Prior to July 1, 2005, the working retiree program allowed employees to retire and, after a break, to be rehired. These "retirees" received retirement benefits and a salary, and they were not required to contribute to the retirement system. In 2005 the legislature amended the statutes to require the retirees to make contributions without receiving additional service credit. The retirees argued that the State could not change the program's terms after they had retired in reliance on the representations that they would not have to contribute. 

 

In 2006, the Court in Layman v. State held that the prior working retiree statute, unlike the old TERI statutes, did not create a contract. However, there was evidence that some retirees may have received contracts via written and oral representations from the retirement agency. Those claims had been remanded to determine whether the retirees had contract claims. The circuit court found there were no contracts but that the State was estopped from changing the program's terms to require contributions.

 

On the contract issue, the retirees argued that the agency created contracts when it required the retirees to sign forms stating they would not have to make contributions. The retirees claimed that when the legislature amended the program, these contracts were breached. The Court affirmed the circuit court's holding that no contracts were created. An agency cannot convert a statutory right into a contractual right. Then the Court reaffirmed that the former retiree statute did not create contractual rights. The forms contained substantially the same language as the statute. Even if the forms were contracts, the agency did not have statutory authority to create contract rights. The Court also highlighted the distinctions between the former retirees statute and the former TERI statutes that led the Court to its conclusion that the old retirees statute did not create contractual rights. The retirees were not bound by similar obligations and had options, not offers. Also, the former retirees program did not expressly guarantee that contributions would not be required.

 

On the estoppel claim, the Court reversed the circuit court and held that estoppel could not lie against the State and, alternatively, that the retirees failed to prove the elements of estoppel. The State is subject to estoppel when its agents act within the scope of their authority. Although the agency told retirees that they would not have to make contributions, and although the retirees may have relied on those representations, estoppel could not lie because the old statute did not create binding contractual rights; therefore, the agents" representations were made outside the agency's authority.

 

The retirees also failed to prove the estoppel elements. The retirees knew or should have known that the program's terms could change, and a disclaimer expressly stated so. Regardless, citizens are presumed to know the law. Also, retirees did not prove justifiable reliance because the evidence varied as to whether they would have retired had they known the terms could change. Because citizens are presumed to know the law, any reliance was unjustified. Finally, any change in position was not prejudicial because the monetary benefit between the two options was minimal.​

 

Justice Hearn dissented, arguing that a binding contract was created.