California Public Agency Labor and Employment Blog - Useful Information for Navigating Legal Challenges

A decision from the U.S. Court of Appeals in the District of Columbia recently cast into doubt the validity of all National Labor Relations Board (“NLRB”) decisions in the year 2012 by holding that three of the current Board members were invalidly appointed.  Thus, in this Court’s view, potentially all the Board’s decisions for the last year have lacked effect.

The NLRB is the federal agency responsible for enforcing the National Labor Relations Act, the law concerned with labor relations in private businesses, including union-management relations, collective bargaining, union elections, and certain concerted actions by employees, among other things.  The public sector is governed by state labor relations laws and state agencies.  Nevertheless, public sector labor relations practitioners, as well as Public Employment Relations Board (“PERB”), often look to NLRB precedent for guidance.

Created in 1935 by Congress, the NLRB is one of the nation’s first and most venerable agencies charged with enforcing employment laws, and its activities in the past year have been particularly robust – the Board has acted to attempt to quicken the schedule for holding union elections, has acted to curtail the use of mandatory arbitration agreements in the employment law context in the much-debated D.R. Horton case, and perhaps most surprisingly, has aggressively enforced the rights of private sector employees to use social media to criticize their employers’ labor practices, and to use social media in other ways to act collectively.

The social media decisions by the NLRB have been closely watched even by the public sector.  Although state labor relations laws are structured differently than the federal private sector laws, there is a fair chance state law agencies will enforce employees’ social media rights in the same way that the NLRB has done in the last year.  Our firm has blogged extensively about the NLRB’s social media decisions (click here for posts), and about even public sector employers adopting social media guidelines that comport with them.

But now has all of that changed?  Not really.

Here are the details of the Court of Appeals’ decision.

Noel Canning, a family-owned bottler and distributor of soft drinks in Washington State, received an adverse decision from the NLRB.  The Board found that the company had improperly failed to reduce to writing and execute a collective bargaining agreement reached with the Teamsters Union.  Noel Canning challenged the decision, arguing that the NLRB lacked authority to decide the matter because three of the Boards’ members were unlawfully appointed.  The company argued that President Obama had appointed the members using his “recess appointment” powers under the U.S. Constitution at a time when Congress was not, in fact, in recess.  The Constitution allows the President to make recess appointments of a limited duration without the “advice and consent” of the Senate, but only when Congress is not in session.  As of January 2012, Board Member Craig Becker’s term would expire and leave the Board unable to function because it lacked the sufficient three members (of five seats) to constitute a quorum.  The President then appointed Democratic union attorney Richard Griffin, Democratic Labor Department official Sharon Block, and Republican NLRB attorney Terence Flynn.

Noel Canning argued to the Court that these appointments were all invalid, because Congress was not actually in “recess” at the time the President made them.  Although at the time in winter 2011-2012, Congress was not acting on legislation, and most members were not even in Washington, Congress had not in fact declared any actual “recess.”

The matter took on aspects of high political/legal drama.  Republican U.S. Senators and the Speaker of the House filed “friends of the court” briefs authored by prominent national appellate lawyers, arguing that the President had overstepped his powers in an effort to re-shape American labor law.  The U.S. Department of Justice submitted a brief in support of the appointments and of the NLRB decision.

The Court ultimately agreed with Noel Canning, and issued a decision finding that President Obama’s appointments violated the separation of powers principles set forth in the U.S. Constitution.  In the last month, the decision in Noel Canning v. National Labor Relations Board has garnered significant national attention, mostly partisan cheering or outcry.  The Friends of the U.S. Chamber of Commerce stated on their website: “I don’t need to tell you that the NLRB is one of the most activist agencies through its agenda against our country’s employers.  And the U.S. Chamber’s successful challenge to the appointments was viewed as a huge victory for America’s job creators.”  On the other hand, veteran legal author Jeffrey Toobin, writing for The New Yorker, called the decision an “atrocity,” and an “extravagant act of judicial hubris.”

Labor lawyers, who must now contend with the real practical aftermath, have offered less clear direction.

There are a number of strong technical, as well as practical, reasons why employers should not now feel free to disregard the NLRB’s last year of social media jurisprudence, or ignore the NLRB’s other rulings.  As to the technical reasons, there are a number of other similar recess appointment cases making their way through the federal appellate courts.  Other federal circuits may disagree with the D.C. Circuit and provide a split in authority as to whether the NLRB has been lawfully constituted during the last year.  Also, for what it is worth, the D.C. Circuit Court of Appeals itself has not opined on the retroactive effect of its Noel Canning decision, or on its effect on the NLRB’s 2012 precedents.  Finally, many commentators expect the U.S. Supreme Court to take up this case in its 2013-2014 term, and the Supreme Court could well uphold the recess appointments.  This will remove doubt as to the NLRB’s 2012 decisions and precedents.

As to practical considerations, regardless of the legality of the NLRB’s decisions, it is clear the agency has thought through its social media positions comprehensively and carefully, not just at the level of Board members, but by the Board’s regional directors, general counsel, and legal staff.  It is very unlikely that new appointments to the Board will substantially change the Board’s general position on social media, or its other recent significant decisions.  This is particularly true given that four years still remain for President Obama’s administration.  The most prudent course, certainly for private sector employers, is to consider the Board’s social media and other jurisprudence as in effect, and act accordingly.  Indeed, litigation matters that have their origins in today’s events (i.e., early 2013) will likely make it to adjudication at a time in the future when the Board has fully, and legally, regained its footing.

For the public sector, the NLRB’s decisions have been persuasive/advisory from the start.  The fact that they are arguably deprived of legal effect based on a procedural point does not make them significantly less persuasive, or reflect a sea change in this area of the law.  Accordingly, it is prudent for the public sector to continue to take heed of the NLRB’s social media and other decisions. 

It will be productive and interesting to follow how this drama at the NLRB unfolds.  Indeed, this week on March 12, 2013, the Obama administration announced it would appeal the Noel Canning decision to the U.S. Supreme Court.

