        IN THE SUPREME COURT OF
               CALIFORNIA

            CAL FIRE LOCAL 2881 et al.,
              Plaintiffs and Appellants,
                           v.
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM,
             Defendant and Respondent;

                  STATE OF CALIFORNIA,
                 Intervener and Respondent.

                           S239958

            First Appellate District, Division Three
                           A142793

               Alameda County Superior Court
                       RG12661622



                        March 4, 2019

Chief Justice Cantil-Sakauye authored the opinion of the court,
in which Justices Chin, Corrigan, Liu, Cuéllar, Kruger, and
Zelon* concurred.



*
   Associate Justice of the Court of Appeal, Second Appellate
District, Division Seven, assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.
      CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC
          EMPLOYEES’ RETIREMENT SYSTEM
                            S239958


         Opinion of the Court by Cantil-Sakauye, C. J.


      In late 2012, our Legislature enacted the California
Public Employees’ Pension Reform Act of 2013 (PEPRA, Stats.
2012, ch. 296, § 15; see Gov. Code, §§ 7222 et seq.),
substantially revising the laws governing public employee
pensions.1 This decision addresses the constitutionality of one
of the changes effected by PEPRA, the elimination of the
opportunity for public employees to purchase additional
retirement service credit.
      The amount of a public employee’s pension benefit is
typically calculated as a fraction of the employee’s annual
compensation near the end of his or her career. The size of the
fraction is generally determined by the employee’s years of
public employment, known as “service credit,” and his or her
age at retirement. The greater the service credit of an
employee and the greater his or her age at retirement, the
larger the fraction.
      Beginning in 2003, many public employees were granted
the opportunity to purchase up to five years of service credit by
making appropriate payments to their pension fund. This


1
       Unless indicated otherwise, all       further   statutory
citations are to the Government Code.
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


purchased credit, known as additional retirement service
(ARS) credit, is treated like ordinary service credit upon an
employee’s retirement.       Participating employees could
therefore receive pension benefits calculated on the basis of up
to five years’ more public employment than they actually
worked. PEPRA effectively repealed the statute granting
public employees the opportunity to purchase ARS credit,
although it did not alter the rights of employees who had
already purchased such credit.
      The parties present two issues for decision. The first is
whether the opportunity to purchase ARS credit was a “vested
right” — that is, a right protected by the constitutional
contract clause.      The terms and conditions of public
employment are ordinarily considered to be statutory rather
than contractual, and they are subject to modification at the
discretion of the governing legislative body. Constitutional
protection can arise, however, (1) when the statute or
ordinance establishing a benefit of employment and the
circumstances of its enactment clearly evince an intent by the
relevant legislative body to create contractual rights or, (2)
when, even in the absence of a manifest legislative intent to
create such rights, contractual rights are implied as a result of
the nature of the employment benefit, as is the case with
pension rights. The second issue, which arises only if we
conclude that the opportunity to purchase ARS credit is
entitled to constitutional protection, is whether the
Legislature’s elimination of that benefit in PEPRA constituted
an unconstitutional impairment of public employees’ vested
rights.




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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


      We conclude that the opportunity to purchase ARS credit
was not a right protected by the contract clause. There is no
indication in the statute conferring the opportunity to
purchase ARS credit that the Legislature intended to create
contractual rights. Further, unlike core pension rights, the
opportunity to purchase ARS credit was not granted to public
employees as deferred compensation for their work, and here
we find no other basis for concluding that the opportunity to
purchase ARS credit is protected by the contract clause. In the
absence of constitutional protection, the opportunity to
purchase ARS credit could be altered or eliminated at the
discretion of the Legislature. We therefore affirm the decisions
of the trial court and the Court of Appeal, which concluded that
PEPRA’s elimination of the opportunity to purchase ARS credit
did not violate the Constitution.
      Because we reach this conclusion, we have no occasion to
address the second issue raised by the parties: whether the
elimination of the opportunity to purchase ARS credit was an
unconstitutional impairment of public employees’ vested
rights. The scope of constitutional protection afforded public
pension rights by our prior decisions, beginning with Allen v.
City of Long Beach (1955) 45 Cal.2d 128 (Allen), has come to be
referred to as the “California Rule,” in part because its breadth
has not been widely adopted by other jurisdictions. (See, e.g.,
Monahan, Statutes as Contracts? The “California Rule” and Its
Impact on Public Pension Reform (2012) 97 Iowa L.Rev. 1029,
1032, 1071-1074 (Monahan) [referring to our doctrine as the
“so-called California Rule” and noting that, of the twelve states
to adopt the rule, three have since modified it].) The state and
many amici urge us to use this decision as a vehicle to reduce


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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


the protection afforded pension rights by modifying or
abandoning the California Rule, while plaintiffs and many
other amici urge us to leave the California Rule intact.
Because we conclude that the opportunity to purchase ARS
credit was not a term and condition of public employment
protected from impairment by the contract clause, its
elimination does not implicate the Constitution. For that
reason, we have no occasion in this decision to address, let
alone to alter, the continued application of the California Rule.
        I. FACTUAL AND PROCEDURAL BACKGROUND
     A. State Employee Pensions
      Although a number of different pension plans cover
public employees in California, governed by a variety of
statutes, local regulations, and agreements, the plans tend to
operate in a similar manner. Here, we discuss provisions
relating to state workers as an illustrative example.2 State
employees are members of the California Public Employees
Retirement System (CalPERS), the state pension system. Both
state employees and their employers are required to make
contributions to CalPERS during the course of their
employment.       (§§ 20170 [creating the Public Employees
Retirement Fund]; 20176; 20671 et seq.; 20790 et seq.) With
some exceptions, a state employee does not become eligible to

2
      Although we discuss state employee pensions, the ban on
ARS credit enacted by PEPRA applies to all “public retirement
system[s],” defined broadly by PEPRA as “any pension or
retirement system of a public employer.” (§§ 7522.04, subd. (j)
[defining public retirement system]; 7522.46, subd. (a)
[banning ARS credit for all public retirement systems].)



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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
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             Opinion of the Court by Cantil-Sakauye, C. J.


receive a pension until he or she has worked for the state for at
least five years and has attained the age of 50. (§ 21060, subd.
(a).) Persons who leave state service without five years of
service or who otherwise are “permanently separated” from
state employment prior to taking retirement can elect to have
their pension contributions returned to them, rather than
remaining a member of CalPERS. (§§ 20731, subd. (b)(3);
20734.)
      Once vested state employees reach the minimum
retirement age, they are eligible to retire and begin receiving
monthly retirement benefits.3 (§ 21250 [benefits paid in
monthly installments].) As noted, the amount of the benefit is
generally determined by the individual employee’s
compensation, age at retirement, and years of service. As an


3
      The use of the term “vested” is potentially confusing here
because the term is used in two different ways in discussing
pensions. As noted, public employees become eligible to receive
a pension only after some minimum period of public
employment, typically five years. (E.g., § 21060, subd. (a).)
Once an employee has become qualified to receive a pension by
satisfying the 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.” That term has come
to refer to a benefit of public employment whose repeal or other
divestment is constrained by the constitutional contract clause.
Public employees acquire a vested right in their pension at the
inception of employment, even though they generally do not
become vested with respect to its receipt until after five years
of employment. (E.g., Packer v. Board of Retirement (1950) 35
Cal.2d 212, 214 [“a public employee, as a part of his
compensation, obtain[s] a vested right to a pension upon
entering his duties”].)



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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
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             Opinion of the Court by Cantil-Sakauye, C. J.


example, the pension benefits of one subgroup of state and
university employees are determined from a table in section
21354.1. The table sets a covered employee’s yearly pension
benefit at 2 percent of the employee’s “final compensation,”
multiplied by the member’s years of service credit, further
multiplied by a number derived from the table.4 The latter
number is determined by the member’s age at retirement and
increases from a minimum of .550 at age 50 to a maximum of
1.250, applicable to retirees of age 63 and over. (§ 21354.1,
subd. (a).) The net effect is to grant a pension equal to 2
percent of a member’s final compensation per year of service
for retirement at age 55, rising to 2.5 percent of final
compensation per year of service for retirement at age 63 or
above; retirement between the ages of 50 and 55 results in a
less generous pension benefit. (Ibid.) At least a dozen similar
schedules are found in the Government Code, applicable to
different categories of public employees but offering benefits
calculated in the same general way.5


4
      Generally speaking, “final compensation” is an
employee’s annual compensation, determined in various ways
for different systems.     For many state employees, final
compensation is their highest compensation earned during any
consecutive 12-month period of state service. (§ 20035, subd.
(a).) For persons hired after the effective date of PEPRA, final
compensation is the highest average annual compensation
during any period of at least 36 consecutive months.
(§ 7522.32, subd. (a).)
5
      See §§ 21353, 21353.5, 21354, 21354.3, 21354.4, 21354.5,
21362, 21363, 21363.1, 21366, 21368, 21369, 21369.1, 21369.2,
21370. Plaintiffs state in their opening brief that they and
their fellow union members are covered by section 21363.4,



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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


     B. Additional Retirement Service Credit
      State employees and other members of CalPERS were
granted the opportunity to purchase ARS credit in 2003 by the
enactment of section 20909 (Stats. 2003, ch. 838, § 1); teachers
had been granted the opportunity in 1997 (Ed. Code, § 22826;
Stats. 1997, ch. 569, § 2). The concept of purchasing service
credit did not originate with ARS credit. Members who had
performed military service or other “public service,” as defined
by statute, had long been able to obtain pension service credit
for that time by making appropriate payments to CalPERS.
(§ 21020; See §§ 20997, 21010 et seq.; Marzec v. Public
Employment Retirement System (2015) 236 Cal.App.4th 889,
897.) Section 20909, however, was the first opportunity for
state employees to acquire “nonqualified” service credit, or
service credit that did not reflect any type of service. (See 26
U.S.C. § 415(n)(3)(C) [defining “nonqualified service credit”];
§ 7522.46, subd. (a).) Because ARS credit is untethered to
actual service, it acquired the nickname “ ‘air time.’ ” (Assem.
Com. on Pub. Employees, Retirement and Social Security,
Analysis of Assem. Bill 719 (2003-2004 Reg. Sess.) Apr. 23,
2003, at p. 2.)6


which provides for a pension of 3 percent of final compensation
per year of service credit, regardless of the member’s age at
retirement beyond the minimum age of 50. (Id. subd (a).)
6
      Limited excerpts from the legislative histories of PEPRA
and section 20909 were included in the record before the trial
court. We have also consulted more complete legislative
histories compiled and maintained by our library, based
largely on materials in the files of the California State
Archives.



