Title: Alameda County Deputy Sheriff's Ass'n v. Alameda County Employees' Retirement Ass'n
Citation: N/A
Docket Number: S247095
State: California
Issuer: California Supreme Court
Date: July 30, 2020

IN THE SUPREME COURT OF 
CALIFORNIA 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSOCIATION 
et al.,  
Plaintiffs and Appellants,  
v. 
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT 
ASSOCIATION et al.,  
Defendants and Respondents; 
STATE OF CALIFORNIA et al.,  
Interveners and Appellants. 
* * * * 
 
CONTRA COSTA COUNTY DEPUTY SHERIFF’S 
ASSOCIATION et al.,  
Plaintiffs and Appellants,  
v. 
CONTRA COSTA COUNTY EMPLOYEES’ RETIREMENT 
ASSOCIATION et al.,  
Defendants and Respondents; 
STATE OF CALIFORNIA et al.,  
Interveners and Appellants. 
* * * * 
 
 
AMERICAN FEDERATION OF STATE, COUNTY AND 
MUNICIPAL EMPLOYEES et al.,  
Plaintiffs and Appellants,  
v. 
MERCED COUNTY EMPLOYEES’ RETIREMENT 
ASSOCIATION et al.,  
Defendants and Respondents; 
STATE OF CALIFORNIA et al.,  
Interveners and Appellants. 
 
S247095 
 
First Appellate District, Division Four 
A141913 
 
Alameda County Superior Court 
RG12658890 
Contra Costa County Superior Court 
MSN12–1870 
Merced County Superior Court 
CV003073 
 
 
 
 
July 30, 2020 
 
Chief Justice Cantil-Sakauye authored the opinion of the 
Court, in which Justices Chin, Corrigan, Liu, Cuéllar, Kruger,  
and Groban concurred. 
 
Justice Cuéllar filed a concurring opinion. 
 
 
1 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v. 
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
S247095 
 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
 
The California Public Employees’ Pension Reform Act of 
2013 (PEPRA; Stats. 2012, ch. 296, § 1) substantially revised the 
laws governing the pension plans of the state’s public 
employees.  In a prior decision, Cal Fire Local 2881 v. California 
Public Employees’ Retirement System (2019) 6 Cal.5th 965 (Cal 
Fire), we rejected a constitutional challenge to one change 
effected by PEPRA, the elimination of the opportunity for public 
employees to purchase “additional retirement service credit” 
under Government Code section 20909.  The present decision 
addresses legal issues raised by a different provision of PEPRA, 
which amended the County Employees Retirement Law of 1937 
(CERL; Gov. Code, § 31450 et seq.).1 
CERL governs the pension systems maintained by many 
of the state’s counties.  Each county system is administered by 
                                        
1  
Unless indicated otherwise, all further statutory citations 
are to the Government Code. 
We use the abbreviation “PEPRA” in its popular sense to 
refer to Assembly Bill No. 340 (2011-2012 Reg. Sess.) (Assembly 
Bill 340), which enacted the amendment under consideration 
here.  (Stats. 2012, ch. 296, § 28.)  Assembly Bill 340 formally 
gave the name “California Public Employees’ Pension Reform 
Act of 2013” only to newly added article 4 of Chapter 21 of the 
Government Code, which spans sections 7522 – 7522.74.  (Stats. 
2012, ch. 296, § 15.) 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
2 
its own retirement board, which is tasked with implementing 
CERL’s provisions.  Under CERL, the amount of an employee’s 
pension benefit is determined as a percentage of the 
“compensation earnable” received by the employee during a 
representative year of county employment.  Even before PEPRA, 
CERL expressly excluded overtime pay from compensation 
earnable and limited the inclusion of payments from a deferred 
compensation plan.  The PEPRA provision at issue here 
amended CERL’s definition of compensation earnable to exclude 
or limit the inclusion of additional types of compensation in an 
effort to prevent perceived abuses of the pension system.  
Although this amendment applies to the calculation of the 
pensions of all employees covered by CERL, the parties agree 
that the issues raised in this appeal relate only to the 
amendment’s impact on the pensions of persons who were first 
employed by a county prior to the effective date of PEPRA, 
referred to as “legacy employees.” 
This challenge to PEPRA’s amendment of CERL raises 
two sets of issues.  First, the Alameda County Deputy Sheriff’s 
Association (Association) and its coplaintiffs (collectively, 
plaintiffs) contend that employees in the three counties involved 
in this matter have a contractual right to receive pension 
benefits calculated without regard to PEPRA’s changes, a right 
based either on (1) agreements in effect when PEPRA was 
enacted or (2) application of the doctrine of equitable estoppel.2  
                                        
2  
As explained below, this matter resulted from the 
consolidation of three separate lawsuits filed by organizations 
representing employees of Alameda, Contra Costa, and Merced 
Counties.  Among the plaintiffs in these actions, only those in 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
3 
Long prior to the passage of PEPRA, employees in each of these 
counties had entered into litigation settlement agreements with 
their respective retirement boards that specify the types of 
compensation included in compensation earnable.  In some 
cases, the provisions added by PEPRA conflict with the terms of 
these 
agreements, 
excluding 
or 
restricting 
items 
of 
compensation that the agreements require to be included in 
compensation earnable.  Plaintiffs argue that these agreements 
confer on existing employees the contractual right to continue to 
include these items of compensation in their pensionable 
compensation, 
notwithstanding 
their 
exclusion 
by 
the 
provisions added by PEPRA, or, alternatively, that the counties 
are equitably estopped from implementing the PEPRA 
amendment in a manner inconsistent with the agreements.  In 
turn, Central Contra Costa Sanitary District (District) and the 
State of California (State) (collectively, defendants) respond that 
the retirement boards are required to implement the provisions 
of CERL, including PEPRA’s amendment, notwithstanding any 
contrary agreements they might have entered into with county 
employees.3 
                                        
the Alameda County action petitioned this court for review of 
the Court of Appeal’s decision.  The plaintiffs in the Contra 
Costa and Merced actions filed respondents’ briefs in this court 
advancing positions similar to those of the Association and its 
coplaintiffs. 
3  
In addition to the petition for review filed by the 
Association, we granted petitions for review filed by both the 
District and the State.  The District had been joined as a 
defendant in the Contra Costa County action because its 
employees participate in a CERL pension plan.  Although not 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
4 
Wholly apart from these ordinary contract issues, 
plaintiffs also contend that county employees who began their 
work prior to PEPRA’s enactment have a constitutional right to 
receive pension benefits calculated according to the law as it 
existed prior to PEPRA.  Since at least the middle of the last 
century, our precedents have granted constitutional protection 
to public employee pension plans.  Under the “California Rule,” 
as it has come to be known (Cal Fire, supra, 6 Cal.5th at p. 971), 
the contract clause of the state Constitution requires any 
modification of public employee pension plans to satisfy a 
standard established in a long line of California Supreme Court 
decisions, including most prominently Allen v. City of Long 
Beach (1955) 45 Cal.2d 128 (Allen I).  As explained below, in 
determining the constitutional validity of a modification to a 
public employee pension plan, Allen I requires a court first to 
determine whether the modification imposes disadvantages on 
affected employees, relative to the preexisting pension plan, 
and, if so, whether those disadvantages are accompanied by 
comparable new advantages.  Assuming the disadvantages are 
not offset in this manner, the court must then determine 
whether the agency’s purpose in making the changes was 
sufficient, for constitutional purposes, to justify an impairment 
of pension rights.  Public employee pension plans may be 
modified “for the purpose of keeping [the] pension system 
flexible to permit adjustments in accord with changing 
conditions and at the same time maintain the integrity of the 
system,” but to survive contract clause scrutiny, such changes 
                                        
initially a party, the State was permitted to intervene in all 
three of the consolidated actions to defend PEPRA. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
5 
“must bear some material relation to the theory of a pension 
system and its successful operation.”  (Id. at p. 131.)  Finally, 
assuming 
the 
changes 
occurred 
for 
a 
constitutionally 
permissible purpose, we interpret Allen I to require the 
modification to provide comparable new advantages to public 
employees unless to do so would undermine, or would otherwise 
be inconsistent with, that proper purpose. 
Invoking the contract clause, plaintiffs argue that persons 
employed by a county at the time of PEPRA’s enactment 
possessed implied contractual rights in the pre-PEPRA terms of 
CERL that are protected against impairment.  Because 
PEPRA’s amendment has the practical effect of diminishing 
some employees’ pension benefits without granting any 
comparable new advantages, plaintiffs contend, its application 
to the pensions of existing employees is precluded by the 
California Rule.  In turn, defendants respond that (1) PEPRA’s 
amendment did not trigger constitutional scrutiny because its 
provisions constituted a clarification, rather than a modification 
of CERL, and, alternatively, (2) any changes met the 
requirements of the California Rule. 
With regard to the ordinary contract issues, we hold that 
county employees have no express contractual right to the 
calculation of their pension benefits in a manner inconsistent 
with the terms of the PEPRA amendment.  Because the county 
retirement boards are required to implement CERL as enacted 
by the Legislature, the settlement agreements, which are silent 
on this issue, must be interpreted to permit the modification of 
board policies to accommodate statutory changes to CERL.  In 
addition, we conclude that plaintiffs have failed to demonstrate 
the elements necessary for the invocation of equitable estoppel.  
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
6 
In particular, there is no evidence that the county boards made 
any representations regarding the continued enforceability of 
the terms of the settlement agreements in the event of 
inconsistent legislative changes to the controlling statutory 
provisions. 
With regard to the constitutional question, we reject 
defendants’ threshold argument that no constitutional issue is 
presented here because the exclusions and limitations from 
compensation earnable imposed by PEPRA did not constitute a 
change in the law governing CERL pension benefits.  Although 
the inclusion in compensation earnable of the elements of 
compensation excluded by PEPRA had not been specifically 
addressed when the amendment was enacted, either in CERL 
itself or its judicial interpretations, the more general law of 
compensation earnable was sufficiently settled prior to PEPRA 
to justify treating the amendment as a change in the law for 
purposes of contract clause analysis.  With respect to the merits 
of plaintiffs’ constitutional claim, however, we hold that the 
challenged provisions added by PEPRA meet contract clause 
requirements.  They were enacted for the constitutionally 
permissible purpose of closing loopholes and preventing abuse 
of the pension system in a manner consistent with CERL’s 
preexisting structure.  Further, it would defeat this proper 
objective to interpret the California Rule to require county 
pension plans either to maintain these loopholes for existing 
employees or to provide comparable new pension benefits that 
would perpetuate the unwarranted advantages provided by 
these loopholes. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
7 
I.  BACKGROUND 
CERL establishes an optional employee pension system 
for county adoption.  Of our state’s 58 counties, 20 have chosen 
to implement their pension plans under CERL.  (Irvin v. Contra 
Costa 
County 
Employees’ 
Retirement 
Assn. 
(2017) 
13 Cal.App.5th 162, 169, fn. 6.)  The remaining counties either 
operate an independent retirement system or contract with the 
state’s pension plan, the Public Employees’ Retirement System 
(CalPERS; § 20000 et seq.).  (Irvin, at p. 169, fn. 6.)  Because the 
legislation at issue here applies only to CERL, the pensions of 
persons employed by counties that do not participate in CERL 
are not directly affected by our decision.  For convenience, our 
subsequent references to “counties” and “county employees” in 
this decision should be understood to refer only to counties that 
maintain a pension plan under CERL and persons employed by 
those counties. 
In addition, as noted above, the arguments raised by the 
parties apply only to county employees who were employed prior 
to PEPRA’s effective date.  PEPRA made substantial changes in 
the law applicable to the pensions of public employees hired 
after its effective date that are not applicable to the pensions of 
legacy public employees, but none of those changes is at issue 
here.  Again for convenience, unless stated otherwise, references 
to “county employees” in the remainder of this decision include 
only persons who were first employed by a county prior to 
PEPRA’s effective date.  Similarly, our description of the 
provisions of CERL addresses only those provisions applicable 
to such legacy employees.  Employees hired post-PEPRA are 
often subject to alternate statutory provisions, and, as a general 
matter, we do not address those provisions. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
8 
A. County Employee Pensions Under CERL  
CERL contains a collection of alternative pension 
provisions tailored to individual counties and subsets of workers 
within those counties.  (See, e.g., §§ 31486, 31487, 31496, 31499, 
31511, 31676.01–31676.19.)  Notwithstanding this tailoring, the 
county plans are identical in their general approach, although 
the details in the following description vary among them. 
Each 
county 
maintains 
its 
own 
pension 
plan, 
administered by a retirement board whose general membership 
is dictated by statute.  (§§ 31520, 31520.1; see Lexin v. Superior 
Court (2010) 47 Cal.4th 1050, 1095–1096 [discussing the 
composition of retirement boards].)  Under the California 
Constitution, such retirement boards have “plenary authority 
and fiduciary responsibility for investment of moneys and 
administration of the system.”  (Art. XVI, §17.)  Both the county 
and its employees must make regular contributions to their 
plan’s pension fund in amounts determined by the county board 
of supervisors, upon recommendation of the retirement board.  
(§§ 31453, 31453.5, 31454, 31621.) 
In general terms, a county employee becomes eligible to 
retire after he or she has worked for the county for at least ten 
years and has attained the age of 55, although the county board 
of supervisors has the discretion to lower the minimum age of 
retirement to 50 years.  (§ 31672, subd. (a).)  Once vested county 
employees reach the minimum retirement age, they may elect 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
9 
to retire and begin receiving monthly retirement benefits.4  
(§ 31672, subd. (a).) 
CERL contains a series of statutory benefit schedules that 
may be adopted by a participating county.  (§§ 31676.01–
31676.19.)  These schedules determine the amount of a retiring 
employee’s pension benefit, which is calculated on the basis of 
the employee’s (1) age at retirement, (2) years of service, and 
(3) final compensation.  Final compensation, explained further 
below, is roughly equivalent to the employee’s annual 
compensation, and it depends directly on “compensation 
earnable,” the statutory term amended by PEPRA.  Under one 
typical schedule, for example, a retiring employee will receive 
an annual pension benefit equal to one-sixtieth of his or her final 
compensation for each year of county employment, multiplied by 
                                        
4  
As explained in Cal Fire, supra, 6 Cal.5th 965, use of the 
term “vested” is potentially confusing here because the term is 
used in two different ways in discussing pensions.  (Id. at p. 972, 
fn. 3.)  County employees become eligible to receive a pension 
after ten years of county employment.  (§ 31672, subd. (a).)  Once 
an employee has become qualified to receive a pension by 
satisfying this minimum service requirement, he or she is said 
to be “vested” with respect to the receipt of a pension.  That is 
not the same as having a “vested right” in a particular pension 
benefit.  The term “vested right” has come to refer to a benefit of 
public employment whose repeal or other divestment is 
constrained by the constitutional contract clause.  (Cal Fire, at 
p. 972, fn. 3.)  To further compound the confusion, “vested right” 
means different things in other legal contexts.  (E.g., Avco 
Community Developers, Inc. v. South Coast Regional Com. 
(1976) 17 Cal.3d 785, 791 (Avco) [“vested right” to pursue a 
permitted real estate development].) 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
10 
a number derived from a table in the statute.5  (§ 31676.1.)  That 
number is determined by the employee’s age at retirement and 
increases gradually with retirement age, reaching a maximum 
for retirement at age 65.  (Ibid.)  This last calculation leads an 
employee who retires at a more advanced age to receive a 
greater pension benefit than a similarly situated employee who 
retires at a younger age. 
As this description demonstrates, a county employee’s 
final compensation is a critical factor in determining the amount 
of his or her pension benefit, because the benefit is calculated as 
a percentage of final compensation.  All other things being 
equal, the greater an employee’s final compensation, the greater 
will be the monthly pension benefit. 
B.  Compensation Earnable 
 
At issue in this matter is PEPRA’s amendment of section 
31461, the CERL provision defining the term “compensation 
earnable.”  Final compensation, which factors directly into the 
                                        
5  
Pension benefits under CERL are composed of two 
elements, a “service retirement annuity” and a “current service 
pension.”  (§§ 31673-31675; O’Neal v. Stanislaus County 
Employees’ Retirement Assn. (2017) 8 Cal.App.5th 1184, 1199.)  
Our example does not discuss the distinction between these two 
elements because it appears to make no practical difference in 
the size of an employee’s pension benefit.  Under the benefit 
schedules, the amount of the current service pension is 
calculated to result in an identical pension benefit for employees 
with identical circumstances of retirement, without regard to 
the respective size of their service retirement annuities.  (E.g., 
§§ 31676.01, 31676.1 [current service pension is calculated so 
that, “when added to the service retirement annuity,” the total 
pension benefit will have a particular value].) 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
11 
pension benefit calculation, is statutorily defined as an 
employee’s annual compensation earnable, received either in a 
single specific year or calculated as an average over three 
specific years.6  (§§ 31462, 31462.1; Ventura County Deputy 
Sheriffs’ Assn. v. Board of Retirement (1997) 16 Cal.4th 483, 499 
(Ventura County).)  The basis for a county employee’s pension 
benefit is therefore the annual compensation earnable received 
by the employee in the period during which final compensation 
is determined. 
Compensation earnable, in turn, is defined in section 
31461 as the employee’s “average compensation . . . for the 
period under consideration upon the basis of the average 
number of days ordinarily worked by persons in the same grade 
or class of positions during the period, and at the same rate of 
pay.  The computation for any absence shall be based on the 
compensation of the position held by the member at the 
beginning of the absence.”7  (§ 31461, subd. (a).)  For purposes of 
this definition, “compensation” is statutorily defined as the 
employee’s “remuneration paid in cash . . . but does not include 
                                        
