The opinion
Filed 3/27/25 (unmodified opn. attached)
CERTIFIED FOR PARTIAL PUBLICATION *
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
AMERICAN FEDERATION OF B322224
STATE, COUNTY AND
MUNICIPAL EMPLOYEES et al., (Los Angeles County
Super. Ct. No. BS166535)
Plaintiffs and Appellants,
v. ORDER MODIFYING
OPINION AND DENYING
CITY OF LOS ANGELES, PETITIONS FOR
REHEARING; THERE IS A
Defendant and Respondent; CHANGE IN APPELLATE
JUDGMENT
INTERNATIONAL
BROTHERHOOD OF ELECTRICAL
WORKERS, LOCAL 18,
Intervener and Respondent.
* Pursuant to California Rules of Court, rules 8.1105(b) and
8.1110, this opinion is certified for publication with the exception
of part B of the Discussion.
THE COURT:
It is ordered that the opinion filed herein on February 27,
2025 be modified as follows:
On page 28, under the DISPOSITION, the word
“Employees” is deleted so that the sentence now read “The City
and Local 18 are entitled to recover their costs on appeal.”
On page 23, footnote 9, delete the following fragment from
the last sentence: “to treat DWP and the City as a ‘single
employer,’ much less” so that the last sentence now reads “The
fact that these separate retirement systems are both under the
umbrella of the City of Los Angeles does not provide a basis to
conclude either LACERS or WPERP members have a vested right
to transfer between DWP and the City without any effect on their
pension.”
There is a change in the appellate judgment.
The respective petitions for rehearing filed by respondent
City of Los Angeles and respondent International Brotherhood of
Electrical Workers, Local 18, are denied.
MARTINEZ, P. J. SEGAL, J. STONE, J.
2
Filed 2/27/25 (unmodified opinion)
CERTIFIED FOR PARTIAL PUBLICATION *
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
AMERICAN FEDERATION OF B322224
STATE, COUNTY AND
MUNICIPAL EMPLOYEES et al., (Los Angeles County
Super. Ct. No. BS166535)
Plaintiffs and Appellants,
v.
CITY OF LOS ANGELES,
Defendant and Respondent;
INTERNATIONAL
BROTHERHOOD OF ELECTRICAL
WORKERS, LOCAL 18,
Intervener and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Mary H. Strobel, Judge. Affirmed.
Rothner, Segall & Greenstone, Hannah Weinstein and
Julia Harumi Mass for Plaintiffs and Appellants.
* Pursuant to California Rules of Court, rules 8.1105(b) and
8.1110, this opinion is certified for publication with the exception
of part B of the Discussion.
Kronick, Moskovitz, Tiedmann & Girard, David W. Tyra
and Alec D. Tyra for Defendant and Respondent.
Schwartz, Steinsapir, Dohrmann & Sommers, D. William
Heine, Daniel E. Curry and Alejandro Delgado for Intervener and
Respondent.
___________________
This appeal arises from the cessation of a Reciprocal
Retirement Benefits Arrangement (Reciprocal Arrangement) for
the transfer of employee pension contributions when public
employees move from job positions with the Los Angeles
Department of Water and Power (DWP) to the City of Los
Angeles (City), or vice versa. The Reciprocal Arrangement was in
effect from 1980 to 2013, but in 2013 DWP withdrew from it. The
City (one of the respondents) followed suit by adopting Ordinance
No. 182824 (the 2013 Ordinance), which suspended the
Reciprocal Arrangement. City employees and their unions 1 (the
petitioners, collectively City Employees) brought an action
against the City, asserting the 2013 Ordinance impairs and
1 This case was brought by the Coalition of City of Los
Angeles Unions, which represents current and former City
employees whose retirement benefits are administered by the Los
Angeles City Employees’ Retirement System—American
Federation of State, County, and Municipal Employees and its
Local Unions 741, 901, 2006, 2626, 3090, and 3672; International
Union of Operating Engineers, Local 501; Laborers International
Union of North America, Local 777; Los Angeles and Orange
County Building & Construction Trades Council; Service
Employees International Union, Local 721; and Teamsters Union
Local 911—as well as three individual City employees—Veronica
Salumbides, Albert Scott, and Charley Mims.
2
diminishes employees’ vested retirement benefits in violation of
the contract clause of the California Constitution. The City
Employees also argue the 2013 Ordinance violates other
provisions of the Los Angeles Administrative Code 2 by forcing
some employees to forfeit health benefits. In the published
portion of the opinion, we conclude the suspended terms of the
Reciprocal Arrangement were not vested rights and thus find no
constitutional violation by the City. In the unpublished portion,
we determine the City Employees have shown no violation with
respect to employee health benefits. We thus affirm the superior
court’s denial of the petition for writ of mandate.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Different Los Angeles City Retirement Plans
The City provides retirement benefits to its employees
through different retirement systems. One is the Los Angeles
City Employees’ Retirement System (LACERS), for City officers
and employees not included in any other retirement system. (Los
Angeles City Charter, §§ 1102, subd. (a), 1150.) 3 The Los Angeles
City Council (City Council) has exclusive authority, authorized by
the Charter, to establish or modify LACERS benefits through
ordinances. (Charter, § 1168.) LACERS benefits are codified in
sections 4.1000 et seq. of the Administrative Code. (Charter,
§ 1150.) The LACERS Board of Administration administers
these benefits. (Charter, §§ 1104, subd. (b), 1106.)