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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


      Under section 20909, a public employee with at least five
years of public employment could, at any time prior to his or
her retirement, make a one-time election to purchase from one
to five years of ARS credit. (Id. subds. (a), (b).) These
conditions of purchase are consistent with the requirements of
federal tax law, which authorizes a tax-qualified retirement
plan to provide for the acquisition of up to five years of
nonqualified service credit after a member has participated in
the plan for at least five years. (26 U.S.C. § 415(n)(3)(B); see
Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading
analysis of Assem. Bill 719 (2003-2004 Reg. Sess.) as amended
Aug. 18, 2003, p. 3 (hereafter, Sen. Rules Analysis).) To
acquire ARS credit, the member was required to pay CalPERS,
either in a lump sum or installments, “an amount equal to the
increase in employer liability, using the payrate and other
factors affecting liability on the date of the request for costing
of the service credit,” a figure calculated by CalPERS.
(§§ 21050, subd. (a); 21052.) In other words, the employee was
required to pay the present value of the increase in his or her
pension benefits that would result from the purchased ARS
credit, at least to the extent that increase could be estimated
from circumstances prevailing at the time the employee
exercised the opportunity to purchase ARS credit.
       When section 20909 was enacted, the purchase of ARS
credit was viewed as particularly beneficial to employees who
joined public service comparatively late in life or who left
public employment temporarily to raise children or to further
their education, and therefore had been unable to acquire
sufficient service credit for a “livable retirement income.” (Sen.
Rules Analysis, supra, at p. 4.) It was anticipated that the


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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


financial burden on employees of purchasing ARS credit would
be partially mitigated because ARS credit could, and
presumably often would, be financed with funds withdrawn
from tax-qualified retirement savings accounts, such as 401(k)
accounts. (Ibid.)
      The Legislature anticipated that ARS credit would be
“cost neutral” to public agencies, since employees were
required to pay CalPERS the full present value of the future
benefits. (Sen. Rules Analysis, supra, at p. 3.) Yet even then,
it was recognized that the eventual cost of ARS credit might
exceed the purchase price paid by pensioners, most obviously
for employees who experienced a significant increase in salary
between the time of purchasing ARS credit and their
retirement. (State and Consumer Services Agency, Enrolled
Bill Rep., Assem. Bill 719 (2003-2004 Reg. Sess.) p. 4.) As the
Department of Finance pointed out in opposing the enactment
of section 20909, CalPERS was required to make a variety of
assumptions in calculating the present value of ARS credit, all
of which “contain a high degree of inaccuracy.” (Department of
Finance, Bill Analysis/Enrolled Bill Rep., Assem. Bill 719
(2003-2004 Reg. Sess.) Mar. 24, 2003, at p. 2.) In an analysis
performed for the years 1997 to 2007, CalPERS found that, in
practice, its methodology for calculating the price of ARS credit
had underestimated its actual cost by 12 percent to 38 percent
for various categories of state workers. (CalPERS, Review of
Additional Retirement Service Credit Purchases (undated) p.
6.) CalPERS recommended revising its calculations to increase
prices accordingly. (Ibid.)




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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


     C. PEPRA
      The centerpiece of PEPRA was a 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. As compared to existing employees’ pensions, the
new plan increased the age at which employees could claim
equivalent pension benefits, set a cap on the total
compensation on which pension benefits could be based,
required employees to pay one-half of the cost of funding their
pensions, and required the annual compensation used to
calculate pension benefits to be determined by averaging over
a three-year period, rather than using a single year. (§§
7522.02, subd. (b); 7522.10, subds. (c), (g); 7522.20, subd. (a);
7522.30, subd. (a); 7522.32, subd. (a).) All of these are less
favorable than the equivalent benefits typically available to
then-existing public employees.
      PEPRA also modified certain statutes governing the
pensions of existing employees. One of these provisions,
section 7522.46, eliminated the purchase of ARS credit by
public employees after December 31, 2012. (§ 7522.46, subds.
(a), (b); Stats. 2012, ch. 296, § 15.) In clean-up legislation
initiated by CalPERS the following year, this provision was
incorporated into section 20909 itself, which now states, in
part, “This section shall apply only to an application to
purchase additional retirement credit that was received by the
system prior to January 1, 2013, that is subsequently approved
by the system.” (Id. subd. (g), as amended by Stats. 2013, ch.
526, § 13.)




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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


      So far as we have been able to ascertain, there is nothing
in the legislative history that explains the Legislature’s
decision to terminate the purchase of ARS credit. Its likely
intent, however, can be inferred from a 12-point plan for
pension reform that formed the foundation for PEPRA,
published by Governor Edmund G. Brown, Jr. in October
2011.7 In recommending the termination of ARS credit, the
Governor’s plan stated, “Many pension systems allow
employees to buy ‘airtime,’ additional retirement service credit
for time not actually worked. When an employee buys airtime,
the public employer assumes the full risk of delivering
retirement income based on those years of purchased service
credit. Pensions are intended to provide retirement stability
for time actually worked.         Employers, and ultimately
taxpayers, should not bear the burden of guaranteeing the
additional employee investment risk that comes with airtime
purchases.” (Governor Edmund G. Brown, Jr., Twelve Point
Pension     Reform     Plan,    Oct.     27,    2011,     p.   4
<https://www.gov.ca.gov/wp-
content/uploads/2017/09/Twelve_Point_Pension_Reform_10.27.
11.pdf> [as of Mar. 4, 2019]; all Internet citations in this




7
      See Sen. Rules Com., Off. of Sen. Floor Analyses
Conference Completed Rep., Assem. Bill 340 (2011-2012 Reg.
Sess.) Aug. 28, 2012, p. 7 [“The comprehensive pension reform
proposal contained in the Conference Committee Report 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.”].



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     CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                     RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


opinion are archived by year, docket number, and case name at
<http://www.courts.ca.gov/38324.htm>.)
      D. This Litigation
      Plaintiff and appellant Cal Fire Local 2881 (Union) is a
labor association whose members are employees of the
California Department of Forestry and Fire Protection, known
as “Cal Fire.” The four individual plaintiffs are Cal Fire
employees. Plaintiffs filed a petition for a writ of mandate
against CalPERS challenging the elimination of ARS credit,
contending that the opportunity to purchase ARS credit was a
vested right protected by the contract clause of the California
Constitution. The trial court approved a stipulation permitting
the state to intervene.
      The trial court denied the petition, ruling that the
opportunity to purchase ARS credit was not protected by the
Constitution and, even if it were, its elimination was a
“ ‘permissible modification to the pension plan’ ” because it was
“materially related to the theory and successful operation of a
pension system.” (See Cal Fire Local 2881 v. California Public
Employees Retirement System (2016) 7 Cal.App.5th 115, 123,
129 (Cal Fire).) The Court of Appeal affirmed on both grounds
in a published decision. (Id. at pp. 127, 129.) That court based
its conclusion that the opportunity to purchase ARS credit was
not constitutionally protected on the absence of any indication
of legislative intent to create a contractual right. (Id. at
pp. 127-128.) It also held that the opportunity was properly
eliminated, even if it was protected by the constitution, on
reasoning similar to that of the trial court. (Id. at pp. 129-131.)
      For the reasons discussed below, we agree with both
courts that the opportunity to purchase ARS credit was not a

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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
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             Opinion of the Court by Cantil-Sakauye, C. J.


benefit of employment protected by the constitutional contract
clause. Given that conclusion, we have no occasion to reach
the further question whether, if it were so protected, its
elimination would have worked an unconstitutional
impairment of public employees’ contractual rights.
                         II. DISCUSSION
     Whether the opportunity for existing public employees to
purchase ARS credit is a benefit of employment protected by
the constitutional contract clause — that is, whether it is a
vested right — is a question of law subject to our independent
review.    (Board of Administration v. Wilson (1997) 52
Cal.App.4th 1109, 1128-1129 (Wilson).)
     A. Constitutional Protection of the Terms and
        Conditions of Public Employment Has
        Historically Been the Exception, Not the Rule
      The vested rights doctrine, the foundation of plaintiffs’
contention that PEPRA’s elimination of the opportunity for
existing public employees to purchase ARS credit was
unconstitutional, is grounded in the constitutional contract
clause. 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.8 (Sveen v. Melin (2018) 584 U.S. __ , 138 S.Ct.


8
      See United States Constitution, article I, section 10,
clause 1 [“No state shall . . . pass any . . . law impairing the
obligation of contracts . . . .”] and California Constitution,
article I, section 9 [“A . . . law impairing the obligation of
contracts may not be passed”]. As noted above, plaintiffs bring
this challenge under the California Constitution.



