California Public Agency Labor & Employment Blog

California Public Agency Labor & Employment Blog

Useful information for navigating legal challenges

Are You Ready for Upcoming Negotiations? – Know Your Contract Costs

Posted in Labor Relations, Negotiations

Calculating-DataIt’s that time of the year when we begin to negotiate labor agreements set to end on June 30th.  Have you started your preparations for the negotiating process? One critical step in labor negotiations is costing your existing MOU.  What do we mean when we say “costing?”  It means you should be able to identify what each item in the MOU costs on a fiscal year basis and thereby determine the total cost of the contract to your agency.

Direct & Indirect Costs – What are They?

Collective bargaining agreements contain both direct costs and indirect costs.  It is important to understand each of these concepts and determine their value.  Direct costs are items that send cash out the door – compensation components and employer paid benefits are the two largest types of direct costs.  Direct costs break down even further into categories such as pensionable, taxable, or those paid to a third party on behalf of an employee.  Some direct costs can be determined by position; others are “bucket items” for which multi-year averages are the best method to determine costs. Indirect costs are typically the value of contract provisions where cash isn’t necessarily leaving the organization but the provision has a value, for example, sick leave.  For most employers, the value is a productivity cost.  However, in other cases where you have minimum staffing, sick leave may result in direct costs via the payment of overtime (to cover the work of the sick employee).

Costing Methodology 

The process of costing is time-consuming and can be tedious.  Also, often agencies rely on what they previously budgeted to spend vs. what they are actually spending.  It is recommended that you understand the difference and focus on what you are actually spending.   In addition, it is important to establish your costing methodology and then communicate it to key stakeholders (i.e. City Manager, Finance Director, HR Director, Elected Officials, etc.).  It is easier to start with the costing of the current MOU and reach consensus on the methodology long before you engage in developing proposals and seeking authority for the next MOU.  A good example is a frequently asked question – what would a 1% salary increase cost?

Well, we need to be clear about the question – 1% of base pay or 1% of total comp? Are we including the value that 1% has on overtime costs?  Have we factored in escalating provisions that we have previously agreed to pay the employer rate for retirement benefits or the impacts of health insurance premiums that were already negotiated and exist in the MOU?  If the base pay for a bargaining group totals $6,287,290 and the total cost for the group is $9,664,591 – then thinking through the 1% question in this way makes a big difference!

Who handles the costing?  Is it the finance department, the budget office, Human Resources?  Hopefully, it is a collaborative effort. If you are fortunate to have a finance system that can prepare costing information and create costing scenarios – you are LUCKY!  For most agencies, downloading data from payroll and finance systems into Excel spreadsheets to run costing calculations is more common.  Have a conversation with your bargaining team leadership and chief negotiator early so you can determine the plan for costing.

Is Costing Really Helpful?

Absolutely! Understanding what each item costs sets the framework for identifying what each proposal in the negotiation process costs.  Both agency and union proposals need to have a value identified in order to determine the feasibility of the proposal.  Additionally, when you have analyzed the cost, you will clearly see what the real impact of a proposal might be.  Clear costing data adds credibility to the meet and confer process.  You should be able to share costing information across the table and it can serve as an effective tool in explaining why items may not be able to be realized during negotiations.  If you find yourself at an impasse and engaged in the fact-finding process, then your costing data will be essential during the fact-finding hearing.

As public agencies begin to see improvements in the financial condition of their organization, costing will continue to be a critical component in labor negotiations.  The long-term sustainability of the compensation structure and the ability to work within the structure require a solid and complete understanding of labor costs.  Effectively using costing to determine one-time costs, the best use of a dollar, structural costs that increase in future years, etc., are issues elected officials want to understand and that you should understand as well.

Learn More

Want to learn more about the process of costing? Join us for at the LCW Pre-Conference workshop:

Costing Labor Contracts | March 8, 2017 | 9AM – 4 PM | Disneyland ® Hotel

The keys to successful negotiations include planning and costing. Just like planning a vacation, the amount of time and effort you put into planning and costing can determine the success of the trip. Costing contract proposals is similar to costing excursions on a vacation – they all sound like a good idea but can we afford them? Join us at this workshop to learn the importance of costing and methods you can use to make costing easy.  Register Today (select Pre-Conference ONLY)

LCW Labor Relations Certification Program

Also, this presentation is the first workshop that is a part of the new LCW Labor Relations Certification Program©. This program is designed to provide labor relations practitioners education combined with practical hands-on experience in a variety of core areas.

Participate in individual seminars and receive a certificate of completion for each completed course or participate in all seven to earn the Labor Relations Certificate.  Learn more >

Are They Ever Coming Back? – Taking a Proactive Approach to Leave Management and Employees who are on Long-Term Leaves of Absence

Posted in Retirement

Leave RequestThis post was authored by Michael Youril.

Leaves of absences are one of the most complex and frustrating areas of personnel management that public agency employers face.  There are several complex, overlapping, and intersecting laws to apply and navigate.  In many situations, it is difficult for the agency to determine its rights and obligations.

