Opinion ID: 2762858
Heading Depth: 2
Heading Rank: 1

Heading: Whether Milwaukee County May Prospectively

Text: Reduce an Employee Benefit ¶22 To determine whether Milwaukee County may prospectively modify unvested benefits, we turn to the session laws that govern MCERS. Chapter 138 of the Laws of 1945 provides that every member of MCERS has a vested right in the annuities and all other benefits in the amounts and on the terms and conditions . . . in effect at the date of commencement of his membership [in MCERS]. Similarly, ch. 326 of the Laws of 1957 provides each MCERS member with a vested right . . . to all increases in benefits covered by amendments subsequent to the date his membership is effective. However, ch. 405 of the Laws of 1965 gives to Milwaukee County home rule authority to make any changes in [its employee] benefit fund which hereafter may be deemed necessary or desirable for the continued operation of [MCERS]. Stoker notes that ch. 405 expressly limits this home rule authority by stating that no such change shall operate to diminish or impair the annuities, benefits or other rights of any person who is a member of [MCERS] prior to the effective date of any such change. ¶23 Stoker interprets ch. 405 of the Laws of 1965 to allow Milwaukee County to reduce benefits only with respect to persons who began employment with Milwaukee County after the reduction takes effect. Stoker reaches this interpretation by invoking the canon of statutory construction known as the rule of the last antecedent, arguing that prior to the effective date of any such change modifies who is a member rather than 14 No. 2012AP2466 annuities, benefits or other rights. Stoker thus argues that ch. 405 forbids Milwaukee County from reducing a benefit of a person whose county employment began prior to the effective date of the reduction. We disagree. ¶24 The principle of interpreting statutes to avoid unreasonable or absurd results is more compelling in this instance than the rule of the last antecedent. See Kalal, 271 Wis. 2d 633, ¶46; Chickasaw Nation v. United States, 534 U.S. 84, 94 (2001) (quoting Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 115 (2001)) (holding that canons of construction 'are often countered . . . by some maxim pointing in a different direction.'). Stoker's interpretation of ch. 405 of the Laws of 1965 would prohibit Milwaukee County from reducing a current employee's expected, future benefits before they vest. That interpretation is unreasonable because a right that is unvested, by definition, can be taken away. See Black's Law Dictionary 1520 (10th ed. 2014) (A vested right is a right that so completely and definitely belongs to a person that it cannot be impaired or taken away without the person's consent.); Neiman v. Am. Nat. Prop. & Cas. Co., 2000 WI 83, ¶14, 236 Wis. 2d 411, 613 N.W.2d 160 (The concept of vested rights is 'conclusory——a right is vested when it has been so far perfected that it cannot be taken away by statute.') (quoting Charles B. Hochman, The Supreme Court and the Constitutionality of Retroactive Legislation, 73 Harv. L. Rev. 692, 696 (1960)). We therefore conclude that ch. 405's limit on Milwaukee County's home rule 15 No. 2012AP2466 authority allows Milwaukee County to reduce a benefit that has not vested prior to the effective date of the reduction. ¶25 Indeed, Stoker seems to recognize that ch. 405's grant of home rule authority allows Milwaukee County to reduce a current employee's expected, future benefits before they vest. Specifically, Stoker argues that ch. 405 does not allow Milwaukee County to reduce the 2% multiplier with respect to her post-2011 service because her right to the use of the 2% multiplier as to future as well as past service was already 'in existence' when the multiplier was reduced. Thus, Stoker's logic seems to acknowledge that ch. 405 would allow a prospective reduction of the 2% multiplier if she did not have a vested right to have the 2% multiplier apply to her post-2011 service. ¶26 Because Milwaukee County may prospectively reduce benefits before they vest, our analysis turns on whether Stoker has a vested right to the 2% multiplier for post-2011 service. B. Whether Stoker Has a Vested Right to Have the 2% Multiplier Apply to Her Post-2011 Service for Milwaukee County ¶27 Having determined that the home rule authority in ch. 405 of the Laws of 1965 allows Milwaukee County to prospectively reduce benefits before they vest, we now determine whether Stoker has a vested right to have the 2% multiplier apply