Appeals court refuses to dismiss retired employees' class action case against Orange County

By Charmaine Little | Sep 8, 2018

PASADENA — The U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a lower court’s decision to dismiss a class action lawsuit against the County of Orange after it changed health benefits for retired employees.

The County of Orange faced complaints by retired employees after it eliminated the Retiree Premium Subsidy and lowered the Grant Benefit, according to the lawsuit. 

The Retiree Premium Subsidy consisted of a pool of retired and active employees so that the company could more efficiently calculate medical insurance premiums, according to court documents. The Grant Benefit gave retired employees a grant each month to help provide for the cost of health care premiums, according to court documents.

Gaylan Harris represented a class of other retired workers that said they had an implied contract that would provide them with the Grant Benefit for the entire term of their retirement. The appeals court determined the plaintiffs gave enough evidence that the Grant Benefit should continue for the duration of their retirement.

“The retirees alleged the existence of annual memorandum of understanding between the union and the County, establishing a right to the Grant Benefit; and the retirees’ specific allegations plausibly supported the conclusion that the County impliedly promised a lifetime benefit, which could not be eliminated or reduced,” Judge Marsha S. Berzon wrote in the opinion.

Considering this, the appeals court reversed the U.S. District Court for the Central District of California’s decision to dismiss the case.

Still, it affirmed the lower court’s decision to dismiss the retirees’ claims that the county violated the California Fair Employment and Housing Act (FEHA). They said it allegedly discriminated against them because of their age when it rejected the Retiree Premium Subsidy. The appeals court pointed out the retirees did not have a right to continue this program.

"We affirm the district court’s dismissal of the FEHA claim, but conclude that the district court erred in dismissing certain of Retirees’ contract claims. We accordingly reverse in part and remand," according to the opinion.

 The court added that California regulations do not block the county’s decision to offer different benefits to retired and active workers. It ultimately determined the county is allowed to separate retirees from other employees via the FEHA “taking into account that the cost of providing medical benefits to the retiree group was higher because the retires were on average older.” 

It affirmed the lower court’s dismissal of this claim.

Circuit Judge Marsha S. Berzon authored the opinion. Circuit Judges Johnnie B. Rawlinson, and Michael R. Murphy concurred.

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