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Health benefits: Governments can't break promises, court rules

November 21, 2011 |  2:09 pm

Health benefits for government retirees may not be eliminated if state and local governments had clearly promised workers those benefits, the California Supreme Court ruled Monday.

In a unanimous decision, that state high court said retired Orange County employees may be able to show they had an implied contract that prevented the county from changing a healthcare plan in a way that caused the premiums of many retirees to skyrocket.

Retirees sued the county in 2007  after it revamped the health benefit program to save money.  A federal trial court sided with the county. An appeals court, which is now considering the case, asked the California Supreme Court to clarify state law in the case.

The California high court sided with employees in its ruling, but said there must be clear evidence that the county promised lifetime health benefits.

"This decision says that when you are in the process of doing public employee pension reform, you have to respect the rights of current retirees," said Ernest Galvan, who represents more than 5,000 Orange County retirees and their family members.

“If you promised them a particular benefit when they were working and promised that would be part of their retirement, then that is a promise you have to keep."

Lawyers for cities and counties said they were pleased that the court established a hurdle for showing that such promises were made.

"The good news for cities and counties is that the court made it clear that you need very strong evidence that the Legislature intended to create a lifetime benefit," said Jon Holtzman, who represented associations of California cities and counties.

The case will now return to the U.S. 9th Circuit Court of Appeals and will turn on whether the evidence showed the county made clear promises in its health-benefit program.

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-- Maura Dolan

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