Court Opinion

ID: 4715079
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:43:14.31122+00
Date Added: 2024-06-11T08:07:25.670883
License: Public Domain

f 27 (concurring in result) — I agree with the majority in result. The Washington Legislature specifically reserved the power to repeal gain sharing in the statutes that created the benefit. When the legislature exercised that reserved power in the way that it did, it did not violate the contract clause. I write separately, however, because I do not agree that “gain sharing was a gratuitous addition to employees’ retirement packages” or that “the employees impliedly consented” to having it repealed. Majority at 224.
González, J.
¶28 First, we held long ago that pension benefits, including public employee pension benefits, are compensation for work done, not gratuities. Ayers v. City of Tacoma, 6 Wn.2d 545, 550-51, 108 P.2d 348 (1940) (citing Bowler v. Nagel, 228 Mich. 434, 440-41, 200 N.W. 258 (1924)). In Ayers, a city comptroller refused to pay public pensions in part on the theory that they were a gift of public funds and unconstitutional under article VIII, section 7 of our constitution.6 Id. at 548, 550. We disagreed and found that the right to a *229pension was not a gratuity but was “ ‘in the nature of compensation for services theretofore rendered.’ ” Id. at 551 (quoting Bowler, 228 Mich, at 440). The contractual nature of pension rights is woven through our public pension jurisprudence. E.g., Navlet v. Port of Seattle, 164 Wn.2d 818, 835, 194 P.3d 221 (2008); Bakenhus v. City of Seattle, 48 Wn.2d 695, 698, 296 P.2d 536 (1956) (citing Luellen v. City of Aberdeen, 20 Wn.2d 594, 148 P.2d 849 (1944), overruled on other grounds by Stenberg v. Pac. Power & Light Co., 104 Wn.2d 710, 709 P.2d 793 (1985)). The fact that gain sharing was part of the contract for only a set period of time does not change the fact that it was contractual for that time.
¶29 Second, in Bakenhus itself we flatly rejected the notion that employees impliedly consent to having their pension benefits reduced by continuing to work for an employer after pension reductions are announced. H.D. Bakenhus had been hired as a police officer by the city of Seattle in 1925. Bakenhus, 48 Wn.2d at 696. At the time, state law made police officers who met certain requirements eligible for a pension equal to one half their salary the year before their retirement. Id. (citing Laws op 1909, ch. 39, at 59). In 1937, the legislature capped police officer pensions at $125 per month. Id. at 697 (quoting Laws of 1937, ch. 24, at 62). Bakenhus retired in 1950, and, based on the 1937 statute, the city paid him only $125 per month. The city of Seattle argued that employees had either impliedly consented to having their pensions reduced by continuing to work for the city after the change was announced or were barred from challenging the reduction under a waiver or estoppel theory. Id. at 700-01.7 In a careful opinion, we rejected the city’s many theories. Id.
¶30 Instead of reaching outside of the arguments presented by the parties in this case to characterize gain *230sharing in ways they did not, I would simply follow precedent. We have developed a three part test to analyze contract clause challenges to legislation, asking “(1) does a contractual relationship exist, (2) does the legislation substantially impair the contractual relationship, and (3) if there is a substantial impairment, is it reasonable and necessary to serve a legitimate public purpose.” Tyrpak v. Daniels, 124 Wn.2d 146, 152, 874 P.2d 1374 (1994) (citing Caritas Servs., Inc. v. Dep’t of Soc. & Health Servs., 123 Wn.2d 391, 403, 869 P.2d 28 (1994)). A separate line of cases establish that any modification of a public pension right (1) must be done to keep the relevant retirement system flexible, (2) must be done to maintain its integrity, and (3) must include counterbalancing benefits for any potential impairment of members’ rights. Bakenhus, 48 Wn.2d at 701-02. This court began harmonizing the Bakenhus line of cases with our traditional contract clause analysis in Retired Public Employees Council of Washington v. Charles, 148 Wn.2d 602, 62 P.3d 470 (2003). Charles was a challenge to the legislature’s decision to lower the employer contribution rate in Public Employees’ Retirement System Plan 1 and Teachers’ Retirement System Plan 1. Id. at 609-10. Plaintiffs challenged the reduction as a violation of the contract clause, among many other things. We considered Bakenhus (among many other things) in determining the existence and scope of the contract itself. Id. at 624 (citing Bakenhus, 48 Wn.2d at 701). We did not rest our contract clause analysis solely on Bakenhus. Id. at 623-28.
