The City of Pleasanton (Pleasanton) and a retired Pleasanton employee, James Linhart, petitioned for a writ of mandate to compel California's Public Employees' Retirement System (PERS) and its Board of Administration (board) to retroactively increase Linhart's monthly retirement allowance. Linhart contended the board erred in determining a portion of his compensation as a division chief for the Livermore-Pleasanton Fire Department was not pensionable. The trial court agreed and entered a judgment directing PERS to increase Linhart's monthly pension allowance retroactively from the date of his retirement in 2006. We reverse the judgment and remand the matter back to the trial court for entry of a new judgment denying the petition.
Linhart joined the Pleasanton Fire Department in 1984. Due to his employment he became a local safety member of PERS. After being promoted to fire captain in 1992, Linhart became a division chief in 1998, when the Pleasanton and Livermore fire departments merged. Linhart retired at the rank of division chief in 2006, after 22 years of service, and began receiving a retirement
As a fire captain in Pleasanton before the merger, Linhart worked a 56-hour workweek: 24 hours on followed by 24 hours off, two times, followed by 24 hours on and four days off. Linhart and others on the 56-hour workweek received an additional 7.5 percent of salary as "in lieu" holiday pay to compensate them for the fact their shift pattern required them to work on holidays. Until 1994, battalion chiefs worked the same 56-hour workweek and, like line personnel, received an additional 7.5 percent of salary as "in lieu" holiday pay. However, in that year, battalion chiefs were moved from the 56-hour workweek to a normal 40-hour workweek, 8:00 a.m. to 5:00 p.m., Monday through Friday. As a result of this change in schedule, battalion chiefs were no longer paid in lieu holiday pay. To avoid a reduction in their pay, Pleasanton chose to raise battalion chief salaries by 7.5 percent.
At the time of the merger in 1998, the Livermore Fire Department included a management classification of division chief. A division chief worked a modified 56-hour workweek. In general, the division chief worked the same schedule as his platoon but, when his platoon was at the station after 5:00 p.m., the division chief was allowed to go home and remain on call. Division chiefs in the Livermore Fire Department received in lieu holiday pay, like their management counterparts in the Pleasanton Fire Department had received prior to 1994.
The Livermore-Pleasanton Fire Department was formed in 1998, or shortly before. Pleasanton's battalion chiefs became division chiefs in the merged department. Linhart was promoted to division chief and given the position of training division chief, which he held until his retirement. The new department adopted an "Interim Compensation Plan" under which "Operations Division Chiefs" — division chiefs who supervised and managed an operations division — were assigned a modified 56-hour workweek like that worked by Livermore division chiefs before the merger.
Under the Interim Compensation Plan, Linhart was not assigned a modified 56-hour workweek. He worked a 40-hour workweek, 8:00 a.m. to 5:00 p.m., Monday through Friday, and was off work on the city's 12 annual observed holidays. However, he was assigned to a "back-up schedule" which required
Section 5.1 of the Interim Compensation Plan, entitled "Standby Pay," provided in relevant part as follows: "Division Chiefs assigned to a standby schedule shall be compensated in an amount equal to seven and one-half percent (7.5%) of the Division Chief control point listed in Appendix A.
Under the Public Employees' Retirement Law, Government Code
From 1998 to 2006, Pleasanton made PERS contributions on behalf of six public safety employees, including Linhart, calculated by including standby pay they received as pensionable special compensation. Pleasanton and the employees believed the employees' retirement benefits would, in part, be
PERS first became aware standby pay was included in Linhart's reported base pay in July 2006. On July 24, 2006, PERS's payroll processing unit informed Pleasanton standby pay was not reportable compensation for retirement purposes and that payroll reporting for Linhart had to be corrected to exclude it. Although the estimate Pleasanton provided Linhart of his retirement allowance in 2006 included standby pay as part of his pensionable final compensation, there is no evidence PERS ever represented to Linhart that his pension benefit would be calculated by including standby pay as part of his final compensation. None of the other similarly situated Pleasanton employees who retired before Linhart received PERS pension benefits based on the inclusion of standby pay.