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             Opinion of the Court by Cantil-Sakauye, C. J.


1815, 1821-1822 (Sveen); San Francisco Taxpayers Assn v.
Board of Supervisors (1992) 2 Cal.4th 571, 584; see Allen v.
Board of Administrators (1983) 34 Cal.3d 114, 119.)
“The Contracts Clause restricts the power of States to disrupt
contractual arrangements. . . . The origins of the Clause lie in
legislation enacted after the Revolutionary War to relieve
debtors of their obligations to creditors. [Citation.] But the
Clause applies to any kind of contract.” (Sveen, 138 S.Ct. at p.
1821.)    The federal contract clause restricts states from
impairing their own contracts, as well as those between private
parties. (United States Trust Co. v. New Jersey (1977) 431 U.S.
1 (United States Trust).) In this context, the term “vested
right” has come to refer to the terms and conditions of public
employment that are protected from impairment by the
constitutional contract clause. (See ante, fn. 3.)
      Contract clause protection of the terms and conditions of
public employment historically has been the exception, rather
than the rule.       “[T]he terms and conditions of public
employment, unlike those of private employment, generally are
established by statute or other comparable enactment (e.g.,
charter provision or ordinance) rather than by contract.”
(White v. Davis (2003) 30 Cal.4th 528, 564 (White).) For this
reason, public employees have generally been held to possess
no constitutionally protected rights in the terms and conditions
of their employment. “[I]t is well settled in California that
public employment is not held by contract but by statute and
that, insofar as the duration of such employment is concerned,
no employee has a vested contractual right to continue in
employment beyond the time or contrary to the terms and
conditions fixed by law.” (Miller v. State of California (1977)


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             Opinion of the Court by Cantil-Sakauye, C. J.


18 Cal.3d 808, 813 (Miller).) It is also “well settled that public
employees have no vested right in any particular measure of
compensation or benefits, and that these may be modified or
reduced by the proper statutory authority.” (Butterworth v.
Boyd (1938) 12 Cal.2d 140, 150 (Butterworth).)              As we
explained in Retired Employees Assn. of Orange County v.
County of Orange (2011) 52 Cal.4th 1171 (Retired Employees),
“ ‘the principal function of a legislature is not to make
contracts, but to make laws that establish the policy of the
[governmental body]. [Citation.] Policies, unlike contracts, are
inherently subject to revision and repeal.’ ” (Id. at p. 1185.)
      In the eighty years since Butterworth, the growing
prevalence of collective bargaining by public employees has
dramatically increased the number of employees whose terms
and conditions of employment are governed by express
contracts, rather than solely by legislative enactments. (See
Meyers-Milias-Brown Act, §§ 3500 et seq. [regulating collective
bargaining by local agency employees]; Ralph D. Dills Act, §§
3512 et seq. [regulating collective bargaining by state
employees].) At least for the term of their collective bargaining
agreement, the employment of such employees is largely a
matter of contract, not statute. (See, e.g., Retired Employees,
supra, 52 Cal.4th at p. 1182 [“our ‘often quoted language that
public employment is not held by contract’ has limited
force where, as here, the parties are legally authorized to enter
(and have in fact entered) into bilateral contracts to govern the
employment relationship”]; Vallejo Police Officers Ass’n v. City
of Vallejo (2017) 15 Cal.App.5th 601, 612 (Vallejo Police) [“Like
other contracts, MOU’s [memoranda of understanding]
ordinarily cover distinct periods of time, and the obligations


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    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
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             Opinion of the Court by Cantil-Sakauye, C. J.


associated with      them     ordinarily      terminate      with   the
agreement”].)
      Yet the growing prevalence of public employment
agreements has not altered the fundamental principle that the
terms and conditions of public employment, to the extent those
terms and conditions derive from legislative enactments, are
not generally protected by the contract clause from repeal or
revision at the discretion of the legislative body. There
continues to be a large number of public employees whose
employment is not governed by an agreement. Even for public
employees covered by an express employment contract, the
issue has continued application. The covered terms and
conditions of their employment may be immune from
legislative modification during the term of the express
agreement, but disputed issues continue to arise regarding the
legislative body’s power to alter the terms and conditions of
employment that are not covered by the agreement or to alter
the terms and conditions established by the agreement after its
expiration. (See, e.g., Retired Employees, supra, 52 Cal.4th at
pp. 1176, 1177-1178 [considering whether retirees could
acquire a vested right in a health premium methodology not
specified in their MOU]; Vallejo Police, at pp. 614-620 [finding
no vested right to retiree medical contributions following
expiration of MOU]; Chisom v. Board of Retirement of Fresno
County Employees’ Retirement Ass’n (2013) 218 Cal.App.4th
400, 414-416.)
      Our decisions have recognized two exceptions to the
general rule permitting legislative modification of statutory
terms and conditions of public employment.         The first,
applicable to statutorily created employment rights generally,


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             Opinion of the Court by Cantil-Sakauye, C. J.


affords the protection of the contract clause to statutory terms
and conditions of public employment when the statute or
ordinance establishing the benefit and the circumstances of its
enactment clearly evince a legislative intent to create
contractual rights. The second exception, which this court has
historically extended primarily to pension rights, protects
certain benefits of public employment by implication, even in
the absence of a clear manifestation of legislative intent. Both
of these means for creating vested rights are invoked by
plaintiffs, and we address them separately below.
     B. Manifestly Intended Contractual Rights
         1. Terms and conditions of public employment are
            protected by the contract clause when the
            circumstances clearly evince a legislative intent to
            create contractual rights
      Notwithstanding the general rule that legislative
enactments do not create rights protected by the contract
clause, the United States Supreme Court has long recognized
an exception when the legislation at issue manifests an intent
to create contractual rights. In United States Trust, supra, 431
U.S. 1, the legislatures of New York and New Jersey had both
approved a statutory covenant limiting the use of mass transit
revenues to subsidize passenger rail transit, a covenant both
states later repealed. (Id. at p. 3.) In evaluating bondholders’
claim that the states’ joint repeal of the covenant
impermissibly impaired their rights under the federal contract
clause, the high court recognized that “a statute is itself
treated as a contract when the language and circumstances
evince a legislative intent to create private rights of a
contractual nature enforceable against the State.” (Id. at p. 17,



                                  17
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


fn. 14.) In United States Trust, the court found it “unnecessary
. . . to dwell on the criteria for determining whether state
legislation gives rise to a contractual obligation” because “[t]he
intent to make a contract is clear from the statutory
language . . . . Moreover, . . . the purpose of the covenant was
to invoke the constitutional protection of the Contract Clause
as security against repeal [of the covenant legislation].” (Id. at
pp. 17-18, citations omitted.)
      We have recognized the same principle. In Retired
Employees, we held that the resolutions of a board of
supervisors governing the terms and conditions of county
employment could create implied contractual rights “when the
language or circumstances accompanying [enactment of the
resolutions] clearly evince a legislative intent to create private
rights of a contractual nature.” (Retired Employees, supra, 52
Cal.4th at p. 1177; see also Youngman v. Nevada Irrigation
District (1969) 70 Cal.2d 240, 246-247 (Youngman) [district
employees successfully pleaded an implied contractual right to
the implementation of a salary schedule].)9
     Retired Employees addressed the question, submitted to
us by the Ninth Circuit Court of Appeals, “ ‘[w]hether, as a
matter of California law, a California county and its employees
can form an implied contract that confers vested rights to



9
      Both Retired Employees and Youngman were decided in
the context of local government employment. Their rationale
would appear to apply as well to legislative enactments at the
state level, but for present purposes it is sufficient for us to
assume, without deciding, that application.



                                  18
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


health benefits on retired county employees.’ ” (Retired
Employees, supra, 52 Cal.4th at p. 1176.) The county had
entered into a series of express contracts with its employees, in
the form of MOUs, relating to their terms and conditions of
employment, but these agreements did not expressly address
the retiree benefits for which the plaintiffs sought
constitutional protection. Each of these MOUs had been
ratified by a resolution of the board of supervisors. (Id. at pp.
1177-1178.) We recognized the ordinary rule that public
employment is a creature of statute, but we held that rule to be
of “limited force” when “the parties are legally authorized to
enter (and have in fact entered) into bilateral contracts to
govern the employment relationship.” (Id. at p. 1182.) We
ultimately “conclude[d] generally that legislation in California
may be said to create contractual rights when the statutory
language or circumstances accompanying its passage ‘clearly
“. . . evince a legislative intent to create private rights of a
contractual nature enforceable against the [governmental
body].” ’ [Citations.] Although the intent to make a contract
must be clear, our case law does not inexorably require that
the intent be express. [Citation.] A contractual right can be
implied from legislation in appropriate circumstances.
[Citation.] Where, for example, the legislation is itself the
ratification or approval of a contract, the intent to make a
contract is clearly shown.” (Id. at p. 1187.) As the final
sentence of that quotation suggests, the court found the
existence of the MOUs critical to its conclusion that an implied
contractual right could have been created. (Id. at p. 1183
[“Where the relationship is governed by contract, a county may
be bound by an implied contract (or by implied terms of a