6  
The three-year average governs unless the county board of 
supervisors affirmatively elects the single year alternative.  
(§§ 31462, 31462.1, subd. (a)(2).)  In either case, the retiring 
employee is entitled to designate the year or years to be used in 
calculating final compensation.  (§§ 31462, 31462.1.) 
7  
CERL 
contains 
a 
few 
alternative 
definitions 
of 
compensation earnable applicable in specific circumstances.  
(See, e.g., §§ 31461.1, 31461.4, 31461.45 [all applicable only to 
Los Angeles County; see §§ 28020, 28022]; 31461.2 [applicable 
only to certain administrators and coroners].)  We are concerned 
here only with the generally applicable definition, which is 
found in section 31461, subdivision (a). 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
12 
the monetary value of board, lodging, fuel, laundry, or other 
advantages furnished to a member.”  (§ 31460.)  Since the 1990s, 
CERL has provided that an employee’s contributions to a 
deferred compensation plan are included in compensation 
earnable in the year of the contribution, rather than the year in 
which the sums are withdrawn from the plan.  (§§ 31460, 31461; 
see Ventura County, supra, 16 Cal.4th at p. 491.)  Further, 
compensation earnable has long been held not to include 
overtime pay.  (See Guelfi v. Marin County Employees’ 
Retirement Assn. (1983) 145 Cal.App.3d 297, 306–307 (Guelfi) 
[“overtime pay is not ‘compensation earnable’ and thus is not to 
be included in computing . . . ‘final compensation’ ”].)  Since 
2000, overtime premium pay has been expressly excluded from 
compensation earnable in most circumstances by section 
31461.6.  (Stats. 2000, ch. 966, § 3.) 
As our quotation from section 31461 suggests, CERL’s 
definition of compensation earnable is both very general and 
somewhat inscrutable.  (See Ventura County, supra, 16 Cal.4th 
at p. 493 [sections 31460 and 31461 are “ambiguous in some 
respects”].)  After an extensive examination of the language and 
legislative 
history, 
we 
held 
in 
Ventura 
County 
that 
“ ‘compensation earnable’ is the average pay of the individual 
retiring employee computed on the basis of the number of hours 
worked by other employees in the same class and pay rate — 
that is[,] the average monthly pay, excluding overtime, received 
by the retiring employee for the average number of days worked 
in a month by the other employees in the same job classification 
at the same base pay level.”  (Id. at p. 504.)  Accordingly, to 
calculate compensation earnable, section 31461 uses a retiring 
employee’s personal daily rate of pay, while it looks to the 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
13 
number of days “ordinarily” worked by comparable employees — 
that is, “persons in the same grade or class of positions during 
the period, and at the same [base] rate of pay” (id., subd. (a)) — 
to determine the number of workdays over which that rate of 
pay is applied.  As a practical matter, a retiring employee’s final 
compensation is the annual compensation the employee would 
have received had he or she worked the average number of days 
ordinarily worked by his or her peers during the final 
compensation period.  To find final compensation, a county 
retirement board is presumably required to determine the 
employee’s compensation during the final compensation period, 
divide that figure by the days worked by the employee in that 
time to determine his or her average daily rate of pay, and then 
multiply that rate by “the average [annual] number of days 
ordinarily worked” (ibid.) by the employee’s peers during the 
final compensation period.8 
Determining 
the 
components 
of 
an 
employee’s 
compensation that are included in compensation earnable has 
been a recurring issue in the implementation of CERL.  The 
compensation of many county employees, particularly including 
public safety workers like the members of the Association, 
consists of a base salary augmented by a series of employee-
                                        
8 
This is the manner in which at least one county retirement 
board does calculate final compensation.  (See, e.g., Orange 
County Employees Retirement System Compensation Earnable 
Policy (Mar. 18, 2019), at p. 4 [using hours worked rather than 
days worked] <https://www.ocers.org/sites/main/files/ 
file-attachments/compensationearnablepolicy_1.pdf> [as of July 
30, 2020]; all Internet citations in this opinion are archived by 
year, 
docket 
number, 
and 
case 
name 
at 
.) 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
14 
specific add-ons to recognize, for example, special training, 
experience, or hazardous duty.  Prior to our decision in Ventura 
County, many county retirement boards were guided by Guelfi, 
supra, 145 Cal.App.3d 297, which held that compensation 
earnable does not include such add-ons unless they are paid to 
all of an employee’s peers.  Guelfi also held that the value of in-
kind advantages provided to an employee is excluded from 
compensation earnable, even if the employee is paid the cash 
value of the advantage rather than receiving it in-kind.  (Id. at 
pp. 303–304.)  Ventura County disapproved both of these aspects 
of Guelfi, holding that the statutory definition of “compensation” 
in section 31460 includes all cash compensation paid to an 
employee, regardless whether the cash represented the value of 
an in-kind benefit or constituted premium pay not received by 
all of the employee’s peers.  (Ventura County, supra, 16 Cal.4th 
at pp. 496–499.)  Because such “compensation” is the basis for 
compensation earnable, these general holdings from Ventura 
County have guided the determination of compensation 
earnable under CERL since the decision’s issuance in 1997. 
C.  PEPRA 
The Legislature viewed PEPRA as a “comprehensive” 
reform of California’s public pension systems.  (Sen. Rules Com., 
Off. of Sen. Floor Analyses, Analysis of Assem. Bill No. 340 
(2011–2012 Reg. Sess.) Aug. 28, 2012, p. 8.)  Many of PEPRA’s 
provisions were based on a reform proposal published by 
Governor Edmund G. Brown, Jr. in October 2011.9  Its 
                                        
9  
A copy of Governor Brown’s “Twelve Point Pension Reform 
Plan,” which is dated October 27, 2011, is posted on the 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
15 
centerpiece was a new pension plan applicable only to newly 
hired public employees that is “less expansive, and therefore 
less burdensome for the state and local governments, than the 
plans covering then-existing public employees.”  (Cal Fire, 
supra, 6 Cal.5th at pp. 974–975.)  But PEPRA also modified 
some statutes governing the pensions of existing employees (Cal 
Fire, at p. 975) and incorporated provisions from separately 
pending legislation that were not a part of the governor’s 
proposal.  One of those provisions was the amendment at issue 
in this matter.10 
                                        
California 
government 
website 
at 
<https://www.ca.gov/archive/gov39/wp-content/uploads/2017/ 
09/Twelve_Point_Pension_Reform_10.27.11.pdf> [as of July 30, 
2020]. 
10  
As explained in a contemporary Senate bill analysis, “The 
comprehensive pension reform proposal . . . is based on the 
Governor’s 12-Point Pension Reform Plan.  [¶]  The Conference 
Committee Report includes 10 of the 12 points included in the 
Governor’s plan. . . .  Additionally, in order to achieve the goal 
of comprehensive reform, included are some pension reform 
changes found in bills going through the Legislature this session 
that were not included as part of the Governor’s plan.”  (Sen. 
Rules Com., Off. of Sen. Floor Analyses, Analysis of Assem. Bill 
No. 340 (2011-2012 Reg. Sess.) Aug. 28, 2012, pp. 7-8.)  Rather 
than arising in the governor’s reform proposal, however, the 
provision of PEPRA under consideration here originated in an 
earlier version of Assembly Bill 340 and was retained 
throughout the legislative process.  (Assem. Bill No. 340, Final 
Hist. (2011-2012 Reg. Sess.); see Assem. Bill No. 340, as 
amended April 25, 2011; Sen. Rules Com., Off. of Sen. Floor 
Analyses, Analysis of Assem. Bill No. 340 (2011-2012 Reg. Sess.) 
Aug. 28, 2012.) 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
16 
The present amendment, applicable to the pensions of 
both legacy and new employees, added a subdivision to the 
definition of compensation earnable in section 31461.11  (Stats. 
                                        
11  
In the text, we often refer to this provision of PEPRA as 
“the PEPRA amendment.” 
Subdivision (b) of section 31461, added by the PEPRA 
amendment, provides: 
“(b) ‘Compensation earnable’ does not include, in any case, 
the following: 
“(1) Any compensation determined by the board to have 
been paid to enhance a member’s retirement benefit under that 
system. That compensation may include: 
“(A) Compensation that had previously been provided in 
kind to the member by the employer or paid directly by the 
employer to a third party other than the retirement system for 
the benefit of the member, and which was converted to and 
received by the member in the form of a cash payment in the 
final average salary period. 
“(B) Any one-time or ad hoc payment made to a member, 
but not to all similarly situated members in the member’s grade 
or class. 
“(C) Any payment that is made solely due to the 
termination of the member’s employment, but is received by the 
member while employed, except those payments that do not 
exceed what is earned and payable in each 12-month period 
during the final average salary period regardless of when 
reported or paid. 
“(2) Payments for unused vacation, annual leave, personal 
leave, sick leave, or compensatory time off, however 
denominated, whether paid in a lump sum or otherwise, in an 
amount that exceeds that which may be earned and payable in 
each 12-month period during the final average salary period, 
regardless of when reported or paid. 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
17 
2012, ch. 296, § 28.)  New subdivision (b) excludes entirely from 
compensation earnable two types of compensation and limits the 
amount of two other types of compensation that can be included 
in any 12-month period during the final compensation period.  
(§ 31461, subd. (b).)  As a result of the amendment, 
compensation earnable now excludes any compensation 
determined by the local retirement board to have been paid to 
enhance a member’s retirement benefit (id., subd. (b)(1)) and 
any compensation for services rendered outside normal working 
hours (id., subd. (b)(3)).  In addition, compensation for the 
surrender of unused paid time off, such as vacation and sick 
leave, and payments made at termination of employment, which 
often also constitute compensation for unused leave time, can be 
included in compensation earnable only to the extent the leave 
time was “earned and payable” in any 12-month period during a 
final compensation year.12  (§ 31461, subd. (b)(2) & (b)(4).)  Soon 
after PEPRA was adopted, related legislation added subdivision 
(c) to section 31461, which clarifies that the “terms of 
subdivision (b) are intended to be consistent with . . . the 
holdings in Salus v. San Diego County Employees Retirement 
                                        
“(3) Payments for additional services rendered outside of 
normal working hours, whether paid in a lump sum or 
otherwise. 
“(4) Payments made at the termination of employment, 
except those payments that do not exceed what is earned and 
payable in each 12-month period during the final average salary 
period, regardless of when reported or paid.” 
12  
The words “and payable” were added to section 31461, 
subdivision (b)(2) by a separate bill passed soon after PEPRA.  
The same bill added subdivision (c) to section 31461.  (Stats. 
2012, ch. 297, § 2.) 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
18 
Association (2004) 117 Cal.App.4th 734 and In re Retirement 
Cases (2003) 110 Cal.App.4th 426.”  (Stats. 2012, ch. 297, § 2.) 
A bill analysis prepared in connection with the pre-
PEPRA version of Assembly Bill 340 explained that the purpose 
of these changes was to circumscribe CERL’s “very broad and 
general definition of ‘compensation earnable’ ” in order to reduce 
pension “ ‘spik[ing],’ ” the manipulation of an employee’s pattern 
of work and pay to produce inflated compensation earnable 
during the final compensation period.  (Assem. Comm. on Public 
Employees, Retirement and Social Security, Analysis of Assem. 
Bill No. 340 (2011–2012 Reg. Sess.) Apr. 25, 2011, p. 3.) 
A review of the exclusions and limitations in PEPRA’s 
amendment of section 31461 demonstrates that the Legislature 
sought to limit pension spiking by eliminating practices that, 
while arguably permitted under the broad language of the 
preexisting definition, are inconsistent with the statute’s overall 
concept of compensation earnable.  Subdivision (b)(1) excludes 
compensation found by a retirement board to have been “paid to 
enhance a member’s retirement benefit.”  In a properly 
operating employment setting, compensation received by 
employees is paid to compensate for their work; its enhancement 
of an employee’s pension benefit is merely a consequence, not an 
objective, of the compensation.  In excluding compensation 
found by the retirement board to have been paid to enhance a 
pension benefit, the Legislature appears to have been concerned 
that some employees, presumably those in positions of unusual 
authority or influence, were able to manipulate county 
compensation practices to artificially increase their cash 
compensation 
during 
the 
final 
compensation 
period.  
Subdivision (b)(1) provides three examples of the types of 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
19 
compensation that could raise an inference of improper 
payment.13  Each contemplates a departure from ordinary 
practices:  cash compensation in lieu of a benefit normally 
provided in-kind (§ 31461, subd. (b)(1)(A)), which would bring 
the value of an otherwise excluded in-kind benefit within the 
definition of compensation; a “one-time or ad hoc payment made 
to a member” but not to peers (id., subd. (b)(1)(B)); and a 
payment made “solely due to the termination of the member’s 
employment” but received while the employee is still employed 
(id., subd. (b)(1)(C)).  Because payments made upon or after 
termination of employment have been held to be outside 
compensation earnable (see In re Retirement Cases (2003) 
110 Cal.App.4th 426, 473–476 (Retirement Cases)), this would 
also make pensionable a form of compensation otherwise 
excluded from compensation earnable. 
New subdivision (b)(3) of section 31461 excludes payments 
for “additional services rendered outside of normal working 
hours” from compensation earnable.  An often-cited example of 
such compensation is on-call duty pay, which is provided to 
                                        
13  
The PEPRA amendment does not require exclusion solely 
because an item of compensation fits within one of these 
examples.  Instead, they illustrate the type of practices that 
raise suspicion under section 31461, subdivision (b)(1).  (Ibid. 
[“That compensation may include. . . .”].)  Before it is excluded, 
an item of compensation described by subdivision (b)(1)(A) 
through (C) must be found by the county retirement board to 
have been “paid to enhance a member’s retirement benefit.”  
(§ 31461, subd. (b)(1).)  Section 31542, subdivision (a), also 
added by PEPRA (Stats. 2012, ch. 296, § 29), requires each board 
to “establish a procedure for . . . determining whether an 
element of compensation was paid to enhance a member’s 
retirement benefit.” 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
20 
employees in return for voluntarily making themselves 
available to be called to work outside their normal working 
hours.  Because such pay is cash remuneration, it is 
“compensation” under section 31460.  Yet because compensation 
earnable excludes overtime pay and is calculated on the basis of 
the days “ordinarily” worked by an employee’s peers (§ 31461, 
subd. (a)), the inclusion of payment for services provided outside 
normal hours in compensation earnable is arguably inconsistent 
with the statutory concept. 
As to new subdivision (b)(2) of section 31461, many 
counties permit employees to accumulate unused leave time, 
such as vacation days and sick leave, and to “cash out” the leave 
time at a later date by receiving the cash value of the time in 
return for its surrender.  Such leave time is earned in the year 
in which it is awarded.  Yet compensation for cashed out leave 
time becomes “compensation” for purposes of section 31460 in 
the year in which the cash value is received, which need not be 
the year in which the surrendered time was earned.  This can 
lead to a distortion of the pension calculation when leave time 
awarded in a prior year is cashed out during the final 
compensation period, since this has the effect of adding 
remuneration for a prior year’s service to the compensation 
received for service during the final compensation period.  
A similar problem arises with payments made upon termination 
of employment, excluded by section 31461, subdivision (b)(4), 
because such payments are generally also compensation for the 
surrender of accrued leave time.  By limiting the amount of 
“cash out” and termination pay that can be included in 
compensation earnable to the value of leave time “earned and 
payable in each 12-month period during the final average salary 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
21 
period” (ibid.), the Legislature appears to have intended to 
prevent 
retiring 
employees 
from, 
in 
effect, 
including 
remuneration earned during prior years in the final 
compensation calculation. 
The State points to an additional function of section 31461, 
subdivision (b)(2) and (4).  Prior to PEPRA’s amendment, even 
in counties that limited the amount of leave time that could be 
cashed out in a calendar year, employees were able to double the 
amount of cashed out leave time received during a final 
compensation year by designating a final compensation year 
that straddles two calendar years, for example, July 1 through 
June 30.  By cashing out leave time in the second half of the 
prior calendar year and the first half of the subsequent calendar 
year, a retiring employee could double the amount of cashed out 
leave time received in the final compensation year.  By limiting 
the inclusion of cashed out leave time to that “earned and 
payable” in a “12-month period,” subdivision (b)(2) and (4) 
prevent this practice. 
We emphasize that there is nothing inherently abusive in 
the practices addressed by section 31461, subdivision (b)(2) 
through (4), at least when divorced from their pension 
consequences.  Accepting voluntary on-call duty and cashing out 
unused leave time to the extent permitted by an employer are 
ordinary practices that serve proper public policy interests.  Yet 
by not expressly excluding such payments when determining a 
county employee’s pension benefit, the pre-PEPRA definition of 
compensation earnable allowed an employee to considerably 
increase his or her pension benefit by volunteering for a large 
quantity of on-call duty or by accumulating and cashing out a 
large quantity of unused leave time during the final 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
22 
compensation period.  Because such enhancements are arguably 
inconsistent with the underlying concept of compensation 
earnable, which is intended to reflect pay for work ordinarily 
performed during the course of a year, these types of 
enhancement have been characterized as pension spiking. 
D.  This Litigation 
Following the enactment of PEPRA, the Association, the 
Merced County Sheriff’s Employees’ Association, and the Contra 
Costa County Deputy Sheriffs Association filed separate 
petitions for a writ of mandate against their respective county 
retirement boards.14  The three matters were eventually 
consolidated in a single proceeding in Alameda County.15  The 
fundamental contention of these lawsuits was that PEPRA’s 
exclusion of certain types of income from compensation earnable 
could not lawfully be applied to the calculation of the pensions 
of persons who were county employees at the time PEPRA 
became effective. 
                                        
14  
Various other entities and individual plaintiffs also joined 
as petitioners in these actions.  In the course of the proceedings, 
additional parties were permitted to intervene or were joined as 
defendants, including the State, several public employers, such 
as the counties and county agencies like the District, and other 
public employee organizations. 
15  
A fourth, similar case from Marin County was ordered 
consolidated with these three, but that case was dismissed on 
demurrer prior to enforcement of the order of consolidation.  The 
judgment in that action was affirmed in Marin Assn. of Public 
Employees v. Marin County Employees’ Retirement Assn. (2016) 
2 Cal.App.5th 674 (Marin County).  We granted review of Marin 
County (Nov. 22, 2016, S237460) but have deferred briefing. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
23 
The litigation revealed that PEPRA’s amendment of 
section 31461 had caused the three county retirement boards to 
change 
certain 
policies 
governing 
the 
calculation 
of 
compensation earnable.  Although the exact pre-PEPRA 
practices varied among these counties, each retirement board 
maintained a policy permitting employees to include in 
compensation earnable at least some of the types of 
compensation that are excluded or limited by the PEPRA 
amendment.  Most often this was compensation for cashed out 
leave time, which could be included in an amount exceeding that 
earned and payable in a single year, but on-call duty pay and 
some termination pay were also includable in one or more of the 
counties.  (See Alameda County Deputy Sheriff’s Assn. v. 
Alameda 
County 
Employees’ 
Retirement 
Assn. 
(2018) 
19 Cal.App.5th 61, 82–83 (Alameda Sheriffs).) 
Further, the changes required by PEPRA were, in some 
cases, contrary to the terms of agreements entered into between 
the county retirement boards and county employees, as well as 
written policies adopted to reflect the terms of those 
agreements.  This court’s decision in Ventura County, supra, 
16 Cal.4th 483, by disapproving much of Guelfi, supra, 
145 Cal.App.3d 297, called into question aspects of the then-
prevailing approach to the calculation of compensation earnable 
under CERL.  In the wake of Ventura County, county employees 
and their representatives filed lawsuits against many CERL 
retirement boards, including those in Alameda, Contra Costa, 
and Merced Counties, to address these issues.  Each of these 
three lawsuits was resolved by a settlement agreement that, in 
part, required the respective retirement boards to include 
various 
types 
of 
compensation 
in 
the 
calculation 
of 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
24 
compensation earnable.  Because these agreements were still in 
effect when PEPRA was enacted, compliance with its 
amendment of section 31461 led the boards to adopt policies that 
were, to some extent, inconsistent with the terms of the 
settlement 
agreements. 
 