Employers must determine if a leave is protected under the Family Medical Leave Act (“FMLA”) and the California Family Rights Act (“CFRA”), the Paid Sick Leave Law, kin care, the Americans with Disabilities Act (“ADA”) and the Fair Employment and Housing Act (“FEHA”).  The workers’ compensation system and the agency’s retirement system can also create additional obligations for the employer.  Violating an employee’s rights under any of these various leave and disability laws, among others, may subject the agency to expensive lawsuits and liability.  At the same time, employers have a need to determine whether an employee is going to return to work and to address its staffing needs.

A common problem employers face are long-term leaves created through the “serial note.”  An employee may turn in a doctor’s note putting them off for a short period of time that can be accommodated by the employer.  However, when the leave is coming to an end, the employee turns in another note extending the leave by a similar period.  This pattern can go on for months or years and it becomes uncertain when, if ever, the employee will return from leave.  Employers face further uncertainty because each leave viewed in isolation appears to be reasonable and finite, but when viewed in its totality creates a hardship and is indefinite.

Employers are often uncertain what rights and obligations they have when an employee is on a leave of absence and are left with many unanswered questions.  When can the employer request more information regarding the employee’s leaves or work restrictions?  How can the employer request more information with violating leave and disability laws or the employee’s privacy rights?  When should leave be provided as a reasonable accommodation and when is it no longer protected under disability and leave laws?  When is another interactive process meeting necessary?

Answering these questions and navigating the various laws often requires a long-term strategy and requires an adaptive multi-step approach.  Agencies must make a case-by-case assessment while still trying to maintain consistency in the way it manages leaves for all of its employees.  Employee leaves are highly fact specific, but a differing treatment of similarly situated employees may leave the agency open to discrimination or retaliation lawsuits.

Public agencies subject to the California Public Employees’ Retirement System (“CalPERS”) and the County Employees Retirement Law of 1937 (“CERL” or “’37 Act”) also must determine when they have an obligation to apply for disability retirement on behalf of an employee.  Under these systems, an employer cannot separate a vested employee for disability.  Instead, they must apply for disability retirement on the employee’s behalf and must often take preliminary steps to ensure that the agency has satisfied its obligation under disability laws and afforded the employee due process when required.

We are here to Help!

LCW is offering a leave of absence review program to assist agencies in developing a tailored, proactive approach to managing employees who are on long-term leaves of absence.  We will provide specific advice and strategies to address each employer’s needs and every employee’s circumstances.  These services include reviewing agency-wide leave concerns and policies, reviewing medical documentation for sufficiency and necessary follow-up, reviewing specific leaves of absence, engaging in the interactive process, developing best practices protocols, and navigating the disability retirement process.  For more information on LCW’s leave review program, visit

We also recently hosted a webinar on this topic – Proactive Leave Management and Addressing Long-Term Leaves of Absence. For more information or to register, visit our website.

No Bones About It: No Compensation for Canine Handlers Training to be Canine Instructors

Posted in Wage and Hour

K-9 OfficerThis post was authored by Alison R. Kalinski

The United States Court of Federal Claims (a court with nationwide jurisdiction hearing specialized claims against the federal government) recently held that a group of certified canine handlers were not entitled to compensation for time spent training to become certified canine instructors.  This was because the training was voluntary and its purpose was not to improve their current duties.  The case, Almanza v. United States, was decided on July 26, 2016.

The plaintiffs in Almanza were 290 Customs and Border Protection Officers and Border Patrol Agents (the “agents”) currently or formerly employed by U.S. Customs and Border Protection, Department of Homeland Security (“CBP”).


CBP operates a Canine Training Program based at two training centers.  Agents wishing to work with canines must attend a seven-week training program.  Canines, canine-handler agents, and canine instructors receive their training through this program.  Upon successful completion, handlers are certified to work with a canine for one year, subject to monthly maintenance training under a certified instructor.

Certified canine handlers may also seek additional certification to become an instructor.  Canine instructors perform the same duties as handlers, but also have additional responsibilities assisting handlers maintaining their certification.  Certified canine instructors are eligible for promotion as a canine instructor at CBP’s training centers.  An agent certified as canine instructor, but who does not work as an instructor at a training center, does not get a pay raise, new title, or additional compensation.  Having the canine instructor certification, however, may help the canine handler advance into a supervisory position which could result in a promotion and pay raise, though canine handlers can still advance without the instructor certification.

To become a certified canine instructor, the agent must successfully complete a rigorous 12-week training program called the Detection Canine Instructor Course (the “Course”).  CBP regularly solicits applicants for the Course through memoranda stating that agents who successfully complete the Course will need to perform additional duties, such as providing instruction support or maintenance training for other handlers.  There is no requirement for canine handlers to participate in the Course.  Canine handlers who do not have or seek canine instructor certification do not suffer any adverse consequences in their current jobs and may continue to work as canine handlers without attending the Course.  Handlers must submit an application and interview for the course and selection is competitive; handlers are often denied spots because they lack sufficient experience.  If a handler is accepted but fails the Course, the handler is not demoted or disciplined and can reapply.

To pass the Course, the handlers must pass four exams with a minimum score of 90%.  No working hours are set aside for studying.  The handlers were encouraged to study the material outside of their normal working hours and on the weekend.  The handlers were not paid for time they spent studying.  Accordingly, they sued for back pay and overtime compensation under the FLSA for the time they spent studying.

