The U.S. Ninth Circuit Court of Appeals this week ruled in favor of the county of Orange in a controversial lawsuit contesting the capping of retiree medical benefits — a decision worth nearly a billion dollars in budget savings estimates for the county general fund.
The 2008 deal to cap retiree medical benefits for retired public workers and executives was the result of a rare partnership between the Orange County Employees Association and Orange County’s all-Republican Board of Supervisors.
The two groups today find themselves locked in a bitter labor contract dispute and headed into formal mediation next week.
The decision to cap retiree medical benefits, which stretches back to 1966, also drove a wedge between the OCEA and the Retired Employees Association of Orange County or REAOC, which quickly filed suit once the decision to cap medical benefits was enacted.
County officials had pooled retirees with active employees since 1985 — something that REAOC representatives have always argued became an implied contract and meant huge savings to retired executives and workers getting the benefit.
By all actuarial accounts, rates for retired workers utilizing the retiree medical benefits spiked significantly when they were separated from active employees.
Retiree representatives argued in court that because county officials continued to reauthorize the retiree medical benefits as part of annual labor contracts, they began to mirror pension benefits, in that retirees made decisions based on the benefits they expected in later years.
Yet county lawyers successfully argued in court that retirees couldn’t point to any kind of authorizing ordinances that would show specific legislative intent by county supervisors to grant the benefit on a lifetime basis.
“A practice or policy extended over a period of time does not translate into an implied contract right without clear legislative intent to create that right — an intent that REAOC has not demonstrated here,” read in part the opinion written by Judge Margaret McKeown on Feb. 13 affirming a district court opinion granting the county summary judgment.
To read the full 15-page opinion, click here.
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