(Alameda 
Sheriffs, 
supra, 
19 Cal.App.5th at pp. 85–86.) 
The plaintiffs in the consolidated actions contended that 
county employees had both a vested right under the 
constitutional contract clause to the continued application of the 
policies in effect prior to PEPRA and, separately, a right under 
the settlement agreements, either directly or pursuant to the 
doctrine of equitable estoppel, to the continued application of the 
policies contained in them.16  After extensive litigation, the trial 
court entered a writ of mandate, ruling that county employees 
possess a vested right to the continuation of some, but not all, of 
the pre-existing practices. 
The Court of Appeal affirmed in part and reversed in part 
in Alameda Sheriffs, supra, 19 Cal.App.5th 61.  The court 
concluded that subdivision (b)(1) and (3), added to section 31461 
                                        
16  
In their complaint, the plaintiffs cited the contract clauses 
of both the state and federal Constitutions as authority for their 
constitutional claims.  In Cal Fire, we implicitly considered only 
California’s contract clause.  (Cal. Const., art. I, § 9; Cal Fire, 
supra, 6 Cal.5th at pp. 976, 977 & fn. 8 [plaintiffs’ claims 
pleaded under the California Constitution].)  We take the same 
approach here, ruling solely on California’s unique approach to 
the contract clause in this context and discussing decisions 
under the United States Constitution only for their persuasive 
value in interpreting our own.  Plaintiffs do not suggest that the 
federal Constitution provides greater protection for their 
pension rights than does the California Constitution. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
25 
by PEPRA, changed the law governing CERL pensions by 
excluding types of compensation that were previously included 
in compensation earnable.  (Alameda Sheriffs, at pp. 109–112.)  
Although recognizing that the constitutionality of these changes 
is governed by the Allen I test, the court declined to resolve the 
constitutional issue, concluding that it was “without sufficient 
information” about the implementation of CERL in the three 
counties.  (Alameda Sheriffs, at p. 123.)  At the same time, the 
court accepted the plaintiffs’ estoppel argument, ruling that the 
injustice resulting from a failure to give effect to the terms of the 
settlement agreements outweighed “ ‘any effect upon public 
interest or policy’ ” from failing to give effect to the terms of 
PEPRA.  (Alameda Sheriffs,  at p. 126.) 
We granted petitions for review filed by (1) the Association 
and the individual plaintiffs in its action, (2) the District, which 
had been joined as a defendant in the Contra Costa County 
action because it employs persons who participate in a CERL 
pension plan, and (3) the State, which had been permitted to 
intervene 
in 
the 
consolidated 
actions 
to 
defend 
the 
constitutionality of the legislation. 
II.  DISCUSSION 
 
The issues raised here fall into two groups:  first, whether 
the provisions of PEPRA’s amendment of CERL violated rights 
acquired by county employees by virtue of the settlement 
agreements entered into with the retirement boards, and, 
second, whether the amendment impaired county employees’ 
constitutionally protected implied contractual rights in the 
implementation of CERL as it existed prior to the PEPRA 
amendment.  Pursuant to traditional jurisprudential principles, 
we turn first to the nonconstitutional questions raised by the 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
26 
settlement agreements.  (See Santa Clara County Local 
Transportation Authority v. Guardino (1995) 11 Cal.4th 220, 
230–231 [the court will not decide constitutional questions when 
other dispositive grounds are available].) 
A.  The Retirement Boards’ Settlement Agreements 
Did Not Create a Contractual or Equitable 
Right to the Calculation of Pension Benefits 
That Supersedes the PEPRA Amendment 
 
Plaintiffs contend that county employees have the right to 
continue, after PEPRA, to have included in compensation 
earnable the items of compensation declared includable by the 
settlement agreements entered into by the retirement boards in 
the wake of Ventura County, despite the exclusion or limitation 
of these items by new subdivision (b)(2) through (4) of section 
31461.17  Plaintiffs contend that this right arises either directly, 
under the terms of the agreements, or by operation of the 
doctrine of equitable estoppel.  We conclude that neither 
argument authorizes the county retirement boards to 
administer CERL in a manner inconsistent with the governing 
statutory provisions by including items of compensation in 
compensation earnable that section 31461, as amended, 
excludes. 
                                        
17  
The precise nature of the compensation at issue varies 
among the settlement agreements, which are not identical in 
their terms, but each agreement states that employees will be 
allowed to include in compensation earnable at least some of the 
types of compensation ruled out by PEPRA’s amendment of 
section 31461. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
27 
1.  Local retirement boards are required to comply 
with CERL in calculating county employee pension 
benefits 
 
An understanding of the proper role of county retirement 
boards under CERL is critical to resolving plaintiffs’ contract 
and estoppel claims.  Under CERL, “management of the 
retirement system is vested” in the county retirement boards.  
(§ 31520.)  This delegation of authority is echoed by article XVI 
of our Constitution, which grants to public employee retirement 
boards, including those operating under CERL, the “sole and 
exclusive responsibility to administer the system in a manner 
that will assure prompt delivery of benefits and related services 
to the participants and their beneficiaries.”  (Cal. Const., art. 
XVI, §17, subd. (a); see Flethez v. San Bernardino County 
Employees Retirement Assn. (2017) 2 Cal.5th 630, 635–636 
[applying art. XVI to a county retirement system].)  As a 
practical matter, the retirement boards’ responsibilities 
generally involve management of the system’s financial assets 
(Westly v. Board of Administration (2003) 105 Cal.App.4th 1095, 
1109–1110 (Westly)) and the processing and payment of claims 
for benefits under the plan (see, e.g., McIntyre v. Santa Barbara 
County Employees’ Retirement System (2001) 91 Cal.App.4th 
730, 734 [board has exclusive authority to determine whether 
plan is obligated to pay benefits to employee]; Masters v. San 
Bernardino 
County 
Employees 
Retirement 
Assn 
(1995) 
32 Cal.App.4th 30, 45 [board has exclusive authority to 
determine whether employee is permanently incapacitated and 
whether the disability is service-related]).  In carrying out these 
responsibilities, the Constitution grants retirement boards 
“plenary authority and fiduciary responsibility for investment of 
moneys and administration of the system.”  (Cal. Const., art. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
28 
XVI, §17.)  Of necessity, the task of processing claims for 
retirement benefits requires the county retirement boards to 
interpret and apply the provisions of CERL, including the 
sections defining compensation, compensation earnable, and 
final compensation. 
The task of a county retirement board is not to design the 
county’s pension plan but to implement the design enacted by 
the Legislature through CERL.  As noted, CERL speaks of the 
retirement boards as “manag[ing]” the retirement system 
(§ 31520), 
while 
the 
Constitution 
charges 
them 
with 
“administer[ing]” the system and its assets (Cal. Const., 
art. XVI, §17, subd. (a)).  Although CERL grants to retirement 
boards the power to make regulations, those regulations must 
be consistent with the provisions of CERL.  (§ 31525 [“The board 
may make regulations not inconsistent with this chapter”].)  The 
boards do not have the authority to “evade the law” that 
otherwise 
applies 
to 
their 
system. 
 
(Westly, 
supra, 
105 Cal.App.4th at p. 1100.)  “The granting of retirement 
benefits is a legislative action within the exclusive jurisdiction 
of the [relevant legislative body]. . . .  [¶] It is not within [a 
board’s] authority to expand pension benefits beyond those 
afforded by the authorizing legislation. . . .  The scope of the 
board’s power as to benefits is limited to administering the 
benefits set by the [legislative body].”  (City of San Diego v. San 
Diego 
City 
Employees’ 
Retirement 
System 
(2010) 
186 Cal.App.4th 69, 79–80; see similarly City of San Diego v. 
Haas (2012) 207 Cal.App.4th 472, 495.)  This conclusion follows 
from principles governing the authority of administrative bodies 
generally:  “[I]t is well established that the rulemaking power of 
an administrative agency does not permit the agency to exceed 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
29 
the scope of authority conferred on the agency by the 
Legislature.  [Citation.]  ‘A ministerial officer may not . . . under 
the guise of a rule or regulation vary or enlarge the terms of a 
legislative enactment or compel that to be done which lies 
without the scope of the statute . . . .’  [Citation.]  And, a 
regulation which impairs the scope of a statute must be declared 
void.”  (Agnew v. State Bd. of Equalization (1999) 21 Cal.4th 310, 
321; see PaintCare v. Mortensen (2015) 233 Cal.App.4th 1292, 
1305–1306 [“An administrative agency ‘has only as much 
rulemaking power as is invested in it by statute.’  [Citations.]  
Regulations that are inconsistent with a statute, alter or amend 
it, or enlarge or impair its scope are void”].) 
Accordingly, it is the Legislature that has final authority 
to establish the provisions governing the award of pension 
benefits under CERL.  Further, it is the judiciary, not individual 
retirement boards, that has “final responsibility” for the 
interpretation of the Legislature’s terms.  (Terhume v. Superior 
Court (1998) 65 Cal.App.4th 864, 873.)  For that reason, 
although county retirement boards have the authority to 
interpret CERL’s provisions as necessary to perform their 
administrative functions, they have no authority to adopt or act 
on an interpretation that is inconsistent with those provisions.  
An administrative action that is unauthorized or inconsistent 
with governing legislation is invalid.  (Terhume, at p. 873.) 
2.  County retirement boards cannot confer a 
contractual right to the calculation of employee 
pension benefits in a manner inconsistent with 
CERL 
 
Plaintiffs argue that, by virtue of the settlement 
agreements, existing county employees have an express 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
30 
contractual right to the continued inclusion in compensation 
earnable of certain items otherwise excluded by PEPRA’s 
amendments.  In order to find such a right, the settlement 
agreements must be interpreted to require that their 
classifications of compensation be applied in calculating the 
pensions of existing employees, regardless of subsequent 
statutory amendments or judicial decisions.  The settlement 
agreements are silent on this issue.  None of them contains a 
provision anticipating the possibility that CERL’s definition of 
“compensation earnable” could be legislatively amended in a 
manner inconsistent with their classifications or addressing the 
fate of those classifications in the event of legislative change or 
contrary judicial decision. 
 
It is a commonplace that “[a] contract must be lawful 
[citation], i.e., it must not be in conflict either with express 
statutes or public policy.”  (Vierra v. Workers’ Comp. Appeals Bd. 
(2007) 154 Cal.App.4th 1142, 1148; see Civ. Code, § 1550.)  
California decisions have repeatedly recognized that this 
principle places constraints on the authority of public agencies 
to enter into agreements, since those agreements are unlawful 
if they exceed the agencies’ procedural and substantive powers.  
Procedurally, an agreement cannot be used to avoid legally 
prescribed procedures by dictating a result that, although 
within an agency’s power, can be achieved only by following 
those procedures.  (E.g., City of San Diego v. California Water & 
Telephone Co. (1947) 30 Cal.2d 817, 823–824 [city agreement to 
abandon road held void because the statutory procedure for 
abandonment, requiring public hearings, is exclusive]; Trancas 
Property Owners Assn. v. City of Malibu (2006) 138 Cal.App.4th 
172, 181–183 [city cannot, in litigation settlement agreement, 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
31 
avoid the requirement of a public hearing and findings by 
agreeing to the functional equivalent of a zoning variance].)  
Substantively, an agency cannot agree to a result that is 
otherwise beyond its power to achieve.  (E.g., Summit Media 
LLC v. City of Los Angeles (2012) 211 Cal.App.4th 921, 936–937 
[city cannot agree to exempt party from otherwise applicable 
ordinances]; Midway Orchards v. County of Butte (1990) 
220 Cal.App.3d 765, 783 [city cannot by agreement approve a 
real estate development that is inconsistent with its general 
plan].)  As a corollary of this principle, a public agency is 
prohibited from entering into an agreement that constrains the 
future exercise of its legislative or police powers.  (Avco, supra, 
17 Cal.3d at p. 800; Summit Media, at p. 934–935.) 
 
As discussed above, the duty of a county retirement board 
is to administer CERL as enacted by the Legislature; the boards 
have no authority to act inconsistently with CERL.  Accordingly, 
the county boards must comply with any changes to CERL 
enacted by the Legislature.  They have no authority to disregard 
such amendments by continuing to pursue a practice that is 
contrary to CERL.  As a consequence, any provision in the 
settlement agreements that would have required the retirement 
boards to continue to apply the agreed upon characterizations in 
the face of contrary legislative changes or authoritative judicial 
interpretations would have been void.  The retirement boards 
had no authority to enter into an agreement that would require 
them to pursue a policy that conflicts with the governing 
legislation. 
Accordingly, 
the 
settlement 
agreements 
are 
best 
interpreted to require the retirement boards to implement their 
classifications of items of compensation only so long as those 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
32 
classifications are consistent with prevailing law.  (See Civ. 
Code, § 1643 [“A contract must receive such an interpretation as 
will make it lawful”]; Edwards v. Arthur Andersen LLP (2008) 
44 Cal.4th 937, 953–954 [same]; Tiedje v. Aluminum Taper 
Milling Co. (1956) 46 Cal.2d 450, 453–454 [“A contract made . . . 
against the express mandate of a statute may not serve as the 
foundation of any action, either in law or in equity”].)  To the 
extent any of the provisions of the settlement agreements are 
now in conflict with section 31461, the agreements must be 
interpreted to permit the retirement boards to modify their 
practices to conform to the governing statute.  County employees 
acquired no express contractual right to have their retirement 
benefits calculated in a manner inconsistent with changes in 
CERL. 
 Plaintiffs argue that the settlement agreements did not 
exceed the retirement boards’ power because the interpretations 
of CERL embodied in the settlement agreements were 
permissible under section 31461 as it existed at the time the 
agreements were executed.  This argument is based, at least in 
part, on footnote 6 of Guelfi, supra, 145 Cal.App.3d at page 307.  
In this controversial footnote, the court interpreted section 
31461 merely to establish a minimum standard for the items 
that must be included in compensation earnable, while leaving 
individual retirement boards the discretion to include other 
items of compensation beyond this minimum.  As Guelfi phrased 
it, “[n]othing in this opinion should be taken as barring either 
the inclusion of [pay premiums or] overtime in the calculation of 
benefits should the Board decide to do so . . . .  Our conclusion is 
only that CERL does not require inclusion of those items of 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
33 
remuneration for retirees.”  (Guelfi, at p. 307, fn. 6, italics 
added.) 
Like the Court of Appeal, we reject this open-ended 
concept of compensation earnable, and we hereby disapprove of 
footnote 6 of Guelfi v. Marin County Employees’ Retirement 
Assn., supra, 145 Cal.App.3d at page 307.  As the Court of 
Appeal correctly explained, compensation earnable under 
section 31461 has a specific statutory definition:  It is an 
employee’s “average compensation . . . for the period under 
consideration,” adjusted for “the average number of days 
ordinarily worked by persons in the same grade or class of 
positions during the period. . . . ”  (§ 31461, subd. (a); see 
Alameda Sheriffs, supra, 19 Cal.App.5th at pp. 94–95.)  The 
term “compensation,” as used in section 31461, is similarly 
statutorily defined:  It is an employee’s “remuneration paid in 
cash” and expressly excludes the “monetary value” of benefits 
paid in kind.  (§ 31460.)  Nothing in those definitions hints 
either that they are intended merely to establish a minimum, 
rather than to serve as a comprehensive definition, or that they 
may be implemented at the discretion of local retirement boards.  
There is no indication, for example, that a local board has the 
discretion to include the monetary value of in-kind benefits, 
which are expressly excluded by section 31461.  Necessarily, the 
same is true of any other item of compensation that, even if not 
expressly mentioned as excluded, does not fall within the 
definitions.  County retirement boards, as discussed above, have 
the ordinary authority of an administrative body to resolve, in 
the first instance, ambiguities in the interpretation and 
application of these statutes, but nothing in the text of sections 
31460 and 31461 hints that the discretion extends further.  As 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
34 
the Court of Appeal pithily put it, “[a]n item of compensation is 
either includable in compensation, compensation earnable, and 
final compensation under the CERL statutes, or it is not.”  
(Alameda Sheriffs, at p. 96.) 
In any event, plaintiffs’ contention — that the 
determination of compensation earnable in the settlement 
agreements 
should 
be 
honored 
because 
they 
reflect 
interpretations that were lawful at the time — misses the point.  
We assume for purposes of this analysis that the settlement 
agreements embodied permissible interpretations of CERL at 
the time they were executed.  The issue here is whether the 
retirement boards could have agreed to continue to implement 
those interpretations despite a statutory amendment that 
rendered the interpretations contrary to CERL.  For the reasons 
discussed above, such a provision would have been beyond their 
authority.  County employees can have no express contractual 
right to the continued adherence to interpretations of CERL 
that are now, as a result of PEPRA, contrary to the statute.18 
                                        
18  
Plaintiffs also argue that county employees acquired a 
contractual right to receive these benefits because their 
contributions to the county pension fund were based on an 
actuarial calculation that included the additional benefit costs 
attributable to the inclusion of items now excluded or limited by 
PEPRA.  In plaintiffs’ view, county employees have, in effect, 
paid for the inclusion of the items excluded by PEPRA but 
permitted by the settlement agreements.  Although this might 
entitle employees to a partial refund of their contributions, an 
issue we do not address, it does not create a contractual right to 
receive benefits in a manner inconsistent with CERL.  
(Cf. Retirement Cases, supra, 110 Cal.App.4th at pp. 453-454, 
469-472 [county employees have a right only to receive a pension 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
35 
Finally, we note that plaintiffs repeatedly refer to the 
settlement agreements as judicially approved.  Judicial 
approval of the agreements does not alter our conclusion that 
they must be interpreted not to confer on the retirement boards 
the authority to pursue policies contrary to CERL.  As noted 
above, our analysis assumes that the interpretations of CERL 
embodied in the settlement agreements were proper at the time 
they were approved.  At most, the courts’ approval confirms this.  
The approving courts, however, rendered no opinion on the 
continued validity of those interpretations in the face of 
subsequent legislative amendments.  Even if judicial approval 
of a settlement agreement could have conferred upon retirement 
boards the authority to violate a future amendment of CERL, a 
very doubtful proposition, there is no reason to conclude that 
these approvals should be understood as conferring such 
authority. 
Our ruling does not mean that county employees could not 
have acquired a constitutional right to the continued calculation 
of their pension benefits in the manner existing prior to PEPRA, 
a right that would be enforceable against subsequent, 
inconsistent amendments to CERL.  In these circumstances, 
however, such a right could be created only by the 
preamendment provisions of CERL, as enforced by the 
constitutional contract clause — that is, created in the manner 
discussed in part II.B, post.  Because the settlement agreements 
are properly interpreted not to require the boards to adhere to 
                                        
benefit as mandated by CERL, regardless of contributions; 
county retirement boards can collect contributions in arrears to 
compensate for increased pension benefits resulting from 
Ventura County’s interpretation of CERL].) 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
36 
contractual terms that become contrary to the governing 
statute, plaintiffs have no express contractual right to receive 
benefits calculated in a manner that is inconsistent with the 
PEPRA amendment. 
3.  Plaintiffs have failed to demonstrate the 
prerequisites for invocation of the doctrine of 
equitable estoppel 
 
The Court of Appeal held that the Merced County 
retirement board is precluded from implementing new 
subdivision (b)(4) of section 31461, which limits the inclusion of 
termination pay in compensation earnable, by the doctrine of 
equitable estoppel.  The estoppel was premised on the 
settlement agreement entered into by that board following the 
issuance of Ventura County.  (Alameda Sheriffs, supra, 
19 Cal.App.5th at pp. 125–126.)  Although the Court of Appeal 
invoked the doctrine only in connection with the Merced County 
agreement, its reasoning would extend more generally to any 
inconsistency between the settlement agreements and the terms 
of section 31461 and require the boards to adhere to the 
interpretation of CERL found in the settlement agreements, 
notwithstanding the changes introduced by the PEPRA 
amendment.19  Plaintiffs urge us to affirm the Court of Appeal 
                                        
19  
The ruling applied only to the Merced County retirement 
board because only its settlement agreement permitted the 
inclusion of termination pay.  Because the Court of Appeal had 
already interpreted the PEPRA amendment not to limit the 
inclusion of compensation for cashed out leave time, the court 
found it unnecessary to consider application of the doctrine of 
estoppel to that type of compensation.  (Alameda Sheriffs, supra, 
19 Cal.App.5th at p. 124.) 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
37 
on this ground and extend our ruling to any inconsistency 
between the settlement agreements and PEPRA. 
 