Decision Process

The Court had to determine whether the studying time was “hours of work” under the FLSA.  Because this case concerned federal employees, the applicable regulation is 5 C.F.R. §551.423(a)(2) which provides that time spent training outside of regular hours is “hours of work” if “(i) [t]he employee is directed to participate in the training by his or her employing agency, and (ii) [t]he purpose of the training is to improve the employee’s performance of the duties and responsibilities of his or her current position.”  While the Court easily concluded that the studying here constituted training outside of regular working hours because the studying was necessary to prepare for the exams, the Court concluded the training was not “hours of work” requiring compensation.


First, the plaintiffs were not required to participate in the training – it was purely voluntary and based on a competitive application.  Canine handlers could continue to serve in their positions without taking the Course.  Second, the purpose of the training was to become a certified canine instructor – not to improve the employee’s duties as a canine handler.  While it was undisputed that the Course would improve the employee’s duties as a canine handler, that was a byproduct of the training, not its purpose.  The goal of the training was to provide new skills to use as a canine instructor.  Accordingly, the plaintiffs did not satisfy the requirements for compensation of training time and the Court granted summary judgment to the CBP.

Application to non-federal employers in California

Almanza is from outside of California and the Ninth Circuit (the federal appellate court covering California) and is not controlling authority in this state.  Nevertheless, it provides guidance on how California employers should determine if training time is hours worked requiring compensation under the FLSA.   For non-federal employers in California, the applicable regulation to determine whether training time must be compensated is 29 C.F.R. §785.27 which provides that training time need not be compensated if all of the following four criteria are met:

  • Attendance is outside of the employee’s regular working hours;
  • Attendance is in fact voluntary;
  • The course, lecture, or meeting is not directly related to the employee’s job; and
  • The employee does not perform any productive work during such attendance.

While the applicable regulation for non-federal employers in California is different than the regulation at issue in the Almanza case, the Almanza case is useful because its discussion is relevant to factors (b) and (c) above, namely, whether the training is voluntary and related to the employee’s job.  In evaluating whether training time is voluntary, employers should consider whether the employee is required to participate and if the training aids an employee in obtaining promotions or pay raises.  Employers should also consider whether the training is directly related to the employee’s job.  If the focus of the training is to provide the employee with new skills or train the employee for another job, then the training is likely not “directly related” to the employee’s job.  This is true even if the training incidentally improves skills needed for the employee’s job.

For Better or Worse: Ten Years of the Firefighters Procedural Bill of Rights Act

Posted in Public Safety Issues

Fire JacketIn 2007, the Firefighters Procedural Bill of Rights Act (FBOR) was enacted after several years of unsuccessful attempts to pass similar legislation. Although the FBOR is modeled after the longstanding Public Safety Officers Procedural Bill of Rights Act (POBR) [Gov. Code, §§ 3300 et seq.], that statutory scheme, which was originally intended for peace officers, presents numerous challenges to the fire service.

As described by several members of the fire service, the culture is quite different from the culture of law enforcement. The observations of fire chiefs and captains show that the POBR’s procedures and protections are not necessarily a good fit. An important difference between firefighters and peace officers is that firefighters work twenty-four-hour shifts; additionally, at least 10 days a month while on these 24-hour shifts, firefighters not only work together but also grocery shop, eat, share significant downtime, and live together. Police officers do not live with each other while on shift, and they spend a substantial amount of time engaging in solitary law enforcement activities.

The dynamic created by the firefighters’ living situation is quite different than in law enforcement. Prior to the FBOR, fire captains could have frank discussions with subordinates without the constraints of the FBOR’s procedures. Although the living situations have not changed from before and after the FBOR, many fire service members believe the rigidity and formalities of the FBOR have altered their culture, causing some fire captains to be reluctant to correct or discipline subordinates.

History of the FBOR

The FBOR’s history and the incongruent comparisons of firefighters to peace officers illustrate the effect the FBOR has had on the fire service culture.

In 1999, Assembly Bill 1411 was introduced as the Firefighters Procedural Bill of Rights Act. In an effort to emulate and afford the same rights as the POBR, the bill substituted the term “firefighter” for “peace officer” and was otherwise word-for-word identical to the POBR. AB 1411 ultimately failed to pass the Senate Appropriations Committee. In the 2007 version, not much changed in the statutory language. However, merely inserting “firefighter” in place of “peace officer” is demonstrative of the adage . . . apples and oranges.

According to Assembly Member John Longville, he introduced AB 1411 to “permit firefighters to engage in political activity in the same manner [as public safety officers] and . . .  [to] require the same procedures and conditions for the investigation and interrogation of a firefighter that could lead to punitive action.” It was also intended “to assure that stable relations are continued throughout the state and to further assure that effective services are provided to all people of the state.”

