ATTACHMENT A

THE PROPOSED DECISION

BEFORE THE

BOARD OF ADMINISTRATION

CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM

STATE OF CALIFORNIA

In the Matters of the Calculation of the Final

Compensation of:

ROBERT T. WOLF,

and

KENNETH L. HALE,

and

CALIFORNIA DEPARTMENT OF

FORESTRY AND FIRE PROTECTION,

Respondents,

Case No. 2016-0211

OAH No. 2016070010.1

Case No. 2016-0212

OAH No. 2016061301.1

PROPOSED DECISION FOLLOWING REMAND

These consolidated matters were heard before Timothy J. Aspinwall, AdministrativeLaw Judge (AU), Office of Administrative Hearings, on November 30, 2016, inSacramento, California.

John Shipley, Senior Staff Attorney, represented the California Public Employees'Retirement System (CalPERS).

Gary M. Messing and Lina Balciunas Cockrel, Attorneys at Law, representedrespondents Robert T. Wolf (Mr. Wolf) and Kenneth T. Hale (Mr. Hale), collectively,respondents.

No appearance was made on behalf of the California Department of Forestry and FireProtection (Cal Fire). On November 1, 2016, CalPERS served Cal Fire with a notice ofhearing of these consolidated proceedings. Based on Cal Fire's nonappeai'ance and thenotice of hearing served by CalPERS, this matter as it pertains to Cal Fire was referred backto CalPERS for default proceedings pursuant to Government Code section 11520.

CALIFORNIA PUBLIC EMPLOYEES'RETIREMENT SYSTEM ^RCMKCMtlNI 51

The separate appeals were consolidated for hearing. Evidence was received in theform of documents and testimony. The record remained open for the parties to file writtenclosing arguments.^ Following the filing of closing arguments, the record was closed and I theconsolidated cases were submitted for decision on February 13,2017. A proposed decisionwas submitted to CalPERS on March 15,2017.

The CalPERS Board of Administration, at its meeting on May 17,2017, voted toremand the proposed decision "for the taking of additional evidence regarding (a) whetherthe members' actual job duties constitute their own group or class of employment, or,alternatively, (b) whether the members' classification should determine whether the pay atissue meets the definition of holiday pay "

An evidentiary hearing following remand was held before AU Aspinwall on 'November 27,2017. John Shipley, Senior Staff Attorney, represented CalPERS. Gary M.Messing and Lina Balciunas Coclael, Attorneys at Law, represented respondents Mr. Wolf^and Mr. Hale. The record remained open for the parties to file written closing arguments.^Following the filing of written closing arguments, oral arguments were heard on February12,2018. The record was closed and the consolidated cases were submitted for decision onFebruary 12,2018.

ISSUE

The issue for determination is whether holiday leave cash-outs should be included inrespondents' final compensation for puiposes of calculating their respective monthlyretirement allowances?

^ CalPERS filed a Closing Brief on January 19,2017, marked as Exhibit 42 foridentification. Respondents filed a Closing Brief on January 20,2017, marked as Exhibit 43for identification. CalPERS filed a Reply Brief on February 13, 2017, marked as Exhibit 44for identification. Respondents filed a Reply Brief on February 13,2017, marked as Exhibit45 for identification. Items marked and admitted as Exhibits 42 through 48 during thehearing following remand on November 27,2017, have been re-marked as Exhibits 46through 52, and admitted.

^ Mr. Wolf passed away prior to the evidentiary hearing following remand. Theparties stipulated that Mr. Wolfs designated beneficiaries of his retirement benefits have aninterest in the outcome of this matter. For simplicity, the interests of Mr. Wolfs designatedbeneficiaries will be referenced as Mr. Wolfs interests.

^ CalPERS filed a Closing Brief on Remand on February 1,2018, marked as Exhibit53 for identification. Respondents filed a Remand Hearing Brief on February 1,2018,marked as Exhibit 54 for identification.