2 Undesignated section references are to the Los Angeles
Administrative Code.
3 Charter references are to the Los Angeles City Charter.
3
DWP provides retirement benefits through the Water and
Power Employees’ Retirement Plan (WPERP). (Charter, § 1180.)
DWP, along with the Departments of Airports and Harbor, is a
“Proprietary Department” within the City. (Charter, § 600,
subd. (a).) It operates autonomously and has independent
funding and a separate budget from the City. (Charter, § 603,
subd. (a).) The DWP Board of Administration governs its funding
and budget. (Charter, §§ 600, subd. (b), 603, subd. (b).) As the
City has regarding LACERS, DWP has the authority to modify
WPERP benefits, and the WPERP Board manages and
administers WPERP and its funds. (Charter, §§ 1104, subd. (c),
1106, 1186.)
B. The Development of the Reciprocal Arrangement Between
LACERS and WPERP
In 1975, the City Council acknowledged employees who
moved between the City and DWP could “suffer a decrease in
benefits” because an employee’s transfer of retirement system
membership triggered a new contribution rate based on the
employee’s age of entry into the second retirement system. That
amount could be “substantially greater than the original
contribution rate” under the previous retirement system.
To counteract the adverse effects, the City Administrative
Officer (CAO) recommended to the City Council’s Personnel and
Labor Relations Committee (Personnel Committee) a “reciprocal
benefits arrangement between the retirement systems.” The
CAO proposed an arrangement in which each retirement system
would be responsible for paying retirement benefits based upon
the “period of service for which retirement credit was earned with
each respective system,” using the employee’s highest
4
compensation earned and the combined years of service at the
City and DWP.
The CAO and the City Attorney determined the Charter
had to be amended before reciprocity could be implemented. In
1977, voters approved the Charter amendment, which allowed
WPERP to enter into a reciprocal agreement with LACERS
“relative to the benefits and contributions of employees who
transfer between the two systems.” The Charter amendment was
enabling only—the City Council, the WPERP Board, and the
DWP Board still had to approve any reciprocal agreement.
Throughout 1977 and 1978, the CAO, LACERS, and
WPERP worked out the details of a reciprocity agreement. In
early 1979, DWP presented an “alternative proposal for
reciprocity” providing the contributions and service credit of a
transferring employee would be transferred from one system to
the other. Every year, each system would determine “the amount
of member contributions which should have been deposited by
each transferring member. The system which receives less than
the required amount of contributions from transferring
employees would be made whole by the system the transferring
employees left.”
C. The Reciprocal Arrangement Between LACERS and
WPERP from 1980 to 2013
The Personnel Committee recommended the City Council
adopt DWP’s counterproposal “[i]n order to proceed toward the
goal of providing reciprocal retirement benefits between
[LACERS] and WPERP by providing at this time only certain
limited portability provisions.” In December 1979, the City
Council adopted Ordinance No. 153,294, codified as former
5
section 4.1060 of the Administrative Code. The preamble stated
the purpose of the ordinance was “to aid in the implementation of
a reciprocal retirement benefit arrangement between [LACERS]
and [WPERP] and to provide benefits for members of [LACERS]
transferring from [LACERS] to [WPERP] and vice versa.”
(Former § 4.1060.) The section became effective in February
1980. In 2013, it was renumbered as section 4.1095.
Section 4.1095, subdivision (b), states that, upon
transferring from DWP to a City department, an employee
immediately becomes eligible for membership in LACERS.
“Membership shall entitle the system member to all benefits for
retirement, disability and death for which he or she would qualify
based upon his or her total service in both the LACERS and the
WPERP.” Subdivision (d) provides that an employee may opt out
of the Reciprocal Arrangement. (§ 4.1095, subd. (d).) Unless the
transferring employee opts out, WPERP must transfer service
credits, along with the employee’s accumulated retirement
contributions, to LACERS. (§ 4.1095, subd. (e).)
Section 4.1095, subdivision (k), provides: “Reciprocity of
Benefit Provisions and Conditions Affecting this Section.
It is the intent and purpose of this section to provide, or help to
provide, portability between the LACERS and the WPERP. The
achievement of complete portability of benefits is dependent upon
appropriate action by the governing body of the WPERP. Should
the implementation of any provisions of this section be possible
only if some specific action is taken by the WPERP, then, and as
to such provisions only, the effect of this section shall be
suspended until appropriate action has been taken by the
WPERP.”
6
Under the Reciprocal Arrangement, employees who moved
between the City and DWP (in either direction) could transfer
employee pension contributions and interest (but not the
employer’s contributions) to their new pension plan. (§ 4.1095,
subd. (e).) The new pension plan had to recognize all service
credit earned by the employee under the former system and
assume any associated pension liability. Employees contributed
at the same retirement contribution rate before and after their
transfers. When employees retired, their most recent pension
plan paid all their benefits, which were calculated based on the
employees’ total years of service in both LACERS and WPERP
and the last highest 12 months of salary.
