Every public safety professional who has banked unused
leave across a long career understands the quiet promise embedded in that
ledger. Those hours represent time not taken with family, shifts covered for
colleagues, and holidays spent in uniform. The expectation has always been that
those hours would count when the pension calculation finally arrived. On July
27, 2026, the California Supreme Court unsettled that expectation for legacy
members of the state’s county retirement systems. In Ventura County Employees’ Retirement Ass’n v. Criminal Justice
Attorneys Ass’n of Ventura County, No. S283978 (Cal. July 27, 2026) (“Ventura”), the Court held that the
California Public Employees’ Pension Reform Act of 2013 (“PEPRA”) bars a
retiring employee from counting leave cashouts above the annual limit fixed by
the terms of employment, even when the employee designates a final compensation
period that spans two calendar years. The decision affirms the Court of Appeal
(see 98 Cal.App.5th 1119 (2024)), and it deserves the close attention of every
association that negotiates leave and retirement terms on behalf of California’s
peace officers, public sector attorneys, and other impacted public sector
employees.
The Issue the Court Decided
The dispute turned on a single sentence in Government
Code section 31461(b)(2). That provision excludes from compensation earnable
any payment for unused leave “in an amount that exceeds that which may be
earned and payable in each 12-month period during the final average salary
period, regardless of when reported or paid.” (Cal. Gov’t Code § 31461(b)(2).)
The retirement system read the phrase to incorporate the annual cashout cap set
by an employee’s terms of employment, so that a member who may cash out 200
hours in a calendar year cannot inflate that figure by straddling two calendar
years within a single final compensation window. The employee associations read
the same phrase to permit inclusion of every hour cashed out during the elected
final compensation period, subject only to what the period itself allowed. The
Court adopted the retirement system’s reading and confirmed that section
31461(b)(2) caps includable cashouts at the annual allowance no matter how the
final compensation period is drawn.
The facts illustrate the stakes with unusual clarity.
The retired member accrued 368.16 hours of leave each year, and his terms of
employment permitted him to cash out 200 hours in any single calendar year. He
designated October 10, 2019 through October 10, 2020 as his final compensation
period, and within that window he cashed out 40 hours in December 2019 and
another 200 hours in February 2020, for a total of 240 hours. He asked the
system to include all 240 hours in his final compensation. The system included
only 200, and the Supreme Court agreed that the 40 additional hours fell
outside compensation earnable because they exceeded the annual allowance that
governed a single calendar year per the terms of his employment.
The Court Conceded Ambiguity and Then
Resolved It Against the Member
The most consequential feature of the opinion is not
the result but the route the Court traveled to reach it. The Court did not hold
that the statute plainly compelled the retirement system’s position. It
acknowledged instead that the system’s construction “may not be the most
immediately obvious or intuitive reading of the statutory text,” and it
described that construction as merely “plausible.” (Ventura, slip op. at p. 22.) Both the trial court and the Court of
Appeal had likewise found the language ambiguous. Confronting genuine
ambiguity, the Court turned to legislative purpose and concluded that
“[c]onsiderations of statutory purpose conclusively resolve the issue” in the
retirement system’s favor because the competing reading would reopen the door
to the pension spiking that the Legislature enacted the statute to close. (Id. at p. 23.)
In a concurring opinion, Chief Justice Guerrero
underscored the divergence from the actual text. She wrote to explain that the
majority’s interpretation is not apparent on the face of the statute, that the ordinary use of the
word “during” is inconsistent with the majority’s construction, and that
the reading survives only because a latent ambiguity emerges once the statute’s
anti-spiking purpose is considered. (Ventura,
Guerrero, C.J., concurring op. at pp. 2-4.) Her concurrence is candid
confirmation that the words the Legislature chose pointed one way while the
result points another.