Governor Jerry Brown last week signed two new privacy laws that will go into effect January 1, 2013.  AB 1844 and SB 1349 prohibit employers, colleges and universities from requiring or asking prospective and current employees and students to disclose social media usernames and passwords.  It also prohibits requiring or requesting employees and students to log onto social media platforms in the presence of the employer or educational institution.  Governor Brown tweeted: “California pioneered the social media revolution.  These laws protect Californians from unwarranted invasions of their social media accounts.”

AB 1844

Public and private employers are now prohibited from requiring a job applicant or employee to provide usernames and passwords to their personal social media accounts such as Facebook or MySpace.  In addition, employers may not require an applicant or employee to access or log on to personal social media in the presence of the employer.  The law defines social media as including videos, still photographs, blogs, podcasts, instant and text messages, email, online services of accounts or website profiles or locations. 

Under AB 1844, employers can access usernames and passwords under two circumstances.  First, an employer can ask an employee to divulge personal social media if the employer reasonably believes it is relevant to an investigation of employee misconduct.  Second, an employer can ask an employee to disclose a username or  password for purposes of accessing an employer-issued electronic device. 

Finally, an employer may not discharge, discipline, threaten to discharge or discipline, or retaliate against an employee or applicant for refusing to provide their personal social media information. 

SB 1349

SB 1349 prohibits public and private colleges and universities from requiring current or prospective students or student groups to disclose their usernames and passwords for personal social media.  Like AB 1844, postsecondary educational institutions also may not require a student, prospective student or student group to access personal social media in the presence of the institution’s employee or representative.   

The new law does not affect an institution’s existing rights and obligations to protect against and investigate alleged student misconduct or violations of law.  The statute also does not preclude educational institutions from taking adverse action against a student, prospective student or student group for any lawful reason.

Finally, educational institutions may not suspend, expel, discipline, threaten to take any of those actions or penalize a student, prospective student or student group for refusing to comply with a demand to access personal social media or for usernames or passwords.

California employers, colleges and universities are encouraged to adopt or review existing social media policies to make sure they comply with these new privacy laws.  Our Los Angeles, San Francisco, Fresno, and San Diego offices are ready to assist and provide guidance on these issues if needed.

Pension reform might still have a fighting chance.  As we mentioned in yesterday’s Special Bulletin, Governor Brown announced that he had reached an agreement with Legislative Democrats to move forward on pension reform with the California Public Employees’ Pension Reform Act of 2013 (”CPEPRA”).  

At the eleventh hour, the joint Conference Committee on Pension Reform introduced the CPEPRA in a rather rushed fashion.  LCW attorney, Gage Dungy, was in attendance at the committee hearing last night and noted:  “The hearing was packed and a little bit chaotic.  Even the Assembly Members and Senators on the committee readily acknowledged that they literally had just received the CPEPRA proposed language and had not yet read it.”  Copies of the revised legislation for CPEPRA (introduced as an amendment to Assembly Bill 340) were released to attendees at the hearing.  Even with the objections of those at the hearing that there had not been sufficient time to review this proposal, the Conference Committee voted to pass on the proposals to the State Assembly and Senate for a vote this coming Friday.  If the Legislature fails to pass the CPEPRA by a majority vote by midnight on August 31, 2012, the legislation will die.

The CPEPRA, if passed, will affect every public retirement system in the state in some fashion, including PERS, STRS, ’37 Act county systems, independent municipal retirement systems and other public employer sponsored retirement plans.  We will address how these changes will affect members of PERS and ’37 Act county systems, in a separate Special Bulletin which will post shortly. 

Here, we highlight how the CPEPRA, as proposed, will impact members of STRS as of January 1, 2013:

• Lower Benefit Formula. Section 24202.6 will be added to the Education Code to require that a STRS member who is first hired on or after January 1, 2013, will have a maximum benefit formula of anywhere from 2% at age 62 to 2.4% at age 65 with the usual incremental decrease for members retiring before the normal retirement age. Current employees will not have any changes in benefit formulas.
• Elimination of Non-STRS Supplemental Defined Benefit Plans.  Except for the STRS Defined Benefit Supplement Plan, employers may not offer a supplemental defined benefit plan to any employee that was not already participating in the employer’s supplemental plan prior to January 1, 2013.  This includes supplemental plans offered by a private provider.
• Limits on “Creditable Compensation.” For any person who is a “new member” of STRS, as defined, on or after January 1, 2013, creditable compensation shall not include, among other things: one-time or ad hoc payments to the member; severance or other payment made in anticipation of a separation from employment, payments for unused leave, including sick leave; payments for additional services rendered outside of normal working hours; employer contributions to deferred compensation or defined contribution plans; or any other form of compensation the STRS board determines should not be creditable compensation.
• Minimum, Early, and Normal Retirement Ages.  For any STRS member first hired on or after January 1, 2013, the minimum and early retirement age will be 55 years, and the normal retirement age will be 62 years.
• Increased Employee Contribution Rates.   It will be mandatory that all “new members” of STRS, as defined, and all new employees employed on and after January 1, 2013 who participate in the defined benefit plan, pay at least 50% of the normal cost rate for participation in STRS.  Employers are prohibited from picking-up the employee’s contribution rate.  Employees may pay more than 50% if agreed to in a collective bargaining agreement only.
• No More Purchase of “Air-Time.”  A public retirement system, including STRS, may not allow for the purchase of non-qualified service credit after December 31, 2012.
• Earnings Limitations on Post-Retirement Employment.  Section 24214 of the Education Code will be further amended; and section 22164.5 added, to allow retired STRS members to perform “retired member activities” without reinstatement to the system, if the pay is not less than the minimum, nor more than the maximum, paid by the employer to other employees performing comparable duties up to the maximum compensation limit in any one school year in an amount established by STRS each year.  “Retired member activities” will be defined as those activities listed in section 22119.5(a) and (b) and section 26113(a) and (b) regardless of whether the retiree is performing those activities as an employee of the STRS employer; as an independent contractor; or as an employee of a third party unless performing a limited term assignment, and the third-party does not participate in a California public pension system, and the activities performed are not normally performed by employees of a STRS employer.
  
