Ed Mendel
April 17, 2016

In another ruling allowing pension cuts, an appeals court last week overturned a state labor board ruling that a voter-approved San Diego pension reform was invalid because the city declined to bargain the issue with labor unions.

The initiative approved by 66 percent of San Diego voters in 2012 gave all new city hires, except police, a 401(k)-style individual investment retirement plan instead of a pension and imposed a five-year freeze on pay used to calculate pensions.

The state Public Employment Relations Board, whose post-election decision was overturned by a unanimous ruling of a three-member appellate panel, took the unprecedented step of trying to get a court to remove the San Diego initiative from the ballot before the vote.

Jan Goldsmith, former San Diego city attorney, told the San Diego Union-Tribune the city stood firm, would not be “bullied” by the labor board, and now the appellate ruling will “reverberate” across California.

“When governments fail to act on problems such as with pension liabilities, the people have a constitutional right to pursue a citizens’ initiative by obtaining signatures on a petition and presenting solutions directly to the voters, bypassing the legislative body,” Goldsmith said. “The court held that there is no requirement that citizens’ initiatives be negotiated with labor unions.”

The labor board ordered that city employees hired after the initiative passed, now about 3,000, be given retroactive pensions with 7 percent interest as a penalty, the Union-Tribune said. The estimated city cost was $20 million when there were only about 1,600 new hires.

Last week, the appellate court ruled the labor board erred when finding in 2015 that former San Diego Mayor Jerry Sanders and the city council committed an “unfair labor practice” by declining to “meet and confer” with labor unions before Proposition B was placed on the ballot.

Lacking the city council votes needed to place a pension reform on the ballot, Sanders and former City Councilman Carl DeMaio, the author of the reform, helped lead and support the initiative campaign.

The support of Sanders and other city officials for the the initiative’s development and campaign is “undisputed,” the court said. But the “meet and confer” obligation only applies to measures placed on the ballot by the governing body, not by citizens gathering voter signatures.

State law meet-and-confer obligations have “no application when a proposed charter amendment is placed on the ballot by citizen proponents through the initiative process,” the appellate court said.

DeMaio’s website said he “has been working with former San Jose Mayor Chuck Reed on a state-wide Pension Reform Initiative and this court victory only improves chances of reform statewide.”

Reed has said that San Jose, with an eye toward a 1984 Seal Beach court ruling requiring bargaining before placing a measure on the ballot, held extensive labor negotiations before the council placed his pension reform measure on the ballot.

But the state labor board agreed to hear a labor unfair practices complaint against Measure B, which was approved by 69 percent of San Jose voters in June 2012, the same election San Diego voters approved pension reform.

The board also agreed to hear a labor complaint about a pension reform approved by Pacific Grove voters in 2010. Courts overturned the Pacific Grove measure and a key part of the San Jose measure enabling the option of cutting pensions current workers earn in the future.

In each case, superior court judges cited what has become known as the “California rule.” The pension offered at hire becomes a vested right, protected by contract law, that can only be cut if offset by a comparable new benefit, erasing any savings.

The protection of the California rule emerged from judges who chose to cite the precedent of a series of rulings, a key one in 1955 in Long Beach. Different rulings were cited in an appeals court decision in a Marin County case last August that could overturn the California rule.

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