“ ‘The doctrine of equitable estoppel is founded on concepts 
of equity and fair dealing.  It provides that a person may not 
deny the existence of a state of facts if he intentionally led 
another to believe a particular circumstance to be true and to 
rely upon such belief to his detriment.  The elements of the 
doctrine are that (1) the party to be estopped must be apprised 
of the facts; (2) he must intend that his conduct shall be acted 
upon, or must so act that the party asserting the estoppel has a 
right to believe it was so intended; (3) the other party must be 
ignorant of the true state of facts; and (4) he must rely upon the 
conduct to his injury.’ ”  (City of Goleta v. Superior Court (2006) 
40 Cal.4th 270, 279 (Goleta).)  Although equitable estoppel is a 
well-accepted remedy among private parties, it has been applied 
sparingly when the party sought to be estopped is a 
governmental entity.  “The government may be bound by an 
equitable estoppel in the same manner as a private party” (City 
of Long Beach v. Mansell (1970) 3 Cal.3d 462, 496–497, 501 
(Mansell)), but the doctrine is invoked only in “those ‘exceptional 
cases’ where ‘justice and right require’ ” (id. at p. 501) — that is, 
when “the injustice which would result from a failure to uphold 
an estoppel is of sufficient dimension to justify any effect upon 
public interest or policy which would result from the raising of 
an estoppel” (id. at pp. 496–497).  In short, “[e]quitable estoppel 
‘will not apply against a governmental body except in unusual 
instances when necessary to avoid grave injustice and when the 
result will not defeat a strong public policy.’ ”  (Goleta, at p. 279.) 
We reject the Court of Appeal’s conclusion with respect to 
equitable 
estoppel 
because 
we 
find 
no 
actionable 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
38 
representations in the settlement agreements that would 
support invocation of that doctrine.  Equitable estoppel 
generally must be premised on some type of representation, 
ordinarily false, about a set of circumstances.  (J.M. v. 
Huntington Beach Union High School Dist. (2017) 2 Cal.5th 648, 
657 (J.M.) 
[“Equitable estoppel 
generally 
requires 
an 
affirmative representation or act by the public entity”]; 
Simmons v. Ghaderi (2008) 44 Cal.4th 570, 584 [“A valid claim 
for equitable estoppel requires . . . a representation or 
concealment of material facts”].)  The representations cited by 
the Court of Appeal were “the promise that [county employees] 
would receive a pension as authorized by CERL,” combined with 
“precise and explicit promises to [county employees] as to what 
such a statutorily authorized CERL pension would include,” 
which promises were found in “their court-approved Post-
Ventura Settlement Agreements.”  (Alameda Sheriffs, supra, 
19 Cal.App.5th at p. 128.)  The cited representations are 
insufficient to support an estoppel in these circumstances. 
The core of plaintiffs’ estoppel claim is the second group of 
statements cited by the Court of Appeal, the boards’ 
representations about the requirements of CERL, as contained 
in the settlement agreements.20  Necessarily, to the extent the 
                                        
20  
The first of these representations, that county employees 
would receive “a pension as authorized by CERL,” is plainly 
insufficient.  Plaintiffs, in seeking an estoppel, are attempting 
to compel the county boards to award pension benefits in a 
manner inconsistent with CERL.  It is defendants who advocate 
for application of the statute’s provisions.  Ordinarily, a party 
will be estopped from “deny[ing] the existence of a state of facts 
. . . he intentionally led another to believe.”  (Goleta, supra, 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
39 
settlement agreements represent an interpretation of the 
statutory provisions of CERL, they reflect the statute as it 
existed at the time the settlement agreements were concluded, 
a decade prior to PEPRA.  The settlement agreements contain 
no representations that can be construed as a guarantee that 
these provisions would not be amended.  On the contrary, as 
discussed above, the agreements contain no provisions 
addressing the agreements’ implementation in the event of such 
an amendment.  Further, all parties were presumably aware 
that CERL’s provisions, as enactments of the Legislature, could 
be changed by that same body, in which event the agreements’ 
interpretations might no longer reflect the statute’s provisions.  
An agency’s representation about the contents of its governing 
statute at a particular point in time, standing alone, provides no 
basis for estopping the agency from conforming its practice to a 
statutory 
change 
that 
occurred 
subsequent 
to 
that 
representation. 
Application of the doctrine of estoppel requires, at a 
minimum, an actionable statement — that is, “an affirmative 
representation or act by the public entity” that is intended to 
induce reliance by the plaintiff.  (J.M., supra, 2 Cal.5th at p. 657, 
italics omitted.)  An actionable representation in these 
circumstances would require, at a minimum, a statement 
indicating that the county boards would adhere to the 
interpretation of CERL found in the settlement agreements 
notwithstanding any change in the governing statute.  In the 
                                        
40 Cal.4th at p. 279.)  We know of no authority for estopping a 
party from denying the very opposite of its purportedly 
actionable representation. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
40 
absence of such a representation, county employees had no 
reason to expect that the county boards would not conform their 
practice to any changes in their governing statute.  The 
plaintiffs provided no evidence of such a statement.  Instead, the 
county boards merely entered into agreements that embodied an 
interpretation of CERL as it existed at the time.  They 
subsequently made statements suggesting that employee 
pensions in their county would be determined according to that 
interpretation.  There is no indication that the boards went 
further, assuring employees that these interpretations were 
impervious to legislative change or, more pertinent, that the 
boards intended to adhere to the interpretations in the face of 
legislative change.  In the absence of this type of representation, 
we find no basis for estopping the county boards from adjusting 
their policies in response to the PEPRA amendment, as they are 
required by law to do.21 
B.  PEPRA’s Amendment of Section 31461 Did Not 
Violate the Rights of County Employees Under 
the Constitutional Contract Clause 
The terms of public employee pensions are protected by 
the constitutional contract clause.  (Cal Fire, supra, 6 Cal.5th at 
                                        
21  
In reaching this conclusion, we do not mean to suggest 
that if such a representation had been made, this would, 
standing alone, justify imposing an estoppel on the county 
boards.  There are, at a minimum, the further considerations of 
the board’s lack of legal authority to follow through on such a 
representation and the application of the overriding test for 
estoppel of a public agency, articulated in Mansell, supra, 
3 Cal.3d at pages 496-497, 501.  We merely hold that plaintiffs 
have failed to demonstrate an actionable representation, the 
threshold requirement for invocation of the doctrine of equitable 
estoppel.  (J.M., supra, 2 Cal.5th at p. 657.) 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
41 
p. 987; Legislature v. Eu (1991) 54 Cal.3d 492, 528 (Eu).)  
At issue here is whether PEPRA’s amendment of section 31461 
to exclude certain types of compensation from compensation 
earnable constitutes a substantial and unjustified impairment 
of county employees’ pension rights, the general standard 
required for a violation of the contract clause in these 
circumstances.  (Sonoma County Organization of Public 
Employees v. County of Sonoma (1979) 23 Cal.3d 296, 308–309 
(Sonoma Employees).)  This is a question of law subject to our 
independent review.  (Allen I, supra, 45 Cal.2d at p. 131.) 
1.  Protection of public employee pensions under the 
contract clause 
a.  Contract clause protections generally 
The vested rights doctrine, the foundation of plaintiffs’ 
contention that PEPRA’s amendment of section 31461 is 
unconstitutional as applied to existing county employees, is 
grounded in the contract clause.  (Cal. Const., art. I, § 9.)  “Both 
the United States and California Constitutions contain 
provisions that prohibit the enactment of laws effecting a 
‘substantial impairment’ of contracts, including contracts of 
employment.”  (Cal Fire, supra, 6 Cal.5th at p. 977.)  This 
constraint applies to public contracts, as well as those between 
private parties.  (Ibid.)  As suggested by the reference to a 
substantial impairment, not every legislative impairment of 
contractual relations triggers the contract clause.  (San 
Francisco Taxpayers Assn. v. Board of Supervisors (1992) 
2 Cal.4th 571, 583–584; Eu, supra, 54 Cal.3d at p. 528 [contract 
clause protects against “unreasonable” impairments].)  “[T]he 
prohibition is not an absolute one and is not to be read with 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
42 
literal exactness like a mathematical formula.”  (Home B. & L. 
Ass. v. Blaisdell (1933) 290 U.S. 398, 428 (Blaisdell).) 
In evaluating legislation that impairs private contractual 
rights, the United States Supreme Court applies what it 
characterizes as a “two-step test.”  (Sveen v. Melin (2018) ___ 
U.S. ___, ___ [138 S.Ct. 1815, 1821].)  As a threshold question, 
the court must determine “ ‘whether the state law has, in fact, 
operated as a substantial impairment of a contractual 
relationship.  [Citations.]  The severity of the impairment is said 
to increase the level of scrutiny to which the legislation will be 
subjected.’ ”  (Energy Reserves Group v. Kansas Power & Light 
(1983) 459 U.S. 400, 411 (Kansas Power).)  In making this 
determination, “the Court has considered the extent to which 
the law undermines the contractual bargain, interferes with a 
party’s reasonable expectations, and prevents the party from 
safeguarding or reinstating his rights.”  (Sveen, at p. ___ [138 
S.Ct. at p. 1822.)  If the state law is found to create a 
“substantial” impairment, “the inquiry turns to the means and 
ends of the legislation.”  (Ibid.)  To justify the legislation, the 
state “must have a significant and legitimate public purpose 
behind the regulation, [citation], such as the remedying of a 
broad and general social or economic problem. . . .  The 
requirement of a legitimate public purpose guarantees that the 
State is exercising its police power, rather than providing a 
benefit to special interests.”  (Kansas Power, at pp. 411–412.)  If 
the legislation survives that scrutiny, “the next inquiry is 
whether the adjustment of ‘the rights and responsibilities of 
contracting parties [is based] upon reasonable conditions and 
[is] of a character appropriate to the public purpose justifying 
[the legislation’s] adoption.’ ”  (Id. at p. 412.) 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
43 
A different, more searching analysis occurs when the state 
legislates an impairment of its own contractual obligations 
because “the government’s self-interest is at stake.”  (Sonoma 
Employees, supra, 23 Cal.3d at p. 308.)  Although “ ‘courts 
properly defer to legislative judgment as to the necessity and 
reasonableness of a particular measure’ ” when “the State itself” 
is not “a contracting party” (Kansas Power, supra, 459 U.S. at 
pp. 413, 412), “complete deference to a legislative assessment of 
reasonableness and necessity is not required” when the state 
seeks to alter its own obligations.  (Sonoma Employees, at 
p. 308.)  In general terms, a state’s impairment of its own 
obligations “may be constitutional if it is reasonable and 
necessary to serve an important public purpose.”  (United States 
Trust Co. v. New Jersey (1977) 431 U.S. 1, 25 (U.S. Trust).) 
Sonoma Employees addressed a contract clause challenge 
to state legislation that nullified every agreement between a 
local government and its employees providing for an annual cost 
of living wage increase greater than the cost of living increase 
given by the state to its own employees.  The legislation had 
been passed in the wake of the electorate’s adoption of 
Proposition 13 in 1978, which the Legislature feared would 
bring a fiscal emergency to the state’s local governments.  We 
invalidated the law as an unconstitutional impairment of the 
wage agreements, concluding that “respondents have clearly 
failed to satisfy their threshold burden of demonstrating that 
the substantial abridgement of petitioners’ contract rights to an 
increase in wages was warranted by a grave fiscal crisis, and 
they advance no other justification for the impairment.”  
(Sonoma Employees, at pp. 313–314.) 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
44 
In justification of the heightened degree of scrutiny 
applied when the state seeks to alter its own contractual 
obligations, we explained in Sonoma Employees, quoting U.S. 
Trust, supra, 431 U.S. at pages 1, 26, 29, 30–31, that “ ‘a 
governmental entity can always find a use for extra money . . . .  
If a State could reduce its financial obligations whenever it 
wanted to spend the money for what it regarded as an important 
public purpose, the Contract Clause would provide no protection 
at all . . . .  [A] State cannot refuse to meet its legitimate 
financial obligations simply because it would prefer to spend the 
money to promote the public good rather than the private 
welfare of its creditors . . . .  [A] State is not completely free to 
consider impairing the obligations of its own contracts on a par 
with other policy alternatives.  Similarly, a State is not free to 
impose a drastic impairment when an evident and more 
moderate course would serve its purposes equally well.’ ”  
(Sonoma Employees, supra, 23 Cal.3d at p. 308.) 
b.  Contract clause protection of public employee 
pension rights in California 
As we discussed in Cal Fire, a public employee has no 
express contractual rights in a pension plan created by statute, 
like CERL.  (Cal Fire, supra, 6 Cal.5th at pp. 977–978, 984–985.)  
Nonetheless, we have recognized, at least since Kern v. City of 
Long Beach (1947) 29 Cal.2d 848 (Kern), that such plans create 
implied contractual rights that are protected against legislative 
impairment by the contract clause.  (Cal Fire, at pp. 984–985.)  
The parties agree that the provisions of CERL, although 
statutory, are protected by the contract clause.  (But see fn. 29, 
post.) 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
45 
With respect to that constitutional protection, our 
decisions have established a standard specifically tailored to the 
unique circumstances presented by public employee pension 
reform.  A modification of the pension rights accorded to a public 
employee at the time he or she commenced public employment, 
or of pension rights made available subsequently during the 
course of his or her public career, will be upheld against a 
contract clause challenge only if it satisfies the test established 
in Allen I:  “An 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.”  (Allen I, supra, 45 Cal.2d at p. 131; see also Betts 
v. Board of Administration (1978) 21 Cal.3d 859, 866 (Betts) 
[contract clause protects not only pension rights available at 
commencement of employment but also those “which are 
thereafter 
conferred 
during 
the 
employee’s 
subsequent 
tenure”].)  This quotation from Allen I is the foundation of the 
California Rule.  By analogy to the federal standard, it defines 
when a modification of public employee pension rights will 
survive contract clause scrutiny as “reasonable and necessary to 
serve an important public purpose.”  (U.S. Trust, supra, 431 
U.S. at p. 25.) 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
46 
A review of the rule’s historical development will help to 
explain its requirements.  As we first recognized over a century 
ago in O’Dea v. Cook (1917) 176 Cal. 659, when a public 
employee renders service under a pension statute “the pension 
provisions become a part of the contemplated compensation for 
those services and so in a sense a part of the contract of 
employment itself.”  (Id. at pp. 661–662; see Cal Fire, supra, 
6 Cal.5th at p. 984.)  In squaring this insight with the 
traditional rule that statutes do not create contractual rights, 
our subsequent decision in Kern held that “public employment 
gives rise to certain obligations which are protected by the 
contract clause of the Constitution, including the right to the 
payment of salary which has been earned.  Since a pension right 
is ‘an integral portion of contemplated compensation’ [citation], 
it cannot be destroyed, once it has vested, without impairing a 
contractual obligation.”  (Kern, supra, 29 Cal.2d at pp. 853.)  It 
is the nature of pension rights as deferred compensation that 
caused Kern to hold them protected under the contract clause.  
(Cal Fire, at pp. 984–985.) 
In and after Kern, we have attempted to define the 
constitutionally appropriate balance between preserving public 
employee pension rights and granting the Legislature the 
flexibility necessary to cope with changing circumstances.  In 
Kern, the defendant city had terminated its safety officer 
pension plan, providing no replacement, mere days before the 
plaintiff officer completed the 20 years of service necessary to 
qualify for a pension.  (Kern, supra, 29 Cal.2d at p. 850.)  We had 
no difficulty finding that the wholesale elimination of previously 
available pension benefits works a substantial impairment of an 
employee’s implied contractual rights.  (Id. at p. 853 [although 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
47 
pension statutes can be modified, “it does not follow that an 
employee may be deprived of all pension benefits by a repeal of 
the statute without the enactment of a substitute”].)  As we 
concluded, allowing a last minute repeal of pension rights 
“would defeat one of the primary objectives in providing 
pensions for government employees, which is to induce 
competent persons to enter and remain in public employment,” 
because “the promise of a pension annuity would either become 
ineffective as an inducement to public employees or it would 
become merely a snare and a delusion to the unwary.”  (Id. at 
p. 856.) 
Given the complete elimination of the plaintiff’s pension 
plan in Kern, we recognized that “[t]he permissible scope of 
changes in the provisions [of a public pension plan] need not be 
considered here . . . .”  (Kern, supra, 29 Cal.2d at p. 855.)  Yet we 
made observations that subsequently influenced the resolution 
of this issue.  Kern acknowledged that “[t]he rule permitting 
modification of pensions is a necessary one since pension 
systems must be kept flexible to permit adjustments in accord 
with changing conditions and at the same time maintain the 
integrity of the system and carry out its beneficent policy.”  (Id. 
at pp. 854–855.)  Because of that necessity, we concluded, “[A]n 
employee may acquire a vested contractual right to a pension 
but . . . this right is not rigidly fixed by the specific terms of the 
legislation in effect during any particular period in which he 
serves.  The statutory language is subject to the implied 
qualification that the governing body may make modifications 
and changes in the system.  The employee does not have a right 
to any fixed or definite benefits, but only to a substantial or 
reasonable pension.  There is no inconsistency therefore in 
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holding that he has a vested right to a pension but that the 
amount, terms and conditions of the benefits may be altered.”  
(Id. at p. 855.) 
The question of the permissible scope of pension plan 
modifications came before the court again in Packer v. Board of 
Retirement (1950) 35 Cal.2d 212 (Packer).  The plaintiff in 
Packer was the widow of a Los Angeles County peace officer who 
died a few years after retiring.  Four years before the deceased’s 
retirement, as part of a larger pension reform, the applicable 
pension ordinance was amended to grant benefits to an officer’s 
surviving spouse only if the officer accepted a lesser retirement 
benefit.  Previously, such surviving-spouse benefits had been 
available as a matter of course to all officers.  Because the 
plaintiff’s husband did not elect the lower benefit alternative, 
the retirement board found that she was not entitled to benefits 
upon his death.  (Id. at pp. 213–214.)   
In addressing the constitutional propriety of the 
modification of the surviving spouse provisions, Packer first 
acknowledged Kern’s ruling that some pension modification is 
permitted to allow state and local governments the flexibility to 
cope “ ‘with changing conditions and at the same time maintain 
the integrity of the system.’ ”  (Packer, supra, 35 Cal.2d at 
p. 214.)  With respect to the particular modification at issue in 
Packer, we noted that “under certain circumstances” the larger 
reform of which the challenged provision was a part “would give 
county peace officers and their families greater benefits than 
they had before.”  (Id. at p. 218.)  Pensions continued to be paid 
to the surviving spouses of officers who died from service-related 
causes, for example, and these were doubled in amount by the 
pension reform.  Other basic terms and conditions of retirement 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
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were unchanged.  In addition, of course, the amended statute 
continued to make available a general surviving spouse benefit 
to retirees, albeit on condition of their accepting a lesser benefit 
during their own life.  (Id. at pp. 218–219.)  Taking the changes 
as a whole, we concluded, it was “difficult, if not impossible,” to 
determine whether the “total value” of an officer’s pension rights 
had been diminished by the amendments.  (Id. at p. 219.)  
Because “[i]t is reasonably clear . . . that the employees, 
including 
[the 
plaintiffs’ 
decedent], 
retained 
rights to 
substantial pension benefits,” we held that the amendment “did 
not exceed the scope of a permissible modification.”  (Id. at 
p. 219.) 
Soon after, we again confronted the issue in Wallace v. 
City of Fresno (1954) 42 Cal.2d 180 (Wallace).  The plaintiff, a 
former police chief who retired in 1949, was stripped of his 
pension benefits after a postretirement conviction for tax fraud.  
(Id. at pp. 181–182.)  The city had enacted its pension plan for 
peace officers in 1923, early in the plaintiff’s career.  The initial 
plan had no provision for depriving a retiree of benefits, but in 
1927 the governing ordinance was amended to require the 
termination of the pension benefits of a retiree who was 
convicted of a felony or a crime of moral turpitude.  (Id. at 
p. 182.)  Although Wallace assumed that the felony conviction 
provision would have been enforceable if contained in the 
original pension ordinance, we held that its application to the 
plaintiff triggered the contract clause because its adoption 
during his employment constituted a modification of the terms 
of his pension plan.  As we framed the question, we were 
required to “determine whether the changes made come within 
the bounds of a reasonable modification or whether their effect 
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50 
is to impair his vested contractual rights.”  (Wallace, at pp. 183–
184.)  We again recognized that modification of a pension plan 
is permitted to cope with changing times, but we balanced this 
principle against “the facts that pension payments are deferred 
compensation to which a pensioner becomes entitled upon 
performing all services required under the contract and that his 
retirement because of age ordinarily shows that he has done 
everything necessary to entitle him to payment of the pension.”  
(Id. at pp. 184–185.)  We concluded that the amendment was not 
a reasonable modification.  As we explained, “[t]he termination 
of all pension rights upon conviction of a felony after retirement 
does not appear to have any material relation to the theory of 
the pension system or to its successful operation.  Rather, the 
change was designed to benefit the city and, as stated in the 
city’s brief, to meet the objections of taxpayers who would be 
opposed to contributing funds for the maintenance of a 
pensioner who had been convicted of a felony.”  (Id. at p. 185.) 
The foregoing three decisions were synthesized in Allen I, 
supra, 45 Cal.2d 128, which articulated the standard for 
contract clause protection of public employee pension benefits 
that persists to this day.  Allen I was the second chapter of the 
story introduced in Kern, which addressed the elimination in 
1945 of the public safety officer pension system of the City of 
Long Beach.  Presumably as a result of the ruling in Kern, the 
city restored the pension plan for officers hired prior to its 
elimination.  Subsequently hired officers, however, worked 
without a pension plan until 1950, when the city entered them 
in the state pension system.  (Allen I, at p. 130.)  The following 
year, the city amended the original pension plan applicable to 
the officers hired before 1945 in three ways:  (1) employee 
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pension contributions were increased fivefold, from two percent 
of salary to ten percent; (2) the city switched from a fluctuating 
pension benefit, which was pegged to the salary paid to current 
employees in the retiree’s final job position, to a fixed benefit, 
which was determined by the retiree’s own late career salary; 
and (3) employees who were granted pension plan service credit 
for a leave of absence for military service were, for the first time, 
required to make contributions to the plan in return for the 
service credit.  (Id. at pp. 130–131.)  The affected officers 
challenged each of these changes as a violation of the contract 
clause. 
Citing Wallace, Packer, and Kern, we acknowledged that 
vested pension rights may be modified “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.”  (Allen I, supra, 45 Cal.2d at p. 131.)  
More specifically, we held, “Such modifications must be 
reasonable, and it is for the courts to determine upon the facts 
of each case what constitutes a permissible change.  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.”  (Ibid.)  
Applying this rule, we rejected all three of the modifications, 
concluding that the plan amendment “substantially decreases 
plaintiffs’ pension rights without offering any commensurate 
advantages, and there is no evidence or claim that the changes 
enacted bear any material relation to the integrity or successful 
operation of the [preexisting] pension system . . . .”  (Ibid.) 
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Our reasoning in rejecting the individual modifications 
gave substance to the rule’s requirements.  We began with a 
consideration of the disadvantages and comparable new 
advantages.  Our discussion of the increase in the contribution 
rate was short and pointed:  “The provision . . . obviously 
constitutes a substantial increase in the cost of pension 
protection to the employee without any corresponding increase 
in the amount of the benefit payments he will be entitled to 
receive upon his retirement.”  (Allen I, supra, 45 Cal.2d at 
p. 131.)  Our consideration of the switch to a fixed pension 
benefit was more deliberate.  As we pointed out, a fixed pension 
benefit is unresponsive to changing economic conditions.  In 
contrast, tying the amount of the benefit to a current employee’s 
salary permits retirees to “maintain a fairly constant standard 
of living despite changes in our economy,” since it is assumed 
that current salaries will reflect those changes.  (Id. at p. 132.)  
Particularly because the post-war period was “an era of rising 
salaries and high cost of living,” we concluded that “plaintiffs’ 
rights would be adversely affected by the change to the fixed 
benefit plan.”  (Ibid.)  Our rationale for questioning the newly 
required contributions in return for credit for military service 
was similar to that of the increased ordinary contributions.  “The 
provision . . . imposes a considerable financial burden upon 
those who, while in the armed forces, earn less than they would 
earn as city employees, and it raises the cost to them of pension 
protection without securing any advantage in addition to that 
which they already enjoyed.”  (Id. at p. 133.) 
After concluding that each of the changes was, for the 
reasons stated, disadvantageous to pre-1945 hires, we 
addressed the purpose of the changes.  Allen I first noted that 
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the changes were not adopted out of concern for the financial 
stability of the pension system.  “The city does not claim that 
any of the provisions contained in [the amendment] was 
necessary to preserve or protect the pension program applicable 
to [pre-1945 hires], and there is no indication that the city would 
have difficulty in meeting its obligations to those employees 
under the provisions of [the original pension plan].”  (Allen I, 
supra, 45 Cal.2d at p. 133.)  Instead, we observed, the city 
explained that “the changes . . . were enacted in order to make 
the pension system for [pre-1945 hires] more nearly coincide 
with the retirement system established . . . for policemen and 
firemen employed after that date, thus to ameliorate ‘personal 
[sic] problems’ assertedly created by differences in pension costs 
and benefits to the two groups of employees and to ‘somewhat 
equalize the compensation provided for employees who perform 
like services.’ ”  (Ibid.) 
We concluded that this rationale was insufficient to justify 
the impairment of pension benefits caused by the various 
changes.  As we explained, “[s]uch purposes, however beneficial 
to the city, bear no relation to the functioning and integrity of 
the pension system established for persons employed prior to 
[1945] and constitute no justification for materially reducing the 
vested contractual rights earned by plaintiffs prior to the time 
[the charter amendment] was adopted.”  (Allen I, supra, 
45 Cal.2d at p. 133.) 
In sum, when evaluating modifications to a public 
employee pension plan under the contract clause, Allen I 
requires a court first to determine whether the modifications 
impose an economic disadvantage on affected employees and, if 
so, whether those disadvantages are offset in some manner by 
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comparable new advantages.22  The court must then determine 
whether the government’s articulated purpose in making the 
changes was sufficient, for constitutional purposes, to justify 
any impairment of pension rights.  Although changes may be 
enacted “for the purpose of keeping [the] pension system flexible 
to permit adjustments in accord with changing conditions and 
at the same time maintain the integrity of the system,” such 
changes “must bear some material relation to the theory of a 
pension system and its successful operation.”  (Allen I, supra, 
45 Cal.2d at p. 131.) 
In the intervening 65 years, our decisions have clarified 
aspects of the Allen I test, but its substance is unchanged.23  In 
                                        