  • These limitations will not apply to compensation paid a retired member for service who has returned to work, after the date of retirement, as a trustee, fiscal adviser, fiscal expert, receiver, or special trustee (but not an “administrator”) appointed by the Superintendent of Public Instruction, the State Board of Education, the Board of Governors of the California Community Colleges, or a county superintendent of schools to address academic or financial weaknesses in a school district pursuant to specified sections of the Education Code and with the specified documentation required.  However, this exception will not apply to a member who has not attained normal retirement age at the time the compensation is earned by the member; or who received a STRS golden handshake; or who received any financial inducement to retire in the previous six months by any public employer.  This section shall apply to compensation paid during the 2012-2013 and 2013-14 fiscal years and will become inoperative on July 1, 2014 and as of January 1, 2015 will be repealed unless a later enacted statute deletes or extends these dates.
• Waiting Period Before Post-Retirement Employment.  A STRS retiree may not receive postretirement compensation from a STRS employer during the first 180 days after the most recent service retirement of that member, nor during the first six consecutive months after the most recent service retirement if the member received a STRS golden handshake or other financial inducement to retire from a public employer.
  
  • This limitation shall not apply, though, if the STRS retiree has attained normal retirement age and has not received a STRS golden handshake or other financial inducement to retire from a public employer, and the retiree’s employment has been approved by the governing body of the employer in a public meeting, as reflected in a resolution adopted by the governing body prior to the performance of “retired member activities,” expressing the employer’s intent to seek an exemption to this limitation.  The resolution must include specific information and findings, including that the appointment is necessary to fill a critically needed position before 180 days has passed and that the termination of employment of the retired member with the employer is not the basis for the need to acquire the services of the member. Employers will be required to submit documentation to STRS showing the retiree’s eligibility for this exception before employment commences. Education Code section 24214, though, will continue to apply to the postretirement employment.
•  Forfeiture of Pension Allowance Upon Conviction Of  Certain Felonies.  If  a public employee, including a member of STRS, is convicted by a state or federal trial court of any felony under state or federal law for conduct arising out of, or in the performance of, his or her official duties, in pursuit of the office or appointment, or in connection with obtaining salary, retirement or other benefits, or for a felony committed against or involving a child who he or she has contact with as part of his or her official duties, shall forfeit all accrued rights and benefits in any public retirement system in which he or she is member from the earliest date of the commission of any felony to the “forfeiture date” (conviction date) and shall not accrue any further benefits in the retirement system.  The member’s contributions will be returned to the member, without interest, upon separation from employment, death, or retirement.  The public employer shall have certain obligations in notifying the retirement system (e.g. STRS) of a qualifying conviction.

Bear in mind this is only a highlight of the more significant portions of CPEPRA that will affect STRS employers.  Moreover, the Legislature may clarify the language of the bill, further, before it is voted upon on Friday.  Finally, there is no guarantee that the bill will pass; we can only wait and see what the Legislature will do before the end of this legislative session.  As always, we will keep you posted.

The way complaints for violation of the Fair Employment and Housing Act (“FEHA”) are processed and enforced by the Department of Fair Employment and Housing (“DFEH”) is about to undergo a significant transformation.  Motivated by a desire to close a nearly $16 billion budget deficit by reducing duplication and maximizing efficiency within State government, Governor Brown signed SB 1038 which eliminates the Fair Employment and Housing Commission.  The Commission is a quasi-judicial administrative agency that is currently responsible for administrative adjudication of FEHA complaints.  The Commission also conducts mediations, engages in rulemaking, and provides public information and training.

As a result of the elimination of the Commission, a new arm of the DFEH, the Fair Employment and Housing Council, will handle aspects relating to rulemaking and holding public hearings on civil rights issues that were formerly administered by the Commission.  In addition, the DFEH will now have the power to directly file complaints against employers in civil courts for FEHA violations. 

Here is how the DFEH processes FEHA complaints under the current and new law.

Under the current law an aggrieved employee can choose to have the DFEH investigate a FEHA complaint on his or her behalf or request a “Right-to-Sue” letter in order to allow the employee to immediately sue the employer in court.  If the DFEH investigates and finds that there is violation under FEHA, then the DFEH can file an accusation with Commission to which the employer has 90 days to respond.  During this time, voluntary mediation services are offered for purposes of settlement negotiations.  If the case is not settled, then the case is prosecuted before an Administrative Law Judge of the Commission.  However, where emotional distress damages or administrative fines are being sought, the employer may elect to have the case removed to civil court.

Under the new law which goes into effect on January 1, 2013, the DFEH will now be able to file lawsuits directly with the court instead of having the claims adjudicated by the Commission.  However, before filing a lawsuit, the DFEH will now require all parties to undergo mandatory dispute resolution free of charge in the DFEH’s Internal Dispute Resolution Division.  As discussed above, mediation is currently a voluntary process.  If the DFEH’s lawsuit is successful, the new law also authorizes courts to award the DFEH reasonable attorney fees and costs including expert witness fees.  The DFEH will continue to offer pre-investigation voluntary mediation.

It is unclear at this time if these changes will affect the processing of FEHA complaints or spawn a spike in DFEH driven lawsuits in the courts.  Consequently, all of our followers are encouraged to stay tuned to the blog for any updates in this evolving area.      

This guest post was authored by Meredith Karasch

Buried within the State’s 2012-2013 budget, is a new provision that may have the effect of suspending portions of the Brown Act.  In an effort to reduce expenditures, the budget suspends reimbursement to local agencies for costs of posting agendas.  Under Government Code section 17581, the state may suspend mandates as part of its budget process.   If a particular mandate is suspended, the local agency is not required to follow the statute (or portion thereof) which has been identified in the state’s budget act as being one for which reimbursement is not being provided for that fiscal year.  This year’s budget has identified the “Open Meetings Act/Brown Act Reform” as one of the mandates it is suspending.  Therefore, the new budget appears to suspend requirements that local agencies comply with the Brown Act.

However, your agency may not want to act too quickly in declaring open government a thing of the past.  First, the California Constitution requires public access to governing board meetings and the Brown Act states that the posting and agenda requirements are necessary to implement this provision.  The Brown Act itself declares “complete, faithful, and uninterrupted compliance with the Ralph M. Brown Act  . .  is a matter of overriding public importance.  Unless specifically stated, no future Budget Act, or related budget enactments, shall, in any manner, be interpreted to suspend, eliminate, or otherwise modify the legal obligation and duty of local agencies to fully comply with [the Act] in a complete, faithful, and uninterrupted manner.” 

