Alameda Cnty. Deputy Sheriff's Ass'n v. Alameda Cnty. Employees' Ret. Ass'n

9 Cal.5th 1032

470 P.3d 85

266 Cal.Rptr.3d 381

ALAMEDA COUNTY DEPUTY SHERIFF'S ASSOCIATION et al., Plaintiffs and Appellants,

v.ALAMEDA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION et al., Defendants and Respondents;

State of California et al., Interveners and Appellants.

Contra Costa County Deputy Sheriff's Association et al., Plaintiffs and Appellants,

v.Contra Costa County Employees' Retirement Association et al., Defendants and Respondents;

State of California et al., Interveners and Appellants.

American Federation of State, County and Municipal Employees et al., Plaintiffs and Appellants,

v.Merced County Employees' Retirement Association et al., Defendants and Respondents;

State of California et al., Interveners and Appellants.

S247095

Supreme Court of California.

July 30, 2020

Mastagni Holstedt, Mastagni, Holstedt, Amick, Miller & Associates, David P. Mastagni, David E. Mastagni and Isaac S. Stevens, Sacramento, for Plaintiffs and Appellants Alameda County Deputy Sheriff's Association, Jon Rudolph, Rocky Medeiros, James Nelson and Darlene Hornsby.

Leonard Carder, Peter Saltzman and Arthur Liou for Plaintiffs and Appellants Public Employees Union, Local 1, International Federation of Professional and Technical Engineers, Local 21, Alameda County Management Employees' Association, David M. Rolley, Peter J. Ellis and Susan Guest.

Rains, Lucia & Willinson, Rains Lucia Stern, St. Phalle & Silver, Rockne A. Lucia, Jr., Timothy K. Talbot, Pleasant Hill, Steven M. Betz and Zachery A. Lopes, Pleasant Hill, for Plaintiffs and Appellants Contra Costa County Deputy Sheriffs Association and Ken Westermann.

Weinberg, Roger & Rosenfeld, Anne I. Yen, Vincent A. Harrington, Jr. and Kerianne Steele for Plaintiffs and Appellants Service Employees International Union, Local 1021 and Building Trades Council of Alameda County.

Bogatin Corman & Gold and William I. Corman for Plaintiffs and Appellants Physicians' and Dentists' Organization of Contra Costa.

Davis, Cowell & Bowe, McCracken, Stemerman & Holsberry and W. David Holsberry, San Francisco, for Plaintiffs and Appellants United Professional Fire Fighters of Contra Costa County, Local 1230.

Beeson, Tayer & Bodine, Beeson, Tayer, Silbert & Bodine, Robert Bonsall, Sacramento, Vishtasp Soroushian, Oakland, Teague P. Paterson and Adrian Barnes, Los Angeles, for Plaintiffs and Appellants AFSCME Local 512, AFSCME Local 2700, Teamsters Local 856, Hasani Tabari, Sandra Gonzalez-Diaz and Daniel Lister. Bennett, Sharpe, Delarosa, Bennett & Licalsi, Law Offices of Bennett & Sharpe, Barry J. Bennett, Thomas M. Sharpe, Katwyn T. DeLaRosa for Plaintiffs and Appellants American Federation of State, County and Municipal Employees, Local 2703, AFL-CIO, Merced County Sheriff's Association, an affiliate of International Brotherhood of Teamsters, Local 856, Jeffrey Miller and Mary McWatters.

Messing Adam & Jasmine, Gary M. Messing, Gregg McLean Adam and Yonatan L. Moskowitz for CAL FIRE, Local 2881, California Correctional Peace Officers Association, Peace Officers Research Association of California, California Statewide Law Enforcement Association, San Francisco Police Officers' Association, San Jose Police Officers' Association, Fresno Deputy Sheriffs' Association, Deputy Sheriffs' Association of Santa Clara County, Marin Professional Firefighters, International Association of Fire Fighters, Local 1775, Association of California State Supervisors, San Francisco Municipal Executives' Association, San Francisco Deputy Probation Officers' Association, Sunnyvale Public Safety Officers' Association, Superior Court Professional Employees' Association of the County of Santa Clara, Sacramento County Professional Accounts Association, City of Fremont Employees' Association, Redwood City Management Employees' Association, Burlingame Police Officers' Association and California State Retirees as Amici Curiae on behalf of Plaintiffs and Appellants.

Reich, Adell & Cvitan, Marianne Reinhold, Santa Ana, Laurence S. Zakson and Aaron G. Lawrence, Los Angeles, for Orange County Attorneys Association and Orange County Managers Association as Amici Curiae on behalf of Plaintiffs and Appellants.

Law Offices of Robert J. Bezemek, Robert J. Bezemek and David Conway, Oakland, for the Peralta Retirees Organization, the California Community Colleges Independents' Organization and the Faculty Association of the California Community Colleges as Amici Curiae on behalf of Plaintiffs and Appellants.

