Public Sector Case Notes

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PUBLIC SECTOR CASE NOTES

By J. Scott Tiedemann and Kaylee E. Feick1

Scott Tiedemann is the Managing Partner of Liebert Cassidy Whitmore, California’s largest public sector labor, employment and education law firm. He is the author of the CPER Pocket Guide to the Firefighters Procedural Bill of Rights, as well as a chapter on that topic in California Public Sector Employment Law. Kaylee Feick is an Associate in Liebert Cassidy Whitmore’s Los Angeles office, where she provides representation and counsel to clients in all matters pertaining to labor, employment, and education law. She provides support in litigation claims for discrimination, harassment, retaliation, wage and hour disputes, and other employment matters. The authors can be reached at (310) 981-2000 and stiedemann@lcwlegal.com or kfeick@lcwlegal.com.

RETIREE FORFEITED PART OF PENSION BECAUSE OF CRIMINAL CONDUCT

Wilmot v. Contra Costa Cty. Employees’ Ret. Ass’n, 60 Cal. App. 5th 631 (2021)

In December 2012, Jon Wilmot, an employee with the Contra Costa County Fire Protection District, submitted his application for retirement to the County’s retirement authority, the Contra Costa County Employees’ Retirement Association (CCERA), established in accordance with the County Employees Retirement Law of 1937 (CERL). On January 1, 2013, the California Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect, which included a provision mandating the forfeiture of pension benefits/payments if a public employee is convicted of "any felony under state or federal law for conduct arising out of or in the performance of his or her official duties."

In February 2013, Wilmot was indicted for stealing County property. In April 2013, CCERA approved Wilmot’s retirement application, fixing his actual retirement on the day he submitted his application in December 2012. In April 2013, Wilmot began receiving monthly pension checks. In December 2015, Wilmot pled guilty to embezzling County property over a thirteen-year period ending in December 2012. Thereafter, the CCERA reduced Wilmot’s monthly check in accordance with PEPRA’s forfeiture provision.

Wilmot petitioned for a writ of traditional mandate and declaratory relief. He argued that the CCERA’s application of the PEPRA’s felony forfeiture provision was improper because the statute does not apply retroactively to persons who retired prior to PEPRA’s effective date. However, the trial court held that the CCERA properly applied the forfeiture provision to Wilmot’s pension. Wilmot appealed.

On appeal, Wilmot first argued that when PEPRA took effect in January 2013, he was no longer a "public employee" because he worked his final day and submitted his retirement paperwork in December 2012. The Court of Appeal disagreed, stating that an employee’s retirement application is pending until approved by a retirement board under the CERL. When PEPRA took effect, Wilmot’s application was submitted, but CCERA did not approve his application until April 2013. Thus, he was subject to PEPRA’s forfeiture provision.

Second, Wilmot argued he was improperly being "divested" of his vested pension benefits. Again, the Court of Appeal disagreed. Instead, the court confirmed that anticipated pension benefits are subject to reasonable modifications and changes before the pension becomes payable, and that an employee does not have a right to any fixed or definite benefits until that time.

Third, Wilmot argued that applying the forfeiture provision "impaired the obligation" of his employment contract with Contra Costa County, which is prohibited by the California Constitution’s contract clause. The court acknowledged that to be constitutional under the contract clause, modification of public pension plans must relate to the operation of the plan and intend to improve its function or adjust to changing conditions. However, the court noted that one of the primary objectives in providing pensions to public employees is to induce competent persons to remain in public employment and render faithful service. Therefore, withholding that inducement if an employee’s performance is not faithful (such as Wilmont, who pled guilty to embezzling County property for thirteen years) is a logical and proper response to improve the function of a public pension plan.

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Fourth, Wilmot argued applying the PEPRA’s forfeiture provision was an unconstitutional ex post facto law—meaning a law that only makes an act illegal or that increases the penalties for an infraction after the act has been committed. However, the court found the forfeiture provision is a civil remedial measure, not a criminal penalty, and does not improperly increase the penalty for Wilmot’s misconduct. Rather, the forfeiture provision merely takes back from Wilmot what he never rightfully earned in the first place, due to his failure to faithfully perform public service.

Accordingly, the Court of Appeal determined that the CCERA properly applied the PEPRA’s forfeiture provision to Wilmot because of his admitted criminal conduct during his employment.

POLICE DEPARTMENT WAS NOT REQUIRED TO DISCLOSE CONFIDENTIAL RECORDS TO THE SUBJECT OFFICER PRIOR TO FURTHER INTERROGATION

Oakland Police Officers’ Ass’n v. City of Oakland, 63 Cal. App. 5th 503 (2021)

In December 2017, a citizen filed a complaint against officers from the Oakland Police Department (Department), alleging that the officers violated the citizen’s rights while conducting a mental health welfare check. The Department’s internal affairs investigation included an interrogation of each of the accused officers. The Department’s investigation cleared the officers.