Further, section 17851 only allows suspension of the portion of an act that requires reimbursement.  Under the Brown Act, the only reimbursement is for the cost “to post a single agenda.”  There are many provisions of the Act beyond the posting requirements.  For example, it seems likely that the legislature did not intend to suspend any part of the Act involving having an agenda that identifies items for discussion or closed versus open session discussions.  Even more important, AB 1464 likely does not suspend the provisions of the Brown Act that allow citizens to sue to enforce the provisions of the Brown Act.  Thus, it is not at all clear that any provision has actually been suspended in any meaningful way.

On a practical level, agencies may also want to consider that the Brown Act was enacted in 1953 and is ingrained in local government culture.  For this reason many agencies may have their own policies and ordinances that require open meetings and posting of an agenda.   School and community college districts are also bound by the Education Code to follow the Brown Act in having open meetings and posting agendas. (Education Code §§ 35145, 72121)  These sections also expressly allow citizen suits to enforce these provisions.  Finally, local entities gain trust from the community when there is transparency in government.  This is an important consideration especially given the minimal cost to the agency of complying with the posting requirements, much of which is accomplished on-line.  Even if legal arguments do not persuade you, the political effects of failing to comply with the Brown Act may be enough to keep your agency complying with open meeting laws.

This guest post was authored by Alison Neufeld and Alison Carrinski

From July 2 to August 15 of this year, school districts have an unusual second opportunity to conduct certificated layoffs in order to address budget gaps.  Section 44955.5, an infrequently invoked provision of the Education Code, applies in any year when the enacted State budget provides for an increase in the net revenue limit of less than 2%. 

On June 27, 2012, Governor Jerry Brown signed the State budget.  The budget includes an increase in the cost of living adjustment of less than 2%, thereby triggering Section 44955.5.  Section 44955.5 authorizes the governing board of any school district to lay off certificated employees, including administrators, where the board determines that its total revenue limit per unit of average daily attendance for the fiscal year has not increased by at least 2 percent, and that it is therefore necessary to decrease the number of permanent employees in the district. 

The statutory period for layoffs under Section 44955.5 begins five days after enactment of the annual budget and ends on August 15 of the same year.  Thus, if a school district chooses to lay off certificated employees during this time, the process must be completed before August 15, 2012.  Section 44955.5 permits the governing board to adopt a schedule of notice and hearing.  With that exception, however, districts must comply the generally applicable layoff procedures set forth in Sections 44951 and 44955. 

If you have questions about these layoff procedures, you should consult counsel. You are welcome to contact any one of Liebert Cassidy Whitmore's offices.

In an effort to keep public employers and retirees confused, the Legislature made more changes to the limitations of post-retirement employment for retirees of the California Public Employees’ Retirement System (“PERS”).  This is the second change to go into effect in less than six months.  Senate Bill 1021, passed by the Legislature on June 28, 2012, and which took effect immediately, will primarily impact the compensation received by PERS’ annuitants when working for PERS employers, but will also make some changes to the length of employment for a certain type of post-retirement appointment.

In two of our previous blog posts, we commented on Assembly Bill 1028 which took effect on January 1, 2012, as well as a PERS’ circular letter providing guidance on the same.  AB 1028 was not so much “new law” as a clarification of the long standing rules against receiving a PERS retirement allowance while employed by a PERS employer.  In particular, AB 1028 emphasized that a PERS annuitant appointed by the governing body of a PERS agency to a high-ranking position (e.g. interim City Manager, Police Chief, etc.) under Government Code section 21221(h) could not, under any circumstances, work for more than one year.  The same annuitant could also not work more than 960 hours in a fiscal year unless an application was made to PERS to exceed 960 hours.  AB 1028 also added the word “temporary” to Government Code sections 21224 and 21229 to emphasize that employment of a PERS retiree is intended to be for a short period of time, although the statutes had long stated that retirees appointed pursuant to these sections must perform work of “limited duration.” 

Now comes SB 1021, a comprehensive bill that made a plethora of changes to statutes ranging from public safety, Department of Corrections, sentencing guidelines, and mental health.  Buried within the bill come further changes to Government Code sections 21221(h), 21224, and 21229.  One of the most significant changes made to all three of these statutes is that the compensation received by the PERS retiree from employment with a PERS employer may not exceed the maximum monthly base salary paid to other employees performing comparable duties as listed on a publicly available pay schedule for the vacant position divided by 173.333 to equal an hourly rate.  The PERS retiree also may not receive any benefits, incentives, compensation in lieu of benefits, or any other forms of compensation in addition to the hourly rate.

SB 1021 also makes substantial changes to Government Code section 21221(h) which governs PERS retirees appointed by the governing body of a PERS agency to high level positions during recruitment for a permanent appointment to that position.  In particular, while it continues to state that the PERS annuitant may not work more than 960 hours in a fiscal year for all PERS employers combined, it eliminates that employer’s ability to request an extension of those 960 hours from PERS.  In addition, it eliminates the requirement that any appointment pursuant to section 21221(h) must not exceed one year.   Therefore, while section 21221(h) still requires that appointments pursuant to this section are to be on an “interim” basis while the agency is actively recruiting to permanently fill the vacant position, the appointment may exceed one year, but in no event shall it exceed 960 hours in each fiscal year.

SB 1021 makes no other changes to Government Code sections 21224 and 21229 except to eliminate the word “temporary” from the sentence that reads, “A retired person  may serve without reinstatement from retirement or loss or interruption of benefits provided by this system upon temporary appointment…”  The word “temporary” first appeared only six months ago in AB 1028 and by elimination only six months later, “temporary” was apparently only temporary. But elimination of this word should not be read to indicate any change to the law.  Both before and after AB 1028, and even after SB 1021, the statue still reads that employment of a PERS retiree by a PERS employer pursuant to sections 21224 and 21229 must be either: (1) during an emergency to prevent stoppage of public business; or (2) because the retired person has specialized skills needed in performing work of limited duration.  Thus, removal of “temporary” is no monumental shift in what we have long understood to mean that a PERS annuitant cannot be employed to fill a regular full-time, part-time, seasonal, or intermittent position and work year-after-year even when not exceeding 960 hours in a fiscal year.  PERS annuitants must still only be used for emergencies or to perform work of limited duration.

