Opinion ID: 1614244
Heading Depth: 2
Heading Rank: 1

Heading: Our prior case law.

Text: In 1914 this court, in Gibbs v. Minneapolis Fire Department Relief Ass'n, 125 Minn. 174, 145 N.W. 1075 (1914), held that the legislature could amend the definition of widow in the pension law to make plaintiff, an employee's widow, ineligible for both accrued and future payments. Quoting cases from other jurisdictions holding a public pension to be a gratuity, we said that [a]s against the state there is no vested right in the pension accruing in the future from month to month. It may be taken away. 125 Minn. at 176, 145 N.W. at 1076. In Hessian v. Ervin, 204 Minn. 287, 283 N.W. 404 (1939), we rejected the challenge of an employee to a pension statute calling for mandatory deductions from the employee's salary and to a claim that the pension fund was actuarially unsound; we reasoned that the employee had no vested right in the pension fund at least until he had retired and perhaps then only as to those payments already accrued. In Johnson v. State Employees' Retirement Ass'n, 208 Minn. 111, 292 N.W. 767 (1940), we unequivocally adhered to the gratuity approach in declining to find a vested right in public pensions, although there the statute in effect at the time the annuity was reduced expressly provided that the retirement board may ratably reduce such annuities whenever the condition of the maintenance fund shall require such reduction. In Halek v. City of St. Paul, 227 Minn. 477, 480, 35 N.W.2d 705, 706-07 (1949), we declined to find a vested right in paid sick leave for public employees and, in so doing, observed that Johnson holds that statutory provisions for payment by a governmental authority to public employees of retirement pensions create no contractual or vested rights, but on the contrary constitute the grant of a gratuity terminable at the will of the grantor   . In Slezak v. Ousdigian, 260 Minn. 303, 309, 110 N.W.2d 1, 5-6 (1961), in denying plaintiff employees the right to an accounting from the defendant secretary of PERA, we observed that [t]he presumption is that a statute or an ordinance granting a gratuity to a public employee such as a retirement pension is not intended to create private contractual or vested rights but merely declares a policy to be pursued until the legislature or city council shall ordain otherwise. Most recently, in Halverson v. Rolvaag, 274 Minn. 273, 143 N.W.2d 239 (1966), in defining the nature of a survivor's interest in federal benefits arising from the death of a national guardsman, we noted that the defendant relied on the line of cases beginning with Gibbs holding a public pension to be a gratuity but distinguished these cases as not being in point. On the other hand, in another line of cases this court has intimated that it is predisposed towards joining the strong trend away from the gratuity theory and towards the contract theory of employees' rights in public pensions. See Donaldson v. Mankato Policemen's Benefit Ass'n, 278 N.W.2d 533 (Minn.1979); Fassbinder v. Minneapolis Fire Department Relief Ass'n, 254 N.W.2d 363 (Minn.1977); Sandell v. St. Paul Police Relief Ass'n, 306 Minn. 262, 236 N.W.2d 170 (1975); Sylvestre v. State, 298 Minn. 142, 214 N.W.2d 658 (1973); State ex rel. Gorczyca v. City of Minneapolis, 174 Minn. 594, 219 N.W. 924 (1928); Stevens v. Minneapolis Fire Department Relief Ass'n, 124 Minn. 381, 145 N.W. 35 (1914). In Gorczyca we held that public pensions were not a gratuity and that the pension statute becomes a part of the employee's contract of employment. In Sylvestre we stated that our cases using the gratuity approach did not involve retirement benefits for judges and, noting the special constitutional provisions applicable to judges, went on to apply a contractual analysis to judges' pensions. In Sandell we again used a contract approach in analyzing the nature of the public pensioner's interest. There we denied plaintiff employees the right to withdraw their contributions to the pension fund on leaving public employment before qualifying for retirement benefits because, since neither the articles or bylaws of the relief association, nor the pension law gave an employee a right to the return of his contributions, plaintiffs were not contractually entitled to a refund. In Stevens v. Minneapolis Fire Department Relief Ass'n, 124 Minn. 381, 145 N.W. 35 (1914), the relief association discontinued the plaintiff pensioner's disability pension without a hearing on the ground that plaintiff was no longer disabled. The relief association defended on the ground that since a pension was a gratuity no hearing was required. We held that due process required a hearing. Stevens, however, does not involve a retroactive change in the pension rules but only a failure to apply the existing rules fairly. Thus we see that our case law over the years has not remained wedded to the gratuity approach, but has at times, without always articulating the reasons therefor, used a contract analysis. We also might observe that another section of chapter 422A reveals that the legislature was aware that rights of some kind could vest under its retirement program. Minn.Stat. § 422A.25 (1982) provides in part: Nothing contained in sections 422A.01 to 422A.25 shall be construed as diminishing, limiting or modifying any vested right of an employee, annuitant or beneficiary to a retirement allowance, annuity or pension acquired under the law existing prior to May 1, 1975. (Emphasis added.) We agree with the state that this proviso fails to define vested rights and, therefore, begs the question before us. Nonetheless, this section indicates that the legislature may have recognized that the gratuity theory of public pensions has no force today. In any event, it is time to put our analysis of public pension cases on a sounder, more consistent, conceptual basis.