After initially acceding to PERS's position that standby pay was not includable as compensation for retirement purposes, Pleasanton requested PERS to reconsider that determination in June 2007. After PERS affirmed its original position, Pleasanton initiated an administrative appeal on behalf of itself and several retired former employees in November 2007, asserting PERS was refusing to pay the concerned retirees "the retirement benefits to which they are entitled."
The appeal was assigned for hearing to an administrative law judge (ALJ) under the auspices of the Office of Administrative Hearings (OAH).
The ALJ issued a proposed decision on December 24, 2009, finding Linhart's standby pay "was not special compensation, because it was paid for services rendered outside of his normal working hours." The ALJ also concluded the payments could not be construed as holiday pay, training premium pay, or shift differential pay, which PERS has determined, in general, to be special compensation in Regulation 571. (Regulation 571, subd. (a)(4), (5).) Further, the ALJ rejected Linhart's arguments that PERS breached its fiduciary duty to him and/or should be estopped by its conduct from excluding his standby pay from his pension calculation. The ALJ found (1) no breach of duty because Pleasanton was in at least as good a position as PERS to discover it was misreporting Linhart's compensation, and (2) no estoppel because PERS never represented to Linhart standby pay would be included in his pension calculation. The ALJ accordingly issued a proposed decision denying Linhart's appeal.
In accordance with section 11517, subdivision (c), the ALJ's proposed decision was timely submitted to the board for a determination whether to adopt the ALJ's decision or take any of the other actions allowed by that subdivision.
After receiving the agenda materials to be provided to board members on February 16, Michael Roush wrote to the board complaining the cover memorandum and recommendation by Patricia Miles was improper because she was the same attorney who had represented PERS in the administrative hearing before the ALJ. Roush asserted this violated Linhart's due process rights. Following postponement of the hearing until March 17, PERS's assistant chief counsel responded to Roush's letter, explaining why the legal department believed his due process claim was misplaced. Roush wrote back, responding to the authorities cited in the legal department's letter.
Roush was present at the PERS board meeting on March 17, 2010, when the board took up the ALJ's proposed decision in Linhart's case. He addressed the board to express concern that none of his correspondence concerning the due process issue had been made part of the agenda materials presented to the board, and to seek a continuance of the Linhart matter so board members would have a chance to read those letters before it decided the case. Following the advice of its chief legal counsel that the due process issue was not before the board, the board voted to adopt the ALJ's proposed decision.
Linhart petitioned the board for reconsideration on the grounds his due process rights had been violated because PERS had not properly separated its "adjudicative" function from its "investigative, prosecutorial and advocacy" functions. He argued the only adequate remedy was for the board to grant him the relief he sought in the underlying administrative appeal. The board voted unanimously to deny the petition.
Linhart petitioned the trial court for a peremptory writ of administrative mandamus directing the board to set aside its decision and issue a new decision recalculating his future retirement benefits and awarding him a retroactive payment based on the inclusion of standby pay as part of his pensionable compensation. The trial court bifurcated the matter into two
On Linhart's substantive claims, the trial court ruled PERS should have included Linhart's biweekly standby pay as part of his pensionable compensation. The court held the payments in issue qualified under several categories of special compensation listed in Regulation 571, including "Training Premium," "Holiday Pay," "Management Incentive Pay," "Off-Salary-Schedule Pay," or "Shift Differential," and also qualified as part of Linhart's "base salary" under section 20636.
PERS timely appealed from the ensuing judgment.
PERS contends the trial court erred in (1) finding a due process violation and reviewing the administrative record de novo and (2) holding the payments in issue came within any category enumerated in Regulation 571, much less that they qualified under multiple categories. PERS further contends Linhart is not entitled to relief based on the theory PERS breached a fiduciary duty to him or should be estopped from denying him pension benefits based on standby pay.
We independently review Linhart's claim the board failed to afford him a fair hearing. (TWC Storage, LLC v. State Water Resources Control Bd. (2010) 185 Cal.App.4th 291, 296 [110 Cal.Rptr.3d 270].)