It is not clear when or if PERS will issue a new Circular Letter modifying its position that retirees appointed under sections 21224 or 21229 may only perform “extra help” work.  PERS identified this work as “elimination of backlog, special projects, work in excess of what the employer’s regular employees can do, etc.”  While we are not expecting PERS to change its position, we will let you know as soon as any new guidance is issued.

These statutes are not to be taken lightly.  These limits on post-retirement employment are not crafted arbitrarily, but stem, in part, from the Internal Revenue Code and Regulations against “in-service distributions” from a qualifying pension plan.  PERS employers and PERS annuitants alike are cautioned to limit post-retirement employment and not to fall into the trap of thinking that the post-retirement employment is permissible so long as the annuitant does not exceed 960 hours in a fiscal year.  PERS annuitants and employers have seen the repercussions of this fallacy both before and after AB 1028 and will continue to do so even after SB 1021.  When in doubt, seek legal advice on post-retirement employment.

Two pension reform ballot measures were overwhelmingly passed by voters in San Diego and San Jose last week.  Now, other cities, counties and districts in California that participate in CalPERS or STRS, or maintain a ’37 Act system are asking, “can we do the same thing?”  The short answer is, “no,” at least not at the local level.   The following is an abbreviated look at why the San Diego and San Jose measures will not directly impact other California public employers, but how other public employers may see some pension reform in the future at the State level.

The Difference Between San Diego/San Jose and Many Other Public Employers in California

Some employers have their own pension investment fund or system, some contribute to a much larger fund or system maintained by a larger entity and in which other employers participate, and/or some pool their funds with other employers called “risk pools.”  The City of San Diego and the City of San Jose, for example, are employers that have their own pension system established and governed by city charter, as well as city ordinances.  Other entities have elected to be a part of those pension systems, as well.  For example, the San Diego Unified Port District, while a separate entity from the City, participates in the City’s pension system, but it is the City’s Charter that governs the system.

Many cities, counties and special districts in California are contracted with the California Public Employees’ Retirement System (“CalPERS”).   CalPERS is the largest public pension system in the country.  Originally established by the State to provide for pensions of State employees, other public employers in the State may also contract with CalPERS to handle contributions, investments, and retirement allowances for their employees.  However, it is the State, not the individual public employers, that decide who will be CalPERS members, how contributions will be made, how investments will be handled, and the terms and conditions for retirement benefits.  This leaves public employers contracting with CalPERS with little control. 

The State Teachers’ Retirement System (“STRS”) is the second largest defined benefit pension system in the country and is a mandatory pension system for, among others, all eligible public K-12 and community college certificated or academic employees in the State. There are also several other defined benefit pension systems in the State including for superior court judges, State legislators, and employees of the University of California.

Just over half of all counties in the State that have their own pension system, but the law that governs their system is established by State legislation known as the County Employees Retirement Law of 1937 (“ ’37 Act”).   While each ’37 Act county maintains its own system, the administration of that system is governed by State law.   Cities and special districts that are situated within these ’37 Act counties may opt to contract with the county’s retirement system, as well.

There are very few public employers in the State that do not have defined benefit pensions.  This has to do with an evolution of laws both at the state and federal level.  Thus, there may be a few public entities that only offer 401(k) type plans.  In addition, federal law does not require public employers to participate in Social Security unless the public employer chooses to opt-in, or previously opted-in and did not withdraw before 1983.  

Because the Cities of San Diego and San Jose maintain their own pension systems governed by their own charters, ballot measures like Measure B and Proposition B passed last week, cannot be done by CalPERS, STRS, and ’37 Act employers, at least not at the local level.  CalPERS employers are heavily restricted to the changes that can be made to save on pension costs by State law, such as Government Code sections 20474 and 20475.  Because CalPERS is governed by the California Constitution and ensuing State legislation, any change to the governing law must be made only through State legislation implemented by State legislators. STRS employers have even less flexibility and again, any change in the governing system must be made at the State level.  Similarly, ’37 Act systems are also governed by State law and substantial changes to any individual ’37 Act system would require legislation at the State level.

However, Governor Jerry Brown unveiled his 12-Point Pension Reform Plan last October which will apply to, among other systems, CalPERS, ’37 Act, and STRS.  Some commentators believe that the ballot measures passed in San Diego and San Jose will act to hasten and embolden the Governor’s 12-Point Pension Reform Plan, but this remains to be seen.

A Side-By-Side Comparison of San Diego, San Jose, and the Governor’s Plans

The San Diego and San Jose ballot measures passed last week proposed to amend each of the Cities’ Charters.  Those Charter amendments are intricate and lengthy.  Similarly, the Governor’s 12-Point Plan while appearing simple in theory, if implemented, would require substantial legislative changes.  Here, we provide you with a simplified and abbreviated, though not all inclusive, comparison of each plan.

San Diego and San Jose Ballot Measures Will Face Legal Challenges

The San Diego and San Jose ballot measures, while approved by voters, are not without their opponents, particularly labor unions.   Prior to the June 5th vote, the Public Employment Relations Board (“PERB”), on behalf of one City labor organization, filed suit against the City of San Diego alleging the City failed to meet and confer with labor unions before placing the matter on the ballot.  The superior court rejected attempts to prevent the measure from being placed on the ballot, but will allow the parties to litigate the issue after voter approval.  Further lawsuits are anticipated, as well.

In San Jose, at least three lawsuits were filed before all ballots were completely counted.   The City filed a preemptive complaint for declaratory relief on June 5th to find that Measure B does not violate the Contracts Clauses of the U.S. and State Constitutions, or constitutional rights of due process or promissory estoppels and for a judicial declaration that the City may implement Measure B as enacted by voters.  Meanwhile, the San Jose Police Officers’ Association and active and retired members of the San Jose Police and Fire Department Retirement Plan filed complaints for declaratory and injunctive relief on June 6th.  The respective plaintiffs allege Measure B impairs vested retirement benefits, violates the Contracts Clause and Takings Clause of the U.S. and California Constitutions, violates constitutional principles of due process and right to petition, as well as separation of powers.   The Police Officers’ Association also alleges other violations of State law including the Meyers-Milias-Brown Act and the California Pension Protection Act.