FACTUAL HNDINGS

1. Renee Ostrander, Assistant Division Chief of the Retirement Account ServicesDivision, CalPERS, filed the Statement of Issues against Mr. Wolf on October 14,2016, andagainst Mr. Hale on October 31,2016, in her official capacity.

2. Cal Fire is a state agency whose employees are members of CalPERS pursuantto Government Code section 20392. The provisions for state agencies contracting withCalPERS are set forth in the Public Employees' Retirement Law (PERL).

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3. Cal Fire Local 2881 (Local 2881) is the certified exclusive bargainingrepresentative for firefighters, fire captains, and other fire control and protection employeesof Cal Fire in State Bargaining Unit 8. The two top executive positions of Local 2881 are thePresident, and State Rank and File Representative.

Respondent Kenneth Hale

4. Mr. Hale became a CalPERS member on July 17,1968, when he beganworking for Cal Fire as a Fire Apparatus Engineer, and subsequently promoted to FireCaptain. In December 2003, Mr. Hale was elected to the position of State Rank and FileRepresentative of Local 2881, and took office in 2004. Mr. Hale promoted to theclassification of Battalion Chief while in office. Mr. Hale's salary and benefits while servingas a union officer were determined by his rank with Cal Fire, not his position with the union.Mr. Hale never returned to firefighting. Mr. Hale served as the State Rank and File 1Representative of Local 2881 from 2004, until his retirement for service on December 3lJ2013.

5. Mr. Hale's duties as State Rank and File Director included labor negotiationswith the State, assisting with the defense of adverse actions imposed upon union members,filing.grievances, coordinating accident investigation teams, and handling day-to-dayquestions and concerns from union members. Mr. Hale was paid based on a 72-hour dutyweek, consisting of three consecutive 24-hour shifts. This schedule, however, was notrepresentative of Mr. Hale's actual work week. Mr. Hale generally worked out of the unionheadquarters in Sacramento five days per week during regular office hours. Mr. Hale's workas a union officer required that he also perform union duties outside regular office hours,including weekends and all holidays during his entire term as a union officer.

Respondent Robert WolfI

6. Mr. Wolf became a CalPERS member on June 1,1978, when he beganworking for Cal Fire as a seasonal firefighter, and subsequently promoted to Fire Captain. In2001, Mr. Wolf was elected to the position of President of Local 2881, and took office in2002. Wolf promoted to the classification of Battalion Chief while he was in office. Mr.Wolfs salary and benefits while serving as a union officer were determined by his rank withCal Fire, not his position with the union. Mr. Wolf never returned to firefighting. Mr. Wolf

served as the President of Local 2881 from 2002, until his retirement for service onDecember 29,2012.

7. Mr. Wolfs duties as the President of Local 2881 included management of thefinances, personnel, government liaisons, lobbying, and responding to day-to-day questionsand issues from union members. Mr. Wolf, like Mr. Hale, was paid based on a 72-hour dutyweek, and generally worked out of the union headquarters in Sacramento five days per weekduring regular office hours. Mr. Wolfs work as a union officer also required that he performunion duties outside regular office hours, including weekends and all holidays during histerm as a union officer.

Agreement between Cal Fire and Bargaining Unit 8I

8. Pursuant to the Agreement Between State of California and CDF FirefightersCovering Bargaining Unit 8 (Agreement), the President and State Rank and FileRepresentative of Local 2881 are allowed to be on full-time release from their positions withCal Fire, with no loss of salary or benefits. The relevant portions of the Agreement are as;follows:

Section 2.8 Full Time Release Time

2.8.1 The State shafi allow up to two full years of release time per year for thePresident of CDF Firefighters (or his/her designee) and one other designee toconduct legitimate Union business. Such full time release time shall result inno loss of compensation (salary or benefits).

