No. 630 September 5, 2024 725

IN THE COURT OF APPEALS OF THE 

STATE OF OREGON

MARK MEISTER,

Plaintiff-Appellant,

v.

PUBLIC EMPLOYEES RETIREMENT BOARD,

Defendant-Respondent.

Lincoln County Circuit Court

21CV14232; A177870

Amanda R. Benjamin, Judge.

Argued and submitted February 13, 2023.

Aruna A. Masih argued the cause and filed the briefs for 

appellant.

Peenesh Shah, Assistant Attorney General, argued 

the cause for respondent. Also on the brief were Ellen F. 

Rosenblum, Attorney General, and Benjamin Gutman, 

Solicitor General.

Before Ortega, Presiding Judge, Powers, Judge, and 

Hellman, Judge.

ORTEGA, P. J.

Affirmed.
726 Meister v. PERB

ORTEGA, P. J.

On appeal in an other than contested case, ORS 

183.484 and ORS 183.500, plaintiff1

 seeks review of a final 

order of the Public Employees Retirement System (PERS) 

that calculated his retirement benefits. In a single assignment of error, plaintiff asserts that PERS, which is administered by defendant the Public Employees Retirement Board 

(PERB), incorrectly computed his retirement benefits when 

it applied the salary cap provision in ORS 238.005(26)(c)(M), 

which became effective January 1, 2020, to his final employment check issued in January 2020. Plaintiff asserts that 

applying the salary cap to that paycheck excluded his lumpsum payment for accrued vacation leave and compensatory 

time (comp-time) from the calculation of his final average 

salary, and, because those hours accrued before the salary 

cap went into effect, that was an unconstitutional retroactive application of the salary cap. We conclude that PERS 

correctly applied the salary cap to plaintiff’s final employment check as provided in ORS 238.005(26) and that it did 

not violate the Contract Clause in Article I, section 21, of 

the Oregon Constitution in doing so. Accordingly, we affirm.

The relevant facts are undisputed. Plaintiff began 

employment in a PERS-covered position on September 1, 

1991, which makes him a Tier One member of PERS. He 

retired on February 1, 2020, after 28 years and 5 months 

of credible service in PERS-eligible employment. By check 

dated January 31, 2020, for the identified pay period of 

January 16 to 31, 2020, plaintiff was paid a lump-sum payment for accrued vacation leave and comp-time that totaled 

$21,945.07. During January 2020, plaintiff was also paid for 

time worked that month, totaling $14,073.52.

On January 1, 2020, Senate Bill 1049 (2019) went 

into effect, which includes a salary cap for purposes of calculating a member’s final average salary, which in turn is 

used to calculate the owed retirement benefit. See Or Laws 

1 As the state points out, on judicial review in the circuit court of an order in 

an other than contested case, ORS 183.484, the party seeking review is meant 

to be referred to as the petitioner. However, the case caption in this matter both 

below and on appeal identifies the party seeking review as plaintiff, so we follow 

that convention in this opinion.
Cite as 334 Or App 725 (2024) 727

2019, ch 355, §§ 39, 62. The salary cap is codified at ORS 

238.005(26)(c)(M), and provides:

“(c) ‘Salary’ or ‘other advantages’ does not include:

“* * * * *

“(M) For years beginning on or after January 1, 2020, 

any amount in excess of $195,000 for a calendar year. If 

any period over which salary is determined is less than 

12 months, the $195,000 limitation for that period shall 

be multiplied by a fraction, the numerator of which is the 

number of months in the determination period and the 

denominator of which is 12.”

On March 23, 2020, PERS issued a notice of benefits to plaintiff which included a calculation for plaintiff’s 

final average salary based on the last 36 months of salary. 