                                  19
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


written contract), as long as there is no statutory prohibition
against such an agreement”].)
         2. There is no indication that the Legislature intended
            to create a contractual right to purchase ARS
            credit
     Plaintiffs rely on Retired Employees, supra, 52 Cal.4th
1171, in arguing for a vested right in the opportunity to
purchase ARS credit, characterizing that decision as finding a
contractual right if the benefits “were promised when
employees provided service.”
      Before addressing this argument, it is important to make
clear what is not at issue here. The only change made by
PEPRA relating to ARS credit was to eliminate the opportunity
to purchase ARS credit after the end of 2012. PEPRA does not
purport to affect the rights of employees who took advantage of
the opportunity to purchase ARS credit while it was still
available.    Persons who actually purchased ARS credit
therefore remain in precisely the same position as they were
prior to PEPRA, and we need not consider their circumstances
further. What is claimed here to be a vested right is the
opportunity to purchase ARS credit, rather than any of the
rights conferred by its purchase.
      As discussed above, it was critical to Retired Employees’
holding that the legislative enactment on which the implied
contractual rights were premised was a resolution approving
an express contract of employment. (Retired Employees, supra,
52 Cal.4th at pp. 1183, 1187.) The county board’s ratification
of this contract provided the requisite clear manifestation of
intent to create contractual rights. Nothing of the sort
occurred in connection with the opportunity to purchase ARS


                                  20
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


credit.    The Legislature did not engage in any sort of
negotiation with the public employees covered by section
20909, let alone ratify an express or implied contract reflecting
its terms. The Legislature simply enacted a statute granting
the opportunity to purchase ARS credit. As Retired Employees
noted, such statutes, which announce a policy rather than
create a contract, “ ‘are inherently subject to revision and
repeal.’ ” (Retired Employees, supra, at p. 1185.)
      Plaintiffs’ characterization of ARS credit as “promised
when employees provided service” suggests the existence of an
affirmative commitment by the Legislature to make the
opportunity to purchase ARS credit available indefinitely, but
they cite no persuasive evidence of such a commitment.
Plaintiffs rely primarily on a clause of section 20909, the
statute conferring the opportunity to purchase ARS credit,
which states that “[a] member may elect to receive this
additional retirement service credit at any time prior to
retirement by making the contributions as specified in Section
21050 and 21052.” (Id. subd. (b).) They contend that this
provision manifests the Legislature’s intent to permit existing
employees to exercise the opportunity to purchase ARS credit
at any point prior to their retirement by (1) working for the
five-year period and (2) thereafter making the required
payments to CalPERS. Although we recognize that the
language, read in isolation, can be interpreted as plaintiffs
urge, we agree with the trial court and Court of Appeal that
this construction reads too much into subdivision (b).
      Rather than a commitment to maintain the opportunity
to purchase ARS credit for the duration of the employment of
existing public employees, this portion of subdivision (b), when


                                  21
     CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                     RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


read in the context of the remainder of section 20909, simply
established that the one-time election to purchase ARS credit
could be made at any point during an employee’s career and
that the election to purchase was not complete until the
required payments to the pension system had been made. (See
Elks Hills Power, LLC v. Board of Equalization (2013) 57
Cal.4th 593, 610 [“ ‘ “[every] statute should be construed
with reference to the whole system of law of which it is a part
so that all may be harmonized and have effect” ’ ”].) The
remaining provisions of section 20909 establish conditions
applicable to the purchase of ARS credit — the requirement of
written notice, the maximum number of years available for
purchase, the minimum service time required before a
purchase can be made, the requirement to purchase in whole-
year increments, the limitation to one purchase event,
restrictions on the applicability of ARS credit for non-pension
purposes, and the type of employees eligible to make the
purchase.10 (Id. subds. (a), (b), (d), (e).) It is therefore


10
      The full text of section 20909 follows:
      “(a) A member who has at least five years of credited
state service, may elect, by written notice filed with the board,
to make contributions pursuant to this section and receive not
less than one year, nor more than five years, in one-year
increments, of additional retirement service credit in the
retirement system.
      “(b) A member may elect to receive this additional
retirement service credit at any time prior to retirement by
making the contributions as specified in Sections 21050 and
21052. A member may not elect additional retirement service
credit under this section more than once.



                                  22
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


consistent with the statute’s remaining provisions to read the
portion cited by plaintiffs as establishing other, similar
conditions, specifying the time during an employee’s career
when ARS credit can be purchased and the manner of
completing that election. Given the existence of this more
plausible reading, plaintiffs’ interpretation does not “clearly
evince a legislative intent to create private rights of a
contractual nature,” which is required before such rights will
be found. (Retired Employees, supra, 52 Cal.4th at p. 1177; see
id. at p. 1187 [“the intent to make a contract must be clear”].)
As the Court of Appeal persuasively explained, “this phrase



      “(c) For purposes of this section, ‘additional retirement
service credit’ means time that does not qualify as public
service, military service, leave of absence, or any other time
recognized for service credit by the retirement system.
      “(d) Additional retirement service credit elected pursuant
to this section may not be counted to meet the minimum
qualifications for service or disability retirement or for health
care benefits, or any other benefits based upon years of service
credited to the member.
      “(e) This section only applies to the following members:
      “(1) A member while he or she is employed in state
service at the time of the additional retirement service credit
election.
      “(2) A member of the system defined in Section 20324.
      “(f) For purposes of this section, ‘state service’ means
service as defined in Section 20069.
      “(g) This section shall apply only to an application to
purchase additional retirement credit that was received by the
system prior to January 1, 2013, that is subsequently approved
by the system.”



                                  23
     CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                     RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


means just what it says and no more — to wit, eligible
employees could opt to purchase the service credit at any
time,” rather than being required to purchase ARS credit at a
particular point in their public careers. (Cal Fire, supra, 7
Cal.App.5th at p. 127.) To convert “this straightforward
reading of this statutory phrase [into a] promise by the
Legislature not to modify or eliminate the option to purchase
service credit” would fly in the face of “the legal presumption
against the creation of a vested contractual right.” (Ibid.)
Beyond this provision, plaintiffs have pointed to no text,
legislative history, or other evidence suggesting that the
Legislature intended to make ARS credit an irrevocable
feature of the employment of then-existing public employees.11
      In arguing for an implied contract, plaintiffs rightly note
that “[p]ension statutes have rarely, if ever, explicitly stated
that a vested right is being created.” As discussed below, our
cases holding that the pension rights of public employees are
protected by the contract clause have done so even without a
manifest indication of legislative intent. We have never held,
however, that the constitutional protection afforded pension
rights, which attaches even in the absence of manifest



11
      In addition to citing section 20909, subdivision (b),
plaintiffs contend that the Legislature should be presumed to
have intended the creation of a contractual right in the
opportunity to purchase ARS credit because the statute
contains no affirmative indication that the opportunity was not
contractual. The argument disregards the requirement of a
clearly evinced legislative intent to create contractual rights in
Retired Employees, supra, 52 Cal.4th at p. 1177.



                                  24
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


legislative intent to create contract rights, extends generally to
all other benefits of public employment.
      C. Implied Contractual Rights
      Given the absence of circumstances clearly evincing a
legislative intent to create a contractual right to purchase ARS
credit, we turn to plaintiffs’ alternative argument that the
opportunity to purchase ARS credit is entitled to the same type
of constitutional protection as public employee pension rights.
         1. The Constitution protects an implied contractual
            right for California’s public employees to receive
            statutory pension benefits because those benefits
            constitute deferred compensation
      Our decisions recognize that, through his or her service,
a public employee acquires a constitutionally protected implied
contractual right to receive statutory pension benefits upon
retirement.    “A public employee’s pension constitutes an
element of compensation, and a vested contractual right to
pension benefits accrues upon acceptance of employment.
Such a pension right may not be destroyed, once vested,
without impairing a contractual obligation of the employing
public entity.” (Betts v. Board of Administration (1978) 21
Cal.3d 859, 863 (Betts).)
      The rationale for the constitutional protection of
statutory pension rights was established over a century ago in
O’Dea v. Cook (1917) 176 Cal. 659 (O’Dea). The plaintiff in
O’Dea was the widow of a San Francisco police officer who died
as a result of injuries suffered in the line of duty. When she
sought to claim her late husband’s pension benefits, which
were created by the city charter (id. at p. 660), the trustees
overseeing the pension plan refused her, citing an amendment


                                  25
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


to the plan that was enacted after the occurrence of her
husband’s fatal injury but before his death.           O’Dea is
recognized for rejecting the legal theory that public employee
pensions constitute a gratuity, a legal argument that persisted
well into the last century. (Monahan, supra, 97 Iowa L.Rev. at
p. 1052; see Dodge v. Board of Education (1937) 302 U.S. 74, 79
[affirming a state court finding of no vested right to a teacher
pension created by statute and characterizing the benefits as
“gratuities”].)   But O’Dea was also the first decision to
articulate the legal foundation for our subsequent decisions
finding a vested right to public employee pensions. In rejecting
the gratuity theory, the court held, without further
elaboration, “where, as here, services are rendered 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.” (O’Dea, at pp. 661-
662, italics added.)
      Although O’Dea went no further in articulating a basis
for the legal protection of pension rights, the connection to the
constitutional contract clause was subsequently recognized by
Kern v. City of Long Beach (1947) 29 Cal.2d 848 (Kern). There
we observed that our decisions following O’Dea had held that
“the right to a pension vests upon acceptance of employment.”
(Kern, at p. 852.) In reconciling this holding with the statutory
nature of pension rights, Kern reasoned that the decisions “are
not in conflict with language appearing in some cases to the
general effect that public employment is not held by contract.
[Citations.] . . . [P]ublic employment gives rise to certain
obligations which are protected by the contract clause of the
Constitution, including the right to the payment of salary


                                  26
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


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. Thus the courts of this state have refused to hold,
in the absence of special provision, that public employment
establishes tenure rights, but have uniformly held that pension
laws such as the [city charter provision at issue in Kern]
establish contractual rights.” (Id. at pp. 852-853.)
      In justifying the constitutional protection given pension
benefits, Kern did not rely on, or even inquire into,
manifestations of legislative intent to confer contractual rights.
Rather, the Kern court found that a contractual right to receive
pension benefits is implied, despite their statutory foundation,
because they constitute a form of deferred compensation. As
Kern explained, a public employee “is not fully compensated
upon receiving his salary payments because, in addition, he
has then earned certain pension benefits, the payment of
which is to be made at a future date. While payment of these
benefits is deferred, and is subject to the condition that the
employee continue to serve for the period required by the
statute, the mere fact that performance is in whole or in part
dependent upon certain contingencies does not prevent a
contract from arising, and the employing governmental body
may not deny or impair the contingent liability any more than
it can refuse to make the salary payments which are
immediately due.” (Kern, supra, 29 Cal.2d at p. 855.) Given
their character as deferred compensation, the receipt of
legislatively established pension benefits is protected by the
contract clause, even in the absence of a manifest legislative
intent to create contractual rights.