22  
Neither Allen I nor any of our subsequent pension 
decisions have addressed a situation in which all economic 
disadvantages of a pension modification were offset by 
comparable new advantages.  Such an argument was made in 
Betts, supra, 21 Cal.3d at pages 864-865, but we found it 
inapplicable in the circumstances presented.  (Id. at p. 867.)  In 
Packer, which predated Allen I, we held that the contract clause 
was not violated upon finding that it was “difficult, if not 
impossible,” to determine whether the “total value” of an 
officer’s pension rights had been diminished by the challenged 
amendments.  (Packer, supra, 35 Cal.2d at p. 219.)  Packer can 
therefore be interpreted as holding that no contract clause 
violation results when a pension plan modification provides 
fully compensating new advantages.  We note, however, that the 
determination of disadvantages and comparable advantages 
was made collectively in Packer, rather than as to individual 
employees.  (See Packer, at p. 218.)  This collective approach was 
effectively disavowed in Abbott v. City of Los Angeles (1958) 
50 Cal.2d 438, 449 (Abbott). 
23  
Plaintiffs argue that, in Olson v. Cory (1980) 27 Cal.3d 
532, we held that a modification of pension rights is “per se 
 
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Abbott, supra, 50 Cal.2d 438, we employed the rationale 
articulated in Allen I in concluding that the change from a 
fluctuating to a fixed pension benefit could not properly be 
applied to persons who were employed by the defendant city at 
the time the change occurred, even though the change had 
occurred 35 years earlier.  (Abbott, at pp. 453–455.)  In the 
process, we explained that the determination of disadvantages 
and comparable new advantages must be made individually as 
to each affected employee, rather than on the basis of the 
employees as a group.  (Id. at p. 449; see similarly Betts, supra, 
21 Cal.3d at p. 864.) 
In analyzing a similar constitutional issue in Betts, supra, 
21 Cal.3d 859, we entertained the argument that, as a general 
matter, the change from a fluctuating benefit to a fixed benefit 
adjusted annually for inflation could pass constitutional muster 
because such a change represented the replacement of “one ‘cost 
of living’ formula” for another.  (Id. at p. 865.)  We found it 
unnecessary to rule on that argument, however, because the 
Legislature had adopted the cost of living adjustment at a time 
when pension benefits were still determined by the fluctuating 
                                        
unreasonable” if it is permanent, rather than temporary.  Olson 
rendered no such holding.  At the point in the decision cited by 
plaintiffs, Olson merely summarized four factors considered by 
the Supreme Court in Blaisdell, supra, 290 U.S. 398, in deciding 
whether a particular impairment of private contracts was 
unconstitutional.  One of these was whether the impairment 
was permanent or temporary.  Contrary to plaintiffs’ claim of 
“per se” unreasonableness, none of the factors was characterized 
as determinative on its own.  (See Olson at p. 539; Blaisdell, at 
p. 441.)  Neither Olson nor any other decision of this court has 
held that an impairment of contracts is unconstitutional solely 
because it is permanent, rather than temporary. 
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method.  The change to a fixed benefit did not come until several 
years later.  Accordingly, we held, the plaintiff had a vested 
right to both a fluctuating pension benefit and the cost of living 
adjustment, 
since 
those 
advantages 
were 
offered 
simultaneously by the pension plan during his public service.  
(Id. at p. 866 [“An employee’s contractual pension expectations 
are measured by benefits which are in effect not only when 
employment commences, but which are thereafter conferred 
during the employee’s subsequent tenure”].) 
Thereafter, in International Assn. of Firefighters v. City of 
San Diego (1983) 34 Cal.3d 292 (Firefighters), our court made 
explicit what was already implicit in the vested rights doctrine, 
namely, that the contract clause does not protect public 
employees against adverse changes in the manner in which a 
pension plan is implemented that are authorized by the existing 
terms of the plan, rather than as a result of legislative changes 
to those terms.  (Id. at pp. 301–302 [holding that an increase in 
employee contribution rates pursuant to the existing terms of a 
pension plan does not violate vested rights].) 
Although we have addressed pension-related contract 
clause issues in a few other decisions rendered in the years since 
Betts, these decisions applied the principles established in 
Allen I, Abbott, and Betts without changing their substance.  
(E.g., City of Huntington Beach v. Board of Administration 
(1992) 4 Cal.4th 462, 471–472 (Huntington Beach); Eu, supra, 
54 Cal.3d at p. 529; Allen v. Board of Administration (1983) 
34 Cal.3d 114 (Allen II).)  Our last decision to touch on these 
issues, issued over 25 years ago, continued to cite the test 
established in Allen I.  (Huntington Beach, at p. 472.) 
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Although it did not otherwise augment our contract clause 
jurisprudence, Allen II has caused some confusion.  When 
summarizing the test applied to pension plan modifications 
under the contract clause, the decision stated that when such a 
change results in disadvantages to employees, it “must” be 
accompanied by comparable new advantages.  (Allen II, supra, 
34 Cal.3d at p. 120.)  This differed from the formulation in Allen 
I, which held that disadvantages “should” be accompanied by 
new advantages.  (Allen I, supra, 45 Cal.2d at p. 131.)  Based on 
this inconsistency, the Court of Appeal in the decision under 
review concluded that “the Supreme Court changed the 
formulation of its reasonableness test” in Allen II.  (Alameda 
Sheriffs, supra, 19 Cal.App.5th at p. 120.)  Although the court’s 
conclusion is understandable, we conclude that Allen II did not 
modify the rule of Allen I.  Other than its isolated use of the word 
“must,” there is no reason to believe that Allen II intended a 
modification.  The two Supreme Court cases Allen II cited as its 
source for the test, Allen I and Abbott, both use the word 
“should.”  Allen II did not indicate an intent to change the 
governing standard, let alone attempt to justify it, as would 
ordinarily occur if we intended to effect a material change in the 
law, and the distinction between “must” and “should” played no 
role in the resolution of Allen II.  Further, our subsequent 
decisions have never recognized a change in the test.  All of our 
later decisions mentioning this standard use the word “should,” 
including a decision issued only one month after Allen II and 
authored by the same justice.  (Firefighters, supra, 34 Cal.3d at 
p. 301; see also Huntington Beach, supra, 4 Cal.4th at p. 472; 
Eu, supra, 54 Cal.3d at pp. 529–530.)  A different division of the 
First District Court of Appeal examined the same question in 
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Marin County and, after a careful analysis, concluded that 
“ ‘[s]hould,’ not ‘must,’ remains the court’s preferred expression.”  
(Marin County, supra, 2 Cal.App.5th at p. 699, review granted; 
see similarly, Hipsher v. Los Angeles County Employees 
Retirement Assn (2018) 24 Cal.App.5th 740, 753, review granted 
Sept. 12, 2018, S250244 [use of “must” in Allen II not to be taken 
literally].)  The one-time use of “must” in Allen II appears to 
have been inadvertent, and it should not be understood to have 
changed the Allen I standard. 
2.  PEPRA’s amendment of section 31461 constituted a 
modification of CERL 
As the Court of Appeal recognized, a legislative action 
cannot be found to have impaired public employee pension 
rights unless the action constituted a modification of the pension 
system.  (Alameda Sheriffs, supra, 19 Cal.App.5th at p. 96 
[“whether the changes to section 31461 . . . unconstitutionally 
impair the vested pension rights . . . depends, at least as an 
initial matter, on whether those changes actually modified 
CERL”].)  Changes in the implementation of a pension plan that 
occur pursuant to its existing terms and conditions, for example, 
do not support a claim of impairment.  (Firefighters, supra, 
34 Cal.3d at pp. 301–302 [increase in employee contribution 
rates pursuant to the provisions of a pension plan does not 
violate the contract clause].)  A change in the language of a 
statute or ordinance governing a pension plan that does not 
change the manner in which it is implemented similarly does 
not support a claim of impairment.  (Gatewood v. Board of 
Retirement 
(1985) 
175 Cal.App.3d 
311, 
319 
(Gatewood) 
[statutory amendment that was consistent with existing judicial 
interpretation did not give rise to contract clause claim].)  
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Legislation amending unambiguous statutory language or 
effectively overruling a settled judicial interpretation of 
statutory language, however, undoubtedly constitutes a 
constitutionally cognizable modification of employee pension 
rights, assuming the legislation materially changed the manner 
in which the pension system is implemented.  We conclude that 
the amendment of section 31461 to add subdivision (b)(1) 
through (3) constituted a change in the law because those 
provisions 
narrowed 
the 
expansive 
interpretation 
of 
compensation earnable adopted in Ventura County.24 
                                        
