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California appeals court sides with county employees on vested rights to benefits

California Gov. Jerry Brown

A California state appeals court panel ruled on Monday that some benefits for participants in public pension plans in Alameda, Contra Costa and Merced counties may be protected prior to a pension reform law outlawing them in 2013.

The benefits outlawed in California Gov. Edmund G. "Jerry" Brown Jr.'s Public Employees' Pension Reform Act of 2013 were those that allowed workers to calculate and add unused vacation time and other leave time to their final years' salaries, thereby increasing their pension benefits. In a challenge to the constitutionality of the reduced benefits by employees of the three counties, a trial judge in Contra Costa County had ruled in May 2014 that using the accumulated vacation time to increase pensions was "unlawful."

The appeals court on Monday concluded that the trial court's analysis of the reform law "on the pensions of legacy members was incorrect in certain respects and also improperly failed to include a necessary vested-rights analysis," according to the ruling. Portions of the case will go back to a lower court.

The California Supreme Court has already agreed to hear the case, consolidating it with the decision of another state appellate panel, which ruled in August 2016 that employees in Marin County were only entitled to a "reasonable pension benefit," not their original pension guarantee. Monday's ruling did note much of the Marin County case's "vested-rights analysis — including its rejection of the absolute need for comparable new advantages when pension rights are eliminated or reduced — is not controversial, and we do not disagree with it."

Ali Bay, Mr. Brown's deputy press secretary, said in an email, "We welcome the decision's affirmation that egregious pension spiking practices called out in the governor's 12-point pension reform plan have long been contrary to the law, and that (the reform act's) effort to end them was constitutional. The decision also affirms the core arguments that the governor made in his recent brief in the California Supreme Court. We are closely reviewing the decision and considering next steps."

Timothy Talbot, partner at Rains Lucia Stern St. Phalle & Silver, attorney for one plaintiff, the Contra Costa Deputy Sheriff's Association, said in a telephone interview, "The decision is the right outcome for the employees we represented. The court did recognize the importance of the promises."

"For my clients anyway, this is a good outcome irrespective of the bigger broader picture of pension law generally," Mr. Talbot said.