In August 1975, AB 301 (POBR) was signed by the governor of California. In the July 1975 California Organization of Police and Sheriffs (COPS) Journal, POBR was described as necessary to protect the rights of police officers who were “accused of minor infractions, suddenly find[ing] themselves transferred to graveyard shifts or to the furthest reaches of the jurisdiction. Others are given the most tedious or undesirable assignments for long periods of time. There are the ‘serving your punishment’ assignments . . . .” Another example of police officer rights allegedly being abused was the “indiscriminate use of the polygraph against police officers.”

Firefighters work 24-hour shifts—police officers do not. It is not possible to punish a firefighter by assigning him a graveyard shift. When the FBOR bills were introduced, there were no allegations of polygraph abuse or unreasonable punishment in the fire service. What exactly the firefighters wanted in 1999 that they were not already entitled to under constitutional due process remains unclear. Assembly Bill 1411 eventually died in the Senate.

In 2006, another legislative effort failed. AB 2857, which ultimately died in the Assembly, was introduced to extend the POBR coverage to firefighters and to overturn the appellate court decision Gauthier v. City of Red Bluff (1995) 34 Cal.App.4th 1441, which held that arson investigators were the only fire personnel who were covered by the POBR.

Finally, with AB 220, the FBOR was enacted. When AB 220 was introduced, the intent was for the FBOR “to mirror most, if not all, of the provisions in POBOR [an alternative acronym for POBR] and make them applicable to firefighters, including those who are paramedics or emergency medical technicians.”

Comparing the Incomparable

Assembly Bill 220’s proponent, the California Professional Firefighters (CPF), compared firefighters to public safety officers: “Firefighters often find themselves in situations where their sworn duty commands appropriate steps to ensure the safety of the public. The reality is that on the street, there are situations where the role of a firefighter intersects with that of a peace officer.” Staff evaluating the bill, however, expressed skepticism with this comparison, noting that no published cases were found involving a firefighter who alleged his due process rights were violated “by an interrogation or investigation for misconduct while executing his job duties.” When considering the history of the POBR and the FBOR and the reasons cited in support of and in opposition to the statutes, the differences are clear.

In each of the attempts to pass the FBOR, the proponents claimed that firefighters “could be” subject to investigations and interrogations that lead to disciplinary action. Opponents argued that firefighters simply were not the subject of investigations and interrogations to the same degree as peace officers.

One of the comments from opponents of the bill was that the POBR created a “hefty” body of case law resulting from the statutes. Indeed, during the first ten years of the POBR, California appellate courts heard 30 cases involving the POBR. The same cannot be said for the FBOR. In the first 10 years of the FBOR, only two reported cases have analyzed or interpreted the FBOR (Poole v. Orange County Fire Authority and Seibert v. City of San Jose), and a third case in 2016 (Clark v. California Dept. of Forestry and Fire Protection), which was decided by a federal district court, did not serve to interpret member rights and instead only considered a point related to litigation of disputes (it found that the FBOR bars individual liability for firefighters who violate the FBOR due process requirements).


After 10 years of the FBOR, fire chiefs, deputy chiefs, battalion chiefs, and captains have cited to the FBOR’s procedures as confusing and irrelevant to the fire service. In support of the FBOR, the Legislature declared that “[f]irefighters who trust their instincts in these volatile emergency situations are deserving of due process rights and protections should those circumstances arise.” However, firefighters already had due process rights and protections, as well as substantial protections through collective bargaining. Perhaps after another 10 years, the effect of the FBOR on the culture will have diminished because by then many of the firefighters will have known only an FBOR-governed fire service.

Court Affirms that PEPRA Does Not Limit County’s Right to Repeal COLA Pickup

Posted in Retirement

Beach background with towel and flip flops and the word Retirement written in sand (studio shot - directional light and warm color are intentional).

On December 20, 2016, the California Court of Appeal for the Third Appellate District reaffirmed the purpose and spirit of the Public Employees’ Pension Reform Act (“PEPRA”) as a law designed to “limit,” rather than “shield,” public employees’ retirement compensation.  In the recent case, San Joaquin County Correctional Officers Association v. County of San Joaquin, the San Joaquin County Correctional Officers Association (CCOA) argued that PEPRA shielded its members, by prohibiting the County from eliminating a pension “pickup” prior to 2018. The Court disagreed.  It found that the County could eliminate the pickup at any point, as long as it did so in accordance with collective bargaining laws.

  1. Employer Pickup under the County Employees Retirement Law of 1937

Under the County of San Joaquin’s retirement system, CCOA members receive a pension benefit and post-retirement cost of living adjustments (COLA). By default, the County Employees Retirement Law (“CERL”) requires increases in COLA contributions to be shared equally between counties and their contributing members.  Prior to PEPRA, the law allowed, but did not require, a county to pay for, or “pick up,” the employee’s share of this contribution.* At the same time, section 31581.2 of the CERL specified that a pickup agreement did not create a vested right for members and that a county could repeal such agreement at any time, subject to meet and confer requirements under the Meyers-Milias-Brown-Act (“MMBA”).  In accordance with the CERL, and prior to PEPRA’s passage, the County of San Joaquin agreed to pick up employees’ shares of COLA contributions.

In September 2012, the County and CCOA negotiated a new memorandum of understanding.  As part of the 2012 negotiation, the County sought to end its COLA pickup, requiring CCOA members to pay their default half of COLA contribution increases.  The County imposed this change following bargaining impasse.