24  
When it is unclear whether the legislation actually effects 
a change in the governing law — that is, when neither the 
preexisting language of the statute nor a judicial decision 
resolves the issue addressed by the legislation — it cannot be 
said with equal confidence that the legislation impairs existing 
pension rights.  The State and the District argue that an 
amendment of ambiguous statutory language governing pension 
rights does not constitute a modification for purposes of the 
contract clause, so long as the amendment qualifies as a 
clarification of the statute.  (See Protect our Benefits v. City and 
County of San Francisco (2015) 235 Cal.App.4th 619, 636-637 
[considering whether a contract clause claim should be denied 
because a change in the governing ordinance was a clarification 
of an earlier ordinance]; In re J.C. (2016) 246 Cal.App.4th 1462, 
1479-1480 [in determining the retroactivity of a statutory 
amendment, an amendment that adopts a reasonable 
interpretation of a previously ambiguous statute is regarded as 
clarifying, rather than changing, the law].)  Given the very 
general language of section 31461, defendants argue that 
PEPRA’s amendments should be viewed as clarifying, rather 
than changing, the definition of compensation earnable.  In light 
of our conclusion, explained hereafter, that the PEPRA 
amendment of section 31461 is properly considered a change of 
the interpretation of section 31461 rendered in Ventura County 
 
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a.  Ventura County adopted a broadly inclusive 
definition of “compensation earnable” 
Our sole decision addressing the scope of “compensation 
earnable” is Ventura County, supra, 16 Cal.4th 483, in which we 
considered whether “various payments by the county over and 
above the basic salary paid to all employees in the same job 
classification are ‘compensation’ within the meaning of the 
[CERL] statute” (id. at p. 487) and clarified the meaning of 
compensation earnable under section 31461.  We began by 
recognizing that the statutory terms “compensation” and 
“compensation earnable” are “ambiguous in some respects” and 
fail clearly to resolve the status of items of compensation beyond 
basic salary or wages.  (Ventura County, at p. 493.)  Regarding 
the first issue, the status of payments over and above base 
salary, we began with the statutory definition of compensation 
as “remuneration paid in cash . . . , but [not] the monetary value 
of board, lodging, fuel, laundry, or other advantages furnished 
to a member.”  (§ 31460; see Ventura County, at pp. 490–491.)  
Accepting the implications of a literal reading of this language, 
we held that the term includes all compensation paid in cash, 
while excluding any benefits conferred in a form other than 
cash.  (Ventura County, at p. 497.)  We applied this ruling to hold 
that a wide variety of cash payments that supplement an 
employee’s base pay are included in “compensation,” including 
uniform allowances, cashed-out leave time, bilingual premium 
                                        
rather than a clarification of the statutory language, it is 
unnecessary for us to decide whether the Legislature’s 
clarification of ambiguous statutory language would avoid 
contract clause scrutiny. 
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pay, pay for field training officer and motorcycle duty, holiday 
pay, and educational incentive pay.  (Id. at pp. 497–498.) 
Having settled the issue of compensation, we turned to the 
meaning of compensation earnable, which bore the definition 
now found in section 31461, subdivision (a).  (Ventura County, 
supra, 16 Cal.4th at p. 499.)  As discussed above, we ruled that 
“ ‘compensation earnable’ is the average pay of the individual 
retiring employee computed on the basis of the number of hours 
worked by other employees in the same class and pay rate — 
that is[,] the average monthly pay, excluding overtime, received 
by the retiring employee for the average number of days worked 
in a month by the other employees in the same job classification 
at the same base pay level.”  (Id. at p. 504.)  In reaching that 
conclusion, we relied in part on the similar language that was 
at one time used to define “compensation earnable” in the 
CalPERS statute.  (Ibid.)  The CalPERS language had been 
repealed a decade earlier and replaced with a more detailed 
statute, which included a new category of items of compensation 
labeled “special compensation.”  Although this legislation 
“recast[] and redefine[d]” compensation earnable under 
CalPERS, we found no indication “that the inclusion of ‘special 
compensation’ in the definition adds anything that was not 
included under the prior legislation.”  (Id. at p. 505.)  As we 
observed, many of the items of compensation that the Ventura 
County plaintiffs sought to include in CERL’s compensation 
earnable “appear to be the type of ‘special compensation’ items 
which are included in the ‘compensation earnable’ of PERS 
members.”  (Ventura County, at p. 504.)  On that basis, we held 
that all of the various “premiums in dispute” are included in 
compensation earnable.  (Id. at p. 505.)  Although we did not 
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specifically identify these premiums, the phrase appears to refer 
to all of the “items plaintiffs seek to have included in their 
‘compensation earnable.’ ”  (Id. at p. 504.) 
b.  Subdivision (b)(4) did not modify CERL 
We first address the pre-PEPRA status of termination 
pay, now excluded by section 31461, subdivision (b)(4), because 
it is the only aspect of section 31461 specifically addressed by a 
published appellate decision following Ventura County.  As 
discussed above, the definitions of “compensation” and 
“compensation earnable” adopted in Ventura County effectively 
overturned aspects of Guelfi, supra, 145 Cal.App.3d 297, which 
had guided the implementation of section 31461 prior to Ventura 
County.  Our disapproval of Guelfi’s long-standing rulings 
spawned a variety of lawsuits statewide by county employees 
and pensioners, as we anticipated.  (Ventura County, supra, 
16 Cal.4th at p. 507).  These lawsuits were consolidated in a 
single proceeding, and those that did not settle became the 
subject of Retirement Cases, supra, 110 Cal.App.4th 426.25 
Among the issues addressed by Retirement Cases was the 
inclusion in final compensation of “termination pay,” which the 
court defined as “one-time cash payments made to plan 
members upon retirement for accrued but unused compensatory 
time, sick leave time, and vacation or holiday time.”  (Retirement 
Cases, supra, 110 Cal.App.4th at p. 473.)  Retirement Cases 
                                        
25  
The lawsuits in Alameda, Contra Costa, and Merced 
County that resulted in the settlement agreements addressed 
ante, part II.A of this decision, were included in the consolidated 
proceeding in Retirement Cases, but each was settled prior to the 
trial court’s entry of judgment in the proceeding. 
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recognized that Ventura County had defined such payments as 
compensation.  The court ruled, however, that they were not a 
part of “final compensation” because, under the relevant 
statutes, the period for calculating final compensation “extends 
up to, but does not include retirement.”  (Id. at p. 474; see 
§§ 31462, 31462.1.)  Until the cash compensation was received, 
the accrued leave time remained an in-kind benefit, excluded 
from compensation under section 31460.  Yet at the time the 
cash was received, the final compensation period had ended.  
(Retirement Cases, at p. 474.)  This ruling was subsequently 
adopted in Salus v. San Diego County Employees Retirement 
Assn. (2004) 117 Cal.App.4th 734, 740. 
Because Retirement Cases and Salus remained good law 
at the time PEPRA was enacted, section 31461, subdivision 
(b)(4) made no material change in the implementation of CERL.  
Subdivision (b)(4) addresses “[p]ayments made at the 
termination of employment.”  Assuming, as the Court of Appeal 
concluded (Alameda Sheriffs, supra, 19 Cal.App.5th at p. 104), 
that this phrase refers to the same type of payments deemed 
“termination pay” by Retirement Cases and Salus — that is, 
payments made after the employment relationship ends — 
CERL already restricted the pensionability of termination pay 
when PEPRA became law.26  As so interpreted, subdivision 
                                        
26  
Alternatively, it can be argued that section 31461, 
subdivision (b)(4), which governs “[p]ayments made at the 
termination of employment,” includes payments made in 
anticipation of an employee’s imminent retirement but received 
prior to termination.  Interpreted in this manner, subdivision 
(b)(4) would constitute a narrowing of the broad ruling of 
Ventura County.  In that case, however, subdivision (b)(4) would 
 
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(b)(4) did not impair county employee pension rights for 
purposes of the contract clause. 
c.  Subdivision (b)(1), (2), and (3) effected a change 
in CERL 
We have not located any other pre-PEPRA judicial 
decision that addresses the inclusion in compensation earnable 
of the remaining items excluded or limited by the PEPRA 
amendment.27  We conclude, however, that the ruling in Ventura 
County was sufficiently clear in including within compensation 
earnable the items of compensation now excluded or limited by 
section 31461, subdivision (b)(1) through (3) that these 
provisions must be considered a change in the law for purposes 
of the contract clause. 
As noted above, Ventura County’s consideration of these 
issues was brief and relatively summary, but the decision 
appears to include the items excluded or limited by the PEPRA 
amendment within the definition of compensation earnable.  
The decision began with a consideration of CERL’s definition of 
“compensation” in section 31640, which concluded that the 
definition includes virtually any item of cash compensation 
received by a county employee.  As the court explained, “[w]hen 
paid in cash, the payment is remuneration and, as it is not 
                                        
also be largely coextensive with subdivision (b)(2).  Because the 
interpretive issue is not material to our resolution of this 
matter, we do not address it further. 
27  
Section 31461, subdivision (c) states that “[t]he terms of 
subdivision (b) are intended to be consistent with and not in 
conflict with the holdings” in Retirement Cases and Salus, but 
neither decision addresses a relevant issue other than 
termination pay. 
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excluded, it is ‘compensation’ under section 31460.”  (Ventura 
County, supra, 16 Cal.4th at p. 497.)  Although that sentence 
related specifically to “cash payments made in lieu of providing 
the same advantages in kind” (ibid.), it captures the court’s 
general ruling regarding the meaning of “compensation.”  This 
term, of course, is the foundation for compensation earnable, 
which is defined as “the average compensation . . . for the period 
under consideration.”  (§ 31461, subd. (a), italics added.)  Given 
the broad definition of “compensation” adopted by Ventura 
County and the absence of any limitations on that term as it is 
used in section 31461, it is reasonable to construe the decision 
as holding that compensation provided as cash remuneration, if 
not expressly excluded from compensation earnable, is included 
in that term.  Because none of the items excluded or limited by 
subdivision (b)(1) through (3) was excluded prior to PEPRA, the 
exclusion of those items must be regarded as a change in the 
law. 
Our discussion in Ventura County of the specific items of 
compensation 
there 
at 
issue 
is 
consistent 
with 
this 
interpretation.  As noted above, the court held that all of the 
“premiums in dispute” are included within compensation 
earnable, presumably referring to all of the items put at issue 
by plaintiffs.  (Ventura County, supra, 16 Cal.4th at p. 505.)  
Those items included, among others, “additional compensation 
for scheduled meal periods for designated employees, pay in lieu 
of annual leave accrual, holiday pay, . . . [and] a longevity 
incentive.”  (Id. at pp. 488–489; see id. at pp. 488–489, fns. 6, 7, 
11 & 12.)  These items are similar to those subsequently 
excluded or limited by section 31461, subdivision (b)(2) and (3) 
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— and yet Ventura County had ruled that they are included 
within compensation earnable. 
Defendants argue that CERL had never permitted the 
inclusion in compensation earnable of the various items of 
compensation excluded or limited by section 31461, subdivision 
(b)(1) to (3).  The argument is not based on Ventura County or 
any other judicial interpretation of CERL, but rather on 
defendants’ own interpretations of the language of the 
governing statutes.  In effect, they argue, the pre-PEPRA 
provisions of CERL should have been interpreted to exclude 
these items.  Even assuming their interpretive arguments have 
merit, our consideration of a change in the law must focus on 
how the governing statutes were interpreted, not how they 
might have been interpreted.  Our contract clause jurisprudence 
is designed, at least in part, to protect the reasonable 
expectations of public employees covered by the pension plan.  
(Betts, supra, 21 Cal.3d at p. 866; see Cal Fire, supra, 6 Cal.5th 
at p. 989, fn. 14.)  Those reasonable expectations are defined not 
only by the statutes themselves, but also by judicial 
interpretations of those statutes.  Employees can reasonably 
expect their pensions to be calculated according to existing 
judicial interpretations, at least until those interpretations are 
limited or overruled by subsequent authority.  Because, as 
discussed above, Ventura County adopted a broad interpretation 
of compensation earnable and because that interpretation was 
never changed or otherwise limited by subsequent judicial or 
statutory authority prior to PEPRA, we measure the PEPRA 
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amendment against that interpretation, not by a different 
interpretation that might have been adopted.28 
The District, for example, relies on an argument made to 
the Contra Costa County retirement board by its outside 
counsel, who opined that the term “final compensation” should 
be interpreted to limit the inclusion of cashed out leave time to 
leave time actually earned by the employee during a final 
compensation year.  Although we might have accepted that 
argument had it been presented in Ventura County, it was not.  
Our decision was unqualified in this regard.  Similarly, the State 
argues that the compensation excluded by section 31461, 
subdivision (b)(1) was “never pensionable” under CERL because 
“the idea of basing a public employee’s pension on payments 
intended to spike the member’s retirement benefit, and not 
exclusively on compensation for faithful service, contradicts the 
fundamental theory of a pension system.”  Although this is 
another plausible argument, Ventura County made no such 
exception in its general ruling that compensation earnable 
includes all non-excluded cash remuneration.  The State’s 
arguments regarding subdivision (b)(2) and (3) similarly rely on 
its own statutory constructions, rather than the actual ruling of 
Ventura County.  For the reasons discussed above, we conclude 
that, when measured against a reasonable reading of the only 
                                        
28 
Our conclusion might be different if the Legislature had 
timely amended an ambiguous statute in a manner contrary to 
the interpretation adopted in a judicial decision, suggesting its 
disagreement with the court’s interpretation, as occurred in 
Gatewood, supra, 175 Cal.App.3d 311.  Because the Legislature 
did not amend CERL in response to Ventura County, that 
situation is not before us.  
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applicable judicial guidance — our ruling in Ventura County — 
subdivision (b)(1), (2), and (3) changed the law of compensation 
earnable. 
3.  PEPRA’s amendment of CERL is not constitutional 
merely because it applies only to pension benefits 
awarded after its enactment 
Before turning to the application of the California Rule to 
subdivision (b)(1) to (3) of section 31461, we address an 
argument prominently urged by the State to support the 
constitutionality of the PEPRA amendment.  Regardless of the 
impact on the pensions of county employees who retire after its 
effective date, the State argues, the PEPRA amendment “could 
not have impaired any vested rights, because [PEPRA’s 
changes] only operate prospectively.”  According to the State, 
PEPRA should be held consistent with the contract clause 
because it “does not affect the pension of anyone who retired 
before its effective date.  Nor does it retroactively re-characterize 
the pensionability of any item that was earned and already 
included in an employee’s final pensionable compensation before 
[its] effective date.”  The argument disregards our long-standing 
contract clause jurisprudence, but there is another, more 
fundamental reason to reject it.  The argument misunderstands 
the retroactive effect of the PEPRA amendment on county 
employee pension benefits. 
It goes almost without saying that the State’s argument is 
inconsistent with our prior pension decisions, and the State 
makes no attempt to reconcile its position with those decisions.  
The contention, in essence, is that the PEPRA amendment is 
prospective because it does not change the pension benefits of 
persons who have already retired or the pensionability of items 
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of compensation earned by county employees who are 
sufficiently near to retirement to have entered the final 
compensation period.  So long as modifications of pension law 
are prospective as so defined, the State argues, the Legislature 
is unconstrained by the contract clause.  Our decisions are 
fundamentally at odds with this conception of the contract 
clause.  In Kern, our first decision to grapple with the 
requirements of the contract clause, the pension modification — 
in fact, a wholesale repeal — applied only to “persons not then 
eligible for retirement.”  (Kern, supra, 29 Cal.2d at p. 850.)  We 
did not suggest that this limitation avoided the contract clause 
issue; on the contrary, we overturned the repeal.  (Kern, at 
p. 856.)  In several subsequent decisions we found pension 
modifications untenable under the contract clause.  None of 
those modifications applied to persons already retired, yet that 
restriction did not preserve their constitutionality.  Nor did we 
suggest that they would have survived constitutional scrutiny if 
only their impact had been limited to persons who had not 
entered the final compensation period.  (E.g., Eu, supra, 
54 Cal.3d 
at 
pp. 
530–532 
[ballot 
initiative’s 
pension 
modifications could not be applied to state legislators who 
assumed office prior to its passage]; Betts, supra, 21 Cal.3d at 
p. 867 [pension modification could not be applied to plaintiff, 
who was employed by the state prior to its enactment]; Abbott, 
supra, 50 Cal.2d at pp. 453–455 [holding that a pension 
modification enacted 35 years earlier could not be applied to 
persons who were employed by the defendant city at the time 
the change occurred]; Allen I, supra, 45 Cal.2d at pp. 131–133.)  
On the contrary, the State’s argument is entirely at odds with 
our contract clause jurisprudence. 
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Because it misunderstands the impact of prospective 
application in this context, the State’s argument does not 
persuade us to modify our long-standing jurisprudence.  In 
evaluating the proper scope of contract clause protection for 
pension rights, it is important to recognize the unusual nature 
of such rights as compensation.  Public employees begin earning 
pension benefits from their first day of work.  As a result, we 
have consistently held that pension rights become vested at that 
time.  (Kern, supra, 29 Cal.2d at p. 855 [a public employee “has 
actually earned some pension rights as soon as he has performed 
substantial services for his employer”]; Dryden v. Board of 
Pension Commissioners (1936) 6 Cal.2d 575, 579 [right to 
pension becomes vested upon acceptance of employment]; 
McGlynn v. State of California (2018) 21 Cal.App.5th 548, 558–
559 [vested pension rights accrue upon commencement of 
work].)  Yet the value of pension rights is not determined until 
the end of an employee’s career, when the retiring employee’s 
pension benefit is calculated.  CERL perfectly illustrates this.  
The amount of a CERL pension benefit is based on a county 
employee’s 
years 
of 
service, 
age 
at 
retirement, 
and 
compensation during a specific one or three-year period.  The 
first two cannot be determined until retirement, and 
pensionable compensation is also normally determined near, if 
not at, the end of the employee’s career.  Further, it is the law 
in effect at the time of retirement that is used to calculate the 
amount of an employee’s pension benefit.  Generally speaking, 
the law prevailing during the period when pension rights are 
earned — that is, during an employee’s career — does not factor 
into the calculation of the value of those pension rights unless 
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that law is still in effect when the pension benefit is calculated 
— i.e., at retirement. 
Because it is the law in effect at the end of a public 
employee’s career that is used to determine the amount of the 
pension benefit, most modifications of the provisions governing 
the benefit calculation have, in practice, a profoundly 
retroactive impact on persons who began their employment 
prior to the modification.  From early on, we have acknowledged 
that the Legislature may modify the statutory terms and 
conditions governing a public employee’s pension over the 
course of his or her career.  (Kern, supra, 29 Cal.2d at pp. 853–
854, citing Pennie v. Reis (1889) 80 Cal. 266 [upholding the 
Legislature’s substitution of a pension plan for the lump-sum 
death benefit available at the beginning of the plaintiff peace 
officer’s career].)  Yet, by normal operation of the pension 
system, such modifications apply not only to the pension rights 
accrued by public employees after the effective date of the 
modification, but also to all pension rights accrued prior.  To the 
extent the modification changes the manner in which a pension 
benefit is calculated, it changes the value of the pension rights 
accrued from the very inception of an employee’s career.  Most 
significant modifications of a pension plan therefore have an 
impact reaching far into the past. 
For this reason, the State’s argument that the PEPRA 
amendment cannot have violated vested rights because it 
operates only prospectively is misguided.  Although the 
amendment’s provisions apply only to employees who retire 
after its effective date, its exclusions and limitations are used in 
the calculation that, by setting the amount of their pension 
benefit, determines the value of the pension rights these 
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employees accrued over the entire course of their careers.  In 
practice, county employee pension benefits will be calculated as 
though the PEPRA amendment was the governing law from the 
beginning of their careers. 
To effect a pension modification that is prospective in 
practice, the Legislature would be required to enact a law that 
applies only to pension rights accrued after its effective date, 
while preserving unchanged the law applicable to pension rights 
accrued prior to that date.  Because PEPRA’s amendment 
applies to all pension rights, regardless of when they were 
accrued, the State’s claim of prospective operation is 
unpersuasive.29 
4.  The PEPRA amendment did not violate the 
California Rule 
In evaluating the constitutionality of modifications to a 
public employee pension plan, Allen I requires a court first to 
determine whether the modification imposes disadvantages on 
affected employees, relative to the preexisting pension plan, 
and, if so, whether the disadvantages are accompanied by 
comparable new advantages.  Assuming the disadvantages are 
not offset, the court must then determine whether the legislative 
body’s purpose in making the changes was sufficient, for 
constitutional purposes, to justify an impairment of pension 
rights.  Although public employee pension plans may be 
modified “for the purpose of keeping [the] pension system 
                                        