                                  27
     CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                     RETIREMENT SYSTEM
              Opinion of the Court by Cantil-Sakauye, C. J.


      Our subsequent decisions have confirmed that the receipt
of pension benefits is granted constitutional protection because
the benefits constitute a portion of the compensation awarded
by the government to its employees, paid not at the time the
services are performed but at a later time. As stated in Miller,
supra, 18 Cal.3d 808, “Pension rights, unlike tenure of civil
service employment, are deferred compensation earned
immediately upon the performance of services for a public
employer ‘[and] cannot be destroyed . . . without impairing a
contractual obligation. Thus the courts of this state have
refused to hold, in the absence of special provision, that public
employment establishes tenure rights, but have uniformly held
that pension laws . . . establish contractual rights.’ ” (Id. at pp.
814; see also, White, supra, 30 Cal.4th at p. 564 [“public
employment gives rise to certain obligations, protected by the
contract clause of the Constitution”]; Legislature v. Eu (1991)
54 Cal.3d 492, 533 [“Decisions of this court have assumed the
federal contract clause protects the vested pension rights of
public officers”].)12


12
       Decisions outside California have characterized public
employee pension plans as “an implied-in-fact unilateral
contract” and justified their constitutional protection on this
ground. (McGrath v. Rhode Island Retirement Bd. (1st Cir.
1996) 88 F.3d 12, 17; see ibid. [characterizing this view as
“fairly well settled” and “applied repeatedly to state and
municipal pension plans”]; see also Moro v. State (Or. 2015)
351 P.3d 1, 20-21; Taylor v. City of Gadsden (11th Cir. 2014)
767 F.3d 1124, 1134; State ex rel. Horvath v. State Teachers
Retirement Bd. (Ohio 1998) 697 N.E.2d 644, 653-654;
Christensen v. Minneapolis Municipal Employees Retirement
Bd. (Minn. 1983) 331 N.W.2d 740, 747-748.) As explained in



                                   28
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


      We have consistently recognized that elements of public
employee compensation other than pension benefits also may
be entitled to this type of implied contractual protection. In
Kern, for example, we stated 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.” (Kern, supra, 29 Cal.2d at p.
853.) To the same effect, we stated in White, that “although
the conditions of public employment generally are established
by statute rather than by the terms of an ordinary contract,
once a public employee has accepted employment and
performed work for a public employer, the employee obtains
certain rights arising from the legislative provisions that
establish the terms of the employment relationship — rights
that are protected by the contract clause of the state
Constitution from elimination or repudiation by the state.”
(White, supra, 30 Cal.4th at p. 566.) Our actual application of
the contract clause to statutory terms and conditions of public
employment outside the pension context, however, has been
limited to the protection of earned salary (id. at pp. 565-566,
570-571 [state employees are constitutionally entitled to
receive compensation for work they have performed]) and the
compensation “promised” to judges at the inception of their



Hoefel v. Atlas Tack Corp. (1st Cir. 1978) 581 F.2d 1, “the
modern view [is] that the promise of a pension constitutes an
offer which, upon performance of the required service by the
employee becomes a binding obligation.” (Id. at p. 4.) That
view is consistent with the general approach, if not the express
analysis, of our decisions.



                                  29
     CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                     RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


term of office. (Olson v. Cory (1980) 27 Cal.3d 532, 538-539
(Olson) [state judges are entitled to receive compensation set
by legislation at the beginning of their judicial term].)13
         2. The opportunity to purchase ARS credit was not a
            form of deferred compensation
      We first consider whether the opportunity to purchase
ARS credit was a form of deferred compensation, in the nature
of pension benefits, and entitled to contract clause protection
on that basis.
      Pension benefits, the classic example of deferred
compensation, flow directly from a public employee’s service,
and their magnitude is roughly proportional to the time of that
service. Just as each month of public service earns an
employee a month’s cash compensation, it also earns him or
her a slightly greater benefit upon retirement. In this way,
pension benefits are, literally, earned by an employee’s work.
Upon retirement, this additional component of his or her




13
       Decisions of the Courts of Appeal have extended the
principles developed in our pension cases to protect a wider
range of public employment benefits. (E.g., California League
of City Employee Associations v. Palos Verdes Library Dist.
(1987) 87 Cal.App.3d 135, 137 (California League) [finding
contract clause protection for terms and conditions of
employment that constituted longevity benefits].) We have no
occasion here to address the merits of that or similar decisions
(see Retired Employees, supra, 52 Cal.4th at p. 1190 [accepting
criticism of California League]), but we do not intend to
suggest that implied contract clause protection is limited to the
circumstances addressed in our own prior decisions.



                                  30
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


compensation is paid to the employee in the form of pension
benefits.
      In contrast, the opportunity to purchase ARS credit,
when it existed, was made available at the option of each
individual employee.        If not taken advantage of, the
opportunity expired upon an employee’s retirement or
termination of employment. Further, the amount of an eligible
employee’s service was entirely irrelevant to his or her exercise
of the opportunity. Once the five-year qualification period was
served, further public employment did not increase the amount
of ARS credit that an employee could purchase or in any other
way affect his or her opportunity. In contrast with pension
benefits, in which a critical determinant is an employee’s term
of public employment, the factor that determined the benefit
received through the purchase of ARS credit was simply the
number of years of ARS credit an employee purchased. And as
noted, all vested employees, regardless of service time, had the
same opportunity to purchase from one to five years of ARS
credit. In fact, the opportunity to purchase ARS credit was so
unconnected to actual service time that a public employee who
had worked just the minimum of five years’ public employment
and was otherwise eligible to retire could, at least in theory,
have doubled his or her pension benefit by purchasing five
years’ ARS credit and retiring soon after.
      Plaintiffs argue that it was necessary for employees to
“earn,” in a sense, the right to purchase ARS credit by working
in public employ for five years. (§ 20909, subd. (a).) We are
not persuaded, however, that the imposition of this
requirement created a constitutionally protected right. As the
state points out, the five-year requirement was required to


                                  31
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


make section 20909’s authorization of ARS credit compliant
with federal tax law, which limits the purchase of nonqualified
service credit to persons who have participated in a pension
plan for at least five years. (26 U.S.C. § 415(n)(3)(B)(ii).)
Further, five years of service is generally required for an
employee to qualify to receive a pension. (E.g., § 21060, subd.
(a).) The five year requirement simply precluded the purchase
of ARS credit by employees who had not yet established their
eligibility for a pension. In light of these independent policy
justifications for the existence of the requirement, we find no
basis for concluding that the opportunity to purchase ARS
credit was granted as deferred compensation for an employee’s
work during the five-year period.
      The opportunity to purchase ARS credit was not different
in form from a variety of other optional benefits offered to
public employees in connection with their work. In addition to
their salary or hourly pay, it is not unusual for public
employees to be offered the opportunity to purchase different
types of health insurance benefits from a variety of providers;
to purchase life and long-term disability insurance; and to
create a flexible spending account, by which certain medical
and child care expenses can be paid with pre-tax income. We
have never suggested that this type of benefit is entitled to
protection under the contract clause.




                                  32
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


         3. There is no other basis to find implied contract
            clause protection for the opportunity to purchase
            ARS credit
             a. Even if viewed as an offer of a unilateral
                contract, section 20909 was properly revoked by
                the Legislature
      Plaintiffs argue that opportunity to purchase optional
benefits such as these is protected by the contract clause
because it constitutes “an offer of a unilateral contract term for
which performance is tendered by beginning and continuing
employment.”      Except under the circumstances discussed
above, statutory terms and conditions of public employment do
not create contractual rights. (Miller, supra, 18 Cal.3d at
pp. 813-814.) Yet even if we treat section 20909 as constituting
an offer of a unilateral contract, the offer was revocable until
accepted by the actual purchase of ARS credit; it did not
require the state to make the opportunity to purchase ARS
credit available for the duration of the careers of existing
employees.
      A unilateral contract is one that is accepted by
performance. (Davis v. Jacoby (1934) 1 Cal.2d 370, 378-379;
Los Angeles Traction Co. v. Wilshire (1902) 135 Cal. 654, 658 [a
unilateral contract is “a mere offer that, if subsequently
accepted and acted upon by the other party to it, would ripen
into a binding, enforceable obligation”]; Civ. Code, § 1584.)
Under ordinary principles of contract law, such an offer can be
revoked or modified prior to acceptance — in other words, prior
to the promisee’s performance of the act constituting
performance. (T.M. Cobb Co. v. Superior Court (1984) 36
Cal.3d 273, 278; Civ. Code, § 1586; 1 Witkin, Summary of Cal.
Law (10th ed. 2005) Contracts, §§ 166-167, pp. 202-204.)