For that calculation, PERS capped plaintiff’s January 2020 

salary at $17,255.04. Plaintiff timely disputed that calculation, arguing that PERS could not apply the salary cap to 

his lump-sum payment for vacation leave and comp-time, 

which he argued were accrued balances attributable to service provided to his employer before January 1, 2020. After a 

review, PERS issued the order at issue here, in which PERS 

determined that plaintiff’s benefit would be decreased by 

$16.49 per month, because plaintiff’s January 2020 salary 

was required to be capped at $16,249.94. In response to 

plaintiff’s specific dispute, PERS stated that, as a Tier One 

member of PERS, plaintiff’s lump-sum payment is included 

as salary in the calculation of benefits, but PERS considered 

that payment to be earned in 2020. Plaintiff sought judicial 

review of PERS’s order in the circuit court, and, on crossmotions for summary judgment, the circuit court entered 

a judgment in favor of PERB, the governing authority of 

PERS, ORS 238.630.

Plaintiff appeals, and under ORS 183.500, we 

review the circuit court’s judgment “to determine whether 

the circuit court correctly applied the standards of its review 

under ORS 183.484.” Hoekstre v. DLCD, 249 Or App 626, 

634, 278 P3d 123, rev den, 352 Or 377 (2012). One of those 

standards requires the circuit court to determine whether 

“the agency has erroneously interpreted a provision of law.” 

ORS 183.484(5)(a). As a practical matter, where, as here, 
728 Meister v. PERB

there are no disputes of fact and the issue presented is one of 

law, we also review to determine whether PERS erroneously 

interpreted a provision of law. Hoekstre, 249 Or App at 634.

On appeal, plaintiff asserts that PERS improperly applied the salary cap to the lump-sum payment for 

his accrued vacation leave and comp-time because he had 

earned that leave before the effective date of the salary cap. 

Plaintiff argues that his accrued vacation leave and comptime were part of his final average salary as part of his contract with PERS, because those hours are included in the 

definition of “salary” and “final average salary.” Thus, plaintiff asserts that PERS’s application of the salary cap was an 

unconstitutional retrospective application to leave balances 

that he had earned for work performed before January 1, 

2020.

PERB responds that PERS’s application of the 

salary cap to plaintiff’s retirement benefit was not a retrospective application because plaintiff’s vacation leave and 

comp-time were not salary until the lump-sum payment 

was paid to plaintiff. PERB reasons that, because plaintiff 

did not receive a cash payout until after the effective date 

of the salary cap, the application of the salary cap was not 

retrospective.

As we understand it, plaintiff’s argument requires 

us to determine whether PERS’s application of the salary 

cap violated the Contract Clause of Article I, section 21,2

because, as applied, the salary cap retrospectively impaired 

a retirement benefit plaintiff earned before January 1, 

2020.3

 There are two steps to determining whether legislation violates the Contract Clause of Article I, section 21:

“First, it must be determined whether a contract exists to 

which the person asserting an impairment is a party; and, 

second, it must be determined whether a law of this state 

has impaired an obligation of that contract.”

2 The Contract Clause in Article I, section 21, provides, “No *** law impairing the obligation of contracts shall ever be passed[.]”

3 Plaintiff does not cite to Article I, section 21, or any other constitutional 

provision is his briefing. However, we understand plaintiff’s arguments about his 

“constitutional rights” and reference in the reply brief to the “Contract Clause” to 

be based on Article I, section 21, and the case law interpreting that provision.
Cite as 334 Or App 725 (2024) 729

Hughes v. State, 314 Or 1, 13-14, 838 P2d 1018 (1992) (citing 

Eckles v. State of Oregon, 306 Or 380, 396-97, 760 P2d 846 

(1988), cert dismissed, 490 US 1032 (1989)).4

 The first step, 

in turn, requires us to answer three questions, “(1) is there 

a state contract?; (2) if so, what are its terms?; and (3) what 

obligations do the terms provide?” Strunk v. PERB, 338 

Or 145, 170, 108 P3d 1058 (2005) (citing Hughes, 314 Or at 

17-29); see also Moro v. State of Oregon, 357 Or 167, 195-231, 

351 P3d 1 (2015) (applying that analysis). The second step 

then focuses on whether the legislation changes or eliminates the state’s obligation under that contract. Strunk, 338 

Or at 170 (citing Eckles, 306 Or at 399-400). “We normally 

answer those questions by applying general rules of contract 

law.” Moro, 357 Or at 194.