2.8.2 Once each year, on or about November 30th, the employer shall buydown the leave credits of the President and the other designee (usually therank and file representative) to either the (a) the normal carry-over maximumor (b) the amount the person brought with him/her into office, whichever ishigher.

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Section 10.1 Holiday Policy

10.1.1 Each calendar year Unit 8 employees shall be entitled to floatingholidays with pay, all of which are in lieu of those pre-existing holidays listedbelow, which are in addition to any other official State holidays as proclaimedand appointed by the Governor or as created by statute for State employees

10.1.2 If the location at which an employee is assigned to work is closed forbusiness on a pre-existing holiday, the employee may be required to take theday off by his/her supervisor. Whenever an employee is required to take the

day off, he/she may use any type of leave credit, following the appropriateguidelines as established for the particular type of leave.

10.1.3 Employees shall request their holiday time-off in advance and shall beallowed to take such holiday time-off in accordance with the vacationscheduling policy (Section 10.2) of this agreement. Holidays shall be taken inwhole day increments except when additional hours are needed to meet thepay period requirement. After December 31,2001, no more than six (6)holidays shall be carried over to the next calendar year. Excess carry-over jwillbe treated as in the Vacation Policy.

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10.1.6 Employees may at their option cash out up to 4 holidays per fiscal year,provided that the Reporting Unit determines that it has the funds available tofund the cash-out. Holiday cash-out shall be done in a fair and equitablemanner.

9. Respondents were entitled to floating holidays with pay in lieu of designatedholidays. (Agreement § 10.1.1.) No more than six holidays could be carried over to the nextyear. (Agreement § 10.1.3.) Once each year, Cal Fire was required to cash out the holidayleave credits accrued by respondents to either the carry-over maximum (six holidays), or theamount the employee brought with him into office, whichever was higher. (Agreement § |2.8.2.) The holiday cash-outs were mandatory.

10. Mr. Wolf received a cash-out in 2004, then there was a lapse until 2008.Subsequently, from 2008 until each respondent retired, Cal Fire cashed out the holiday leavecredits for both respondents to the normal carry-over maximum for Mr. Hale, and the amountof holiday leave credits Mr. Wolf brought with him into office. Respondents were the onlytwo Cal Fire employees to receive mandatory holiday leave credit cash-outs. Cal Fire did notreport respondents' holiday leave credit cash-outs to CalPERS as compensation eamable tobe included in the calculation of respondents' monthly retirement allowances.

Additional Evidence Following Remand

Three witnesses testified at the hearing following remand. Their testimony issummarized below.

11. Kenneth Hale: Any member of Local 2881, in good standing, is eligible to iserve as President of Local 2881, and any rank and file member in good standing is eligiblieto serve as the State Rank and File Representative. Mr. Hale's responsibilities as the State.Rank and File Representative required that he always be available to both union membersand state officials in the event of an emergency. There was no written schedule, because hewas required to be available at any time, 365 days per year. Mr. Wolf, during his tenure asPresident of Local 2881, was also required to be available at any time, 365 days per year.

Officials in the Governor's Office, Cal Fire, and other state offices were aware thatrespondents were available at all times. Mr. Hale received phone calls from state officialsand union members during business hours, weekends, and holidays, as the situationsrequired. If someone tried to call Mr. Hale when he was unavailable, Mr. Wolf would likelycover the call. Similarly, if a nonpolitical call came in while Mr. Wolf was unavailable, Mr.Hale would likely cover the call.

Respondents were promoted to the position of battalion chief while serving as unionofficials. Their responsibilities as union officers were distinct from other battalion chiefs,and did not change with the promotion. The primary difference is that respondents' workwas devoted to union business. Respondents were forbidden from engaging in anyfirefighting duties, as would normally be required of a battalion chief. Respondents did nothave any fire station responsibilities, whereas a battalion chief will normally be in charge oftwo fire stations. Respondents, as union officers, did not have any supervisors within the CalFire hierarchy. Respondents retired as union officers and did not return to a firefighting unit.Had they done so, they would have kept all of their promotions and step increases earnedduring their time as union officials.