to her post-2011 service. ¶28 An employee benefit may be modified before it vests. Loth v. City of Milwaukee, 2008 WI 129, ¶¶33-43, 315 Wis. 2d 35, 758 N.W.2d 766. In Loth, prior to 2004, the City of Milwaukee 16 No. 2012AP2466 offered premium-free health insurance to its employees that reached age 60, were employed by the city for at least 15 years, and retired. Id., ¶2. In 2002 the city amended this retirement benefit to provide shared-premium-cost health insurance to anyone who reached age 60, was employed by the city for at least 15 years, and retired after January 1, 2004. Id. Loth had 15 years of city service in 1999, and in 2005 he reached age 60 and retired. Id. When Loth received shared-premium-cost health insurance after retiring, he sued the city, arguing that he was entitled to premium-free health insurance. Id., ¶3. He reasoned that he reached 15 years of service when the premiumfree health insurance retirement benefit was in effect, and that reaching 15 years of city service was the only requirement for becoming entitled to this benefit. Id. ¶29 We upheld the city's modification of the retiree health insurance benefit with respect to Loth. Id., ¶¶6-7. We determined that the city made a unilateral contract offer of premium-free retiree health insurance benefits, and that the city modified the benefits before Loth became entitled to them by accepting the offer. Id., ¶¶6, 14. We focused on the terms and conditions of the benefits to determine how they could be accepted by an employee and thus become an entitlement. Id., ¶31. According to the terms and conditions of the city's health insurance benefits for retirees, the benefits were accepted and became an entitlement when an employee fulfilled three requirements: being employed by the city for 15 years, reaching age 60, and retiring. Id., ¶¶6, 16-29. Because Loth did not 17 No. 2012AP2466 perform the requested acts of reaching age 60 and retiring while the premium-free health insurance benefit was in effect, id., ¶14, he had no contractual right to this benefit. Id., ¶6; see also id., ¶39 (Loth had no right to premium-free health insurance upon retirement because he had not fully performed the services entitling him to such benefits when the City amended [its] policy . . . .). We distinguished cases that rejected employers' attempts to reduce their employees' benefits after they vested. Id., ¶¶32-46. Thus, Loth stands for the principle that an employer may modify a benefit that has not vested because its terms and conditions for entitlement have not been satisfied. ¶30 To determine whether Milwaukee County reduced a vested benefit of Stoker, we focus on the terms and conditions of the multiplier. See id., ¶31; see also ch. 138, Laws of 1945 (stating that MCERS members have a vested right to benefits on the terms and conditions of the benefits). The terms and conditions of the 2% multiplier are located in Milwaukee County ordinances and the collective bargaining agreement. The ordinance that created the 2% multiplier stated that the 2% multiplier applied to all pension service credit earned on and after January 1, 2001. M.C.G.O. § 201.24(5.15)(1)(a) (2000).12 Pension credit service is earned by rendering service for Milwaukee County. M.C.G.O. App. B. § 301 (1980). The ordinance 12 This ordinance created a 2% multiplier by adding 0.5% to the existing 1.5% multiplier. See supra note 5. 18 No. 2012AP2466 at issue provided that the 1.6% multiplier applied to service . . . rendered on and after January 1, 2012. M.C.G.O. § 201.24(5.1)(2)(f) (2011). Likewise, the collective bargaining agreement adopted in 2011 provided that a 1.6% multiplier would apply to all pension service credit earned on and after January 1, 2012. The plain language of these ordinances and the collective bargaining agreement shows that the multiplier accrues over time as county service is rendered, and the multiplier is directly tied to that service. Because the multiplier accrues as service is rendered, the home rule power in ch. 405 of the Laws of 1965 allows Milwaukee County to reduce the multiplier with respect to Stoker's service rendered after the effective date of the reduction. ¶31 Other case law also supports our conclusions that the multiplier accrues over time as service is rendered and that, therefore, Milwaukee County may reduce the multiplier with respect to service rendered after the reduction takes effect. In Loth we discussed the court of appeals' decision in Champine v. Milwaukee County, 2005 WI App 75, 280 Wis. 2d 603, 696 N.W.2d 