An employer subject to the County Employees Retirement Law of 1937 (“’37 Act”) maintains the unilateral right to discontinue picking-up the member contributions of its employees after exhausting all collective bargaining obligations. This was the decision of the San Bernardino County Superior Court on April 11, 2014 in denying a Petition for Writ of Mandate filed by the San Bernardino County Public Attorneys Association (“SBCPAA”), a labor organization, against the County of San Bernardino. (San Bernardino County Public Attorneys Assn. v. County of San Bernardino, et. al., Case No. CIVDS1304516.)
The County, represented by Steven M. Berliner, partner in our Los Angeles office, and Frances Rogers, associate in our San Diego office, unilaterally implemented terms and conditions of employment after satisfying all meet and confer obligations. Those terms included eliminating the County’s pick-up of a portion of its employees’ member contributions to the county retirement system. SBCPAA filed a lawsuit challenging this action, arguing that a statute enacted as part of the California Public Employees’ Pension Reform Act of 2013 (“PEPRA”) actually required the County to continue the pick-ups absent the employees’ agreement to the change. Amicus Curiae briefs were filed by the State of California, the California State Association of Counties, and the California Special Districts Association.
Government Code section 31631 of the ’37 Act was enacted as part of PEPRA. Section 31631 states, in relevant part, “Notwithstanding any other law, a board of supervisors or the governing body of a district may, …without a change in benefits, require that members pay all or part of the contributions of a member or employer, or both, for any retirement benefits …For members who are represented in a bargaining unit, the payment requirement shall be approved in a memorandum of understanding…”
The intent of this statute is to provide an avenue for employees to share a part of the employer’s contribution rate, provided employees agree in a memorandum of understanding. SBCPAA argued, however, that this statute also requires agreement of employees to pay any contributions, including their normal member contributions.
The Court found that the plain language of section 31631 requires employee agreement to pay their own member contributions. However, that part of the statute is completely inapposite to other parts of the ’37 Act, the intent of PEPRA, and the intent of the Meyers-Milias-Brown Act (“MMBA”). It is also unconstitutional under the California Constitution.
Prior to PEPRA, section 31581.2 of the ’37 Act permitted employers to pick-up all or a portion of the member contributions of its employees and to discontinue doing so at any time after exhausting all meet and confer obligations under the MMBA. PEPRA did not repeal section 31581.2, although it was amended to prohibit employer pick-ups for “new members” as defined under PEPRA. The intent of PEPRA is to ensure public pension systems are sustainable. Among its provisions, PEPRA prohibits employers from picking up the contributions required of “new members,” discourages employers from doing the same for classic members, and encourages all employees to share a portion of the employer’s normal cost to fund pension benefits.
The Court observed that the overall statutory schemes of the ’37 Act, PEPRA and MMBA did not grant labor organizations the power to compel employees to continue to pick up employee contributions by simply refusing to agree to pay their own normal contributions to the retirement system.
Moreover, the Court found that because the plain, clear language of section 31631 requires employee agreement in a memorandum of understanding in order for them to pay their own member contributions, the provision of section 31631 at issue is unconstitutional in violation of the “Home Rule” Doctrine. Under Article XI, Sections 1 and 11 of the California Constitution, the board of supervisors of any county has the sole authority to determine the compensation of its employees and control county money. The California Supreme Court previously held that the Legislature may not enact a law that places the authority in another person or entity to determine the compensation of county employees. (County of Riverside v. Superior Court (2003) 30 Cal.4th 278.)
The Court also rejected SBCPAA’s argument that employer pick-ups are a constitutionally-protected “vested” right. The law is clear that employer pick-ups of employee member contributions are an employment benefit, not a retirement benefit and as such, are not vested and constitutionally protected post-employment benefits.
This decision is an important victory, not only for the County of San Bernardino, but for all employers who maintain a retirement system under the ’37 Act. Although this is a trial court decision which does not create precedential law, it signals the direction of courts in a post-PEPRA landscape. A similar lawsuit involving the County of Orange, also handled by Steven M. Berliner and Frances Rogers, is set to be heard at the end of May.
Liebert Cassidy Whitmore’s Retirement Practice Group handles a wide array of retirement law matters, including litigation, administrative proceedings, and providing advice and counsel. For more information visit: www.lcwlegal.com/retirement.