California Retirees Found in Violation of Post-Employment Pension Laws, Appeals Court Rules

A California Court of Appeal has ruled that certain retirees violated state pension laws by continuing to work in roles that effectively made them common law employees of public agencies. The ruling, which upholds a decision by the California Public Employees’ Retirement System (CalPERS), has significant implications for retirees receiving pensions and the agencies that employ them.

The Case Background

The case involved Tarlochan Sandhu, a retiree who provided financial services to multiple California cities through Regional Government Services (RGS), a public agency that offers staffing solutions to local governments. While Sandhu was technically employed by RGS, the court found that the cities he worked for had substantial control over his work, making him a de facto employee under common law employment standards.

According to the ruling, Sandhu’s work was integrated into the regular business operations of the cities he served. Additionally, the cities had the ability to terminate his services without cause, further solidifying the employer-employee relationship. Under California law, public retirees collecting pensions from CalPERS are subject to strict post-retirement employment restrictions. Violating these rules can lead to financial penalties, including the repayment of pension benefits received while working in an unauthorized capacity.

For a full understanding of California’s pension laws, visit the CalPERS website.

Court’s Decision and Its Impact

The appeals court upheld CalPERS’ decision that Sandhu’s employment violated post-retirement work restrictions. This ruling reinforces CalPERS’ authority in enforcing pension regulations and serves as a warning for both retirees and public agencies.

The decision is particularly relevant to local governments that frequently contract with retirees for consulting or temporary roles. Many such contracts are structured to comply with pension laws, but as this case demonstrates, the actual nature of the working relationship determines compliance, not just the terms of a contract.

The court emphasized that an employer-employee relationship is determined by factors such as:

• The level of control an agency has over a worker’s responsibilities and schedule.
• Whether the work is part of the agency’s normal operations.
• Whether the agency can terminate the worker at will.

Financial and Legal Consequences

As a result of the ruling, CalPERS may require Sandhu and other retirees in similar situations to repay pension benefits received while working in a noncompliant capacity. Such recoveries serve as a warning to retirees who may unknowingly be violating pension laws by continuing to work for CalPERS-affiliated employers.

CalPERS has been actively investigating cases where retirees exceed post-employment limits. Under current regulations, retirees can work for a public employer without affecting their pension only under strict conditions:

• Employment must be limited to 960 hours per fiscal year.
• The retiree must not be engaged in a position that would otherwise be classified as permanent.
• The work must be classified as temporary, urgent, or specialized.

Failure to adhere to these conditions can lead to significant financial repercussions. More details about these restrictions are available on the CalPERS post-retirement employment page.

Broader Implications for Retirees and Public Agencies

The ruling highlights a growing concern over the use of retirees in public sector roles. Many local governments rely on retired experts for consulting services, yet they must carefully structure these arrangements to comply with pension laws.

Agencies hiring retirees should:

1. Clearly define consulting roles to avoid resembling traditional employment.
2. Ensure retirees do not work excessive hours beyond CalPERS’ legal limits.
3. Seek legal counsel to review contracts before engaging retired workers.

For retirees, the ruling is a stark reminder to verify employment conditions before accepting public sector work. Misclassification can lead to pension disruptions and repayment demands.

Next Steps and Future Outlook

This case sets a precedent for stricter enforcement of post-retirement employment rules in California. As CalPERS continues to scrutinize such arrangements, retirees and agencies alike must take proactive steps to ensure compliance.

Public agencies that rely on retirees for expertise may need to reconsider how they structure contracts or seek alternative staffing solutions. Meanwhile, retirees should consult with CalPERS before accepting employment with a government entity to avoid unintended violations.

For updates on this case and other retirement policy issues, visit the California State Courts website.

Conclusion

The California Court of Appeal’s decision serves as a cautionary tale for retirees and government agencies. While hiring experienced retirees can provide valuable expertise, it must be done within the legal framework to avoid financial and legal consequences. As CalPERS increases oversight, both retirees and public employers must ensure compliance with state pension laws.

This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.