Thus, while these pension reform measures are designed to control the spiraling pension costs and unfunded liabilities, the measures may be held hostage in costly litigation.  The fate of these measures has yet to be seen.

In sum, public employers will anxiously watch as the San Diego and San Jose pension reform measures unfold.  In the meantime, California has a long road ahead to effectively reform public pensions for all local and State employers.

Maryland recently became the first in the nation to ban employers from asking job applicants and employees for their Facebook and other social media passwords.  The law was signed into legislation by Maryland’s Governor approximately one year after the ACLU took on the case of Robert Collins who claimed he was forced to turn over his Facebook password to the Maryland Department of Corrections during a job interview.  Collins claims he was required to give his password to the interviewer who then proceeded to log onto his account and look through his personal messages, wall postings and photographs while Collins sat there. 

The new Maryland law, which goes into effect in October, specifically prohibits employers from asking or requiring a job applicant or employee to disclose any user name, password or other means for accessing a personal account on a social media site through a computer, telephone, PDA or other similar device.  The law also makes it illegal for employers to refuse to hire an applicant or take any adverse employment action against an employee for refusing to provide their personal login information.

Supporters of internet privacy are applauding Maryland’s adoption of the nation’s first so-called “social media password law.”  Supporters say such legislation is important because it not only protects individual privacy but it also prevents employers from accessing information that they cannot ask about during the hiring process such as ethnicity, sexual orientation and religion.

Since Maryland’s passage of a social media password law, several states including California and the federal government are proposing similar legislation.  For example, there are currently two bills pending before Congress.  The Password Protection Act of 2012 was recently introduced in the Senate and House.  The PPA proposes to prohibit employers from forcing prospective or current employees to provide access to their own private account on social media sites as a condition of employment.  The PPA would also prohibit employers from discriminating or retaliating against a prospective or current employee because that employee refuses to provide his or her password.  In addition, the Social Networking Online Protection Act, which provides similar protections as the PPA, has been introduced in the House.  However, SNOPA goes further in that it would also protect students from being forced to disclose their login information to schools from kindergarten through the university level. 

The California Legislature is expected to vote this year on AB 1844.  This bill would ban employers from requiring a job applicant or employee to provide usernames and passwords to their personal social media accounts.  The proposed law defines social media as “an electronic medium where users may create and view user-generated content, including uploading or downloading videos or still photographs, blogs, video blogs, podcasts, or instant messages.”  In addition, because the proposed law bans employers from asking for login information, the law also prohibits employers from checking social media sites before hiring an employee.  Therefore, an employer could not later be held liable for negligent hiring if it did not search a prospective employee’s social media site.  The proposed law states that “an employer does not fail to exercise reasonable care to discover whether a potential employee is unfit or incompetent by the employer's failure to search or monitor social media” before hiring.

SB 1349, known as the Social Media Privacy Act, is also pending in the California Legislature.  This bill is similar to AB 1844 except that it goes further by banning public and private postsecondary educational institutions from requiring or requesting a current or prospective student from disclosing their usernames and passwords for a personal social media account or to provide the institution with access to that account. 

It remains to be seen whether the California legislature or Congress will adopt social media password laws.  Governor Brown has not taken a position on AB 1844 or SB 1349.  However, given the current trend favoring social media password protection laws, California employers may want to consider refraining from asking for social media login information from current and prospective employees unless there is a strong legitimate business reason for doing so.  Even then, employers should carefully weigh the potential risks associated with asking for such information.    

Please contact our Los Angeles, San Francisco, Fresno, or San Diego office for any assistance in reviewing social media policies.

The California Supreme Court issued a ruling upholding a law that eliminated redevelopment agencies throughout the State.  This closely watched lawsuit stemmed from two measures passed by the Legislature last summer to help close California’s budget deficit.  The first measure eliminated more than 400 redevelopment agencies that were funded by property tax dollars.  The second measure allowed these agencies to continue operations but only on the condition that they share part of their property tax revenue with the State.  Although the Court upheld the law eliminating redevelopment agencies, the Court struck down the second measure. 

The Court’s ruling is undoubtedly a blow to cities and counties across the State who rely on redevelopment money to fund improvement projects within their communities.  Thus, public agencies who are already facing financial difficulty should be prepared to deal with additional challenges that may result from the Court’s ruling.  Agencies facing these issues should consider the following points. 

Agencies should be prepared to handle questions from the media and employees about the impact of the Court’s ruling on their financial condition.  For example, questions regarding possible layoff or cuts to public services may arise.  Because of increased scrutiny of public agencies in this “post-Bell” era, agencies must carefully evaluate the impact the Court’s ruling will have on them before responding to any inquiries, and carefully scrutinize how they will address these issues publicly. 

If layoffs are being considered, agencies are reminded to review any language relating to layoffs contained in memorandums of understanding, personnel rules and other policies.  Agencies should pay specific attention to layoff procedures including any timelines associated with the layoff process and the manner in which employees are selected for layoff.  In addition, the agency may have to meet and confer with the bargaining units of represented employees before initiating any layoffs.  Agencies should also think about how the layoffs will be communicated to employees. 

Finally, the loss of redevelopment funding could trigger the need to seek additional cuts through labor negotiations.  Consequently, agencies should prepare a budget summary regarding the agency’s financial condition.  In addition, agencies should familiarize themselves with language in the memorandums of understanding regarding re-opening negotiations and the timeline for conducting negotiations especially in light of the new requirements under AB 646.  

If you have questions, please contact our Los Angeles, San Francisco, Fresno, or San Diego office. 

This guest post was authored by Steve Berliner

As of January 1, 2012, PERS retirees will have additional restrictions on their ability to work for PERS agencies.  While AB 1028 affects several different Government Code sections, it is garnering the greatest attention for its changes to Government Code sections 21221(h) and 21224; the two statutes that address post-retirement work opportunities and restrictions for PERS service retirees with PERS agencies.