The Court’s analytical move carries real significance
for public employees because it required the Court to set aside a rule that has
long favored pensioners. For decades, California courts have construed pension
statutes liberally and resolved ambiguities in favor of the applicant. (See Barrett v. Stanislaus Cnty. Emps. Ret. Ass’n
(1987) 189 Cal.App.3d 1593, 1603.) The employee associations pressed that
principle here, and it pointed squarely toward the broader reading. The Court
answered that liberal construction “must be consistent with the clear language
and purpose of the statute,” and it held that the pensioner favoring canon must
yield here because it conflicts with the Legislature’s overarching anti-spiking
design. (See Ventura Cnty. Deputy
Sheriffs’ Ass’n v. Bd. of Ret. (1997) 16 Cal.4th 483, 490.) In other words,
the tie no longer runs to the employee once a court identifies a countervailing
legislative purpose, and pension spiking supplies a purpose that a reviewing
court can invoke across a wide range of compensation disputes.
Why the Reasoning Matters Beyond Leave
Cashouts
The holding governs a discrete question about leave
cashouts in a final compensation period that straddles two calendar years, yet
its method reaches much further. PEPRA is a sprawling statute enacted quickly,
and many of its provisions have given rise to disputes and are likely to
continue doing so in the future. Every one of those provisions is now subject
to interpretation under the framework this Ventura
decision reaffirms, and that framework instructs courts to consult the anti-spiking
purpose whenever the words admit more than one reasonable meaning. A retirement
association that wishes to exclude a category of pay will attempt to frame
inclusion as a potential avenue for spiking, and after this decision, that
framing will carry substantial weight. Members should therefore expect systems
to press expansive exclusions in future disputes over on-call pay, specialty
premiums, uniform and equipment allowances, and other items whose treatment
PEPRA did not spell out with precision.
The decision also weakens a tool that member advocates
have relied upon for a generation. When a pension statute was ambiguous, the
liberal construction canon gave employees a thumb on the scale, and it often
proved decisive in close cases. This opinion subordinates that canon to
legislative purpose and thereby shifts the balance of interpretive advantage
toward the systems in exactly the situations where the statute is least clear.
Associations litigating future ambiguities will need to build their arguments
on text and structure rather than on the presumption that ambiguity favors the
applicant, because the Court has now signaled that the presumption gives way
whenever the anti-spiking rationale is available.
The Signal to the Legislature
The opinion carries a further lesson for those who
shape pension policy in Sacramento. The Court repeatedly grounded its reading
in the practical concerns of plan administration and funding, observing that
the retirement system’s interpretation allows counties to anticipate their
obligations rather than absorb liabilities that swing between one hundred and
two hundred percent of the annual cashout limit depending on how a member
elects a final compensation period. (Ventura,
slip op. at p. 24.) Legislation should be assessed against this backdrop in
which courts will fill statutory gaps with cost containment and anti-spiking
assumptions rather than with the older presumption favoring the pensioner. If
the Legislature intends a benefit to be included, it will need to say so with
precision, because ambiguity will no longer be construed generously in the
member’s favor. Associations that seek legislative clarification of favorable
treatment for particular pay items should draft proposed amendments with that
reality in mind and should not assume that silence or generality will be read
to their advantage.
What This Means for Your Members
The immediate practical consequence is
straightforward. Legacy members who plan to cash out substantial accrued leave
near retirement can no longer increase their final compensation by designating
a final compensation period that reaches into a second calendar year in order
to stack two annual allowances. The annual cap set by the terms of employment
now controls the entire 12-month final compensation period regardless of when
it falls in relation to calendar years. Associations should review their
memoranda of understanding and their members’ retirement planning materials so
that no member approaches retirement expecting credit for cashouts that this
decision now excludes.
The larger consequence is strategic. This case
reflects a determined and well-resourced effort to secure the broader reading
for public employees. Nevertheless, that effort did not prevail before the
state’s highest court despite thoughtful advocacy and a serious textual
argument that even the Chief Justice found more faithful to the statute’s
words. The outcome confirms that the interpretive terrain has shifted and that
future gains for members will come from careful bargaining and precise
legislative drafting rather than from favorable canons of construction. We
stand ready to help our client associations reassess their leave and retirement
provisions, to model the effect of this ruling on individual members nearing
retirement, and to press for the statutory clarity that will protect the
benefits our public safety professionals have earned through decades of
service.
