In April 2016, Elaine Estrada, a payroll employee with the City of La Habra Heights, was charged with unauthorized computer access, misappropriation of public funds, and embezzlement by a public officer for removing payroll deductions, resulting in her not paying the required employee share for dependents covered on her health insurance plan. The misconduct occurred between 2007 and 2009.
She subsequently entered into a plea agreement, which involved: pleading no contest to the unauthorized access to a computer system or network, but sentencing would be delayed for six months, at which time the felony plea would be vacated and a misdemeanor plea of no contest would be entered in its place. Additionally, she would return to the City the amount of money she owed and serve one year of probation starting on the date of her sentencing.
Estrada verbally acknowledged that she understood these terms and that a plea of no contest would be treated as a finding of guilt. Estrada’s plea was entered in June 2017. Estrada complied with her plea agreement and the charge was reduced from a felony to a misdemeanor. After serving one year of probation, the criminal case against her was dismissed in March 2019.
Meanwhile, the City submitted a forfeiture of benefits form to CalPERS that stated that Estrada had been convicted of a job-related felony. CalPERS notified Estrada that because of her felony conviction, a portion of her accrued retirement benefits was subject to forfeiture. Government Code Section 7522.72, which was enacted as part of California’s pension reform in 2013, provides that if a public employee is convicted of a felony for conduct arising out of or in the performance of official duties, the employee forfeits certain accrued retirement benefits, which “shall remain forfeited notwithstanding any reduction in sentence or expungement of the conviction.” Estrada was also ineligible to return to CalPERS-covered employment or accrue further CalPERS benefits.
Estrada appealed the forfeiture action, arguing that she was not convicted of a felony because her felony had been replaced by a misdemeanor. An Administrative Law Judge issued a proposed decision denying the appeal, and the CalPERS Board of Administration adopted that decision which found that Estrada forfeited benefits from September 1, 2007, the earliest date of the commission of the felony, through June 28, 2017, the date of her felony conviction. Estrada then filed a writ in Superior Court, which was also denied. She appealed.
The California Court of Appeal agreed with all the prior decisions. It found that while the term “conviction” isn’t defined in Government Code Section 7522.72, it is recognized in California that a plea of guilty (and therefore, a plea of “no contest”) constitutes a conviction. As a result, once Estrada pled no contest to a felony charge related to the scope of her employment, she was effectively convicted of a felony at that time, for purposes of Section 7522.72, even if the felony was later reduced to a misdemeanor.
Estrada v. Public Employees’ Retirement System, 2023 Cal. App. LEXIS 727 (Cal. Court of Appeal, 9/21/23).