The first question of the first step of the inquiry—is 

there a state contract?—is not at issue, because, as decided 

in Hughes, “PERS was intended to be and is a contract 

between the [public employer] and its employees[.]” 314 Or 

at 25; see also, e.g., Strunk, 338 Or at 170. As the Supreme 

Court has explained, “[t]he PERS contract is formed when 

the employee accepts the offer. An employee ‘accept[s] the 

offer by providing the services’ that his or her employer 

sought, resulting in a unilateral contract. ** * And, because 

the employee accepts the offer through performance, ‘a 

member’s acceptance reaches only as far as the work that 

the member has performed.’” James v. State of Oregon, 366 

Or 732, 740, 471 P3d 93 (2020) (quoting Moro, 357 Or at 198, 

201; internal citations omitted).

The second two questions—what are its terms? 

and what obligations do the terms provide?—ultimately 

are at the heart of this case. We first address the standard 

we must apply to determine the contractual terms. “[T]he 

4 In his reply brief, plaintiff asserts that ORS 238A.470 applies here. 

However, contrary to plaintiff’s assertion, the Supreme Court recently reaffirmed that ORS 238A.470 does not apply to Tier One members, such as plaintiff, 

or to Tier Two members. See James v. State of Oregon, 366 Or 732, 741 n 2, 471 

P3d 93 (2020) (“That [Contract Clause] impairment-of-contract analysis applies 

to all categories of PERS members, even though OPSRP members are subject to 

a legislative reservation of rights that does not apply to Tier One and Tier Two 

members.” (Emphasis added.)); see also Moro v. State of Oregon, 357 Or 167, 218, 

351 P3d 1 (2015) (“[R]espondents rely on a reservation of rights provision, ORS 

238A.470, that the legislature applied to OPSRP members but not to Tier One 

and Tier Two members.”). Thus, we do not address that argument further.
730 Meister v. PERB

terms of the statutory PERS contract are a matter of legislative intent and only statutory terms that ‘unambiguously 

evince[] an underlying promissory, contractual legislative 

intent’ become a part of the statutory PERS contract.” Arken 

v. City of Portland, 351 Or 113, 136, 263 P3d 975, adh’d to 

on recons sub nom, Robinson v. Public Employees Retirement 

Board, 351 Or 404, 268 P3d 567 (2011) (quoting Hughes, 314 

Or at 26 (second brackets in Arken)); see also Moro, 357 Or 

at 202 (“[T]he standard of clear and unmistakable contractual intent applies to both the question of whether there is 

an offer to form a contract and also to whether a particular provision is a term of that offer.”). Not every provision 

in the PERS statutes is a term of the PERS contract, and 

the Supreme Court has set out two principles to guide the 

inquiry:

“First, because the PERS offer promises remunerative 

pension benefits as compensation for employment, the offer 

may include provisions that define the eligibility for benefits or the scope of benefits. ***

“** * [T]he PERS offer does not necessarily include 

those administrative aspects of PERS as compensation for 

employment.

“Second, not all remunerative provisions are terms of 

the PERS offer. Instead, a remunerative provision will 

be a term of the offer only if it is mandatory, rather than 

optional or discretionary.”

Moro, 357 Or at 204-05.