There is no doubt that AB 1028's changes in this area are important and must be followed, but they do not mark any monumental shift in philosophy.  In fact, they are more a clarification of the current law rather than a drastic change in the law.

Government Code section 21221(h) is the section used when the retiree is to be appointed by the agency's governing body.  It currently allows PERS retirees to be appointed for a limited duration to a position deemed by that governing body as requiring specialized skills or during an emergency to prevent stoppage of public business.  A retiree can be appointed for a term not to exceed one year, AND may not work more than 960 hours in a fiscal year (July 1- June 30).  There is an ability to exceed 960 hours in a fiscal year if a request is made to PERS before the 960 hour limit is exceeded and PERS does not deny the request.  There is no mechanism to request that the one year term be exceeded.  Section 21221(h) has generally been used to fill high level vacancies for positions that are appointed by the governing body, such as City Manager, Police Chief, Fire Chief, etc., with a retiree who is willing to work for a short period of time.  This arrangement helps the agency fill that position while a permanent replacement is sought.  However, section 21221(h) has not always been used solely for this purpose and the current statutory language does not explicitly limit it to that arrangement.

AB1028 simply takes the standard scenario described above and makes it the sole basis for post-retirement employment under the statute.  Moreover, if there was any question about whether the one year limitation on post-retirement employment could be circumvented by simply reappointing the retiree to another one year term, AB 1028 explicitly prohibits subsequent appointments.  Lastly, AB 1028 limits the retiree's compensation to the maximum published pay schedule for the vacant position. 

Changes to Government code section 21224 are even more modest.  This section does not require appointment by the governing body, but it does require appointments be for a limited term.  Currently, these appointments implicitly required specialized skills for the post-retirement appointment to be lawful.  That implication was derived from the heading of the section, although the plain language of the actual statute did not contain this requirement, only requiring the work to be in an emergency or because the retiree had needed "skills."  AB 1028 adds the special skills requirement in the actual statutory language.  It also reinforces the limited term restriction by added that the appointments shall be temporary.  It made no other changes to that statute.

AB 1028 does not affect any of the other limitations on post-retirement work, such as those applicable to retirees who retired before reaching normal retirement age or the limitations applicable to retirees who recently received unemployment insurance.

This guest post was authored by Connie Almond

This legislative season various “post-Bell” laws were proposed to prevent excessive compensation for public officials and to foster greater transparency in local governance.  One bill which was adopted, AB 1344, made significant changes in both respects.

AB 1344 prohibits an employment contract between a local agency and a chief executive officer or a department head of a local agency – “local agency executive” – from providing an automatic contract renewal that includes an automatic compensation increase greater than a cost of living adjustment. 

Another part of AB 1344 deals with severance benefits.  Existing law requires employment contracts between employees and local agencies to include a provision that, if the contract is terminated, the maximum cash settlement an employee may receive is the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contract, with a maximum of 18 months.  AB 1344 prohibits any employment contract with a local agency executive from providing a cash settlement greater than this.

AB 1344 also requires an officer or employee of a local agency who is convicted of a crime involving abuse of office or position to reimburse the local agency fully for specified payments made by that local agency to the officer or employee.

Finally, AB 1344 changes the Brown Act to mandate that local agencies post the agendas of their legislative bodies on the agency’s website.  The bill also prohibits  any legislative body from holding a special meeting regarding the salary, salary schedule, or other form of compensation for any local agency executive.

AB 1344 applies to all local agencies, including charter counties, charter cities, and charter cities and counties.

Although AB 1344 is focused on preventing excessive compensation for executives, the revision to the Brown Act requires that all agendas be posted on the agency’s website at least 72 hours before the meeting, regardless of whether any compensation issues are going to be discussed at the meeting.  This new requirement may be burdensome for agencies that already struggle to post their agendas in a timely manner.  Although this amendment is not particularly surprising in light of the technological age, getting accustomed to this new requirement may take some time, particularly for smaller agencies.  Before AB 1344 goes into effect on January 1, 2012, local agencies should assess their technological capabilities and plan on allotting extra time to post their agendas to avoid a Brown Act violation.

AB 1344’s provisions regarding employment contracts with local agency executives only applies to contracts executed or renewed after January 1, 2012, and not to existing contracts.  Nevertheless, local agencies should be prepared for careful review and, in some cases, contract revisions, for department heads and the chief executive officer which provide for automatic compensation increases greater than a cost of living adjustment.  AB 1344 does not bar executives from receiving larger salary increases.  The employment contract simply cannot automatically renew if there is an automatic compensation increase greater than a cost of living adjustment.

How much more time do you think it will take your agency to post agendas with this new requirement?  Does your agency already post agendas online?  Let us know your thoughts.

In August we reported on a new Missouri law that regulated communications between teachers and students on social media websites.  We also reported on the Missouri State Teachers Association’s (“MSTA”) successful efforts to block this so-called “Facebook Law” by obtaining a preliminary injunction from a Missouri Court.  Now, Missouri’s Legislature has voted to repeal the controversial portion of the law which barred teachers from communicating with students on social media platforms that allow “exclusive access.”  The Legislature also extended the deadline for school districts to establish social media use guidelines from January 1 to March 1, 2012. 

Missouri’s Governor signed the bill into law last Friday.  As a result, the MSTA said it would decide in the coming weeks whether to dismiss its case.  Currently, a court hearing is scheduled for February 20 to decide whether the original version of the law should be permanently enjoined.

Although the MTSA appears to be satisfied with the new bill, the ACLU expressed disappointment with the Governor’s failure to veto the bill.  Specifically, the ACLU is concerned that school districts will not be able to create social media policies that also protect free speech rights.  John Chasnoff, program director for the ACLU of Eastern Missouri, told the St. Louis Post Dispatch “We think the legislature kicked the can down the road on this issue and just passed the buck to local school districts.  It’s been so difficult for the legislature to hammer out a bill that meets the needs and is constitutional.  Imagine how difficult it will be for school boards.”

This guest post was authored by Connie C. Almond

On October 9, the Governor signed AB 646 amending the Meyers-Milias-Brown Act to require factfinding as a means of resolving an impasse in labor negotiations under certain circumstances.  Under the new law, charter cities and counties that have impasse procedures which include, at a minimum, a process for binding arbitration are not subject to the factfinding procedures.

