Ventura County etc. v. Criminal Justice Attorneys Assn. etc. CA2/6 ( 2024 )

Filed 1/4/24 Ventura County etc. v. Criminal Justice Attorneys Assn. etc. CA2/6
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
VENTURA COUNTY 2d Civil No. B325277
EMPLOYEES’ RETIREMENT (Super. Ct. No.
ASSOCIATION, VENCI00546574)
(Santa Barbara County)
Plaintiff and Respondent,
v.
CRIMINAL JUSTICE
ATTORNEYS ASSOCIATION
OF VENTURA COUNTY et
al.,
Defendants and Appellants.
After our Supreme Court’s decision in Alameda County
Deputy Sheriff’s Assn. v. Alameda County Employees’ Retirement
Assn. (2020) 9 Cal.5th 1032 (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.)
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)
1 We granted the Retired Employees’ Association of
Ventura County, Inc., Regina (Renee) Artman, Scott Barash, Lyn
Krieger, Mark Lunn, Roberto R. Orellana, Tracey Frances Pirie,
Marty Robinson, and Chris Stephens’s application to file an
amicus curiae brief in support of Appellants.
2 Further unspecified statutory references are to the
Government Code.
2
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.)
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.) As relevant here,
3 Final compensation for “new members” who joined the
retirement system on or after January 1, 2013, are governed by
different statutes (§§ 7522.32, 7522.34). The calculation of their
retirement benefits is not at issue here.
3
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
4
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. 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.) The court
5
upheld the PEPRA exclusions, concluding they did not violate
contractual, equitable, or constitutional rights. (Id. at p. 1054.)
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, 2013,
PEPRA’s effective date. Any overpayments made to employees
before the issuance of the Alameda decision were not recouped.
The lawsuit
In its first cause of action, VCERA filed a lawsuit seeking
declaratory relief that it had the “legal authority” to take the
actions set forth in the Resolution with respect to the PEPRA
exclusions.4
4 VCERA alleged a second cause of action for declaratory
relief with respect to other provisions in the Resolution. This
second cause of action is not at issue in this action nor are the
other provisions in the Resolution.
6
Leroy Smith, the former county counsel of Ventura County,
filed a cross-complaint against VCERA for declaratory relief.
Smith accrued 368.1 hours of annual leave per year, and his
calendar year allowance for leave cashouts was 200 hours. As a
Tier 1 member, Smith designated October 2019 to October 2020
as his final average compensation period. He cashed out 240
hours of leave: 40 hours in 2019 and 200 hours in 2020. VCERA
only included compensation for the 200 hours of leave (his
calendar year leave allowance) in determining Smith’s
compensation earnable. Smith’s cross-complaint alleged a single
cause of action for declaratory relief that VCERA had a legal duty
to include cash payments for all 240 hours of leave in his
compensation earnable for the purposes of calculating his
retirement benefits.
The County of Ventura (the County) filed a complaint in
intervention in Smith’s cross-action. The County alleged one
cause of action for declaratory relief, seeking a judicial
declaration that “VCERA was not legally required to take the
actions set forth in [the Resolution] . . . as it relates to annual
leave cashouts that exceed what can be redeemed in a single
calendar year.”
The parties stipulated to resolving two issues by summary
adjudication: (1) whether VCERA must exclude from
compensation earnable annual leave cashouts exceeding the
calendar year allowance for leave cashouts; and if so, (2) whether
VCERA must exclude such leave cashouts from the calculation of
retirement benefit payments to members who retired on or after
January 1, 2013, the effective date of PEPRA’s amendments to
CERL.
7
The trial court granted summary adjudication in favor of
VCERA. As to the first issue, the court found that for members
with a 12-month final average compensation period (Tier 1
members), “VCERA must exclude from the calculation of
retirement benefit payments all compensation for leave cashouts
that exceed the maximum amount of leave that was earnable and
payable to the member in either calendar year that began or
ended with the member’s 12-month measurement period.”
Similarly, for members with a 36-month period (Tier 2 members),
VCERA must exclude leave cashouts that exceed the maximum
amount of leave earnable or payable in “any three-calendar-year
period that began or ended within the member’s 36-month
measurement period.”
As to the second issue, the trial court concluded that
“VCERA may exclude such leave cashouts from the calculation of
retirement benefit payments made on or after August 31, 2020, to
VCERA members who retired on or after January 1, 2013.”