¶31 What we did impliedly in Charles I would do explicitly today. I would hold that the traditional contract clause analysis applies to contract clause challenges to statutes affecting public employee pension rights. As it was in Charles, Bakenhus is relevant to our contract clause analysis but does not replace it. Id. at 624 (citing Bakenhus, 48 Wn.2d at 698-99, 701); see also Wash. Educ. Ass’n v. Dep’t of Ret. Sys., 181 Wn.2d 233, 249, 332 P.3d 439 (2014).
¶32 I would resolve this case simply on step two of the contract clause analysis: whether the repeal of gain sharing *231substantially impaired the contractual relationship. Like the majority, I would hold that it did not. The original legislation stated that gain sharing could be adjusted or repealed at any time. E.g., Laws of 1998, ch. 340, § 3 (“The legislature reserves the right to amend or repeal this chapter in the future and no member or beneficiary has a contractual right to receive this postretirement adjustment not granted prior to that amendment or repeal.”), ch. 341, § 312(4). A contractual right is potentially impaired by a statute that alters its terms, imposes new conditions, or lessens its value. Charles, 148 Wn.2d at 625 (citing Wash. Fed’n of State Emps. v. State, 127 Wn.2d 544, 563, 901 P.2d 1028 (1995)). In this case, the language of the original gain-sharing statutes does not “ ‘evince a legislative intent to create private rights of a contractual nature’ ” in ongoing gain sharing. Haberman v. Wash. Pub. Power Supply Sys., 109 Wn.2d 107, 145, 744 P.2d 1032, 750 P.2d 254 (1987) (quoting U.S. Tr. Co. v. New Jersey, 431 U.S. 1, 17 n.14, 97 S. Ct. 1505, 52 L. Ed. 2d 92 (1977)). Given this reservation, the legislature reserved the power to repeal gain sharing and its exercise of that power did not substantially impair the contractual relationship. Accord Strunk v. Pub. Emps. Ret. Bd., 338 Or. 145, 177-78, 108 P.3d 1058 (2005).
¶33 Bakenhus is in accord. The threshold issue under Bakenhus is whether there is a pension right that has been changed by subsequent legislation. E.g., 48 Wn.2d at 700. If there is a pension right that has been changed, then Bakenhus must be satisfied or the contract clause is violated. See, e.g., Wash. Fed’n of State Emps., AFL-CIO, Council 28 v. State, 98 Wn.2d 677, 678-79, 658 P.2d 634 (1983). Here, the pension right at issue was the right to gain sharing for as long as the legislature allowed gain sharing. From its inception, the right was subject to the legislature’s explicitly reserved power to repeal or revoke it in the future. See Laws of 1998, ch. 340, § 3, ch. 341, § 312(4); Laws of 2000, ch. 247. Given the legislature’s statutory reservation, the legislature’s subsequent action did not modify any right.
*232f 34 Based on a plain reading of the statutes, there was no promise to gain sharing in perpetuity. Thus, repealing it was not a substantial impairment of the contract under Tyrpak or a modification of a pension right under Bakenhus. See Tyrpak, 124 Wn.2d at 152 (citing Caritas, 123 Wn.2d at 403); Bakenhus, 48 Wn.2d at 700-01.
¶35 With those observations, I respectfully concur in result.

 That provision says:
No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm, or become directly or indirectly the owner of any stock in or bonds of any association, company or corporation.
Wash. Const, art. VIII, § 7.

 Counsel suggested at oral argument that Bakenhus, properly understood, was a contract clause case because, he contended, it was argued that way to the trial court. While this might have been the complexion of the case before the trial court, it was not analyzed as a contract clause case before this court.