AB 646 repeals existing Government Code section 3505.4, which permitted unilateral implementation of an agency’s last, best and final offer following exhaustion of “applicable” impasse procedures, and enacts new Section 3505.4, requiring factfinding if a mediator is unable to effect a settlement within 30 days of his or her appointment and the union requests factfinding.

AB 646 also adds Government Code section 3505.7 which provides in pertinent part that after “any applicable mediation and factfinding procedures have been exhausted . . . a public agency that is not required to proceed to interest arbitration may, after holding a public hearing regarding the impasse, implement its last, best, and final offer . . .” 

The catch is that existing Government Code section 3505.2 remains unchanged and does not require an agency to agree to mediation.  That raises the very important question whether an agency can avoid factfinding altogether if it chooses not to agree to mediation.  If factfinding only kicks in after an unsuccessful mediation, and an agency does not have to agree to mediation, it is arguable whether factfinding is really required. 

Starting January 1, 2012, if factfinding is indeed required, a union may request that the parties submit their differences to a factfinding panel following unsuccessful mediation.  In an apparent oversight, the legislation fails to place a time limit on the union’s ability to request factfinding.  The union and the agency each select a panel member and the chairperson of the panel is either mutually agreed upon by the parties or appointed by the PERB.  Within 10 days of its appointment, the factfinding panel will meet with the parties and may make inquiries and investigations, and hold hearings.  The parties equally bear the costs of the chairperson, and each party bears the costs of their appointed panel member.

The panel must reach its findings and recommendations based on eight criteria:

1. State and federal laws that are applicable to the employer
2. Local rules, regulations, or ordinances
3. Stipulations of the parties
4. The interests and welfare of the public and the financial ability of the public agency
5. Comparison of the wages, hours, and conditions of employment to employees performing similar services in comparable public agencies
6. The cost of living
7. The overall compensation presently received by the employees
8. Any other facts which are normally or traditionally taken into consideration in making the findings and recommendations

There will likely be litigation over the ambiguities in the new law and/or the Legislature will enact clarifying legislation.  In the meantime, agencies should consult with their legal counsel to plan for the impact, if any, of AB 646 upon negotiations starting on January 1.

On July 5, 2011, a new law that will add a union-presence to public sector personnel and merit commissions passed in the California Senate and awaits signature by the Governor.  AB 455, authored by Nora Campos (D - San Jose), allows the union representing the largest number of a public agency’s employees to appoint half of the members of a public agency’s personnel or merit system commission.  Such appointments are now usually made by the governing board of the agency itself.

AB 455 calls for inclusion of a new section of the Meyers-Milias-Brown Act, which will be California Government section 3507.7.  Subsection (a) would provide that, “When a public agency has established a personnel commission or merit commission to administer personnel rules or a merit system, the governing board of the public agency shall appoint one-half of the members of the commission, and one-half of the members of the commission, nominated by the recognized employee organization, shall be appointed by the governing board of the public agency.  Whenever multiple bargaining units are represented by different recognized employee organizations, the employee organization representing the largest number of employees shall be the one empowered to designate commission members pursuant to this section.”

Subsection (b) provides that all the members of the commission will mutually select a chairperson as an additional member.  This chairperson would likely serve as a “swing vote” in splits along management-union lines, and he/she could have a great deal of power on future commissions/boards.

The bill is sponsored by the American Federation of State, County and Municipal Employees (“AFSME”), and has the support of several other labor organizations.  The unions’ rationale for the bill is to remedy what the unions claim to be a pro-employer disposition of commission appointees.  In contrast, The League of California Cities has encouraged Governor Brown to veto the legislation. It argues that, among other things, AB 455 represents a substantial intrusion on what has traditionally been an area in which public agency boards and elected leaders are intended to exercise discretion.

Allowing unions such a substantial role in the process would by many accounts greatly change the existing landscape.  Indeed, by its own terms, the law provides the right to control appointments to the largest union (at least the union representing the most employees in the agency).      

There is some thought in legal circles that AB 455 may violate the constitutional rights of charter cities and counties by violating principles of “home rule.”  If AB 455 is signed into law, these constitutional concerns will likely be answered by the Courts. 

In March 2010, President Obama signed the Patient Protection and Affordable Care Act into law.  This new Act requires that health plans and insurers who offer coverage to children on their parents’ plan make the coverage available until the child reaches age 26.  This law applies to married and non-married children, even if they are no longer a dependent for tax purposes.  However, it does not apply to spouses or grandchildren.  The Act also amended federal tax laws to exclude the value of any employer-provided health coverage for an employee’s child from the employee’s income through the end of the taxable year in which the child turns 26. 

Before this law was enacted, many plans and insurers could remove adult children from their parents’ health care policies because of their age.  This left many college graduates or children who moved away from their parents’ home without coverage.  As a result, approximately 30% of young adults between the ages of 19 and 25 were uninsured.  According to the U.S. Department of Health and Human Services, this rate represented more than one in five of the total uninsured.  This was higher than any other age group. 

The Act went into effect last fall.  Although California had extended health care coverage to adult children up to age 26 in accordance with the new federal law, California failed to amend its tax laws to conform with the federal law regarding the taxable treatment of the coverage.  Consequently, while parents were able to exclude the value of the health insurance from their income under federal law, the value of such coverage still qualified as taxable income to parents under California law. 

However, on April 7, 2011, Governor Jerry Brown signed Assembly Bill 36.  This conforms California tax law with federal law regarding the taxable treatment of health care coverage for adult children.  Thus, under both federal and California law, parents may now exclude the value of this coverage from their gross income.  AB 36 is effective immediately and is retroactive to September 23, 2010, the day the Act went into effect. 

Because this year’s deadline to file federal and state tax returns is April 18, 2011, employers have already distributed W-2 Forms to their employees for 2010.  These include in wages the value of adult children health coverage.  Thus, employers should consult with their tax advisors and be prepared to handle requests from employees for a corrected Form W-2 adjusting their taxable wages to exclude the value of this coverage.  Employees will need the amended form to file an amended tax return.