When the City and DWP devised the Reciprocal
Arrangement, they anticipated that the number of employees
transferring from the City to DWP and from DWP to the City
would be roughly the same. Between 1980 and 1991, the
Reciprocal Arrangement required LACERS and WPERP to
calculate every year whether transfers into their plans were over-
or under-funded and to bill the other plan accordingly. (Former
§ 4.1060, subd. (13).) This “annual adjustment” was included to
protect the plans from “massive differences in employee
contribution rates.” In 1991, however, LACERS determined that
the cost of performing the calculations outweighed the benefits of
recouping the small amounts actually billed, mostly because of
the near parity of employees transferring in either direction. In
1993, the City removed the annual adjustment provision from the
Administrative Code, thus eliminating the mechanism for
correcting funding imbalances between LACERS and WPERP.
7
D. WPERP’s Suspension of Reciprocity and the Romero
Litigation
In approximately 2009, amid the “Great Recession,” the
City began encouraging employees to transfer to DWP and other
Proprietary Departments as a way to address a budgetary crisis
and avoid City layoffs. In 2010, in response to a concern that
more employees were transferring from the City to DWP than in
the other direction, the WPERP Board commissioned a study to
determine the financial impact of the Reciprocal Arrangement.
The study found that, between April 2004 and March 2010, 1,623
employees transferred from the City to DWP, but only 270
employees transferred from DWP to the City. As a result,
WPERP’s unfunded liability had increased by approximately
$183 million, while LACERS experienced a comparable decrease.
In May 2010, the WPERP Board voted to suspend the
Reciprocal Arrangement for all employees transferring from the
City to DWP while it examined the situation further. In October
2010, the City Council voted to veto the WPERP Board’s
suspension.
In November 2010, WPERP filed suit in Los Angeles
Superior Court to enjoin the City Council from refusing to
recognize the WPERP Board’s suspension of the Reciprocal
Arrangement. (See Romero, et al. v. City Council of the City of
Los Angeles, et al. (2013, No. BC449834) (Romero).) The City
Employees and LACERS were not parties to the Romero lawsuit
and did not seek to intervene.
The City demurred on the grounds that WPERP lacked
standing and the Reciprocal Arrangement between LACERS and
WPERP was a retirement benefit that only the City, through
legislative action, could implement or remove. In December
8
2012, the trial court overruled the City’s demurrer. The City
filed a petition for writ of mandate asking this court to overturn
the trial court’s decision.
We denied the City’s writ petition. (City of Los Angeles v.
Superior Court of Los Angeles County et al. (Nov. 19, 2013,
B246933) [nonpub. opn.].) In doing so, we rejected the City’s
assertion that “reciprocity in this case is the kind of retirement
benefit with respect to which only the City, and not WPERP (or
LACERS), can take action.” Rather, we determined the City
failed to demonstrate reciprocity was a “benefit” to which
members of WPERP or LACERS were entitled. We determined
the applicable Administrative Code provision (then section
4.1060, later renumbered as section 4.1095) “indicates that
reciprocity is not a retirement benefit granted by the City, but
rather it is an agreement between the City and WPERP
authorizing portability of retirement benefits.” We also noted
that “[r]eciprocity was not established solely by the City Council
as the City’s legislative body, but rather it required the approval
of WPERP.” 4
The City and WPERP subsequently settled the Romero
litigation, and the City agreed to suspend the Reciprocal
Arrangement between LACERS and WPERP. Respondent
4 No doubt recognizing the City Employees were not a party
to or in privity with any party to the Romero litigation,
respondents do not argue any of our holdings in Romero should
be given collateral estoppel effect here. (See DKN Holdings LLC
v. Faerber (2015) 61 Cal.4th 813, 824 [collateral estoppel applies
“against one who was a party in the first suit or one in privity
with that party”]; accord, Cruz v. City of Merced (2023)
95 Cal.App.5th 453, 471.)
9
International Brotherhood of Electrical Workers, Local 18 (Local
18), the exclusive bargaining representative of about 9,500 DWP
employees and interveners in this case, was a party to the
settlement.
One of the settlement terms was that “[f]or each member
who moves from a position covered by WPERP to a position
covered by LACERS or from a position covered by LACERS to a
position covered by WPERP after the effective date of the
amendment to suspend [the Reciprocal Arrangement], each
retirement plan (WPERP and LACERS) will be fiscally
responsible only for the years of service and final average salary
the member earned while a member of that retirement plan.”
The settlement also provided employees would be able to
purchase time served with the other system at “full actuarial
value.”
E. The 2013 Ordinance’s Suspension of Reciprocity
In December 2013, the City adopted the 2013 Ordinance “to
suspend reciprocity between [LACERS] and [WPERP], and to
make related changes.” Among other changes, the 2013
Ordinance (effective January 1, 2014) enacted new subdivision (l)
to existing section 4.1095, which provides: “Suspension of the
Reciprocal Retirement Arrangement. Employees who
change employment from the DWP to other positions with the
City that make them eligible for membership in LACERS on or
after January 1, 2014, shall not be eligible to participate in the
reciprocal retirement arrangement established in this section.
Reciprocity on the terms and conditions set forth in this section
shall only be provided to those employees who changed
employment from the DWP to other positions with the City that
10
made them eligible for membership in LACERS prior to
January 1, 2014.”
As a result of the 2013 Ordinance, employees who transfer
from WPERP to LACERS after January 1, 2014 are ineligible for
a transfer of benefits under the Reciprocal Arrangement.
Depending on the LACERS tier into which they fall, transferring
City employees may not receive credit from LACERS for their
prior WPERP service. (See §§ 4.1080.5, subd. (c), 4.1080.6,
subd. (c), 4.1080.7, subd. (b), 4.1080.8, subd. (k).)