245. Loth, 315 Wis. 2d 35, ¶¶44-46. We noted that the court of appeals in Champine held that a payout for accrued sick leave represents a benefit that is 'earned as the work is performed.' An employee accrues sick allowance (and may earn the right to receive payout for the accrued sick allowance) gradually as the employee performs his or her work. Id., ¶46. ¶32 In Champine, prior to 2000, Milwaukee County allowed its non-union employees to receive the cash value of 19 No. 2012AP2466 approximately 400 hours of their unused sick leave upon retirement. Champine, 280 Wis. 2d 603, ¶¶2-3. In 2000 Milwaukee County adopted an ordinance that allowed its non-union employees to receive the cash value of all of their unused sick leave upon retirement. Id. This ordinance did not have a start date or end date. Id., ¶2. In February 2002 Milwaukee County adopted an ordinance that limited non-union employees' sickleave payout at retirement to approximately 400 hours of unused sick leave, effectively reinstating the limit in place prior to 2000. Id., ¶6. This February 2002 ordinance took effect on March 15, 2002. Id. ¶33 The court of appeals held that the 2002 ordinance lawfully limited the sick-leave payout benefit with respect to sick leave that accrued after the limit took effect. Id., ¶¶1517. Specifically, the court held that the ordinance's prospective reduction of the sick-leave payout benefit did not breach a contract with the non-union employees. Id., ¶14. However, the court held that non-union employees who retired after the effective date of the 2002 ordinance were entitled to receive a retirement payout of all of the sick leave that they accrued prior to the effective date of the 2002 ordinance. Id., ¶¶15-17. The court reasoned that the sick-leave payout benefit is a form of deferred compensation that is earned as the work 20 No. 2012AP2466 is performed. The benefit can be changed, but only as it is related to work not yet performed. Id., ¶16.13 ¶34 In Pasko v. Milwaukee County, 2013 WI App 91, 349 Wis. 2d 444, 836 N.W.2d 461, two Milwaukee County retirees sued the County for paying them the cash value of approximately 400 hours of unused sick leave upon retirement. The two plaintiffs had been union members while Milwaukee County employees, and their union contracts provided that upon retirement they would receive a cash payout of all of their unused sick leave. Pasko, 349 Wis. 2d 444, ¶6. Before retiring, the plaintiffs were promoted to non-union managerial positions, thus subjecting them to the Milwaukee County ordinance adopted in February 2002, which limited the sick-leave payout upon retirement for non13 Stoker argues that Champine is distinguishable because the court of appeals stated that in the absence of a collective bargaining agreement or employment contract, [Milwaukee County] should not be bound to continue providing a benefit it now regrets offering. Champine v. Milwaukee Cnty., 2005 WI App 75, ¶19, 280 Wis. 2d 603, 696 N.W.2d 245. Stoker interprets this language to mean that Champine involved neither a collective bargaining agreement nor a contract, unlike the present case. To the contrary, the court of appeals explained that the 2000 ordinance, which provided a right to a payout of all unused sick leave upon retirement, was a contract while it was in effect. Id., ¶14. This quoted language simply meant that the 2000 ordinance did not provide a vested right to the sick-leave payout with respect to future service. In any event, in a nearly identical case that involved union contracts with Milwaukee County, the court of appeals reached the same conclusion as it did in Champine. See Pasko v. Milwaukee Cnty., 2013 WI App 91, ¶¶9-14, 349 Wis. 2d 444, 836 N.W.2d 461. Thus, the fact that Champine did not involve union contracts or collective bargaining agreements is not a meaningful distinction. 21 No. 2012AP2466 union employees to approximately 400 hours of unused sick leave. Id., ¶¶3-6. This ordinance was at issue in Champine. Id., ¶5. Because the plaintiffs retired as non-union employees, Milwaukee County argued that, under the 2002 ordinance, they were entitled to a payout of only approximately 400 hours of unused sick leave. Id., ¶¶6, 9. ¶35 The court of appeals held that the plaintiffs were entitled to a payout upon retirement of all of the unused sick leave that they accrued while they were covered by union contracts with Milwaukee County. Id., ¶13. Under the union contracts, the sick-leave hours that the plaintiffs accrued while they were union members vested as