In holding it violated Linhart's due process rights for Attorney Miles to serve as both PERS's "prosecutor" at the hearing before the ALJ and as "the advising staff person" from the agency to the board, the trial court principally relied on Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd. (2006) 40 Cal.4th 1 [50 Cal.Rptr.3d 585, 145 P.3d 462] (ABC) and Nightlife Partners, Ltd. v. City of Beverly Hills (2003) 108 Cal.App.4th 81 [133 Cal.Rptr.2d 234] (Nightlife). According to the court, these cases stand for the principle that an advocate for the agency position in a contested administrative proceeding, such as Attorney Miles in this case, cannot properly offer advice or recommendations to the agency's adjudicative tribunal when it determines the appeal. The court specifically rejected PERS's position that the sole purpose of this rule is to prevent ex parte communications between the prosecution and the decision maker or its delegees. While the trial court acknowledged ABC was primarily concerned with ex parte communications, it found the cases recognized a separate problem with the blending of prosecutorial and adjudicative functions in that, in the trial court's words, it "gives rise to an appearance of a lack of objectivity or neutrality."
Later in the opinion, the Supreme Court clarified it was not endorsing a rule prohibiting all prosecutor-decision maker contact: "The Department and Attorney General express concern that a rule precluding prosecutor-decision maker contact will have dramatic consequences for this and other agencies, requiring agencies to split and depriving agency heads of the advice of their subordinates. Nothing about our interpretation of the APA requires splitting this agency or any other. The Department may still function as a unitary agency. In doing so, however, it must afford licensees fundamentally fair hearings by observing a limited internal separation of functions. The agency head is free to speak with anyone in the agency and to solicit and receive advice from whomever he or she pleases — anyone except the personnel who served as adversaries in a specific case. [Citations.] ... Virtually the only contact that is forbidden is communication in the other direction: a prosecutor cannot communicate off the record with the agency decision maker or the decision maker's advisers about the substance of the case. But the one contact that is forbidden is the one contact that occurred here." (ABC, supra, 40 Cal.4th at pp. 16-17, italics added, fns. omitted.) As we read this passage from ABC, the Supreme Court is saying that under the APA the agency decision maker cannot properly solicit or receive private, ex parte advice from the personnel who served as adversaries in the case. It is not saying the agency decisionmaking body is precluded from soliciting or receiving a written analysis and recommendation from the agency's prosecuting attorney delivered to it as part of a public agenda packet along with the adversary's opposing analysis and recommendation.
Barring the type of communication that occurred here would make little practical sense. Should the board receive only the administrative appellant's analysis and recommendation? That would give an undue advantage to administrative appellants. Should it receive only the ALJ's decision without argument or explanation by either side as to why it should be approved or rejected? That would deprive the board of essential information it needs to fairly evaluate the ALJ's decision. Or should the agency be required to utilize a separate, independent staff unit that is unfamiliar with the appeal to review the issues and the administrative record and provide it with an objective analysis and recommendation? Not only would the latter requirement constitute "splitting" the agency, which the Supreme Court in ABC found unnecessary, but it would also duplicate the function already served by having an independent ALJ hear evidence and render a decision.
In Morongo Band of Mission Indians v. State Water Resources Control Bd. (2009) 45 Cal.4th 731 [88 Cal.Rptr.3d 610, 199 P.3d 1142] (Morongo), the Supreme Court emphasized that it takes a practical approach in construing due process rights in an administrative context, and presumes adjudicators are not biased absent evidence to the contrary: "In construing the constitutional due process right to an impartial tribunal, we take a more practical and less pessimistic view of human nature in general and of state administrative agency adjudicators in particular. In the absence of financial or other personal
Nightlife, cited by the trial court, also does not support its due process ruling. The facts in Nightlife were that an assistant city attorney who had represented the city in federal litigation against a local cabaret offering adult entertainment was used as a legal adviser to the decision maker throughout a hearing on the cabaret's appeal of the city's decision to revoke its permit. (Nightlife, supra, 108 Cal.App.4th at pp. 84-85.) The decision maker announced at the outset of the hearing that he had never presided at such a hearing before, and would therefore have the assistant city attorney advising and assisting him in the proceeding. (Id. at p. 85.) The two conferred in private from time to time during the hearing, apparently concerning evidentiary rulings and legal issues. The cabaret's appeal was denied. (Ibid.) These facts are very far removed from what occurred in this case. Attorney Miles did not sit with the board or its presiding officer and give legal advice to them in private as they heard or voted upon Linhart's appeal or motion for reconsideration, or at any other time.
