Ventura Cnty. Emp. Ret. Ass'n v. Crim. Just. Att'y Ass'n. of Ventura Cnty.

Superior Court County of Santa Barbara, Colleen K. Sterne, Judge (Super, Ct. No. VENCI00546574) (Santa Barbara County)

Rains Lucia Stern St. Phalle & Silver, Jacob A. Kalinski, Santa Monica, and Brian P. Ross for Defendants and Appellants

Norman Dowler and Michael G. Walker for Retired Employees’ Association of Ventura County, Inc., Regina Artman, Scott Barash, Lyn Krieger, Mark Lunn, Roberto R. Orellana, Tracey Frances Pirie, Marty Robinson and Chris Stephens as Amici Curiae on behalf of Defendants and Appellants.

Nossaman, Ashley K. Dunning, San Francisco, Aalia Taufiq and Alexander Westerfield for Plaintiff and Respondent.

BALTODANO, J.

After our Supreme Court’s decision in Alameda County Deputy Sheriff’s Assn. v. Alameda County Employees’ Retirement Assn. (2020) 9 Cal.5th 1032, 266 Cal. Rptr.3d 381, 470 P.3d 85 (Alameda), the Ventura County Employees’ Retirement Association (VCERA) adopted a resolution (the Resolution) excluding compensation for accrued, but unused, hours of annual leave exceeding employees’ calendar year allowance ("leave cashouts") for purposes of calculating their retirement benefits. VCERA subsequently filed a lawsuit seeking a judicial declaration that its Resolution was legal. The trial court ruled in favor of VCERA. The Criminal Justice Attorneys Association of Ventura and Ventura County Professional Peace Officers’

Association (collectively, Appellants) appeal the judgment.¹ We affirm.

FACTUAL AND PROCEDURAL HISTORY

VCERA is a public retirement system established by Ventura County to provide retirement benefits to employees of the county and other local public entities, including Appellants. It is governed by the County Employees Retirement Law of 1937 (CERL) (Gov. Code,² § 31450 et seq.), the California Public Employees’ Pension Reform Act of 2013 (PEPRA) (§ 7522 et seq.), and article XVI, section 17 of the California Constitution. VCERA is administered by a board of retirement (the Board) charged with implementing CERL’s provisions. (Alameda, supra, 9 Cal.5th at p. 1052, 266 Cal.Rptr.3d 381, 470 P.3d 85.)

Retirement calculations under CERL and PEPRA

CERL governs the calculation of VCERA members’ retirement allowances based on a statutory formula comprised of an employee’s (1) age at retirement, (2) years of service, and (3) final compensation. (§§ 31676.01-31676.19.) Only final compensation is relevant to this dispute.

For "legacy" members (employed by the county or another public retirement system prior to PEPRA’s effective January 1, 2013, date)³, final compensation is calculated based on an employee’s "compensation earnable" during a representative period of their employment. (§§ 31462, 31462.1.) The representative period of employment is either a 12- or 36-month "final average compensation" period. Legacy members with a 12-month final average compensation period are Tier 1 members (§ 31462.1, subd. (a)). Legacy members with a 36-month final average compensation period are Tier 2 members (§ 31462, subd. (a)).

Section 31461 defines "compensation earnable" as "the average compensation as determined by the board, for the period under consideration upon the basis of the average number of days ordinarily worked by persons in the same grade or class of positions during the period, and at the same rate of pay." (§ 31461, subd. (a).) In other words, it is. the "‘average monthly pay … received by the retiring employee for the average number of days worked in a month by the other employees in the same job classification at the same base pay level.’ " (Alameda, supra, 9 Cal.5th at p. 1058, 266 Cal.Rptr.3d 381, 470 P.3d 85.)