Here, the parties generally agree that the PERS 

contract with plaintiff, a Tier One member of PERS, included 

a term that his lump-sum payment for vacation leave and 

comp-time would be included as salary for the purposes of 

calculating plaintiff’s final average salary to determine his 

retirement benefit.5 See ORS 238.435(1) (For persons who 

established PERS membership after January 1, 1996, as 

provided in ORS 238.430, “[PERB] shall not include any 

lump sum payment for accrued vacation pay made to the 

member during the last 36 calendar months of membership 

5 Neither plaintiff nor PERB has suggested that plaintiff’s comp-time payment is required to be treated any differently than his vacation-leave payment. 

As a result, we do not distinguish those payments in our analysis.
Cite as 334 Or App 725 (2024) 731

***.”); OAR 459-005-0001(32)(b)(B) (“For a Tier One member, a lump sum payment for accrued vacation pay is considered salary: * ** In determining final average salary for the 

purpose of calculating PERS benefits.”). Plaintiff, however, 

asserts further that the contract term is that his accrued 

vacation leave and comp-time itself is part of the definition 

of “salary” for purposes of calculating his PERS benefits. 

Plaintiff does not explain how he arrives at that conclusion, 

and as explained below, we reject it.6

We start with a discussion of the statutes at issue, 

because they define the terms of the PERS contract with 

plaintiff. See, e.g., Moro, 357 Or at 205, 210 (analyzing the 

wording of the PERS statutes to determine the contract 

terms). The plain text of the definition of “salary” in ORS 

238.005(26)(a) does not support plaintiff’s assertion that 

“salary” included his accrued vacation leave and comp-time. 

Instead, the definition of salary includes only “renumeration 

* * * in cash.” (Emphasis added.) That statute provides, as 

relevant here:

“‘Salary’ means the remuneration paid an employee 

in cash out of the funds of a public employer in return 

for services to the employer, plus the monetary value, as 

determined by the Public Employees Retirement Board, of 

whatever living quarters, board, lodging, fuel, laundry and 

other advantages the employer furnishes the employee in 

return for services.”

ORS 238.005(26)(a).7 That definition of salary has been in 

place since before plaintiff’s hire date in 1991. See former

6 Two of the cases cited by plaintiff do not assist his argument, because those 

cases concerned the terms contained in an employment contract and not the 

terms of the PERS contract as expressed in the PERS statutes. Furthermore, 

those cases addressed circumstances not at issue here. See Harryman v. Roseburg 

Fire Dist., 244 Or 631, 420 P2d 51 (1966) (holding that an employer could not 

revoke a contract term that had allowed payout of unused accumulated sick leave 

upon termination of employment with respect to already earned leave); Brett v. 

City of Eugene, 130 Or App 53, 880 P2d 937 (1994), rev den, 320 Or 507 (1995) 

(holding that an employer could apply a prospectively unilateral modification 

that capped the number of hours of leave an employee could accrue). With respect 

to Oregon State Police Officers’ Assn. v. State of Oregon, 323 Or 356, 918 P2d 765 

(1996), abrogated by Moro v. State of Oregon, 357 Or 167, 351 P3d 1 (2015), the 

Supreme Court disavowed the reasoning employed by that case it its entirety, and 

we will not rely on it here. See Moro, 357 Or at 225.

7 For the first time at oral argument, plaintiff asserted that “other advantages” could include plaintiff’s vacation leave or comp-time. We reject that 
732 Meister v. PERB

ORS 237.003(8)(a) (1991), renumbered as ORS 238.005 (1995). 

When plaintiff accepted the offer of the PERS contract by 

working, plaintiff was accepting the offer that any renumeration in cash that he received for his public service would 

be “salary.” For Tier One members, that includes lump-sum 

payments made by public employers to their employees for 

accrued leave, because such a payment is “remuneration 

paid an employee in cash,” and is not subject to the exclusion 

that applies to Tier Two members under ORS 238.435(1). 

At no time did the statutory definition of salary contain a 

contract offer to plaintiff that his accrued vacation leave 

and comp-time would be considered salary before they were 

paid out in cash to plaintiff. That is, plaintiff’s accrued leave 

itself was not a retirement benefit.