In finding a due process violation on the rather egregious facts of that case, the Nightlife court relied in part on a provision of the APA, section 11425.30, which specifies how an administrative agency's "adjudicative functions" must be separated from "the investigative, prosecutorial, and advocacy functions within the agency." (Nightlife, supra, 108 Cal.App.4th at pp. 91-93; see §§ 11425.10, subd. (a)(4), 11425.30.) The trial court specifically relied on this principle of separation of functions to conclude there had been a due process violation in this case. The relevant portions of section 11425.30 are instructive: "(a) A person may not serve as presiding officer in an adjudicative proceeding in any of the following circumstances: [¶] (1) The person has served as investigator, prosecutor, or advocate in the proceeding or its preadjudicative stage. [¶] (2) The person is subject to the authority, direction, or discretion of a person who has served as investigator, prosecutor, or advocate in the proceeding or its preadjudicative stage. [¶] ... [¶] (c) The
For these reasons, we find the trial court erred in its determination Linhart's due process rights were violated, and in reviewing the administrative record de novo. Although the trial court was required in any event to exercise its independent judgment on the evidence,
The board decision found as a fact "standby pay was compensation for services that Linhart rendered outside of his normal 40-hour workweek." From this, the board drew the legal conclusion the pay "was not special compensation, because it was paid for services rendered outside [Linhart's] normal working hours." Linhart maintains these determinations are against the weight of the evidence.
At the administrative hearing, the retired chief of Pleasanton's fire department, Stewart Gary, testified the 7.5 percent pay increment was to compensate fire division chiefs "for assigned duties in excess of the normal 40-hour workweek daytime office schedule." He stated "that was the prime intent, that the normal salary did not take into account the assigned after-hours duties." Later in the hearing, Linhart's counsel asked: "And was that for services that
Linhart testified to the same effect. He stated he understood the 7.5 percent pay "represented work that I did outside of the 40-hour work week on evenings, weekends and holidays, and that work primarily was emergency response work." Later, he testified, "I believe it was due to additional emergency response requirements or as [the compensation agreement] states `standby,' because I was assigned to a regular schedule of backup duty, which is what we call backup duty." He stated he made "a distinction between the backup and the ordinary schedule that the other division chiefs had." He further explained: "We would call it the backup duty, where ... I had an emergency response vehicle with radios, pagers. And the fire chief would designate how quickly we needed to be able to respond and be in district. So I was pretty much on call .... And there was no overtime received for that."
Linhart maintains that since he was required to be available as a backup division chief on a regular schedule (three 24-hour shifts in each nine days), these backup duty periods were part of his "normal working hours" for purposes of section 20636. However, there was no dispute that, unless called in to relieve the division chief who had primary responsibility in an emergency, he could be at home after 5:00 p.m. every day during the week and all day on weekends and holidays, while on backup duty. There was no evidence in the record as to the circumstances in which he would be called upon to relieve the division chief or how frequently or infrequently those circumstances arose.
