Cal Fire Local 2881 et al. v. California Public Employees’ Retirement System et al. (State of California), S239958

The California Supreme Court held oral arguments in the Cal Fire case this morning.  Cal Fire is an “anti-spiking” pension case. The specific issue is whether the State properly eliminated the option to purchase “air-time” as part of PEPRA. Here is an initial quick summary:

• Near the end of the argument Chief Justice Cantil-Sakauye summarized her view of the law as: 1) the terms and conditions of public employment are generally set forth in statute and not contract (Miller case); and 2) the courts have recognized an exception for pensions under the theory of an implied contract. Therefore the Chief Justice pressed the union attorney on why the purchase of air time should be considered a “pension” since the employee did not actually work the years for which the air-time is being purchased.
• Justice Kruger pressed a related point: If air-time is an implied contract, what is the consideration?  And if a condition is the “purchase” of the air-time why is there a contract before payment?
• Justice Cuéllar asked whether the union’s argument would also apply to other benefits such as life insurance and 401(k) investment options.

My Prediction: I think the Court is going to rule in favor of the Governor in this specific case and hold that there was no “vested” right to purchase air time.  While the Justices asked tough questions on both sides, the Justices seemed far more skeptical of the union’s position.  The tough questions to the Governor’s attorney seemed more to be the Justices trying to find where to “draw the line.”

Impact on the Marin Case and the California Rule

The most interesting part of the argument involved questions that got very close to the issue in the Marin County case involving the California Rule on pensions.  Several justices asked the Governor’s attorney whether there is an impediment to changing pensions prospectively for current employees.  The Governor’s attorney said several times that contract law did not prohibit such a change.  Later he clarified that prospective changes for current employees would not violate any “vested” rights as long as there was still a “reasonable substantial pension benefit.”  The Justices jumped all over this term and tried to get the Governor’s attorney to define it.  I don’t think there was total clarity even at the end.  However, what was interesting was that the Justices seem to agree that there is not clarify in the case law about vested rights.  In other words, several Justices made statements that lead me to think it’s not clear to them that there is a “California Rule” as asserted by the unions.  For example, Chief Justice Cantil-Sakauye remarked that the discussion in Allen about a vested right to deferred compensation was “never fully developed.”

[Note: I took a lot of notes of the oral argument so I hope to write more about this case later. However, I wanted to get an initial summary out to people who were not able to listen to the oral argument right away.  This is just what I think are the highlights.]