Rejecting the County’s decision to impose this change, CCOA argued that PEPRA prevented the County from imposing the benefit reduction until January 2018.  In support of its arguments, CCOA largely relied on Government Code section 31631.5, which was added to the CERL when PEPRA was implemented.  Under the PEPRA, all “new members,” as defined, are required to pay 50% of the normal cost of the retirement benefits.  However, for those who are not “new members,” section 31631.5 states that counties can require these classic or legacy members to pay 50% of the “normal cost of benefits” up to specified, percent-based limitations for each membership category.  According to the statute, effective January 1, 2018, employers can impose this requirement after meeting and conferring in good faith, through all impasse procedures.  However, the statute also provides that it does not apply to bargaining unit members that are already paying at least 50% of the normal cost and does not modify a county’s authority, as it existed on December 31, 2012, to change the amount of member contributions.  CCOA argued that this statute prohibited the County from changing its COLA pickup, viewing the pickup as part of the “normal cost of benefits.”

The Court denied the CCOA’s argument that this new PEPRA statute sheltered bargaining unit members from the pickup elimination.  The Court did not determine whether the COLA was part of the “normal cost of benefits,” finding the argument irrelevant to the legal issue presented.  Instead, the Court determined, because the County had the authority to repeal its pickup agreement under section 31581.2 of the CERL, at any time, as of December 31, 2012 (and prior), it could repeal the agreement through bargaining despite any time-delayed easing implemented by PEPRA.

Though the legislature delayed giving effect to some provisions of PEPRA, the Court explained that this was done to “ease the transition” and allow changes to be negotiated gradually.  However, the gradual effect of PEPRA was not intended to provide a “shield” to retirement system members, insulating them from properly, and lawfully, imposed pension increases until 2018.  Under the CERL, the County had the “right to reduce any contributions it chose to make toward what would otherwise have been the employee’s half-share of COLA payments.”

  1. Employer Paid Member Contributions under the Public Employees’ Retirement Law

Notably, like the CERL, the Public Employees’ Retirement Law (“PERL”) allows CalPERS contracting agencies to pay all or a portion of a classic member’s “normal contributions.” This is commonly referred to as an employer paid member contribution or “EPMC.”*  Also, like the CERL, the PERL provision that allows employers to cover a classic member’s default contribution, specifies that the contracting agency retains the authority to increase, reduce, or eliminate its payment of the member’s contribution.  Section 20516.5 of the PERL is similar in language to section 31631.5 of the CERL, and both sections were enacted as part of the PEPRA.  Accordingly, applying the reasoning from the Court in San Joaquin County Correctional Officers Association v. County of San Joaquin, PEPRA does not prohibit CalPERS employers from reducing or eliminating employer paid member contributions at any time, in accordance with the PERL, through proper bargaining and impasse procedures.

*After PEPRA, both the CERL and PERL limit employer pickups and employer paid member contributions to classic employees.  PEPRA does not allow employers to pay the member contribution of PEPRA-defined “new members.”

Employers’ Continuing Affordable Care Act Obligations Under the Trump Administration

Posted in Healthcare

iStock_000066252725_LargeOne of the first acts of the new Administration was to issue an Executive Order (the “Order”) “Minimizing the Economic Burden of the Patient Protection and Pending Repeal.”  The Executive Order, which is in line with the President’s campaign platform to repeal and replace the Patient Protection and Affordable Care Act (ACA), provides:

“It is the policy of my Administration to seek prompt repeal of the [ACA] (the “Act”).  In the meantime, pending such repeal, it is imperative for the executive branch to ensure that the law is being efficiently implemented, take all actions consistent with law to minimize the unwarranted economic and regulatory burdens of the Act, and prepare to afford the States more flexibility and control to create  a more free and open healthcare market.”

The Order directs the Secretary of Health and Human Services (the “Secretary”) and all other executive agencies heads with authority and responsibilities under the ACA, to exercise their legally conferred authority to grant waivers, deferrals, and exemptions to the ACA, and to delay implementation of ACA provisions that would have the effect of imposing “fiscal” burdens on States, individuals, families, healthcare providers, insurers, patients, recipients of health care services, and manufacturers of medical products.  The Order defines “fiscal burden” to include costs, fees, taxes, penalties or regulatory burdens.  Furthermore, the Order directs the Secretary and other agency heads, to the extent permitted by law, to grant flexibility to States in implementing their healthcare programs.

While the Order does not repeal or replace the ACA, as doing so must be done by Congress, the Order essentially directs those executive agency heads, who have the responsibility of implementing the ACA, to use their authority to waive or delay implementation of certain provisions.

The Administration’s Order does not currently limit an employer’s responsibility to file ACA Reporting forms for the 2016 tax year.  As we previously published in our November Client Update article, Applicable large employers (ALEs) (those with 50 or more full –time employees, including full-time equivalent employees, in the previous year) must file 2016 Forms 1094-C and 1095-C, which report to the IRS information related to the ACA’s shared responsibility provisions.  Additionally, small employers with self-insured plans must file2016 1095-B forms with the IRS.     Employers have until February 28, 2017, if not filing electronically, or March 31, 2017, if filing electronically, to submit Forms 1095-B, 1094-C or 1095-C to the IRS.