When PEPRA became effective in January 2013, it revised laws governing pension plans and amended provisions of CERL. (Alameda, supra, 9 Cal.5th at pp. 1051-1052, 266 Cal.Rptr.3d 381, 470 P.3d 85.) As relevant here, PEPRA amended section 31461 by adding subdivision (b), which excludes certain items from compensation earnable (hereafter referred to as "PEPRA exclusions"). (Assem. Bill No. 340 (2011-2012 Reg. Sess.); Stats. 2012, ch. 296, § 28.) PEPRA now excludes from compensation earnable: "(2) Payments for unused

vacation, annual leave, personal leave, sick leave, or compensatory time off, however denominated, whether paid in a lump sum or otherwise, in an amount that exceeds that which may be earned and payable in each 12-month period during the final average salary period, regardless of when reported or paid"; and "(4) Payments made . at termination of employment, except those payments that do not exceed what is earned and payable in each 12-month period during the final average salary period, regardless of when reported or paid," (§ 31461, subd. (b)(2) & (4).)

Leave cashouts

A VCERA member may receive compensation for leave cashouts—accrued, but unused, hours of annual leave. A member’s terms of employment (e.g., a Memorandum of Agreement or the County Management Resolution) limit the number of hours a member may cash out in a calendar year. The calendar year’s allowance for leave cashouts varies depending on the employer and the employee’s seniority, date of hire, bargaining unit, and title.

VCERA members may designate a 12- or 36-month final average compensation period that does not align with calendar years. Thus, the designated period may straddle two or four calendar years. For example, a Tier 1 member (those employees with a 12-month final average compensation period) may designate July 1 of year 1 to June 30 of year 2, or a Tier 2 member (those employees with a 36-month final average compensation period) may designate July 1 of year 1 to June 30 of year 4.

For legacy members, a member’s compensation earnable includes compensation for leave cashouts during the 12- or 36-month final average compensation period. Before Alameda, a member’s compensation earnable could include leave cashouts exceeding the member’s calendar year allowance for leave cashouts. To illustrate, if ‘ a member designated a final average compensation period that aligned with the calendar year(s), that member could not cash out more than their calendar year allowance for leave cashouts. But, if a member designated a final average compensation period that straddled multiple years (two years for Tier 1 members or four years for Tier 2 members), that member could cash out leave exceeding their calendar year allowance within the designated period. For instance, if the calendar year’s allowance for leave cashouts was 200 hours, a Tier 1 member could cash out 200 hours in year 1 and an additional 200 hours for year 2 for a total of 400 hours of leave redeemed during their final average compensation period.

Alameda decision and the Resolution

In July 2020, our Supreme Court decided Alameda, supra, 9 Cal.5th 1032, 266 Cal.Rptr.3d 381, 470 P.3d 85. In Alameda, the plaintiffs (labor unions and other labor groups) challenged the amendments to CERL (i.e., the PEPRA exclusions under § 31461, subd. (b)) on the ground that the plaintiffs possessed (1) contractual or equitable rights to receive pension benefits and (2) a constitutional right to receive pension benefits according to the law as it existed prior to PEPRA. (Alameda, supra, 9 Cal.5th at pp. 1052-1053, 266 Cal.Rptr.3d 381, 470 P.3d 85.) The court upheld the PEPRA exclusions, concluding they did not violate contractual, equitable, or constitutional rights. (Id. at p. 1054, 266 Cal. Rptr.3d 381, 470 P.3d 85.)

Thereafter, in October 2020, the Board adopted the Resolution in response to Alameda. The Resolution stated that Alameda "determine[d] that CERL retirement boards may not include items in retirement allowance calculations, either compensation earnable under section

31461, as amended, or pensionable compensation under section 7522.34, that the applicable statutes require them to exclude. [¶] … [¶] The Board hereby determines that the Alameda Decision and other applicable law require it to change its determinations of certain pay codes for … compensation earnable."

Following adoption of the Resolution, VCERA excluded from compensation earnable payments for leave cashouts that exceeded a VCERA member’s calendar year allowance for leave cashouts. This exclusion applied to all retirement benefit payments made on or after August 31; 2020, (the date of the first issuance of retirement allowances after Alameda became final) to all VCERA members who retired on or after January 1,...