                                  33
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


      Under section 20909, to accept the “offer” to purchase
ARS credit, a public employee must (1) file a written election
with the employee’s pension board (id. subd. (a)) and (2) make
appropriate payments to the retirement system (id. subd. (b)).
Accordingly, even if section 20909 were treated as establishing
the offer of a unilateral contract, the Legislature was entitled
to revoke that offer as to all public employees who had yet to
make a written election and the required payments. In
PEPRA, the Legislature did just that.
       Plaintiffs argue that engaging in public employment was
sufficient to prevent revocation of the section 20909 offer
because an offeror’s right to revoke or modify a unilateral
contract ends once partial performance occurs. (State of
California v. Agostini (1956) 139 Cal.App.2d 909, 914 [“ ‘If an
offer for a unilateral contract is made, and part of the
consideration requested in the offer is given or tendered by the
offeree in response thereto, the offeror is bound by a
contract’ ”].) We disagree, however, with the premise of their
argument, that public employment constituted partial
consideration for the acquisition of ARS credit.            The
opportunity to purchase ARS credit was conditioned on public
employment, but it was not offered in exchange for public
service. For those employees who had already been publicly
employed for five years at the time section 20909 was enacted
in 2003, no public service was required to qualify for an
election to purchase ARS credit. Such employees’ mere status
as public employees on the effective date was sufficient. Once
other public employees had served the five years necessary to
qualify to receive a pension, they were also qualified for full
rights under section 20909.        Although continuing public


                                  34
     CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                     RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


employment was necessary to retain the qualification to make
an election, that continuing service did not bring an employee
any closer to acquiring ARS credit. Performance — the
consideration for the acquisition of ARS credit — required the
filing of a written election and payment of the necessary sums.
      Our conclusion in this regard is bolstered by the
requirement in section 21052, which sets the terms of payment
for ARS credit, that an employee contribute the full amount of
“the increase in employer liability” in order to acquire ARS
credit. (Id.) An employee’s public service appears not to have
been viewed by the Legislature as constituting partial
consideration for an election under section 20909, since the
employee received no offsetting credit for the value of that
service in purchasing ARS credit.
      In this regard, plaintiffs argue that a contractual right
with respect to the opportunity to purchase ARS credit should
be found because public employees reasonably expected that
the opportunity would continue to be made available for the
duration of their employment. The only cited basis for those
“reasonable expectations,” however, is the belief that the
opportunity to purchase ARS credit would continue to exist in
the future because it “was in effect for ten years.” The
argument proves too much. We have never held that statutory
terms and conditions of public employment gain constitutional
protection merely from the fact of their existence, even if they
have persisted for a decade.14 Such a rationale would directly


14
     In one prior decision, Betts, supra, 21 Cal.3d 859, we
suggested that public employees’ “contractual pension



                                  35
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


contradict the general principle that such terms and conditions
are not a matter of contract and are generally subject to
legislative change. (Miller, supra, 18 Cal.3d at pp. 813-814;
Butterworth, supra, 12 Cal.2d at p. 150.)
            b. The opportunity to purchase ARS credit was not
               entitled to constitutional protection solely
               because it involved the pension system
       Plaintiffs also argue that the opportunity to purchase
ARS credit was protected by the contract clause because it was
a “pension right,” enacted as part of the public employee
retirement law and implemented through the pension system.
As plaintiffs phrase it, the opportunity to purchase ARS credit
constituted a vested right because, if an employee exercised
that opportunity, “it increased the pension benefit.” We have
never held, however, that a particular term or condition of
public employment is constitutionally protected solely because
it affects in some manner the amount of a pensioner’s benefit.
       Our decision in Miller, supra, 18 Cal.3d 808, is
illustrative. The plaintiff in Miller was a state tax attorney
who was forced to retire upon reaching the age of 67, the


expectations” were relevant to determining the extent of their
vested pension rights. (Id. at p. 866; see similarly, Bellus v.
Eureka (1968) 69 Cal.2d 336, 341, 350 [employee expectations
relevant to interpreting terms of pension plan].) It is one thing
to consider employees’ expectations in determining the extent
of protected rights. It is a different matter, and simply
circular, to consider employees’ expectations in determining
whether a particular benefit is protected at all, at least when
those expectations are based solely on the existence of the
benefit.



                                  36
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


statutory age of mandatory retirement from state service. At
the time he began his state employment, and until a few years
before his retirement, the mandatory age of retirement was 70,
and the plaintiff’s pension benefit would have been less if he
was required to abide by the lower retirement age. (Id. 18
Cal.3d at p. 811.) Despite the impact on the plaintiff’s pension
benefit, we declined to hold that he had a vested right to retire
according to the mandatory age in effect at the time he joined
state service. (Id. at pp. 812, 815-817.)
      We began our discussion by reiterating the familiar
principle that public employment in California is a creature of
statute, not contract, and “no employee has a vested
contractual right to continue in employment beyond the time
or contrary to the terms and conditions fixed by law.” (Miller,
supra, 18 Cal.3d at p. 813.) “In view of these long and well
settled principles,” we concluded “that the power of the
Legislature to reduce the tenure of plaintiff’s civil service
position . . . by changing the mandatory retirement age was not
and could not be limited by any contractual obligation.” (Id. at
p. 814.) We distinguished cases involving pension rights,
explaining that pension rights, “unlike tenure of civil service
employment,” are “deferred compensation” and therefore
protected by the contract clause. (Ibid.)
      We then turned to a second question, whether the impact
of the legislation on the plaintiff’s pension benefits
“nevertheless work[ed] an impairment of any vested right to
earn a larger monthly pension based upon continued state
service until age 70.” (Miller, supra, 18 Cal.3d at p. 815.)
Drawing on decisions holding that “the right to pension
benefits vests upon the acceptance of employment,” the


                                  37
     CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                     RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


plaintiff contended that “upon acceptance of public
employment [he] acquired a vested right to a pension based on
the system then in effect,” which allowed him to earn
maximum benefits by working to age 70. (Id. at pp. 815, 817.)
We rejected the argument because the plaintiff had failed to
satisfy the prerequisite for maximum benefits, that he work
until age 70.      Although we recognized that it was the
legislative enactment that mandated his retirement before he
reached the age of 70, we found no vested right to achieve the
maximum pension benefit because, as discussed above,
“plaintiff had no vested contractual right to continue working
for any specified period of time.” (Id. at p. 817.) “In short, [the
plaintiff’s] membership in [the state retirement system] did not
confer on him the right to remain in state employment beyond
age 67 and he had no constitutionally protected right to
continue in his position until age 70 in order to receive a larger
retirement allowance. . . . [¶] [T]he power of the Legislature,
unfettered by contract, reduced the mandatory age of
retirement and thereby created the condition subsequent
whose occurrence not only terminated plaintiff’s employment
but also defeated his expectation of additional salary and a
larger retirement allowance.” (Ibid.)
      A second decision illustrating the same principle is
Creighton v. Regents of University of California (1997) 58
Cal.App.4th 237 (Creighton), which involved an early
retirement program implemented to cope with budget cuts at a
university laboratory. Eligible employees, who were covered
by a defined benefit pension plan, were given a three-month
period to decide whether to accept immediate retirement in
return for an additional five years of service credit. When, two


                                  38
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


weeks into the three-month period, administrators concluded
that the program was too generous, they reduced the offer to
an additional three years of service credit for persons who had
not yet accepted the offer. This change naturally reduced the
size of the pension benefits available to employees who took
advantage of the program. (Id. at p. 241.) The plaintiffs, who
accepted early retirement after the reduction of the offer, sued
to obtain the benefit of the original proposal, contending that
because the program concerned their pension plan they had a
vested right to the terms of the original proposal. (Id. at p.
242.)
      The Court of Appeal rejected the claim. The court
accepted that the program constituted a “retirement benefit,”
thereby distinguishing it from other types of compensation, but
it held that the program was “different in kind from the
benefits governed by the [line of cases granting constitutional
protection to pension benefits], none of which concerned a one-
time, special, elective incentive offered to eligible employees
during a short, specified ‘window’ period, in response to specific
financial exigencies.” (Creighton, supra, 58 Cal.App.4th at pp.
243-244, fn. omitted.) The document governing the early
retirement program expressly stated that it “ ‘shall not be a
vested or accrued Plan benefit.’ ” (Id. at p. 244.) Based on that
provision, the court had “no difficulty in concluding that the
language . . . clearly and unambiguously means that [the
program] creates no vested right to either its additional age
and service credits or the resulting enhanced pension
payments.” (Ibid.) “Rather,” the court held, “it is a limited
offer of enhanced benefits which, upon an eligible employee’s




                                  39
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


timely acceptance . . . , and with consideration . . . , creates a
separate binding contract.” (Id. at p. 245.)
      As Miller and Creighton demonstrate, a term and
condition of public employment that is otherwise not entitled to
protection under the contract clause does not become entitled
to such protection merely because it affects the amount of an
employee’s pension benefit.        In any event, although the
purchase of ARS credit does increase the amount of a pension
benefit, as plaintiffs argue, it does not affect the amount of the
pension benefit that represents deferred compensation. That
portion of the pension benefit is the same for employees who
elect to purchase ARS credit and those with the identical
employment experience who decline to purchase it. Acquiring
ARS credit merely adds an amount attributable to the
purchased service credit to the monthly benefit payable as
deferred compensation. Rather than compensation for public
employment, the increase in pension benefits from the
purchase of ARS credit is a return of, and perhaps a return on,
the funds used to make the purchase.
      Plaintiffs cite Wilson, supra, 52 Cal.App.4th 1109, in
support of their position, arguing the decision rejected a
distinction between “pension benefits” and “pension rights.”
Wilson addressed the constitutionality of a change in the
manner in which the state made its contributions to the state
pension fund, from funding on a current basis to funding a year
in arrears. (Id. at pp. 1117-1118.) In the process, the court
rightly rejected the state’s argument that the vested rights
doctrine applies only to changes in pension benefits, as opposed
to changes in other aspects of the pension system. As the court
noted, the doctrine applies to the “modification of any ‘vested


