SAN JOSE -- San Jose owes a former employee more than $28,000 for unused sick leave under a judge's ruling that puts the city on the hook to pay millions of dollars to other retiring workers from the generous perk it has tried to claw back.

Santa Clara County Superior Court Judge Mary Arand's tentative ruling, dated Thursday, could influence other cases in California where it has been unclear whether "vested rights" protections for government employee pensions apply to other retirement perks. Her decision says San Jose must pay Lorie Deisenroth the $28,080 worth of unused sick leave that the former account technician said the city wrongly withheld on grounds that it eliminated the perk three months before her retirement a year ago.

Yolanda Cruz, president of the union that had represented Deisenroth, called it a victory for city employees who feel their retirement benefits are under siege from city leaders who say the perks' soaring costs are devouring the city budget. The city imposed elimination of the sick-leave cash-outs over union objections.

"It's just unfortunate that we had to take this path, and it was a costly path," Cruz said, adding that her union is willing to negotiate changing the benefit in the future. "We all knew this was a vested right, and this ruling just confirms that."


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But San Jose officials also claimed a victory, noting that the decision says the city can stop letting employees continue banking more sick leave credits to build up bigger retirement windfalls in the future. That is the position San Jose has offered in recent union talks, said city officials who added that the current budget assumes continued sick-leave payouts and won't be affected by the ruling.

"I think there's good news in the decision for us because it will allow us to move in a direction we've been trying to move in eliminating sick-leave payouts," Mayor Chuck Reed said. "We're trying to change things on a going-forward basis -- people keep what they've got and we apply changes in the future."

Though Deisenroth's case was not a class action and the decision is still considered tentative, neither side indicated plans to challenge it, making it likely the ruling will stand and apply to other city workers eligible for the sick-leave retirement perk.

"Anyone who is in a similar position to Ms. Deisenroth and has a vested right to payment of unused accrued sick leave would be gratified by the decision," said her attorney, Teague Paterson. Deisenroth had been counting on the sick-leave payout to help fund her children's education.

Arand noted it is the first time a California court has considered the question, which attorneys said could potentially guide decisions elsewhere in the state. In reaching her decision she cited cases in other states including Wisconsin and Missouri.

"The decision doesn't necessarily reflect a change of law but confirms that California law is applied in the same way it is everywhere else," Paterson said.

City Attorney Rick Doyle said the decision that the city can cap the benefit going forward "may have implications statewide." As a city employee he did not handle the case, which contract lawyers argued on the city's behalf.

Sick leave cash-outs are pretty much unheard of in private employment, where time off for illness is treated as a use-it-or-lose it benefit. But it's not unusual in government, and San Jose officials say the city's perk is among the most generous.

Employees who have worked at least 15 years may bank up to 30 weeks -- 1,200 hours -- of unused sick leave to cash out at retirement at their final pay rate, even though they earned most of those hours years earlier while paid a lower salary.

Police officers and firefighters must work longer to qualify -- 20 years -- but have no limit on the amount of sick leave they can cash out at retirement, resulting in even greater payouts and accounting for most of the annual bill for the perk that has topped $10 million in recent years.

News of the payouts has rankled taxpayers in recent years. The city has cut its police force and trimmed library hours to cover growing retirement costs. Yet amid the cutbacks, the sick-leave perk has let many longtime employees walk away with a retirement bonus big enough to buy a new car, and in the case of top administrators, police and fire chiefs, six-figure windfalls large enough for a yacht.

City unions have argued that the same "vested rights" under California law that bar government employers from diminishing their pensions for the duration of their careers apply to other retirement perks like sick-leave cash-outs. City officials claimed authority to change or discontinue such benefits, but acknowledged it was tough to convince the judge that an employee could lose the value of a perk built up over a career.

"This is a real difficult case here," Doyle said. "You had a career, 30-year employee who'd earned her sick leave. The court had to take that into consideration. At the end of the day it's probably a decision the city can live with."

Reed agreed, noting that the city last month offered police officers a deal that would freeze sick-leave that can be cashed out and the rate at which it will be paid by June 23. That would let officers maintain but not increase the current value of their accumulated sick leave.

"The public certainly does get worked up about these large payouts," Reed said. "We've committed that we're going to fix the problem. Now we've got a court decision that allows us to do that. That should help us achieve a negotiated solution."

Contact John Woolfolk at 408-975-9346. Follow him on Twitter at Twitter.com/johnwoolfolk1.