Likewise, “final average salary” for purposes of computing retirement benefits includes “salary” that is “paid” to 

the employee. Final average salary is defined as the greater 

of:

“(a) The average salary per calendar year paid by one 

or more participating public employers to an employee who 

is an active member of the system in three of the calendar 

years of membership before the effective date of retirement 

of the employee, in which three years the employee was 

paid the highest salary. ***.

“(b) One-third of the total salary paid by a participating public employer to an employee who is an active member of the system in the last 36 calendar months of active 

membership before the effective date of retirement of the 

employee.”

ORS 238.005(9). Here, PERS applied ORS 238.005(9)(b) 

as the provision providing the greatest benefit to plaintiff. 

Under that provision, retirement benefits are computed 

by determining the “salary paid by a participating public 

employer” to the PERS member during the relevant time 

frame. That statute does not contain an offer to include 

accrued vacation leave or comp-time in the PERS retirement 

argument both because it was not timely raised and because it conflicts with our 

long-standing case law. See Oreg. Fire/Police Retire. v. PERB, 62 Or App 777, 783, 

662 P2d 729, adh’d to on recons, 65 Or App 465, 671 P2d 729 (1983), rev den, 296 

Or 464 (1984) (“other advantages” refers to like-kind consumable items to “living 

quarters, board, lodging, fuel, laundry”). 
Cite as 334 Or App 725 (2024) 733

benefit calculation that is not paid as salary, as that term is 

defined in ORS 238.005(26).

Having identified the contract term, we turn to identifying the precise obligation that term imposes, because “[i]

t is those obligations that set the conditions that the legislature may not in the future alter without consequences.” 

Strunk, 338 Or at 201. Here, the obligation is straightforward based on the foregoing discussion: PERS was obligated 

to include plaintiff’s January 2020 lump-sum payment as 

“salary” in calculating his final average salary. PERS did 

that. However, plaintiff argues that the salary cap cannot 

apply, because the lump-sum payment was attributable to 

work he performed before January 1, 2020. The problem with 

plaintiff’s argument is that it does not grapple with the precise contours of the PERS contract term at issue here, which 

was that plaintiff was entitled to have lump-sum payments 

for accrued leave (that was paid to plaintiff during the relevant time) included as salary for purposes of calculating his 

retirement benefits. There was no salary to include in the 

calculation until plaintiff earned the salary—that is, until 

plaintiff earned the lump-sum payment—by terminating 

his employment while he had accrued unused leave that his 

employer had agreed would be paid out to plaintiff upon termination. The employer here fulfilled that agreement with 

plaintiff and paid out that leave on January 31, 2020. And, 

as provided by the contract term, PERS included that payment as salary in the calculation of his final average salary 

as salary paid to plaintiff in January 2020.

As we see it, the only remaining question in this case 

is whether the contract term included an obligation to not 

apply the January 2020 definition of salary to that January 

31, 2020, lump-sum payment. The Supreme Court answered 

that question in the negative in James. In that case, the 

court addressed a facial challenge under Article I, section 

21, to the salary cap. After determining that the salary cap 

applied only prospectively, the court addressed whether the 

pre-amendment definition of salary was an irrevocable term 

of the PERS contract. The court concluded that it was not, 

because a final average salary is not a type of benefit offer 

that takes time to complete the acceptance; rather, it is a 
734 Meister v. PERB

benefit “which ‘accrues incrementally as a PERS member 

renders additional service to his or her employer.’” James, 

366 Or at 755 (quoting Moro, 357 Or at 224). Plaintiff has 

not asserted an argument that would lead us to a different 

result than the one reached in James.

In sum, we conclude that PERS’s application of the 

salary cap to plaintiff’s January 2020 salary, which included 

a lump-sum payment for accrued vacation leave and comptime, was not an impairment of contractual obligations in 

violation of Article I, section 21.

Affirmed.