Respondents were compensated differently than other battalion chiefs. As unionofficers they were not eligible to receive overtime pay. Rather, they were compensatedbased on a 72-hour workweek, consisting of three 24-hour days. Also, because of their jduties, respondents were eligible for only some of the pay differentials and incentivesavailable to other battalion chiefs. For example, Mr. Hale qualified for the longevity pay ̂differential .and the educational incentive pay, but did not qualify for the HAZMAT incentivebecause as a union officer he did not work with hazardous materials.

12. Tim Edwards: Mr. Edwards succeeded Mr. Hale, and currently serves as theState Rank and File Representative. His responsibilities as a union officer are essentially asMr. Hale described them, and require that he respond to calls at any time 365 days per year.As with Mr. Hale and Mr. Wolf, he is paid based on a 72-hour work week, and does notreceive overtime compensation. His classification within Cal Fire is fire apparatus engineer.He was promoted to this position while serving as the State Rank and File Representative. Ifhe leaves his union position and returns to a firefighting unit, he would be required to attendthe fire academy before going into the field, as is required of all active apparatus engineers.

13. Mike Lopez: Mr. Lopez succeeded Mr. Wolf, and currently serves as thePresident of Local 2881. He served as Vice President of Local 2881 under Mr. Wolf. He !was promoted from captain to battalion chief while serving as president. His responsibilitiesas a union officer are essentially as Mr. Hale described them, and require that he respond tocalls at any time 365 days per year. He speaks by telephone with state and union officialsduring business hours, and on weekends and holidays. If he is temporarily unavailable, thehope is that the caller will contact Mr. Edwards. He is also paid based on a 72-hour workweek, and does not receive overtime compensation.

Dispute Regarding Mandatory Holiday Leave Cash-Outs

14. Counsel for respondents sent letters to CalPERS on June 9, 2014, and June 30,2015, requesting that the mandatory holiday leave cash-outs be included in respondents' finalcompensation for purposes of calculating their respective monthly retirement allowances.Respondents asserted that the holiday leave cash-outs should be included in the calculationof their retirement allowances because: (a) respondents constituted their own "group or classof employment" under the definition provided in Government Code section 20636,subdivision (e); and (b) respondents were normally required to work on approved holidaysbecause they worked in positions that require scheduled staffing without regard to holidays,as set forth in California Code of Regulations, title 2, section 571, subdivision (a)(5). 'CalPERS responded in a letter dated July 17,2015, in which it rejected respondents' jassertions, stating that the holiday leave cash-outs would not be properly included inrespondents' final compensation for purposes of calculating their respective monthlyretirement allowances. The arguments advanced by both parties are summarized below.

Statutes and Regulations Essential to Parties' Arguments

15. The statutes and regulations essential to an understanding of the arguments'advanced by the parties are quoted below.

Government Code section 20636, subdivision (c)(2), states as follows: |Special compensation shall be limited to that which is receivedby a member pursuant to a labor policy or agreement or asotherwise required by state or federal law, to similarly situatedmembers of a group or class of employment that is in addition topay rate

Government Code section 20636, subdivision (e)(1), states as follows:

As used in this part, "group or class of employment" means anumber of employees considered together because they sharesimilarities in job duties, work location, collective bargainingunit, or other logical work-related grouping. One employee maynot be considered a group or class.

California Code of Regulations, title 2, section 571, subdivision (a)(5), states as |follows:

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The following list exclusively identifies and defines specialcompensation items for members employed by contractingagency and school employers that must be reported to CalPERSif they are contained in a written labor policy or agreement:

(5) Statutory Items

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Holiday Pay - Additional compensation for employees who arenormally required to work on an approved holiday because theywork in positions that require scheduled staffing without regardto holidays. If these employees are paid over and above theirnormal monthly rate of pay for approved holidays, theadditional compensation is holiday pay and reportable to PERS.

