LCW Partner Jennifer Rosner and Associate Attorney Anni Safarloo successfully represented a city in an action brought by three police officers who disputed their retirement benefits formula based on the city’s contract with the California Public Employees’ Retirement System (CalPERS).
In May 2012, the city hired the three individuals to become sworn police officers once they successfully completed the Police Academy. They would also then be eligible for safety membership in CalPERS. Until the officers completed the Police Academy, they remained non-sworn employees and were classified in CalPERS as Miscellaneous employees.
At the time of their hiring, the applicable Memorandum of Understanding (MOU) between the city and union provided the city’s “current sworn” police officers with a “3% at 50” CalPERS retirement formula, meaning they would be eligible for retirement at age 50 with an annual allowance equal to 3% of their pensionable compensation for each year of service. The MOU also provided that the city would amend its contract with CalPERS to provide a “3% at 55” retirement formula for sworn employees hired after July 1, 2012. According to the officers, representatives from the city promised them during their recruitment that they would be entitled to the “3% at 50” retirement formula even though they were not sworn at the time of hire.
In July 2012, the city adopted a resolution providing that the “3% at 55” formula would apply to employees entering the safety classification with CalPERS after the effective date of the resolution. The city thereafter effectuated the language of the resolution in an ordinance and by an amendment to its contract with CalPERS, which became effective in September 2012.
In December 2012, the officers’ status changed to sworn police officers after they graduated from the Police Academy. Since the officers did not become sworn personnel until after the July 1, 2012 cut-off stated in the MOU and the September 2012 CalPERS contract amendment, the City enrolled them in the “3% at 55” retirement formula.
The officers filed a lawsuit alleging breach of contract. In addition, they filed a petition for writ of mandate action requesting the court to order the city to provide the retirement benefits allegedly promised to the officers either by making a written request to CalPERS for a contract amendment to include the officers in the “3% at 50” retirement formula or providing the officers with a supplemental retirement allowance to make up the difference between the two formulas. The Court stayed the lawsuit until the petition for writ of mandate was adjudicated.
LCW filed a demurrer on behalf of the city as to the petition for writ of mandate. The Court sustained the demurrer without leave to amend and denied the petition for writ of mandate on the grounds that the officers failed to exhaust their administrative remedies through CalPERS’ administrative process. The court agreed and acknowledged that a city may enter into a contract with CalPERS, and further, that the pension formula for employees covered by that contract is determined under the Public Employees Retirement Law (PERL). The court confirmed that the CalPERS’ Board of Administration (Board) is the sole judge of conditions under which persons may be admitted to and continue to receive benefits under the retirement system. The Board also has the discretion to correct an error affecting any active or retired member caused by the contracting agency (the city) or CalPERS. Since the officers’ petition alleged that an error in the city’s amended contract with CalPERS caused them to be subject to a less desirable CalPERS retirement formula, the court held they were obligated to seek relief through CalPERS before seeking relief from the court.
Note:
A demurrer is a powerful tool that can save public agencies litigation fees by getting lawsuits dismissed before trial. LCW attorneys can help public agencies determine whether a case is appropriate for demurrer.