they were earned. Id., ¶¶9-13. Thus, the vesting trigger of sick leave was the day-by-day accrual of sick leave. Id., ¶12. The court noted that Milwaukee County could have used, but did not use, a different vesting trigger in its union contracts so as to preserve its ability to retroactively reduce the amount it was required to pay retirees for sick leave already accrued. Id. ¶36 In Valeo v. J. I. Case Co., 18 Wis. 2d 578, 119 N.W.2d 384 (1963), a collective bargaining agreement provided that employees were eligible for a certain amount of vacation pay annually and that the right to vacation pay began accruing each year on June 1. Valeo, 18 Wis. 2d at 579. The employer terminated the collective bargaining agreement on February 29, 1960, three months before June 1. Id. A strike ensued and lasted until a new collective bargaining agreement was signed on September 19, 1960. Id. at 579-80. The employer denied its 22 No. 2012AP2466 employees any vacation pay for the period of June 1, 1959, through February 29, 1960, arguing that the right to vacation pay did not vest until June 1 and that the collective bargaining agreement was terminated before June 1. Id. at 580. An employee sued the employer, arguing that he was entitled to vacation pay that accrued during the nine months from June 1, 1959, through February 29, 1960. Id. at 580, 583. This court held that the employee had a vested right to the vacation pay that accrued as services were performed for the employer during these nine months. Id. at 585. The court reasoned that the nature of vacation pay [is] compensation for work performed, and the collective bargaining agreement did not provide that the right to vacation pay vested based on something besides service rendered. Id. ¶37 Champine, Pasko, and Valeo show that certain employee benefits, by their nature, accrue as service is rendered unless a contract or law states otherwise. In the present case, the nature of the pension multiplier is compensation for work performed. See id. As we already explained, the relevant Milwaukee County ordinances and the collective bargaining agreement expressly state that the multiplier accrues as service is rendered. See M.C.G.O. §§ 201.24(5.15) (2000), App. B. 301 (1980), 201.24(5.1)(2)(f) (2011). If Milwaukee County wanted to make the 2% multiplier vest immediately when enacted with respect to all future service, it could have used a vesting trigger besides day-by-day accrual, but [i]t did not. See Pasko, 349 Wis. 2d 444, ¶12. Thus, the language of the 23 No. 2012AP2466 ordinances and collective bargaining agreement and the nature of the multiplier show that the multiplier, like vacation pay and sick leave, accrues over time as service is rendered. ¶38 Because the multiplier is a form of deferred compensation that is earned as the work is performed, it can be changed, but only as it is related to work not yet performed. See Champine, 280 Wis. 2d 603, ¶16. See also Wisconsin Prof'l Police Ass'n v. Lightbourn, 2001 WI 59, ¶¶11112, 243 Wis. 2d 512, 627 N.W.2d 807 (holding that statute governing Wisconsin Retirement System, which stated that benefits accrued as service is rendered, allows reduction of benefits with respect to service performed after the reduction).14 14 The statute in Lightbourn provided in relevant part: Rights exercised and benefits accrued to an employee under this chapter for service rendered shall be due as a contractual right and shall not be abrogated by any subsequent legislative act. The right of the state to amend or repeal, by enactment of statutory changes, all or any part of this chapter at any time, however, is reserved by the state and there shall be no right to further accrual of benefits nor to future exercise of rights for service rendered after the effective date of any amendment or repeal deleting the statutory authorization for the benefits or rights. (continued) 24 No. 2012AP2466 ¶39 Loth, Champine, Pasko, and Valeo show that Stoker's reliance on ch. 138 of the Laws of 1945, ch. 326 of the Laws of 1957, and ch. 405 of the Laws of 1965 is misplaced. These chapters state that MCERS members shall have a benefits contract that protects their vested rights, but these chapters do not explain whether the 2% multiplier is a vested right with respect to future service. Indeed, these chapters do not mention this multiplier at all.15 As we explained, the relevant Milwaukee County ordinances, the collective bargaining agreement, and Loth, Champine, Pasko, and Valeo show that Stoker did not have a vested right to have