                                  40
     CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                     RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


contractual pension right,’ ” which prior decisions had held to
include the manner of pension funding. (Id. at p. 1145.)
Although Wilson rightly held that “ ‘vested contractual pension
right[s]’ ” encompass more than the benefits paid by a pension
system, it did not attempt to define the scope of such rights,
beyond the funding mechanism actually addressed in the
decision. For the reasons stated above, we conclude that the
opportunity to purchase ARS credit was not a vested
contractual pension right.
             c. The opportunity to purchase ARS credit is not
                entitled to constitutional protection under
                Olson v. Cory
      We held in Olson, supra, 27 Cal.3d 532, that state judges
are entitled under the contract clause to receive, for the
duration of their term, the compensation established by statute
for their position at the outset of their term, characterizing this
as “[p]romised compensation.” (Id. at p. 538.) The plaintiffs in
Olson were a group of current and former California judges
who challenged an amendment to the statute governing
judicial compensation that reduced their cost-of-living
increases. As a result of the legislation, judges would receive a
five percent salary increase, rather than the fractionally
greater increase that would have been available prior to the
amendment. (Id. at pp. 536-537.) Olson found the legislation
unconstitutional on two independent grounds: (1) the statute
violated our Constitution’s prohibition against the reduction of
an elected state officer’s salary during his or her term of office
(id. at pp. 537, fn. 2 & 543-544; see Cal. Const., art. III, § 4);
and (2) the statute violated judicial officers’ vested rights
under the contract clause.



                                  41
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


      Our consideration of the contract clause issue began by
acknowledging the case law holding that public employment “is
not held by contract and therefore is not protected by the
contract clause.” (Olson, supra, 27 Cal.3d at p. 537.) We
distinguished those decisions, however, on the grounds that
the matter at hand concerned “the right to compensation by
persons serving their term of public office to which they have
undisputed rights.” (Id. at p. 538.) We found the situation
analogous to the circumstances in Sonoma County
Organization of Public Employees v. County of Sonoma (1979)
23 Cal.3d 296 (Sonoma County), which held that a state
statute reducing public employee cost-of-living increases
embodied in a memorandum of understanding ran afoul of the
contract clause. (Id. at pp. 302-303, 313-314.) Characterizing
“the elements of compensation for [public] office” to be
“contractually vested upon acceptance of employment,” Olson
held that the contract clause precludes the Legislature, during
the term of a judicial officer, from reducing the benefits
available at the commencement of his or her term. (Olson,
supra, 27 Cal.3d at pp. 538, fn. 3 & 539.) We recognized that if
a judge chose to enter a new term of office after the effective
date of the challenged legislation, he or she would be subject to
the reduced compensation established there. (Id. at p. 540.)
      Olson does not support plaintiffs’ claim of a vested right
to purchase ARS credit. First, critical to Olson’s reasoning was
the defined term of office served by judicial officers. (See
Olson, supra, 27 Cal.3d at p. 538, fn. 3 [distinguishing
Millholen v. Riley (1930) 211 Cal. 29, because it concerned a
public employee whose employment “apparently could be
terminated at will”].) Olson treated the statutory employment


                                  42
     CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                     RETIREMENT SYSTEM
              Opinion of the Court by Cantil-Sakauye, C. J.


benefits available to a judge at the beginning of his or her term
as, in effect, a contract for the length of the term, and its ruling
was effective only for the duration of a judge’s term. The
decision anticipated that upon entering into a new term,
judges would be subject to the statutory terms and conditions
of employment then in effect. (Id. at p. 540.) Plaintiffs and the
other employees affected by PEPRA’s elimination of the
opportunity to purchase ARS credit do not have discrete terms
of service. They claim an open-ended entitlement to ARS
credit for the duration of their public careers. Second, Olson
relied on the central role played by monetary compensation in
the employment decision. As the court noted, “[a] judge
entering office is deemed to do so in consideration of — at least
in part — salary benefits then offered by the state for that
office.” (Id. at p. 539.) Compared to salary benefits, the
subject of Olson, the opportunity to purchase ARS credit was a
minor part of the benefits available to public employees.
Although it might have been a desirable optional benefit for
some employees, its significance was likely minimal in
comparison to salary, vacation, health care, and pension
benefits. Even if Olson were to be applied outside the context
of state officers serving for a fixed term, we would be unwilling
to extend its holding to all of the terms and conditions of a
public employee’s employment, without regard to the
significance of those benefits. As discussed above, we have
never held that the terms and conditions of public employment
are protected by the contract clause merely because of their
existence. If Olson were applied to protect a relatively minor
benefit, such as the opportunity to purchase ARS credit, there
would be little left of that principle.



                                   43
     CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                     RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


             d. A legal opinion expressed by CalPERS did not
                create contractual rights
      As a final note, plaintiffs argued in the courts below that
the opportunity to purchase ARS credit should be found a
vested right because CalPERS once characterized it as such in
a publication. (CalPERS, Vested Rights of CalPERS Members:
Protecting the Pension Promises Made to Public Employees
(July 2011).) The publication presented this conclusion as the
result of “[CalPERS’s] understanding of the current state of
vested rights law in California.” (Id. at p. 13.) Plaintiffs do not
explicitly repeat their argument in this court, but they cite the
CalPERS publication occasionally in their briefs as supporting
the protected nature of ARS credit rights. Whether the
opportunity to purchase ARS credit is a constitutionally
protected right is an issue of constitutional law, not pension
law. With due respect to CalPERS, its interpretations of the
state Constitution are not entitled to the same deference as its
interpretations of California’s pension laws.          (See, e.g.,
Yamaha Corp. of America v. State Bd. of Equalization (1998)
19 Cal.4th 1, 12 [agency entitled to deference when
interpreting statutes and regulations within its “ ‘expertise
and technical knowledge’ ”].)
                        III. DISPOSITION
      The state and many amici curiae have urged us to use
this decision as an occasion to re-examine the California Rule,
the doctrine developed in our prior decisions defining the scope
of constitutional protection afforded pension rights. Our
holding that the opportunity to purchase ARS credit is not a
vested right precludes such a re-examination. Underlying the
California Rule is the constitutional contract clause, which


                                  44
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
             Opinion of the Court by Cantil-Sakauye, C. J.


prohibits state laws that impair contractual obligations.
Because we conclude that California’s public employees have
never had a contractual right to the continued availability of
the opportunity to purchase ARS credit, the question of
whether PEPRA worked an unconstitutional impairment of
protected rights does not arise. Necessarily, if there was no
contractual right to ARS credit in the first place, a law
eliminating ARS credit could not have impaired a contractual
right. Our decision in this matter therefore expresses no
opinion on the various issues raised by the state and amici
curiae relating to the scope of the California Rule.
     For the reasons stated above, we affirm the decision of
the Court of Appeal.


                                       CANTIL-SAKAUYE, C. J.


We Concur:
CHIN, J.
CORRIGAN, J.
LIU, J.
CUÉLLAR, J.
KRUGER, J.
ZELON, J.*



________________________
*
      Associate Justice of the Court of Appeal, Second
Appellate District, Division Seven, assigned by the Chief
Justice pursuant to article VI, section 6 of the California
Constitution.


                                  45
      CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC
          EMPLOYEES’ RETIREMENT SYSTEM
                           S239958


            Concurring Opinion by Justice Kruger


      I concur in the majority opinion, which I have signed. I
write separately to expand briefly on a key element of the
analysis:    why the opportunity to purchase additional
retirement service (ARS) credits was not an employment
benefit that vested by implication, as were the pension benefits
at issue in Betts v. Board of Administration (1978) 21 Cal.3d
859, Kern v. City of Long Beach (1947) 29 Cal.2d 848, and
similar cases.
      Our cases concerning the vesting of public employee
pension rights are most easily understood through the lens of
ordinary contract law principles. Under those principles, an
implied-in-fact unilateral contract can arise from the
government’s offer of an employment benefit in exchange for
the public employee’s acceptance by entering into or continuing
in public service. When the benefit is one that will be provided
only in the future—like a pension—the formation of such a
contract vests the right to that benefit, making the
government’s offer irrevocable as to employees who have
worked for the deferred benefit and earned it as part of the
employment bargain. (Maj. opn., ante, at p. 28, fn. 12; Betts v.
Board of Administration, supra, 21 Cal.3d at p. 863; Kern v.
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
                      Kruger, J., concurring


City of Long Beach, supra, 29 Cal.2d at pp. 851–852, 855; see
McGrath v. Rhode Island Retirement Bd., etc. (1st Cir. 1996) 88
F.3d 12, 16–17; Moro v. State (Or. 2015) 351 P.3d 1, 20–22.)1
      Of course, not every statute or ordinance providing an
employment benefit (or even every aspect of a statutory
pension program) constitutes an implied offer for a unilateral
contract, and thus not every future benefit is the subject of a
vested right; if that were so, the implied-right exception would
swallow the general rule that the terms and conditions of
public employment are set by statute rather than contract.
(Maj. opn., ante, at pp. 16, 35–36.) Our cases have treated
deferred compensation programs, such as pension plans, as
special in this regard. An understanding of why these
programs create implied vested rights is important to our
understanding of why the particular program at issue here
does not.
      Deferred compensation programs provide a particularly
clear case for formation of an implied unilateral contract.