Employers must also furnish to individuals copies of the 2016 Form 1095-B or 1095-C.  These forms must be furnished to individuals by March 2, 2017.

It is unclear whether the Administration will, moving forward, continue to enforce certain provisions of the ACA, including the IRS reporting requirements under the employer shared responsibility provisions.  We will continue to update you if and when the Administration issues further guidance.   For the time being, employers are strongly encouraged to comply with the reporting requirements, or risk being assessed penalties.

CalPERS Explains Impact to Employer Contributions Due to Reduction in the Assumed Rate of Return

Posted in Retirement

Retirement Road Sign with blue sky and clouds.On January 19, 2017, CalPERS provided greater clarity on how contracting agency employers, and even some members, will see contribution rate increases due to a decision to reduce the assumed rate of return.  On December 20, 2016, we reported that the Board of Administration was poised to, and in fact did, reduce the assumed rate of return following a recommendation by the Finance and Administration Committee that the current assumed rate of 7.5% was unrealistic in today’s economy.

The assumed rate of return, also called a discount rate, is the percentage of expected returns on investments made by CalPERS.  Generally, the higher expected return, the lower employer contributions will likely be. The problem arises, though, that if CalPERS’ investments do not meet the expected return rate, this creates risk and greater unfunded liabilities because the employer contribution rates were based on that expected return.

On December 21, 2016, the CalPERS Board voted to adopt a reduction in the assumed rate of return over a three-year period.  According to CalPERS’ recent Circular Letter, for contracting agencies, the discount rate will fall from 7.5% to 7.375% for fiscal year 2018/2019, then to 7.25% for fiscal year 2019/2020, and finally to 7% for 2020/2021.

The result is two-fold:  an increase in the normal cost of pension benefits and an increase in the unfunded accrued liability (UAL).  This not only means an increase in employer contributions, but for those employees who are “new members” under the Public Employees’ Pension Reform Act of 2013 (PEPRA), they too will see an increase in member contribution rates as these members are required by law to pay 50% of the normal cost of their retirement benefits.

Public agency employers can expect the following relative increases in their normal cost contribution:

2018/2019       0.25% – 0.75% increase for miscellaneous plans; 0.5% – 1.25% for safety plans

2019/2020       .5% – 1.5% increase for miscellaneous plans; 1.0% – 2.5% for safety plans

2020/2021       1.0% – 3.0% increase for miscellaneous plans; 2.0% – 5.0% for safety plans

In addition, employers will see gradual increases in their UAL payment, with a five-year ramp up for each reduction in the assumed rate of return.  As such, employers can generally see an approximate increase in their UAL payment for both miscellaneous and safety plans as follows:

2018/2019       2% – 3% increase in the UAL payment

2019/2020       4% – 6%

2020/2021       10% – 15%

2021/2022       15% – 20%

2022/2023       20% – 25%

2023/2024       25% – 30%

2024/2025       30% – 40%

For example, assume an employer’s current UAL payment is $800,000 for fiscal year 2017/2018.  In 2018/2019, the employer could generally expect a payment of $816,000 up to $824,000.

These numbers are current global estimates projected by CalPERS, but employers should refer to their annual valuation reports this summer which will provide specific projections for your plans.

These increases no doubt bring significant strain on employers, some of whom are still grappling with losses occasioned by the Great Recession.  Employers should be cognizant that further increases are always possible in future years if actuarial assumptions are again updated, as they were in the last few years.

Some possible strategies for employers to address these hikes include:

  • Maintain and publish comprehensive multi-year projections on pension costs prepared by independent actuaries who can provide direct recommendations and strategies to the governing board. These reports should be transparent and thoroughly presented and discussed in open board/council meetings or workshops to educate stakeholders, employees and the public.
  • As part of long-term budgeting, maintaining and increasing restricted reserve funds for paying down unfunded liabilities.
  • Subject to meet and confer with employee labor organizations, stabilize larger on-schedule salary increases and increases in other pensionable compensation, and in the alternative, offer increases in non-pensionable benefits, such as health care contributions or contributions to a defined contribution retirement plan, subject to IRS and PEPRA limits.
  • Subject to agreement with employee labor organizations, consider cost-sharing employer contribution rates by CalPERS contract amendment and/or MOU. This again can be negotiated in exchange for other benefits.

Employers are also encouraged to collaborate with labor negotiators and actuaries for creative strategies in addressing pension rate increases.

“I Don’t Feel So Good” – Protecting Employees from Illness in the Workplace During Cold and Flu Season

Posted in Employment

Sick Human 4The holiday season is behind us, but we are still in the thick of cold and flu season.  It seems like everyone you pass on the street or stand next to on the bus is sneezing, coughing, or blowing their nose.  With so many people sick, it’s not surprising that many people have also encountered the same sneezing and coughing from a colleague who is sick but came to work anyway.

When sick employees come to work, it can have a significant and detrimental impact on the employer because the sick employee is likely to be less productive than normal and, more critically, he or she risks spreading the illness to other employees, thereby reducing their productivity and/or requiring them to miss work to recover.