California Code of Regulations, title 2, section 571, subdivision (b)(2), states asfollows:

The Board has determined that all items of special compensationlisted in subsection (a) are:

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(2) Available to all niembers in the group or class

Respondents' Arguments

16. Group of Class of Emplovment: Respondents argued that the holiday leavecash-outs qualify as "special compensation" because they are available to all members ofrespondents' group or class of employment, as required by statute and regulation. (Gov.Code, § 20636, subd. (c)(2); Cal. Code Regs., tit. 2, § 571, subd. (b)(2).) Respondentsargued that their group or class should be defined as Bargaining Unit 8/employmentrank/union officer, on the basis that this best fits the statutory definition of a "group or classof employment" as "a number of employees considered together because they sharesimilarities in job duties, work location, collective bargaining unit, or other logical work-related grouping." (Gov. Code, § 20636, subd. (e)(1).) Respondents argued that as unionofficers they had more in common with each other as a work-related grouping than withother members of Bargaining Unit 8 who shared their rank as battalion chiefs. Specifically;respondents worked only on union business, they did not work as active firefighters, theywere no longer eligible for overtime, and they were required to cash out their holidays.Given this definition of their group or class, respondents argued they were a group or class oftwo. Thus, the requirement that the holiday cash-outs as special compensation be availableto all members of the group or class was satisfied.

Respondents argued in the alternative that their group or class should be definedsimply as Bargaining Unit 8. They argued further that mandatory holiday leave cash-outs forunion ofiicers are available to all members of Bargaining Unit 8, because any member in

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good standing of Bargaining Unit 8 is eligible to become a union ofiQcer. With the group orclass thus constituted, respondents argued, the requirement that holiday cash-outs as specialcompensation be available to all members of the group or class was satisfied.

17. Required Scheduled Staffing: Respondent's next argued that they werenormally required to work on approved holidays because they worked in positions thatrequire scheduled staffing without regard to holidays, consistent with California Code ofRegulations, title 2, section 571, subdivision (a)(5). Respondents normally worked on everyholiday, even though they did ncft have a written schedule requiring them to work onholidays. They worked on holidays because union business required them address issuesjasthey arose on holidays. Respondents were paid for working every holiday during their tenureas union officers in the form of mandatory holiday cash-outs. Respondents argued that a'written schedule was unnecessary because they knew union business would require theirattention on any given holiday, and those who needed to contact them knew they wereavailable. Respondents argued that the essential features of a holiday work schedule are:(1) the employee knows in advance he/she is required to work on holidays, (2) the employeeis paid to work on holidays, and (3) those who need to reach the employee also know theemployee is required to work on holidays. On these grounds, respondents argued that theirholiday cash-outs qualify as "special compensation" because their positions requiredscheduled staffing without regard to holidays, and the cash-outs were available to allmembers of their group or class.

CalPERS's Arguments

18. Group or Class of Employment: CalPBRS argued that the holiday cash-outsdo not meet the first requirement for consideration as "special compensation" which is that itbe available to all similarly situated members of a group or class. (Gov. Code, § 20636,subd. (c)(2); Cal. Code Regs., tit. 2, § 571, subd. (b)(2).) CalPERS argued that the statute^criteria defining "group or class of employment" as set forth in Government Code section20636, subdivision (e)(1), do not support respondents' claim that they are a group or class oftwo. Reviewing the statutory criteria, CalPERS pointed out that respondents' respectiveduties as union officers were separate and distinct Mr. Wolfs duties, as President of Local2881 included executive functions such as handling finances, personnel, and governmentliaisons. Mr. Hale's duties as the State Rank and File Representative included labornegotiations, assisting with the defense of adverse actions, and coordinating accidentinvestigation teams. Second, the fact that respondents worked during most business hours atthe union offices in Sacramento tends to favor a determination that respondents were a groupor class of two. This, however, must be balanced against the fact that both Mr. Wolf and Mr.Hale often worked from locations other than their offices. Third, respondents were bothmembers of Bargaining Unit 8. This, CalPERS argued, weighs in favor of a finding thatrespondents were not a group or class of two, but were in a group or class with othermembers of Bargaining Unit 8.

