Dec. 22, 2014 – A Wisconsin Supreme Court majority (5-2) has concluded that Milwaukee County had legal authority to prospectively reduce pension amounts that accrue while employees are still working, a loss for health care workers and its union.
Milwaukee County calculates pension amounts for retired workers by multiplying the highest average salary by a “percentage multiplier” and the number of service years. When Suzanne Stoker started working for the county, the multiplier was 1.5 percent.
In 2000, the multiplier increased to 2 percent for service starting in 2001, and dropped to 1.6 percent for work performed starting in 2012. These were ordinance changes.
Stoker and other workers, members of the Wisconsin Federation of Nurses and Health Professionals, sued for breach of contract, arguing they had a vested interest in multiplier increases and it could not be reduced by ordinance unless they consented.
The circuit court granted a motion for summary in favor of Stoker, and an appeals court affirmed. But in Stoker v. Milwaukee County, 2014 WI 130 (Dec. 19, 2014), a supreme court majority reversed, concluding the Stoker did not have vested rights.
“We conclude that the legislature preserved Stoker’s rights and benefits already accrued but also gave Milwaukee County home rule authority with the flexibility to enact such prospective-only changes,” wrote Justice Annette Ziegler for the majority.
The state law that created the Milwaukee County Employees’ Retirement System says workers have a vested interest in retirement benefits and “they shall not be diminished or impaired by subsequent legislation or by any other means without his consent.”
However, in 1965, the legislature gave “home rule” authority to Milwaukee County, meaning the county could determine any changes to the county’s retirement system, so long as changes did not impair the vested rights of retirement plan beneficiaries.
Stoker began employment in 1982 when the “percentage multiplier” that would be used to determine pension amounts was 1.5 percent. She said she and others had a vested right to the 0.5 percent bump in the percentage multiplier that could not be altered.
According to the terms of a collective bargaining agreement negotiated in 2011, the percentage multiplier fell to 1.6 percent prospectively starting in 2012. Milwaukee County then adopted a new ordinance to reflect the percentage change.
However, as the supreme court majority noted, the previous 2 percent multiplier was still used to determine “accrued” pension amounts for service prior to 2012.
The majority rejected the argument that Stoker had a vested right to a 2 percent multiplier for work performed after 2011, since that work had not been performed.
“[T]he relevant Milwaukee County ordinances and the collective bargaining agreement expressly state that the multiplier accrues as service is rendered,” Justice Ziegler wrote.
Because the majority ruled that Stoker had no vested right, it did not decide whether the labor union could consent to the multiplier amendment on her behalf.
Justice Ann Walsh Bradley wrote a dissenting opinion, joined by Chief Justice Shirley Abrahamson, concluding that state statute, not the county ordinance, controls.
“It is only by repeatedly ignoring the language of the governing session laws that the majority is able to conclude that the County may reduce the pension multiplier, thereby dealing a blow to the employees,” Justice Bradley wrote in the dissent.
The dissent said the law creating the Milwaukee County retirement system clearly states that rights to benefits vest on the date the county employment commences.
Justice Bradley said Stoker had a vested right to a 1.5 percent multiplier when she began her employment, and a vested right to any multiplier increases.
“Although chapter 138 of the Laws of 1945 could have initially been read as the majority posits, a 1957 amendment to that chapter clarifies that an employee has vested rights to increases in benefits, not just the benefits available at the start of employment,” wrote Justice Bradley, offering case law to support that interpretation.