29  
In making this observation, we do not mean to suggest 
that a change that is prospective in practice would thereby be 
insulated from contract clause scrutiny under Allen I.  We 
intend merely to illustrate the type of amendment that, in the 
pension context, would be truly prospective in its impact. 
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flexible to permit adjustments in accord with changing 
conditions and at the same time maintain the integrity of the 
system,” to survive contract clause scrutiny such changes “must 
bear some material relation to the theory of a pension system 
and its successful operation.”  (Allen I, supra, 45 Cal.2d at 
p. 131.)  Finally, assuming the changes were made for a proper 
purpose, one further analytic step is necessary, as explicated 
below:  The Legislature’s decision to impose financial 
disadvantages 
on 
public 
employees 
without 
providing 
comparable advantages will be upheld under the contract clause 
only if providing comparable advantages would undermine, or 
would otherwise be inconsistent with, the modification’s 
constitutionally permissible purpose.  We conclude that the 
PEPRA amendment survives this constitutional scrutiny. 
a.  The PEPRA amendment imposed 
disadvantages on county employees without 
providing comparable advantages 
There is no question that the PEPRA amendment 
diminished county employees’ pension rights without providing 
any comparable new advantages.  New subdivision (b)(1) 
through (3) of section 31461 exclude from compensation 
earnable categories of compensation that, prior to PEPRA, were 
includable.30  Although the impact on the pension rights of 
individual employees will vary, depending on the employee’s 
personal circumstances and the policy adopted prior to PEPRA 
                                        
30  
Because, as explained above, section 31461, subdivision 
(b)(4) did not change CERL for purposes of the contract clause, 
we need not evaluate that subdivision under the California 
Rule.  Our conclusion would not, however, be different if 
subdivision (b)(4) were included in the analysis. 
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by his or her county retirement board regarding the inclusion of 
these categories, it seems inescapable that the pension benefits 
of some county employees will be less than they otherwise would 
have been as a result of the PEPRA amendment.  In the three 
counties involved in this matter, for example, retirement board 
policies permitted at least some of the types of compensation 
excluded by new subdivision (b) to be included in compensation 
earnable.  Because that compensation will no longer be factored 
into employees’ final compensation, diminished pension benefits 
will result.  There is no argument that PEPRA provided affected 
employees new advantages to offset the financial impact of these 
exclusions. 
b. PEPRA’s amendments of CERL were enacted for 
the constitutionally permissible purpose of 
conforming pension benefits more closely to the 
theory underlying section 31461 by closing 
loopholes and proscribing potentially abusive 
practices 
The second component of the California Rule is the 
requirement that the changes to a public pension plan have been 
enacted for a constitutionally permissible purpose.  The 
requirement is premised on the recognition in Kern, supra, 
29 Cal.2d 848, that “[t]he rule permitting modification of 
pensions is a necessary one since pension systems must be kept 
flexible to permit adjustments in accord with changing 
conditions and at the same time maintain the integrity of the 
system and carry out its beneficent policy.”  (Id. at pp. 854–855.)  
While acknowledging this need for flexibility, we held in Allen I 
that modifications of public pension plans are permissible only 
if they relate to the operation of the plan and are intended to 
improve its functioning or adjust to changing conditions, holding 
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that “alterations of employees’ pension rights must bear some 
material relation to the theory of a pension system and its 
successful operation . . . .”  (Allen I, supra, 45 Cal.2d at p. 131.) 
Our decisions since Allen I have upheld few, if any, 
pension modifications as properly motivated.  Perhaps the 
closest we have come to sustaining such a change was Betts, 
supra, 21 Cal.3d 859, in which we considered a modification of 
the pension system serving state officers.  The plan originally 
pegged the amount of officers’ pension benefits to the salary of 
persons currently holding the same office held by the pensioner 
upon retirement.  (Id. at p. 862.)  The modification at issue 
changed this means of preserving the purchasing power of 
pension benefits to an annual cost of living adjustment.  (Id. at 
p. 865.)  We expressed a willingness to entertain the state’s 
argument that the change was constitutionally permissible 
because it represented the replacement of “one ‘cost of living’ 
formula” with another, but we concluded that the argument 
could not be sustained “[u]nder the circumstances of this case.”  
(Ibid.) 
Our decisions have more often given substance to this 
requirement of Allen I by delineating what is not a 
constitutionally permissible purpose.  In Wallace and Allen I, 
both of which found a violation of contract clause protections, 
the defendant cities advanced essentially political reasons for 
the pension modifications at issue.  In Allen I, the city adopted 
three changes to a pension system covering senior employees 
that had the effect of increasing the cost of participation in the 
plan for employees and diminishing their benefits.  The city 
characterized the changes as an attempt to equalize the pension 
benefits of the senior employees and more recent hires, who 
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were covered by a different, less generous pension plan.  (Allen I, 
supra, 45 Cal.2d at p. 133.)  We found this rationale insufficient, 
reasoning that “[s]uch purposes, however beneficial to the city, 
. . . constitute no justification for materially reducing the vested 
contractual rights earned by plaintiffs . . . .”  (Ibid.)  In Wallace, 
supra, 42 Cal.2d 180, we rejected as improperly motivated a 
modification that stripped pension benefits from retirees upon 
conviction of a felony in order “to meet the objections of 
taxpayers who would be opposed to contributing funds for the 
maintenance of a pensioner who had been convicted of a felony.”  
(Id. at p. 185.)  Finally, in Abbott, supra, 50 Cal.2d 438, we 
addressed a city’s argument that the modification of its pension 
plan was justified as an attempt to stem rising pension costs.  
In defense of its switch from a fluctuating pension benefit, 
intended to compensate for changes in the cost of living, to a 
fixed benefit, the city contended that “if the amendments had 
not been made ‘the cost to the City and its taxpayers would have 
reached such staggering proportions that, in all probability, the 
system would have ceased to exist.’ ”  (Id. at p. 455.)  We rejected 
the argument, observing that the city’s hypothetical prediction 
of costs so great as to lead to the pension system’s abolition was 
speculative and failed to account for the fact that a pension 
system is essential to attract qualified municipal employees.  
(Ibid.)  This left the city to rely only on rising costs, an argument 
we found insufficient, without more, to justify the change.  
(Ibid.) 
Given our past decisions, we have no difficulty finding that 
the PEPRA amendment was enacted to maintain the integrity 
of the pension system and “bear[s] some material relation to the 
theory of a pension system and its successful operation.”  
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(Allen I, supra, 45 Cal.2d at p. 131.)  As discussed above, the 
Legislature’s primary purpose in enacting the PEPRA 
amendment was to modify CERL’s “very broad and general 
definition of ‘compensation earnable’ ” to prevent pension 
spiking.  (Assem. Com. on Public Employees, Retirement and 
Social Security, Analysis of Assem. Bill No. 340 (2011–2012 Reg. 
Sess.) Apr. 25, 2011, p. 3.)  An examination of the changes made 
by PEPRA demonstrates that the Legislature accomplished this 
objective by introducing new exclusions and limitations that 
bring the definition of “compensation earnable” into closer 
alignment with the preexisting theory underlying CERL’s 
determination of pension benefits.  A legislative intent to align 
the express language of a pension statute more closely with its 
intended manner of functioning directly relates to both the 
theory of a pension system and its successful operation. 
The definition of “compensation earnable” in section 
31461, which specifies the manner in which a retiring 
employee’s compensation is used in calculating his or her 
pension benefit, is a critical component in establishing the 
general theory underlying CERL’s payment of pension benefits.  
As discussed above, compensation earnable is based on the 
retiring employee’s average daily rate of pay during the final 
compensation period, applied over the number of days ordinarily 
worked during that time by the employee’s peers, identified as 
“persons in the same grade or class of positions during the 
period.”  (§ 31461, subd. (a); see Ventura County, supra, 
16 Cal.4th at p. 504.)  Among employees in this peer group, 
differences in pension benefits are therefore determined by 
variations in individual employees’ average daily compensation 
during the final compensation period, rather than by the 
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relative amount of time the employees worked.  An employee 
becomes entitled to a greater pension benefit than his or her 
peers by being compensated at higher rate, not by working more 
days.  This is so because the calculation required by section 
31461 assumes that all employees have worked the same 
number of days — that is, “the average number of days 
ordinarily worked by persons in the same grade or class of 
positions during the period” — and excludes overtime pay 
earned outside of “normally scheduled or regular working 
hours.”  (§§ 31461, subd. (a), 31461.6, subd. (a).)   
Given this fundamental definition, the inclusion in final 
compensation of the items of compensation excluded or limited 
by the PEPRA amendment can be viewed as distorting the 
pension calculation and increasing pension benefits beyond the 
amount anticipated by the underlying theory of compensation 
earnable.  Section 31461, subdivision (b)(2), for example, limits 
the inclusion of payments for unused leave time in 
compensation earnable to the amount “earned and payable . . . 
during the final average salary period, regardless of when 
reported or paid.”  Restricting the inclusion of such payments to 
those earned in the final compensation period promotes the 
underlying theory established by the general language of section 
31461.  Leave time earned prior to the final compensation period 
is, necessarily, awarded in return for work performed prior to 
that period.  The receipt of cash-out payments for such leave 
time during the final compensation period therefore has the 
effect of shifting compensation for that earlier work into the 
final compensation period, thereby artificially inflating the days 
of compensation received during the final compensation period.  
This is incompatible with the general approach of section 31461, 
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which calculates pensionable compensation on the basis of the 
same work time for every employee within a pay class.  Limiting 
the inclusion of such payments in the compensation earnable 
calculation to the amount “earned and payable” during the final 
compensation period, as required by section 31461, subdivision 
(b)(2), reduces the potential for distortion from this type of 
compensation.  (See Alameda Sheriffs, supra, 19 Cal.App.5th at 
pp. 97–98 [“the touchstone for calculating compensation 
earnable is still the compensation that was actually earned by 
the retiring employee in ‘the period under consideration’ ”].)31  It 
is noteworthy that, since 1995, CERL has treated payments 
from a deferred compensation plan in this manner, deeming 
deferred compensation to be included in compensation “when 
earned, rather than when paid.”  (§ 31461, subd. (a); see Stats. 
                                        
31  
The 
Court 
of 
Appeal 
interpreted 
section 
31461, 
subdivision (b)(2) to permit the inclusion of an unlimited 
amount of cashed out leave time in compensation earnable, 
regardless when accrued, by holding that the phrase “earned 
and payable” in subdivision (b)(2) modifies “leave cash-outs,” 
rather than the leave time itself.  It then concluded that the 
cash-out is earned when paid, rather than when the leave time 
is accrued.  (Alameda Sheriffs, supra, 19 Cal.App.5th at pp. 98-
100.)  Although, in practice, an employee can accrue only a 
limited amount of leave time in a final compensation period, 
there is no similar practical constraint on the amount of leave 
time that can be cashed out during that time.  The Court of 
Appeal’s interpretation therefore renders subdivision (b)(2) 
pointless, and an “interpretation of statutory language that 
renders the language useless” is, of course, disfavored.  
(Williams v. Superior Court (1993) 5 Cal.4th 337, 354.)  A better 
reading requires “earned and payable” to refer to the amount of 
leave time that can be accrued during the final compensation 
period. 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
80 
1995, ch. 558, § 1.)  Subdivision (b)(2) is consistent with this 
approach and serves the underlying theory of compensation 
earnable in the same manner. 
A comparable rationale supports the enactment of section 
31461, subdivision (b)(3), which excludes “[p]ayments for 
additional services rendered outside of normal working hours.”  
Section 31461 bases compensation earnable on the same 
number of days worked for all employees within a particular pay 
grade.  The long-standing exclusion of overtime from 
compensation earnable, now embodied in section 31461.6, 
confirms that an employee’s pensionable compensation is 
generally to be based on pay for work performed during normal 
working hours.32  Consistently with this exclusion of overtime, 
subdivision (b)(3) requires the exclusion of compensation for 
other services rendered outside normal working hours.  This 
restriction prevents employees from volunteering, during their 
final compensation period, to perform additional services 
outside normal working hours in order to artificially inflate 
their daily rate of pay.  Subdivision (b)(3) therefore reinforces 
the portion of section 31461 that requires compensation 
earnable to be based on the same work year for all employees 
within a particular pay grade. 
                                        
32  
This understanding is reinforced by the text of section 
31461.6, which excludes “overtime premium pay” unless the pay 
is received as compensation “for hours worked within the 
normally scheduled or regular working hours that are in excess 
of the statutory maximum workweek.”  (Id., subd. (a).)  In other 
words, overtime pay is not excluded if it is earned by an 
employee as part of his or her “normally scheduled or regular 
working hours.”  (Ibid.)  Only payment for excess hours, as 
compared to the employee’s peers, is excluded. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
81 
Finally, section 31461, subdivision (b)(1) excludes 
compensation “paid to enhance a member’s retirement benefit.”  
As discussed above, the three examples of potentially excludable 
compensation provided in subdivision (b)(1)(A) through (C) 
demonstrate that this section is intended to prevent various 
forms of manipulation of the compensation earnable calculation.  
Subdivision 
(b)(1)(A) 
categorizes 
as 
suspicious 
cash 
compensation received in lieu of a benefit that had previously 
been provided in kind.  This practice has the effect of converting 
a nonpensionable benefit into pensionable compensation.  
Subdivision (b)(1)(B) calls attention to “one-time or ad hoc 
payment[s]” made to an employee but not to peers.  The ad hoc 
and exclusive nature of the payment presumably signals the 
possibility of manipulation of the pension calculation.  
Subdivision (b)(1)(C) casts doubt on payments that are made 
solely due to termination yet are paid prior to termination.  This 
practice would shift such compensation into the final 
compensation period, again converting a nonpensionable benefit 
into pensionable compensation.  The common thread is the 
alteration of the normal pattern of an employee’s compensation 
for the purpose of increasing the compensation received during 
the final compensation period.  The exclusion mandated by 
subdivision (b)(1) therefore reinforces the requirement in 
section 31461 that an employee’s pension benefits be based on 
his or her compensation.  As the word implies, “compensation” 
is money paid in return for the performance of services.  If a 
payment is made to an employee for the purpose of enhancing 
his or her pension benefit, it is not paid in return for the delivery 
of services but for another purpose entirely — to boost the 
employee’s postemployment pension benefits.  This is clear 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
82 
pension abuse, and the express exclusion of such payments from 
compensation earnable is fully consistent with the theory 
underlying section 31461. 
As the preceding discussion demonstrates, the exclusions 
introduced by PEPRA unquestionably “bear [a] material 
relation to the theory of a pension system and its successful 
operation.”  (Allen I, supra, 45 Cal.2d at p. 131; see Claypool v. 
Wilson (1992) 4 Cal.App.4th 646, 666 [a valid justification for 
changing a pension system “must relate to considerations 
internal to the pension system”].)  The definition of 
compensation earnable is a critical element in the calculation of 
pension benefits.  The interplay of those elements is the very 
embodiment of “the theory of [the CERL] pension system,” and 
a workable definition of compensation earnable is crucial to “its 
successful operation.”  (Allen I, at p. 131.)  Further, as the 
Legislature explained in passing the amendments, the 
amendment was designed to limit pension spiking, the 
manipulation of compensation to artificially increase a pension 
benefit.  Unquestionably, preventing manipulation of the terms 
of a pension plan to produce outsize benefits is a substantively 
proper reason for modifying the plan, since it serves to maintain 
the system’s financial integrity and discourage gamesmanship 
in the management of compensation practices. 
c.  The Legislature was not constitutionally 
required to offset the disadvantages imposed by 
PEPRA’s amendment of section 31461 with 
comparable advantages 
In featuring a properly motivated pension modification 
that imposes uncompensated financial disadvantages on plan 
participants, this matter requires us to address for the first time 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
83 
the interplay of the two parts of the Allen I test.  There is no 
doubt that Allen I requires a modification of public employee 
pension rights to have been properly motivated — that is, to 
have been enacted “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” and to “bear some material relation to the theory of a 
pension system and its successful operation.”  (Allen I, supra, 
45 Cal.2d at p. 131.)  Less clear is the role of the second part of 
the test, the offsetting of financial disadvantages with 
comparable new advantages.  Because neither Allen I nor any of 
our subsequent pension decisions has featured a properly 
motivated 
pension 
modification 
that failed 
to 
provide 
comparable advantages to offset its disadvantages, we have 
never ruled on the constitutionality of such a modification.  The 
ruling of Allen I that disadvantages “should,” rather than 
“must,” be offset by comparable new advantages implies that the 
contract 
clause 
does 
not 
invariably 
require 
offsetting 
advantages, but we have never addressed the circumstances 
under which such advantages need not be provided. 
Because we have concluded that the PEPRA amendment 
was enacted for a constitutionally permissible purpose yet 
imposes uncompensated financial disadvantages, we must now 
turn to this unresolved issue.  For reasons explained below, we 
conclude that the contract clause requires a properly motivated 
pension modification to provide comparable new advantages to 
offset any financial disadvantages unless to do so would 
undermine, or would otherwise be inconsistent with, the 
constitutionally 
permissible 
purpose 
underlying 
the 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
84 
modification.  Further, we hold that the PEPRA amendment at 
issue here is constitutional under this analysis. 
1.  A modification of public employee pension 
rights will not be sustained under the 
contract clause solely because it serves a 
constitutionally permissible purpose 
It is possible to read Allen I to suggest that a modification 
of public employee pension rights that is properly motivated is 
constitutional, regardless of its imposition of uncompensated 
disadvantages.  Under such an interpretation, our analysis 
would end here, since we have concluded that the PEPRA 
amendment serves a constitutionally permissible purpose.  Two 
considerations dissuade us from such a reading. 
The first is the use by Allen I of “should” in connection 
with the first part of its test, that “changes in a pension plan 
which result in disadvantage to employees should be 
accompanied by comparable new advantages.”  (Allen I, supra, 
45 Cal.2d at p. 131, italics added.)  If the use of “should” by 
Allen I is not to be disregarded as merely precatory, it must be 
understood to mean, at a minimum, that although some 
properly motivated pension modifications that fail to provide 
comparable advantages will pass constitutional scrutiny, others 
will not.  Further, although this language implies that the 
enactment of comparable advantages is not an invariable 
constitutional requirement, the use of such a strongly directive 
word suggests that comparable advantages are preferred.  
Speaking generally, modifications of public employee pension 
plans “should” preserve the value of plan participants’ pension 
rights. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
85 
Second, as we emphasized in Allen I, the ultimate test for 
modifications to a public pension plan under the contract clause 
is reasonableness:  “Such modifications must be reasonable, and 
it is for the courts to determine upon the facts of each case what 
constitutes a permissible change.”  (Allen I, supra, 45 Cal.2d at 
p. 131.)  Even when a court finds that a pension modification 
was enacted for a constitutionally proper purpose, that alone 
does not ensure its reasonableness.  A further test must be 
interposed to ensure that any imposition of uncompensated 
financial disadvantages on plan participants as a result of the 
properly motivated pension modification is reasonable. 
2.  Modifications to a public employee pension 
plan that serve a proper purpose yet impose 
uncompensated disadvantages will be 
sustained only if providing comparable 
advantages would undermine, or would 
otherwise be inconsistent with, their 
constitutionally permissible purpose 
The contract clause protects from substantial impairment 
public employees’ implied contractual rights in their pension 
benefits.  Despite this protection, we have long recognized that 
public employees’ pension benefits are not immutable, “since 
pension systems must be kept flexible to permit adjustments in 
accord with changing conditions and at the same time maintain 
the integrity of the system and carry out its beneficent policy.”  
(Kern, supra, 29 Cal.2d at pp. 854–855.)  At times, those 
adjustments may incidentally reduce the value of employees’ 
pension rights.  As we recognized in Allen I, this does not 
necessarily mean that the adjustments are unconstitutional. 
It might have been possible to adopt a rule requiring that 
any disadvantages imposed by a pension modification must be 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
86 
offset by comparable new advantages.  But in Kern we 
effectively disavowed such a rule, holding, “The employee does 
not have a right to any fixed or definite benefits, but only to a 
substantial 
or 
reasonable 
pension. 
 