F. Trial Court Proceedings
In December 2016, the City Employees filed a verified
petition for writ of mandate, 5 with causes of action against the
City and LACERS, among others not relevant to this appeal, for
(1) the unconstitutional impairment of vested contractual rights
in violation of the California Constitution, and (2) the violation of
sections 4.1102 and 4.1111 by “Respondents’ use of vested retiree
health Employee Contributions to pay for retirement, disability
retirement and/or survivorship benefits by transferring
employees.” The City Employees alleged “LACERS members
have vested contractual rights to receive, and LACERS has a
ministerial duty to pay, full career City service retirement
benefits calculated at the employees’ final compensation and
retiree health benefits from LACERS for the employees’
aggregate City service with both the DWP and in LACERS-
5 A petition for writ of mandate under Code of Civil
Procedure section 1085 “is proper where . . . the claim is that an
agency has failed to act as required by law.” (California Assn. for
Health Services at Home v. State Dept. of Health Services (2007)
148 Cal.App.4th 696, 705.)
11
covered positions.” The City Employees did not challenge
WPERP’s authority to suspend reciprocity or make any claim
against WPERP or DWP. No evidence was submitted that
employees were induced into working for the City or DWP based
on the promise of reciprocity or portability of their pension
benefits.
In September 2021, the trial court granted Local 18’s
motion to intervene. Local 18 requested the court deny the
petition, arguing that the opportunity to transfer between the
WPERP and LACERS retirement systems was not a “vested”
right protected by the constitutional contract clause, and even if
it were, the City’s elimination of that benefit was not an
unconstitutional impairment of employees’ vested pension rights.
In May 2022, the court denied the petition. Relevant here,
the court found that the City Employees had failed to establish
that they had a vested contractual right to the Reciprocal
Arrangement that was protected by the California Constitution.
The court also found there was no evidence to support the City
Employees’ claim that their 4 percent contributions toward
retiree health benefits were being improperly applied to pension
benefits in violation of sections 4.11021 and 4.1111.
In July 2022, the trial court entered judgment in favor of
the City, LACERS, and Local 18. The City Employees’ appeal
was dismissed with prejudice as to LACERS under a stipulation
between the City Employees and LACERS, leaving only the City
Employees’ claims against the City to be addressed on appeal.
The City Employees timely appealed. Respondents are the
City and Local 18.
12
DISCUSSION
A. The City Employees Do Not Have Vested Rights to the
Terms of the Reciprocal Arrangement
The City Employees assert that for those employees who
initiated employment with DWP during the period that the
Reciprocal Arrangement was in effect, from 1980 to 2013, an
implied contract was formed guaranteeing that the pensions
owed would not lose value as a result of their transferring from
DWP to the City. The City Employees contend they had
constitutionally protected, vested rights to these terms of the
Reciprocal Agreement. However, the diminished rights about
which they complain are not their rights to the pension benefits,
but rather to the terms of the Reciprocal Arrangement, which
were not constitutionally guaranteed.
1. The scope and effect of the 2013 Ordinance
The 2013 Ordinance, which suspended the Reciprocal
Arrangement when it took effect on January 1, 2014, was not
retroactive. Retirees or current employees who transferred
between DWP and the City prior to January 1, 2014 (but not
after), or continued working in the same position with no such
transfers, would not experience any change in pension benefits as
a result of the 2013 Ordinance. The suspension of reciprocity
under the 2013 Ordinance would impact only the pensions of
those employees who transfer between DWP and the City, or vice
versa, after January 1, 2014.
The suspension of reciprocity could affect such employees in
several important ways. For instance, because total years of
service credit is a multiplier in the benefits calculation, years
spent at one department would have previously combined with
13
years at the other to create a larger multiplier. However,
following the suspension of the Reciprocal Arrangement, WPERP
service cannot be used for calculating an employee’s LACERS
benefit allowance unless the member purchases WPERP credit.
(§ 4.1007, subd. (d).) As a result, employees who transferred after
January 1, 2014, and halfway through their career, could
experience a more than $1,000 per month reduction in a WPERP-
LACERS combined retirement allowance because of the 2013
Ordinance. The City Employees submitted evidence that one of
the individual plaintiffs will receive $29,000 less per year in
retirement benefits as a result of the suspension of the Reciprocal
Arrangement. In addition, although employees transferring to
LACERS from DWP after January 1, 2014 may purchase credits
for their prior WPERP service, as a result of the 2013 Ordinance,
employees would have to pay for both the employee and employer
contributions. (§ 4.1020.1, subds. (a)-(c).) The 2013 Ordinance
estimates that two years of WPERP credit would cost $60,000 for
an employee earning $100,000 annually. (§ 4.1020.1, subd. (c).)
2. Applicable law and standards of review
The City Employees’ claim is founded on the concept of
vested rights. “The vested rights doctrine . . . is grounded in the
constitutional contract clause.” (Cal Fire Local 2881 v. California
Public Employees’ Retirement System (2019) 6 Cal.5th 965, 976-
977 (Cal Fire).) The California Constitution, which provides that
a “law impairing the obligation of contracts may not be passed”
(Cal. Const., art. I, § 9), “prohibit[s] the enactment of laws
effecting a ‘substantial impairment’ of contracts, including
contracts of employment.” (Cal Fire, at p. 977; see Fry v. City of
Los Angeles (2016) 245 Cal.App.4th 539, 548 (Fry) [“The contracts
clause limits the power of public entities to, by enacting a law,
14
unilaterally modify their own contracts with other parties.”].)