the 2% multiplier apply to her post-2011 service. ¶40 We note that our conclusion that Milwaukee County may prospectively modify benefits before they vest is consistent with the anti-cutback rule of the Employee Retirement Income Security Act (ERISA) of 1974.16 The anti-cutback rule allows Wis. Stat. § 40.19(1) (1997-98). Stoker argues that Lightbourn is not helpful in the present case because, unlike Wis. Stat. § 40.19(1), the session laws governing MCERS do not state that benefits accrue as service is rendered or allow prospective reductions of benefits. However, the relevant Milwaukee County ordinances and collective bargaining agreement state that the pension multiplier accrues as service is rendered, and ch. 405 of the Laws of 1965 allows prospective reduction of unvested benefits. Thus, we find helpful the Lightbourn court's conclusion that a benefit that accrues as service is rendered may be prospectively reduced. 15 Section 1 of ch. 326, Laws of 1957 mentions a multiplier, but Stoker does not argue that this multiplier is relevant in the present case. 16 See 29 U.S.C. § 1054(g). 25 No. 2012AP2466 employers subject to ERISA to modify benefits with respect to future service because those benefits have not yet accrued. Cent. Laborers' Pension Fund v. Heinz, 541 U.S. 739, 747 (2004). The anti-cutback rule prohibits employers subject to ERISA from adding new conditions to benefits that have accrued for service rendered. Id. Stoker argues that Milwaukee County may go beyond the protections under the anti-cutback rule by providing benefits that vest before service is rendered. However, as we have explained, the relevant Milwaukee County ordinances and collective bargaining agreement show that the multiplier is a benefit that accrues for service rendered. ¶41 Similarly, Stoker's reliance on Welter v. City of Milwaukee, 214 Wis. 2d 485, 571 N.W.2d 459 (Ct. App. 1997), and Rehrauer v. City of Milwaukee, 2001 WI App 151, 246 Wis. 2d 863, 631 N.W.2d 644, is also misplaced. In Welter the City of Milwaukee provided a duty disability retirement allowance to police officers who became disabled due to injuries suffered in the course of their employment. Welter, 214 Wis. 2d at 487-88. At a certain age, known as the conversion age, an officer who was receiving a duty disability retirement allowance began receiving a less-generous service retirement allowance instead. Id. at 488. The City of Milwaukee lowered the conversion age while the plaintiffs were employed as police officers. Id. The plaintiffs became disabled and received a duty disability retirement allowance that was converted to a service retirement allowance when they reached this lower conversion age. Id. The plaintiffs sued the city, arguing that they had a vested right 26 No. 2012AP2466 to the higher conversion age that was in effect when they began employment with the City of Milwaukee. Id. The court of appeals agreed with the plaintiffs. Id. The court of appeals reasoned that an officer's right to a disability pension vests when the officer begins employment with the City of Milwaukee, rather than when the officer becomes disabled. Id. at 494-95. The court held that two session laws governing the City of Milwaukee's retirement system dictated this result. Id. ¶42 Welter is inapposite in the present case. Welter involved a right that vested when a person began employment. In the present case, we already determined that Stoker accrues a right to the pension multiplier as she renders county service. Further, the multiplier in effect when Stoker began employment with Milwaukee County was 1.5%, and the multiplier has not been reduced below that level with respect to any of Stoker's past or future service.17 Although the court of appeals in Welter relied solely on two session laws to conclude that a disability pension vested when employment began, we think the better approach in the present case is to interpret the relevant ordinances to determine the extent to which the multiplier was a vested right within the meaning of the session laws governing MCERS. See Dunn v. Milwaukee Cnty., 2005 WI App 27, ¶¶2, 10-11, 13, 279 Wis. 2d 370, 693 N.W.2d 82 (relying on relevant ordinance to 17 This fact also provides a basis for distinguishing ch. 138 of the Laws of 1945, upon which Stoker heavily relies, because this chapter applies only to benefits in existence when a person's county employment began. 