Peter Nowicki was employed with the Moraga-Orinda Fire District (District) from 1983 until 2009. In July 2006, Nowicki became the District’s fire chief. Nowicki had an employment contract with a four-year term. Later, Nowicki and the District agreed to two contract amendments. The amendments granted Nowicki added benefits, including salary increases, annual vacation and holiday “sell-backs,” and additional vacation and administrative leave credit. Nowicki was a member of the Contra Costa County Employees’ Retirement Association (CCCERA), which administers pensions for Contra Costa County.
On January 30, 2009, two-and-a-half years into his term as fire chief, Nowicki retired for personal reasons. Nowicki’s contract said he was eligible for retirement benefits under the then-applicable formula, which took into account a member’s “highest annual compensation earnable.” When Nowicki retired, his retirement allowance was based on the total of his final year’s salary, plus the vacation leave and holiday cash-outs he took during his final year of employment.
In late 2013, CCCERA began a “lookback project” to review past incidents of unusual compensation increases at the end of employment, and to determine if pension spiking had occurred through “members’ receipt of pay items that were not earned as part of their regularly recurring employment compensation during their careers.”
In August 2015, Nowicki received a letter from CCCERA’s Board of Retirement (Board) that the Board had scheduled a hearing to determine whether adjustments to his retirement allowance were warranted. The letter noted that before the Board adjusted Nowicki’s retirement benefits, it would give him the opportunity to present his position and any relevant information.
Following a September 2015 open public meeting on the issue, CCCERA sent Nowicki a letter stating that the Board had determined he had caused his final compensation to be improperly increased at the time of retirement, and therefore, his retirement allowance would be reduced from $20,448.09 to $14,667.74 per month. CCCERA also informed Nowicki that his retirement allowance had been overpaid from January 2009 through September 2015 and that Nowicki would be responsible for repaying the overpayments plus interest, which totaled $585,802.90.
Nowicki subsequently filed a petition for writ of administrative mandate requesting an order rescinding the Board’s decision to reduce his pension benefit and reinstating the benefit as originally calculated. The trial court denied Nowicki’s writ after determining that Nowicki did not meet his burden of establishing that the Board’s decision to decrease his monthly allowance was an abuse of discretion. Nowicki appealed.
The California Court of Appeal reversed the trial court’s ruling. The statute at issue, in this case, was Government Code Section 31539, subdivision (a)(2), which provides that the board of retirement may, in its discretion, correct any error made in the calculation of a retired member’s monthly allowance if “the member caused his or her final compensation to be improperly increased or otherwise overstated at the time of retirement and the system applied that overstated amount as the basis for calculating the member’s monthly retirement allowance.” On appeal, Nowicki argued that there was no evidence of impropriety on his part, given that he acted to increase his final year’s compensation under CCCERA’s own rules and he simply sold benefit accruals back in his final year, as he had in prior years.
First, the Court of Appeal considered the meaning of “improperly” as used in Section 31539. Relying on the history behind the statute’s enactment, the court concluded that the use of the word “improperly” unquestionably reflected an intent for subdivision (a)(2) to address actual wrongdoing.
Next, the court analyzed whether the evidence of Nowicki’s pre-retirement conduct supported a finding that he caused his “final compensation to be improperly increased or otherwise overstated at the time of retirement.” The court noted that Nowicki’s contract expressly allowed for annual salary adjustments. While his original contract did not include benefit sell-back provisions, it did permit contract amendments by mutual written agreement. In addition, Nowicki had previously utilized the sell-back provisions in his prior battalion chief contract every year between 2000 and 2006. Nowicki twice used the sell-back provisions, and his amended contract permitted him to do so. This was also permitted under the law and CCCERA guidelines in place at the time.
The court also found the Board’s lookback project the Board used standards that took effect in 2013 and were only to be applied prospectively. The Board had no authority to apply the 2013 standards to Nowicki’s 2009 retirement.
The Court of Appeal concluded that the Board erroneously applied subdivision (a)(2) to Nowicki. The court found that “it simply is not plausible that the Legislature intended to empower retirement boards to target long-retired county employees who had negotiated with their employer for contract terms permitted under then-existing law and county retirement association guidance, solely because those acts enabled them to increase their final compensation at the time of retirement.” Thus, the trial court erred in denying Nowicki’s petition for writ of mandate.
Nowicki v. Contra Costa Cty. Employees’ Ret. Ass’n, 67 Cal.App.5th 736 (2021).
Note:
In 2013, the Legislature enacted the Public Employees’ Pension Reform Act (PEPRA) to curb pension spiking. PEPRA would also have prohibited Nowicki’s conduct, had it occurred after 2013.