A North Carolina sheriff's deputy retired, started receiving retirement pay, and then discovered he would lose that pay if he took a new job with the local government. So he sued his former employer.

What happened. Jerry Wiggs worked for Edgecombe County as a deputy sheriff for many years. On March 1, 2004, he informed the NC Local Government Employees' Retirement System and the Edgecombe County Administrative Office that he intended to retire on April 1 and that he expected to receive a special separation allowance. In 1984, the North Carolina General Assembly had created the special separation allowance to provide supplemental retirement income to qualifying law enforcement personnel.

The Local Retirement System certified that as of March 31 he would have 30 years of creditable service accumulated. On April 1 he retired and began receiving benefits.

In May, Wiggs applied for a part-time job as a police officer with the Raleigh-Durham Airport Authority, which was a member of the same Local Retirement System. The Airport Authority advised Wiggs to ask the Edgecombe County manager whether he would continue to receive his special separation allowance payments if he took a job with the airport.

He submitted this inquiry to the county manager on June 3. On July 12, the Edgecombe County commissioners adopted a resolution that separation allowances would terminate if a retiree accepted another job with any local government participating in the Local Retirement System. Consequently, Wiggs did not pursue his job application with the Airport Authority.

Wiggs sued Edgecomb County on October 4. He claimed that the county had breached his contract and violated the federal and state constitutions by breaking its contract to pay him a separation allowance on retirement. The trial court and court of appeals ruled for Wiggs. Edgecomb County appealed to the state Supreme Court.

What the court said. The General Assembly's intention behind creating the special separation allowance was to reward officers for devoting their lives to the dangerous business of law enforcement. Edgecombe County argued that the law gave local government officials the power to set eligibility requirements for local officers. It further argued that North Carolina General Statutes Sec. 143-166.41 stipulates that a retiree who receives a special separation allowance who is later reemployed by another member of the Local Retirement System is no longer eligible for the special separation allowance.

The Supreme Court held that this interpretation of the statute was wrong. The statute states that payments should be made "under the same terms and conditions, other than the source of payment, as apply to each State department, agency, or institution." Nothing in the law said that payments to an officer end if he accepts another government job. The law both authorized and required Edgecombe County to enter into a contract with law enforcement officers that promises special retirement payments.

Edgecombe County argued that it was in the public interest to limit payments to retirees by preventing "double dipping." The Supreme Court disagreed. Though local governments do have a duty to be fiscally responsible, this does not trump their obligation to follow contracts made with government employees.

The Court agreed with Wiggs that Edgecombe County's resolution violated the Contract Clause of the U.S. Constitution. The Constitution reads: "No state shall pass any law impairing the obligation of contracts." The promise made by the General Assembly to pay a separation allowance to retirees created a contract between the local government and its law enforcement officers. Moreover, when Wiggs announced his plans to retire and the county told him he was eligible for its special separation allowance, there were no restrictions limiting his right to re-employment after retirement. He was entitled to payments according to the law as it stood when his benefits vested.

Edgecomb County did not have the right to retroactively change the rules about his allowance by passing a resolution ending payments to retirees who took new jobs. Wiggs v. Edgecombe County, Supreme Court of North Carolina, No. 466A06 (5/4/07).

Point to remember: Employees accept jobs relying on promises employers made at the time of hiring; employers can't retroactively change those promises.