SACRAMENTO, Calif., February 20, 2018 – The California Business Roundtable (Roundtable) filed a friend of the court brief with the California Supreme Court in the pension reform case of Cal Fire v. CalPERS. The California Supreme Court is considering a case challenging the Public Employee Pension Reform Act (PEPRA) passed in 2012. The Governor is defending PEPRA in the litigation brought by public employee unions.

In its brief, the Roundtable urges the Court to reject the California Rule and overrule any cases that have adopted it because the Rule infringes on the Legislature’s sovereign right and duty to protect public employers, public employees, and California citizens.

“We support the Governor and the Roundtable in their efforts to protect the interests of public employees, taxpayers and residents by ensuring that State and local governments can take necessary and reasonable steps to ensure that their pension plans are sustainable,” said Chuck Reed, Chair of Retirement Security Initiative.

The brief argues that the California Rule is unconstitutional and that it creates contractual rights without any evidence of legislative intent, for which “Air Time” is but one example. PEPRA eliminated “Air Time”, a pension spiking practice, that allowed employees to buy extra years of service that are credited to their pension benefits. Public employee unions claim that the right to buy “Air Time” is protected from change by the California Rule even though the option to buy “Air Time” was not created as part of a contractual agreement.

In place of the California Rule, the Court should give pension benefits the same constitutional protection as salary—no more, no less. Adopting this approach would give employees a contractual right to any benefits that they have earned through past services, while giving employers the freedom to prospectively modify the rate at which employees earn benefits for future services.

The Roundtable brief asserts the California Rule has numerous legal flaws:

  • It violates the bedrock principle that statutes create contractual rights only when the Legislature clearly intended to do so.

  • It violates black-letter contract law by creating contractual rights that violate the reasonable expectations of the parties.

  • It violates longstanding constitutional law by assuming that every contractual impairment automatically violates the California and Federal Contract Clauses.

  • It lacks persuasive or precedential value. The Rule was initially adopted without anything resembling a full consideration of the relevant issues.

  • It has been almost uniformly rejected by federal and state courts—including by several courts that previously accepted it.

  • It has had—and will continue to have—devastating economic consequences on California’s public employers.

To view or download the Roundtable’s brief, go to: https://tinyurl.com/ybcrfnr4.

About the California Business Roundtable

The California Business Roundtable is a nonpartisan organization comprised of the senior executive leadership of the major employers throughout the State, with a combined workforce of over 750,000 employees. For more than 40 years, the Roundtable has identified the issues critical to a healthy business climate and provided the leadership needed to strengthen California’s economy and create jobs.

About Retirement Security Initiative

Retirement Security Initiative (RSI) is a national, bipartisan advocacy organization focused on protecting and ensuring the fairness and solvency of public sector retirement plans. Our mission is to inform and educate policy leaders and the public regarding the importance of fair and sustainable public sector retirement plans, and organize and support policy development and advocacy efforts at the federal, state and local levels. Learn more at www.RetirementSecurityInitiative.org.