Ventura County Deputy Sheriffs' Ass'n v. Board of Retirement
940 P.2d 891, 97 Cal. Daily Op. Serv. 6466, 16 Cal. 4th 483 (1997)
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Rule of Law:
Under the County Employees Retirement Law of 1937 (CERL), cash remuneration paid to an employee, with the exception of overtime pay, must be included in the 'compensation earnable' used to calculate pension benefits, even if not all employees in the same job classification receive such payments. However, employer contributions to an employee's deferred compensation plan are not considered 'compensation' and are therefore excluded from pension calculations.
Facts:
- Ventura County established a retirement system for its employees pursuant to the County Employees Retirement Law of 1937 (CERL).
- Pursuant to a memorandum of agreement and a county resolution, Ventura County paid certain employees cash payments in addition to their base salary.
- These additional payments included a bilingual premium, a uniform maintenance allowance, educational incentive pay, pay in lieu of annual leave, holiday pay, and bonuses for special duties like motorcycle patrol or field training.
- For certain management employees, Ventura County also made matching contributions to their deferred compensation plans.
- The Ventura County Deputy Sheriffs' Assn. was a party to the agreement providing some of these benefits.
- Three individual retired employees were also entitled to certain of these additional cash payments during their employment.
- Ventura County refused to include these various cash payments and its matching deferred compensation contributions when calculating the 'final compensation' upon which retiring employees' pensions were based.
Procedural Posture:
- An employee association and three retired employees (plaintiffs) filed a petition for a writ of mandamus in the superior court to compel the Ventura County retirement board to include certain payments in their pension calculations.
- The superior court (trial court) denied the petition.
- The plaintiffs appealed the denial to the California Court of Appeal.
- The Court of Appeal (intermediate appellate court) affirmed in part and reversed in part, holding that most premiums were properly excluded but that the county’s matching deferred compensation payments must be included.
- Both the plaintiffs and the defendants petitioned the Supreme Court of California for review, and the court granted both petitions.
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Issue:
Under the County Employees Retirement Law of 1937, are cash payments for various premiums, allowances, and bonuses, as well as employer contributions to a deferred compensation plan, considered 'compensation earnable' that must be included in an employee's 'final compensation' for pension calculation purposes?
Opinions:
Majority - Baxter, J.
Yes, in part, and no, in part. Cash payments for various premiums, allowances, and bonuses are 'compensation earnable' and must be included, but employer contributions to a deferred compensation plan are not. The court reasoned that 'compensation' under § 31460 broadly includes 'remuneration paid in cash.' Cash payments like uniform allowances and educational incentives fit this definition and are not excluded as non-cash 'advantages.' The court then analyzed 'compensation earnable' under § 31461, rejecting the prior interpretation from Guelfi v. Marin County Employees’ Retirement Assn. which required a pay item to be received by all employees in a job class to be included. By examining the legislative history of § 31461, including its 1937 predecessor, the court concluded the statute's purpose is to calculate an individual employee's pension based on their own pay (excluding overtime) over the average number of days worked by similar employees, not to limit 'compensation earnable' to only those pay items common to the entire class. Conversely, the court found that § 31460's definition of compensation explicitly includes amounts 'deducted from a member’s wages' for deferred compensation but is silent on employer contributions, meaning the legislature did not intend for such contributions to be included in the pension base.
Analysis:
This decision significantly broadens the pension base for many county employees under CERL by rejecting the narrow, uniformity-based test for 'compensation earnable' established in the earlier Guelfi case. By clarifying that most cash premiums and allowances count towards an individual's pension calculation, the ruling increases potential retirement benefits and consequently the funding obligations of counties. The decision establishes a clear framework: cash remuneration for services is generally includable (except overtime), while in-kind benefits and employer-side contributions to deferred compensation plans are not. This holding aligns the interpretation of CERL more closely with similar provisions in the Public Employees’ Retirement Law (PERL), promoting greater consistency in California public pension law.