27 No. 2012AP2466 determine if Milwaukee County employees had a vested right to future pay increases); Champine, 280 Wis. 2d 603, ¶¶13-14 (relying on relevant ordinance to determine if Milwaukee County employees had a vested right to receive a cash payout for all of their unused sick leave upon retiring); Hussey v. Milwaukee Cnty., 740 F.3d 1139, 1143 (7th Cir. 2014) (relying on relevant ordinances to determine if Milwaukee County retirees had a vested right to premium-free health insurance). Again, these ordinances provide that the multiplier accrues as service is rendered. ¶43 In Rehrauer the plaintiffs began their employment as City of Milwaukee firefighters prior to February 8, 1972. Rehrauer, 246 Wis. 2d 863, ¶2. When their employment began, the City of Milwaukee provided limited-term duty disability benefits to its firefighters who became disabled due to an injury suffered during the course of employment. Id. A contract in effect between February 8, 1972, and September 30, 1977, provided more-generous lifetime duty disability benefits. Id., ¶¶2, 7. After September 30, 1977, the City of Milwaukee again offered limited-term duty disability benefits. Id., ¶3 n.3. The plaintiffs applied for disability benefits after September 30, 1977, so the City of Milwaukee awarded them limited-term duty disability benefits in effect at that time. Id., ¶2. The plaintiffs sued the city, arguing that they gained a vested contractual right to the lifetime duty disability benefits established during their employment. Id., ¶5. 28 No. 2012AP2466 ¶44 The court of appeals agreed with the firefighters. Id. The court concluded that the firefighters gained vested rights in the highest level of duty disability benefits that came to be contractually established during their years of active duty. Id., ¶20. The court reasoned that, [u]nder § 36-13-2-c of the Milwaukee City Charter, [the plaintiffs] have a 'vested right in the . . . benefits in the amounts and on the terms and conditions and in all other respects as provided in the law . . . in effect at the date of commencement of his [or her] membership and as subsequently amended.' Id., ¶16 (emphasis added by court of appeals). ¶45 Rehrauer is inapposite in the present case. In Rehrauer the court of appeals relied on an ordinance that expressly provided a vested right to an increase in benefits, and it also relied on the holding in Welter that disability benefits vest immediately rather than when an employee becomes disabled. Id., ¶¶13-14, 16. In contrast, the ordinances relevant in the present case do not state that MCERS members have a vested right to have an increased multiplier apply in perpetuity. To the contrary, these ordinances provide that the multiplier accrues over time as service is rendered. It is true that the ordinance relied upon in Rehrauer is similar to ch. 326 of the Laws of 1957, which provides each MCERS member with a vested right . . . to all increases in benefits covered by amendments subsequent to the date his membership is effective. However, as we already discussed, ch. 326 does not explain the precise nature of the vested right it mentions. Because the 29 No. 2012AP2466 multiplier vests over time as service is rendered, the vested right to which ch. 326 refers does not include a vested right to have the 2% multiplier apply in perpetuity. Rather, the vested right to which ch. 326 refers includes the right to have the 2% multiplier apply to all service that is rendered while the 2% multiplier is in effect. ¶46 Accordingly, we are not persuaded by Stoker's argument that Welter and Rehrauer apply in the present case because they involved session laws similar to the session laws that govern MCERS. Disability benefits, unlike the pension multiplier, are a promise by an employer that is not conditioned on subsequent action by an employee, such as rendering service. Instead, disability benefits are a promise to receive coverage for an unforeseen event that happens at some point in the future. As we explained, we rely on the relevant Milwaukee County ordinances and the collective bargaining agreement to determine the extent to which the 2% multiplier is a vested right within the meaning of the session laws. In light of these ordinances and the collective bargaining agreement, we conclude that Stoker does not have a vested right to have the 2% multiplier apply to her post-2011 service, which she rendered after the 2% multiplier was reduced to 1.6%. Because Stoker did not have a vested right to have the 2% multiplier apply to her post-2011 service, Milwaukee County was free to reduce the multiplier below 2% for her post-2011 service. See Loth, 315 Wis. 2d 35, ¶¶30-47.