Reed Smith, San Diego, Harvey L. Leiderman, Jeffrey R. Rieger and May-tak Chin, San Francisco, for Defendants and Respondents Alameda County Employees' Retirement Association and Contra Costa County Employees' Retirement Association and their respective Boards of Retirement.

Nossaman, Ashley K. Dunning, San Francisco, Peter H. Mixon, Robert L. Gaumer, Michael V. Toumanoff, Jill N. Jaffe, San Francisco, Natasha Saggar Sheth and Jennifer Meeker, Los Angeles, for Defendants and Respondents Merced County Employees' Retirement Association and Merced County Employees' Retirement Association Board of Retirement.

Kamala D. Harris and Xavier Becerra, Attorneys General, Douglas J. Woods and Thomas S. Patterson, Assistant Attorneys General, Constance L. LeLouis and Anthony P. O'Brien, Deputy Attorneys General, Peter Krause, Legal Affairs Secretary, Rei R. Onishi, Deputy Legal Affairs Secretary for Intervener and Appellant State of California.

Jones Day, Beth Heifetz, G. Ryan Snyder and Karen P. Hewitt, San Diego, for California Business Roundtable as Amicus Curiae on behalf of Intervener and Appellant State of California.

Colantuono, Highsmith & Whatley, Michael G. Colantuono and Liliane M. Wyckoff, Pasadena, for League of California Cities as Amicus Curiae on behalf of Intervener and Appellant State of California.

Meyers, Nave, Riback, Silver & Wilson, Richard D. PioRoda, Kenton L. Alm ; Renee Sloan Holtzman Sakai; Renee Public Law Group, Linda M. Ross and Randy Riddle, San Francisco, for Real Party in Interest Central Contra Costa Sanitary District.

Atkinson, Andelson, Loya, Ruud & Romo, Anthony P. De Marco, Irvine, and Joshua E. Morrison, Cerritos, for Association of California School Administrators as Amicus Curiae.

Greines, Martin, Stein & Richland and Timothy T. Coates, Los Angeles, for Los Angeles County Employees Retirement Association as Amicus Curiae.

Opinion of the Court by Cantil-Sakauye, C.J.

The California Public Employees' Pension Reform Act of 2013 (PEPRA; Stats. 2012, ch. 296, § 1) substantially revised the laws governing the pension plans of the state's public employees. In a prior decision, Cal Fire Local 2881 v. California Public Employees' Retirement System (2019) 6 Cal.5th 965, 244 Cal.Rptr.3d 149, 435 P.3d 433 ( Cal Fire ), we rejected a constitutional challenge to one change effected by PEPRA, the elimination of the opportunity for public employees to purchase "additional retirement service credit" under Government Code section 20909. The present decision addresses legal issues raised by a different provision of PEPRA, which amended the County Employees Retirement Law of 1937 (CERL; Gov. Code, § 31450 et seq. ).¹

CERL governs the pension systems maintained by many of the state's counties. Each county system is administered by its own retirement board, which is tasked with implementing CERL's provisions. Under CERL, the amount of an employee's pension benefit is determined as a percentage of the "compensation earnable" received by the employee during a representative year of county employment. Even before PEPRA, CERL expressly excluded overtime pay from compensation earnable and limited the inclusion of payments from a deferred compensation plan. The PEPRA provision at issue here amended CERL's definition of compensation earnable to exclude or limit the inclusion of additional types of compensation in an effort to prevent perceived abuses of the pension system. Although this amendment applies to the calculation of the pensions of all employees covered by CERL, the parties agree that the issues raised in this appeal relate only to the amendment's impact on the pensions of persons who were first employed by a county prior to the effective date of PEPRA, referred to as "legacy employees."

This challenge to PEPRA's amendment of CERL raises two sets of issues. First, the Alameda County Deputy Sheriff's Association (Association) and its coplaintiffs (collectively, plaintiffs) contend that employees in the three counties involved in this matter have a contractual right to receive pension benefits calculated without regard to PEPRA's changes, a right based either on (1) agreements in effect when PEPRA was enacted or (2) application of the doctrine of equitable estoppel.² Long prior to the passage of PEPRA, employees in each of these counties had entered into litigation settlement agreements with their respective retirement boards that specify the types of compensation included in compensation earnable. In some cases, the provisions added by PEPRA conflict with the terms of these agreements, excluding or restricting items of compensation that the agreements require to be included in compensation earnable. Plaintiffs argue that these agreements confer on existing employees the contractual right to continue to include these items of compensation in their pensionable compensation, notwithstanding their exclusion by the provisions added by PEPRA, or, alternatively, that the counties are equitably estopped from implementing the PEPRA amendment in a manner inconsistent with the agreements. In turn, Central Contra Costa Sanitary District (District) and the State of California (State) (collectively, defendants) respond that the retirement boards are required to implement the provisions of CERL, including PEPRA's amendment, notwithstanding any contrary agreements they might have entered into with county employees.³

Wholly apart from these ordinary contract issues, plaintiffs also contend that county employees who began their work prior to PEPRA's enactment...