But “not every legislative impairment of contractual relations
triggers the contract clause.” (Alameda County Deputy Sheriff’s
Assn. v. Alameda County Employees’ Retirement Assn. (2020)
9 Cal.5th 1032, 1075 (Alameda County).)
Unlike private employment, the terms and conditions of
public employment are generally established by statute rather
than by contract. (Cal Fire, supra, 6 Cal.5th at p. 977.)
Consequently, most terms and conditions of public employment,
including compensation and benefits, are not protected by the
contract clause and may be “ ‘modified or reduced by the proper
statutory authority.’ ” (Ibid.; see Hinchliffe v. City of San Diego
(1985) 165 Cal.App.3d 722, 725 [“Public employment, by and
large, is not held by contract, but by statute,” and thus the public
employee “can have no vested contractual right in the terms of his
or her employment, such terms being subject to change by the
proper statutory authority.”].) “Contract clause protection of the
terms and conditions of public employment historically has been
the exception, rather than the rule.” (Cal Fire, at p. 977.) In this
context, “vested rights” are those terms and conditions of public
employment that are protected from impairment by the contract
clause. (Ibid.)
Public employees’ pension rights are considered vested
rights. (Cal Fire, supra, 6 Cal.5th at pp. 979, 983; accord,
Alameda County, supra, 9 Cal.5th at p. 1074 [“The terms of
public employee pensions are protected by the constitutional
contract clause.”].) “[T]hrough his or her service, a public
employee acquires a constitutionally protected implied
contractual right to receive statutory pension benefits upon
15
retirement.” (Cal Fire, at p. 983.) 6 “Upon accepting public
employment, one acquires a vested right to a pension based on
the system then in effect, and to additional pension benefits
conferred during his or her subsequent employment.” (Protect
Our Benefits v. City and County of San Francisco (2015)
235 Cal.App.4th 619, 628; accord, Fry, supra, 245 Cal.App.4th at
p. 550.)
The rationale for the constitutional protection of pension
benefits, despite their statutory foundation, is that they are a
form of deferred compensation. (Cal Fire, supra, 6 Cal.5th at
pp. 983-985.) A public employee “ ‘is not fully compensated upon
receiving his salary payments because, in addition, he has then
earned certain pension benefits, the payment of which is to be
made at a future date.’ ” (Id. at pp. 984-985; accord, Kern v. City
of Long Beach (1947) 29 Cal.2d 848, 855 (Kern).) The objective of
offering a pension—“to induce competent persons to enter and
remain in public employment”—“would be thwarted if a public
employee could be deprived of pension benefits, and the promise
of a pension annuity would either become ineffective as an
inducement to public employees or it would become merely a
6 There are two ways vested rights are created: (1) “when the
statute or ordinance establishing the benefit and the
circumstances of its enactment clearly evince a legislative intent
to create contractual rights,” and (2) when courts have
determined certain benefits (primarily pension rights) are vested
rights “by implication, even in the absence of a clear
manifestation of legislative intent.” (Cal Fire, supra, 6 Cal.5th at
pp. 978-979.) The City Employees rely on the second way and
eschew any reliance on the first means of establishing that a
vested right is at issue here.
16
snare and a delusion to the unwary.” (Kern, at p. 856.)
“ ‘While payment of these [pension] benefits is deferred,
and is subject to the condition that the employee continue to
serve for the period required by the statute, the mere fact that
performance is in whole or in part dependent upon certain
contingencies does not prevent a contract from arising, and the
employing governmental body may not deny or impair the
contingent liability any more than it can refuse to make the
salary payments which are immediately due.’ ” (Cal Fire, supra,
6 Cal.5th at p. 986.) “ ‘Such a pension right may not be
destroyed, once vested, without impairing a contractual
obligation of the employing public entity.’ ” (Id. at p. 983; see,
e.g., Kern, supra, 29 Cal.2d at pp. 852-853, 855-856 [firefighter
had a vested right to his pension earned through work already
performed, and city could not, shortly before the firefighter was
going to retire, eliminate pensions]; United Firefighters of Los
Angeles City v. City of Los Angeles (1989) 210 Cal.App.3d 1095,
1101 [charter amendment imposing cap on cost of living
adjustments for pension benefits impaired pension right];
California Teachers Assn. v. Cory (1984) 155 Cal.App.3d 494, 506
[state may violate the contract clause by failing to fulfill its
statutory obligation to make continuing contributions to its
employees’ retirement fund so as to preserve the actuarial
soundness of the fund].)
Whether an employee benefit related to a pension “is a
benefit of employment protected by the constitutional contract
clause—that is, whether it is a vested right—is a question of law
subject to our independent review.” (Cal Fire, supra, 6 Cal.5th at
p. 976; accord, Board of Administration v. Wilson (1997)
52 Cal.App.4th 1109, 1129.) The interpretation of a municipal
17
ordinance or charter is also a legal issue subject to de novo
review. (Fry, supra, 245 Cal.App.4th at p. 549; see Zubarau v.
City of Palmdale (2011) 192 Cal.App.4th 289, 305 [“ ‘Statutory
construction is a question of law for the courts and the rules of
statutory construction applicable to statutes are also applicable
to local ordinances.’ ”].)