CalPERS also argued that other logical work-related groupings favor a finding thatrespondents' group or class is best defined by their rank of employment (e.g. battalion chief)

within Bargaining Unit 8. Respondents' salary and promotional opportunities were governedby their membership in Bargaining Unit 8, not their status as union officers. Respondentswere both promoted to the rank of battalion chief, with attendant increases in salary, duringtheir tenure as union officers, pursuant to the terms of the Agreement. The Agreement atsection 2.8 specifically provides that respondents' fiill-time release to serve as union officers"shall result in no loss of compensation (salary or benefits)."

With respect to respondents' argument that the holiday cash-outs are available to allmembers in good standing of Bargaining Unit 8, and that Bargaining Unit 8 would be areasonable group or class of employment for respondents, CalPERS pointed out that pursuantto the Agreement, only two members of Bargaining Unit 8 may be released to serve as unionofficers at any given time. Consequently, only two members of Bargaining Unit 8 canreceive the mandatory holiday cash-outs at any given time, which does not satisfy therequirement that the holiday cash-out be available to all members of the group or class ofemployee to be considered as "special compensation."

19. Required Scheduled Staffing: CalPERS next addressed the regulatorystandard that holiday pay may be considered as special compensation only "for employeeswho are normally required to work on an approved holiday because they work in positionsthat require scheduled staffing without regard to holidays." (Cal. Code Regs., tit. 2, § 571,subd. (a)(5).) CalPERS argued that respondents were not normally required to work onholidays, and that their positions did not require scheduled staffing on holidays.

CalPERS acknowledged that respondents made themselves available and respondedto calls on holidays. However, CalPERS argued, there is no evidence that respondents wererequired to work during times when they were not called upon during a holiday. Though ^respondents may have been required to respond to calls, they were effectively on standbyduring holidays. Standby pay is specifically excluded from consideration as "specialcompensation." (Gov. Code, § 20636, subi (g)(4)(I).)

CalPERS further argued that respondents' positions as union officers did not requirescheduled staffing during holidays. CalPERS would define a "schedule" as something whichspecifies a date and time when designated individuals are required to fill specific positions.There was no specified date and time when respondents were required to work on holidays.Rather, CalPERS argued, they were effectively on standby during all holidays, without anyrequirement for scheduled staffing during holidays.

Discussion and Analysis

20. For respondents' holiday leave credit cash-outs to be considered as specialcompensation, they needed to establish that the cash-outs were available to all members oftheir group or class of employment. Respondents' argument that they constituted a group orclass of two is unpersuasive in light of the statutory criteria defining a "group or class ofemployment." (Gov. Code, § 20636, subd. (e)(1).) Although respondents both worked asunion officers at the same office location in Sacramento, and though they were not eligible

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for certain types of compensation available to other members of Bargaining Unit 8, such asovertime pay, they had much in common with other members. They retained the rights andpromotional opportunities as other members of Bargaining Unit 8. Respondents were paidand promoted during their time as union officeholders consistent with their classificationwith Cal Fire. The fact that respondents worked in the same union offices in Sacramentoexclusively on union matters, and that they worked roughly similar hours without eligibilityfor overtime pay, does not establish that respondents were a group or class of two, or thatthey left their classification as firefighters when they became union officers. Moreover, anemployee may not be a member of more than one group or class. {Prentice v. Board of 'Administration, California Public Employees' Retirement System 157 Cal.App.4th983,993.) For these reasons, respondents did not establish that they were a group or class oftwo. I

