s work should supplement the work of regular staff (“extra help,” such as elimination of backlog, special projects, or work in excess of what regular staff can do) or during an emergency, such as a natural disaster to prevent stoppage of public business.

The Circular Letter also clarifies CalPERS’ interpretation of the lesser used Government Code section 21221(h).  This section authorizes a governing body to fill a vacant position on an interim basis during the recruitment for a permanent employee to fill the position.  It has typically been used to fill high-level positions that are appointed by and report directly to the governing body, such as the city manager or police chief.  It was unclear if PEPRA and section 21221(h) conflicted and if section 21221(h) continued to be valid. CalPERS has determined that section 21221(h) remains valid after PEPRA.