If a legislative action is deemed to modify vested pension
rights, courts then employ the “California Rule” to determine if
the modification nevertheless survives contract clause scrutiny.
Under the California Rule, “ ‘[a]n employee’s vested contractual
pension rights may be modified prior to retirement for the
purpose of keeping a pension system flexible to permit
adjustments in accord with changing conditions and at the same
time maintain the integrity of the system. [Citations.] Such
modifications must be reasonable. . . . To be sustained as
reasonable, alterations of employees’ pension rights must bear
some material relation to the theory of a pension system and its
successful operation, and changes in a pension plan which result
in disadvantage to employees should be accompanied by
comparable new advantages.” (Alameda County, supra, 9 Cal.5th
at pp. 1076-1077.)
3. The portability terms under the Reciprocal
Arrangement were not protected as deferred
compensation or because they affected pension benefits
The City Employees contend “the City’s requirement [under
the Reciprocal Arrangement] that LACERS credit its members
for service performed at DWP conferred upon such employees
increased deferred compensation” that is entitled to
constitutional protection. (See Cal Fire, supra, 6 Cal.5th at
p. 985 [pension benefits are protected by the contract clause
18
“[g]iven their character as deferred compensation”]; Alameda
County, supra, 9 Cal.5th at p. 1077 [“It is the nature of pension
rights as deferred compensation that caused Kern to hold them
protected under the contract clause.”].) Cal Fire is instructive in
evaluating whether we should treat the terms under the
Reciprocal Arrangement as “deferred compensation” such that
the City Employees had a vested right to them.
In Cal Fire, the plaintiffs argued a statute allowing state
employees to buy up to five years of additional retirement service
credit (and thus boost their pension benefits) created a vested
right to purchase the credit. (Cal Fire, supra, 6 Cal.5th at
pp. 969-971.) The Supreme Court first clarified that the rights of
employees who had already purchased the service credit were not
at issue because those employees “remain[ed] in precisely the
same position as they were prior to [the statute’s enactment].”
(Id. at p. 981.) Instead, the court framed the asserted vested
right as the opportunity to purchase the service credit. (Ibid.)
The court rejected the theory that the opportunity to
purchase service credit was a form of deferred compensation akin
to the pension benefits themselves. (Cal Fire, supra, 6 Cal.5th at
pp. 986-987.) The court emphasized that “pension benefits, the
classic example of deferred compensation, flow directly from a
public employee’s service, and their magnitude is roughly
proportional to the time of that service. . . . [P]ension benefits
are, literally, earned by an employee’s work.” (Id. at p. 986.) In
contrast, the opportunity to purchase service credit was available
to every employee who had worked for at least five years and, if
not taken advantage of, expired upon an employee’s retirement or
termination. (Id. at pp. 986-987.) Further, “the amount of an
eligible employee’s service was entirely irrelevant to his or her
19
exercise of the opportunity,” as a lengthier period of service did
not increase the amount of service credit an employee could
purchase. (Id. at p. 987.) The opportunity to purchase service
credits was “not different in form from a variety of other optional
benefits offered to public employees in connection with their
work”—including the opportunity to purchase health, life, or
long-term disability insurance or create a flexible spending
account—that were not protected under the contract clause.
(Ibid.)
Similarly, the Reciprocal Arrangement did not grant the
City Employees the rights to a form of deferred compensation
akin to pension benefits. Unlike pension benefits, for which “a
critical determinant is an employee’s term of public employment”
(Cal Fire, supra, 6 Cal.5th at p. 987), here “the amount of an
eligible employee’s service was entirely irrelevant to his or her
exercise of the opportunity” to avail herself of the perks under the
Reciprocal Arrangement (ibid.). The opportunity to transfer
between DWP and the City and to take advantage of reciprocity
between their pension systems was available to employees
regardless of years of service. Thus, unlike pension benefits, the
opportunity to avail oneself of the terms of the Reciprocal
Arrangement is not proportional to years of service, a hallmark of
deferred compensation. (Cf. id. at p. 985 [“the receipt of pension
benefits is granted constitutional protection because the benefits
constitute a portion of the compensation awarded by the
government to its employees, paid not at the time the services are
performed but at a later time”]; City of San Jose v. Howard
Jarvis Taxpayers Assn. (2024) 101 Cal.App.5th 777, 797 [“the city
has an obligation to pay future pension benefits to its current and
former employees, who have already earned them”], review
20
granted Aug. 14, 2024, No. S285426.)
The City Employees suggest that the revocation of the
Reciprocal Arrangement “undermine[d] the retirement value of
work already performed by City employees,” which distinguishes
this case from Cal Fire where the benefits at issue, the
opportunity to purchase service credits, “had not been earned as
a component of the employees’ compensation.” They assert that if
employees transfer from DWP to the City after January 1, 2014,
their pension benefits earned at DWP prior to 2014 will be
“devalued” as a result of the 2013 Ordinance. The fallacy of the
City Employees’ argument is that the 2013 Ordinance does not
affect an employee’s pension benefits in any way unless the
employee chooses to transfer after January 1, 2014. 7 The City
Employees receive the same retirement credits at DWP for their
past work there as before the 2013 Ordinance—they just cannot
transfer them, unless they purchase the requisite employer and
employee contributions. While the City Employees assert that
advancing along certain career paths sometimes requires moving
between DWP and other City departments, they concede
employees do not have a constitutionally protected right to
transfer between DWP and the City. And even assuming the
City Employees are correct that employees could face a choice of
either being laid off or involuntarily transferred, 8 a public
7 Of course, an employee’s ability to transfer is not
guaranteed, and depends on various factors such as department
needs and the employee’s qualifications.