1
      We often ask whether a statute creates implied vested
rights, but when the terms of a pension plan are set by statute
for all public employers participating in the plan, it is the
employer’s offer of employment subject to the plan, rather than
the statute itself, that constitutes the contractual offer. (See
Moro v. State, supra, 351 P.3d at p. 21 [“Although the [Public
Employee Retirement System] contract results from an offer
and acceptance, the PERS statutes are themselves not an offer
that employees can accept.         Instead, each participating
employer offers a promise to its employees to provide
compensation, including PERS benefits, in exchange for the
employees’ services.”].)



                                2
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
                       Kruger, J., concurring


Monetary compensation, whether received periodically for
work performed during the period or deferred until retirement
in the form of a pension benefit, is the central consideration for
which public employees, like other workers, enter and continue
in employment. An implied contractual promise protecting
this type of pension right arises because neither party could
reasonably understand a deferred compensation offer to be
revocable at will after employment. (See Brant v. California
Dairies, Inc. (1935) 4 Cal.2d 128, 133 [intent of contractual
parties determined objectively from their words and conduct];
Meyer v. Benko (1976) 55 Cal.App.3d 937, 942–943 [mutual
assent to contract determined by “what the outward
manifestations of consent would lead a reasonable person to
believe”]; 1 Witkin, Summary of Cal. Law (11th ed. 2017)
Contracts, § 767, p. 821.) No reasonable employee would agree
to defer significant portions of his or her compensation without
a vesting guarantee, and no reasonable employer would
imagine that employees had agreed to work on such terms.
      None of this is true of the opportunity to purchase ARS
credits provided by Government Code section 20909. For
reasons the majority opinion discusses, the parties could not
reasonably have understood that opportunity as an offer that
could be accepted simply by employment in a participating
California Public Employees’ Retirement System agency. (Maj.
opn., ante, at pp. 34–35.) Among other things, no new service
was required of public employees who had already served five
years when section 20909 was enacted (a period corresponding
to the general pension vesting period and to the requirements
of federal tax law) and purchasers had to pay the full
estimated value of the additional credits under Government


                                 3
    CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES’
                    RETIREMENT SYSTEM
                      Kruger, J., concurring


Code sections 20909 and 21052. Objectively speaking, a party
looking at this arrangement would understand that the ARS
purchase option was not offered in exchange for any period of
public service but rather in exchange for the statutorily
mandated purchase price. (See Foley v. Interactive Data Corp.
(1988) 47 Cal.3d 654, 677–678 [parties’ intent to agree on
implied contractual terms is determined from their conduct];
Rest.2d Contracts, §§ 19, 30, com. d, p. 86, 71, com. b, p. 173
[terms of offer and acceptance governed by objective
manifestations of assent].) The offer was one that could be
accepted only by the employee’s election and actual purchase of
ARS credits, not simply by staying on the job.
      For these reasons, I agree with the majority: No implied
unilateral contract arose simply from an employee’s entering
or continuing in public service during the period the ARS
program was in force. As a consequence, the contract clause of
the California Constitution did not protect the right to
purchase ARS credits from later alteration or revocation.


                                           KRUGER, J.
I Concur:
LIU, J.




                                4
See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Cal Fire Local 2881 v. California Public Employees’ Retirement System
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 7 Cal.App.5th 115
Rehearing Granted

__________________________________________________________________________________

Opinion No. S239958
Date Filed: March 4, 2019
__________________________________________________________________________________

Court: Superior
County: Alameda
Judge: Evelio M. Grillo

__________________________________________________________________________________

Counsel:

Carroll, Burdick & McDonough, Messing Adam & Jasmine, Gary M. Messing, Gregg McLean Adam,
Jason H. Jasmine and Yonatan L. Moskowitz for Plaintifffs and Appellants.

Olson, Hagel & Fishburn, Christopher W. Waddell, Lance H. Olson, Deborah B. Caplan and Richard C.
Miadich for Californians for Retirement Security as Amicus Curiae on behalf of Plaintifffs and Appellants.

Silver, Hadden, Silver and Levine, Stephen H. Silver and Jacob A. Kalinski for Ventura County
Professional Fire Fighters Association as Amicus Curiae on behalf of Plaintifffs and Appellants.

Mastagni Holstedt, David E. Mastagni, Isaac S. Sevens, Jeffrey R.A. Edwards and Erich A. Knorr for Lake
County Correctional Officers’ Association, Mendocino County Deputy Sheriffs’ Association, Merced City
Firefighters, International Association of Firefighters, Local 1479, AFL-CIO, Napa City Firefighters
Association, International Association of Fire Fighters, Local 3124, AFL-CIO, Palo Alto Firefighters,
International Association of Fire Fighters, Local 1319, AFL-CIO, Sacramento Area Firefighters,
International Association of Firefighters, Local 522, AFL-CIO, Santa Clara County Correctional Officers
Association, Deputy Sheriffs’ Association of Alameda County, El Dorado County Deputy Sheriff’s
Association, Ontario Police Officers’ Association, Sacramento Police Officers Association and Sacramento
County Deputy Sheriff’s Association as Amici Curiae on behalf of Plaintifffs and Appellants.

Leonard Carder, Peter W. Saltzman, Kate Hallward and Arthur Liou for Amalgamated Transit Union Local
1225, Amalgamated Transit Union Local 1555, International Brotherhood of Electrical Workers Local
1245, International Federation of Professional and Technical Engineers Local 21, Marin Association of
Public Employees, Operating Engineers Local Union No. 3 and Physicians’ and Dentists’ Organization of
Contra Costa as Amici Curiae on behalf of Plaintifffs and Appellants.
Page 2 – S239958 – counsel continued

Counsel:

Rains Lucia Stern St. Phalle & Silver, Stephen H. Silver and Timothy K. Talbot for Los Angeles Police
Protective League, Ventura County Deputy Sheriffs’ Association, California Association of Highway
Patrol, Garden Grove Police Association, California Statewide Law Enforcement Association, Orange
County Employees’ Association, Los Angeles County Professional Peace Officers’ Association,
Association for Los Angeles Deputy Sheriffs, Deputy Sheriffs’ Association of Santa Clara, Fresno Deputy
Sheriffs’ Association, Coalition of Santa Monica City Employees and Antioch Police Officers’ Association
as Amici Curiae on behalf of Plaintifffs and Appellants.

Reich, Adell & Cvitan, Marianne Reinhold, Laurence S. Zakson and Aaron G. Lawrence for Orange
County Attorneys Association and Orange County Mangers Association as Amici Curiae on behalf of
Plaintifffs and Appellants.

Rothner, Segall & Greenstone and Glenn Rothner for American Federation of State, County and Municipal
Employees, American Federation of Teachers, National Education Association, Service Employees
International Union, California Faculty Association, California Federation of Teachers and California
Teachers Association as Amici Curiae on behalf of Plaintifffs and Appellants.

Matthew G. Jacobs, Wesley E. Kennedy and Preet Kaur for Defendant and Respondent.

Brian J. Bartow and Scott S. Brooks for California State Teachers’ Retirement System as Amicus Curiae on
behalf of Defendant and Respondent.

Jonathan M. Coupal; Benbrook Law Group, Bradley A. Benbrook and Stephen M. Duvernay for Howard
Jarvis Taxpayers Association and Ventura County Taxpayers Association as Amici Curiae on behalf of
Defendant and Respondent.

Kamala D. Harris and Xavier Becerra, Attorneys General, Douglas J. Woods and Thomas S. Patterson,
Assistant Attorneys General, Tamar Pachter and Nelson Ryan Richards, Deputy Attorneys General; Peter
A. Krause and Rei R. Onishi for Intervener and Respondent.

Atkinson, Andelson, Loya Ruud & Romo, Anthony P. De Marco and Joshua E. Morrison for Association
of California School Adminstrators as Amicus Curiae on behalf of Intervener and Respondent.

Jones Day, Beth Heifetz, G. Ryan Snyder and Karen P. Hewitt for California Business Roundtable as
Amicus Curiae on behalf of Intervener and Respondent.

Renne Sloan Holtzman Sakai, Jonathan Holtzman and Linda M. Ross for League of California Cities as
Amicus Curiae on behalf of Intervener and Respondent.

Bruce D. Goldstein, County Counsel (Sonoma), Debbie F. Latham, Chief Deputy County Counsel; and
Dennis Bunting, County Counsel (Solano) for County of Sonoma and County of Solano as Amici Curiae on
behalf of Intervener and Respondent.

Lounsbery Ferguson Altona & Peak, Kenneth H. Lounsbery, James P. Lough and Alena Shamos for City of
Pacific Grove as Amicus Curiae on behalf of Intervener and Respondent.
Page 3 – S239958 – counsel continued

Counsel:

Gibson, Dunn & Crutcher, Daniel M. Kolkey, Perlette Michèle Jura, Theodore M. Kider and Samuel D.
Eisenberg for Pacific Research Institute as Amicus Curiae on behalf of Intervener and Respondent.

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):

Greg McLean Adam
Messing Adam & Jasmine
235 Montgomery Street, Suite 828
San Francisco, CA 94104
(415) 266-1800

Rei R. Onishi
Deputy Legal Affairs Secretary
Office of Governor Edmund G. Brown, Jr.
State Capitol, Suite 1173
Sacramento, CA 95814
(916) 445-0873