Below are answers to common questions that employers must navigate, particularly during the winter months.

Can I send a visibly sick employee home from work?

Yes, an employer can require an employee to go home if the employee is showing signs of a contagious illness (such as sneezing, runny nose, coughing, and/or vomiting).  This applies even if the employee does not want to leave work.  Employers should consider including in an employee handbook or relevant personnel policies or procedures language confirming the right to remove sick employees from the work environment.

Of course, particularly during cold and flu season when many employees may be exhibiting signs of lingering illness, employers will likely only choose to send employees home in extreme cases.  Therefore, employers must ensure they are acting in a non-discriminatory and non-retaliatory manner in sending an employee home, and be consistent in what level of severity is required before the employer takes action.

Finally, where an employee has a more serious illness than a common cold or stomach bug, employers should confer with an attorney or their human resources department before sending the employee home, because such employees may have rights under, for example, the Family Medical Leave Act (“FMLA”), the California Family Rights Act (“CFRA”), the Americans with Disabilities Act (“ADA”), and/or the California Fair Employment and Housing Act (“FEHA”).

Am I required to send a sick employee home?

Possibly, under certain circumstances.  Under the California Occupational Safety and Health Act, employers are required to maintain safe and healthful working conditions for employees.  It is highly unlikely that exposure to a colleague with a cold or flu would violate this law, but it is possible that allowing an employee to be exposed to a more serious communicable disease by a allowing a sick employee to remain at work could be a violation.

Similarly, it is unlikely that a cold or flu contracted at work would be serious enough to be covered by workers’ compensation laws, but employees who contract more serious communicable diseases may be entitled to workers’ compensation benefits as a result.

I have a number of employees out with the flu.  Are they entitled to FMLA/CFRA leave?

Possibly.  If the flu constitutes a “serious health condition” under the FMLA/CFRA for a particular employee, he or she would be entitled to take FMLA/CFRA-protected leave (assuming all of the other prerequisite conditions were met).  The flu may be a “serious health condition” if:

  • The employee is unable to work or perform other regular daily activities for three consecutive calendar days; and
  • The employee requires treatment from a healthcare provider twice within 30 days and/or requires continuing treatment under the supervision of a health care provider.

Though the flu alone is unlikely to constitute a “serious health condition” for most employees, certain populations (i.e., people over the age of 65, pregnant women, people with compromised immune systems) are at a higher risk of experiencing complications that could become serious.

What else can I do to keep my employees healthy during cold and flu season?

It is critical that employees know that they are expected to utilize their sick leave when necessary, to go home if they fall ill at work, and to stay home when they are sick.  Managers can encourage compliance with these expectations by setting a good example.  Some employees may fear that taking sick leave will be construed as laziness or a lack of commitment to their duties.  Seeing that managers take leave to recuperate when they are sick should help alleviate those fears.   Conversely, if employees see that their managers come to work when they are sick, employees will believe that they are expected to do the same, regardless of the guidance they have been given.

And when all else fails, turn to the wisdom that is repeated every year in effort to prevent illness from spreading:  get your flu shot, wash your hands often, and cover your mouth!

Tips from the Table: Developing Your Influencing Skills

Posted in Labor Relations, Negotiations

We are excited to continue our video series – Tips from the Table. In these monthly videos, members of LCW’s Labor Relations and Negotiations Services practice group will provide various tips that can be implemented at your bargaining tables. We hope that you will find these clips informative and helpful in your negotiations.

Six Statutes for the New Year

Posted in Employment

2017As 2017 kicks off, employers should be aware that a number of new state-wide laws and local ordinances begin taking effect.  In this blog, we highlight just a few that California’s public employers should now be implementing.

Seeing Green in Twenty-Seventeen: Minimum Wage Increases for California Employees

Regardless of potential changes to Federal wage and hour requirements in the wake of a new presidential administration, California employers are now required to follow the state’s new minimum wage.  As of January 1, 2017, the minimum wage for California employees increased to $10.50 per hour.  This new wage will apply to all California employers, including the state, political subdivisions of the state, and municipalities, with the following exceptions:

  • Employers with 25 or fewer employees. These employers will have until January 1, 2018, to raise wages to $10.50 per hour;
  • When increase is temporarily delayed by the Governor for certain specified economic or state budgetary reasons, as certified by the Director of Finance; and potentially
  • Counties and charter cities. Legal authority provides strong arguments to counties and charter cities that they are not covered by state minimum wage. This is based on those agencies’ constitutional authority to set employee compensation.  (In some limited instances, a matter of statewide concern can potentially supersede a county’s or charter city’s ability to set compensation for its employees.)

As reported in our 2016 Legislative Roundup, the state minimum wage will continue to increase every year, until it reaches $15.00 per hour.  After that, the state minimum wage will be adjusted annually based on a consumer pricing index.

Stick to the Basics! State Employers Cannot Exceed Federal Law Requirements to Verify Employment Eligibility.