Following the Department’s investigation, the Oakland Community Police Review Association (OCPRA), a civilian oversight agency with independent authority to investigate claims of police misconduct, conducted its own investigation into the citizen complaint. Before the OCPRA’s interrogations of the officers, counsel for the officers demanded copies of all "reports and complaints" prepared or compiled by the Department’s investigators pursuant to a provision within the Public Safety Officers Procedural Bill of Rights Act (POBRA). Cal. Gov’t Code § 3303(g). Section 3303(g) provides that a public safety officers shall have access to a tape recording of their interrogation "if any further proceedings are contemplated or prior to any further interrogation at a subsequent time. The public safety officer shall be entitled to a transcribed copy of any notes made by a stenographer or to any reports or complaints made by investigators or other persons, except those which are deemed by the investigating agency to be confidential."

The OCPRA agreed to provide the officers with recordings and transcribed notes from their prior interrogations during the Department’s investigation, but refused to produce any other materials. After interrogating each officer, the OCPRA completed its investigation and determined that the officers knowingly violated the complainant’s civil rights.

The officers and their union filed a petition for writ of mandate, alleging that the City of Oakland violated their procedural rights by refusing to disclose the requested reports and complaints prior to the officers’ subsequent interrogations.

The trial court noted that the Fourth District of the California Court of Appeal examined a similar issue in Santa Ana Police Officers’ Association v. City of Santa Ana. 13 Cal. App. 5th 317 (2017) (Santa Ana), and held that the POBRA requires agencies to disclose complaints and reports to officers after an initial interrogation and "prior to any further interrogation." Relying on Santa Ana, the trial court granted the petition and ordered the City to disregard the officers’ interrogation testimony in any current or future disciplinary proceedings. The City appealed, and the First District of the California Court of Appeal reversed and remanded the matter to the trial court for further proceedings.

The Court of Appeal held that the plain language of section 3303(g) only requires disclosure of recordings of an officer’s interrogation prior to any subsequent interrogation of the officer. The statute does not specify when an officer’s entitlement to the reports and complaints arises, but does grant an agency the ability to withhold these materials on confidentiality grounds under certain circumstances, including if disclosure would otherwise interfere with an ongoing investigation. Accordingly, the court held that stenographer’s notes, reports, and complaints should be disclosed upon request, including prior to a subsequent interrogation, unless the investigating agency designates the material as confidential. The court noted that the agency can also de-designate a record previously deemed confidential when the basis for confidentiality no longer exists, such as the end of the investigation.

The court also concluded that mandatory disclosure of complaints and reports prior to any subsequent interrogation of an officer suspected of misconduct undermines a core objective of the POBRA maintaining the public’s confidence in the effectiveness and integrity of law enforcement agencies by ensuring that internal investigations into officer misconduct are conducted promptly and fairly.

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The Court of Appeal disagreed with the Santa Ana decision, reversed, and remanded the matter to the trial court to determine whether the City had a basis for withholding the requested reports and complaints due to their confidential nature.

PERB FINDS COUNTY ENGAGED IN BAD FAITH EFFECTS BARGAINING BECAUSE OF MISREPRESENTATIONS AND EXPLODING OFFER

Criminal Justice Attorneys Association of Ventura County v. County of Ventura, PERB Dec. No 2758-M (2021)

In November 2017, the Criminal Justice Attorneys Association of Ventura County (Association) filed unfair practice charges against the County of Ventura alleging the County unilaterally characterized accrued leave as taxable income and engaged in bad faith bargaining. The parties consolidated both charges for the administrative hearing.

Following the hearing, an administrative law judge (ALJ) issued a proposed decision. The proposed decision found that the County violated its duty to bargain in good faith by unilaterally implementing its decision to withhold taxes on "constructive receipt income" without completing negotiations over the negotiable effects of that decision. In addition, the ALJ found that the County bargained in bad faith during its negotiations to amend the annual leave redemption plan. Specifically, the ALJ found that the County misrepresented its tax withholding plan and made an exploding offer without justification. The ALJ dismissed the Association’s remaining allegations. The County filed exceptions to the proposed decision.

Under the parties’ Memorandum of Understanding (MOU), each represented employee accrued annual leave on a biweekly basis at a rate based on length of service. Employees could use annual leave hours for paid time off or redeem them for cash. Before August 2016, the County neither reported accrued annual leave hours as taxable income, nor withheld taxes based on such hours until employees either used them as paid time off or redeemed them.