8 As the superior court noted, the argument employees may
be involuntarily transferred lacks support. On appeal, the City
Employees cite two pieces of evidence. First, they point to the
21
employee “ha[s] no constitutionally protected right to continue in
his position . . . in order to receive a larger retirement allowance.”
(Miller v. State of California (1977) 18 Cal.3d 808, 817 (Miller);
see Summers v. City of Cathedral City (1990) 225 Cal.App.3d
1047, 1065 [“there is no contractual right to the continuation of
public employment”]; see also Kern, supra, 29 Cal.2d at p. 853 [no
“right to tenure” in the absence of special provision].) Thus, if
employees choose to transfer, we cannot say any vested right has
been impaired. 9
declaration of an employee who notes that career promotions may
involve transfers between the City and DWP. But the employee
also states there is a pathway for his career that does not require
such a transfer. Second, the City Employees refer to provisions of
the Charter that allow for temporary appointments in
emergencies and provide for “bumping” employees with less
seniority to avoid layoffs, “which can have a cascading effect of
employees changing positions and departments.” (Charter,
§§ 1013, 1015.) However, there is no evidence that these
provisions have ever resulted in transfers between the City and
DWP or that such transfers have had any lasting impact on
pension benefits.
9 The City Employees suggest that we should treat the terms
of the Reciprocal Arrangement as vested rights because DWP is a
department that is part of the City of Los Angeles, and thus the
transfers at issue involve “multiple retirement systems for a
single employer.” They provide no authority to support their
argument, which in any event is not well-taken. DWP is a
“Proprietary Department” of the City that is funded
independently and operates autonomously and separately from
other City departments. (Charter, §§ 600, subd. (a), 602, 603.)
Each of the respective boards for LACERS and WPERP has the
“sole and exclusive responsibility to administer its system . . . to
22
Miller is particularly instructive here. In Miller, a state
employee plaintiff challenged a statute that reduced the
mandatory retirement age for his employment category from 70
to 67. (Miller, supra, 18 Cal.3d at p. 811.) Because the plaintiff
had to retire at 67, he lost the opportunity to work several more
years and thus achieve the maximum pension benefit that he
previously would have been able to obtain. (Id. at p. 812.) The
Supreme Court examined whether “the reduction in the
mandatory age of retirement impair[ed] a vested right of plaintiff
to qualify for a larger monthly pension based on service until the
age of 70.” (Id. at p. 811.)
The Supreme Court concluded the reduction in the
mandatory age of retirement did not “work an impairment of any
vested right.” (Miller, supra, 18 Cal.3d at pp. 815, 817.)
“Although his right to a pension based on this system was
vested,” his right to receive such benefits was subject to the
condition that he remain in state employment until age 70. (Id.
at p. 817) “Plaintiff failed to satisfy that condition since he was
lawfully placed on retirement at age 67. Thus, his right to a
maximum pension based on retirement at age 70 never matured.”
(Ibid.) Plaintiff did not have a vested right to the maximum
pension benefit because he “had no vested contractual right to
continue working for any specified period of time.” (Ibid.) His
provide benefits to system participants.” (Charter, § 1106,
subd. (a)(1).) The fact that these separate retirement systems are
both under the umbrella of the City of Los Angeles does not
provide a basis to treat DWP and the City as a “single employer,”
much less to conclude either LACERS or WPERP members have
a vested right to transfer between DWP and the City without any
effect on their pension.
23
“loss of pension benefits resulted not from an impairment of his
vested rights, but from the occurrence of a condition subsequent
to the accrual of those rights,” i.e., the Legislature’s reduction of
the age of retirement that “defeated [plaintiff’s] expectation of . . .
a larger retirement allowance.” (Id. at pp. 816-817; see also Kern,
supra, 29 Cal.2d at p. 853 [“The fact that a pension right is vested
will not, of course, prevent its loss upon the occurrence of a
condition subsequent such as lawful termination of employment
before completion of the period of service designated in the
pension plan.”].)
Miller aptly demonstrates that a legislative change that
has the effect of lowering expected pension benefits does not
necessarily amount to an impairment of vested rights. In Cal
Fire, the Supreme Court relied on Miller in holding that a “term
and condition of public employment that is otherwise not entitled
to protection under the contract clause does not become entitled
to such protection merely because it affects the amount of an
employee’s pension benefit.” (Cal Fire, supra, 6 Cal.5th at p. 992;
see id. at p. 990 [“We have never held . . . that a particular term
or condition of public employment is constitutionally protected
solely because it affects in some manner the amount of a
pensioner’s benefit.”].) That the cessation of the Reciprocal
Arrangement could affect pension benefits that accrued for pre-
2014 service is thus not sufficient to find the employees had a
vested right to the terms of the Reciprocal Arrangement.
