Breaking PEPRA Update: PEPRA's application to transit workers temporarily suspended; Gov. Brown sues the Dept. of Labor

The Legislature passed and Governor Brown signed AB 1222, which temporarily exempts from California Public Employees’ Pension Reform Act (“PEPRA”) public transit employees who work for agencies that receive funding from the Federal Transit Administration.  Treated by the Legislature as an “urgency statute necessary for the immediate preservation of the public peace, health, or safety,” AB 1222 immediately went into effect on October 4, 2013.

Here's the background.  Among other things, PEPRA prohibits public retirement systems from treating certain pay items as income that counts towards a public employee's pension, even if the retirement system had treated that pay item as pensionable income for years.  PEPRA also establishes new pension formulas for employees hired on or after January 1, 2013.

In early September, the federal Department of Labor (“DOL”) determined that PEPRA interferes with the collective-bargaining rights of transit unions to negotiate over pension benefits.  The DOL's conclusion was significant:  under federal law, it is a condition for receipt of federal transit aid that a local agency preserve the collective bargaining rights of transit employees.  PEPRA, therefore, stood in the way of local agencies receiving millions of dollars in federal transit aid.  AB 1222 's exemption of transit workers from PEPRA is an emergency measure to ensure that California continues to receive federal transit aid.

But that is not all:  the same day AB 1222 went into effect, the Governor sued the federal Department of Labor to challenge the DOL's ruling that PEPRA conflicts with California transit workers' collective bargaining rights.  If the Court upholds the DOL's ruling, then AB 1222's exemption of public transit workers from PEPRA becomes permanent.  If the court overturns the DOL's ruling, then the exemption of public transit workers will expire, and these workers will be subject to PEPRA.  Meanwhile, as we await a court decision, AB 1222 will expire on January 1, 2015.  In other words, transit district employees will be exempt until a federal court overturns the DOL’s determination, or January 1, 2015, whichever is sooner. 

We will continue to follow these PEPRA legal developments.  In the meantime, please contact your labor counsel if you have questions about PEPRA and its application to transit workers.

By Sean Graham | October 8, 2013

Legal Developments