Federal law requires employers to verify the employment eligibility of their employees through the use of a Federal I-9 form.  As part of that process, employees are required to present documentation affirming their identity and employment authorization.  However, employees must only present either a document listed as acceptable under “List A” of the form, or by presenting one document from “List B” and one document from “List C.”  Employees have the discretion to choose which combination of documents to provide.

New state legislation, codified at Labor Code section 1019.1, prohibits California employers from requesting more or different immigration status documents than those required by federal law.  Employers are also prohibited from refusing to honor documents that on their face reasonably appear to be genuine.  Moreover, they cannot refuse to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work.  For example, a person could be authorized to work, even temporarily, based on a pending application for asylum, student status, a familial relationship, or for many other reasons. Under the law, employers cannot give preference to hiring a person because that person is authorized to work based on a familial relationship rather than a pending asylum application.  In short, if an employee is authorized to work, employers must consider the authorization sufficient.

Employers are also prohibited from attempting to reinvestigate or re-verify an incumbent employee’s authorization to work.  An employer who violates these new prohibitions may be assessed a $10,000 penalty – per violation – and may be liable for equitable relief (e.g. back pay).

Violating Labor Code section 1019.1 may additionally constitute, and/or support, claims of unlawful discrimination.

Voting “No” on Sexual Harassment: Elected Officials to Receive Training to Prevent Sexual Harassment

AB 1825, meet AB 1661.  When perpetrated by an appointed official, elected Mayor, or Local Agency Commissioner, sexual harassment is not only offensive and unwelcome, but often also results in humiliation and bad press for everyone involved, including the target/victims of the conduct.  Moreover, when the member of a legislative body engages in sexually harassing conduct, such conduct appears “tolerated,” if not encouraged by the agency at large.

Effective January 1, 2017, all members of local agency legislative bodies and elected local agency officials (collectively referred to as “local agency officials”) must receive sexual harassment prevention and education training if the agency provides “any type of compensation, salary, or stipend” to any of its officials.  Like agency supervisors subject to AB 1825, local agency officials are required to receive the training within the first six months of taking office and, at least, every two years thereafter.  Even before local officials assume their new positions, agencies are required to provide them with written recommendations as to courses that will meet the training requirements.

Agencies must also retain records of the dates local officials satisfy training requirements and of the entity that provided the training.  They must keep such records for at least five years following the training.  These records will be subject to disclosure under the Public Records Act.

If your agency already requires appointed and elected officials to complete AB 1825 training (within six months of taking office and every two years thereafter), the agency should already be well on the way to compliance with AB 1661.

Public Records Act Request? Visit Us Online! – Public Agencies Can Now Direct Individuals to Website Information Responsive to a Public Records Act Request

Effective January 1, 2017, public agencies are allowed to direct individuals who request public documents to such records posted on the agency’s website.  If the documents are not posted to the agency’s website, it may add them in response to the request, and direct the responder to the site.  An agency will only then be required to provide the requestor with a copy of the records if the requestor is unable to access or reproduce the records from the website directly.  In such cases, public agencies will be allowed to request payment of fees covering direct costs of duplication, or a statutory fee, if applicable.

As a number of public agencies have been in the practice of maintaining public documents online, this updated provision should provide some relief in time and resources spent responding to PRA requests.

Gender-Neutral Relief! Law Requires Equal Access to Single Occupancy Restrooms.

Gone (I hope) are the days of long lines outside of the single-occupancy, female-designated restroom, while a male-designated restroom remains empty.  The “should we, or shouldn’t we?” question of those who have considered defying gender-based bathroom signage in years past is now answered by law – yes, you should!  While gender-based bathroom wars wage on in other states, California further ensures that restrooms be made available for all people, regardless of gender.  Starting March 1, 2017, any “single-user” toilet facilities maintained by a business establishment, place of public accommodation, state or local government agency, must be identified as “all-gender” toilet facilities, with compliant signage.  Such facilities must be designated for use by no more than one occupant at a time or for family or assisted use.

In addition to complying with state law, be sure to consult local ordinances for appropriate restroom designations.  Some cities, such as San Francisco, also have gender-neutral restroom requirements, which may include additional direction or recommendations for appropriate signage.

Mind the Wage-Gap: Prior Salary Cannot be Used to Justify a Disparity in Compensation

As of 2016, California Labor Code section 1197.5 was amended to prohibit employers from paying an employee wage rates less than rates paid to employees of the opposite sex for “substantially similar work.”  (Previously, the statute referred to “equal work.”)  This amendment meant a mere title differential was not sufficient reason to pay a female employee less than a male colleague or predecessor, if, in fact, the work she performs is substantially similar in nature.

Continuing its efforts to reduce discriminatory wage gaps, the California legislature has again amended section 1197.5.  Effective January 1, 2017, Labor Code section 1197.5 codifies existing law and specifies that a person’s prior salary cannot, by itself, justify a disparity in compensation based upon sex, ethnicity, or race.   The legislature enacted this change, finding that pay based on prior salary to set pay rates contributes to gender, race, and ethnicity-based wage gaps by perpetuating wage inequalities. Accordingly, California employers should immediately scrutinize practices in which they ask employees what they were paid in prior positions.

For more about new laws effective this New Year, check out LCW’s 2016 Legislative Roundup.