21. Respondents argued, alternatively, that they were in a group or class definedsimply by Bargaining Unit 8 as a whole. Tliis is reasonable, as it represents the commondenominator for respondents as both union officers and members of Bargaining Unit 8.Respondents' further argument that mandatory holiday cash-outs are available to allmembers of Bargaining Unit 8 is unconvincing. It is true that any member of BargainingUnit 8 in good standing is eligible to run for election as a union officer. However, the statuteand regulation requiring that an item of special compensation be available to all members ofa group or class are written in the present tense, referencing the special compensation "whichis received" (Gov. Code, § 20630, subd. (c)(2)), and items of special compensation which'"are" available to all members in the group or class (Cal. Code Regs., tit. 2, § 571, subd. j(b)(2)). Nothing in these provisions states that it is sufficient if the special compensation isavailable to all members, one or two at a time, contingent upon future elections. Becauserespondents did not form a group or class of two, and because no other members ofBargaining Unit 8 were then eligible to receive mandatory holiday cash-outs, respondents'icash-outs are not reportable to CalPERS as special compensation. (Gov. Code, § 20636,subds. (c)(2), (e)(1).) j

22. Respondents did not establish they were required to work on approved 'holidays "because they work in positions that require scheduled staffing" as specified in ,California Code of Regulations, title 2, section 571, subdivision (a)(5). Respondents 'established they were required to work on holidays in order to respond to the needs of unionmembers. Respondents did not, however, demonstrate they were required to work onholidays "because" their respective positions required "scheduled staffing" on holida)^.There is no evidence that scheduling was a factor in determining whether respondentsworked on holidays. They handled issues during holidays as needed, as the issues arose,without regard to scheduling. For these reasons, respondents' mandatory holiday cash-outsdo not qualify as special compensation. In addition, respondents were effectively on standbyduring, holidays, responding to calls as needed, but not necessarily doing any other unionwork if not called upon during a given holiday. Standby pay is not included as an item of 'special compensation. (Gov. Code, § 20636, subd. (g)(4)(I).) For this reason, too,respondents' holiday cash-outs are not reportable to CalPERS as special compensation.

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LEGAL CONCLUSIONS '

1. Respondents have the burden of proof to establish they are entitled to theretirement allowance they seek. {Greatorexv Board of Administration (1979) 91 Cal.App.3d57.) Any ambiguity or uncertainty in the meaning of pension legislation must be resolved infavor of the pensioner, but such construction must be consistent with the clear language andpurpose of the statute. {Ventura County Deputy Sheriffs' Assn. v. Board of Retirement '(1997) 16 Cal.4th 483,490.)

Applicable Law and Regulations

2. CalPERS is a "preflmded, defined benefit" retirement plan. {Oden v. Board ofAdministration (1994) 23 Cal.App.4th 194,198.) The formula for determining a member'sretirement benefit takes into account: (1) years of service; (2) a percentage figure based onthe age on the date of retirement; and (3) "final compensation." (Gov. Code, §§ 20037,21350,21352 and 21354; City ojf Sacramento v. Public Employees Retirement System (1991)229 Cal.App.3d 1470,1479.)

3. Government Code section 20630 defines "compensation" as the remunerationpaid out of funds controlled by the employer in payment for the member's servicesperformed during normal working hours or for time during which the member is excused ,from work because of holidays, sick leave, industrial disability leave, vacation,compensatory time off, and leave of absence. Pursuant to Government Code section 20630,respondents' compensation for retirement allowance calculation may be no more than their"compensation eamable," as that term is defined in Government Code section 20636. (Gov.Code, § 20630, subds. (a), (b).)

4. "Compensation eamable" is composed of (1) pay rate, and (2) specialcompensation, as defined in Government Code section 20636, subdivisions (b), (c), and (g).(Gov. Code, § 20636, subd. (a).)