DISCUSSION
Appellants contend the trial court erred in interpreting
subdivision (b)(2) of section 31461 as applied to legacy
members—employees who began their employment before
PEPRA’s effective date. They argue that nothing in the statute’s
plain text or legislative history required the Board to exclude
leave cashouts exceeding employees’ calendar year allowance for
leave cashouts from retirement benefit calculations. We conclude
the trial court did not err.
The trial court’s interpretation of a statute is a question of
law that we review de novo. (R & P Capital Resources, Inc. v.
California State Lottery (1995) 31 Cal.App.4th 1033, 1036.)
When interpreting a statute, “our fundamental task is to
8
ascertain the Legislature’s intent to effectuate the purpose of the
statute. [Citation.] We begin by examining the statutory
language, giving terms their plain, ordinary meaning. If the
language is ambiguous, we may look to extrinsic sources,
including legislative history. We select the construction that
comports most closely with the intent of the Legislature, with a
view of promoting, rather than defeating, the general purpose of
the statute, and avoiding an interpretation that would lead to
absurd results.” (Fair Education Santa Barbara v. Santa
Barbara Unified School Dist. (2021) 72 Cal.App.5th 884, 898.)
In upholding the PEPRA exclusions, including section
31461, subdivision (b)(2), our Supreme Court in Alameda
examined the legislative intent behind PEPRA and its
amendments to CERL. (Alameda, supra, 9 Cal.5th at pp. 1059-
1063.) The court observed that a bill analysis of the “pre-PEPRA
version of Assembly Bill 340 explained that the purpose of these
changes was to circumscribe CERL’s ‘very broad and general
definition of “compensation earnable” ’ in order to reduce pension
‘ “spik[ing],” ’ the manipulation of an employee’s pattern of work
and pay to produce inflated compensation earnable during the
final compensation period.” (Id. at p. 1061.) Moreover, the court
noted that a review of the PEPRA exclusions “demonstrates that
the Legislature sought to limit pension spiking by eliminating
practices that, while arguably permitted under the broad
language of the preexisting definition, are inconsistent with the
statute’s overall concept of compensation earnable.” (Ibid.)
In analyzing subdivision (b)(2) and (4) of section 31461,
Alameda observed that in counties where an employee is
permitted to cash out leave time, “compensation for cashed out
leave time becomes ‘compensation’ for purposes of section 31460
9
in the year in which the cash value is received, which need not be
the year in which the surrendered time was earned. This can
lead to a distortion of the pension calculation when leave time
awarded in a prior year is cashed out during the final
compensation period, since this has the effect of adding
remuneration for a prior year’s service to the compensation
received for service during the final compensation period. A
similar problem arises with payments made upon termination of
employment, excluded by section 31461, subdivision (b)(4),
because such payments are generally also compensation for the
surrender of accrued leave time. By limiting the amount of ‘cash
out’ and termination pay that can be included in compensation
earnable to the value of leave time ‘earned and payable in each
12-month period during the final average salary period’ [citation],
the Legislature appears to have intended to prevent retiring
employees from, in effect, including remuneration earned during
prior years in the final compensation calculation.” (Alameda,
supra, 9 Cal.5th at p. 1062.)
Alameda also noted that “[p]rior to PEPRA’s amendment,
even in counties that limited the amount of leave time that could
be cashed out in a calendar year, employees were able to double
the amount of cashed out leave time received during a final
compensation year by designating a final compensation year that
straddles two calendar years . . . . By cashing out leave time in
the second half of the prior calendar year and the first half of the
subsequent calendar year, a retiring employee could double the
amount of cashed out leave time received in the final
compensation year. By limiting the inclusion of cashed out leave
time to that ‘earned and payable’ in a ‘12-month period,’
10
subdivision (b)(2) and (4) prevent this practice.” (Alameda, supra,
9 Cal.5th at pp. 1062-1063, italics added.)
The Supreme Court clarified that although there was
nothing “inherently abusive” about cashing out unused leave
time outside the context of pension benefit calculations, “the
pre-PEPRA definition of compensation earnable allowed an
employee to considerably increase his or her pension benefit
by . . . accumulating and cashing out a large quantity of unused
leave time during the final compensation period. Because such
enhancements are arguably inconsistent with the underlying
concept of compensation earnable, which is intended to reflect
pay for work ordinarily performed during the course of a year,
these types of enhancement have been characterized as pension
spiking.” (Alameda, supra, 9 Cal.5th at p. 1063.)
