The California Supreme Court will soon schedule oral argument in controversial cases involving legislative pension reform impacting the pension benefits of state and local government employees. By the close of 2020, the Supreme Court will issue a decision that may very well strike at the heart of the so-called “California Rule.”

For nearly 60 years, since the California Supreme Court issued its decision in Allen v. City of Long Beach in 1955, the “California Rule” remained a mainstay of California common law. The California Rule is the general notion that a public employee is vested in the pension benefit promised at the start of employment such that those benefits cannot be reduced even for prospective service except under exceptionally limited circumstances. To be legally permissible under the California Rule, the modification of a pension benefit “must bear some material relation to the theory of a pension system and its successful operation” and any modification that results in disadvantages to employees must be accompanied by comparable new advantages.

Among the provisions enacted with the Public Employee Pension Reform Act of 2013 (PEPRA) were changes to the definitions of “compensation earnable” or “pensionable compensation.” These two terms refer to the items of employee compensation that may be included in the calculation of the employee’s ultimate pension benefit. For example, compensation for special assignments, education, or performance of extra duties. The PEPRA revised a statute under the County Employees Retirement Law of 1937 (CERL) such that particular items of compensation that were formerly included in “compensation earnable,” are now expressly excluded for employees hired prior to PEPRA’s effective date (“Legacy Members”). Soon after, Legacy Members challenged what they believed to be PEPRA’s violation of the California Rule.

Read the whole article on LexBlog.

This article quotes selections from “California Supreme Court May Soon Decide the Fate Of The “California Rule”” by Brett A. Overby in LexBlog.