5. "Pay rate" means the normal monthly rate of pay or base pay of the memberpaid in cash to similarly situated members of the same group or class of employment forservices rendered on a full-time basis during normal working hours. "Pay rate" for a memberwho is not in a group or class, means the monthly rate of pay or base pay of the member,paid in cash and pursuant to publicly available schedules, for services rendered on a full-timebasis during normal working hours, subject to statutory limitations. (Gov. Code, § 20636,subd. (b)(1).)

6. "Special compensation of a member includes a payment received for specialskills, knowledge, abilities, work assignment, workdays or hours, or other work conditions."(Gov. Code, § 20636, subd. (c)(1).) Special compensation is limited to that which is receivedby a member pursuant to a labor policy or agreement or as otherwise required by state orfederal law, to similarly situated members of a group or class of employment that is inaddition to payrate. If an individual is not part of a group or class, special compensation is

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limited to that which the Board determines is received by similarly situated members in theclosest related group or class that is in addition to payrate. (Gov. Code, § 20636, subd.(c)(2).)

7. A "group or class of employment" means a number of employees consideredtogether because they share similarities in job duties, work location, collective bargainingunit, or other logical work related grouping. A group or class must include more than oneemployee. (Gov. Code, § 20636, subd. (e)(1).) An employee may not be a member of morethan one group or class. (Prentice, supra, 157 Cal.App.4th 983, 993.) |

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8. "The board shall promulgate regulations that delineate more specifically andexclusively what constitutes ̂ special compensation* as used in this section. A uniformallowance, the monetary value of employer-provided uniforms, holiday pay, and premiumpay for hours worked within the normally scheduled or regular working hours that are inexcess of the statutory maximum workweek or work period applicable to the employee...shall be included as special compensation and appropriately defined in those regulations."(Gov. Code, § 20636, subd. (c)(6).)

9. California Code of Regulations, title 2, section 571, exclusively identifies anddefines special compensation items for members employed by a contracting agency that mustbe reported to CalPERS if they are contained in a written labor policy or agreement. (Cal.Code Regs., tit. 2, § 571, subd. (a).) Subdivision (a)(5), states that holiday pay must bereported to CalPERS under specific circumstances, as follows:

Holiday Pay - Additional compensation for employees who arenormally required to work on an approved holiday because theywork in positions that require scheduled staffing without regardto holidays. If these employees are paid over and above theirnormal monthly rate of pay for approved holidays, theadditional compensation is holiday pay and reportable to PERS.

10. California Code of Regulations, title 2, section 571, subdivisions (c) and (d)provide:

(c) Only items listed in subsection (a) have been affirmativelydetermined to be special compensation

(d) If an item of special compensation is not listed in subsection(a),... then it shall not be used to calculate final compensationfor that individual.

11. Government Code section 20636, subdivision (g)(4)(I), specifically excludesstandby pay from being considered as pay rate or special compensation.

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Cause to Affirm CalPERS' Determination

12. The matters set forth in the Factual Findings and Legal Conclusions have beenconsidered. For each of the reasons set forth therein, particularly those matters discussed inFactual Findings 20 through 22, respondents did not meet their burden to establish thatmandatory holiday leave cash-outs must be included in their final compensation forpurposes of calculating their respective monthly retirement allowances. Any otherassertions advanced by the parties not addressed above and inconsistent with this decision,have been considered and are found to be unpersuasive.

ORDER

CalPERS' determination that the mandatory holiday leave cash-outs do not constitutecompensation eamable, and therefore not to be included in respondents' final compensationfor purposes of calculating their respective monthly retirement allowances, is AFFIRMED.The consolidated appeals of Robert T. Wolf and Kenneth L. Hale to include mandatoryholiday leave cash-outs in their final compensation for purposes of calculating theirrespective monthly retirement allowances are DENIED.

DATED: March 13,2018

■DoeuSlgnsd by:

G2

^6aAECC8E5EF478..

TIMOTHY J. ASPINWALLAdministrative Law JudgeOfiice of Administrative Hearings

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