In our view, Linhart's position that his "normal working hours" included his standby schedule does not reflect a reasonable interpretation of the statute or of the standby pay provision of his labor agreement. It would mean Linhart's "normal" workweek was not 40 hours, but over 60 hours — a difference of more than 50 percent. Yet for the additional 20-plus hours added to his normal workweek he was only being compensated at a small fraction of his base salary. Consistent with the testimony of the witnesses, and the unambiguous language of Linhart's compensation plan, we think it is more reasonable to view the 7.5 percent pay increment as compensation to Linhart for being available to work on a standby basis outside of his normal working hours. Moreover, "`where our review requires that we interpret the PERL or a PERS regulation, the court accords great weight to PERS interpretation.'" (Molina, supra, 200 Cal.App.4th at p. 61 [construing § 20636]; see Prentice v. Board of Administration (2007) 157 Cal.App.4th 983, 989 [69 Cal.Rptr.3d 167] [construing § 20636]; City of Sacramento v. Public Employees Retirement System (1991) 229 Cal.App.3d 1470, 1478 [280 Cal.Rptr. 847].) This is in recognition of the fact that as the agency charged with administering PERL, PERS has expertise and technical knowledge as well as "`"an intimate knowledge of the problems dealt with in the statute and the various administrative consequences arising from particular interpretations."'" (Yamaha Corp. of America v. State Bd. of Equalization (1999) 73 Cal.App.4th 338, 353 [86 Cal.Rptr.2d 362], quoting Asimow, The Scope of Judicial Review of Decisions of California Administrative Agencies (1995) 42 UCLA L.Rev. 1157, 1196.)
The board's decision in this case is presumptively correct with respect to the issue of whether the pay in question was for services rendered during
Linhart conceded in the course of the administrative proceedings, "under the CalPERS regulations standby pay is not included as one of the `extra pays' on which final compensation is to be based for retirement benefit purposes." He maintains on appeal, however, that the 7.5 percent compensation he received was not in substance standby pay even though it was labeled that way in his compensation plan. He argues the compensation fell under five distinct "extra pay" categories authorized in Regulation 571 — holiday pay, shift differential pay, training premium pay, management incentive pay, and off salary schedule pay. We do not believe the regulation is that elastic.
Holiday pay is described in Regulation 571 as "Additional compensation for employees who are normally required to work on an approved holiday because they work in positions that require scheduled staffing without regard to holidays." (Regulation 571, subd. (a)(5).) Linhart's pay did not meet this definition. His compensation plan provided in paragraph 7.1 that managers on a 40-hour, Monday through Friday schedule — which under paragraph 14.1 included Linhart's schedule as training division chief — got 12 approved holidays per year. Although Linhart might occasionally have to work on a holiday if he was on backup and was called in to relieve the shift commander, he was not "normally required to work" on holidays. In fact, he was normally not required to work on approved holidays. While it is true battalion or division chiefs in Livermore and Pleasanton had received holiday in lieu pay in the 1990's when their regular 56-hour-per-week shift pattern regularly required them to work on holidays, and there is some evidence the 7.5 percent pay increment paid to Linhart was intended in part to avoid financially penalizing managerial employees who did not work the standard 56-hour-per-week shift pattern, that does not mean Linhart's standby pay was actually paid for working on holidays. If anything, these historical factors show the compensation had to be paid for standby duties (or by raising the base salary) because Linhart could not be paid for regular holiday work he was no longer required to perform.
Regulation 571 defines "Shift Differential" pay as "Compensation to employees who are routinely and consistently scheduled to work other than a
"Training Premium" pay is defined in the regulation as "Compensation to employees who are routinely and consistently assigned to train employees." (Regulation 571, subd. (a)(4).) Although as training division chief, it was certainly one of Linhart's central assigned duties to train employees, we find no evidence in the record the 7.5 percent pay increment he received was because he performed one of the central duties of his position. Absent some evidence, we will not lightly infer Pleasanton found it necessary or desirable to pay the fire department's training division chief separate "special compensation" for performing the core duty named by his job title. The mere fact one of the work assignments mentioned in Regulation 571 happens to overlap with Linhart's job description is not evidence any item of extra pay he received is attributable to that assignment.
Linhart did not propose his "management incentive pay" and "off salary schedule pay" theories at any time in the administrative proceedings or even in the trial court. These theories were first injected sua sponte by the trial court, as was the theory the 7.5 percent was part of Linhart's base payrate. In our view, Linhart waived all of these theories by failing to raise them in the administrative proceeding.
