Florida Supreme Court Upholds Legislation Requiring Public Employees to Contribute to Retirement Accounts

In a 4-3 decision in Scott v. Williams, No. SC12-520 (Fla. Jan. 17, 2013), the Florida Supreme Court recently upheld the constitutionality of a 2011 law, Senate Bill 2100, requiring Florida’s public employees to contribute three percent of their pay to the Florida Retirement System (FRS). In addition to the employee contribution being held constitutional and remaining in effect, this decision also affirmed the elimination of the cost of living adjustment (COLA) for service after July 1, 2011. This decision impacts Florida’s more than 600,000 state and local employees, including police officers, firefighters, teachers, and other public employees, as well as state and local governments that faced the possibility of having to reimburse millions of dollars of monies already contributed by employees.

Senate Bill 2100 was signed into law in May 2011 and went into effect on July 1, 2011. When the law passed, legislative leaders noted that Florida was the only state in the United States that did not require its employees to contribute to their retirement funds. Opponents of the bill noted that the FRS was one of the nation’s strongest pension plans and that public employees’ contributions were not directed to secure the FRS fund but instead were used to reduce employers’ contributions.

In June 2011, a group of Florida state employees and public employee unions challenged the law by filing suit against Governor Rick Scott and other government officials. Circuit Court Judge Jackie Fulford of the Second Judicial Circuit held that Senate Bill 2100 violated the Florida Constitution’s contract clause, takings clause, and collective bargaining clause. Specifically, Judge Fulford held that several portions of Senate Bill 2100 were invalid based on language contained in a 1974 amendment to Florida Statute § 121.011(3)(d) called the “preservation of rights” statute, which provides that the rights of members of the retirement system “shall not be impaired by virtue of the conversion of the Florida Retirement System to an employee noncontributory system.” Judge Fulford also held that Senate Bill 2100 was an unconstitutional taking of private property without full compensation and unconstitutionally impaired or abridged the right of public employees to collectively bargain regarding retirement benefits.

In reversing the lower court’s decision in its entirety, the Florida Supreme Court looked to a case it decided in 1981, Florida Sheriffs’ Association v. Department of Administration, 408 So. 2d 1033 (Fla. 1981). There, the court held that the “preservation of rights statute” did not prohibit the legislature from prospectively altering benefits for future service in the existing plan.

Once the Florida Supreme Court concluded that Senate Bill 2100 did not breach any contract between the state of Florida and the public employee members of the FRS, it reversed the lower court ruling that Senate Bill 2100’s changes to the FRS constituted an unconstitutional taking. Finally, the Florida Supreme Court held that nothing in Senate Bill 2100 prevented public employees from collectively bargaining regarding their retirement benefits. The court also held that it could not conclude that effective collective bargaining had been impaired or abridged. “Nor can we conclude” noted the court, “in a facial challenge to the amendments, that ‘effective’ collective bargaining has been abridged or impaired on those issues.” The court did not address the state’s argument that Senate Bill 2100 also limits rights to collectively bargain on retirement issues based on the legislature’s exclusive control over public funds.

Scott v. Williams is significant for Florida public employers, not only because it means that employers do not have to reimburse millions of dollars to employees, but also because it reaffirms the legislature’s ability to make prospective changes to current employees’ pension benefits. For Governor Scott and many legislators, this decision represents a policy victory with the potential to create momentum for more sweeping changes to the FRS, including the potential for a shift to 401(k)-type retirement plans for public employees. For public employee unions, this decision serves as motivation to effect turnover in the legislature in the 2014 elections. For employers, the decision also serves to change the collective bargaining landscape to one where unions will seek to recoup the three percent pay contribution for their members as a part of their bargaining strategy.