We follow the Supreme Court’s analysis of subdivision
(b)(2) and (4) to conclude that amended section 31461 requires
exclusion of compensation for leave cashouts that exceed the one
(or three) calendar year’s limits for such cashouts for purposes of
calculating legacy members’ retirement benefits. Designating a
12- or 36-month final average compensation period that straddles
multiple years to receive compensation for leave cashouts greater
than the amount a member could receive in one or three calendar
years, respectively, is the type of manipulation that the PEPRA
exclusions sought to eradicate. (See Alameda, supra, 9 Cal.5th at
pp. 1062-1063.)
Appellants argue that our high court’s statements in
Alameda regarding the legislative intent behind the PEPRA
exclusions are dicta. But when the Supreme Court has reached
well beyond the holding necessary to its opinion to express its
broader view, as it did in Alameda, dicta from the high court
11
should be followed. (Aviles-Rodriguez v. Los Angeles Community
College Dist. (2017) 14 Cal.App.5th 981, 990.) In our view, the
high court’s statements in Alameda are persuasive. We thus
reject Appellants’ argument that the Supreme Court’s analysis
regarding section 31461, subdivision (b)(2) was dicta.
Appellants contend the plain language of section 31461,
subdivision (b) makes no mention of a “calendar year” and thus
does not limit leave cashouts to what is earned and payable in a
“calendar year.” But in our view, subdivision (b)(2)’s limitation of
leave cashouts “in an amount that exceeds that which may be
earned and payable in each 12-month period during the final
average salary period” is ambiguous. The final average
compensation period may or may not be based on a calendar year.
This ambiguity is highlighted where, as here, an employer places
calendar year limitations on leave cashouts. Where there is
ambiguity, we look to extrinsic sources such as legislative history.
As the Alameda court observed, the legislative history reveals the
PEPRA exclusions were intended to eliminate pension spiking by
“excluding income designed to artificially inflate a pension
benefit” and “limiting the inclusion of other types of
compensation that were reasonably viewed as inconsistent with
CERL’s general approach to pensionable compensation.” (See
Alameda, supra, 9 Cal.5th at p. 1102.)
We must interpret section 31461, subdivision (b), to
effectuate the Legislature’s intent of eliminating pension spiking.
Thus, we interpret this statute to comport with the “underlying
concept of compensation earnable, which is intended to reflect
pay for work ordinarily performed during the course of a year.”
(Alameda, supra, 9 Cal.5th at p. 1063.) A member’s
compensation earnable during the final compensation period is
12
meant to reflect the average pay the retiring employee received.
(Id. at p. 1058.) And, an employee’s average pay during this
compensation period includes payment for leave cashouts that is
subject to annual limitations. Allowing members to avoid annual
leave cashout limitations by designating a straddled final
average compensation period does not comport with the concept
of compensation earnable and is inconsistent with the legislative
intent behind the PEPRA exclusions.
While we appreciate the impact of the Board’s resolution on
members’ retirement allowances, we nonetheless conclude the
Board was required to comply with section 31461, subdivision (b)
and Alameda and exclude compensation for unused leave
exceeding their calendar year allowances. “The task of a county
retirement board is not to design the county’s pension plan but to
implement the design enacted by the Legislature through CERL.”
(Alameda, supra, 9 Cal.5th at pp. 1066-1067.) The Board had no
authority here to “adopt or act on an interpretation [of CERL’s
provisions] that is inconsistent with those provisions.” (Id. at p.
1067.)5
5 Appellants do not challenge the trial court’s resolution of
the second issue—whether VCERA can exclude from
compensation earnable leave cashouts that exceed annual
cashout limitations for members who retired on or after January
1, 2013, PEPRA’s effective date. Accordingly, we will not address
this issue or disturb the trial court’s ruling on this issue. (Golden
Door Properties, LLC v. County of San Diego (2020) 50
Cal.App.5th 467, 555 [issues not raised in appellant’s opening
brief are deemed waived].)
13
DISPOSITION
The judgment is affirmed. Respondent shall recover costs
on appeal.
NOT TO BE PUBLISHED.
BALTODANO, J.
We concur:
GILBERT, P. J.
CODY, J.
14
Colleen K. Sterne, Judge
Superior Court County of Santa Barbara
______________________________
Rains Lucia Stern St. Phalle & Silver, Jacob A. Kalinski
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, Aalia Taufiq and Alexander
Westerfield for Plaintiff and Respondent.