However, in the summer of 2016, County Counsel met with the County’s elected Auditor-Controller to express concerns about the tax implications of the redemption option in the County’s annual leave plans. The Auditor-Controller subsequently conducted an investigation and determined that the redemption option in the plan risked exposing both employees and the County to unintentional tax consequences under the "constructive receipt doctrine." The Auditor-Controller noted that absent an agreement to amend the County’s MOUs to avoid this issue, he was obligated to comply with federal tax laws and would begin reporting the annual leave plan benefits as taxable income in tax year 2017.

Over the course of the next several months, the County and Association met on numerous occasions to discuss the issue. During these meetings, the County reiterated its position: absent changes to the redemption plan, the County intended to start treating accrued leave eligible for redemption as constructively-received income. The Association maintained that the County’s leave plans did not trigger the constructive receipt doctrine because they already included substantial limitations on employees’ ability to redeem leave hours.

In January 2017, the parties began negotiations for a successor MOU. While they negotiated the redemption language in their annual leave plan on multiple occasions, they were never able to reach an agreement. When the Association asked questions to learn more about the County’s constructive receipt tax implementation plan, the County’s lead negotiator responded that except for a few minor exceptions, the County would only be reporting accrued leave hours as taxable constructive receipt income and that, for the most part, there would be no tax withholding.

On April 4, 2017, the County issued a proposal that expired on April 7, 2017. While there was some confusion as to which elements of the County’s proposal would expire, the Association did not accept the proposal and the County withdrew it. The parties subsequently reached a tentative agreement for a successor MOU, but it did not contain any provisions designed to address the constructive receipt issue. The Association ratified the tentative agreement.

In September 2017, the Auditor-Controller sent a letter to all employees whose unions had not agreed to modify their leave redemption plans indicating the County would treat the value of accrued leave as constructively received income. The Auditor-Controller later confirmed that it would be both reporting constructively received income and withholding taxes on that income from employees’ paychecks, which contradicted the information the County’s lead negotiator provided during negotiations. Over the Association’s objection, the County implemented its plan and began withholding taxes on constructively received income on November 24, 2017. As a result, some employees’ paychecks netted out to near zero. The County continued to report accrued annual leave hours as a constructively received income and withhold taxes on that income in the 2018 tax year.

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The Public Employment Relations Board (PERB) first considered whether the County had negotiated in bad faith during its negotiations with the Association over amending the parties’ leave redemption plan. The County argued that both items that the ALJ had found were in bad faith-its representations at the bargaining table and its exploding offer-were outside the statute of limitations period. PERB disagreed.

PERB regulations prohibit PERB from issuing a complaint with respect to any charge based upon an alleged unfair practice occurring more than six months prior to the filing of the charge. PERB noted that the Association only knew in September 2017 that the County had made misrepresentations at the bargaining table, a time which was within six months of the Association’s November 2017 unfair practice charges. Further, while the Association knew about the County’s exploding offer in April 2017, more than six months before the November 2017 charge, PERB considers conduct that occurs outside the statute of limitations period if there is also challenged conduct within the limitations period. Thus, the Association’s unfair practice charges were timely.

Moreover, PERB concluded that the County’s exploding offer indicated bad faith. While an exploding offer is not a per se violation, a bargaining party shows bad faith under the totality of conduct test if it does not adequately justify a threatened change in position that is inherent in an exploding offer. Here, the County made an offer with an expiration date only three days later. While PERB credited the County’s argument that the tax liability was a reasonable basis for not leaving its offer on the table throughout 2017, the County could not provide a clear reason for its exceedingly short, three-day deadline. Thus, PERB concluded that the County’s inability to justify the tight timeline was intended at least in part to pressure the Association into reaching agreement on a successor MOU, which is not legally sufficient to justify an exploding offer.

Next, PERB found that the Association did not waive its right to bargain the effects of the County’s decision to withhold taxes on constructively-received income. The duty to bargain in good faith extends to the implementation and effects of a decision that has a foreseeable effect on matters within the scope of representation. While the County argued that the Association waived its right to bargain following the September 2017 letter, PERB determined that the County did not provide the Association with clear notice of its decision to implement tax withholding based upon constructively received income until November 2017. In any event, even if PERB regarded the County’s September 2017 letter as adequate notice, the Association repeatedly indicated its interest in bargaining over the impacts of the County’s decision.

Finally, PERB concluded that the County did not negotiate in good faith prior to implementing its tax withholding decision. As a result, PERB ordered the County to reimburse employees for any accountancy and/or related professional fees incurred in relation to the County’s implementation of its constructive receipt tax withholding decision.

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Notes:

1. The authors thank their colleague Andrew Pramschufer for his contributions to this column.