Labor Relations: The Meet and Confer Process

In Retired Employees Association of Orange County, Inc. v. County of Orange (“ REAOC ”), however, the California Supreme Court held that vested benefits may be implied under certain circumstances depending on the language of the underlying agreement. The Court distinguished the Sappington case by noting that while the Court of Appeal found that express language of the agreement in that case did not provide a vested benefit, there was nothing in the Court of Appeal’s decision to indicate that vested benefits could not be implied in the public employee context. Based on the REAOC case, it is possible that vested benefits may be implied from an agreement, ordinance, or resolution where the language and surrounding circumstances clearly evidence a legislative intent to create that right. In later REOAC litigation, the Ninth Circuit (which interprets federal law in several western states, including California) provided much needed clarification regarding implied rights when it held that “a practice or policy extended over a period of time does not translate into an implied contract right without clear legislative intent to create that right.” There is no bright line rule on this issue and courts will most likely have to analyze individual agreements and expectations to make a determination on the potential vesting of retiree benefits for current and former employees and an agency’s ability to modify such benefits. It appears, however, that a practice or policy of providing a benefit will not by itself create a vested right to continue receiving that benefit in the future. ii. Defined Benefit Pension Plan Public employees are often provided a pension which provides a guaranteed monthly benefit amount or a guaranteed amount after a set number of years of service. With a defined benefit plan, the amount of income an employee receives on retirement is defined - or decided - in advance. For example, where employees have a pension plan with a “2% at age 55” formula, they receive an annual pension equal to 2% of their final compensation multiplied by the number of years of service to the agency, up to any statutory maximum percentage. Defined benefit plans are organized so that both the employer and the employee contribute to the plan. The extent to which the parties can agree to defined benefit formula modifications has decreased since the enactment of the California Public Employees’ Pension Reform Act of 2013 (PEPRA). For example, as a result of PEPRA, the available retirement formulas are now limited. All “new members” who are in the miscellaneous retirement classification receive the “2% at 62” benefit formula. Three formulas exist for new members who are classified as safety members: the Basic Safety Plan (2% at 57), Safety Plan I (2.5% at 57), and Safety Plan II (2.7% at 57). (Gov. Code §§ 7522.25(a)-(d).) Though new members will receive the formula that is closest to the formula applicable to safety members hired on December 31, 2012, while providing a lower benefit, the parties may agree to a lower formula; however, a lower formula may not be imposed through impasse procedures. The provisions that prohibit any agency from implementing a new tier other than the tiers available under the PEPRA, clearly apply to “new members.” It is unclear, however, whether agencies may negotiate a new and lower tier for classic members hired after a specified future date. Although the PEPRA does not expressly prohibit this practice, there is language that is susceptible to that interpretation. Thus, agencies should consult with legal counsel before

Labor Relations: The Meet and Confer Process ©2019 (s) Liebert Cassidy Whitmore 33