CalPERS contracting agencies and schools should be aware that effective January 1, 2017, if an employee’s termination is overturned on appeal, back pay is not the only thing the employee will be able to recover. On June 21, 2016, we reported that Assembly Member Cooper introduced a new bill, AB 2028, which if passed, would allow CalPERS school and local agency members reinstated by administrative or judicial order following an involuntary termination to retroactively receive service credit and compensation earnable as though they were never terminated. The Legislature enacted, and Governor Brown signed, AB 2028 this past Fall.  The new law went into effect on January 1, 2017.

AB 2028 permits CalPERS members who were involuntary terminated from employment on or after January 1, 2017, and subsequently reinstated pursuant to an administrative, arbitral or judicial proceeding (collectively, a “proceeding”) to receive service credit and compensation earnable as though they were never terminated. The Bill clarifies that administrative proceedings include proceedings before the governing board of a school district, a charter school, a county office of education, or a community college district.  The reinstatement of these benefits will be effective as of the date from which retroactive salary is awarded in the proceeding.

AB 2028 addresses a gap in existing law, where state employees who have been subject to an involuntary termination that is subsequently overturned receive service credit retroactively.

However, such a mechanism did not, until AB 2028, apply to employees of a CalPERS contracting local agency or school. While pre-AB 2028 law allowed all CalPERS members who retired after an involuntary termination and who were subsequently reinstated to their employment to receive retroactive benefits, CalPERS school and contracting local agency members who did not retire after involuntary terminations were not eligible to receive retroactive benefits upon reinstatement.

Under AB 2028, contributions to the CalPERS system (the “System”) must be made for any period for which salary is awarded in the proceeding in the amount that the CalPERS member would have contributed had his or her employment never been terminated.  The Bill does not expressly state who is responsible for paying the retroactive contributions into the System, i.e. the agency, the reinstated employee or both.  However, the legislative history suggests that because the Bill is intended to make an employee whole, as if he or she had never been terminated, the contribution obligations would mirror the agency and members’ regular contribution practices.

Finally, AB 2028 requires employers to notify CalPERS of a final decision ordering reinstatement within five (5) days of the decision becoming final. That notice must include the date of involuntary termination, the date on which the employee was reinstated, and any additional information CalPERS may require to implement the bill.  The new law does not require contracting agencies to provide an employee with additional retirement benefits that the employee would not otherwise have been entitled to had he or she not been involuntarily terminated.