There 
is 
no 
inconsistency therefore in holding that he has a vested right to 
a pension but that the amount, terms and conditions of the 
benefits may be altered.”  (Kern, supra, 29 Cal.2d at p. 855.)  
Plainly, however, the recognition that pension benefits are not 
immune from change does not grant carte blanche to the 
Legislature.  As discussed at length above, the California Rule 
has two components:  The Legislature must act for a proper 
purpose and the net level of benefits “should” be preserved.  
(Allen I, supra, 45 Cal.2d at p. 131.)  The logical implication of 
the latter component is that the contract clause requires the 
level of pension benefits to be preserved if it is feasible to do so 
without undermining the Legislature’s permissible purpose in 
enacting the pension modification. 
This requirement gives substance to the instruction in 
Allen I that the disadvantages created by a pension modification 
“should be accompanied by comparable new advantages.”  (Allen 
I, supra, 45 Cal.2d at p. 131, italics added.)  When the 
Legislature can feasibly preserve the value of public employee 
pension rights by providing comparable new advantages — that 
is, when providing such advantages is not inconsistent with the 
constitutionally permissible purpose of the changes — the 
Constitution requires it to do so.  On the other hand, when 
providing comparable new advantages would undermine, or 
would otherwise be inconsistent with, the constitutionally 
permissible purpose of the change, the contract clause imposes 
no requirement that the Legislature frustrate its permissible 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
87 
purpose by providing comparable new advantages.  Such 
modifications will be upheld under our Constitution despite the 
financial disadvantage they impose on public employee pension 
benefits. 
This rule is consistent with our past constitutional rulings 
on the power of the state to impair its own contracts.  We have 
always recognized that such impairments may survive contract 
clause scrutiny, but we have also held that they are subject to 
significant constraints.  “ ‘[A] State is not completely free to 
consider impairing the obligations of its own contracts on a par 
with other policy alternatives.  Similarly, a State is not free to 
impose a drastic impairment when an evident and more 
moderate course would serve its purposes equally well.’ ”  
(Sonoma Employees, supra, 23 Cal.3d at p. 308, quoting U.S. 
Trust, supra, 431 U.S. at pp. 30–31.)  When preserving the value 
of public employee pension rights does not disserve the 
Legislature’s constitutionally permissible pension reform 
objectives, the contract clause requires it to preserve that value. 
3.  Requiring the provision of comparable new 
advantages would undermine the 
constitutionally permissible purpose of the 
PEPRA amendment 
PEPRA provided no new advantages to existing county 
employees to offset any impact of the exclusions and limitations 
in new subdivision (b)(1) through (3) of section 31461.  As 
indicated above, however, we conclude that providing such 
advantages 
would 
have 
undermined 
the 
amendment’s 
constitutionally permissible purpose.  Accordingly, the PEPRA 
amendment did not violate the contract clause of our 
Constitution, notwithstanding the failure of the Legislature to 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
88 
provide new features to offset the financial disadvantages of the 
PEPRA amendment. 
The purpose of PEPRA’s amendment of section 31461 was 
not to change in any fundamental way the implementation of 
the CERL pension system.  Save for the exclusion of a few items 
from pensionable compensation, CERL operates as it did before 
PEPRA.  Nor was it to reduce the cost burden of the system on 
counties, other than incidentally.  Rather, as explained above, 
the purpose was to bring administrative practice under section 
31461 into closer alignment with the system’s underlying theory 
by excluding income designed to artificially inflate a pension 
benefit (§ 31461, subd. (b)(1)) and limiting the inclusion of other 
types of compensation that were reasonably viewed as 
inconsistent with CERL’s general approach to pensionable 
compensation (§ 31461, subd. (b)(2), (3)).  Stated differently, the 
Legislature was attempting to reduce manipulation and abuse 
by closing loopholes created by the very general language of 
sections 31460 through 31462, which define “compensation,” 
“compensation earnable,” and “final compensation.”  Each of the 
changes in subdivision (b)(1) through (3) is arguably inherent in 
the overall intent of section 31461, but the failure of the statute 
expressly to address these specific circumstances left their fate 
to the interpretations of 20 individual county retirement boards.  
This was exacerbated after our decision in Ventura County 
confirmed and gave effect to the broadly inclusive language of 
sections 31460 and 31461.  PEPRA’s amendment compels 
uniformity on the issues it addresses, guaranteeing that 
compensation earnable will be implemented consistently with 
the Legislature’s intent in each CERL county. 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
89 
It would be anomalous, at best, to hold that the 
Constitution requires current employees to be provided an 
equivalent advantage to mitigate the effect of eliminating from 
compensation earnable payments that, in the view of the 
Legislature, are inconsistent with the theory underlying the 
pension system.  Requiring comparable advantages would be 
wholly inconsistent with the Legislature’s purpose by restoring 
in some form advantages that, in the view of the Legislature, 
should not have been available to county employees in the first 
place. 
Experience with the implementation of a statutory 
pension system will inevitably reveal the need for change to 
close loopholes and foreclose opportunities for abuse.  The 
Legislature must have the authority, discretion, and flexibility 
to address such problems without being required to, in effect, 
extend the life of the loopholes and the opportunities for abuse 
for the duration of the careers of current employees by providing 
comparable advantages.  (See Pomona Police Officers’ Assn. v. 
City of Pomona (1997) 58 Cal.App.4th 578, 587 [Legislature 
amended CalPERS governing statute “to curb certain perceived 
pension abuses [by] local governments”].)  Because requiring 
comparable advantages under these circumstances would 
significantly undermine the Legislature’s constitutionally 
permissible purpose, the contract clause imposes no such 
requirement. 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Opinion of the Court by Cantil-Sakauye, C. J. 
 
90 
III.  DISPOSITION 
The State, at least implicitly, and amicus curiae California 
Business Roundtable, explicitly, urge us to use this decision as 
an occasion to reexamine and revise the California Rule, arguing 
that the rule constitutes an improper interpretation of the 
contract clause and bad public policy.  Because we conclude that 
PEPRA’s amendment of CERL did not violate the contract 
clause under a proper application of the California Rule, 
however, we have no jurisprudential reason to undertake a 
fundamental reexamination of the rule.  The test announced in 
Allen I, as explained and applied here, remains the law of 
California. 
 
For the reasons stated above, we reverse the decision of 
the Court of Appeal and remand the matter to that court, with 
directions to remand to the trial court to vacate the judgments 
entered in each of the three consolidated proceedings and to 
conduct further proceedings consistent with this decision. 
 
CANTIL-SAKAUYE, C. J. 
 
We Concur: 
CHIN, J. 
CORRIGAN, J. 
LIU, J. 
CUÉLLAR, J. 
KRUGER, J. 
GROBAN, J. 
 
 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v. 
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
S247095 
 
Concurring Opinion by Justice Cuéllar 
 
This case resolves a constitutional challenge to a recent 
amendment of the County Employees Retirement Law of 1937 
(Gov. Code, § 31450 et seq.).  (See Stats. 2012, ch. 296, § 28.)  
What the amendment does is reduce county employees’ pension 
rights by narrowing the definition of “compensation earnable.”  
(Gov. Code, § 31461).  What the amendment does not do is 
provide any comparable new advantages to county employees.  
We uphold the change nonetheless, in this quite particular 
situation:  The definitional change was enacted for a 
constitutionally permissible purpose — one that would have 
been undermined by the provision of any offsetting financial 
advantage for employees.  (See maj. opn., ante, at pp. 87-89.)   
Two points are worth bearing in mind as one reads the 
court’s legal analysis in the context of this particular statutory 
amendment.  First, the test the court applies here is merely a 
specific application, fit for this situation, of a more general 
inquiry:  whether a reduction in pension rights without any 
comparable new advantages is “reasonable” and “necessary” to 
further “an important state interest.”  (Sonoma County 
Organization of Public Employees v. County of Sonoma (1979) 
23 Cal.3d 296, 308; see maj. opn., ante, at pp. 43, 45, 51, 85.)  
Modifications to pension rights present many complexities, and 
courts must determine their validity “ ‘upon the facts of each 
case.’ ”  (Maj. opn., ante, at p. 85, quoting Allen v. City of Long 
ALAMEDA COUNTY DEPUTY SHERIFF’S ASSN. v.  
ALAMEDA COUNTY EMPLOYEES’ RETIREMENT ASSN. 
Cuéllar, J., concurring 
 
2 
Beach (1955) 45 Cal.2d 128, 131.)  Second, at no point did 
plaintiffs in this case attempt to show the amended definition 
was unnecessary to achieve the Legislature’s permissible 
purpose, or was otherwise unreasonable.   
With that understanding, I concur in the Chief Justice’s 
opinion for the court.   
CUÉLLAR, J. 
 
 
 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Alameda County Deputy Sheriff’s Assn. v. Alameda County Employees’ Retirement 
Assn.   
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding  
Review Granted XX 19 Cal.App.5th 61 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S247095 
Date Filed: July 30, 2020 
__________________________________________________________________________________ 
 
Court:   Superior 
County:  Contra Costa 
Judge:  David B. Flinn 
 
__________________________________________________________________________________ 
 
Counsel:  
 
Mastagni Holstedt, Mastagni, Holstedt, Amick, Miller & Associates, David P. Mastagni, David E. 
Mastagni and Isaac S. Stevens for Plaintiffs and Appellants Alameda County Deputy Sheriff’s Association, 
Jon Rudolph, Rocky Medeiros, James Nelson and Darlene Hornsby. 
 
Leonard Carder, Peter Saltzman and Arthur Liou for Plaintiffs and Appellants Public Employees Union, 
Local 1, International Federation of Professional and Technical Engineers, Local 21, Alameda County 
Management Employees’ Association, David M. Rolley, Peter J. Ellis and Susan Guest. 
 
Rains, Lucia & Willinson, Rains Lucia Stern, St. Phalle & Silver, Rockne A. Lucia, Jr., Timothy K. Talbot, 
Steven M. Betz and Zachery A. Lopes for Plaintiffs and Appellants Contra Costa County Deputy Sheriffs 
Association and Ken Westermann.  
 
Weinberg, Roger & Rosenfeld, Anne I. Yen, Vincent A. Harrington, Jr. and Kerianne Steele for Plaintiffs 
and Appellants Service Employees International Union, Local 1021 and Building Trades Council of 
Alameda County. 
 
Bogatin Corman & Gold and William I. Corman for Plaintiffs and Appellants Physicians’ and Dentists’ 
Organization of Contra Costa. 
 
Davis, Cowell & Bowe, McCracken, Stemerman & Holsberry and W. David Holsberry for Plaintiffs and 
Appellants United Professional Fire Fighters of Contra Costa County, Local 1230.   
 
Beeson, Tayer & Bodine, Beeson, Tayer, Silbert & Bodine, Robert Bonsall, Vishtasp Soroushian, Teague 
P. Paterson and Adrian Barnes for Plaintiffs and Appellants AFSCME Local 512, AFSCME Local 2700, 
Teamsters Local 856, Hasani Tabari, Sandra Gonzalez-Diaz and Daniel Lister. 
Bennett, Sharpe, Delarosa, Bennett & Licalsi, Law Offices of Bennett & Sharpe, Barry J. Bennett, Thomas 
M. Sharpe,  Katwyn T. DeLaRosa for Plaintiffs and Appellants American Federation of State, County and 
Municipal Employees, Local 2703, AFL-CIO, Merced County Sheriff’s Association, an affiliate of 
International Brotherhood of Teamsters, Local 856, Jeffrey Miller and Mary McWatters. 
 
 
Messing Adam & Jasmine, Gary M. Messing, Gregg McLean Adam and Yonatan L. Moskowitz for CAL 
FIRE, Local 2881, California Correctional Peace Officers Association, Peace Officers Research 
Association of California, California Statewide Law Enforcement Association, San Francisco Police 
Officers’ Association, San Jose Police Officers’ Association, Fresno Deputy Sheriffs’ Association, Deputy 
Sheriffs’ Association of Santa Clara County, Marin Professional Firefighters, International Association of 
Fire Fighters, Local 1775, Association of California State Supervisors, San Francisco Municipal 
Executives’ Association, San Francisco Deputy Probation Officers’ Association,  Sunnyvale Public Safety 
Officers’ Association, Superior Court Professional Employees’ Association of the County of Santa Clara, 
Sacramento County Professional Accounts Association, City of Fremont Employees’ Association, 
Redwood City Management Employees’ Association, Burlingame Police Officers’ Association and 
California State Retirees as Amici Curiae on behalf of Plaintiffs and Appellants.  
 
Reich, Adell & Cvitan, Marianne Reinhold, Laurence S. Zakson and Aaron G. Lawrence for Orange 
County Attorneys Association and Orange County Managers Association as Amici Curiae on behalf of 
Plaintiffs and Appellants.   
 
Law Offices of Robert J. Bezemek, Robert J. Bezemek and David Conway for the Peralta Retirees 
Organization, the California Community Colleges Independents’ Organization and the Faculty Association 
of the California Community Colleges as Amici Curiae on behalf of Plaintiffs and Appellants.   
 
Reed Smith, Harvey L. Leiderman, Jeffrey R. Rieger and May-tak Chin for Defendants and Respondents 
Alameda County Employees’ Retirement Association and Contra Costa County Employees’ Retirement 
Association and their respective Boards of Retirement. 
 
Nossaman, Ashley K. Dunning, Peter H. Mixon, Robert L. Gaumer, Michael V. Toumanoff, Jill N. Jaffe, 
Natasha Saggar Sheth and Jennifer Meeker for Defendants and Respondents Merced  County Employees’ 
Retirement Association and Merced County Employees’ Retirement Association Board of Retirement. 
 
Kamala D. Harris and Xavier Becerra, Attorneys General, Douglas J. Woods and Thomas S. Patterson, 
Assistant Attorneys General, Constance L. LeLouis and Anthony P. O'Brien, Deputy Attorneys General, 
Peter Krause, Legal Affairs Secretary, Rei R. Onishi, Deputy Legal Affairs Secretary for Intervener and 
Appellant State of California.   
 
Jones Day, Beth Heifetz, G. Ryan Snyder and Karen P. Hewitt for California Business Roundtable as 
Amicus Curiae on behalf of Intervener and Appellant State of California.  
 
Colantuono, Highsmith & Whatley, Michael G. Colantuono and Liliane M. Wyckoff for League of 
California Cities as Amicus Curiae on behalf of Intervener and Appellant State of California.   
 
Meyers, Nave, Riback, Silver & Wilson, Richard D. PioRoda, Kenton L. Alm; Renee Sloan Holtzman 
Sakai; Renee Public Law Group, Linda M. Ross and Randy Riddle for Real Party in Interest Central Contra 
Costa Sanitary District. 
 
Atkinson, Andelson, Loya, Ruud & Romo, Anthony P. De Marco and Joshua E. Morrison for Association 
of California School Administrators as Amicus Curiae.   
 
Greines, Martin, Stein & Richland and Timothy T. Coates for Los Angeles County Employees Retirement 
Association as Amicus Curiae.   
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Rei Onishi 
Office of Governor Gavin Newsom 
State Capitol, Suite 1173 
Sacramento, CA 95814 
(916) 445-0873 
 
David E. Mastagni 
Mastagni Holstedt 
1912 I Street 
Sacramento, CA 95811 
(916) 446-4692 
 
Timothy K. Talbot 
Rains Lucia Stern St. Phalle & Silver 
2300 Contra Costa Blvd., Suite 500 
Pleasant Hill, CA 94523 
(925) 609-1699