SACRAMENTO, California — SACRAMENTO, California — The California Supreme Court issued a decision clarifying how accrued leave is treated in the final pension calculations for certain public sector workers. The ruling addresses a dispute over whether employees can spread the cashing out of unused vacation time across multiple years to increase their retirement benefits or if they are restricted by annual contractual limits.
The case originated from Leroy Smith, a retired county counsel from Ventura County. Smith designated the period from October 2019 through October 2020 as his final year of service and sought to cash out 240 hours of accrued leave during that time. However, his employment agreement permitted him to receive payment for only 200 hours in any given year. The Ventura County Employees’ Retirement System refused to include the additional 40 hours in the formula used to determine his pension amount.
Smith and other retired employees from the same county argued that the 2013 pension reform law signed by former Governor Jerry Brown did not explicitly require these hours to fall within a single twelve-month period. They contended that the statute was silent on this specific timing constraint. A state appeals court previously ruled against their interpretation, prompting two public safety unions to appeal the lower court’s decision to the state’s highest judicial body.
In its opinion, the high court found otherwise than the appeals court had suggested regarding the scope of allowable payouts. The justices determined that the statutory language refers to the common meaning of a 12-month period. Consequently, the court held that only the amount of vacation time an individual is contractually permitted to receive in cash during any given year can be counted toward the pension formula.