We conclude any rights employees had under the
Reciprocal Arrangement were not vested rights, and the City
Council could modify those terms as it did in adopting the 2013
24
Ordinance. 10 (See Piombo v. Board of Retirement (1989)
214 Cal.App.3d 329, 339 [“to the extent respondent had a ‘right’
to redeposit and thereby reinstate his pension rights, that right
was statutory in nature and . . . [was] subject to modification by
the Legislature or proper statutory authority. . . . The fact that
[the Legislature’s exercise of its power] defeated his expectation
of having an option to reinstate pension rights . . . did not result
in any impairment of his vested rights”].) Because the City
Employees have not established a vested contractual right, the
question whether the 2013 Ordinance and suspension of the
Reciprocal Arrangement worked an unconstitutional impairment
of such rights “does not arise,” and we need not reach whether
the 2013 Ordinance would pass muster under the California
Rule. (Cal Fire, supra, 6 Cal.5th at p. 995; see Miller, supra,
18 Cal.3d at p. 818 [where court concluded plaintiff suffered no
impairment of vested rights, court “need not undertake the
analysis” whether changes in the state’s pension system were
reasonable].)
B. The 2013 Ordinance Does Not Violate Sections 4.1102 and
4.1111
In addition to retirement benefits, LACERS provides
healthcare benefits to retired employees with at least 10 years of
City service. (§§ 4.1080.7, subd. (a), 4.1111 subds. (d), (e).) The
City Employees assert that the 2013 Ordinance, specifically
section 4.1020.1, “requires employees to forfeit retiree healthcare
10 We need not reach respondents’ alternative argument that
the terms of the Reciprocal Arrangement were not vested rights
because they were contingent on DWP’s continued participation
in the arrangement.
25
benefits rights when employees use their 4% of vested employee
retiree health contribution funds to purchase WPERP service
credit,” purportedly in violation of sections 4.1102 and 4.1111.
We now lay out the highly technical provisions relied on by
the City Employees to make their argument, but note the City
Employees have forfeited their claim by failing to provide a
cogent argument regarding how the interplay between these
provisions led to violations of some employees’ rights. 11 (County
of Sacramento v. Singh (2021) 65 Cal.App.5th 858, 861 [“we may
treat a point that is not supported by cogent legal argument as
forfeited”]; accord, Cahill v. San Diego Gas & Electric Co. (2011)
194 Cal.App.4th 939, 956.) Moreover, from what we can glean of
their argument, its premise is incorrect, because there is no
showing employees were required to use their healthcare
contribution funds for an improper purpose.
Section 4.1020.1 permits LACERS members to purchase
credit for periods of service with DWP. If a member has
contributions on deposit with WPERP, the member must
authorize a transfer of those contributions to LACERS to be
credited towards payment of the service credit. (§ 4.1020.1,
subds. (a), (d)(1).) Section 4.1020.1, subdivision (b), provides,
“Service purchased under this section shall not count as service
or service credit for the purpose of qualifying for any benefits
11 In their reply brief, the City Employees concede “the
discussion of this issue in their Opening Brief included errors.”
They state they “attempt[ed] to more clearly set forth [their]
position” on reply, but it does not appear they were successful,
because they cite incorrect code sections and still do not set forth
a comprehensible argument.
26
provided in [section 4.111],” i.e., a healthcare benefit. (See
§ 4.111.)
Section 4.1003, subdivision (c)(2), requires certain members
to “contribute by salary deduction to the Retirement Fund an
additional four percent (4%) of the member’s compensation
earnable retroactive to July 1, 2011.” In return, they “shall
receive the [healthcare] benefit set forth in Section 4.111(c).”
(§ 4.1003, subd. (c).)
Within the LACERS fund is a separate health benefits
account that “shall only be used for” healthcare and medical
benefits, and its assets “may not be used for retirement . . .
benefits.” (§ 4.1102, subds. (a), (d), (e).)
The City Employees’ argument appears to rest on the
assumption that under section 4.1003, subdivision (c), a member
must contribute 4 percent of transferred WPERP credits toward
healthcare benefits (i.e., benefits under § 4.1111, subd. (c)), while
the 2013 Ordinance (§ 4.1020.1, subd. (b)) simultaneously
prevents those credits from going toward healthcare benefits.
The City Employees also argue the 2013 Ordinance requirement
that an employee contribute 4 percent of transferred WPERP
credits towards healthcare benefits violates the requirement of
section 4.1102 that contributions towards retiree healthcare
benefits shall only be used for the payment of healthcare benefits
and not for retirement benefits.
However, section 4.1003, subdivision (c), requires
employees to contribute 4 percent “of the member’s compensation
earnable” “by salary deduction.” (§ 4.1003, subd. (c)(2), italics
added.) The statute defines “compensation earnable” as “[t]he
full salary, wage or compensation established for any position or
office in the City service for the particular period involved in any
27
calculation required.” (§ 4.1001, subd. (a).) The neighboring
subsections repeatedly reference salary deductions when
discussing compensation contributions. (See § 4.1003, subd. (c).)
Therefore, section 4.1003, subdivision (c), requires an
employee to contribute 4 percent of the employee’s salary by
deduction, not 4 percent of purchased retirement credits. Nor do
the City Employees cite any evidence to support their claim that
employees must forfeit their contributions toward healthcare
benefits to purchase WPERP credit. The City Employees failed
to show that members’ contributions toward retiree health
benefits were being improperly applied to pension benefits in
violation of the Administrative Code.
DISPOSITION
The judgment is affirmed. The City Employees and Local
18 are entitled to recover their costs on appeal.
STONE, J.
We concur:
MARTINEZ, P. J.
SEGAL, J.
28