The courts have consistently held parties may not advance new theories in the courts that were not presented to the administrative agency. The court in NBS Imaging Systems, Inc. v. State Bd. of Control (1997) 60 Cal.App.4th 328 [70 Cal.Rptr.2d 237] held the trial court erred in granting a petition for writ of mandate based on a theory not raised in the administrative proceeding because "the hearing officer and the board had no opportunity to evaluate the application or import of these tardy assertions and the superior court had no authority to consider them." (Id. at p. 337.) Numerous cases are in accord that a party must present its factual and legal claims to the administrative agency
Linhart fails to demonstrate the board did not proceed according to law or that its findings and determinations under section 20636 were against the weight of the evidence or contrary to law. And he has waived judicial review of those issues he failed to raise in the administrative proceeding, including his claim the pay in issue was part of his base pay.
Linhart contends even if this court determines his standby pay is not pensionable under section 20636, PERS is nonetheless estopped by its own conduct from denying him higher pension benefits. He maintains all four elements of estoppel are satisfied here: (1) PERS knew or should have known there was a discrepancy between the member earnings reported for Linhart and the amount of earnings that would be calculated based on his reported hourly base payrate; (2) PERS either intended its failure to identify this discrepancy (and its receipt and retention of excess pension contributions from Linhart's employer) be relied upon, or Linhart had the right to believe it was so intended; (3) Linhart was ignorant of the discrepancy; and (4) Linhart in making his retirement plans and Pleasanton in not revising its fire department compensation plan relied on the conduct of PERS to Linhart's injury. (See Driscoll v. City of Los Angeles (1967) 67 Cal.2d 297, 305 [61 Cal.Rptr. 661, 431 P.2d 245].)
As a threshold matter, the parties differ over whether the estoppel remedy is available to Linhart as a matter of law. PERS asserts estoppel is not available "where the government agency to be estopped does not possess the authority to do what it appeared to be doing." (Medina v. Board of Retirement (2003) 112 Cal.App.4th 864, 870 [5 Cal.Rptr.3d 634] (Medina); see Fleice v. Chualar Union Elementary School Dist. (1988) 206 Cal.App.3d 886, 893 [254 Cal.Rptr. 54] ["principles of estoppel are not invoked to contravene statutes and constitutional provisions that define an agency's powers"].) In Medina, the Court of Appeal found estoppel was not available because the retirement board lacked authority to classify as safety members employees whose duties did not encompass being a police officer and did not otherwise meet the statutory definition of safety members. (Medina, at p. 869.)
We do not find Crumpler persuasive here. Linhart makes no claim section 20125 or any other provision of PERL authorized the board to make his standby pay pensionable even though it did not qualify as such under section 20636. Linhart argues instead that because the trial court found nothing in PERL precluded PERS from determining his extra pay was pensionable, PERS could have made that determination itself and estoppel is therefore available to him as a remedy if its conditions are satisfied. Because we disagree with the trial court's conclusion, and find section 20636 did at all times preclude PERS from treating Linhart's standby pay as pensionable compensation, we hold any award of benefits to Linhart based on estoppel is barred as a matter of law.
In our view, Linhart's breach of fiduciary duty theory is simply a way of restating his equitable estoppel claim, which we have already found is barred as a matter of law. PERS's fiduciary duty to its members does not make it an insurer of every retirement promise contracting agencies make to their employees. PERS has a duty to follow the law. As stated in City of Oakland, the policy reflected in the constitutional provision is to "ensure the rights of members and retirees to their full, earned benefits." (City of Oakland, supra, 95 Cal.App.4th at p. 46.) It does not authorize an order compelling PERS to pay greater benefits than section 20636 allows, either by estoppel or as tort damages for an inadvertent failure to timely correct a contracting agency's error. (Cf. § 20160, subd. (a)(3) [authorizing PERS to correct errors or omissions of members, contracting agencies, or itself, but not to provide the party seeking correction with a "status, right, or obligation not otherwise available" under the PERL].)
For all of these reasons, we reverse the judgment.
The judgment is reversed and the matter is remanded to the trial court with directions to enter a new judgment denying the petition for writ of mandate. Costs are awarded to appellant.
Marchiano, P. J., and Dondero, J., concurred.